Thursday , 25 July 2024

Is the First of Many Currency Crises Just Now Unfolding? Are Gold & Silver About to Take Off As a Result?

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I expect the eventual endgame to this whole Keynesian  monetary experiment that has been going on ever since World War II [will] finally terminate in a global currency crisis. [That being said,] I’m starting to wonder if we aren’t seeing the first domino – the Japanese yen – start to topple…[It has] cut through not only the 2012 yearly cycle low, but also  the 2011 yearly cycle low and never even blinked [and should it continue its steep decline] and break through the 2010 yearly cycle low [of 105.66] I think we have a serious currency crisis on our hands. Needless to say, if the world sees a  major currency collapse… it’s going to spark a panic for  protection – to gold and silver. Wouldn’t it be fitting that at a time  when they are completely loathed by the market they are about to become most cherished? [This article analyzes the situation supported by 3 charts to make for a very interesting read.] Words: 620; Charts: 3

So writes Toby Connor ( in edited excerpts from his original article* entitled Has the First Currency Crisis Begun?.

This article is presented compliments of (A site for sore eyes and inquisitive minds) and (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Connor goes on to say in further edited excerpts:

I think everyone just naturally  assumes that the Yen is dropping in response to Prime Minister Abe’s  intent to imitate US policy and print its way out of its  troubles. The problem with this strategy is of course, eventually Japan will break its currency.

Japan is in a particularly tenuous situation  in that their debt to GDP dwarfs most of the rest of the world. The only hope they have of servicing this debt is for interest rates to stay  basically at zero. Any move by interest rates above this artificially low level and Japan’s debt becomes unserviceable,  without resorting to a greater and greater debasement of the currency.  Unfortunately that will also result in an acceleration of the collapse  of the currency, which would just cause Japanese bonds to be sold even  more aggressively -a nasty catch-22 situation. At this point there is no way out for  Japan. The only question is when will the endgame arrive. Japanese bond  bears have been asking themselves that question for almost 2 decades.

The recent move in the Yen has started me wondering if that end game hasn’t now begun. In the chart below I have marked the  successive yearly cycle lows with blue arrows. As you can see this major cycle bottom tends to arrive between March and May most years. If the  2013 yearly cycle low arrives in the normal timing band, then there may  be a big problem developing with the Japanese currency. The reason I say that is because the Japanese Yen is basically already in free fall and we may still have another one – three months to go before a final bottom.

Another warning sign is the fact that  this decline cut through not only the 2012 yearly cycle low, but also  the 2011 yearly cycle low and never even blinked. In an orderly decline both of these levels should have generated at least a decent bear market rally. In my opinion, it’s very worrisome that the  Yen didn’t even slow down as it moved through these major support  levels.
The next major support level is at the 2010 yearly cycle pivot. If the Yen slices through this support level  also, then I think we have a major currency crisis on our hands.


Needless to say if the world sees a  major currency collapse, which up to this point I think most people  would consider to be an absurd idea, it’s going to spark a panic for  protection.

Despite stocks entering the euphoria stage of this bull market, stocks are not going to protect one from a currency crisis. Only hard assets will do that, and the two hard assets that are best at protecting one’s wealth are gold and silver. Wouldn’t it be fitting that at a time  when gold and silver are about to be most cherished, they are now  completely loathed by the market?

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

* (Subscribe to GOLD SCENTS by Toby Connor by Email – $10.00 one week trial subscription)

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One comment

  1. Good Charts, I think the other countries will jump in to help Japan before they fall through the 2010 cycle LOW, if for no other reason that to protect their own currency. I think that once the world began to understand the enormity of Fukushima nuclear disaster which happened on March 11, 2011, other Countries started to shift their holdings which then started meltdown in the Yen. The delay in the Yen chart I believe is due to the Japanese limiting Fukushima information in the media, so that the Yens fall is seen later in time.