Category: Finance

Countries print unsubstantiated paper money to lower the value of their currency and stimulate exports. Other country’s currencies rise in relative value, which affects their own ability to export pushing them to print more of their own money. And so it goes with currency wars. Without the accountability of a quantifiable and measureable hard-asset base for valuation, the cycle continues unabated.

Stock market manipulation has diverted attention away from the world’s economic problems. When inflation is high, governments are obligated to raise interest rates, which then slows the economy, which can lead to recession if the economy is not healthy. Quantitative easing (QE) plus market manipulation hides the problem. Inflation, which is the inevitable result of race-to-the-bottom currency wars, has been redirected to create record-setting stock market valuations.

Historically, gold has been used by investors as a hedge against inflation. For the past three years, the price of gold has been manipulated. Bank stocks go up; gold goes down. Bank stocks go down; gold goes down. Oil stocks go up; gold goes down. Oil stocks go down; gold goes down. QE starts; gold goes down. QE stops; gold goes down. The contradictory explanations proffered by the financial services industry are ridiculous, yet confidently presented.

Aggressive gold purchases by China, Russia and India have outstripped the actual supply of gold being produced by 150% – that is, 400 tons per month of demand versus 260 tons per month of supply. This can only mean that world inventories of gold kept in ETF reserves, bank reserves and country vaults (in particular, the U.S.) must be in massive, and very illegitimate, decline.

Well over a year ago, Germany requested that their 300 tons of gold being held in U.S. Fed vaults in New York be repatriated. They have received only 5 tons to date. Switzerland recently voted against increasing their gold reserves to 20% from 7%, which would have required purchasing the equivalent of one half year of the entire world’s production of gold. The population was originally in favour of the proposal, but the Swiss National Bank mounted an aggressive campaign against it, which unbelievably included a ban on all Paypal donations directed toward causes aligned with the yes vote.

Conspiracy theories regarding the empty (gold-less) vaults at the Federal Reserve in New York are gaining momentum. Another conspiracy theory taking root is in regard to the datestamp reference on the gold bars themselves (each bar is numbered). Bars made in 1960 are showing up on the open market, indicating that old and dusty inventory, i.e. scrape-the-bottom-of-the-barrel reserves, are being tapped. The message here, of course, is that even though the well is running dry, the global economy cannot be given any reason to believe that demand is not being met.

As the hard-asset of gold moves from west to east, banks, governments and everyone in the financial services sector are well-motivated to tell the same rose-coloured story of all being well. Unfortunately, after three years of orchestrated deception, the western stock of gold is severely depleted. The Federal Reserve began this charade in the hope that the QE program would get the economy back on its feet before anyone noticed. But their double-down strategy took too long and failed to produce the robust economy needed to hide the carnage. Time is running out.

What will it take for a correction to happen?

A simple failure to meet delivery will disrupt the system. Germany is motivated to be content with a 5 ton delivery because, as Europe’s financial saviour, they need stability to reign. But Switzerland, France and others are queuing up to demand their gold back from the Fed as well. And please understand that this isn’t new gold; this is balance sheet gold that is supposedly being held for them in inventory in U.S. vaults. They will not be pleased if their gold has disappeared.

The government would like us to believe that inflation is stable and manageable at their target of 2% or so. This is impossible. A far more likely scenario is that the printing rampage has masked the deep state of deflation already upon us. The stock market manipulation has gone on for far too long and, inevitably, the landing will not be pretty.

The gold bubble burst last year but gold is back now and supported with some solid fundamentals for long term growth.

The Nixon shock measures of 1971 cancelled Bretton Woods and moved the world currency valuation standard away from gold to the U.S. Dollar. Without the underlying support of a measureable tangible asset, we were set on a path of spiralling, systemic inflation. The present calamity in global financial markets has been well-forecasted.

Countries all over the world continue to print unsubstantiated cash supplies. The M3 number, which ceased being publicly available in 2005, was the main component used in determining the true value of the US Dollar (i.e. all U.S. assets divided by all U.S. money-in-print). The only basis for currency valuation at this time is held by the U.S. government.

The existing fiat-currency cash bubble is both fascinating and disturbing. Considering the brain power and millions of man-hours thrown at managing the global financial industry, the elephant-in-the-room cash bubble is strangely silent and odour-free. One does not have to be a conspiracy theorist to appreciate the extent to which the value of gold has been self-servingly manipulated by the U.S. government; trillions of dollars per year created from thin air with no inflation. A return to a Bretton Woods model of asset-based valuation would expose the flaws and deception inherent in the existing system, and the U.S. government would never willingly return to this level of scrutiny or accountability. Likewise, economists and financial planners will never back a return to gold as a world currency; multi-million-dollar paychecks are tied to supporting the backroom machinations of bank bail-outs. But the inevitable transition is coming and all of these stakeholders have been relieved of the burden of making this decision for us.

China has spent the last five years amassing tons upon tons of gold. As the speculative market in ETFs diminished and the value of gold dropped, China was able to triple their stockpile and has become a major player in international gold holdings. An aggressive mining acquisition program combined with shrewd market-price negotiation (i.e. all gold mined by companies they partner with – inside and outside of China – must be delivered to and stay in China) ensured a constant and exponentially increasing inventory. Equally aggressive was a program to promote the purchase of gold to its own citizens through retail stores dedicated to the distribution of real gold assets, supplying an eager population with everything from jewellery to gold bars.

Why? China knows that the trillions of U.S. Dollars still held in their reserves are quickly becoming worthless. Their five-year mission to convert as much of their U.S. Dollar portfolio to hard-asset mining companies has been successful and they are ready to implement the next step.

China’s intention to have the Yuan/Renminbi become the world’s trade currency is no secret. Supported by gold reserves, it will be promoted as the safest and most stable choice for international business. The world’s fiat currencies will establish their market value through the trading of tangible hard-assets in established market systems, just like the good old days.