US Money Supply Surges Surges 33% in 4 Months - Gold To Follow?

Tyler Durden's picture

From Gold Core

US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?

Gold is trading at USD 1,623.80, EUR 1,177.95, GBP 1,027.01, JPY 124,535.72, AUD 1587.39 and CNY 10,354/oz.

Gold’s London AM fix this morning was USD 1,623.00, GBP 1,027.02 and EUR 1178.14 per ounce.

Yesterday’s AM fix was USD 1,629.00, GBP 1,033.24 and EUR 1,180.17 per ounce.

U.S. M2 Money Supply: Accelerating Sharply in 2011

Gold prices are mixed today as markets remain on edge due to increasing divisions amongst European leaders on how to solve the intractable Eurozone debt crisis. There continues to be very strong demand for physical bullion globally and support is  strong at the $1,600 level due to this demand.

The sharp fall of copper yesterday, by 6%, is an indication that the US, Chinese and indeed global economy is very fragile and may soon begin to contract.

Physical demand in Asia, mainly India and China, has entered the traditional peak season with Indian festivals and the increasingly important Chinese New Year.

This is reflected in premiums in Asia which remain good. There are reports of massive physical buying out of China on gold’s fall close to $1,600 yesterday. The most active Shanghai gold futures traded at a premium of more than $10 over spot prices earlier today. The contract stood at 335.22 yuan a gram, or $1,634 an ounce, at a premium of $3.

Cross Currency Table

Premiums in Hanoi, Hong Kong, Singapore and Mumbai remain robust on continuing physical demand.

Demand from Asia is due primarily to concerns about fiat currencies – both domestic or local currencies but also the current reserve currencies of the euro and of course the global reserve currency the dollar.

China M2 Money Supply: M2 Growth is Decelerating, Yet Still Rising

While all the focus has been on the Eurozone debt crisis recently, the US is suffering a stealth debt crisis of its own which is being ignored - for the moment. As is the burgeoning debt crisis in China.

The US fiscal position is appalling with a $1.6 trillion deficit projected for fiscal 2012 alone. For those who have lost count, the US national debt has risen to over $14.8 trillion. The latest updated projections reveal that the US will reach a 100 percent debt to GDP ratio by Halloween – in 10 days time.

Gold’s recent weakness has coincided with a period of dollar strength but with trade and budget account deficits as far as the eye can see, this dollar strength is likely to be brief.

Indeed, the dollar’s recent strength is due to the fact that while the dollar’s fundamentals are very poor – its competing fiat currencies such as sterling and the euro have similar if not worse outlooks due to imprudent monetary policies.

The possibility that gold could surge to as high as $10,000/oz is gaining traction amongst some respected market participants.

Paul Brodsky, co-founder of QB Asset Management Company has again warned regarding the risks posed to US Treasuries and the possibility of a sharp revaluation of gold that could see gold reach $10,000/oz.

A twenty-year veteran of the bond market in his own right, Brodsky told King World News that the US may return to some form of Gold Standard in order to restore faith in the US dollar.

Proponents, including Steve Forbes and Ron Paul, argue a gold standard would prevent what they see as irresponsible money creation and force the U.S. to live within its means by limiting the amount of money monetary authorities can create.
The idea that the US could revalue gold and devalue the dollar (as was done by Roosevelt in the Great Depression) is gaining increasing currency.

Gold prices would hit $10,000 an ounce or even more should current calls for a return to the gold standard become reality, according to Brodsky.

In conversation with King World News, money manager, Stephen Leeb, said that gold is remarkably undervalued and “is going to add another digit over the next five to ten years there is very little doubt about that.”

Leeb recently said that gold could rise to $12,500/oz. He concluded this based on many of the factors documented by GoldCore in recent years such as gold in terms of financial assets, the monetary base and surging money supply globally.

As the ‘U.S. M2 Money Supply: Accelerating Sharply in 2011’ chart shows, US money supply (M2) has surged in a parabolic manner in the last few months and is up by more than 50% year to date and up 33% in just 4 months - from June 1st to October 1st.

For the latest news and commentary on financial markets and gold please follow us on Twitter

(Bloomberg) -- Gold Pares Worst Weekly Loss in a Month as Commodities Advance on EU Plan

(Reuters) -- Gold edges up on arbitrage buying

(MarketWatch) -- Gold futures rebound in electronic trading

(Bloomberg) -- South Korea to Drop Gold Rings from CPI Basket

(The Motley Fool) -- Why I Was Completely Wrong About Gold

(The Telegraph) -- Italian bond yields reach point of no return

(The Economic Collapse) -- The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System

(King World News) -- Dollar Devaluation Coming, Gold to be Revalued

Brodsky: Apropos of Everything (and Gold)

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Irish66's picture

"Printing large amounts of money"  says it all

paarsons's picture

Good citizens of Metropolis!

