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Confusing Inevitable with Imminent
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Confusing Inevitable with Imminent
Written by Jeff Thomas (click for original)
In the early 2000’s, I began to advise friends and associates that much of the world would likely be entering a depression before the decade was out. In my belief, it would happen in stages, first with an initial mini-crash and recovery, but at some point, several years later, the recovery would prove to be a false one. The economy would remain in the doldrums. Then, a far bigger crash would take place and the world would be in a full-blown depression. As a hedge, I recommended that they buy gold, as gold would survive and retain value, as stocks, bonds and even currencies went south.
I turned out to be correct on the timing of the initial crashes, but entirely incorrect on the timing of the second, greater crash.
I considered it possible that the major events could begin as early as 2010, but would more likely occur from 2012 on. That date has passed, and although governments have consistently damaged their economies ever further, the house of cards, however shaky, is still standing.
Thankfully, I’m not alone in my inexact timing. Those investors and economists who have had decades-long records for accuracy in their prognostication have all been early in their predictions with regard to the major events that surround the coming crashes.
And each has recommended gold as a hedge, stating that, if and when markets do crash and currencies collapse, there will be a dramatic rise in the price of gold.
Certainly, gold continued its rise following the mini-crash of 2008 and it seemed that it was on its way skyward. Many prognosticators stated that, if it topped $2000, that would be it – there would be no stopping gold, as even the average person would finally understand that gold is not an investment as such, but a means of wealth preservation , especially during times of great flux.
But, after gold passed $1900, it took a dive. Goldbugs regarded it as an overdue correction, but the “get rich quick” punters dropped gold like a hot potato and gold remained down. Each time gold has rallied, the bullion banks have sold naked gold shorts in the futures market, then purchased the shares to be redeemed for bullion, which has then been sold in the physical market, hammering down the gold price. Now, four years after the fall from $1900, gold sits a price that makes it just low enough to prohibit the profitability of taking it out of the ground.
Certainly, it benefits both the banks and the major governments of the world to hold down gold and we should not be surprised if they endeavour to do so.
Nowhere is the “Gold is dead” message more prominent than in the US, where people tend to see the value of any commodity in terms of its relativity to the US dollar. Understanding gold’s real value would be easier if Americans regarded the dollar as “rising against gold” instead of “gold declining against the dollar.” This may seem like hair-splitting, but in fact, the dollar is concurrently rising against most of the world’s currencies. The currencies of most countries are, in fact, declining against gold.
These Are the Good Old days
The US dollar is looking good worldwide and, in fact, so is gold – it’s just that, at present, the dollar is in the number one spot. In fact, I wouldn’t rule out a burst of faith in the dollar when, inevitably, the recent papering-over of the Greek problem once again fails and the EU as a whole is clearly in trouble. When that occurs, gold will again rise, but the dollar will also be likely to rise – possibly more dramatically than gold.
But, unlike gold, the dollar is at risk. US debt has placed it in a precarious position from which it will most certainly fall. As billionaire investor Jim Rogers has repeatedly stated, “I’m long on the dollar, but I hope I’m smart enough to get out in time.” Recently, he added, "If gold goes under $1,000, I hope I'm smart enough to step up and buy more gold — maybe even a lot of gold."
The dollar is not a truly strong currency - it is essentially, “the best looking horse in the glue factory.” It will be the last to go, but it will indeed go. We may have a bit of time before that happens. Whether it’s measured in months or years we can’t be certain. But right now (and especially if the dollar rises further against gold), gold is a bargain. It has either reached its bottom, or will do so in the foreseeable future. Anysignificant drop would be a sign to back up the truck and load up, as its eventual rise is inevitable.
These are, in fact, the good old days, a time when gold is comparatively cheap.
Availability of Gold
But those who are just getting on board with the concept of wealth preservation through gold ownership are bumping into a problem that they hadn’t anticipated – it’s getting harder to find any for sale.
With the news of each major sell-off, investors assume that availability must be considerable, yet physical gold is becoming ever-more difficult to locate. The Chinese, who have a vested interest in holding down the price, repeatedly downplay their purchase volume, yet even the amount that is known to pass into Chinese hands far exceeds that which they claim to hold.
Further, the issue of coins by those countries that produce gold and silver coins for sale is steadily diminishing. Large private suppliers are advising their retailers that their inventories cannot be maintained. And at the street level, coin shops are announcing that they’re no longer able to promise even thirty-day notice deliveries of coins.
So, what does this say to the potential gold buyer? Well, first, it says that, whilst there is still paper gold out there in the form of ETF’s, the punters whose approach has been to chase the market, hoping to sell high and buy low, have largely left the market and moved on to other speculations. Those who continue to hold gold tend to be those who do so for wealth preservation. For them, a year (or even several years) of low prices is not a reason to dump the yellow metal. They are the long-termers, who will hold, no matter how low gold may go in the short term. In fact, should the price drop below $1000, they (like Jim Rogers) are likely to buy with both hands.
