Sunday, August 19, 2012

Gold Demand Continues To Drop

I have written extensively about gold over the years.   The people who are telling us we need to return to a gold money standard are, in fact, proposing economic slavery.  Gold money isn’t democratic money.  Gold money benefits those who have the gold.  It always has.  It artificially limits the money supply and creates artificial poverty.  You have to look no further than Europe where the gold standard once was the basis for massive class warfare and systemic poverty while kings, corporations and private for-profit bankers looted society and the world through imperialism and colonialism.  Gold money was created by crooks to serve crooks. 

Gold money is the antithesis of democratic money.  There are zero historical examples of gold-backed money being democratic money.    To institute a gold standard today would lock in the gains the elites have pilfered from the rest of us.  All while slamming the brakes on everyone else’s ability to get their hands on much-needed money.   It would benefit no one but the status quo and would push us into a depression as far as they eye can see.   A lack of gold standard has nothing to do with anything in the creation of this crisis.  In 1929 the United States had most of the world’s gold and was on the gold standard.  That was the problem.  Anyone who believes we should return to a gold standard either doesn’t understand money or democracy or both.   Or, is a member of the status quo who seeks to subvert democratic money or, even worse, is a useful idiot unwittingly shilling for the status quo.

About six months ago a player in the gold and gold futures (derivatives) market said that the leverage in the gold market is about 200 to 1.  Now, that would take some work to validate that specific number but we have discussed on here numerous times that the gold market is driven by extreme leverage.  That makes Lehman Brother’s leverage ratio in 2008 look like child’s play. 

The gold market needs central bankers to keep bailing them out just as banksters were bailed out for their faulty trades.  But, most gold ideologues despise central banking.   It’s no great irony that the gold investor’s best friend is their perceived enemy.   That without the institution they hate so much, they would have lost everything.  We need a central bank in our nation.  We simply need one that is part of a public banking system that serves democracy rather than capitalism or corruption or politicians or the military-industrial complex.   Then we can create a merit-based economy, be it capitalism or something else, that works for democracy.

Gold prices, just like any other price, are determined by supply and demand.  And, the demand that has driven gold higher for the last decade has been fueled artificially by derivatives and its associated massive leverage.  If you think central bankers are going to solve this crisis, you should own gold.  If not, well then, you were just along for the trade and hopefully you’ll wake up to a faulty belief system before the implosion occurs.   If central bankers can’t find a way to inject trillions of new dollars, euros, yuan, etc into the system, 2012 is a tipping point.  Money is draining out of the global economy at an alarming rate.  Much faster than 2008.  And, that is exactly what we said would happen numerous times over the last seven years.  The crisis would manifest itself first in the U.S. but then the back end of the crisis would be felt disproportionately outside of the U.S. as globalization collapsed.  A very unique and lonely position that is going to come to pass.  Gold investors had better start praying for central bankers to bail them out. 

In closing, I find it interesting that John Paulson, the noted hedge fund manager, has increased his stake in gold.  Paulson is notorious for getting some of the 2008 crisis correct in his leveraged bets and making billions.  But since 2008 he has had some huge losing bets.  It is impossible to continue to make huge bets with leverage over and over again when the system is in failure mode.  That is, unless someone has access to information others don’t.   We know in 2008 that Wall Street was making bets against products they were actually selling to clients.  And, were actually making bets against our municipalities, schools and states – predatory capitalism.  Paulson and others don’t have that edge today because the system they were so reliant on, crony global finance, is dying.   So, their bets won’t react as prior bets will as the linearity of the past is gone. 

Title link here.

posted by TimingLogic at 1:44 PM