Guest Post: "The Screaming Fundamentals For Owning Gold", by Chris Martenson

Chris Martenson has granted us permission to reprint his latest report, in its entirety. Not only that, he has also generously offered to join Vaulters this Thursday for the weekly Access2Access webinar. Even if you can't make the webinar, please take the time to read this important and comprehensive article.

"The Screaming Fundamentals For Owning Gold",

By, Chris Martenson

This report lays out the investment thesis for gold. Silver is mentioned only where necessary, as a separate report of equal scope will be forthcoming on that topic. Various factors lead me to conclude that gold is one investment that you can park for the next ten or twenty years, confident that it will perform well. Timing and logic for both entering and finally exiting gold as an investment are laid out in the full report.

The punch line is this: Gold (and silver) is not in bubble territory, and its largest gains remain yet to be realized; especially if current monetary, fiscal, and fundamental supply-and-demand trends remain in play.

Introduction
In 2001, as the painful end of the long stock bull market finally seeped into my consciousness, I began to grow quite concerned about my traditional stock and bond holdings. Other than a house with 27 years left on a 30 year mortgage, these paper holdings represented 100% of my investing portfolio. So I dug into the economic data to discover what the future likely held. What I found shocked me. It's all in the Crash Course, in both video and book form, so I won't go into that data here; but a key takeaway is that the US is spending far more than it is earning, and supporting that gap by printing a whole lot of new money.

By 2002, I had investigated enough about our monetary, economic, and political systems that I came to the conclusion that holding gold and silver would be a very good idea. So I poured 50% of my liquid net worth into precious metals, and sat back and waited.

So far so good.  But the best is yet to come... unfortunately.  I say 'unfortunately' because the forces that are going to drive gold higher in current dollar terms are the very same trends that are going to leave most people, and the planet, much worse off than they are now.

Part 1: Why Own Gold?
The reasons to hold gold (and silver), and I mean physical bullion, are pretty straightforward. So let’s begin with the primary ones:

  1. To protect against monetary recklessness
  2. As insulation against fiscal foolishness
  3. As insurance against the possibility of a major calamity in the banking/financial system
  4. For the embedded 'option value' that will pay out handsomely if gold is re-monetized

Monetary Risk
By ‘monetary recklessness’, I mean the creation of money out of thin air and the application of more liquidity than the productive economy actually needs. The central banks of the world have been doing this for decades, not just since the onset of the 2008 financial crisis. In gold terms, the supply of above-ground gold is growing at  1.7 % per year, while the money supply has been growing at more than three times that yearly rate since 1960:

Over time, that more than 5% growth differential has created an enormous gap due to the exponential 'miracle' of compounding.

Now this is admittedly an unfair view, because the economy has been growing, too. But money and credit growth has still handily outpaced the growth of our artificially and upwardly-distorted GDP measurements by a wide margin.  Even as the economy stagnates under this too-large debt load, the credit system continues to expand as if perpetual growth were possible.  Given this dynamic, we continue to expect all the resulting extra dollars, debts and other assorted claims on real wealth to eventually show up in prices of goods and services.

And since we live in a system where money is loaned into existence, we also have to look at the growth in credit, as well.  Since 1970 the US has been compounding its total credit market debts at the astounding rate of nearly 8% per annum:

This desperate drive for continuous compounding growth in money and credit is a principal piece of evidence that convinces me that hard assets, of which gold is perhaps the star representative for the average person, are the place to be for a sizeable portion of your stored wealth.

Negative Real Interest Rates
Real interest rates are deeply negative (meaning that the rate of inflation is higher than Treasury bond yields). This is a forced, manipulated outcome courtesy of central banks that are buying bonds with thin-air money. Of course, the true rate of inflation is much higher than the officially reported statistics by at least a full percent or possibly two, and so I consider bond yields to be far more negative than your typical observer.  Historically, periods of negative real interest rates are nearly always associated with outsized returns for commodities, especially precious metals. If and when real interest rates turn positive, I will reconsider my holdings in gold and silver, but not until then. That's as close to an absolute requirement as I have in this business.

Dangerous Policies
Monetary policies across the developed world remain as accommodating as they’ve ever been. Even Greenspan's 1% blow-out special in 2003 was not as steeply negative in real terms as what Bernanke engineered over his more recent tenure. But it is the highly aggressive and ‘alternative’ use of the Federal Reserve balance sheet to prop up insolvent banks and to sop up extra Treasury debt that really has me worried. There seems to be no way to end these ever-expanding programs, and they seem to have become a permanent feature of the economic and financial landscape.  In Europe, the equivalent is the sovereign debt now found on the European Central Bank (ECB) balance sheet.  In Japan we have prime minister Abe's ultra-aggressive policy of doubling the monetary base in just two years.  Suffice it to say that such grand experiments have never been tried before, and anyone that has the vast bulk of their wealth tied up in financial assets is making an explicit bet that these experiments will go exactly as planned.

Chronic Deficits
Federal fiscal deficits are seemingly out of control and are now stuck in the $1 trillion range. Massive deficit spending has always been inflationary, and inflation is usually gold/silver friendly. Although not always, mind you, as the correlation is not strong, especially during mild inflation (less than 5%). Note, for example, that gold fell from its high in 1980 all the way to its low in 1998, an 18 year period with plenty of mild inflation along the way. Sooner or later I expect extraordinary budget deficits to translate into extraordinary inflation.

Banking System Risk
Reason #3, insurance against a major calamity in the banking system, is an important part of my rationale for holding gold.

