X marks the spot

BullionVault

11 November, 2016

're-monetization' of gold (Elite level) 4/4

Last week I gave an example of the value of gold. It allows our financial overlords to regain our trust and belief in their financial system when it implodes. I suggested that the U.S. could back their twenty trillion debt with gold, either before or after a spike up in interest rates to fifteen percent.

However, they won't. Nixon didn't in 1971 and Clinton won't do it either. So, what is the value of gold? In our financial system, gold and only gold is money. As a very last resort, gold will be used to pay for trade imbalances. Gold will help free up international trade but only when international trade grinds to a halt due to a loss of faith in the dollar http://www.zerohedge.com/news/2015-10-10/death-cognitive-dollar-dissonance-remonetization-gold.

This is where the IMF believe that their SDR will reveal its power. When exporters refuse to accept dollars, the IMF reveals its own paper currency and will expect us to use it. This isn't a solution, it is merely a delay. Each delay increases the damage that will be done when the financial system implodes.

At some point in the future, international trade will grind to a halt. Our way of life will be disrupted. Gold is the lubricant that will get international trade moving again. Most likely, an SDR wrapped in gold leaf.

Why? What? How?

How about an historical factual example? From 1950.

Imagine you are a Saudi Prince / a cut throat pirate ruling your people with a kind hand / utter brutality. (Again your point of view depends on whether or not you are the Prince or whether your hands have just been cut off for stealing food to feed your starving family.) Oil is discovered. Being a Prince 'owning' a desert is quite different to owning the world's largest and easiest to pump oil field. Luckily, Mr Kissinger, an Angel caring deeply for each and every US citizen, recognises an opportunity to do Gods work. Kissinger offers the Prince the full protection of the U.S. army and lots of dollars. The protection is desperately needed. However, the Prince laughs at dollar payment. The Prince does not believe in dollars as money. In other words, he has no confidence in the dollar. So this trade doesn't even start. How is the trade started? Well, despite the dollars being freely convertible into gold the trade starts with an annual shipment of 300 tonnes of gold directly to the Prince. An annual royalty fee paid in a fixed weight of gold and U.S. military protection provided the oil was priced in dollars.

See how gold gets trade moving when a paper currency is not acceptable? The Prince was told he should exchange his increasing dollar hoard for US govt interest bearing debt because he would be paid dollar interest on his dollars. The Prince collapsed in a fit of laughter. However, the planes loaded with gold kept arriving so he did as he was asked.

History indicates that gold is used as money as a last resort. The U.S. will not be repaying debts with gold, see 1971. However, they will include it in deals to buy oil, see 1950.

This is unfortunate if your pensions or chosen investment products have a good chunk of govt debt in them. Dollars, pounds, yen and euros are all, more or less, the same. As is all government debt. Whether they are bills, bonds, gilts or whatever.

So, assuming international trade has ground to a halt and the gold leaf covered SDR is accepted. What is the price of gold? Well, exporting nations would probably accept a one billion 'dollar' value SDR which includes one tonne of gold.

The actual SDR takes its 'value' from a basket of paper currencies which take their value from each other. Originally, gold was included as this is how our paper currencies all began. Gold is always required to get people to have belief and confidence in paper currencies. This works until those issuing the paper currencies realise how much more wealthy they could be without the gold handcuffs. They explain it to us quite differently. Eventually, too much paper currency is issued but more needs issuing each year or a plague of defaults wipes out the paper currency financial system. When the old financial system collapses / falters another can be quickly fabricated, based on part, with gold. Hence the SDR described earlier.

So, what price for the one tonne of SDR gold? Currently, forty three million dollars. (25th August 2016) There is no need for that to increase. In my currency, thirty two million pounds or 38 million euros or 4.2 billion yen. Now, the ratios in the SDR basket could change if a country did not obey the IMF. Owning gold would protect your wealth from such changes. Over time 'INFLATION' would reduce the value of the SDR but not reduce its gold content, HINT.

Anyway, that could easily extend the life of the current financial system a decade or two. At the end of which, the 'billion dollar' SDR is valued at exactly one tonne of gold and the SDR and paper currencies valued at nothing.

That is the value of gold. (The price of gold is always controlled by the paper currency issuers. See 1960 London gold pool.) It's price, in this example, eventually one million dollars is worth nothing and one kilogram of gold worth a million fully gold backed dollars. In other words, a kilogram of gold is a kilogram of gold. The value of the dollar varies from one twentieth of an ounce of gold to 23mg to nothing.

