Paper Money

We have talked quite a bit about paper money, so we will remind you of just one thing...the entire paper-money-system is reliant 100% in the faith of that paper by all of it's users. As we have seen throughout history, as soon as people begin to doubt the validity of the paper (lose faith), they will first off demand a lot more of it to hedge their faith (inflation) and if that doesn't help, they will quit taking it or demanding it all together. When that happens, it's a total collapse....which already happened to Iceland last fall.

The article posted below is discussing China and how they are scrambling to get their investments in more sound assets as they are starting to doubt the U.S. ability to pay them back the $ trillion + dollars they are owed.

Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.
"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years."

Did you catch that black hole comment? It really does become clear when you realize that when societies print too much paper-money...it ceases to be rare...hence it loses it's value.

The article continues;
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944.

Read full article here; http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html

This article was prophetic in more ways than one in that it foreshadows the potential collapse of the Western currency system and then goes on to talk about ideas of creating a world currency that would be backed by something other than paper and "good faith".