Gold: Welcome To The Weimar Death Spiral

For starters, I want to re-emphasize the importance of getting your money OUT of fiat currency and OUT of U.S. banks.  If you read this article and do not come to that conclusion, you will end up getting what you deserve:  Commerzbank To Hoard Euros  The Fed is devaluing the dollar every day.   My solution for day to day cash management is Bitgold.  I am not an “ambassador” or “affiliate.”  But I am convinced that it’s the best viable means of managing money that requires “fungability” – i.e. that you need for daily expenses.  You can sign-up for Bitgold here:   Gold-Backed “Checking” Account.  Bitgold operates OUTSIDE of the global Central Banking system.

Second, a colleague of mine told me he knows why the stock market is up today – because it’s open.   That’s not entirely a joke.  But what is a joke is the underlying cause:  rampant global money printing disguised as “quantitative easing  – or Central Bank asset monetization.”

Goodbye Keynes, hello Havenstein.  The Fed and the ECB have resorted to Weimar-style money printing.   The lack of transparency makes it easy for them to impose various forms of disguise to hide the outright money printing.   Today the ECB rolled out its program to buy corporate bonds.  It prints money and buys the bonds of U.S. and European corporations.  The disguised name is “quantitative easing.”

It’s a meaningless description.  It’s printing money and giving that money to banks and corporations to spend.   It may not increase the official tabulation of the money supply, but effectively it balloons the supply of money.   After all, money is spending or lending power.   That money sitting on bank balance sheets translates into “high powered” reserve credit.  It multiplies the spending power by 10.  That’s the real supply of “money” in the system.

The precious metals market understands this truth.  The move in gold is “quantitative price appreciation.”   It’s gold’s response to “quantitative easing.”  For the last five years, the Fed and the ECB – and with help from China, I suspect – has been able to further disguise its money printing by using paper derivative forms of gold – OTC derivatives, Comex futures, LBMA forwards, Central Bank lease agreements and hypothecation – to hold down gold’s quantitative price appreciation.

But that ability to keep a lid on the price of gold may well be measurably fatigued.  The demand for deliverable physical gold and silver is starting to offset the price dilution that has been imposed on the precious metals market with printed derivative forms of gold and silver.  GATA – on the foundation of the research done by Frank Veneroso in the mid-1990s (he visited several Central Banks and discovered that they were leasing gold in large quantities to help hold down the price) – predicted that eventually the physical market would overwhelm the paper market and lead to a huge parabolic move in the price of gold.

It’s taken a lot longer than any of us could have imagined.   But something different is occurring in the gold market right now, because all the technical indicators over the last 15 years that have foreshadowed a massive take-down in the price of gold are betraying their promoters.  While the price-rigging schemes may not have completely run out of energy, as John Embry said yesterday:  “I’d much rather be playing our hand than theirs.”

I took profits (265%) on a call option trade on a high quality mining stock that I presented to the subscribers of the Mining Stock Journal in the debut issue.  It was a low-risk proposition.  I rolled the profits into shares of the stock.   I currently am sitting on a 25% gain in a short term trade idea presented to MSJ subscribers less than two weeks ago (a high quality junior stock).  I am looking to make 30-40% in total within another week and then take the profit.  Again, another low-risk trade idea.  In the next issue published tomorrow, I am presenting a high-risk, high-return junior silver mining stock idea.  You can subscribe and get all the back-issues (email delivery) with this link:   Mining Stock Journal.

One more note:  I presented a brand new silver explorer to subscribers of the Short Seller’s Journal on Jan 10th.  That stock is up 663% since then and still has room to double from here.

9 thoughts on “Gold: Welcome To The Weimar Death Spiral

  1. BitGold rocks ! Easy as using PayPal. Comes with fiat based debit MasterCard too for interfacing with the “old world”.

  2. Good one, Dave. I’ve also suspected over the last few years that the monetary manual used by Yellen, Carney, Draghi, etc. is Central Banking for Dummies (R. von Havenstein).

  3. math pop quiz: how many trillionaires can a monetary system sustain before currency collapse? yes adding 40 trillion dollars to the monetary system is possible and sustaining purchasing power is possible by hiding it all in over bloated “asset” prices but soooooner or later one of these geniuses is gonna work out they better “sell” before the value disappears in a puff of “yellen smoke”
    first by inflation>then by deflation> the simplest scam that has worked for centuries> but keep kidding ourselves it’s “finance”

  4. Not convinced we’ll see Wiemar conditions in the USofA anytime soon … but wouldn’t be surprised to see the USD hit somewhere near 80 on the DYX sometime in the next couple years … which would roughly translate into around $2K per ounce AU and somewhere around $75 per ounce AG, IMO.

    1. It’s not just about the price of the PM’s but the application. If bullion supports debt-free liquidity in the form of debt-free currency (like bitgold) , then overextended debt (fiat currency) can be safely purged and this will help all debt based currencies.

      OTOH, if PM’s sit in a heap , unemployed, the debt currencies will suffer based on the full and lonely responsibility of supporting the economy. That’s a dire situation, IMO.

      The above forms the rationale as to why and when CB’s will support bullion or look the other way. Liston to the power and experience of the CB’s in this case. They are a culture of liquidity. When we see bullion making an economic contribution, we’ll likely see a return to much more organic pricing of PM’s and every other real widget in this current dysfunctional global circumstance.

      The full liquidity model needs some yang with the existing yin to approach symbiosis.

  5. I don’t know much about Bitgold , but I have been buying and storing physical gold fractional coins for a long time. It seems to me that having 1/10th,1/4 and 1 ounce gold coins as well as a large quantity of silver ounce coins would be a good idea and these types of bullion are easy to hide and transport.

    1. Bitgold is about the liquidity of your PM’s. PM’s that don’t move contribute no economic value to you or the world. The real economic value is in the movement.

  6. I was thinking about bitgold which I own. If the banks go to hell and credit dries up, including credit and debit cards. A bitgold Visa card might be the only thing that provides you and your family liquidity to buy things like groceries. If there is a “temporary” ban on physical metal, having some overseas might be a blessing. If the Chinese figure out bitgold then I think its stock will surge and the participation in bitgold will surge. It’s a great hedge against fiat. There is a lot to like…beyond what I’ve mentioned.

    1. Petedivine …. The bitgold merchant tools are now being released to the market, so there are two avenues for liquidity now, on using their system to buy things for your daily lifestyle.

      They’ve had the debit card you mentioned for about a year and that’s been available for USA accounts, but within the last couple of months, they have released direct P2P gold payments within the US and they have also released merchant tools which will be equipped to to take bullion based payment with mass as a the unit of account, a direct ownership transfer of the bullion in Brinks. This is the important part on the basis of the debit card only being loadable with fiat currency.

      The greatly hidden truth that is bubbling up as this beast rises is that bullion that circulates not only supports the economy but also allows for existing debt (fiat currency) to be purged. Everybody wins.

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