Thus the U.S. federal reserve now can issue eight trillion gold backed dollars for the U.S. government to spend into the economy in whatever way most benefits their donors. Should confidence not be restored sufficiently then actual gold dollars would have to be issued. Nothing will have changed, especially for those who do not hold physical gold somewhere safe like bullionvault.

There, you knew I was selling something / attempting to restore your sovereignty.

Clicking on the bullionvault adverts on this blog and then buying some gold or silver will net me a single currency unit for every eight thousand / eighty thousand currency units you exchange. (Part of their affiliates program.) I am not suggesting for a moment that you do this, I am merely informing you of an existing relationship.

I could just as easily explain the bullionvault adds as an easy way for you to check the 'price' of gold in your favourite paper currency. The value of gold exists only in your own mind. I merely write about how I value humanity and profoundly dislike the concept of world war three.

Silver. This is even more interesting than gold. Get both. Get none. Get one. Your choice. Get critically thinking about the world and how we choose to allocate resources. I am not offering financial advice, I am trying to get you thinking critically.

Money does not exist, it is simply an idea.

Gold and silver can readily be used as if it were money, everything is else is just credit.

Gold, oil and dollars were the things I first considered four years ago when I first wondered about the subprime mortgage disaster. Dollars are a paper currency which historically means that they will eventually become worthless. Gold is money. Oil is what our entire civilisation runs on.

An interesting thought experiment is to value everything on the planet in gold. Imagine two brothers. Between them they own everything. They hate to share so they decide that one owns the entire planet and the other owns all the gold. Whatever the value we place on the world, in whatever units we care to measure it in, that value is fully reflected in the 'price' of the gold. World GDP rises from eight to eighty trillion, no problem, the price of the gold rises to match the new world valuation.

Now, imagine that the oil supplying countries, or one of them, decides to be paid in gold, rather than a paper currency. Eighty million barrels each day are consumed and ten tonnes of gold mined or recycled daily. Thus, ownership of the two can simply be swapped. The value of gold would be 8 barrels per gram.

Under these conditions, with the two brothers owning everything, the additional gold and additional oil belongs to them. Ownership can be readily exchanged without effecting their previous holdings.

So, eight barrels per single gram of gold.

That is the value of gold. Now, no doubt, you want to know the price of this gold in your own favourite paper currency? Well, that is tricky. The price of oil in dollars varies continually. Sometimes it is one hundred dollars and sometimes it is forty dollars. What a strange measuring instrument this paper dollar is. Today it is probably forty dollars. Eight barrels multiplied by forty dollars is 320 dollars. Thus 320 dollars could get you sufficient oil to sell for one gram of gold. You 'could' if you wanted, say gold was worth 320,000 dollars per kg and not the undervalued 43,000 dollars per kg it is today. An eight fold increase in gold price.

The point of this is to make you aware that dollars are not a very good instrument for measuring things as important as prices and wages. Unless, of course, you are the currency issuer.

100 years ago a dollar was actually 1,550mg of gold
Today a dollar is 23mg of gold and this trend is accelerating rather than slowing down.

Today an economist would say that we cannot use gold as money as there simply isn't enough.

Some would argue that we cannot use gold as money as we have issued far too much credit.

Both are wrong. There is enough gold and credit will simply expand until it collapses.

What there isn't enough of is critical thought and far too much wishful thinking.

The price of gold? For hundreds of years the price of gold has been controlled. For two hundred years the British controlled it and for two hundred years the price never changed.. Then for decades the U.S. controlled it. In the 1960's the main currency issuers controlled it. Today, the federal reserve with help, controls the price of gold. The currency issuers want one thing, your total obedience to their paper currency and not to recognise the value of gold. The value of gold is its six thousand year history of being recognised as being a timeless, cultureless money. Or barbaric relic by the paper currency issuers friends.

Gold, honest money for honest politicians.
Gold, sound money for ethical bankers.

Which is why, currently, the currency issuers call gold tradition rather than money.

Which is why gold is so important for mankind's maturation from monkey brained barbarians into something so much more satisfying. At which point, gold may well become simply decorative but not until paper currencies are deemed an intellectual embarrassment. A primitive tool for primitive man aka us.

Well done for reading all this. Now spend a year understanding the world as it actually is, rather than what we (westerners) are all taught and believe it is.

