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“Panicking” Central Banks to Power Gold Higher

Panicking Central Banks to Power Gold Higher

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Institutions will be the drivers of gold demand, Ray Dalio issues warning about the greenback, and silver believers could soon be rewarded.

Institutional demand will power gold prices as central banks panic

As Egon von Greyerz notes via ZeroHedge, uncertainty has been the theme across the board this year, and it is unlikely to dissipate any time soon. von Greyerz believes that the uncertainty is tied to the end of a cycle, and while the full timeline of the cycle isn’t entirely clear, its social and economic aspects are directly tied to the abolishment of the gold standard in 1971.

This accelerated the precarious path that the Federal Reserve set for the U.S. when it was created in 1913, one of perpetually expanding debt and an economy based on faith. That there is no solution to the debt issue has been painfully demonstrated by various administrations. The Clinton administration from 1998-2001 and the current Trump administration have been among the most vocal regarding the issue, yet neither has been able to prevent the U.S. national debt from roughly doubling every 8 years.

von Greyerz sees central banks as being on exceptionally shaky grounds, as the aforementioned untethering started the fall of fiat currencies. Most of them have lost around 85% against gold since 2000, and all of them have lost upwards of 97% of their value since 1971. While the U.S. dollar stands out as exceptionally long-lasting, von Greyerz sees economic factors that are beginning to threaten it.

…click on the above link to read the rest of the article…

Governments Have Crippled the World’s Economies. Revolution May Soon Follow.

GOVERNMENTS HAVE CRIPPLED THE WORLD’S ECONOMIES. REVOLUTION MAY SOON FOLLOW.

The world seems to be on fire. A couple of months ago, the economic upswing was still firmly established, production expanded, and unemployment was declining. It all changed with the advent of the coronavirus or, to be precise: things turned really sour with the politically dictated lockdowns. As a reaction to the spread of the virus, governments in many countries ordered shops and firms to shut down and people to stay home. The inevitable result was a close to complete breakdown of the economic system. Hundreds of millions of people were thrown into outright despair; in India alone 120 million workers lost their jobs in April 2020.

The economic collapse sent the unbacked paper money system into a tailspin. Borrowers were unable to service their debt, and banks unwilling to roll over maturing loans, let alone extend new funds to struggling debtors. The entire credit pyramid was about to come crashing down. To prevent this from happening, governments and their central banks went “all in,” providing huge amounts of money to pay for people’s lost incomes and firms’ evaporating profits. Of course, governments do not have the money that they have promised to spend.

Central banks have started running the electronic printing presses, issuing great amounts of newly created money into the banking and financial sector and also injecting new balances into people’s accounts held with banks. In other words: as production contracts heavily, the quantity of money is rising strongly. This is, no doubt, an inflationary policy, for, if anything, inflation must be understood as an increase in the quantity of money. One possible outcome of a policy of increasing the quantity of money is price inflation: the increase in the money prices of goods and services.

…click on the above link to read the rest of the article…

Gold’s long-term gains have even outperformed Warren Buffett…

Gold’s long-term gains have even outperformed Warren Buffett…

Warren Buffett, despite his extraordinary investment success, has a rather famous and long-standing love/hate relationship with precious metals.

Maybe it started with his dad– Congressman Howard Buffett of Nebraska– who, as a staunch advocate for the gold standard, argued to his colleagues on Capitol Hill that “paper money systems have always wound up with collapse and economic chaos.”

Warren himself acquired a record-setting 128 million ounces of silver back in the late 1990s… which he later sold at a profit in the early 2000s.

But to listen to him talk about precious metals these days, he’s always negative.

Buffett often quips that if you took the world’s entire supply of gold and melted it together, it would form a cube of about 68 feet (~21 meters) per side and be worth around $9 trillion.

With that same $9 trillion, you could buy every share of Apple, Disney, Google, Microsoft, JP Morgan, Exxon Mobil, all the farmland in the United States, all the developable land in Manhattan, and still have more than a trillion dollars left over.

This is Buffett’s central argument: gold doesn’t produce anything. So it’s much better to invest in a productive asset like a business, farmland, etc.

Sure, I’d rather own a profitable, productive asset than a pile of metal.

But Buffett is completely wrong to compare gold to productive assets… they’re apples and oranges.

Gold isn’t an ‘investment’. It’s an insurance policy against paper currencies will lose value over time. So a MUCH better comparison for gold is CASH.

Using Buffett’s same thought experiment, would an investor with $9 trillion rather have all that money sitting in a bank earning 0%? Or buy all the productive assets I mentioned above?