And let me clear: I’m not referring to “paper" gold, which includes the various tradable vehicles (like the "GLD" ETF) that you can buy like stocks through your broker. I’m talking about physical gold and silver because of their unusual ability to sit outside of the banking/monetary system and act as monetary assets.

Literally everything else financial, including our paper US money, is simultaneously somebody else’s liability. But gold and silver bullion are not. They are simply, boringly, just assets. This is a highly desirable characteristic that is not easily replicated.

Should the banking system suffer a systemic breakdown, to which I ascribe a reasonably high probability of greater than 1-in-3 over the next 5 years, I expect banks to close for some period of time. Whether it's two weeks or six months is unimportant; no matter the length of time, I'd prefer to be holding gold than bank deposits.

During a banking holiday, your money will be frozen and left just sitting there, even as everything priced in money (especially imported items) rocket up in price. By the time your money is again available to you, you may find that a large portion of it has been looted by the effects of a collapsing currency. How do you avoid this? Easy; keep some ‘money’ out of the system to spend during an emergency. I always advocate three months of living expenses in cash, but you owe it to yourself to have gold and silver in your possession as well.

The test run for such a bank holiday was recently tried out in Cyprus where people woke up one day and discovered that their bank accounts were frozen. Those with large deposits had a very material percentage of those funds seized so that the bank's more senior creditors, the bondholders, could avoid the losses they were due.

Most people, at least those paying attention, learned two things from Cyprus:

  1. In a time of crisis those in power will do whatever it takes to assure that the losses are spread across the population rather than taken by the relatively few institutions and individuals that should take the losses.
  2. If you make a deposit with a bank, you are actually an unsecured creditor of that institution; which means you are legally last in line for repayment should that institution fail.

Re-monetization Potential
The final reason for holding gold, because it may be remonetized, is actually a very big draw for me. While the probability of this coming to pass may be low, the rewards would be very high for those holding gold should it occur.

Here are some numbers:  The total amount of 'official gold,' or that held by central banks around the world, is 31,320 tonnes, or 1.01 billion troy ounces. In 2013 the total amount of money stock in the world was roughly $55 trillion.

If the world wanted 100% gold backing of all existing money, then the implied price for an ounce of gold is ($55T/1.01BOz) = $54,455 per troy ounce.

Clearly that's a silly number (or is it?). But even a 10% partial backing of money yields $5,400 per ounce. The point here is not to bandy about outlandish numbers, but merely to point out that unless a great deal of the world's money stock is destroyed somehow, or a lot more official gold is bought from the market and placed into official hands, backing even a small fraction of the world's money supply by gold will result in a far higher number than today's ~$1,300/oz.

The Difference Between Silver and Gold
Often people ask me if I hold goldandsilver as if it were one word. I do own both, but for almost entirely different reasons.

Gold, to me, is a monetary substance. It has money-like qualities and it has been used as money by diverse cultures throughout history. I expect that to continue.

There is a slight chance that gold will be re-monetized on the international stage due to a failure of the current all-fiat regime. If or when the fiat regime fails, there will have to be some form of replacement, and the only one that we know works for sure is a gold standard. Therefore, a renewed gold standard has the best chance of being the ‘new’ system selected during the next bout of difficulties.

So gold is money.

Silver is an industrial metal with a host of enviable and irreplaceable attributes. It is the most conductive element on the periodic table, and therefore it is widely used in the electronics industry. It is used to plate critical bearings in jet engines and as an antimicrobial additive to everything from wall paints to clothing fibers. In nearly all of these uses, plus a thousand others, it is used in vanishingly-small quantities that are hardly worth recovering at the end of the product life cycle -- so they often aren't.

Because of this dispersion effect, above-ground silver is actually quite a bit less abundant than you might suspect. When silver was used primarily for monetary and ornamentation purposes, the amount of above-ground, refined silver grew with every passing year. After industrial uses cropped up, that trend reversed, and today it's thought that roughly half of all the silver ever mined in human history has been irretrievably dispersed.  

Because of this consumption dynamic, it's entirely possible that over the next twenty years not one single net new ounce of above ground silver will be added to inventories, while in contrast, a few billion ounces of gold will be added.

I hold gold as a monetary metal. I own silver because of its residual monetary qualities, but more importantly because I believe it will continue to be in demand for industrial uses for a very long time, and it will become a scarce and rare item.

NOTE: PeakProsperity.com reserves its deeper analysis for our enrolled members, which is usually contained in Part 2 of our reports. Given the importance and widespread interest in this particular topic, we are exercising the rare exception to make Part 2 (below) available to the public.

Part 2: Supply & Demand Are Shockingly Out Of Balance

Gold Demand
Gold demand has gone up from 3,200 tonnes in 2003 to 4,400 tonnes in 2013, and that's even with a massive 800 tonnes being disgorged from the GLD tracking fund over 2013 (purple circle, below):

Note the dotted red line in this chart: it shows the current level of mine production. World demand has been higher than mine production for a number of years.  Where has the additional supply come from to meet demand?  We'll get to that soon, but the quick answer is: it had to come from somewhere, and that place was 'the West.'

A really big story in play here is the truly historic and massive flows of gold from the West to the East, with China being the largest driver of those gold flows.

China
Alasdair McLeod of GoldMoney.com has assembled the public figures on China's cumulative gold demand which, notably, do not include whatever the People's Bank of China may have bought. Those are presumably additive to these figures unless we are to believe that the PBoC now purchases its gold over the counter and in full view (which they almost certainly do not).

Using publicly available statistics only, it's possible to calculate that in 2013 China alone accounted for more than 2,600 tonnes of demand, or more than 60% of total demand or, as we'll soon see, almost all of the world's total gold mine production:

Of course China has a lot of money to spend, a long and comfortable relationship with gold as a legitimate asset to hold, and has to be very pleased by the repeated bear raids in the western markets that drive the price of gold down, even as gold demand has surged to record highs as a consequence of these lower prices.

