http://www.garynorth.com/public/images/7010a.gifThat's the key right there. If the central bank conjoins with the government at the hip and swaps its fascist partner (stops caring about the banks), you might see something like this happen.
Until then, the Fed is pretty constrained - they essentially just swap assets around - promises to pay that are deemed more valuable for promises that are worth less. Worthless mortgage securities for fresh AAA rated treasuries on deposit with full reserve capability. But it all hinges on the ability of credit to continuously expand - the fractional reserve banking system cannot survive a contraction in total money + credit. It dies. Depositors begin to demand deposits to pay off debts, because debts become more expensive as monetary velocity decreases and total credit contracts (less promises to pay against the same physical goods and services).
The velocity of money has dropped by over 80% since the year 2000. For every $1.00 of GDP added last quarter, it took over $2.00 in new debt. Government spending is accounted for in total GDP, even though it is an economic distortion and malinvestment with several costs: a) the cost of removing scarce resources from the economy in the first place, b) the cost of what might have been done with those resources (cure for disease, new paradigm shifting technology, etc), and c) the cost to finally re-allocate them when the malinvestment can no longer be sustained (the bubble bursts).
This is the real estate bubble but fifty times the size. Total M2 moneys supply for the world's reserve currency sits at about 10 trillion. Currency and credit derivatives are over 700 trillion. All it would take is a mere 10% in counterparty claims or defaults and the entire monetary system of the planet blows up.
As such, I do and have always recommended having a good store of your savings in precious metals. Precious metals are not "investments" - an investment is something that you expect to generate you a yield. Precious metals are cash savings in another form. Treating them this way is the only smart way to hold them.