Clearly it’s more attractive to own productive assets than cash sitting in a bank.

 …click on the above link to read the rest of the article…

A Sign of Things to Come: China Adds 1,853 Metric Tonnes to “Official” Gold Reserves

A Sign of Things to Come: China Adds 1,853 Metric Tonnes to “Official” Gold Reserves

While Western governments continue to ravage each other viciously, seemingly unable to come to terms on even the simplest of agendas, the East, led predominately by the financial juggernaut that is China, continues to chug along, slowly but surely carrying through on their long term plans.

While we look inward and fight among one another, becoming increasingly polarized and isolated into our various political “camps”, ceasing any form of communication with each other, our economic rivals are racing past us, forming partnerships and making plans.

Russia and China are two such countries that I have often talked about in past articles, highlighting how the West has forced these two countries into a partnership that threatens to overtake the West as the economic powerhouse of the world.

While our financial “gurus” continue to shuffle pieces of paper back and forth between each other, trading digital numbers in ever increasingly quantities, as if they had any real, true intrinsic value.

Russia and China are happily making moves around the world, acquiring physical, tangible assets that will play key roles in the coming economic conflict that the world will inevitably face at some point in our not too distant future.

Although their demand for oil, rare earths and various other forms of assets is seemingly insatiable, there is one asset class above all others that I am particularly interested in, precious metals.

Both countries have made it blatantly obvious that they are not happy with the current “status quo” and would love to see an eventual change. That change being a toppling of the US Dollar as the reserve currency of the world.

This has led to a rapid accumulation in precious metals by Russia, who have forecast their purchases on an almost monthly basis.

…click on the above link to read the rest of the article…

Retailers Rejecting Customers’ Cash As More Ban Paper Money

“Your cash is not wanted here”, a growing number of retailers and restaurants throughout the US and UK are telling customers. But are reasons being given by companies for the new “cashless” approach — speed, efficiency, and the safety of store employees — valid enough to require something as utterly and downright unAmerican as rejecting cash?

We think not, and unfortunately the trend of “cash not welcome here” establishments is growing, to the point that lawmakers are beginning to take note and could introduce legislation barring the practice, as Massachusetts has done already, and as the New Jersey State House could be set to do next. According to a Federal Reserve survey conducted in 2017 cited in The Wall Street Journal, cash represented 30% of all transactions in America, with 55% of those being under $10.

via the NY Times

Regardless of Americans’ longtime preference for plastic in most transactions, many of which take place online, research by the Federal Reserve found that cash is still king in terms of Americans’ daily lives and usage, and as the study concluded further, this remains true across all income levels:

Not only is cash used frequently for small value and in-person purchases, it is also used by a wide array of consumers. The data on cash use by household income provides two main insights. First, consumers make—on average—14 cash transactions per month, regardless of household income. It is also noteworthy that cash was the most, or second most, used payment instrument regardless of household income, indicating that its value to consumers as a payment instrument was not limited to lower income households that may be less likely to have access to an account at a financial institution.

…click on the above link to read the rest of the article…

Story of a Gold Coin

Here’s a true story of one gold coin, a 50 Pesos gold coin like that pictured above.

Earlier this month, my friend Hugo Salinas Price emailed an interesting story about a single gold coin that that he still holds dearly.

Story of a Gold Coin by Hugo Salinas Price

As I was shuffling papers in some old files, I came across a slip of paper on which I had written down the price I had paid for a Mexican $50 gold peso coin: 717 Mexican pesos.

Judging from the price, I figure that the purchase was made sometime in 1972, when the price of a Troy ounce of gold was $46 dollars. The Mexican $50 gold peso coin contains 37.5 grams of pure gold, and 37.5/31.1 grams per Troy ounce, is 1.206: so there is 1.206 times more gold in a Mexican $50 gold peso piece, that in a Troy ounce of gold.

Thus, $46 dollars per ounce x 1.206 = $55.48 dollars as the value of the gold in the $50 gold peso coin, in 1972.

The rate of exchange Dollar/Peso in 1972 was 12.50 Mexican pesos per dollar, so $55.48 US x $12.50 = 693.50 pesos. I paid 717 pesos, because gold coins are always sold for a small percentage more than the price of bullion gold; in this case, the surcharge was for 3.4%.

The international price of an ounce of gold, as of November 30 was $1,222.10 dollars. The rate of exchange was at 20.40 Mexican pesos per dollar. So today’s price of the Mexican $50 gold peso coin should be close to $1,222.10 x 20.40 x 1.206 = 30,067 pesos. The quote this morning is: 30,890 pesos.

