Tag Archives: Gresham’s Law

Silver And Gresham’s Law

Gold is unobtainable for most people in the world the way it’s priced right now. If a global crisis hits silver is going to be remonetized by the free market. If it’s not just an industrial metal, like it is today, if governments and central banks start holding it (silver), and this is a copy-cat effect, because obviously you know this, once one of the central banks does something the rest will do it because they don’t want to be different. – Lior Gantz, The Daily Coin, Silver Will Be Re-Monetized By The Market

In 1965 Lyndon Johnson signed the Coinage Act of 1965, which removed the silver content from dimes and quarters and took the silver content in half-dollars down to 40%.   In 1970 silver was removed completely from the half-dollars.   The excuse given was that the country was running out of silver.    But the truth is that the U.S. Government in conjunction with England was dumping its Central Bank stock of silver  (and gold) onto the market in order to prevent the price of these precious metals from rising against the U.S. dollar, which had been effectively the world’s reserve currency for 20 years.

In fact, the silver-based U.S. coins were disappearing from the market because the value of the silver content in these coins had risen above the face value of the coins.  It was real-time proof of Gresham’s Law.   In effect, it was an effort by the U.S. Government to de-monetize silver, which has been civilized history’s oldest monetary metal.  The U.S. could not yet de-monetize gold because, based on the Bretton Woods Agreement, the U.S. was required to back all Treasuries bonds issued to foreign buyers with gold.   But a year after the last remnants of silver were removed from U.S.-minted coins, the Nixon Government disconnected gold from the reserve currency.

Ultimately, silver will become re-monetized.  Silver has been, is and always will be “poor man’s gold.”  In today’s episode of The Daily Coin, we discuss the eventual re-monetization of silver.   As a bonus, we describe the fraudulent nature of Tesla’s latest earnings report.

No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts. – U.S. Constitution, Article 1, Section 10, Clause 1

Did Gresham’s Law Invade JP Morgans Comex Gold Vault?

Gresham’s Law states that bad money drives good money out of the system.  People will use inferior money in their daily “bartering” for goods, services, investments etc and hoard good money.

We are seeing Gresham’s Law work in the gold market, where eastern hemisphere Central Banks, investors and populations are in the process of hoarding all the gold the west will send their way in exchange for the constituent country fiat currencies.  “Here, take our currency and convert it to dollars and sell us your gold.”

And the gold seems to disappear from sight.   Can anyone hazard a guess how much gold the People’s Bank of China controls or where it’s safekept?

Recently my friend and colleague Craig “Turd Ferguson” Hemke – TFMetals Report – noticed an usual amount of gold was being removed from the “registered”/investor account in JP Morgan’s Comex vault.    Last Friday, for instance, 24% of the eligible gold disappeared from JPM’s registered vault account and disappeared to destinations unknown:  LINK

Again yesterday another chunky 160,750 ozs of gold fled the questionable custody of JP Morgan’s eligible account (click on image to enlarge):

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The amount of gold removed yesterday represented 32% of the amount of gold remaining the eligible account after last Friday. In total, this entity or entities has/have removed 49% of the gold that was sitting in “investor safekeeping” section of JP Morgan’s Comex custodial vault.

We can only speculate what might of “spooked” the entitled owners of that gold to take it away from the Comex.

However, I will say this confidence:   whomever removed that gold decided that they no longer trusted JP Morgan to safekeep it.  It’s interesting because the Comex offers storage rates that are a significant discount to market rates to investors who take delivery off the Comex and use the Comex vaults for safekeeping.

Whatever the case may be, nearly 50% of ALL of the gold in Comex vaults has been removed since 2011 (source:  24hgold.com, edits are mine – click to enlarge):

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From Dystopia To Armegeddon

When the going gets weird, the weird turn pro.  – Hunter S. Thompson

I mentioned the news reports of fist-fights breaking out at traffic intersections in Denver. Then yesterday I hear two different news reports of random gun shots.  One of shots fired into someone’s house in a not so great part of Denver (Aurora).  The second report of bullets flying across one of Denver’s busiest highways and hitting cars.  Then I learn last night that bullets flying into cars driving on highways in Arizona have become part of everyone’s daily routine.

We’re sliding into the “Mad Max” scenario which many of us for a long time have envisioned eventually hitting this country.  I would have thought that this environment would have started engulfing this country in 2008.  But the Government pulled what appeared to be a rabbit out of its hat which enabled it to kick “Mad Max” down the road for a bit.  That “rabbit” by the way, while preventing an all out collapse and actually making life better for the people closest to the money spigot, was nothing more than a disguise designed to help the elitists confiscate even more wealth from the middle class.

The population’s hatred for the Government grows stronger by the day.  The popularity of Trump’s candidacy for President is a reflection of this intensifying despise.   A growing segment of the population cheers harder for Trump everyday as he lashes out with insults at the politicians everyone now hates.  Let’s be honest, Trump is at least as corrupt as the career politicians he’s humorously defacing.  He would be a horrible President.  Of course, so would every other candidate on the roster for both Parties.

Perhaps the best – yet least understood – evidence of the darkness which is slowly engulfing the the U.S. is the disappearance of physical precious metals from the global financial system.   Gold and silver is being removed hand-over-fist from public view.  Most of the gold is being moved from west to east, where it’s being removed from the bullion exchanges by the 10’s of tonnes on a daily basis.  For instance, the Hong Kong Metals Exchange just had its largest daily withdrawal – 19.7 tonnes – in its history.   Roughly 100 tonnes per week is now being removed from the Shanghai Gold Exchange.  This is Gresham’s Law in action, folks.

