What Might the Looming Correction Look Like?

great depression, recession, market correctionQ: When the financial music stops, what will the fallout entail?

A: A market correction is coming, and most people know it. The current financial situation is unsustainable. So when will this happen, and what will it look like?

Background

Before 1971, the dollar was backed by gold. In the 1960s, French President, Charles de Gaulle, saw the United States spending on the Great Society and the Vietnam War and started getting a little bit leery of the U.S. government spending all this cash. France started trading its dollars for gold, pushing the U.S. to the brink. Nixon chose to preserve spending and end the gold standard.

In the 40+ years since, the world has been on a fiat currency system, meaning nothing is backing the dollar, yen, euro, etc., except the faith of the people using the stuff. The monetary system is overdue for a major correction after four decades of the current fiat system.

It’s likely to happen soon and abruptly.

The Correction

The likelihood is that, very soon, we’re going to see some sort of gold-backed currency again. It’s unlikely to be the dollar (at least not a first), simply because doing so would restrain federal spending. It’s more likely to be a currency from a country with a positive trade surplus like China and/or one that has an abundance of natural resources like Australia or Canada. The country adopting some type of gold standard first is likely to do a partially backed gold currency, which means every dollar or equivalent would be backed by, say, $0.25 worth of gold. This would be a fractional system, a 10% backing of the currency with gold.

Whichever country does this first will transform their currency into the global leader of stability, precisely as the U.S. dollar was for nearly a century.