The Gold Bull Market Has Not Yet Begun

Once again, we continue to be entertained by Mr Nadler over at Kitco (see G.F.M.S. = Gold's Final, Mature Stage - April 14, 2010) who this time quotes the G.F.M.S. Ltd prognostications of gold entering the final stages of a bull market. Rest assured that the bull market in gold will not even begin until the 1980 inflation adjusted price of gold of over $2000 is achieved. The only "bull" we are witnessing at the moment is a rising Dow Jones Index on minimal volume and maximum Plunge Protection Team assistance. The commentary of those that can see the demise of gold down the track but not the abyss of the current financial meltdown that lurks in front of them simply underlines the lack of intellectual integrity.

Governments the world over can see this slippery slope to hell in front of them and this is probably the reason for the latest "initiative" of the I.M.F.

In fact, perhaps the time has come for the I.M.F. to change its name from the International Monetary Fund to the International Mafia Foundation. How else do you explain the I.M.F. selling 200 tonnes of gold to the Reserve Bank of India for a lousy $US6.7 billion late last year when just a few days ago it was able to announce an increase in its New Arrangement to Borrow (NAB) from $50 billion to $550 billion?

by Ercan Baysal

The increase in the New Arrangement to Borrow is nothing more than a jointly produced illusion by 39 nations to give the appearance of solidarity and strength in another phoney money scam. This is obvious given that even Greece will be contributing US$2.5 billion.

So the answer goes unanswered as to why the I.M.F. sold its gold. Perhaps good old J.P. Morgan told them that they were going to deliver a killer blow to the gold price, so they sold in advance to give the appearance of astute money managers. Whatever the reason, it has failed up till now. Perhaps J.P.'s price manipulation strategy went wrong. It appears someone blew the whistle and it wasn't the postman.

So will the I.M.F. will be the mother of a new international currency with sperm donations from a bunch of wa..... sorry, I meant bankers? This new currency like all others is not money but debt. It is designed to paper over the gaping holes in the finances and credibility of the international financial order lest it caves in with the next sequence of crises in Europe, the U.S.A. etc. It will of course further indebt the indebted.

Dear readers, there is nothing new here. Snake oil salesmen, confidence men, charlatans, crooks, and thieves now wear suits and control banks and governments. The big question is, for how long can democracy and capitalism survive without totally mutating into some chaotic Medusa that will return the world to the Stone Age?

Every single thinking investor knows that all the stimulus and support packages given to banks,consumers, motor vehicles, home owners, student loans etc will in the end turn out to be support packages for gold when collapse imposes itself.

So while these government sponsored relief packages delay the inevitable, they nevertheless silently build up the price of gold. The explosion is coming and it will blow up anybody holding paper currency for anything more than daily exchange purposes.

Up until now it appeared that deleveraging could and would return the world to a more secure footing despite its thorn infested and uphill path. Perhaps this is no longer possible. The still gargantuan size of the derivatives market, the opaque and inspection-resistant Federal Reserve, the Goldman Sachs infested government, the colossal amounts of contingent liabilities that nations still harbour, the unaudited U.S. gold holdings, the complex political terrain as well as the even more complex web of international money flows and investments make the task too great for a world that is more intent on confrontation rather than resolution and individuals who are hell bent on personal enrichment rather than personal enlightenment.

The above is best summed up by James Quinn in a recent article (It Was a Wonderful Life) where he notes:

Europe, Russia and Japan were devastated by World War II.....The rest of the world looked to the U.S. to lead and be the beacon of light on the hill as the shining example of capitalism, freedom, and morality......Almost 30% of our economy was based upon producing things the rest of the world wanted to buy. Another 12% of GDP was from productive functions of agriculture and mining. .....finance and professional services accounted for only 14% of the economy. Today manufacturing accounts for 11% of the economy, while finance and professional services account for 33% of the economy."

In short finance and manufacturing have changed places. In fairness to finance, it must be said that it has manufactured the greatest range financial products that the history of mankind has witnessed so far. The only problem is that they are so toxic that they have either parked them in the Federal Reserve's underground bunker or have changed the "labelling" through relaxed accounting standards.

Governments the world over now know that they cannot meet the current let alone the future expectations of their electorates. None of them will admit to it publicly for obvious reasons. This is why they keep wrapping up the problems in more and more paper so as to prevent their people from realising the package is empty bar a simple note saying, "I OWE YOU." In fact this is the adult adaptation of the children's game known as 'pass the parcel'. The graph below which was included in a recent post by Tyler Durden on Zero Hedge (4/14/2010) is worth a million words and much more.

After pondering the above do you still think this world has a way out of its mess?

Or try this for a quick calculation:

The US has approximately 150 million workers of whom 47% pay no tax. If projected personal tax revenues of the US government account for around 45% of total revenues and we assume that this group is also responsible for 45% of the current debt ceiling of $14.3 trillion, then this leaves each TAX PAYING taxpayer with a debt of over $80,000. If off balance sheet items are included then the figure comes closer to $500,000 per TAX PAYING taxpayer. Borrowing and money printing can only mask the situation for a limited period.

We have all been conditioned to keep an eye on our computer screens as if they are stop watches to some sprint race. This will not be a sprint race until it is too late for most. By then gold and silver will be out of reach because paper currency will no longer be worth a Continental. Apart from precious metals the best defence is minimal or zero debt.

Almost every announcement, law or action by governments is designed to cover, twist or destroy the truth in the process of keeping the masses in a stupor whilst their pockets and futures are emptied by the puppeteers whose names we dare not speak.

Before I forget allow me to quote a joke from the jovial helmsman of GFMS Mr Klapwijk (as characterised by Mr Nadler):

"the rise of gold prices is not sustainable because jewellery demand has dropped to less than half of total demand, and record investment buying at some point will fall off."

Well all I can say is two things:

1. The price of gold has already more than doubled, tripled or quadrupled in a great many currencies in the last 10 years as shown in this table:
    

2. If only 50% of the money that flows to jewellery now flows to investment, there will be another leap in the price of gold because jewellery prices are more than double the price of gold they contain at least in Western markets. The fall-off in the demand for jewellery has more to do with the global financial downturn than with the escalating price of gold. Why else would investment demand be increasing in the face of escalating prices were it not for the imminent demise of paper currencies which is now set in stone?

The time is approaching when gold will not be for sale because it will once again reclaim its primary position as inflation-hedged money rather than jewellery. The time is also approaching when currencies are printed in such quantities, that they will probably be printing the latest news on them or at least some kind of advertising for corporations so as to offset the cost of printing.

When currencies are destroyed the real issue then becomes whether our freedoms are also destroyed because as Ronald Reagan once stated:

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on, for them to do the same."

A free world needs a currency that IS money and free of manipulation and duplication, otherwise we will return to previous periods of unfulfilled human potential and unfulfilled aspirations. In the meantime, the world dances to the tune of a US government that is fixated on retaining the position of the dollar but not its value so as to wipe its slate clean by stealth.

Sydney Australia
P.S. My thanks to the brilliant cartoonists who can capture the essence better than all of us.