Finally, before you try to debate some part of these blogs with me remember one thing. The point of all these blogs is for you to critically think about things both small and large. If all I had to write was 'remember the sea is red not blue' then that is what I would have written. Regardless of what colour I think the sea actually is. (Green.)

Have fun and do whatever you can to prevent World War Three.

The next post will be a yearly round up published in December.

Future posts will be published on the third Friday of each month.

I write as though Clinton won the election and not Trump. Clinton has the best chance of doubling US debt from twenty to forty trillion dollars. Those amassing centralised control will want this doubling of debt. It gives them more time to take even more from us. Trump has built his empire upon debt. Trump, whether he realises it or not, depends heavily upon the banks who fund his extravagant lifestyle. The banking cabal may have an easier time controlling Trump than Clinton.

So there really is no choice and no real difference in the two candidates provided by the central planners. Clinton is a vote for more of the same, much more. Trump is a protest vote, a release valve in the same way Obama was. Remember the 'hope and change'? Well, nothing changed. Trump may well win. Will he manage to get the debt up to forty trillion dollars? The central planners will all be doing their absolute best to help or coerce any president into doubling the debt over each and every eight year period.

Clinton or Trump, what difference does it make? None.

It has been said that whichever of them wins, will put the other in jail. I doubt it. The central planners will want to reward both of them for playing their parts. Do the central planners realise just how vicious a woman scorned can be?

Anyway, Trump does appear to be more human than Clinton so he may win.
Clinton has scared more people into believing Trump is dangerous, so she may win.

Either way, I don't care.

Bernie Sanders, I am told by someone who knows him well, was the man to vote for. The central planners managed to remove him from the ballot with ease.

Ron Paul, a great many believe he is the best man for the job. The central planners repeatedly managed to remove him from the ballot.

Whichever becomes president of the united states of america, one thing remains certain, nothing will have changed. Nothing.

Americans either accept the status quo or they don't. They accept their new 'mascot', with hope or with fear, or they don't.

Central planners will feed upon us even if we die off in great numbers, until we start critically thinking in great numbers.

How many millions or billions need to die before mankind matures into a critical mass of thoughtful and compassionate beings?

The Romney / Obama or Clinton / Trump 'choice' reminds me of our brexit vote. The central planners really do want us to believe in their omnipotence. They really do want us to choose Obama, Clinton and for the UK to remain in Europe. So what happens when we don't? The central planners are quick to emphasise that any problems are now because we were given a choice and chose incorrectly. This is exactly how an abusive relationship works.

Central planners originally gained power by promising how much better things would be. Central planners are now clinging on to power by telling us how bad things would be without them. Central planners do believe they are right. Their confidence is absolute. They want us to believe in them. Which is where the flaw is. For us to believe in them more than we believe in our own eyes, ears and thoughts places mankind's future in the hands of a few. If they are ever wrong then the consequences for the rest of us will be massive. On a deeper level, the central planners crush innovation. If we believed in ourselves then there would be far more innovators, more artists, more artisans, more story tellers, more entertainers and more diversity. Wealth would not be concentrated in the hands of Elon Musk, Clinton and Trump. Wealth would be far more widely and equitably divided. As would power.

Is Elon Musk the world's greatest innovator? May be. He certainly has the easiest access to wealth.

Is Clinton the world's best person to lead the western world into a new era of enlightenment? She certainly makes the best possible use of her gifts for the accumulation of her own wealth and power.

Is Trump the world's greatest property developer? Or has he just been incredibly well funded and his competitors not had such financial support.

Centralised control creates a stadium effect. One or two actors earn millions whilst thousands live on rice and beans. One or two well financed media moguls control thousands of information outlets, thus biasing the news somewhat. It all ties together beautifully. Those who get to decide when to issue bank credit and to whom, EVENTUALLY, control everything. The status quo is assured. Until it isn't. Society / humanity becomes more and more rigid. Less able to withstand shock at the same time it appears to be ever stronger.

Picture thousands of companies competing to provide us with electricity. We get to choose companies that mainly use nuclear power or gas or coal or whatever. We get to choose companies that have better service or a strong connection to our own community. We get actual choices. Not a false brexit or Trump / Clinton choice. Actual choices, plural. We also get a robust electricity network. If coal powered electrical distribution became too expensive we could choose another electricity provider.

