Peak Gold

by PeakResources



We are rapidly approaching the end of cheap resources. The wealth of most Americans could get wiped out during the next decade due to commodity inflation. Focusing on your real purchasing power is critical. As this brief documentary discusses, what is it that makes gold so special? Merely a "tradition" as Bernanke would have us believe, or sound 'money'?

This Gold Bug Ain't for Turning!

by Bill Bonner

Whoa! This is getting interesting...
Gold crashing on Monday. Slight recovery yesterday. Stocks crashed on Monday too. Now surging.
What happened to gold? No one knows. There were reports of a 124.4 ton sell order from an investment bank on Friday morning. But from whom? Why? Nobody knows.
From Bloomberg:

The CME's Comex unit is making it more expensive for speculators to trade after gold fell the most in 33 years today, dropping to the lowest since February 2011, after prices entered a bear market last week. Silver, also in a bear market, slumped 11% today and extended the year's loss to 23%.

In the financial markets, we spend most of our time waiting for something to happen. When years go by and nothing happens, we assume that nothing will ever happen. When it does happen, we are totally surprised.
Is something happening now? A major change of direction? Is another shoe dropping?
All Downhill for Gold?
A consensus is forming that the gold market has reversed direction. The bull market of the last 14 years has finally ended. It's all downhill from here, say the mainstream pundits.
But if that is true, what else will have to be true? The last bull market in gold ended when the Fed dramatically changed course.

China produces 90 tons, consumes 320 tons in Q1-2013

The Association added that country's gold production gained 11% in the same period to 89.91 tonnes.

BEIJING (BullionStreet): World's largest gold producer and second largest consumer China's total gold usage reached 320.54 metric tonnes in the first quarter, China Gold Association said.
According to CGA, purchases of gold bars surged 49% to 120.39 tonnes, while jewelry gained 16% to 178.59 tonnes.
Gold consumption in China soared 26% in the first three months of 2013 from a year ago amid strong bullion sales and rising jewelry demand.
The Association added that country's gold production gained 11% in the same period to 89.91 tonnes.
Analysts said Chinese gold imports are likely to swell further after rising strongly for a second straight month in March, as investors seek safety from economic uncertainty and after prices plunged to a two-year low last month.
Meanwhile, China's net gold inflows from Hong Kong rose to 223.519 tonnes in March from 97.106 tonnes in February.
China produced 403 tonnes of gold in 2012, but consumption was more than double at 832.2 tonnes.
Demand for gold from India and China is a major factor in global prices, with the World Gold Council saying the two countries account for more than a third of global appetite.

Are We a 'Criminal Element'?

by Bill Bonner 

 















Back in the USA, stocks rose again yesterday. The Dow finished up 128 points. Gold fell $25 per ounce yesterday... and everybody seems to think it will be going down forever. (A word of caution: probably not.)
Last week, we went to São Paulo, Brazil. There, too, we found taxi drivers who knew a lot more about monetary crises than the typical US economist. Said one:

I remember. I was just a kid. But my father would call and tell us to run to the grocery store. He had just been paid. We'd dash for the grocery story, meet him there and buy everything we could. We spent every cent in just a few minutes.

Our friend was recalling what it was like in the late 1980s in Brazil. The government had caused inflation... then hyperinflation. Prices rose so fast that as soon as people got some cash they ran to the grocery store to spend it.
Later, there was no point. In 1990, hyperinflation in Brazil reached 30,000%. What cost 1 real (the Brazilian currency) in 1980 cost 1 trillion in 1997. The hyperinflation wiped out the middle class... and wiped the shelves clean.
"It's hard to run a business when you don't know what your money is going to be worth," said our friend. "Businesses tended to just stop."



From Harare to Buenos Aires...

And here in Argentina, there came an announcement this week. The government will freeze the price of gasoline for the next six months.

What Is a Gold Standard?

Before 1971, U.S. dollars were backed by gold. This meant that the federal government could not print more money than it could redeem for gold. While this constrained the federal government, it also provided citizens with a relatively stable purchasing power for goods and services. As Learn Liberty explains in this simple 4 minute clip, today's paper currency has no intrinsic value; it is not based on the value of gold or anything else. Under a gold standard, inflation was really limited. With floating value, or fiat, currency, however, some countries have seen inflation reach extremely high levels - sometimes enough to lead to economic collapse. Gold standards have historically provided more stable currencies with lower inflation than fiat currency. Of course, this leaves the question open of whether the United States return to a gold standard?

Arizona Becomes 2nd State To Make Gold & Silver Legal Tender

by Tyler Durden

Just under a month ago we raised the prospect of a number of states following Utah (which authorized bullion for currency in 2011) down the path of gold and silver as legal tender. "The legislation is about signaling discontent with monetary policy and about what Ben Bernanke is doing," was how this shift was previously described and as Yahoo reports, the Arizona Senate on Tuesday approved a measure to make gold and silver legal currency in the state, in a response to what backers said was a lack of confidence in the international monetary system. The bill will make gold and silver coins legal tender as of mid-2014 and more than a dozen other states continue to mull the transition. Those against the bill argue somewhat ironically, "anybody who thinks gold or silver is a really safe place to put your money had better think again," anchored on the last two weeks, but as one supporter of the bill added, a "sound and honest money system such as gold and silver" is needed to bring stability.

Book review: David A. Stockman – “The Great Deformation – The Corruption of Capitalism in America”

by DETLEV SCHLICHTER

David Stockman’s new book “The Great Deformation” is a brilliant, penetrating analysis of the present state of the US economy and the US political system, and a detailed account of how the nation got into this mess. The book will upset Democrats and Republicans alike, and quite a few other constituencies as well, which can, in this case, be safely accepted as proof that Stockman’s narrative is spot on.

