Gold In 2016: "Economic Power Is Shifting"

Tyler Durden's picture




 

Submitted by Alasdair Macleod via GoldMoney.com,

Advance signs of a global slump in economic activity emerged in 2015.

Furthermore, the dollar's strength, coupled with widening credit spreads confirms a global tendency for dollar-denominated debt to contract. These developments typically precede an economic and financial crisis that could manifest itself in 2016, partially confirmed by the disappointing performance of equity markets. If so, demand for physical gold can be expected to escalate rapidly as a financial crisis unfolds.

Introduction

Gold has now been in a bear market since September 2011. Major central banks in the advanced economies have implemented policies that have covertly suppressed the gold price, while they have overtly inflated asset prices. This has led to valuation extremes in all asset markets, including gold, that would never be seen in free markets backed with sound money. We can be certain that today's unprecedented build-up of price distortions will be corrected eventually by market forces, probably in the coming months. The commencement of a crisis has already been evidenced by the collapse in energy and industrial-commodity prices, causing major problems for nations and international companies with US dollar obligations and suddenly finding they lack the revenue to service them. The scale of commodity-related losses is not generally understood, but cannot be ignored for much longer.

The rapid expansion of central bank balance sheets since the Lehman crisis is the ultimate phase of a process that can be traced back to at least the 1980s. Starting in London, US and European banks at that time took control of securities markets. Since then, they have increasingly directed bank credit at the expansion of those securities markets, principally through the development of over-the-counter (OTC) derivatives, but also by dominating bond and equity markets, and regulated derivatives.

The expansion of bank credit aimed towards financial activities has had the triple effect of inflating financial assets, suppressing commodity prices below where they would otherwise be, and enhancing international demand for the US dollar as the main pricing currency. The result has been an unprecedented peace-time expansion of global debt, while confidence in the reserve currency has been maintained. However, there are indications that this period of expansion is now at an end. According to the Bank for International Settlements' statistical releases, the gross value of bank-held derivatives has been contracting since 2013. Notional amounts of outstanding OTC contracts peaked at end-2013 at $711 trillion, and by June 2015 had declined to $553 trillion.

This is an important point, because an unseen bubble at the heart of the financial system is deflating with unknown consequences. When bubbles deflate, and here we are talking about one in the hundreds of trillions, bad debts are usually exposed. Even though much of the reduction in outstanding OTC derivatives is due to consolidation of positions following the Frank Dodd Act, much of it is not.

When free markets reassert themselves, and they always do, the disruption promises to be substantial. We appear to be in the early stages of this event.

Dollar and European dangers

As noted above, the rising value of the dollar measured against commodities is a major problem. In the short-term the dollar is extremely over-bought against record levels of commodity short positions. Most notable is the dollar price of oil, with West Texas Intermediate having fallen from $105 in June 2013 to $32 today. While much of the fall can be attributed to lower demand from a slowing global economy, some of it is undoubtedly due to the strength of the dollar itself. Bad and potential bad debts, many commodity-related and denominated in dollars, are a global issue, and the US banks are trying to control their international loan exposure. Consequently, international borrowers with dollar-denominated debt are being forced to sell down local currencies to buy dollars in order to cover their dollar obligations. The problem has been aggravated further by speculators bidding up the dollar against these distressed buyers.

The dollar's overvaluation is also supported by the belief that the US economy is healthy and performing relatively well. With official unemployment down to 5%, demand for domestic credit, while patchy, is basically sound and growing at a moderate pace. However, nominal GDP growth is entirely due to monetary stimulus being not yet offset by lagging price inflation, and is not the well-founded economic recovery generally supposed. But for dollar bulls, the apparent strength of the US economy is another reason to believe the dollar will remain strong, given the prospect of a rising interest rate trend. There are considerable dangers to this bullish view for the dollar, not least the degree to which it is already discounted in current prices.

A second global problem is the financial and economic condition of the Eurozone. 2015 saw the Greek crisis deferred, but for 2016 we have the prospect of trouble from Spain and Portugal, with government debt as a percentage of GDP estimated at 100% and 130% respectively. In the Spanish general election in December an anti-austerity combination of the left-wing Podemas and PSOE political parties won 159 seats against the ruling party's 123. Negotiations are now underway, but it looks like an anti-austerity coalition will form the next government. Greece was difficult enough, but Spain is many times greater in terms of its economic impact and the amount of government debt involved. Also, Portugal, whose economy is about the same size as that of Greece, had its general election in October, and the ruling party lost its overall majority, suggesting that anti-austerity pressures will increase in Lisbon as well. And Greece has not gone away.