Of course the big risk in all that Chinese demand for gold is that China may stop buying that much gold in the future for a variety of reasons.

One could be that the Chinese bubble economy finally bursts and people there no longer feel wealthy and so they stop buying gold.

Another could be that the Chinese government reverses course and makes future gold purchases illegal for some reason.  Perhaps they are experiencing too much capital flight, or they want to limit imports of what they consider non-essential items.

Who knows?

I do know that Chinese demand has been simply incredible and, keeping all things equal, I expect that to continue, if not increase.

India
India, long a steady and traditional buyer of gold, saw so much buying activity as a consequence of the lower gold prices that the government had to impose controls on the amount of gold imported into the country, even banning imports for a while:

Central Banks
Another factor driving demand has been the reemergence of central banks as net acquirers of gold. This is actually a pretty big deal. Over the past few decades, central banks have been actively reducing their gold holdings, preferring paper assets over the 'barbarous relic.' Famously, Canada and Switzerland vastly reduced their official gold holdings during this period (to effectively zero in the case of Canada), a decision that many citizens of those countries have openly and actively questioned.

The UK-based World Gold Council is the primary firm that aggregates and reports on gold supply-and-demand statistics. Here's their most recent data on official (i.e., central bank) gold holdings:

Note that the 2009 data is lowered by slightly more than 450 tonnes in this chart to remove the one-time announcement by China that it had secretly acquired 454 tonnes over the prior six years, so this data may differ from other representations you might see. I thought it best to remove that blip from the data. Also, the data for 2012 and 2013 must also be lacking official China data because the last time they announced an increase in their official gold holdings was in 2009.

In just 2013 alone, the gap between China's apparent and reported gold consumption was over 500 tonnes and the Chinese central bank, for a variety of reasons, is the most likely candidate to have absorbed such a quantity. If true, then China alone increased its official reserves by more than the rest of the world combined in 2013.

The World Gold Council puts out what is considered by many to be the definitive source of gold statistics, which are the source data for the above chart. I do not consider the WGC to be definitive since their statistics do not comport well with other well reported data, but let's first take a look at what the WGC had to say about gold demand in 2013:

The big story there, obviously is that investment demand absolutely cratered even as jewelry and coins and bars rose to new heights. And nearly all of that investment drop was driven by flows out of the GLD investment vehicle. That is, gold was chased out of the weak hands of mainly western investors and into the strong hands of Asian buyers who wanted physical bullion and jewelry.

This huge drop in total demand, led by plummeting investment demand, fits quite well with the 15% price drop recorded in 2013. So the WGC tells a nice coherent story so far.

But the problem with this tidy story is that it simply does not fit with the above data about China's voracious appetite for gold, let along India's steady demand and rising demand in Europe, the Middle East, Turkey, Vietnam or Russia.

The summary of the fundamental analysis of gold demand is:

  • there is a huge and pronounced flow of gold from the West to the East
  • there is rising demand from all quarters except for the hot money GLD investment vehicle (which I have never been a fan of)
  • all of this demand has handily outstripped mine supply which means that someone's vaults are being emptied (the West's) as someone else's are rapidly filling (the East's)

Now about that supply...

Gold - Supply
Not surprisingly, the high prices for gold and silver in 2010 and 2011 stimulated quite a bit of exploration and new mine production. Conversely, the bear market from 2012 to 2014 has done the opposite.

However, the odd part of the story for those with a pure economic view is that with more than a decade of steadily rising prices, there has been relatively little incremental new mine production.  For those of us with an understanding of depletion it's not surprising at all.

In 2011 the analytical firm Standard Chartered calculated  a rather subdued 3.6% rate of gold production growth over the next five years based on lowered ore grades and very high cash operating costs:

Most market commentary on gold centres on the direction of US dollar movements or inflation/deflation issues – we go beyond this to examine future mine supply, which we regard as an equally important driver. In our study of 375 global gold mines and projects, we note that after 10 years of a bull market, the gold mining industry has done little to bring on new supply. Our base-case scenario puts gold production growth at only 3.6% CAGR over the next five years.

(Source - Standard Chartered)

Since then, the trends for lower ore grade and higher costs have only gotten worse. But the huge drop in the price of gold in 2011 and 2012 was the final nail in the coffin and resulted in the slashing of CAPEX investment by gold mining companies.

Of course, none of this is actually surprising to anyone who understands where we are in the depletion cycle, but it's probably quite a shock to many an economist. The quoted report goes on to calculate that existing projects just coming on-line need an average gold price of $1,400 to justify the capital costs, while green field, or brand-new, projects require a gold price of $2,000 an ounce.

This enormous increase in required gold prices to justify the investment is precisely the same dynamic that we are seeing with every other depleting resource: energy costs run smack-dab into declining ore yields to produce an exponential increase in operating costs. And it's not as simple as the fuel that goes into the Caterpillar D-9s; it's the embodied energy in the steel and all the other energy-intensive mining components all along the entire supply chain.

Just as is the case with oil shales that always seem to need an oil price $10 higher than the current price to break even, the law of receding horizons (where rising input costs constantly place a resource just out of economic reach) will prevent many an interesting, but dilute, gold ore body from being developed. Given declining net energy, that's that same as "forever" as far as I'm concerned.

Just like any resource, before you can produce it you have to find it. Therefore the relationship between gold discoveries and future output is a simple one; the more you have discovered in the past, the more you can expect to produce in the future, all things being equal.