Here's the truth.

We're all fucked.

Run to the hills.

Pinto Currency's picture



M1 money stock up 22.6% year over year and 19.4% YTD


M2 money stock up 10.3% year over year and 9.3% YTD


Not so bad at all.  Central planning is wise.  Repeat until it seems true.


Snidley Whipsnae's picture

The Fed will keep printing until moral improves.

How's it working so far?

Pinto Currency's picture


Buy timber and paper company equities.

Troll Magnet's picture

Copying is cheaper than printing.  Long Kinko's!

Cash_is_Trash's picture

Money can't be printed but currency can.

I am more equal than others's picture

This is the 'Weimar Solution' which will lead to the 'Final Solution.' 

Snidley Whipsnae's picture

The world is drowning in paper.

We need a sequal to the film "Water World"... "Paper World"...

Print Ben, Print!

Beastmanager's picture

Wowowoww, this is it! Deflationist short squeeze!

Smiddywesson's picture

Hee, hee.  I don't think it's over just yet.  We are likely to continue to see deflation in some areas of the economy and inflation in others.  I think the reluctance to announce QE3 and bail out the EU banks shows they intend to stretch this out as long as possible.  But there are signs this is coming to an end.  In risk of repeating myself, I see those signs as:

  • Global economic based protests (over 1500 cities)
  • Step Two: The trade wars are beginning
  • Step Three:  Major military conflicts on the horizon
  • Major US and European banks at the brink of the cliff
  • There's a bank run on BOA
  • Gold refuses to stay below $1600, a clear sign that the margin hikes and manipulation were overdone and strong hands prevail and/or the price suppression mechanism is at the breaking point and can't push gold down any further without decoupling it from paper.
  • JPM silver shorts are greatly reduced and position limits will end the silver suppression game.
  • Desperation on the part of economic officials who have made themselves a laughing stock.  These guys didn't get to the top of the pyramid by ignoring their political capital.  Today, the biggest fishes are squandering that credibility.  End game is near.
  • Rapidly widening spreads in the PM markets
  • Operation Twist has turned into Operation Twisted (fail)
  • Foreign banks are dumping US treasuries.  The continuance of the USD as a safehaven is crumbling. 
  • Changing the circuit breakers to stop trading was a tell that they are about to leave the little guy holding the bag in what could be a limit down situation in stocks, where only algos get to sell during the first few minutes of trading each day 

I really don't think the Fed and the ECB will hyperinflate.  They need to boil the frog slowly, not stampede everyone into PMs.  Also, if they hyperinflate, there will be a political rebellion and the Fed and the major banks will be finished.  The ECB has replaced most of their foreign currency reserves with gold.  When the asset side of their balance sheet is fully purged, and the Fed hits its target gold acquisition, I believe they will have lost all motivation to continue kicking the can and we will get a new monetary policy based on some referrence to gold.

I really don't agree this will continue into 2013 as some on ZH have expressed.  Maybe if the game didn't change that would be so, but that's the problem with all the hyperinflation and deflation arguments, Ben and company are going to do what's good for TPTB.  That means they are going, to borrow a phrase from sailing, tack their way to their objective.  That objective is to bail out the banks, restore their balance sheets, say nobody saw it coming, and paint themselves as heroes for "saving the world."  Of course, that requires them to first destroy the balance sheets of the central banks by bailing out the major banks, which will destroy the finances of all the savers in fiat currencies, and then fill the asset side of their balance sheets with something they can inflate to balance out the expanded liability side of their books.  After the price inflation of that asset, they are instantly solvent, and anyone without that something  upon which the monetary system will be based, will instantly take a haircut without ever filling out a tax form.

The price of gold will rise when the central banks are positioned.  They are likely to crash paper prices immediately prior to the change.  The announcement will come after hours when the markets are closed.  There will be no opportunity to position oneself for the change unless you have physical, or you are willing to catch the knife when they drive prices down.