Greece in 2015 was the warm-up act for what's ahead in the Eurozone. Meanwhile, €3 trillion of government bonds in Europe now trade with negative yields, an unprecedented situation, which illustrates how overvalued European government bonds in general have become, particularly when taking into account the parlous condition of some major governments' finances. The Eurozone banks are also financially precarious, having an average Tier 1 capital ratio to tangible assets of 5.1%, dropping to 4.1% when off-balance sheet items are included. Furthermore, the netting off of credit default swaps permitted under new Basel Committee rules has allowed the banks to conceal their true loan risk. The combination of European banks gaming the system, average core balance sheet leverage (including off-balance sheet obligations) of 24:1, and their balance sheets laden with wildly overvalued government bonds, has the makings of a crisis in search of a trigger.

A European banking crisis could escalate very rapidly if and when it starts, and would be an event beyond the direct control of an alarmingly undercapitalised ECB. The initial effect might be to drive the dollar higher in the foreign exchanges, particularly against the euro, and instigate a further markdown of commodity prices, as markets try to discount the economic implications of a systemic problem in the Eurozone. If an event such as this occurs, it would be impossible to limit it to a single geographical area. The major central banks would be forced into a coordinated rescue programme, involving a major expansion of all their balance sheets, on top of the post-Lehman crisis expansion.

Once initial uncertainties are out of the way, the prospect of escalating systemic risk should be very positive for gold, which is the only certain hedge against these events. To determine the potential for the gold price, its current value should be assessed by looking at the long-run inflation of fiat dollars relative to the increase of above-ground gold stocks, and adjusting the dollar price of gold accordingly.

FMQ and gold

The fiat money quantity represents the total fiat money that has been produced by the US banking system. It includes fiat currency not in circulation, being mainly bank reserves sitting on the Fed's balance sheet. The chart below shows the monthly accumulation of US dollar FMQ since 1959.

gold 2016 1

Following the Lehman crisis, the dollar-price of gold fell initially before recovering and gaining all-time highs in September 2011. With the benefit of hindsight, we can surmise that the immediate effect of the Lehman crisis was to trigger a flight into the dollar, before it became evident that the Fed's actions aimed at stabilising the financial sector were succeeding at the expense of monetary inflation. This also provides an explanation as to why, in order to maintain confidence in the dollar, the gold price had to be subsequently suppressed. Judging by all the circumstantial evidence following the Cyprus crisis, the most notable suppression exercise was in April 2013, and close study of market actions and volumes reveals that other less dramatic price suppressions have from time to time also taken place.

Given this experience, it would be wrong to rule out another attempt by the western central banks to suppress the price of gold in the event of a crisis. However, it is becoming clear that they can only suppress the price through the paper markets, given the relative scarcity of physical bullion in western central bank vaults, and the reluctance of individual central banks to compromise their bullion holdings any further. These short-term uncertainties cannot be quantified, but we can have a clear idea as to gold's current true value, expressed in US dollars. This is the subject of our next chart.

gold 2016 2

The chart shows the price of gold deflated by both the increase in FMQ over the years and by the expansion of above-ground gold stocks, since the price was fixed at $35 in 1934 by President Roosevelt. Adjusted by these two factors, gold at end-December 2015 was priced at the equivalent of $3.25 in 1934 dollars, less than 10% of the 1934 price. The only occasion the adjusted price has been lower was in 1971, just months before the Nixon shock, when the Bretton Woods system finally collapsed. The adjusted price stood at $3.13 in March that year.

The next chart shows the same price adjustments applied to the gold price, this time from August 2008, when the Lehman crisis broke and the nominal gold price was $918.

gold 2016 3

The adjusted price, reflecting the expansion of both the FMQ and above-ground gold stocks, now stands at $402, a decline of 56% in real terms since Lehman.

On value considerations, we can therefore conclude the following:
• Gold is cheaper than it has ever been against the world's reserve currency, with the single exception of the time when it was so under-priced that the US Government was forced to scrap its peg at $35 and abandon the Bretton Woods Agreement.
• Compared with the situation at the time of the Lehman crisis, gold is significantly cheaper today, which is wholly at odds with the continuing systemic risk to fiat currencies from undercapitalised banks, unprepared for the prospect of markets normalising.

Many contemporary financial analysts would argue that gold is not relevant to these issues, because gold is no longer money. This line of reasoning ignores the fact that ordinary people in the west do not get this message and are accumulating gold coins and small bullion bars at increasing rates. And more importantly, economic power is shifting from countries where this Keynesian view is prevalent to countries where it is not. The next section looks at the geostrategic implications of the shift in the ownership and pricing of gold from west to east.

