Host of World Economic Forum: "Capitalism in its current form, has no place in the world around us."

Davos elites to seek reforms of 'outdated' capitalism.

"We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations," said Klaus Schwab, host and founder of the annual World Economic Forum.

"Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.  "We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual," the 73-year-old said, adding that "capitalism in its current form, has no place in the world around us."

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Iranian Currency Approaching Toilet Paper Status

In one month, the Iranian rial has lost 15% of its value on concerns over the ability of the government to maintain economic stability in the face of sanctions. By March of 2012, it is anticipated that the annual inflation rate in Iran will have hit 21.6%.

Iranians are rushing to convert their rials to gold or US dollars.

There are, however, at least eight Iranians currently sitting comfortably at home, counting their Bitcoins (this number represents currently-connected users of the standard client):

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Exter's Pyramid

John Exter was an American economist and central banker who believed in sound money.

He had a theory that in a period of debt deflation, capital would flow from the riskiest of asset classes down to that which, by its very nature, is sound money. Take a look at Exter's Pyramid, below. As the global debt crisis continues to spiral out of control, the credit instruments at the top of the pyramid will begin to collapse until the bottom of the pyramid is reached. Where do you think Bitcoin would fit into this pyramid?

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Europeans About to Lose Access to Their Bank Accounts

The Telegraph reports:

"There are also growing fears for Italy, whose new government was forced to pay record interest rates on new bonds issued yesterday. The yield on new six-month loans was 6.5 per cent, nearly double last month’s rate. And the yield on outstanding two-year loans was 7.8 per cent, well above the level considered unsustainable."

"If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse."

"Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit."

This is why you're seeing the US dollar launch into the stratosphere, even though the US government has its own massive debt problems to sort out.

Anything is safer than holding Euros right now, even Bitcoins.

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Former Deputy Editor of the Wall Street Journal: Bitcoins are an Option if US Monetary System Fails

Comments from a panel at the Cato Institute’s 29th Annual Monetary Conference:

George Melloan
Former Deputy Editor, Wall Street Journal

- Jokes about what a nickel could buy during the (big Baby Ruth bar) Depression and now (a jellybean).

- Talks about post-WWII monetary policy in Britain, and how British Socialism led them astray. War in Vietnam did much the same thing in the US, leading Nixon to end Bretton Woods.

- Dollar’s primacy increasingly questioned.

- Inflation coming as the Fed creates credit to fund the US government.

- Doubts that multilateral currencies like the SDRs of the IMF would work. The Euro proves that.

- The US needs monetary reform, but we might need to fail before that comes. Gold, bitcoins, scrips, barter if things break down. Fiat currencies are liquid, barter is inefficient.

- If the US dollar goes, a lot else will go down as well.


Speaking of the US monetary system failing:

Forbes: "The next financial crisis will be hellish, and it’s on its way"

"We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out."

"The Fed's entire balance sheet totaled around $800 billion before the 2008 crash, nearly all of it Treasuries. Now the Fed holds more than double that amount in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets."

"Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet. Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out."

And I will end with the last line from Ann Barnhardt's letter announcing the closure of Barnhardt Capital Management:

"Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law."

I sleep well at night knowing I'm holding Bitcoins, because I don't have to try to predict on exactly which day the global financial system will collapse, because it's about to implode, and it's not far off.

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