Fiat Currency Race To Zero: The “Suddenly” Part Of The Story Approaches

“Gold, unlike all other commodities, is a currency…and the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.” … Alan Greenspan, ex-US Federal Reserve Chairman, August 23, 2011

The chart on the right shows the purchasing power of the dollar from when the Fed was founded to present. Pretty much self-explanatory but it’s why we buy and own physical gold. For now the price of gold has found resistance – likely official – in the high $1700’s.  But that will soon change as gold soars in response to what appears to be global Central Banks’ – led by the Federal Reserve – willingness to print unlimited quantities of paper currency in order to keep price (note: not “value”) of  financial assets elevated.

The overwhelming imperative to keep control of markets is a recipe for hyperinflation and will ultimately fail. The Fed would have us believe that the slump in business activity is only due to the coronavirus lockdown and that shortly after it ends normality will return. It will hope that we have forgotten that fully five months before the virus hit, it was forced to inject liquidity into the repo market at the rate of tens of billions every day.

The Fed’s monetary policy replicates John Law’s attempt to keep his bubble going in 1720 France. Law failed to maintain the price of just one asset, the Company of the Indies, his Mississippi venture, by printing livres to buy the shares. Within seven months the currency had collapsed and priced in worthless currency, the shares had fallen from 12,000 livres to just one or two thousand.

The principal upon which the Fed and the other major central banks are embarked is the same in every respect, but with a far larger task. The project will fail for the same reason: no one can fool all of the people all of the time. It is increasingly obvious that both the currency and financial asset values will collapse John Law-style, probably by the end of this calendar year, if precedents are any guide.

The passage above is from Aladair Macleod’s latest essay which explains in detail the process why fiat currencies will eventually become offered without a bid while, concomitantly, physical gold goes bid without offers:  Anatomy Of A Fiat Currency Collapse

Is The Comex On The Cusp Of Defaulting?

“How did you go bankrupt?” Bill asked
“Two Ways,” Mike said. “Gradually then suddenly”
– Ernest Hemingway, “The Sun Also Rises”

And this could usher in the “suddenly” moment:  “The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally.” – Reuters, April 28, 2020

Chris Marcus of Arcadia Economics and I discuss the potential of a Comex default:

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Cheap Oil And Money Printing: Rocket Fuel For Mining Stocks

“Gold, unlike all other commodities, is a currency…and the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.” … Alan Greenspan, ex-US Federal Reserve Chairman, August 23, 2011

For now the price of gold has found resistance – likely official resistance – in the high $1700’s. I think there’s a good chance gold pops over $1800 before Memorial Day weekend, if not sooner. Silver continues to frustrate but the gold/silver ratio appears to be headed lower. Patience with silver will eventually be highly rewarded and rewarded in spades with the silver mining stocks.

Bill Powers of Mining Stock Education invited me to chat about oil, the economy, money printing and mining stocks:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Fed Lies And Money Printing: Rocket Fuel For Gold

For central banks, monetary inflation is everywhere the solution. Bank rescues, payment chain failures, the furloughing of millions of employees, helicopter money to bail out whole populations, money to bail out governments, money to support all categories of financial assets: the list is endless in scope and infinite in quantity. The survival of the global financial system is at stake. If it survives, state-issued money will have been destroyed. But then what is the point of owning financial assets valued in valueless currency?

While this process of monetary destruction would have reasonably been expected to evolve over time, the coronavirus has accelerated it. The fate of the $640 trillion derivative mountain recorded by the Bank for International Settlements is sealed and will be settled through bank bankruptcies and state-directed elimination. – Alasdair Macleod, The Looming Derivatives Crisis

Phil/John Kennedy hosted John Titus and me to try and untangle The Big Lie that is the Federal Reserve and the real reasons behind the Fed’s massive money printing program:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

A Run On Comex/LBMA Gold Bars Is Inevitable

As uncovered by Ronan Manly in a must read article, at least 50% of the “eligible” gold reported in Comex vaults actually will never be made available for delivery. On Friday the Comex vault report showed 14 million ozs in the “eligible” category. At least 7 million of this belongs to owners who the CME has determined likely have no interest in re-selling the bars.