Now, here is an opportunity for a central planner to gain our trust and confidence. To initiate a new belief system whereby we believe in the central planners more than we believe in ourselves. Basically, central planning will get us cheaper electricity. Less duplication of equipment and rules and regulations to make things 'fair' for everyone. The central planner scoops a fair bit of wealth but electricity is cheaper.

However, we have lost the choice we once had. So, the price of electricity can rise. The central planner can take more wealth. Innovation is also removed. Thousands of providers can make thousands of commercial decisions, some will pay off. Two or three providers are only seeking to repay the financiers. Seeking only innovation in financing to buy out their competitors.

Unfortunately, the real problem has been hidden. Thousands of service providers ensures continuity of service. You do get duplication. You get a robust electrical supply. Two service providers, keen on maximising profit so as to be able to borrow sufficient sums for mergers and acquisitions, do not duplicate equipment. They have the bare minimum. This eventually leads to an increasingly brittle and fragile system that is not capable of withstanding any level of shock. It just fails.

No electricity, generally means no water either. Then no gasoline. Then no food in the shops.

Hopefull, you are now a little more educated in the benefits of centralised power and its flaw. Perhaps, America does not have to suffer a Zombie Apocalypse caused by one or more massive but brittle systems simply failing.

Obviously, the central planners will blame small system collapses on a Russian government cyber attacks and or Muslims. They cannot and will not blame themselves for creating systems that are not robust. Ultimately, the blame lies with us, the people.

I gave the electricity example as I believe it is the easiest to understand. Central planners are either intelligently managed and dismantled by the masses or the systems we rely on for our survival will, one day, simply not function.

I am a systems analyst and design engineer. I have, privately funded, spent four years analysing global systems. Very few engineers of my calibre will give global systems any thought whatsoever. I have given four years of my life to it. Four years.

Mankind always faces a fork in the road, we need to take it. Soon. Or go over the cliff.

A quick thought. On the titanic, the electricity did not go off until after the vessel broke into two pieces. The first class bar was a better place to be than a life boat, until it wasn't.

NB

An Engineer designed the titanic to be unsinkable.

The captain, facing huge financial pressure, sailed the thing at full speed, knowingly through a field of icebergs. (Unusually calm sea.)

An accountant changed the specified rivets for cheap ones. Which is why the titanic split open like a dodgy seam in a cheap suit.

The titanic was designed to be unsinkable. It wasn't built to be unsinkable. It wasn't operated to be unsinkable. It was believed to be unsinkable until it sank. I suspect quite a few people drowned still believing it was unsinkable.

Our financial overlords DON'T give a shit about any of us. The official narrative still has us believe the engineer was at fault and not the accountant.

In this example the engineer is the innovator.
The accountant a disciple of our financial overlords.

Today, one hundred years later, the accountant draws the higher salary.

Our financial overlords DON'T give a shit about the truth, just their ever increasing skim and whatever it takes to maintain it. Clinton is their best shot at maintaining the skim. Protest vote Trump is perceived to be easily brought to heel by our financial overlords, if necessary. Sanders and Paul, simply weren't put forward by 'our' political system. How neatly 'our' political system aligns with our financial overlords whims.

So dear reader, you have made your choice. Do YOU believe in banks being wealthy when you KNOW they lend out ten times more 'money' than they have?

Or are you, as I am, beginning to understand?

This post portrayed 'financial overlords' as the baddies, as the ones to blame. I did this to make the post easier to read. It is highly probable that nobody on the planet considers themselves to be a 'financial overlord'. As far as I am aware, I just made the phrase up earlier today. At an Elite level of understanding, there really is no one person or one group to blame for societies ills. This includes Russians, Putin, the Rothschilds, ISIS, the Chinese, immigrants, Bush, Yellen, Bernanke, economists, skin pigmentation levels, Democrats, Reblicans, 'them', Jews, Christianity, aliens, accountants, bankers, Goldman Sachs, governments, big pharmaceutical, Obamacare and Muslims. Or any other group, even pure parasites like the Federal Reserve, IMF and BIS. Or psychopaths. We are to blame, we being adults. All of us. All seven billion of us. Pointing fingers is not a solution. Neither is dropping bombs on those of us we point fingers at. We all know this, yet the inequality grows ever worse increasingly faster.

What would you have me write next?


Why?

This was written before Trump was declared President Elect. I am surprised but Brexit also surprised me. Perhaps I am far too easily surprised. 1,000 currency units gambled upon a Trump Brexit double would have returned 16,000 currency units.

Anyway, whatever. Y'all take care now.