This next chart should tell you everything you need to know about where we are in the depletion cycle for gold, as even with the steadily rising prices between 1999 and 2011 (going from $300 and ounce to $1,900), gold discoveries plummeted in 1999 and remained on the floor thereafter:

Here we see that the 1990's decade saw quite a number of large discoveries that are currently in production but which were not matched in later years. Since it takes roughly ten years to bring a mine into full production following discovery, it's fair to say that we are currently enjoying production from the discoveries of the 1990's. Future gold production will largely be shaped by the discoveries made since then.

In other words: expect less gold production in the future.

Meanwhile, there will be more money, more credit, and more people (especially in the East) competing for that diminished supply of gold going forward.

Let's take another angle on gold supply, but which circles back and supports the above chart showing fewer and smaller discoveries in recent years.

The United States Geological Survey, or USGS, keeps a mountain of data on literally every important mined substance. I think it's staffed by credible people, doing good work, and I've yet to detect political influence in their reported statistics.

At any rate, the latest assessment on gold reveals that their best guess for world supply is that something on the order of 52,000 tonnes of reserves are left. Which means that, at the 2012 mining rate of 2,700 tonnes, there are 19 years of reserves left:

This doesn't mean that in 19 years there will be no more new gold to be had, as reserves are always a function of price; but it gives us a sense of what's out there right now at current prices.

As much as I like the folks at the USGS, I will point out one glaring discrepancy in their data as a means of exposing why I think these reserves, like those for many other critical things like oil, are probably overstated.  And that story begins with South Africa (highlighted in the table above with the blue dotted line.)

There you'll note that, at 6,000 tonnes, South Africa has the second largest stated country reserves. However, according to official South African data, they claim to have an astonishing 36,000 tonnes of reserves.  Which is right?

Neither as it turns out.

First, the true story of South African gold production is completely obvious from the production data. It's a story of being well and truly past the peak of production:

And not just a little bit past peak, but 44 years past; down a bit more than 80% from the peak in 1970.  The above chart is simply not even slightly in alignment with the claims of the South African government to have 36,000 tonnes of reserves. But pity the poor South African government which knows that gold exports represent fully one third of all their exports. Of course they will want to claim massive reserves that will support many future years of robust exports.

Instead, the South African production data can be modeled by the same methods as any other depleting resource and one such analysis has been done and arrived at the conclusion that there are around 2,900 tonnes left to be mined in South Africa.

The analysis is quite sound; and the authors went on to point out that the social, economic, energy, and environmental costs of extracting those last 2,900 tonnes are quite probably higher than the current market value of those same tonnes. If they are extracted, South Africa will be net poorer for those efforts. This is the same losing proposition as if it took more than one barrel of oil to get a barrel of oil out of the ground - the activity is a loss and should not be undertaken.

For lots of political and economic reasons, however, gold mining will continue in South Africa. But, realistically, someone in government there should be thinking this through quite carefully.

The larger story wrapped into the South African example is this: perhaps there are 19 years of global gold reserves left (at current rates of production), but I doubt it.

Instead, the story of future gold production will be one of declining production at ever higher extraction costs -- exacerbated by the 80,000,000 new people who swell the planet's population every twelve months, the hundreds of millions of people in the East who enter the ranks of the middle class annually, and trillions of new monetary claims that are forced into the system each year.

And this brings me to my final point of this part of the public part of this report.

Scarcity
If we cast our minds forward ten years and think about a world with oil costing 2x to maybe 4x more than today, we have to ask ourselves some important questions:

  • How many of our currently-operating gold and silver mines, or the base metal mines from which gold and silver are by-products, will still be in operation then?
  • How many will simply shut down because their energy costs will have exceeded their marginal economic benefits?

After just 100 years of modern, machine-powered mining, all of the great ore bodies are gone, most of the good ones are already in operation, and only the poorest ones are left.

By the time you are reading stories like this next one, you should be thinking, Why are we going to all that trouble unless that's the best option left?

South African Miners Dig Deeper to Extend Gold Veins' Life Spans

Feb 17, 2011

JOHANNESBURG—With few new gold strikes around the world that can be turned into profitable mines, South Africa's gold miners are planning to dig deeper than ever before to get access to rich veins.

The plans raise questions about how to safely and profitably mine several miles below the surface. Success would mean overcoming problems such as possible rock falls, flooding and ventilation challenges and designing technology to overcome the threats.

Mark Cutifani, chief executive officer of AngloGold Ashanti Ltd., has a picture in his office of himself at one of the deepest points in Africa, roughly 4,000 meters, or 13,200 feet, down in the company's Mponeng mine south of Johannesburg. Mr. Cutifani sees no reason why Mponeng, already the deepest mining complex in the world, shouldn't in time operate an additional 3,000-plus feet deeper.

"The most critical challenges for all of us in South Africa are depths and depletion of reserves," Mr. Cutifani said in an interview.

The above article is just a different version of the story that led to the Deepwater Horizon incident. Greater risks and engineering challenges are being met by hardworking people going to ever greater lengths to overcome the lack of high quality reserves to go after.

By the time efforts this exceptional are being expended to scrape a little deeper, after ever smaller and more dilute deposits, it tells the alert observer everything they need to know about where we are in the depletion cycle, which is, we are closer to the end than the beginning.  Perhaps there are a few decades left, but we're not far off from the day where it will take far more energy to get new metals out of the ground compared to scavenging those already above ground in refined form.

At that point we won't be getting any more of them out of the ground, and we'll have to figure out how to divvy up the ones we have on the surface.  This is such a new concept for humanity -- the idea of actual physical limits -- that only very few have incorporated this thinking into their actions.  Most still trade and invest as is the future will always be larger and more plentiful, but the data no longer supports that view.