So my investment of 717 pesos, made 46 years ago, has turned into an investment worth 30,890 pesos today. Looks like a good investment.

But there’s a lot more! Because back in 1993, our President Salinas de Gortari chopped three zeroes off the rate of exchange. So actually, the 717 pesos I invested turned into 30,890,000 of the old pesos!

 …click on the above link to read the rest of the article…

The Big Picture: Paper Money vs. Gold

The Big Picture: Paper Money vs. Gold

Numbers from Bizarro-World

The past few months have been really challenging for anyone invested in gold or silver; for me personally as well. Despite serious warning signs in the economy, staggering debt levels and a multitude of significant geopolitical threats at play, the rally in risk assets seemed to continue unabated.

Bizarro-World intrudes into our reality, courtesy of central banks. [PT]

In fact, I was struggling with this seeming paradox myself. As I kept looking at the state of the markets, I couldn’t help but wonder “what if they just keep kicking the can down the road for the next 20 years, or even longer?”

Since the peak in 2011, gold and silver have been in a strong correction period and overall, prices haven’t benefited from all the trillions that have been injected into the markets since 2008. Total credit growth was approximately $80 trillion, climbing from $160 trillion to around $240 trillion in a mere 10 years.

The major central banks combined increased their balance sheet by buying government and institutional debt from $6 trillion to $21 trillion (FED, ECB, BOJ, PBoC), but none of it went into gold. However, even though these days we read and hear these numbers so often, it is still almost impossible for the true meaning of these sums to really sink in.

A trillion is hard to truly take in and understand; $80 trillion in debt is something already so far beyond our grasp that it might as well be $100, $200, or $300 trillion and it would almost make no conceptual difference. A good way to correct this dissonance is just think about the fact that 1 million seconds are 8 days, 1 billion seconds are 35 years and 1 trillion seconds translate into 32,000 years – bringing us back to the Stone Age.

Assets held by major central banks.

PBoC balance sheet

…click on the above link to read the rest of the article…

2019 Outlook: The State of Sound Money in the United States

2019 Outlook: The State of Sound Money in the United States

The Great Recession, coupled with the “Ron Paul Revolution,” prompted a renaissance of the sound money movement in the United States.

As Germany, Russia, and China — to name a few — continue to increase their gold holdings, the hegemonic power of Federal Reserve Notes (referred to today as the dollar) is slowly slipping away.

Simultaneously, whispers—once relegated to fringe corners—of restoring sound money have become passionate, concerned, and loud.

The destruction of sound money over the past century stems from actions at the federal level, but there are steps which states can take —and even have already taken —to move toward real, sound, constitutional money.

As state legislatures reconvene in the next few weeks, let’s take a look at the current state of play…

Since 2016, sound money has made a splash on the state level. According to the 2018 Sound Money Index, a new ranking of all 50 states on the extent to which they have implemented the pro-sound money policies, there are currently 38 states with an exemption of sales and use tax on the purchase of gold and silver.

Since 2016, legislators in 10 different states have introduced bills, seven of which were signed into law, to restore sound money by eliminating taxes on gold and silver within their borders.

In 2017, a quarter of all states without a sales tax exemption on gold and silver introduced new measures to eliminate the tax against the monetary metals. As states continue to make inroads on the sales tax issue, Tennessee and West Virginia are expected to introduce bills to remove sales and use taxes on sound money in 2019.

…click on the above link to read the rest of the article…

The Art of Defaulting

… the debt-financed overspending of the 1960s had continued into the early 1970s. The Fed had funded this spending with easy-credit policies, but by paying back its debts with depreciated paper money instead of gold-backed dollars, the U.S. effectively defaulted.

Ray Dalio

Principles for navigating big debt crises

Ray Dalio of Bridgewater Associates is one of my role models in life and, when he writes a new book, I would normally visit Amazon.co.uk more quickly than you can count to ten, but not this time!

What? Have I fallen out of love with Ray’s way of thinking? Not at all, but I found out that his new book – Principles for Navigating Big Debt Crises – can actually be downloaded for free. Ray, being the class act he is, has decided that everybody should know how to navigate a debt crisis; hence he has chosen to make it freely available (as a PDF copy).

Much (but not all) of the content below is inspired by Ray’s thinking. He is not as explicit in his new book as I am below (and as he has been before) in terms of the timing of the next debt crisis, but it’s pretty clear that he also thinks the writing is on the wall.

