Understanding the Global Financial World

I began learning about personal finance when I was twenty-five. That’s where I’ve been focused for the past twenty years. Learning about wealth building within the US economy. Stocks, real estate, precious metals, currency trading, building your income, etc. Recently over the past two years, I’ve been spending some time reading and learning about world politics and global finance. The journey has been very eye opening.

As I’ve spent more and more time talking with people about their money, I’ve come to realize how little people really know about what is going on in the financial world both here at home in the US and in the global financial world. Things that affect the well being and futures of themselves and their families. Things that are already in motion. Are we prepared?

Take for example what is called the “dollar hegemony.” In more common terms, the dollar’s dominance as the world currency by which all other countries do business with each other. The dollar has been the dominant form of exchange for decades. It has propped up the US economy and allowed a majority Americans to enjoy a very prosperous lifestyle. However, did you know that several other countries are positioning to challenge the dollar’s dominance in global finance?

China has been acquiring gold since since at least 2009 in an effort to position the Chinese Yuan as an alternative for global trade and settlements between nations. Russia also has been acquiring gold in a bid to divest off the western banking system and alleviate risk to their economy as a result of US and western sanctions. In late 2017 and 2018, China conducted testing of their oil exchange conducted in gold backed Chinese Yuans. This article by Brookings Institution provides a glimpse into the current state of the Chinese vs. US oil markets.

This is just one example of how global financial developments will affect us as Americans.

The 2008-2009 Financial Crisis

The average American doesn’t understand what really happened during the 2008-2009 financial crisis and how it was different from previous financial crises that the United States has faced.

During previous financial crises such as those faced in the early 1900’s, 1930’s and 1940’s, insolvent banks were allowed to fail. In other words, “unhealthy” banks were allowed to fail, and “healthy” banks survived. While there were some losses to the general public as the financial system rebooted itself, the system repaired itself and continued. Bad debt was dealt with and the system healed.

In the 2008-2009 financial crisis, all banks were bailed out by the Federal Bank and ultimately the American Taxpayer. Losses were mitigated and the overall debt remained. The amount of overall global debt increased with the bailout of the banking and other financial institutions.

According to James Rickards in The Road to Ruin, the additional national and global debt load that was incurred in 2008-2009 has still not been “unwound” in 2016. It is this debt load and still accumulating debt load that will make the next financial crisis even more catastrophic to the US and global financial system.

Little Known Facts of Financial History

I’m a rather young 47 years old. I remember the gas crisis of the 1970’s where my parents waited in line for rationed gasoline, and I remember discovering that someone had siphoned the gasoline out of my parents’ cars during the evening. Now I have experienced and lived through the financial crisis of 2008-2009. However, I’ve never lived through the United States government confiscating personal property as it did during the financial crises of the 1930’s.

On April 5, 1933, less that one month after being sworn in as President of the United States, FDR put into action Executive Order 6102 requiring with limited exceptions that all gold held by U.S. citizens be surrendered to the U.S. Treasury. Oh, and let’s not leave out the fact that any citizen that failed to comply would be met with imprisonment.

So this begs the question, “will the government confiscate assets again during a future financial crises?”

Is Your Interest Piqued?

You may be asking how all this may affect your financial future? I don’t have all the answers, but I’m searching.

The financial elites control the global and national financial systems. It’s all connected through the IMF (International Monetary Fund) and other entities. By looking into the past and learning about the global financial world, you get a glimpse into what the future will hold during any future financial crises. It is much better to be prepared than unprepared during a financial crisis. One of our many mistakes is to believe the illusion that everything will continue in a healthy and stable fashion. History shows us that financial instability is a norm of the financial system, but many of us live our lives as if the “party” will never end.

If you’d like to learn more about the global financial world, check out James Rickards The Death of Money and The Road to Ruin to get you started.