Risk of Systemic Collapse and Fiat Currency Crisis Gold Over $1600 and Silver Over $40.30

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Risk of Systemic Collapse and Fiat Currency Crisis Gold Over $1600 and Silver Over $40.30
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Gold rose 0.5% in U.S. dollar terms to a new nominal record high at $1,602.05 per ounce. Euro falls saw the dollar rise 0.8% against the euro and gold rise 1.4% in euro terms to EUR 1,041 per ounce.

Gold rose 0.9% in British pound terms to £996 per ounce. Gold rose 0.8% to CHF 1,309 per ounce in the ‘safe haven’ fiat currency the Swiss franc (more below).

Gold rose to new record nominal highs in debt laden U.S. dollars, euros and pounds today due to the growing risk of a systemic financial collapse and fiat currency crisis.

Cross Currency Rates

European equities are lower with the FTSE down 1.1%. Asian equities were mixed with the Nikkei eking out a 0.4% gain.

Oil prices are lower despite continuing considerable geopolitical risk in North Africa and the Middle East.

Spanish, Italian and Greek bonds are under pressure with the yield on the Greek 10 year rising over 18% and Italy’s 10 year back over the 6% mark.

The second stress test is increasingly being seen as an abject failure and another futile exercise to obfuscate and deny the massive exposure of European banks.

This exposure is not just to sovereign debt, but also to loans worth in the trillions - including residential mortgages, small-business loans, corporate debt and commercial real-estate loans to individuals and institutions.

Gold in Swiss Francs – 2001 to July 2011 (in Nominal Terms, Non Inflation Adjusted Terms)

The much used contagion word is still not understood by most and we are beginning to see a classic contagion vicious circle as the bailout of western banks led to a deterioration of sovereign debt markets and now many of these same banks are massively exposed not just to sovereign debt but to individual, corporate and institutional debt.

A failure to raise the debt ceiling and a U.S. Treasury default would have severe consequences for the global financial system, given the central role played by U.S. Treasuries and U.S. government bonds.

Nearly every part of the global financial system from retail investors to companies and from governments to central banks hold Treasuries for reserves, for collateral and or for security.

Thus, a U.S. default would mean that the modern financial system itself could be at risk of collapsing.

The massive debt pyramid that gradually grew since 1971 (when Nixon closed the gold window and the U.S. dollar and all currencies became simply paper currencies dependent on the performance of governments and central bankers) and went parabolic due to the cheap money ultra loose monetary policies of recent years is at risk of collapsing which will result in a systemic crisis.