Down we go …
Daily Bell: Is the world headed toward a further depression?
Hugo Salinas Price: It is headed for worse than depression. It is headed for collapse, and the direct cause of this has been the idea that the world could manage quite well without gold money. In 1970, total international reserves, excluding gold, were about $50 billion dollars. Today, total international reserves, excluding gold, amount to just under $11 Trillion dollars. What has happened is that the “payments” of trade imbalances between nations, since 1971, have been with fiat currency – the dollar, the British pound, the yen, and lately, the euro. None of these currencies can achieve settlement, a cornerstone concept; the dollars are in effect certificates of credit, and pay no interest, so they are exchanged by the creditor (exporter) countries for bonds, which are certificates of a debt obligation: there is the proof that there has been no settlement of trade imbalances. Then the bonds are used to build a pyramid of local fiat money.
Total world debt relative to world GNP (here I have to resort to a term – GNP – that is a fallacious concept of present-day economics) is so great that it cannot be sustained. The whole apparatus is coming down. There is no alternative to collapse. Collapse is not comparable to depression. From a depression, if humans are allowed to act, the mistakes can be written off and human effort will restore prosperity. Collapse involves social collapse, and with social collapse you get social fragmentation and revolution. Dark days ahead!