We are at a point in history where we can easily look forward and make the case for declining per-capita production of numerous important elements just on the basis of constantly falling ore grades. Gold and silver fit into that category rather handily. Depletion of reserves is a very real dynamic. It is not one that future generations will have to worry about; it is one with which people alive today will have to come to terms.

The issue of Peak Cheap Oil only exacerbates the reserve depletion dynamic by adding steadily rising energy input costs to mix. Should oil get to the point of actual scarcity, where we have to ration by something other than price, then we must ask where operating marginal mines slot onto the priority list. Not very highly, would be my guess.

Part 3: Protecting Your Wealth With Gold
For all the reasons above, it's only prudent to consider gold an essential element of a sound investment portfolio.

In Part 3: "Using Gold to Protect Yourself In Advance of the Greatest Wealth Transfer of Our Lifetime" we detail out the specifics of how much of your net worth to consider investing in gold, in what forms to hold it, which price targets are gold and silver most likely to reach, and which eventual indicators (likely years away) to look for that will signal that it's time to sell out of your precious metal investments.

The battle to keep gold's price in check is truly one for the ages. Not because gold deserves such treatment, but because the alternative is for the world's central planners to admit that they've poorly managed an ill-designed monetary system of their own creation. As a result, price manipulation is an additional important factor to be aware of, and to address in your accumulation strategy.

Make sure you're taking steps today to ensure that the purchasing power of your wealth is protected, if not enhanced, when the trends identified above arrive in full force.

Click here to access Part 3 of this report: http://www.peakprosperity.com/insider/85067/using-gold-protect-yourself-advance-greatest-wealth-transfer-our-lifetime

82 Comments

CPE's picture

Bullish!

:D

Mr. Fix's picture

2nd

Holy crap! That's a lot of information.

Thanks Turd! yes

AUAGforever's picture

Duh

If we can only get rid of the comex now.

Motley Fool's picture

That's nice of him

It's a decent piece of writing...I even quoted from it in one of the day-old posts. ^^

I was very sad to see the imbedded report on the amount of gold left in South Africa. This stupid $IMFS system has drained us dry. :(

Les Baux's picture

Has anyone ever seen

A graph that depicts the number of potential mining locations relative to ore grade (specifically au density)?  I would be very interested to know if it is linear, logarithmic or something else entirely.  It would yield great insight into the realistic trajectory and ceiling one could expect in a bull market past the highs of the most recent one.

silver66's picture

7th Heaven

excellent piece

Silver66

Stack till it hurts

tyberious's picture

THE BANKERS MIDWIFE

The Hegelian Dialectic Triad of problem/reaction/solution which we have so often discussed here is both a conscious and subconscious process by which we gather unto ourselves what is attainable.

The conscious component is the unfolding plan of centralization and consolidation which we see in all aspects of life.  The emerging multilateral financial system where all currencies and commodities will de-peg from the US dollar and peg to the SDR of the International Monetary Fund is following a predetermined pattern which has plagued mankind and how he relates to the world since the very beginning, whatever you choose that beginning to be matters not.  It is the same in and through everything.

As we move through April some of the important dates and meetings we have discussed are happening, such as the G20 meetings coming at the end of this week.  It is these meetings which were referred to by the G20 back in February when they stated that the US has until their next meeting to pass the IMF 2010 Reforms or they would take “aggressive measures” to force the changes without the participation of America.

Keeping with our Hegelian principles, the United States has been willfully cast in the role of villain to the emerging and necessary multilateral financial system.

This is not Russia and Putin overthrowing some boogeyman banking cabal.  This organized structure exists in the world as the rent seeking organized elite, of that their is no doubt.  But it does not stand in contrast to the pure dictates and desires of a larger mass of disorganized humans who suffer from the same malady.

In fact, in my life experience, it is those who profess to be the best whom are the worst.

Until we fully understand and accept the opposing paradigms as explained here, we will forever battle illusionary demons and villains.  Only through a thorough comprehension of our true nature will we honestly address the imbalances in our world.

With that being said, lets investigate the more tangible evidence in support of our thesis as presented.

In the last few days the following events have happened:

1. Russian Central Bank changed its logo to that of a Golden Ruble.

2. Britain is calling on the US to pass the IMF Reforms.

3. Ukraine situation is evolving into a Russian version of the initial American coup.

4. Syrian rebels are being provided with weapons again.

5. Renminbi trading hubs have been implemented in London and Frankfurt.

6. Russia announces deal where they trade goods for Iranian oil.  This is Iranian oil which Russian oil companies can then sell on the world market in currencies other than US dollars.

7. US threatens retaliation for attempts to by-pass the dollar.

This is just a sampling of what is taking place.  Most readers are fluent enough in following world events that I do not need to list all matters and events.  The above list should suffice.

Now below we will delve into why the above manufactured opposing paradigms are simply that, manufactured stage theatrics which allow for specific companies and industry interests to fight over the table scraps of the Bank for International Settlements.

A cursory investigation into the Bank for International Settlements clearly proves that all countries and banks are moving towards the same goal of centralization and consolidation.