China, India and the rest of Asia

China and India, together with all the other countries in mainland Asia, have been draining the west's vaults of above-ground gold stocks for far longer than most people in western capital markets realise. China first delegated the management of gold policy to the Peoples Bank by regulations adopted in 1983, in a move that followed the post-Mao reforms of 1979/82. The intention behind these regulations was for the state to acquire substantial amounts of gold, to develop gold mining, and to control all processing and refining activities. At that time the west was doing its best to suppress gold in order to enhance the credibility of paper currencies, by releasing large quantities of vaulted bullion through leasing and outright sales. This is why the timing is important: it was an opportunity for China, with its one-billion plus population in the throes of rapid economic reform, to diversify growing foreign currency surpluses, in the same way as the Arab nations did earlier and contemporaneously between 1973-1990 following the oil price boom.

When China set up the Shanghai Gold Exchange in 2002 and encouraged its private sector to accumulate gold, the state had obviously acquired enough bullion for its own strategic purposes. We cannot know how much the state has actually accumulated, or indeed to what extent the gold she has mined has been taken into state ownership since, but the amount is likely to be very substantial. We do know that gross deliveries into public hands since 2002, satisfied mainly by imports from western vaults, exceed 11,000 tonnes to date. It is therefore quite possible that China and its citizens now have more gold than all the other central banks put together, given that some official gold is currently leased by western central banks and some has been secretly sold to suppress the price.

The monthly statements about China's gold reserve additions are therefore meaningless. However, Russia is now accumulating official reserves as well, and the Indian state is trying to acquire her citizen's gold by stealth, having been frozen out of the market through lack of supply. The bulk of Asia is, or will be, bound together through the Shanghai Cooperation Organisation, an economic partnership dominated by China and Russia, encompassing more than half the world's population, and which accepts physical gold as the ultimate form of money. And what clearly emerged in 2015 is that the dominant trade currency in this bloc will unquestionably be the Chinese yuan, the currency of the country that has now cornered the world's physical gold market.

The future for the world's money is rapidly developing, as will become increasingly apparent in 2016. The era of dollar supremacy is coming to an end, no doubt hastened by the Fed's ultimately destructive monetary policies. The threat to the dollar's primacy is also a threat to the other great paper currencies: the euro, the yen and sterling. Whether or not these fail before, with or after the dollar, is only a matter for timing. China must have foreseen this possible outcome, otherwise she would not have embarked on a policy of accumulating gold as long ago as 1983, invested substantial resources into gold mining and refining, actively encouraged her citizens to own it, and is today promoting use of her currency for global trade and the pricing of gold.

Western market observers seem to be unaware of how advanced China's currency policy is today. Instead, they expect a full-blown credit crisis, the result of the credit expansion of recent years being undermined by a rapidly slowing economy. Furthermore, they argue that Chinese labour costs have increased and require a much lower yuan exchange rate to become competitive again. Based on western-style macroeconomic analysis, they naturally conclude that China will require a substantial currency devaluation to contain these problems.

While it is a mistake to gloss over the considerable economic difficulties, this analysis is flawed on two counts. Firstly, the state owns the banks, so a credit crisis stops with the debtors. And secondly, under the thirteenth five-year plan, China is embarking on a redirection of economic resources from being the cheap manufacturer for the rest of the world to serving its growing middle class and developing trans-Asian infrastructure. China's unemployment rate is estimated to be about 5%, so workers employed on current production lines will need to be redeployed, if the state's economic strategy is to progress. A substantial devaluation is therefore counterproductive, though the central bank does move the yuan's peg against the dollar from time to time.

The purpose behind China's accumulation of gold can only be to eventually make the yuan a reliable store of value. China will need to see a higher gold price in yuan, probably at a time dictated by external events, which she will patiently await. This is why, having developed the Shanghai Gold Exchange into the world's most important physical gold market, China plans to price gold in yuan, with the objective that the yuan-gold peg will eventually supersede yuan-dollar peg.

We will surely end 2016 with a wider appreciation that the dollar is no longer king, and that the future for money lies in Asia, the yuan, and gold.

Conclusion

In the near-term, paper gold is extremely oversold, reflecting the expression of western establishment sentiment in the paper markets. Futures and forward markets are short of paper gold to an extraordinary degree. Whether or not this leaves open the possibility of further falls in the dollar price of gold in the next few months is a moot point. More importantly, on longer-term considerations, gold has not been this undervalued since the events leading to the collapse of the Bretton Woods agreement. If current events lead to a systemic crisis in western capital markets in 2016, which given the global slump in economic activity looks increasingly likely, a further expansion of central bank balance sheets on top of the post-Lehman expansion seems certain. If this happens, it is unlikely the purchasing power of the dollar and the other major currencies will remain at current levels. And if the dollar loses purchasing-power, price inflation will rise along with nominal interest rates, and a wider debt liquidation in western capital markets becomes a real possibility.

