Sleight-of-Hand Won’t Save Global Financial System
April 24, 2012
With continued volatility in many of the key global markets, 40 year veteran, Robert Fitzwilson wrote this exclusive piece for King World News. Fitzwilson is founder of The Portola Group, one of the premier boutique firms in the United States. Here are Fitzwilson’s observations: “The world’s fiat money system is based upon a sleight-of-hand, the most significant magic trick ever invented. The sleight-of-hand begins with the creation of debt, frequently issued by a sovereign entity such as a king or a nation. The debt often starts out being backed by some real asset, such as land in the French Revolution or gold in the case of the U.S. during the early stages of our Federal Reserve System.”
Robert Fitzwilson continues:
“That is not a requirement, however, just a sweetener. What could be better than debt backed by real assets as well as the full faith and credit of the issuer able to be used as legal tender (money)? The really wonderful part of this scheme is that the ‘money’ can be lent and re-lent many times over, allowing the initial supply of this money to multiply many times over the original amounts that were created.
At some point, the outstanding amount of issued debt overtakes the value of the underlying real collateral. The ‘guarantee’ becomes diluted as more debt is issued. Eventually, the issued amount exceeds the value of any real collateral or the link is severed as occurred during the Nixon Administration. At that point, the debt (money) is backed only by the full faith and credit of the issuing entity….