By Bill Holter
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 U.S. 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 the 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 but 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, 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 (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 leveraged and financially in higher risk situations than ever before in history!
I would be remiss in writing this if I did so without talking about “U.S. gold”. There is so much anecdotal evidence the U.S. has been divesting gold (even custodial held gold) for years, in no way can anyone credibly believe the 8,300 tons claimed 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 was the size of a thimble?
Going one step further, “gold” has been rehypothecated 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 …but we will find out sooner or later and the mass of paper owners will be left holding just that …paper. The cover up has gone on for years and was done to support confidence in the dollar, U.S. 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. This, at the same time gold has never been cheaper in relation to the amount of dollars outstanding. This 1+1 is a no brainer, never before 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!
This was a public article, if you would like to read all of our work please follow this link to subscribe https://www.jsmineset.com/membership-account/membership-levels/.
Comments welcome firstname.lastname@example.org
Disclaimer© 2010 Junior Gold ReportJunior Gold Report’ Newsletter: Junior Gold Report’s Newsletter is published as a copyright publication of Junior Gold Report (JGR). No Guarantee as to Content: Although JGR attempts to research thoroughly and present information based on sources we believe to be reliable, there are no guarantees as to the accuracy or completeness of the information contained herein. Any statements expressed are subject to change without notice. JGR, its associates, authors, and affiliates are not responsible for errors or omissions. Consideration for Services: JGR, it’s editor, affiliates, associates, partners, family members, or contractors may have an interest or position in featured, written-up companies, as well as sponsored companies which compensate JGR. JGR has been paid by the company written up. Thus, multiple conflicts of interests exist. Therefore, information provided herewithin should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. No Offer to Sell Securities: JGR is not a registered investment advisor. JGR is intended for informational, educational and research purposes only. It is not to be considered as investment advice. Subscribers are encouraged to conduct their own research and due diligence, and consult with their own independent financial and tax advisors with respect to any investment opportunity. No statement or expression of any opinions contained in this report constitutes an offer to buy or sell the shares of the companies mentioned herein. Links: JGR may contain links to related websites for stock quotes, charts, etc. JGR is not responsible for the content of or the privacy practices of these sites. Release of Liability: By reading JGR, you agree to hold Junior Gold Report its associates, sponsors, affiliates, and partners harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries (financial or otherwise) that may be incurred.
Forward Looking Statements
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy, forward looking numbers or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Junior Gold Report does not take responsibility for accuracy of forward looking statements and advises the reader to perform own due diligence on forward looking numbers or statements.