China and her SCO partners have taken steps to be protected from this outcome and have cornered the gold market. A wise person should take note and think seriously about the implications.

Enjoy 2016.

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Sat, 01/09/2016 - 18:29 | 7023335 Rich from PDT
Rich from PDT's picture

Gold should be at about $2,400.00 and Silver should be at $65.00

When Trump becomes president the manipulation will end.

Trump 2016!!!

All Trump supporters visit: www.ptdradio.com
www.powerthroughdiscipline.com

Sat, 01/09/2016 - 18:37 | 7023352 crossroaddemon
crossroaddemon's picture

And you think Trump will stop the manipultion because... ?

Sat, 01/09/2016 - 19:22 | 7023524 Crisismode
Crisismode's picture

 

 

Because he is Trumperiffic.

 

Sat, 01/09/2016 - 19:29 | 7023545 highandwired
highandwired's picture

Another Chemtrail plant explosion in China:  https://www.youtube.com/watch?v=mynwBknrR_g

Sat, 01/09/2016 - 19:23 | 7023526 kill switch
kill switch's picture

 

It's not Trump it's the fact that it will collapse of it's own weight. Paper will provide the perfect catalyst for this,, and it will be wonderful...

 

 

Sat, 01/09/2016 - 19:55 | 7023617 beemasters
beemasters's picture

Probably because Trump's hair is gold that some people think he will naturally stop the manipulation even without him ever saying he would.

However,
"Turning to gold prices, Trumps tells Newsmax: “I think gold will go up as long as people don’t have confidence in our president and our country. And they don’t have confidence in our president." - http://www.newsmax.com/Finance/StreetTalk/donald-trump-china-opec/2011/0...

My guess is if he is elected president, he will ensure that gold price remains suppressed just to show the people have confidence in him.

Sat, 01/09/2016 - 18:37 | 7023354 yellensNIRPles
yellensNIRPles's picture

No offense, but Trump can't to shit about the manipulation, and I expect another large down leg prior to the massive uptick people are expecting. I also think a lot of folks need to think outside the box with gold. Don't buy anything that will be a confiscation target. They've already done it once. This is not science fiction. Look at what India is attempting right now. CBs are in panic mode, and that means they are all scrambling for gold, whether that is public or not.

Sat, 01/09/2016 - 19:11 | 7023481 Doña K
Doña K's picture

In that case, they can take your 401k and lock your bank savings as well. (just like Greece only allows 60 euro/day withdrawl.)

Gold can be hidden and the black/gray market will increase the value.

Stop the fearmongering

Sat, 01/09/2016 - 20:02 | 7023667 dhengineer
dhengineer's picture

They only got about a third of the gold they were expecting in 1934. Most of it just went overseas or underground.  The gold that was found was turned in by mom-and-pop, or by those who had it in safe deposit boxes.  A cop had to accompany you if you opened your box, so they confiscated it on the spot. They never went door-to-door to find it, however.

You are right that they will take the electronic "money".  The coming black markets will be epic, however, and physical gold/silver will always have a place in such markets.

Sat, 01/09/2016 - 19:12 | 7023488 Bill of Rights
Bill of Rights's picture

Ya well it's not 1930 so don't expect a line to form to give the CB's private gold.

Sat, 01/09/2016 - 18:40 | 7023365 FIAT CON
FIAT CON's picture

Trump loves money, Can he be bought? Will being Prez turn him into a power junky?

Like Doug Casey say's "don't vote, it just encourages them" When they get a majority vote, It goes to their head. Hmm, I have lots pf popcorn.

Sat, 01/09/2016 - 19:28 | 7023542 WhackoWarner
WhackoWarner's picture

$2400?

$65?

That will not solve the basic Ponzi problem.  Way low to balance countless trillions of OTC derivatives traded out of view that have amused a few playing with the life of humanity.  Strip them naked.  I do not advocate violence BUT TAKE ALL OF THEIR ASSETS AND LEAVE THEM HOMELESS.

 

The paper gold fixing reminds me of the financing of "Springtime For Hitler" via "The Producers"  whereby 2500 % of contract to profit was sold to little old ladies .  And paper gold is WAY WAY higher than that claim to ownership.

 

"It's Springtime for Htler TIME financing one hundred fold."  .  Storm the Bastille folks.