The Executive Board of the BIS is a list of top economists and central bank figure heads from the most powerful countries:

Chairman: Christian Noyer, Paris

Mark Carney, London
Agustín Carstens, Mexico City
Luc Coene, Brussels
Jon Cunliffe, London
Andreas Dombret, Frankfurt am Main
Mario Draghi, Frankfurt am Main
William C Dudley, New York
Stefan Ingves, Stockholm
Thomas Jordan, Zurich
Klaas Knot, Amsterdam
Haruhiko Kuroda, Tokyo
Ann Le Lorier, Paris
Stephen S Poloz, Ottawa
Raghuram Rajan, Mumbai
Jan Smets, Brussels
Alexandre A Tombini, Brasília
Ignazio Visco, Rome
Jens Weidmann, Frankfurt am Main
Janet L Yellen, Washington
Zhou Xiaochuan, Beijing

Impressive list of individuals isn’t it.

Now go to the BIS website at:

https://www.bis.org/cbanks.htm

Explore the list of countries who have a Central Bank which is a part of the BIS system.  You will find virtually ever country on Earth, except for North Korea, which is most likely under the People’s Bank of China or the Republic of Korea itself.

Russia is there.  China is there.  Iran is there. And so on and so on.

Can we really expect that any one of these countries is standing against a system which they themselves are entrenched within?

America was used by the rent seeking elite to expand the central bank system around the world.  With this system now fully in place the US will be used as the bad guy paradigm to gather the world within the structure of a centralized multilateral system which may or may not “self limit” rent seeking and allow for a bi-directional transfer of wealth based on fundamental economic and humanitarian principles.

The Bank for International Settlements and those who control it, have given birth to a centralized banking system with a supra-sovereign currency from which the future will be extracted.  America helped with the delivery and will now be reduced to a participating member within a larger gathering.

Let there be no more silly talk of good guys and bad guys.  Our inward battle must be fought alone and the outward physical manifestation of this conflict will dictate how the world will look in a hundred years.  As many great philosophers and thinkers over the ages have stated, be the change you wish to see in the world.  Stop looking for saviors and scapegoats.

The Garden of Eden awaits our return.  – JC Collins

http://philosophyofmetrics.com/2014/04/08/the-bankers-mid-wife/

Hagarth's picture

Living off the grid in BC

On Lasqueti Island

silver2013's picture

Everyone and everything

Everyone and everything points to a dollar collapes and a silver/gold spike....but why its taking so long? And if its taking this long; how do wr know if it wont take another 20 to 40 years or more? Also many countries have dual currency and gold and silver its still worthless because the system wont let the people use gold or silver for food amdother gooda...i guess its anyone guess what really is going to happen one day.

ancientmoney's picture

U.S. hates it when others horn in on currency rigging . . .

silver2013's picture

Take a look at cuba. Us

Take a look at cuba. Us dollar its actually worth 20% less so people dont like it. Castro has a new currency that he made up and he said the usa dollar is worth 20% less than his curency. People over there have gold and silver but its worthless because they cant buy food and other goods..noone takes it. So reality check
If the shit really hits the roof and usa decides to invent another currency for us ...we are screwed.

Les Baux's picture

@silver2013

You've got the right idea.  It could take 40 years, or 200 for that matter.

It could also take 6 months.  As they say here:

Prepare accordingly.

Hagarth's picture

Women of Soul: In Performance at the White House

PBS had this show on last night, a bit of music and a glimpse of what its like in the White House, small room(?) or Large Stage?  This was from last March but featured  Aretha Franklin, Melissa Etheridge, Patti LaBelle, Jill Scott, Janelle Monáe, Tessanne Chin, and Ariana Grande bring blues, jazz, soul, R&B, and Rock and Roll together at the White House.

If any of your can watch it online in the USA (I am blocked since I'm Canadian...) here is the link.

http://video.pbs.org/video/2365217043/

The interesting bit was the music performed.  First song was from the Wizard of OZ y'know the one with the Yellow brick road?  The Second Song was also Gold related and the 3rd was Freedom related.  Sorry I am not that good with song names otherwise I would list them, but again there seemed to be a lot of songs within the lineup Gold themed.  Pattie Labelle had a costume on that made her look like a green pyramid with a black obelisk in the center.

securi_D's picture

Chris Martenson is Excellent

And he puts out fantastic analytical work on precious metals (as well as the economy). If you've never visited his site, I would highly recommend doing so and watching his crash course series, which is free. Can't wait for his A2A!

-_D

bullion only's picture

When will i happen?

The collapse, the reset, the new currency...........That is the million dollar question. Or shall I say multi-trillion dollar question.

I read last night that we only had 20 more years of gold to mine so at he latest 20 years. Bu I also read that in May he Chinese and Russians could announce a big gas deal. If his is done in gold or yuan or anything but dollars then I think the reset could be as early as May.

What does it mean for the rest of the world? Freedom from exported inflation. What does it mean for Americans? Higher prices.

Food, energy, all imports as well as what we export because those other countries can bid up what we would comsume domestically.

But isn't hat what we wanted all along? A weaker dollar to boost our export economy. But we don't have that anymore.

Human labor is a commodity. China then east Asia, Africa. I will be a long time before our labor will work for hose wages. Better to be on welfare.

One teacher said to his high school class on retirement. "You are he future of America and that's why I'm leaving."

RT

bullion only's picture

Sorry "t" key sticking

My apologies.

Great forum btw.

RT

El Gordo's picture

BO

My guess is that if the China/Russia gas deal goes through or other non-dollar denominated big deals are announced that our CIC will claim success in his ongoing effort to bring us to our knees, or at least to grab our ankles.  He's theoretically only got 2 years left to accomplish his mission, and frankly, I'm pretty impressed with how far he has taken us in a relatively short 6 years.  It's still conceivable that he could finish the job by the time his term is up; if not, he'll have to do something else.

