The British Pound Sterling lost its status as the primary basis of global trade in 1944. Why? Because the Treasury of the United States held title to about 4/5ths of the world’s officially-held gold reserves [more than 20,000 tons after WWII]. The dollar became the world’s “reserve currency” because U.S. government creditors could convert their dollars to U.S. gold [from 1792 until Aug. 15, 1971].
Since gold convertibility was suspended in 1971, the U.S. dollar has retained its “reserve-currency” status because of the dollar’s forty-year monopoly in settling OPEC oil trades [the “Petro-Dollar” system].
After the 2007 credit-collapse, China began to implement a strategy to slowly ‘de-peg’ from the petro-dollar and aggressively** add gold to its foreign exchange reserves.
China is now ‘de-dollarizing’ [unloading U.S. Treasuries]; and U.S. debt is rising. Since the world debt-crisis began, U.S. debt has more than doubled [up 114% in only nine years]. This chart shows how rapidly the monetary base has been expanding:
The official money supply quadrupled from 2009 to 2014. But the Federal Reserve no longer reveals how much or how fast the total monetary base is expanding. To avoid the spotlight on the ballooning total, the Fed quit publishing the “M3” monetary aggregate in 2006. [Image of the Adjusted Monetary Base courtesy of Zerohedge.]
Money-printing is showing up in the inflated stock market, select real estate markets, and the rising costs for insurance, rent, utilities, tuition, medical care, bitcoin, groceries, gold.
The day credit FROZE worldwide [Aug. 9, 2007], the gold price was $662.60/oz [London p.m. fix]. On March 14, 2008, people were shocked when gold surged past $1,000/oz for the first time ever.
THE EAST IS DRAINING BULLION FROM THE WEST.
Of the 3,000 tons of gold mined each year, every ounce of gold is PRE-SOLD. Who is buying all of the gold? Since the 2007 credit-collapse, Chinese, Russian, Indian, and Middle Eastern purchases of gold bullion have been unprecedented. Buyers from the Near and Far East [VietNam, Turkey, Singapore, Hong Kong, Shanghai, Dubai, Bangkok, etc.] are vacuuming available bullion supplies on every price-dip. (Recently, Russian buying has dwarfed purchases by China!)
In the last nine years, there has been a massive draw-down of deliverable gold at the LBMA [London Bullion Market Association] and the NY COMEX [New York Commodities Exchange]. As a result of “scrap” shortages, the world’s five major refineries have waiting lists for deliveries of pure bullion. Today, warehouse inventories of available “Good Delivery Bars” [400 oz gold bars, 1,000 oz silver bars] are extremely low at major bullion banks.
Two of the bullion banks under pressure are JPMorganChase Bank — JPMorganChase is custodian of “SLV” the silver ETF (Exchange Traded Fund) and the Hong Kong & Shanghai Banking Corp — HSBC is custodian of “GLD” the gold ETF.
PAPER SILVER • PAPER GOLD
Today, more than half of the world’s population believe that the only real money is gold and silver. On the other hand, less than ½ of 1% of Americans own physical precious metals. Most investors in the West buy PAPER silver and gold ‘derivatives’ [options, commodities futures contracts, and ETFs].
The PAPER market is an entirely ‘different breed of cat’ than the PHYSICALS market. Physical bullion cannot be printed; the supply is limited. The highly leveraged PAPER market has an unlimited, ‘virtual’ supply of silver and gold. In this securitized, fractional-reserve system, they sell gold and silver contracts without the bullion to back the contracts ounce-for-ounce [the practice of selling 100s of ounces to every 1 oz of stored physical silver is called “naked shorting.”]*
NAKED SHORTING DISTORTS SUPPPLY AND DEMAND.
Thanks to an unlimited supply of PAPER silver and gold, the digital market is in control of spot prices. Prices do not reflect actual supply and demand for physical bullion. During intervals in 2011, 2013, 2014, and July 2015, supplies of silver were so tight, U.S coin dealers were unable to satisfy over-the-counter demands. But each time, the market was flooded with massive tonnage of PAPER silver to suppress the price.
Shortages of actual silver and gold bullion can be hidden as long as naked shorting controls the pricing mechanism. The last time free-market forces prevailed against the trading desk of the New York Federal Reserve was in 2011.When silver and gold supplies completely dried up around the world, silver climbed 160% in only nine months. Coin dealers across the nation were “Bid only” – “No offer.”
DON’T END UP HOLDING A PIECE OF PAPER.
A whole lot more money-printing is headed our way. And deliverable bullion in the West is in short supply. Extreme product shortages always end up triggering runs to higher highs. The next move up in precious metals will be propelled by even greater supply deficits. Take delivery while products are readily available in North America. Silver is the poor man’s gold. Old U.S. 90% silver dimes and quarters [pre-1965 coins] could be used in small transactions.
Coins made of silver and gold store value over time. The paper dollar loses value over time — it is guaranteed. In 1971, a $1 bill was equivalent to 1/35th of one ounce of gold. Today, a $1 bill is worth 1/1,360th of a one-ounce gold coin [below].
Submitted by Denise Rhyne
* NAKED SHORTING (three articles):
YouShouldBuyGold.com/2017/09/GOLD & SILVER-pdf
** The Eastern Hemisphere is buying physical bullion aggressively in anticipation of the coming dollar “re-set.” 2017 HEADLINES from Luke Gromen @LukeGromen:
“Shanghai Gold Exchange February Withdrawals Highest on Record, up 67% y/y.”
“Indian silver imports rose 96% in February 2017.”
“Indian Gold Imports Surge: Imports rose 65% in February from January imports. February 2017 Indian gold imports were up 148% from February 2016.”
“Russia adds another huge pile of gold to reserves in March.”
“China gold bar/coin sales up 30% year to year.”
“Indian physical gold buying may be behind Dubai tightness”London (Platts) 25 Apr 2017
“India’s April gold imports more than double fr yr ago”
“UPDATE: China’s net-gold imports via Hong Kong more than doubles in March” Reuters http://www.reuters.com/article/china-gold-imports-idUSL4N1HX3GL
There is always a ‘lag time’ before massive expansion of the money supply causes a sudden, sharp rise in prices. Today, dollar debasement is being obscured by new ways to calculate the Consumer Price Index [CPI] and Gross Domestic Product [GDP]. The method uses hedonics, weighting and substitution. Most changes in costs for essentials are excluded from indices.