 

Sat, 01/09/2016 - 18:30 | 7023337 Vint Slugs
Vint Slugs's picture

I guess we can forgive him but Alasdair should realize that it's the Dodd Frank legislation, not the reverse.

Sat, 01/09/2016 - 18:37 | 7023348 knukles
knukles's picture

Yeah yeah yeah   If I had a Krugerrand for every bullish article on gold since the 4th quarter of 2011, I'd be stinking rich.

Sat, 01/09/2016 - 18:43 | 7023379 FIAT CON
FIAT CON's picture

If history repeats itself after the 2008 crash, Gold could be a great item to hold!

I wish my money was in gold instead of stocks in 2007, My portfoilio would be much better off.

Sat, 01/09/2016 - 19:25 | 7023530 kill switch
kill switch's picture

I'd be stinking rich.

 

In what?

Sat, 01/09/2016 - 19:32 | 7023559 WhackoWarner
WhackoWarner's picture

Well Sir Knuckles  You have been reading a long time.  IF you have not accumulated a few Krugs along the way then nothing will cure.    Think again buddy.  I have been seeing this crap since gold was $300/oz.  Waiting for the casino to collapse.

Feel like an idiot?  Nope, don't think so.

Knukles, hope you have your house in order.

Sat, 01/09/2016 - 18:37 | 7023353 FIAT CON
FIAT CON's picture

 I missed a buying dip on dec 17th (Canada) I'm still tempted to add to the boating accident soon.

 

Sat, 01/09/2016 - 18:38 | 7023360 explosivo
explosivo's picture

Out of all the pundits in the alt-media these days, Mr. McCleod is one for which I have the utmost respect. 

Sat, 01/09/2016 - 18:39 | 7023364 crossroaddemon
crossroaddemon's picture

This guy is so full of shit. The dollar ain't gong anywhere anytime real soon, and gold will continue to be manipulated downwards. Does anyone here think there will EVER be a day of honest accounting? Short of a full-on tech crash the present ruling powers are going to remain in control, and there is jack shit we can do about it.

Sat, 01/09/2016 - 18:50 | 7023406 ramgold2206
ramgold2206's picture

 I hate agreeing with you Crossroaddeamon....but you are right .. we are never going to get honest accounting... however I have been an accountant for nearly 20 years and fictional equity can only credit the debits for so long, eventually the short has to be recognised. I know I could be assumed of having a vested interest because I'm selling bullion.... but its the only honesty left in the system.. BUY GOLD.. as much of it as you can as quick as you can... buy it from me,, buy if from your local dealer.. I dont care just get your hand on it any way you can...plus or minus 10% on premium aint going to make a blind bit of difference when the facewashing begins

 

www.teamramgold.com/about-us     buy the 5gram for best value

Sat, 01/09/2016 - 19:41 | 7023598 crossroaddemon
crossroaddemon's picture

I think you underestimate their ability to print to infinity. I think we'll be here in five years bitching about this exact same stuff. Most of us will be poorer is all. I can proudly say that I will not be, but that doesn't have a damn thing to do with gold.

Sat, 01/09/2016 - 21:26 | 7023801 FIAT CON
FIAT CON's picture

I agree 100%. If only a few of us buy gold the force that it will create will be proportional, but if we ALL buy gold the force will be propoertional!

Real Money vs Fiat

By buying gold you are supporting Real Money VS Fiat, you are supporting "your money" not giving "your money" to a banker or a corporation to gamble with it for you, meanwhile helping to create the next bubble. I agree that gold pays no interest, but it also carries no 3rd party liability. It carries no major risk of a great loss. Gold will never go anywhere near zero, especially if the sheeple wake up and demand a gold standard, that will make it soar, unlike many companies or Governments. 

My Idea of a Monetary system is with the use of REAL MONEY not currency, it would work something like this. First we would all wake up and trade our Fiat for Money ie. gold/silv PHYSICAL! And with the help of some great free minds out there, we the people would create a new system, and not allow any gov to control it.  

To make this possible we will need a co-op between Gold and bit coin or something like it, a relationship of sorts, one where we the people being our own central banks holding our own physical PM's, and readily available places whereas we can convert gold for Bit Coin. Maybe there are some of those gold ATM's in UAI. not being used and we can convert them to be Gold for Bitcoin ATM's. These machines can replace the banking systems ATM's. When we want to shop, we bring some physical PM's to a location whereas we exchange them for Bitcoin and send the "Money" where it needs to go, bills, other debts and small purchases like gum or luch at the restaurant or anywhere around the world, you only buy as many bitcoins as you need to pay whomever, and therefore protecting yourself from volitlity of Bit-coin and preserving your wealth in your GOLD.

