Chart Of The Century!

August 7, 2016

In a recent article, Peter Degraaf posted a series of charts including the one below.  I must confess I had never seen this particular chart before…but extremely glad it was posted.  I knew the monetary base had grown wildly, but did not realize the extent until seeing it in graph form.  While Peter spent just one paragraph on this, let's look at it in depth to get a better understanding of why it is so important and what it really means.

Let's start by deconstructing this down to what it really means.  First, I must confess I do not know whether this chart is comparing the "priced" amount of US gold to the monetary base or rather the price of gold to the monetary base (because the axis is not labeled).  Either way, this chart tells us something VERY important!  The price of gold relative to the monetary base has never been lower than it is right now…other than at the end of last year. 

Looking at the chart, you can clearly see the "markup" of gold in 1933 from $20.67 to $35.  You can also see the run from $35 to $850 during the 1970's and peaking in 1980.  You can also see the turn in 2000-2001 when gold traded down to $256 per ounce.  These were very important generational turns. However, we can glean something even more important from this chart.  In relation to the monetary base, you can now purchase gold below $20.67, below $35 and below $256 when adjusted for the monetary base outstanding!  The monetary base has grown and grown for 100 years. Moreover, it has exploded in the last 8 years. 

Making this simple to understand: As the monetary base grows…money is printed, it is like slicing a pie.  With each "cut" (addition of dollars), each slice gets smaller and smaller.  As with anything, the smaller something becomes, the less valuable it will be.  In banking or finance, this concept is called "inflation" when a currency becomes more plentiful in relation to goods ...prices rise because it takes more of the more plentiful currency to purchase the same amount of goods as compared to previously.

Shifting gears, there is another side to this equation and one the powers that be are desperately trying to keep hidden from you.  They have been suppressing the price of gold to hide the fact they have sliced and diced the "dollar pie" until now the slices are miniscule (i.e. the dollar has very little value left).  They have done this at the same time "risk" has exploded.  When I say "risk", I am talking about systemic risk.  Never before has the world taken on as much leverage in relation to GDP nor versus collateral.  Banks, brokers, insurance companies and even sovereign governments are now more financially leveraged in higher risk situations than ever before in history!

I would be remiss in writing this if I did so without talking about "US gold".  There is so much anecdotal evidence the US has been divesting gold (even custodial held gold) for years. Consequently, there is no way one can credibly believe the claimed 8,300 tons is still there.  If this is the case which I absolutely believe it is, then the above chart would be revised to even lower levels.  I guess the best way to illustrate would be to go back to our pie analogy: How big would the many more slices be if the total pie were the size of a thimble?

Going one step further, "gold" has been re-hypothecated many times over.  We have seen instances on COMEX where there were more than 500 ounces represented by paper contracts for every one real ounce they claimed to have.  We have no way to know what the real global number of hypothecated gold is to actual gold. Nonetheless, we will find out sooner or later. Consequently, the mass of paper owners will be left holding just that...PAPER.  The cover up has gone on for years - and was perpetuated to support confidence in the dollar, US Treasuries and the fiat currency system in general. 

The currency/debt system we live in will mathematically implode as sure as the sun will rise tomorrow.  This is simple logic, the system as a whole cannot grow enough to pay back nor service the debt already in use, "debt saturation" if you will.  Richard Russell called it, "inflate or die" - which means either "inflate" the currency or outright default, there is no in between in the end.  Someone, somewhere "loses", there is no way around this. The odds greatly favor the holders of currencies as being the losers…rather than outright default.

To finish, it is my hope you are putting 1+1 together while reading this.  There has never been a more dangerous time financially than today in all of history.  Simultaneously, gold has never been cheaper in relation to the amount of dollars outstanding.  This 1+1 is a no brainer - never before has there been a greater need for the safety of gold - and never has the insurance policy been this cheap!  Of course we could talk about silver which is extremely cheap versus gold, but that would be overkill for another writing.  This will end with a massive call on gold by EVERYTHING credit ...which is everything, everywhere financial!  The "call" for real gold will come on like a light switch flipped overnight.  You either have it, or you don't...and never will!


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Bill HolterBill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration. Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present. You can reach Bill at:


Due primarily to the California Gold Rush, San Francisco’s population exploded from 1,000 to 100,000 in only two years.