FED QE

When the money (Gold) runs out…

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As governments have used their ammunition in fighting to retain power for their Fiat currencies, the price of Gold and the Exchange Traded Product (ETP) or Exchange Traded Fund as it is more commonly called for Gold – the GLD has fallen.

But there comes a time in every charlatan’s performance when those watching no longer believe in the power of the magician pulling the strings behind the scenes.

In this case the arm of power behind the throne – the Central Banks – have sold or leased much of their Gold to Bullion Banks, who have sold this gold on the markets as their futures contracts came to an end, and the buyers took delivery, rather than as might have happened previously – settled in cash – it is increasingly obvious that as the number of contracts increase and more and more gold heads east to China and India, and north to Russia, and to numerous other central banks worried about their gold held in U.S. vaults, and have begun to increase their holdings, and repatriate their gold from overseas vaults, that it couldn’t go on forever.

And then this piece caught my eye…

http://www.kitco.com/commentaries/2015-09-29/Not-Enough-Gold-To-Pay-All-Holders-Of-Gold-Obligations.html

So what will happen when the gold does really run out?

Initially, I suspect Bankers will settle for cash, but probably have to pay a premium to do so, as those who own the metals contracts extract their pound of flesh. This will probably be under the radar, at first, but it will eventually leak out, and as more and more people have to settle for cash, the premiums will rise. This will feed through into the published prices, as the disconnect between the paper price and the settle price increasingly becomes obvious.

According to figures I’ve seen there are between 100 and 200 contracted ounces, for every real ounce in existence. This is how the Bankers came to dominate the world and its economies. The left hand not letting the right hand know the truth or what it was upto.

Fractional Reserve Lending meant lending out upto 10times the amount held on deposit. Of course this assumes they hold ten per-cent in reserve. BUT in the last ten years, those same bankers have had as little as 3 per-cent and that means they were lending out in excess of 30x their reserves. And that is the reason for the boom, and the bust when we had our Bear Sterns and Lehman moments.

If the Bankers persist in this lending and futures contracts binge, then it will end in disaster for the banks (and us) but at that point, the price of gold – both official and unofficial, will explode to the upside.

Of course in the meantime, as Harry Dent has stated on several occasions, the price may fall in the meantime, as first deflation due to demographics, and his convergence waves take hold, but as has been mooted on Bloomberg today, perhaps QE4 is but a printing press away?

And if it happens, when all that money leaks into the economy?

Can you say Boom?

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Kicking the Can – Again (Thurs 31 Oct, 2013)

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So, as the Hurricane passed over the UK, on Sunday, and into Monday, we counted the cost.  It took a day or so for the damage control systems to take account of the damage, and we learned there had been further major traumas to several people, and even the death of one woman.

Our sympathies extend to their friends and families.

No doubt the Insurance companies  providing insurance to these property owners will be looking for ways to shave off a few thousand pounds of disbursements as the claims start coming in with immediate effect.  And those whose properties have been damaged will be spending their disbursements having their properties refurbished to get their businesses back up to productive use, adding to GDP, and if that involves materials imported from overseas, and value added here in the UK, then also GNP – but we won’t be any better off.

On the other side of the Atlantic today, we learn that the Fed (Federal Open Market Committee) met to discuss the U.S. economy, and decided to take no action, leaving in place another further dilution of the nation’s wealth by a further $85 BILLION – $1,940,639.25 per minute, raising the Fed’s balance sheet to almost $4 TRILLION. ($4,000,000,000,000).

I find it peculiarly confusing, that the Central Bankers can print out another $85,000,000,000 and no-one bats an eyelid, but we learn that in the U.K., a man who had decided to make his own U.K. British Pound coins (allegedly upto £1.5 milion including blanks) and that man got 8 years in prison (currently up for appeal)

So rich bankers can do it, and give themselves large bonuses for doing so, but poor folks can’t… Doesn’t sound fair to me?

Which is why originally, money was just gold and silver… (and Copper of course for pennies)

In other words the only people who used to make money – legally – were the miners, who sold it to the lawful mint, to be coined into legal tender.

Ah!  Yes, but there’s the rub, the Banks don’t get their cut when that happens.

And that’s why the price of Gold and Silver is manipulated using paper derivatives. If the sheeple* were allowed to see the REAL value of Gold and Silver, more and more would likely begin to buy it, and that means currency, that the Fed would like to have put into risk assets, such as property and stocks and shares (and to a lesser extent T-Bills) rather than a lump of metal, that gains in value but doesn’t employ people, would leave the economy.  (and prop up miners in foreign climes)

Makes you wonder why foreign governments and miners aren’t kicking up a fuss about it?

W.

* The word ‘Sheeple’ is a derogatory term used to define the great uneducated and uninformed masses, who follow the rest of the herd, rather than get educated and think for themselves.