This is how you take the money and therfore the power out of the gov's and bankers hands, with out one bullet fired and since people have a herd mentality, all we have to do is reach criticall mass and the rest will follow as the sheep they are. How long will it take to make any change depends on the amount of force applied, and the sheeple are starting to figure it out, after listening to all of us over and over again.

If we have a gold standard, and if QE is decided upon as the answer to try to help the economy,  a simple repricing of gold ,will immediatly put more money in the hands of ALL the people equally, and all of the people will get the money at the same time, and all of the people will benefit proportionally (proportionally spread helicoter money), which is not what is happening now! The bankers and the wealthy are getting the money first and benefitting from it before any of the money trickles down to help the  middle and lower classes. The middle and lower classes will never be the beneficiaries of this current system this is by design! This is the most critical thing to wrap your head around ,is that this is done by design! Until the sheeple wake up and realize that this system has been created by design to help the rich take form the poor. You are being gamed!

An analagy of this would be weekly playing poker with what you thought were your buddies, and finding out that they all have been cheating you, and then you still sit down at the table and let them continue to cheat you.

Wealth is created by exchanging your freedom/work for money. The direction one must take should be obvious. When the sheeple wake up and rush to gold, todays prices are irrelavant. Buying Gold Removes "your assets" from the bankers possession, which prevents them from using your wealth and gambling with it, aiding them to create the next bubble and preventing the next taxpayer bail out of the banks. It makes you your own central banker.

When will it happen? Tick Tock.

I will close with some of my favorite quotes;

 “gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” 

Alan Greenspan  FED  RES Chairman 

 “The absence of gold as an intrinsic part of our monetary system today, makes our century, the one that has just passed, unique in several thousand years.....”  - Robert Mundell, 1999, accepting the Nobel Prize.

"Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves."

-- Norm Franz “There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.” Ludwig von Mises 

"When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad." Ron Paul

Sat, 01/09/2016 - 19:36 | 7023572 WhackoWarner
WhackoWarner's picture

Dollar will likely rise like a rocket.  How long? Dunno.

 

Gold will be sunk and rise and sunk.  But finally this will collapse.  Death throes.  Jack shite you can do about it.  Fed has no more weapons and market forces will take the podium and speak.

Sat, 01/09/2016 - 19:42 | 7023604 crossroaddemon
crossroaddemon's picture

I don't believe that, honestly. They own the system and it is whatever they say it is. Barring outside intervention (which I don't expect; I personally think Putin is a globalist schill) they can pretty much keep printing forever.

Sat, 01/09/2016 - 20:35 | 7023752 Bear
Bear's picture

The "Big Short"?

Sat, 01/09/2016 - 18:42 | 7023374 kevinearick
kevinearick's picture

Prologue:  Empire Melodrama & Unusual Circumstances

Marriage for the purpose of raising children is the motor-generator, which requires real work, which is why the majority wants nothing to do with it, except to commandeer yours as a means of extortion. That’s Family Law and that’s History, consumers as heroes replacing parents. Everything else is an add-on.

Variability, the demographic and derivative financial boom/bust cycle, economic activity measured as GDP, with artificial fiscal and monetary accounting gain, is counterproductive. The industrial revolution wasn’t about providing for people; it was about leveraging economic slavery. The Brits quickly ran through their stock of natural resources and rebooted with a massive new stock in America, with a new mythology, the US Constitution, and the same outcome, which was stupidly replicated globally; a battery as an economy, with no source, perfect.

Cultural Marxism is the marriage between capitalism and socialism, to maintain feudalism, profit for a few at a loss to the many, and as natural resources are depleted, fascism upon economic collapse is the only possible outcome. Financial engineering simply hides the result from the manufactured majority operating the system, paid in their own debt to ignore plain facts until it’s far too late, when their consumptive habits take the majority over the cliff. Essentially government shorts natural selection and programs stupid for the purpose.

If you listen to an establishment guy like Rubio, he begins with free enterprise and immediately goes to single females with children, and the many strikes against them, as the customer of government, few of which may be supported in a real economy, as the most cursory examination of demographics will tell you. Trump is the capitalist, Bernie is the socialist and the rest are mutts in the middle. Kasich would have an argument as a centrist if families weren’t exiting Ohio, for decades, leaving the rest with nothing but paper certificates of compliance.