We already know about the growing shortages for minted silver products around the world, especially in the U.S.   And the disappearance of gold from the Comex bank vaults is nothing short of stunning.  The ratio of fraudulent paper gold to deliverable physical gold hit 229:1 to yesterday.  To say this is “silly” is an insult to the word “silly.”  This reflects and epitomizes the extreme degree of corruption, fraud and theft which is burying the United States.

I was exchanging emails this morning with GATA’s Bill “Midas” Murphy.  We were marveling at just how extreme and blatant the manipulation of the precious metals market has become.  I find it beyond amusing that mainstream financial media – which rolls out charts of stocks and select commodities all day long – has failed to put on display the chart that shows that gold gets hit 90% of the time only when the Comex floor trading is open.  Funny non-coincidence, that.

I suggested to Bill that something really bad is going to hit our system:

Think about the manipulation of the metals market that occurred just before the Lehman, AIG/Goldman collapses. They took silver from $21 in March that year to $7 by late October.

Now think about how much more brutal this manipulation is both in the context both of the intensity and the disappearance of physical metal from the system.

I’d estimate that the manipulation now is probably 5x worse and more blatant than in 2008. Which means whatever is going to hit the system will be at least 5x worse than 2008.

I know most people who understand what is going on would like to see a collapse and thorough flush of the system.  Unfortunately, the dystopic behavior starting to show up in the general population will be met with brutal force by the near-totalitarian U.S. Government in an attempt to control it.   The inevitable systemic collapse will enable the Government to impose totalitarian control on the country to a degree that would be heartily admired by history’s despots.

It’s going to start to get really weird in this country (as if it has gotten weird enough already)…

More Surprises In The Physical Gold Market Reaffirm Gresham’s Law

While I don’t follow the data reporting on the Comex on a day-to-day basis – primarily because 1) I don’t have the time, 2) enough people do follow it and report on anything unusual and 3) I don’t fully trust what is reported.

However, Avery Goodman posted an article on Seeking Alpha, The Big Long,  that caught my eye.  He noted that Goldman Sachs and HSBC reported delivery of 7.1 tons of gold into their “house” accounts on August 6.   Goldman stopped 3.2 tons and HSBC stopped 3.9 tons.

This equates to 250,438 ozs of gold, or roughly 2,500 contracts.    It also coincidentally, or not coincidentally, represents just a little less than the amount of gold that JP Morgan moved from its “eligible” account to its “registered” account in order to meet the  JP Morgan issued delivery notice on 2,750 contracts on August 4.   So it would appear as if Goldman and HSBC “stopped,” or took delivery in their house account of most of the gold what was delivered from JP Morgan’s customer house account.

My initial response to this development is that it should not surprise us that Goldman may be accumulating a long position in physical gold despite having noted analysts at the firm issuing bearish gold research reports.  Goldman is infamous for taking the other side of trades that it convinces clients to implement.

What I will say, however, is that we can’t necessarily assume that the Goldman and HSBC gold was ultimately destined for their respective banks’ proprietary positions.  For instance, it could well be the case that Goldman is on the hook for delivery of physical gold to a counterparty of one of its OTC precious metals derivatives contracts.  If that’s the case, perhaps the easiest source of gold to fulfill that obligation was to take the other side of some of JP Morgan’s reported Comex vault inventory.

Similarly, while its conceivable, perhaps even probable, that HSBC might be building its own “nest egg” of golden eggs, it’s also quite possible that HSBC needed to source gold for the GLD vault, of which it is the custodian.  Yes, GLD uses 400 oz bars and the Comex “traffics” in 100 oz bars, but it would be easy enough to do a gold bar swap in order to convert 100 oz bars into LBMA 400 oz. bars.

My point here is that the available information on Comex gold transactions is opaque by design.  But having said that, the relevant piece of information here is that a significant amount of physical gold has been removed from the visible of publicly reported vault holdings.

It seems that the above-ground, available supply of physical gold and silver continues to disappear down rabbit holes all over the world, further reaffirming Gresham’s Law.

 

Gresham’s Law: No More Retail Gold In Europe

Bad money drives out good money.”   Gresham’s law is an economic principle that states:  “When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”  – Murray Rothbard

Gresham’s Law is also known as Copernicus’ Law, as Nicolaus Copernicus first formulated the theory in 1519.   The idea is that when a system has different forms of currency circulating and one of the currencies is perceived to be overvalued relative to the alternative currency, the undervalued currency will be hoarded and the overvalued currency will be used for transactions.

From The Dollar Vigilante:

I’ve been in Europe a couple of days now and one of my main goals here, other than protesting the G7, Bilderberg and visiting Liberland, was to find out if what Martin Armstrong wrote about – that there is a shortage of gold at the retail level in Europe – is true. What I’ve found is that, indeed, it is true, as in many European countries one is no longer able to buy retail gold coins for investment.

Shops are buying precious metals still, but no one is selling. Spanish banks that once sold gold to the public have shut down in Spain, and if people leave Spain wearing a lot of jewelry, authorities weigh and inspect the precious metals, as Armstrong reports.

You can read the rest of this here:  No More Retail Gold In Europe

The article above is based on reports from Martin Armstrong.  If the author for The Dollar Vigilante had not verified the assertions from Armstrong, I would not have published the report.

Armstrong never misses a chance to throw in some kind of reasoning for why he thinks gold is going lower.  He erroneously correlates demand in China with reported shipments of gold from Switzerland to Hong Kong.  That’s laughable because anyone who writes about gold should know that China also imports gold through Beijing and Shanghai and those numbers are a State secret.  Through the week ended May 22, withdrawals from the Shanghai Gold Exchange are up 20% vs. 2014 and 8% over the same period in 2013, which was a record year for withdrawals (2,197 tonnes).