It's All About Confidence

Remember that when you are dealing with paper money (also referred to as fiat currency) it's all about the confidence.  As long as the world all agrees that the U.S. dollar will buy a bottle of Coca Cola....then it continues to work.  But what happens if the confidence starts to erode or vanish in the governments that are printing the paper money?  Then what we have been saving in our savings accounts for months or years can also erode or vanish.

Christine Lagarde, the managing director of the International Monetary Fund, warned that the global economy is entering a "dangerous new phase" on Friday, ahead of the G7 summit in Marseilles, France.

She warned that both advanced and emerging economies faced key economic challenges, and that governments must "act now" to stop further contagion.
 

"Policymakers should stand ready, as needed, to take more action to support the recovery, including through unconventional measures," Lagarde said.

"The world is collectively suffering from a crisis of confidence, in the face of a deteriorating economic outlook and rising concerns about the health of sovereigns and banks."

See it here;  http://www.cnbc.com/id/44450547 

Uh oh.  A crisis of confidence all over the world?  That doesn't sound good for a paper money system that is all backed by dozens of bankrupt countries who simply swap IOU's by the trillions.

Let's remember that as the world shakes, the only thing that will remain are those things that are built on a firm foundation.