If you want to read the wise words of a very smart man, I suggest you give yourself one for Christmas, which you can do here. Christmas presents rarely come cheaper than this.

Debt crises of different sorts

In the following, I will focus on what Ray calls major debt crises – crises that have caused a slump in GDP of at least 3% but, in reality, there are different types of major debt crises.

…click on the above link to read the rest of the article…

You Can’t Eat Gold 

“You can’t eat gold.” The enemies of gold often unleash this little zinger, as if it dismisses the idea of owning gold and indeed the whole gold standard. It is a fact, you cannot eat gold. However, it dismisses nothing.

This gives us an idea. Let’s tie three facts together. One, you can’t eat gold. Two, gold is in backwardation in Switzerland. And three, speculation is a bet on the price action.

The fact that gold is inedible is supposed (by the enemies of liberty) to be proof positive that a gold standard wouldn’t work. Of course, there’s always the retort: You can’t eat dollars!

That may be emotionally satisfying, but there is a deeper issuer that the anti-gold crowd is missing. Yes, money makes terrible food but, also, food makes terrible money. A car makes a lousy airplane. And a shoe makes an awful TV. Cow poop is putrid as food for people, but it works well as fertilizer for plants. Each thing fits a particular purpose.

Why does food make terrible money? One reason is that it’s perishable. No one—other than a refrigerated warehouse—can make a bid on food beyond his own short-term needs. Without this robust bid, food has limited marketability. That is, it has a wide spread between its bid and offer prices.

Think of it in human terms, or even personal terms. Suppose you strolling along the sidewalk, and you’re hungry. You see a restaurant sign, “Hamburger + fries + drink $10.” You would pay the offer price. The next restaurant is going out of business, and its sign says, “All inventory must go! 50 hamburgers and 50 pounds of fries for $100!” You would not pay it (unless you were with 49 friends).

…click on the above link to read the rest of the article…

The Gold Standard: Protector of Individual Liberty and Economic Prosperity

The Gold Standard: Protector of Individual Liberty and Economic Prosperity

A Piece of Paper Alone Cannot Secure Liberty

The idea of a constitution and/or written legislation to secure individual rights so beloved by conservatives and among many libertarians has proven to be a myth. The US Constitution and all those that have been written and ratified in its wake throughout the world have done little to protect individual liberties or keep a check on State largesse.

Sound money vs. a piece of paper – which is the better guarantor of liberty? [PT]

Instead, in the American case, the Constitution created a powerful central government which eliminated much of the sovereignty and independence that the individual states possessed under the Articles of Confederation.

While the US Constitution contains a “Bill of Rights,” the interpreter of those rights and the protections thereof is the very entity which has enumerated them.  It is only natural that decisions on whether, or if such rights have been violated will be in favor of the State.

Moreover, nearly every amendment which has come in the wake of the Bill of Rights, has augmented federal power at the expense of the individual states and that of property owners.

History has shown the steady erosion of individual rights and the creation of “new rights” and entitlements (education, health care, employment, etc.) which have occurred under constitutional rule.  Instead of being a limitation on government power, constitutions have given cover for a vast expansion of taxation, regulation, debt, and money creation.

As Murray Rothbard notes in Anatomy of the State: All Americans are familiar with the process by which the construction of limits in the Constitution has been inexorably broadened over the last century. 

…click on the above link to read the rest of the article…

Paper money eventually returns to its intrinsic value – zero

Paper money eventually returns to its intrinsic value – zero


Venezuela 🇻🇪

Before hyperinflation vs NOW!


At one time, Venezuela had the largest oil reserves in the world, which provided steady revenues for the country and a good living for its citizens. Oil accounted for most of Venezuela’s exports. Life in Venezuela was excellent. Then, in 1998, came President Hugo Chavez. Chavez used the abundant income stream to go on a spending spree as he instituted a large number of entitlement programs using the oil revenues. A strike in 2003 interrupted Chavez’s plans and caused the GDP to crash by 27 percent in just four months. Chavez began nationalizing industries and instituting price controls, which was the beginning on Venezuela’s inflationary spiral as Venezuelans developed a reliance on their government for products and services.

The price of crude oil plummeted in 2014, and the economy shrank by 30 percent. Oil revenues, in the form of U.S. dollars, were dwindling, and Venezuela was unable to continue importing necessary goods. These days, in 2018, stores are empty as people attempt to survive on dealing through the black market.