Bsong's picture

I have to confess.  My

i

DayStar's picture

Harvey's Up! (TFMR)

Get the full-Harvey at:  http://www.tfmetalsreport.com/comment/397408#comment-397408

  • Mark O’Byrne: Gold bullion rose by 1.3% today to a session high of $1,313.50, on safe haven demand due to renewed geopolitical tensions in Ukraine. Technical buying was also likely after gold moved above the $1,300 an ounce mark. This may have triggered stop loss buying. Gold looks set to benefit from the continuing economic and geopolitical uncertainties. Also supportive may be Chinese demand which returned after their markets reopened after the Tomb Sweeping holiday yesterday. 
  • Harvey: Gold was held to a 1% gain as the bankers try and restrict its advance. Actually throughout the entire day gold has been held in check. Silver seems to be an enigma as its open interest is almost at multi year highs and yet the silver price remains low. Many are having difficulty explaining this. I believe that China is the proxy holder of many of those Comex longs and they are waiting for the right time to cash in those contracts for real silver. As for gold, China is very happy that the Bank of England is obliging by supplying via Switzerland the gold that it requests. Today,day 4 of negative GOFO's rates signalling a lack of London good delivery bars that the criminal bankers use to attack gold. We had a slight decrease in negativity in the 6 month and 3 and 2 month GOFO, while the one month stays in backwardation. 
  • Robin Harding and Josh Noble (FT): The US has warned Beijing not to go back to manipulating its currency, following a sharp depreciation of the renminbi since the start of 2014. "If the recent currency weakness signals a change in China's policy away from allowing adjustment and moving toward a market-determined exchange rate, that would raise serious concerns," said a senior Treasury official ahead of this week's IMF, World Bank, and G20 meetings in Washington. 
  • Gina Chon: The Federal Reserve granted a fresh concession to banks that are subject to the Volcker rule on Monday, giving them two more years to offload their holdings in collateralised loan obligations to comply with the measure. The Volcker rule, aimed at banning proprietary trading, would have forced banks to divest their CLO investments, resulting in billions of dollars in losses. 
  • Chris Powell: James Turk says the growing backwardation in the gold market as central bank intervention increasingly distorts all major markets. John Embry says that the gold price has been in government lockdown for three weeks but that gold's fundamentals remain "rock-solid".
  • Paul Ploumis: The decision by the Reserve Bank of India (RBI) to grant gold import license to five private sector banks saw gold premiums tumbling by nearly 70% during last week. as the first sign of relaxation of tight gold curbs, the RBI allowed five more banks from private sector to import gold, thereby making more gold available in market. GJF forecasts the monthly gold shipments by the country to double to almost 50 tons in March ’14 from 25 tons during Feb ’14. Consequent to the RBI announcement, the premium on the yellow metal plunged from $85 per ounce to $25-$30 levels per ounce.
  • Yesenia Duran: CME Group Inc., the world’s largest futures market, experienced what it called “technical issues” that prompted it to halt trading of about two dozen contracts on its Globex futures and options markets today. Wheat, corn, cattle and hogs were among the halted contracts. The exchange posted the notice at 12:51 p.m. Chicago time. None of its largest financial contracts, include futures on interest rates, equity indexes, currencies and energy products, were affected. “We experienced a technical issue that resulted in certain agricultural futures and options markets being halted on CME Globex today. The issue has been resolved,” Chris Grams, associate director of corporate communications at CME Group, told Futures. CME livestock, dairy/butter, weather, commodity indices, crude palm oil and ethanol futures and options markets reopened at 2:30 Central Time for the remainder of the Tuesday, April 8 trading session.”
  • Koos Jansen: In 2013 Indian net silver import broke all records at 6016 metric tonnes. The Indian gross monthly import average in 2013 was 512 metric tonnes. In January 2014 gross silver import was 461 metric tonnes, down 44 % m/m, up 51 % y/y.
  • Bill Holter: Can you imagine what it would be like if we were not able to "print and spend" dollars for trade because foreigners would not accept them? Can you imagine the array of products that simply would not make it to the shelves of Walmart if we could not spend our dollars internationally? This IS going to happen at some point and to some extent. Unfortunately in my opinion, what happened in New Orleans after hurricane Katrina will be a template for what will be seen in many cities and even towns across the country. We were a great country that got "fat and lazy" and lived off the fat, then the muscle and now the bone of what was left to us by our predecessors. We as a nation physically still have the ability to turn this around (financially not so much), mentally I am afraid this is no longer the case. I'm pretty sure that we will look back at the current "lean times" and long for them.
  • Zero Hedge: The last time global equity markets were falling at this pace (on a growth scare) was the fall of 2011. That time, after a big push lower, November saw a mass coordinated easing by central banks to save the world... stock jumped, the global economy spurted into action briefly, and all was well.This time, it's different. The Fed is tapering (and the hurdle to change course is high), the ECB balance sheet is shrinking (and there's nothing but promises), the PBOC tonight said "anyone anticipating additional stimulus would be disappointed," and then the BoJ failed to increase their already-ridiculous QE (ETF purchase) programs. The JPY is strengthening, Asian and US stocks are dropping, CNY is weakening, and gold rising.
  • TruNews: A fairly large number of people believe that the Yellowstone volcano–also known as the supervolcano–might blow soon, signaled, they say, by animals appearing to flee the park. First it was bison. Now some bloggers have been posting analysis on a video that they say shows a herd of elk sprinting out of the park, including over a fence. “A massive herd of elk, sprinting and jumping the gate away from Yellowstone. This is huge,” said one blogger. “Oh they’re going to their summer locations, we’re told. But wouldn’t they stay within the gate. They’re restricted to that gate, but still the herds run away. This is another huge sign of mass animal movements. Look at the size of the herd.”
  • TruNews: A North Korean official has been executed with a flame-thrower, South Korean media has reported. He is one of up to 11 senior party officials with close ties to Jang Song-taek — Kim Jong-un’s recently purged uncle — who have been apparently executed or sent to political prison camps. Jang was publicly tried and executed in December after being found guilty of corruption and activities that ran counter to the policies of the Workers’ Party of Korea. The regime has shut down the department within the Workers’ Party that Jang previously headed. O Sang-hon, a deputy minister at the ministry of public security, was “executed by flame-thrower”, a source told South Korea’s Chosun Ilbo newspaper. Mr O was executed because he had followed Jang’s instructions to turn the ministry into a personal security division to help safeguard his business dealings, the paper reported. 
  • Dave Hodges: The practice of ridesharing, in its informal form, is almost as old as the automobile itself, but in the digital age app-enabled ridesharing has seen an explosion in interest, threatening the commercial taxicab industry and the city officials who depend on that industry for revenue. Despite the fact that proponents of Agenda 21 mandate that we drive less, taxicabs unions are able to force the small entrepreneurs out of business. The penalty for private ride-sharing for non taxicabs entities is the forfeiture of one’s automobile. This practice violates the Equal Protection clause of the 14th Amendment. Additionally, restraint of free trade and the First Amendment right to peaceably assemble. And when two or more parties peaceably assemble, government does not have the right to regulate and exchange of services. 
  • RT: Nuke talks with Iran are collapsing as US opposes Iran's pick for a UN envoy. Washington and Tehran are again at odds after the United States Senate voted this week to ban the Iranian diplomat nominated to serve as his country’s ambassador to the United Nations from entering the US. The Senate overwhelmingly agreed on Monday this week that Iran’s pick for UN envoy, Hamid Aboutalebi, shouldn’t be allowed to step foot in the US due to his alleged role in the 1979 hostage crisis at the American Embassy in Tehran.
  • Michael Snyder (The Economic collapse) - Part 1 of 6 of 16 signs you are unprepared for a collapse: http://www.tfmetalsreport.com/comment/397408#comment-397408