As you should suspect by now, everything in the empire mirrors itself. Your family is the input from nature, which is smoothed by political media to enter the public healthcare selection IC, represented as a gain with fiscal accounting, smoothed again for a leveraged gain with monetary accounting, smoothed again for entry into the public education programming IC, smoothed again, and Walla Walla Washington, you have poverty driving feudalism in a positive feedback loop, always chasing leakage until it implodes of its own dead weight. The system continually gets SMART only in that more fools enter the casino until there are no more fools and the system is completely disconnected from nature.

The fools will assume that you are similarly disabled so long as you adopt the arbitrary habits consistent with any one of the artificial event horizons traveling backwards, when in Rome, which is worth no more than 10% of your time, depending upon the gravity required for your development. Economic mobility, ac circulation, is created to the extent you train others to advance time. How much fuel and oxygen you provide depends upon your relative position in the empire cycle.

Like the end of every empire cycle, this empire is in a wagon with no steering and no gears, approaching a cliff, requiring a quantum leap to avoid WWIII. I’m old. What you want to do about it is up to you, but if you want to carry any of that gravity forward, you will have to translate time in an elevator, which not so luckily has already been provided, and shouldn’t be difficult considering that the empire is always travelling backwards.

How do you turn a flattop around on a dime?

The universe is not quite so stupid as the majority would like to assume. Saying one thing and doing another is a game for stupid, not an economy. Of course the morons want you to think in terms of scarcity as a setup for money, which they control.

Stack stupid on the counterweight and let it hash for itself.

Obamacare is sterilizing and editing DNA without notice, with an attached information system wherever you go, so you might want to pick another route, if you are the 1% being hunted. There’s a reason why a good repairman is well paid and hard to find. If you think about it, before you jump, it’s all the same crap and sooner or later you are going to get paid, for educating yourself.

Chasing pot and smoking the profits on the margin is not the answer.

Why would you trust a contract adopted by a slaveholder cartel, government,  that is made to be broken?

Sat, 01/09/2016 - 18:42 | 7023375 ebworthen
ebworthen's picture

Guess I better hold that little bit of money in my I.R.A. invested in Gold Miners parked, eh?

That was always the plan, so it can sit.  Better than being in the F.A.N.G.'s or blue chips; the bastards.

Sat, 01/09/2016 - 18:42 | 7023376 seek
seek's picture

Not to rain on the gold parade, but I really think these charts need to take velocity into account. If the velocity were the same and FQM was sky high, the gold skyrocket would make sense. Except... that's not the case, a bunch of that printed money is simply warehoused on balance sheets to make fucked banks look solvent, and it's not sloshing about in the open economy.

Sat, 01/09/2016 - 21:39 | 7023946 FIAT CON
FIAT CON's picture

And that is the problem with Fiat currency, when printed goes to the wealthy, for the means of profitying from it before it reaches the economy, if it ever trickles down, this is why the wealthiest are even wealthier than ever. This system is designed by them for them, designed to prey on you!

Sat, 01/09/2016 - 18:45 | 7023389 Muse minus Time
Muse minus Time's picture

More warnings & advice on gold/oil/power - this offers an upside for the US

http://journal-neo.org/2016/01/09/russia-breaking-wall-st-oil-price-mono...

This will be a radical shift for the US hopefully we don't have WWIII.

Sat, 01/09/2016 - 19:03 | 7023443 HenryHall
HenryHall's picture

Yes, it's reported elsewhere too. This is indeed big news. All eyes are now on what Saudi Arabia does next.

Russia now sells crude oil futures priced only in Russian Rubles. Crude oil futures exchange is in St. Petersburg (formerly Leningrad).

Sat, 01/09/2016 - 20:08 | 7023684 Bear
Bear's picture

With BHO at the helm, I can see SA making a move away from the petro dollar since BHO and VJ are Iranian zealots.

Sat, 01/09/2016 - 20:34 | 7023710 HenryHall
HenryHall's picture

Maybe not for spot sales.

But will Saudi sell crude oil futures on the St. Petersburg exchange??

Maybe to drive down prices, maybe for other reasons.

The answer to that question has huge implications. Law of unintended effects.

Bear in mind the St. Petersburg exchange is oil futures, not spot sales.

Sat, 01/09/2016 - 19:30 | 7023550 o r c k
o r c k's picture

Interesting to see a positive spin on this. If only. I think most would see this as the absolute guarantee of world war. The death of the petrodollar appears to be a lot sooner than I thought. No, the US will not allow this to happen without an all-out fight. If allowed, it would be the end of American hegemony and infinite financing of MIC inspired conflict. Maybe after the war, if anything of value is left standing and not radioactive, the US could have a clean start-over. But not if the same crowd is allowed to keep power. If so, it all would have been for nothing. 