Stockman is an angry man and he admits so himself early in his 719-page tome. That anger adds bite and verve to his writing and keeps what is in fact a detailed historical account and economic analysis always highly entertaining. The book is long but never boring. Furthermore, Stockman does not let the anger cloud his judgement, which remains, in my view, relentlessly accurate throughout.

Is It Time To Sell Your Gold?

by Bill Bonner



Dear readers ask about gold. Is it time to sell? To buy? To forget about it?
Gold fell $25 yesterday; it now stands at $1,575 per ounce. The gold price could break all the way down to $1,000. But we don't expect it. Gold is not in a bubble.
As you have seen, gold is neither overpriced nor underpriced. It buys about what it should buy. Maybe a little less. Maybe a little more.
How do we know what gold "should" buy?
We don't, really. But gold is a natural thing. It is pulled from the earth by people, using the technology and resources available to them. As their productivity in other areas goes up, so does – generally – their ability to extract gold from the ground.

The US is moving to a gold standard

by Jan Skoyles

Following the news that last week Arizona lawmakers passed a bill that will see precious metals become legal tender we thought this would be the perfect time to bring you a fourth installment of The Real Asset Report. Here we look at the moves several US states are making to move to sound money. Look out for the great infographic below.

 ‘No State Shall make any Thing but Gold and Silver Coin a Tender in Payment of Debts’ 1787 US Constitution: Article I, Section 8.

When President Nixon closed the gold window in 1971, ending Bretton Woods, it signalled the final disregard for the Founding Fathers’ US Constitution.
Whilst many have long campaigned for a return to the gold standard, including Dr Ron Paul, a former Congressman and GOP presidential candidate, moves to use gold and silver as legal tender have hit the big time since the financial crisis.
There are now 20 US states that either have successfully passed bills to allow gold and silver to be used as legal tender, or have been exploring it as an option.

Gold manipulation, Part 2: How they do it (and a suggestion to hedge it)

by Martin sibileau

This is the second of three articles I am posting on the suppression of gold. In the first article I showed that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. This second article will show how that suppression takes place. Those familiar with the gold market will likely find nothing new. The third article will examine the implications of this suppression and support the claim of the gold bugs, namely that physical gold will trade at a premium over fiat gold or gold paper is also not a conspiracy theory, but the logical outcome of the current paradigm.

How they do it: The concept

The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation. In its simplest form, gold cannot be printed and, as its supply remains anchored, its price should spike if the supply of fiat money increases. The implicit math behind can be represented as follows:

Given a constant demand for money…

China Preparing To Impose Bretton Woods II Gold Standard

by King world News

The flow of power and gold is going from West to East.  China may have accumulated a staggering 1,500 tons of gold last year alone.  China’s growth is now picking up steam as well.  What is really stunning is how much the yuan has increased in terms of international transactions.”

“The usage of the yuan in international transactions has been increasing at an unbelievable 170% per year.  That’s how fast the yuan has been increasing in terms of international transactions.  So goes the gold, so goes the power, and you can see it in the prominence the yuan is gaining.

The Chinese definitely have a plan here and that is to get control of gold....

“We are headed for another Bretton Woods.  It is unsustainable for currencies to continue to lose their purchasing power while median incomes, especially in the US, continue to go down in the West.

The Central Bank Revolution I (Well ‘Nominally’ So)

by Ben Davies

“The Checklist Manifesto – How to get things right”, is a masterful book for its narrative and practical application. Written by Atul Gawande, an acclaimed surgeon based in the US, he takes us on a journey of how the simple checklist helps individuals deal with immensely complex situations, where risks can be calculated and often lives protected – skyscraper construction, medicine and investment banking.

First introduced into the US Air Force to assist pilots, the humble checklist in all its simplicity has helped generations of pilots navigate the complexity of flying modern aeroplanes. Gawande himself has introduced the concept into operating theatres and hospitals around the world with astounding success.

The year 2012 in perspective

by sibileau.com 

“…If you tax a nation to death, destroy its capital markets, nourish its unemployment, condemn it to an expensive currency and give its corporations liquidity at stupidly low costs you can only expect one outcome: Defaults….”

Click here to read this article in pdf format: December 9 2012

Today, I want to summarize what we covered over the year. During 2012, I sought to address both theory and market developments. Under an Austrian approach, I discussed many macroeconomic topics: the effect of zero interest rates, the myth of decoupling (between the US and the Euro zone), collateralized monetary systems (as imposed by the European Central Bank), the technical (but not realistic) possibility of a smooth exit from the Euro zone, the destruction of the capital markets by financial repression, the link between the futures, repo and gold markets and consumer prices (I don’t like the word “consumer prices”, but it is better than speaking of a “price level”), insider trading, circular reasoning in mainstream economics, high-frequency trading, what can precipitate the end game to this crisis, the technicalities of a transition to a gold standard, the conditions for a successful implementation of the gold standard, and the flawed logic behind the Chicago plan, as proposed by Benes & Kumhof.

Let’s now briefly follow up on each of the market themes I covered in 2012:

1.-There has been no decoupling: The Euro zone is coupled to the US dollar zone

At the end of 2011, when the collapse of the banking system in the Euro zone (courtesy of M. Trichet) was dragging the rest of the world, the Swiss National Bank established a peg on the Franc to the Euro and the Federal Reserve extended and cheapened its currency swaps with the European Central Bank. These two measures –indirectly- coupled the fate of the assets in the balance sheets of the Euro zone banks to the balance sheets of the central banks of Switzerland and the US.