As of Friday’s vault report, the Comex shows 18.6 million ozs of gold. Of that, 14 million was “eligible.” Roughly 4.7 million of the “eligible” gold is LBMA bars that have been supposedly allocated to Comex-approved vaults in London and made available for fake delivery under the 4GC “enhanced gold” contract.

Subtracting 4.7 million ozs from the eligible gold designation and using a 50% haircut on the remaining 9.3 million eligible ozs gives us 4.65 million eligible ozs plus 4.6 million “registered” ozs. The 9.2 million ozs of gold that is potentially available for delivery can disappear quickly if just 28.4% of the June gold contract longs decide to stand for delivery.

At some point large buyers looking for delivery of physical gold that can be removed from custodial vaults and moved to private safekeeping away from NYC or London are going to make a run on the vaults in London in NYC. The run on the LBMA vaults has been going on since well before the virus crisis. Chris Marcus of Arcadia Economics and I discuss this likelihood in our latest weekly conversation:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Virus Crisis Used To Transfer Trillion$ To Wall Street

“We have previously called Wall Street an institutionalized wealth transfer system from the 99 percent to the 1 percent. The CARES Act puts the wealth transfer system on steroids by letting the fat cats on Wall Street keep their decade-long obscene compensation which was made by hiding their risks off their balance sheets (privatizing the profits) and now forces taxpayers to pick up the tab for the losses on the toxic debt (socializing the losses). Treasury Secretary Steve Mnuchin has said this is nothing like the 2008 financial crisis – and yet, it is everything like the 2008 financial crisis except that it’s an even more brazen money grab.”  – Wall St On Parade

The taxpayer squeeze is on. Shut down the economy for a few months, open up the Fed’s money fire hose and give Wall Street a good spraying of digital dollars to monetize its bad casino bets and enable the players to continue getting huge bonuses. Wall Street On Parade has the details in this must-read:  How $4.5 Trillion Was Outsource To Wall Street.

Physical Gold And Silver Continue To Disappear

I was watching one of the Fed Governors who made the assertion that “low interest rates would be here for a long time” and I thought to myself this guy must be on drugs because the U.S. has had low interest rates for 12 years now, which is already a long time.

The current shortage in physical gold and silver was developing many months before anyone ever heard of “coronavirus.”  In fact, what’s happening now as Central Banks print trillions of paper currency further validates Gresham Law. Bad money drives out good money – physical gold and silver will be hoarded and fiat paper Central Bank money will be used for transactions.

Rob Kreinz of GoldSilverPros invited me onto his podcast to discuss the ramifications of rampant money printing and the rush into physical gold and silver:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

A Slow Motion Short Squeeze In Gold

The inexorable rise in the price of gold, despite the concerted effort among the BIS, western Central Banks, CME and LBMA using paper derivatives to keep a lid on the price gold reflects the likelihood that a short-squeeze in physical gold bullion is percolating.

Former copper futures trader and Chairman of GATA, Bill Murphy, calls this a “commercial signal failure,” which occurs when the demand for the fulfillment of the physical commodity underlying a paper derivative overwhelms the ability of the entities short the contracts to fulfill the terms of the contract.  Soon this slow motion short squeeze will transition into “fast” time.

Chris Marcus and I discuss the likelihood of this development on the Comex:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

The Paper Gold Market Is Imploding

The CME/LBMA latest paper derivative product – the Accumulated Certificate of Exchange aka “4GC” – is failing. Badly.  After its introduction last week there has been zero trade activity in the contract:  4GC Settlement data.  The contract fabricates a paper claim on 25% of an LBMA 400 oz bar for Comex participants seeking delivery of the 100 oz Comex bar. It’s an attempt to transfer LBMA gold in fractional derivative form to the Comex.   The contract is an absolute farce, a fact confirmed by complete lack of interest in it from the market.

The effort by the western Central Banks in conjunction with the bullion banks to keep a lid on the price of gold is failing. It’s not the first time (see The London Gold Pool collapse).  This failure is reflected in the historic spread between the spot price of gold as determined twice a day on the LBMA and the Comex gold futures curve.

Chris Marcus and I discuss the causes and implications of this market signal in our weekly conversation:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information