But, there’s still the dollar to be considered. As long as it continues to rise against other currencies, gold will appear to be falling in price. The dollar promises to remain high as long as the yen and the euro hold out. But should they fall, the dollar will be exposed.
Let’s say the Chinese start selling their US debt back into the US market in a bigger way, or the EU defaults on its debt, or the inflation caused by QE creates commodity price spikes. There are many, many possible triggers that will cause the dollar to tank and, surely, one of them will occur, we just don’t know which one, or, more importantly, when.
Of one thing we can be reasonably certain. If the dollar starts to head south, we will see a flood of people seeking to buy gold in an effort to preserve their wealth. However, as all the punters have already been driven out of the market and only the long-termers remain, potential buyers will find themselves making higher and higher offers, as sellers will be almost non-existent.
With any investment, when panic buying sets in, the sky is the limit. We shall therefore see a gold mania. Most economists predict a figure in the $5000-$8000 range, but other estimates go far higher.
A gold mania is not imminent, but I believe it is inevitable.
Jeff is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. Although he spent his career creating and developing businesses, for eight years, he penned a weekly newspaper column on the theme of limiting government. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion. He is now a regular feature writer for Casey Research’s International Man.
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but gold isn't backed by anything ..... /snark
You took your Gold to a coin shop to sell? that's all the IQ test i need thanks...
Déjà vu...feel like I've read this article a half dozen times in the past year.
" Are gold prices being suppressed? "I consider that [question] to be ridiculous," Casey says. "I find that counter-factual and actually rather ridiculous. "
http://www.kitco.com/news/video/show/FreedomFest-2014/722/2014-07-11/Gol...
Diversification will always be required in any environment. This is especially true if there are wild swings back and forth between the dollar and other currencies. Going all in on gold will never be a good long term strategy.
" A gold mania is not imminent , but I believe it is inevitable " .
And I believe that The Citizens' Gold Confiscation Act edicted by Roosevelt on April 5th, 1933, in order to avoid the Federal State's post-1929 bankrupcy, will be used again . The CGCA suddenly made owning physical gold illegal and the citizens had to give it to the Federal State and received a paper certificate . People forget History too easily .
Last year when Cyprus Island got bankrupt, the government emptied the citizens' "useless" savings bank accounts . Bankrupt governments become extremely "creative" when they need to rob their citizens .
Yeah, sometime between here and eternity. Maybe about the time the sun dwindles to become a red dwarf. Meanwhile, when I have to sell an ounce or two, or three, to pay my Dad's nursing home bill, or the property taxes on his house, or any of my own bills or my rent, yeah, the dude at the coin shop *does* care about it's "phony paper" price in dollars.
I went all-in in late 2010 and 2011. Kept buying all the way down from there too, till I didn't have anything else. Then, when metals became close to worthless, I had to start selling them, at yardsale prices, just to live and take care of my own, because I had already sold everything else.
So tell me again about how the paper price doesn't matter. You might as well tell me that death, or birth, doesn't matter.
"Maybe about the time the sun dwindles to become a red dwarf. "
Nope. Not enough mass to generate gold... or silver either for that matter.
http://www.world-science.net/othernews/120906_silver.htm
In its present iteration (pre-collapse) the "Sun" can only make iron and lighter elements (lower atomic numbers) via fusion. But even if the Sun went "nova" it still would not be dense enough to make silver or gold.
In retrospect, what kind of return were you expecting?
After the price rocketed up over 10 years, you decided to go "all-in" (actually more than all-in as you had to liquidate due to bills)? Wanna know what went wrong? Look in the mirror. You got overly greedy looking for a big score while buying end of dollar insurance and the debt on a non-productive asset is not paying off. Duh.
Gold is forged only during the explosions of massive stars, it is truly an amazing thing. The dollar is not much more than collective human folly.
One day in the distant future I expect to see a series of articles from these pundits about how they were right when they predicted $5k/oz AG. Still waiting.
Mind, if the dollar is toilet paper $5k won't seem like much.
"If the dollar is toilet paper..."
...the government could make money by selling "custom print dollars" with the picture of the "President of your choice" on them. Charge like 10 or 20% premium and maybe they could stabilize the currency and the economy!
The only way a paper dollar will be worth something, is when they print one with wide open beaver on both sides.
And, it still won't be as beautiful or as useful as a 20 dollar gold coin.
The world needs a currency to settle international trade in and it needs to be an electronically transeferable currency. For it to gain wide acceptance and in a short time, it needs to be backed by something, like gold, that is universally recognised as valuable. That is how the US$ came to be the dominant currency of world trade. Its replacement in international commerce too needs to have these characteristics, but without the drawbacks of a national currency which can be devalued as per the domestic compulsions of the one issuing the currency.