All this and more on...

The Harvey Report! wink

DayStar

stealthbear's picture

A 2 A with Chris

Can't wait to listen to this one.  Chris Martenson has an excellent way of presenting information in a calm and rational manner, and you, Turd, do a fantastic job of interviewing your guests on A2A.  You ask pertinent questions, then let your guests answer without interruption.  You are a natural at this!  Good catch for an interview.

stealth

tyberious's picture

Ron Paul

The Founders knew there can be no freedom without the ability to defend it. 

So they included the Second Amendment in the U.S. Constitution as a bulwark against government tyranny. 

In honor of our Second Amendment freedoms, I'm pleased to announce that Campaign for Liberty is giving away a brand new Daniel Defense AR-15. 

The giveaway is free to enter, and you can learn more at the page linked below.

Just click here to enter Campaign for Liberty's AR-15 gun giveaway for your chance to win

Campaign for Liberty will contact you via email if you are the winner. 

Thank you for your support of Campaign for Liberty. 

For Liberty,

Ron Paul 
Chairman

FreddyKrugerrand's picture

The Miners

Instead, the story of future gold production will be one of declining production at ever higher extraction costs...

_________________________________________________________________________________

This is what has me worried about the miners.  If the gold price ultimately reflects the positive fundamentals discussed in the article Turd posted, will the increase in the price of gold out-weigh the higher extraction costs and lower reserves and drive the share prices higher?  At this point, I'm inclined to hang on to the PM miner fund I have and see if we can't get one more boom.

Stratajema's picture

What the writer does not know

What the writer does not know is that the U.S. military/government/contractor has unique and secretive mining technology that no private firm or foreign government has.  That mining technology is/was used to drill out the area for underground U.S. "cities".  So if this technology ever makes it into the private sector, it would greatly reduce the time needed to mine ore.  Rumors are this mining technology can create a 40 foot diameter hole by 1 mile in about a day or so... through solid rock.

Groaner's picture

Smack down number 6500

No news, USD has hardly budged and its Wednesday.. 90% of the time its a down day plus the Crime Syndicate coming out with their fantasy notes..

Lintltj5's picture

@Tyberious

I'd love to sign up, but the Fuher here in New York has decreed that such "child killers" as this are no longer allowed in our state. All who own this weapon of mass destruction and do not register said weapon at their nearest Gestapo headquarters will be declared felons in t minus 6 days.

Daniel Defense makes awesome goods however.

ancientmoney's picture

Hang onto your Spongebob Squarepants silver coins . . .

ag1969's picture

BREAKING: 20 injured in stabbings at Pennsylvania school

Twenty people were injured in a mass stabbing at a Pittsburgh area high school, and at least one person is in police custody.

The injury toll at Franklin Regional High School in Murrysville jumped dramatically after early reports of a handful of stabbings, according to KDKA.

At least four people were taken by medical helicopters to medical centers.

Dan Stevens, a spokesman for Westmoreland County emergency management, told the Associated Press that the suspect is in custody.

It is unclear if the attacker is a student at the school.

Read more: http://www.washingtontimes.com/news/2014/apr/9/1-arrested-in-stabbings-at-pennsylvania-school/#ixzz2yOl8OW00
Follow us: @washtimes on Twitter

Time for everyone to register their knives.

Watch live coverage from WPXI

http://www.nbcnews.com/#/storyline/school-stabbing-spree/stabbing-pittsburgh-high-school-n75571

Syndicate contentComments for "Guest Post: "The Screaming Fundamentals For Owning Gold", by Chris Martenson"