The central bankers are the only ones who know what is coming.  They are buying, and they are outright lying about gold.  So, even though this is all based on supposition, I don't see any other way for the central banks to survive this crisis. 

pvzh's picture

What you describe will lead to hyperinflation immediately. Economy is such a funny thing -- you cannot raise price of one thing / asset arbitrary to achieve your goal. I can tell you that from experience in USSR where economy was planned, and they tried to overvalue somethings because it believed to be a "luxury". For example, they raise prices on cars (50% -- 100%) overnight (the was done several times after WW2 with the same sequence of events after wards). Same day as announced other prices that are not directly controlled by the state ("farmers' markets") saw very similar increases and after minor adjustments remained there. USA is not USSR (not yet at least fully), so next step after gold jump, oil in the world markets will jump by the same percentage and will stay locked to gold. After that either rationing plus hyperinflation in the black market or just hyperinflation.

DaveyJones's picture

hyperinflation is NOT something the government does or does not allow. It is a panic moment, whose precision point is hard to predict but still a rational and innevitable result of constant currency erosion. Hyperinflation is also a natural producer of deflation in certain long term items as all the money crowds up on the short end not wishing to take a ride longer than five minutes. That's Weimar and soon us.     

Chaffinch's picture

Nicely put Smiddy. A damned sight more interesting than reading Goldcore's article!

I'm not sure about the end of paper gold though. Are they going to bring other paper markets down as well - paper oil, wheat, etc?

I take the point that a crazy amount of paper gold is traded, and there isn't the physical to back it, but that situation has existed for a long time, without a real problem, because trades can always be settled for cash. There isn't enough gold to back the paper, but there is always a counter party to claim from. If shorts get stopped out in a massive upwards move, then maybe market makers will end up so short they go bust... - would the CBs let this happen? Why not?

Pinto Currency's picture





The Fed and G20 central banks have hyperinflated over the past 20 years.  That is why you have a $100 trillion world bond market which is on the verge of puking.  When the bond market sluce gates break, you will see hyperinflation faster than you can say "tsunami" as the rush into real assets and general equities accelerates.


That is why you have all the "deflation" promotion on Bloomberg and CNBC.  The only deflation that we will see will be measured in the cost of goods in gold and silver money.  The cost of goods in fiat currency will then be best described by Jackie Gleason (if he was still with us).

Smiddywesson's picture

I think we agree on that point.  We will continue to have inflation on the things we use and deflation on the assets we own, until the kick the can game comes to an end.  As you say, the size of the deluge when the sluce gates break could very well overwhelm the plans of the evil central bankers.  As far as I'm concerned, that's doubly good for holding physical gold.

Pinto Currency's picture




I think that when we measure value of goods in fiat currency everything will increase in price as the currency devalues - some things will rise in price faster than others (i.e. gold, silver, food, etc.)


However, measured in terms of silver and gold (money) the price of things will deflate in price as silver and gold increase in value the fastest.  My take.

Beastmanager's picture

Too much faith on the central bankers have you, Skywalker

twotraps's picture

really awesome, an article within the article, had to read it twice!  have a good weekend

Elliott Eldrich's picture

Once velocity picks up inflation is going to skyrocket. I don't see any other way this can go.

Quinvarius's picture

People who short silver are insane.

Under 1 billion cash cleans the whole place out.

Chaffinch's picture

Yes Quinvarius I agree that they are insane.

The problem is:

1) You and I lack the necessary billion dollars

2) Those who do have a billion dollars have tried and failed, because Comex does not fight fair

3) A major flaw in the plan to clean out Comex is that buyers of futures contracts cannot insist on delivery. Sellers can insist on delivery!

DosZap's picture

Got your PVC Bitchezz,if it goes to $3k+ look for the Confiscation orders to come down.

NO way they allow prudent, and smart phys holders to kame thos profits.

It didutes the 1%. And they cannot have that.

Cassandra Syndrome's picture

This is going to lead to chronic inflation, don't care how low its velocity is. 

GeneMarchbanks's picture

No question about inflation coming but also deflation. Biflation.

Cassandra Syndrome's picture

Inflation for the stuff we need like food and energy that have highly inelastic supply curves. Deflation for all the stuff we don't need like durable goods. This off course will skew the CPI much to the glee of the Bernank

Snidley Whipsnae's picture

It won't matter how much the CPI is 'skewed' if Benny and Obummer fail to feed people... Real fire works start when people have nothing to eat.