Venezuela is printing currency at the speed of a copy machine. The more money that is injected into circulation, the more it becomes devalued.

…click on the above link to read the rest of the article…

Mexico’s Central Bank Just Broke with the War on Cash

Mexico’s Central Bank Just Broke with the War on Cash

Motivated by inflation?

A strange thing just happened in Mexico. The Bank of Mexico (Banxico), announced that it is considering launching a 2,000 peso note (ca. $105), double the highest denomination note currently in circulation. It’s also considering doing away with Mexico’s lowest denomination 20 peso bill (ca. $1.05), which will be replaced by a coin with the same face value.

Not everyone’s happy about the proposal, which forms part of a range of measures aimed at updating Mexico’s currency notes. Miguel González Ibarra, director of the Center for Financial Studies and Public Finance of the National Autonomous University of Mexico, said that introducing a higher denomination bill flies in the face of the broad trend among advanced economies to weed out such notes.

In 2016 Peter Sands, the former CEO of the British bank Standard Chartered, set the tone of the debate when he published a report for Harvard Kennedy School of Government imploring central banks around the world to stop issuing high-denomination notes and bills. They include the €500 note, the $100 bill, the CHF1,000 note and the £50 note. This is the first rule of the war on cash: make high-denomination notes taboo in law-abiding circles.

“Such notes are the preferred payment mechanism of those pursuing illicit activities, given the anonymity and lack of transaction record they offer, and the relative ease with which they can be transported and moved,” the report warned. In other words, only criminals use cash. High-denomination notes, the report added, “play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy.”

…click on the above link to read the rest of the article…

What Causes the Acceptance of Paper Money?

Demand for a good arises because of its perceived benefit. For instance, people demand food because of the nourishment it offers them. This is however not so, with regard to the pieces of paper we call money – why do we accept them?

Following the view of Plato and Aristotle, economists regard the acceptance of money as an historical fact introduced by the government decree[1]. It is government decree, so it is argued, that makes a particular thing accepted as the general medium of the exchange i.e. money.

In his writings, Carl Menger raised doubts about the soundness of the view that the origin of money is a government proclamation. According to Menger,

An event of such high and universal significance and of notoriety so inevitable, as the establishment by law or convention of a universal medium of exchange, would certainly have been retained in the memory of man, the more certainly inasmuch as it would have had to be performed in a great number of places. Yet no historical monument gives us trustworthy tidings of any transactions either conferring  distinct recognition on media of exchange already in use, or referring to their adoption by peoples of comparatively recent culture, much less testifying to an initiation of the earliest ages of economic civilization in the use of money[2].

Why conventional demand – supply analysis fails explaining the price of money

So how does a thing that the government proclaims will become the medium of the exchange, acquire purchasing power or a price? We know that the price of a good is the result of the inter-action between demand and supply. From this, we could reach a conclusion that the price of money is also set by the law of demand-supply.

…click on the above link to read the rest of the article…

The Dollar–From Bohemia to Bust

THE DOLLAR – FROM BOHEMIA TO BUST

Virtually no investor studies history and the few who do always think it is different today. The most important lesson is that people never learn. If they did, they wouldn’t be invested in a stock market that on any criteria is now at a bubble extreme. And they wouldn’t be invested in a global debt market which has grown exponentially in recent decades and which will become worthless in the next few years as debtors default. Nor would anyone hold paper money which is down 97-99% in the last 100 years and which is guaranteed to soon fall the final bit to take the value to zero.

The history of money clearly illustrates that “Plus ça change, plus c’est la même chose” (the more it changes, the more it is the same thing). The most constant factor in the history of money is the cycle of boom and bust or euphoria and despair. Cycles are part of nature just like the change of seasons.

But throughout history, mankind has always believed that they know better than previous generations and can eliminate the cycle of boom and bust. This is what the British prime minister Gordon Brown proudly declared before the economy collapsed in 2007. And the Nobel Prize winner in Economics, Paul Krugman, also believes that eternal prosperity can be generated by creating endless debt and printing unlimited money.

But history has time and time again turned hubristic know-it-alls into humbled has-beens.

FOR 6,000 YEARS GOLD HAS OUTLIVED ALL CURRENCIES

Whenever mankind has deviated from sound money, the consequences have without fail been catastrophic. The only money which has survived since it first came into use around 6,000 years ago is gold. All other money has been destroyed by greed and economic mismanagement. I believe I have quoted Voltaire for over 20 years and will continue to do so: “Paper Money Eventually Returns to its Intrinsic Value – ZERO”.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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