Let’s keep things very simple:
1. The future of gold will not be determined by the USA.
2. The present manipulation in gold is purely Western, and any other thought is rank nonsense. This event is both short term and very short sighted in terms of people’s published analysis.
3. The triumvirate of Euroland, Russia and China will determine the future of gold as financial power has shifted from the West towards the East.
4. The strategy of the flushing of Lehman Brothers was to initiate a transfer of failed and to fail debt and debit, producing obligations in all forms from the balance sheets of international banks and investment banks onto the only entity that could mechanically accept them in infinite amounts, the balance sheet of Western central banks. To avoid a total and terminal collapse of Western finance, the US Fed had to take the entirety of the problem onto its balance sheet in exchange for newly created electronic bank wired funds.
5. This cash then simply filled an empty hole that was not visible to a general public because of the willingness of FASB to allow these institutions to call what was worthless as full value.
6. The means of the transfer is presently and was QE.
7. QE was a total success in stopping an absolute economic collapse of the West in an unprecedented economic proportion.
8. QE was for the banks and not for anything else. It filled a black hole made invisible by FASB capitulation to political pressure allowing fraudulent computer valuations. This gave birth to the large equity rally off the bottom in early 2009 within two weeks of the FASB’s capitulation.
9. Because of the nature of QE, the only real economic stimulant was the wealth effect of a roaring equity market. That left Main Street totally out of the equation and did nothing to reverse the long term bull trend in unemployment.
10. Any consideration of an exit formula for the Fed to reduce the size of its balance sheet must take into consideration the quality of the assets that QE has purchased, which is known to have a strong emphasis on paper that truly has and will never have a market. For those assets that do have a market, sales of the dimension of the purchase would certainly impact interest rates in a most alarming way because of the lack of international buying of US Federal debt. All debt markets affect all other debt markets from the loan shark to the US treasury.
11. So there must be a way of doing the necessary in order to compensate for the weak asset expansion of the balance sheet of the Fed and other central banks because there is no exit strategy despite the over-educated academics that would try and convince you otherwise.
12. I am the most practical market related writer in this field. I assure you all talk of an exit program is based on a full recovery to opulent economic times that QE is not designed to produce, nor can.
13. Because the problem at the time of Lehman Brothers was so great, there wasn’t even a good estimate of its size so that QE had to be to infinity. I stated that many years before Bloomberg.
14. Therefore the solution to the present problem that must take place before there is any chance of real economic recovery is that central banks must balance their balance sheet in an economic condition as present and predicted here to remain about the same or worse that permits absolutely no exit strategy.
15. That means that the price of gold as the other central bank asset must rise in the free market significantly so that the balance sheets of the Western world central banks begins to heal and maybe even balance.
16. The mathematics of the price of gold are well in excess of the two magnets now functioning at $2111 and revolving around $4000.
17. Marry this concept to the recent memo of CIGA Belgian and you have the total solution to the present problem that no other mechanism can produce. This will be initiated not by the USA, but by Euroland, Russia and China.
Now add the text of the discussion of earlier this week on the ascendancy of the euro as we enter the final chapter of the Monetary Crisis of 2008 caused by the fraud of OTC derivatives, a crime with many millions of victims and potentially a lost generation. Not one of the major perpetrators suffered corporal repercussions.
Jim Sinclair’s Commentary
This is a brief of discussions within a private self financed research group in Holland.
It demands respect and my gratitude for their contribution of this ever more complicated subject, Gold.
They can be reached at goudstudieforum.com
The Asian wealth producers (physical economy) and the major oil and gas owners, sympathize with the euro goldkoncept, that concept being, the market revaluation of gold without any link to any currency. (Remember the Duisenberg Speech.)
Gold, the wealth reserve (so not as a currency), shall be freely valued at the world’s gold auctions. The demise of the old dollar standard and rise of the Gold value standard and reserve.
Real value should be priced in and exchanged for a currency that also values, recognizes and promotes gold as a value standard. That currency is not the dollar, but the € (€ system and regime).
This (brilliant) idea/concept is not new. The early pioneers were Jacques Rueff and Triffin. Read: The Monetary Sin of the West.
Both wanted, but disagreed, to a free-floating gold price (value) during the London Gold Pool period (sixties). Their (Reuff and Triffin’s) point was:
Financial, monetary, and economic global stability by introducing the Gold Value Standard. The Dollar-regime (system) refused and forced the acceptance of the absurd SDR (paper gold).
But the two-tier gold market was born:
Monetary ($)gold and non-monetary gold. Oil and Asians keep accumulating physical gold and the € currency (€-system) that favors Free Floating Gold Value. Stability means that value should be exchanged for value. Currencies that recognize the value of gold as a wealth reserve are worth to buy valuable oil and products. The owners and producers of wealth get the assurance that their wealth can be safely stored as a reserve in free floating gold value, the only appropriate store of wealth.
That’s the running transition out of the non-wealth $-system.
Conclusion to both briefs:
You have all the mechanical parts of the solution to the problem. The progress toward resolving this mess will again make huge profits for the “Good ole boys club,” particularly the Yalies.
Gold will move up in the free market and that is what this reaction is all about. The Canadian Dollar, Swiss and Euro will all benefit. Gold will not be confiscated because it becomes a major asset of the insiders. Gold producing companies with low cost operation will enjoy the leverage common to that industry in what is about occur. The amount of bearishness now developing in gold and certainly in good gold shares is the ultimate contrarian’s dream about to come true.
This is the golden stage. It is so simple it is almost silly, but few if any, really get it.