The New Development Bank (BRICS Bank) is ideally suited to be the entity to issue such currency to replace the US$ in international trade. When that happens, the price of gold in US$ can hit 50,000 per ounce, but it doesn't mean the purchasing power of the US$ against other commodities will remain the same. It only means the US$ will have become completely worthless while all other items of value would have retained their value.
The US became the dominant currency after WWII beaucse they sold goods to both sides of the war before they entered it late in the game. They excepted other countries gold for goods, so at the end of the war they had most of the gold. The worlds people believed in the power of the US gold backed $ this is how it became the reserve currency. Then the US cheated the world by printing more $'s than they had gold and other countries caught on to this and the French priminister was the first to announce that he wanted to trade all of the us$ back to the US for gold. He knew the US was cheating the whole world. Then as the US knew this would catch on and they soon would be out of gold, president Nixon announced that the US would be TEMPORARILY suspending the gold standard. Then they established the Petro Dollar with the Saudis, another forced story.
That is true. So the issuers of any new gold backed currency have to convince the world that it too won't go the way of the US$.
The BRICS group is uniquely positioned to do that. That the economies of the member countries are as diverse as can be is a huge advantage. It is impossible for all of them to become net-importers or net-exporters simultaneously for them to have the same converging need to manipulate the currency. Unlike national or regional currencies, this currency would be used only for external trade and is completely insulated from the domestic compulsions of the members. Since the volume of the currency represents the net international trade surplus (which is always zero) and the amount of gold, there is never a reason to increase its supply, unless the bank's gold holdings go up by way of members depositing gold with the bank. If the bank is constrained to make loans not through double entry book-keeping, but by borrowing from those running trade surpluses, it effectively becomes an institution to recycle current account surpluses of member countries to those members running current account deficits and instantly curtails the power of banks in any country being able to influence any other country.
Too many people claim there is no problem at all .Deafness to bad economic news is always the result of efficient propaganda . The USA is about to be bankrupt, about to lose the ability to print dollars out of the blue, as the US dollar is no longer the only international currency and becomes worthless. Since 2014, the most populated and least indebted nations, the BRICS ( Brazil, Russia, India, China, South Africa) and their allies have signed contracts in order to use their own currencies in international trade . Since May 2015, together with most of the E.U. countries (France, Germany, Britain etc ...), they contribute to 2 Chinese international banks ( China Development Bank and AIIB ) to replace the old monopoly of NATO banks, IMF and the World Bank . The times are changing for the USA.
When the USA, the World's biggest client, goes bankrupt, the world's dominoes will fall one by one . That is why the American intenational banksters are trying to start WWIII far fom home, inventing a succession of would-be "enemies" (Afghanistan, Iraq, Iran, Lybia, Syria, Russia , China etc ...), sometimes imposing dictators ( Ukraine), then selling weapons to the rebels ( resistants) against those dictators and financing ( with high nterests) the reconstruction of the destroyed countries. They did exactly the same with WWII : After 1929, the American banksters financed the campaign of Hitler's election in 1933, sold weapons to the European resistants ( rebels) against Hitler and financed (with huge interests) the reconstruction of the destroyed cities . That was the way thy "solved " the post-1929 bankrupcy .
Always the same criminal solutions to the same evils. But will they be successful this time ?
In 1929 the US was on gold standard and a net exporter, so it was easy to fund activities outside, since access to US funds meant access to US and global resources. Today the US is not on gold standard and is a net importer, meaning access to US funds is useful only as long as the US$ can buy resources from other countries. If that ability is cut off by introducing a gold backed currency, not controlled by any single country or region and converts to which can be defended militarily if necessary, the purchasing power of the US$ on the international markets and hence the US influence collapse immediately. Initially, the US can still coerce its client states to accept the US$ as payment, but cannot coerce them to price their exports in US$. The pricing will be done in the more stable gold backed currency and those still forced to accept US$ as payment will be quickly converting it to gold. The price of gold will, in US$ terms, hit unprecedented highs and all the gold on offer in the US$ will be snapped up immediately. Gold futures markets (in US$) will cease to operate since no one will be willing to bet how high the gold prices can go in US$ terms.
With Russia firmly stationed and operating in the Middle East, the US will not be able to coerce anyone, under the threat of invasion, for long, to continue to use the US$ which will be falling like rock against gold and the new gold backed international trading/reserve currency. With no threat of military invasion, the ME countries, including the US allies like the Kingdom of Saudi Arabia, will quickly start conducting their trade in the new currency.
About the only countries which cannot insulate themselves from the US influence and coercion will be its border states, Canada and Mexico. They will probably be forced to join a monetary union with the US and a new North American currency (the rumoured Amero) will be issued, provided the US remains as a single political entity.
The US is finished. Those hoping that the US has some as yet untested and unproven leverage against China or Russia and can maintain its stranglehold on the global financial order are just desperate.
There's gold in them thar hills!
in the long run
sigh
It could be tomorrow or two years. I'm kind on betting on sooner rather than later since all the CB's are determined to print themselves to death. Think world wide Zimbabwe......