Sat, 01/09/2016 - 19:40 | 7023594 WhackoWarner
WhackoWarner's picture

orck???? 

Death of the petrodollar appears to be a lot sooner????

 

How long you been watching?.   Decades me. 

Sat, 01/09/2016 - 21:51 | 7023957 FIAT CON
FIAT CON's picture

Eactly, the last 2 countries that tried this recently were sent some American forced Democrocy. The USSA cannot easily bomb or covertly attack Russia like they have to smaller countries. 

Sat, 01/09/2016 - 18:56 | 7023423 FIAT CON
FIAT CON's picture
  • jan 2007 Gold $610./oz
  • Jan 2016 Gold $1104/oz

Gold is up over 80% and gold has been going down since the highs of $1900 in sept 2011 If the gold follows history of the last bust we could see gold prices of $2000/oz, After it peaks and comes down to a bottom.Maybe reaching highs this time of $4000/oz.

I think there will be far more gold bugs this time around! ie. bankers,countries, awakened sheeple.

Sat, 01/09/2016 - 19:48 | 7023628 WhackoWarner
WhackoWarner's picture

Yes but if gold again is priced as the one and only no-counter-party player at the table.  Which is the role it always played for centuries.

If gold is given back the role of backing and limiting debt spending....the amount of national, corporate, private debt that has no collateral is astounding.  And so would be the price of monetary metals that cannot be printed.

 

Would you at this moment loan fiat backed by nothing but political promises to tax generations into poverty (so elite life can continue)....or partake in a loan backed by physical gold ounces?  And I am talking on a small level here.

 

My neighbour comes to me and asks for $10K.  I ask for collateral.  What am I going to accept?  US/Euro bonds with negative returns?  or a few ounces of gold.

Sat, 01/09/2016 - 19:10 | 7023441 Spiritof42
Spiritof42's picture

If this happens, it is unlikely the purchasing power of the dollar and the other major currencies will remain at current levels. And if the dollar loses purchasing-power, price inflation will rise along with nominal interest rates, and a wider debt liquidation in western capital markets becomes a real possibility.

MacCleod lost me a long time ago. He's proof that the quantity of worlds is not proportional to the depth of thought. There is no other currency for the dollar to lose purchasing power against. If he's thinking of gold, he's delusional. Debt liquidation means DEflation, not INflation.

When this debt liquidation reaches avalanche speed, it'll impoverish evey person in its path. THAT's why you want PM.

Sat, 01/09/2016 - 19:39 | 7023590 bamawatson
bamawatson's picture

quantity of worlds is not proportional to the depth of thought ---- bravo to you, spot on, pithy

your concise assessment applies to esssentially all chin rubbing pontificators

we call em touts in my world

Sat, 01/09/2016 - 19:06 | 7023458 NoWayJose
NoWayJose's picture

A couple months ago, junk silver was real hard to find. Premiums went up to $4.99 over spot even with silver near $15. What is surprising to me is that silver is now under $14 and premiums have been cut to under $3 over spot. And now supply is plentiful. I find it hard to believe that bucket loads of silver were sold at $15, and especially not sold at under $14. So where did this supply come from?

Did one of those hedge funds that liquidated suddenly dump junk silver?

Sat, 01/09/2016 - 20:28 | 7023562 HenryHall
HenryHall's picture

> Did one of those hedge funds that liquidated suddenly dump junk silver?

Somebody did. I have no idea who did, but I'm grateful.

Sat, 01/09/2016 - 20:40 | 7023766 Bear
Bear's picture

Premiums on all physical have decreased. This will happen as the price becomes'stable' at this new lower price. The premium becomes a measure of volitility

Sat, 01/09/2016 - 19:09 | 7023473 cheech_wizard
cheech_wizard's picture

I love this bubblelicious economy.

I just sold three pieces of cardboard for $2200.

Standard Disclaimer: Have to love those collectible card games that I shoved into cardboard boxes 12 years ago, and just dug them out this past weekend. Surprised at how much the bigger sucker will pay.

Now I can do some more pm shopping...

 

Sat, 01/09/2016 - 19:42 | 7023600 bamawatson
bamawatson's picture

uh we need your ssn, you must submit a 1099, and let former sen barney fagg inspect your anal cavity

Sat, 01/09/2016 - 20:17 | 7023708 cheech_wizard
cheech_wizard's picture

042-68-4425

I put this on all my 1099 forms.

Sat, 01/09/2016 - 19:49 | 7023631 bookofenoch
bookofenoch's picture

Atlas Shrugged in real time

Sat, 01/09/2016 - 20:07 | 7023683 JD59
JD59's picture

I always take my tax return fiat and buy some physical.

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