Smiddywesson's picture

And that's when your stash acquired since 1968 goes nuclear, because that's one of the few things that will force the Fed and the ECB to make their move.  That's when paper gold crashes and they try to scare everyone out of the paper market and then announce, after the markets are closed, that we are entertaining a new monetary standard, backed by gold, just not gold valued at today's price, because that wouldn't bail them out.

barkster's picture

everyone will be fed. why, monsanto will probably even be delivering to everyone's doorstep. "want a side of roundup with that soy/female hormone burger, sir?"

Smiddywesson's picture

Soylent green is so much tastier than soylent yellow.

silver500's picture

This is correct, inflation for necessities and items that are produced quickly with lower capital investment required for production.

Inflation (Phase 1 inflation):
Bus fares

Middle (Phase 2 inflation):
Washing Machines

Deflation (Phase 3 inflation):
Real Estate
Industrial machinery

DaveyJones's picture

yup. Not sure about furniture since you don't really need new stuff that badly, its technology does not turn over like the microchip and its intimately tied to real estate  

Long-John-Silver's picture

Lots of people will be very happy to repair/restore your old furniture at a fraction of it's replacement cost.

Quinvarius's picture

Gonzalo Lyra wrote an awesome article about what hyper inflation looked like in South America.  That is pretty much what he described.  Prices on a lot of things actually dropped very far relative other things with more utility.  For example, you could trade a home for a car.  And knowing what it will look like, I think there is a good chance the CPI will barely show it.

GeneMarchbanks's picture

There's something missing here that is not discussed: DigiDollars.

Hyperinflation is a political event, not monetary. Funding for the PDs will continue but not for the so called 'real' economy. Financial bubbles forming are not a sign of hyperinflation.

Snidley Whipsnae's picture

Hyper inflation occurs when citizens lose faith in the currency; ie, that the currency they hold today will purchase the same amout of bread tomorrow as it does today.

You can call that a political or monetary phenomena... Congress has abdicated it's responsibility, handing it over to the Fed.

The Fed, which is owned by bankers, is supposed to be independent of the US Gov... Do you believe this?

When the Fed and other central banks routinely intervene in all asset markets how can one say that 'hyper inflation is a political event'?

Not buying that one.

fnord88's picture

Agreed. If anything I would say hyperinflation is a psychological event. When people believe their money will buy less tomorrow than it does today, velocity will pick up and it will spiral out of control. An important thing to remember is massive printing occurs AFTER hyperinflation has started, not BEFORE.

silver500's picture

There are two main factors at work here:

1. As the economic situation becomes worse people must spend a higher proportion of their income on necessaties

2. The low interest rates and loose monetary policy that cause the inflation also causes too much debt funded investment into capital intensive production.  Therefore the supply of goods with a long production cycle will be too high and the price of these goods will fall in the medium term

Smiddywesson's picture

I don't think TPTB are going to have the luxery of stretching this out over a long period of time after they hyper print.  When the real printing begins (already has) the clock will begin ticking on how long they can go before they announce a new monetary system.  The end of the world deflation and inflation arguments assume the central banks don't have a plan to stick us with the bill and survive.  They are not supermen, but they have shown themselves to be very competent jugglers.  If we reach the wheelbarrow point, the central banks are dead and the New World Order will be swept away.  They know this.  TPTB have no intention of being unseated from power, and I'm not optimistic enough to believe they will be.

TPTB decide what is money.  For a time, that thing was paper.  Now, we are returning to gold as money (real money) and when they have enough of it, or their hand is forced, they will tell us gold is money (again).  The plan is for them to be sitting on a pile of it when that announcement is made, and them tax everyone without gold by ramping the price of gold.

And everyone lived happily ever after.


Soda Popinski's picture

Agreed.  I also think its fair that we start calling the bernankster 'Bicurious Ben'

Gamblor's picture

Ron Paul has it nailed. Gold may rise, but the real heights will be in silver - it's what the man on the street can afford. 

I got one of these back in change from my Chinese food delivery last night.  I would make sure they were out of circulation if I was the government - we wouldn't people asking questions about what the heading means...


"Silver certificate?  What does that mean?"

MonsterBox's picture

More interesting is "Who printed the "Silver Certificate"? Not the Federal Reserve, but the US Treasury...

And "Why did the Treasury print them for those several years in the 1960's?"  JFK was trying to do an Andrew Jackson.

just read this piece on JFK Executive Order 11110

FEDbuster's picture

How did that work out for JFK? 

pods's picture

Many have a different opinion about EO 11110, including G. Edward Griffin, of TCFJI fame.  That order merely delegated the president's authority to the sec of the treasury.