By Hubert Moolman
The death blow of a financial era that started in about 1971 appears to be in its final stages and seems to be waiting for a fierce run to gold, silver and certain other non monetary asset classes. The blow could be provided by the massive increase in the “paper prices” of gold, silver etc. over the next couple of years, which could lead to an end of confidence in fiat money and other debt based financial assets.

The current monetary order will be exposed for the fraud that it is, and it will collapse just like the monetary orders before i.e. the gold exchange standard and the Bretton Woods standard.

The biggest losers will be those that are significant holders of fiat currency. However, a collapse of the world monetary system is such a serious and profound issue, that we will all probably be losers.

In the last century the world’s monetary order (rules) were significantly changed during the 1929 to early 1930s, when the gold exchange standard collapsed and in the late 1960’s finally collapsing in 1971.

These changes were brought about by the presiding powers over the system due to the pressure on the questionable system, which could be seen in the fact that financial assets-non real assets or intangible assets had become way over-valued.

In other words, the claims on tangible assets were not supported by the relevant tangible assets at an equivalent basis. Thus, the number of claims was far more than tangible assets.

What is very interesting about these dates above, when the rules were changed, when looking at the Dow/Gold ratio, is the fact that the Dow/Gold ratio had just peaked some years before that, in 1928 and in 1965 respectively.

Recently the Dow/God ratio has of course peaked in 1999 and here we are in 2010 at a time where the world’s monetary system is again fragile. Evidence of this is easily found when looking at the financial landscape especially since 2007. Here events such as the stock market crash of 2008, Iceland, Greece to name but a few come to mind.

However, this time the change might be different due to fact that the final direct link between gold and dollar was already removed in 1971. How much more corrupt can you make the system? In other words, what else could be done to relieve the pressure on the system?

So this time there might be no change of the rules by “the powers that be” in order to relieve the pressure on the system as was done in 1933 and 1971, but instead, we might have the system finally collapsing by itself - by way of a devastating hyperinflationary scenario.

Well, it is important to know that the Dow/Gold ratio is an indicator of whether stocks are over- or under-valued in relation to real money. Also, stocks are a very significant and important financial asset; therefore, the Dow/Gold Ratio is also an indicator to which extent financial assets could be over or under-valued in relation to real money or to which extent claims on tangible assets outweigh or under weigh tangible assets.

When claims on tangible assets outweigh tangible assets high Dow/Gold ratio or financial assets are over-valued, that premium is normally reflected in the debt levels in the financial system. Why? Simply because we have a debt based monetary system. If you study the simple basic accounting formulae, Equity = (Assets – Liabilities) this will become even clearer.

So in 1999, as in 1928 and 1965, the peak in the Dow/Gold ratio was likely indicating that the weight of debt brought about by the very same monetary system has reached critical levels and could eventually collapse the fragile monetary order.

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