The gold mining business will be looked back on in time as the greatest business opportunity of the millennium. That which polite groups look on today as an investment pariah will outperform the tech stocks of 2006-07 and hold their price levels rather than crashing like a South Sea bubble.
Today you got insight from CIGA Patrick on the essential tool gold has been to central banks, a hint of a final price on gold and why it takes almost a generation to return gold to its rightful owners, the Germans, who have made that request of the US Treasury and Fed. That is an article that you should print, read and re-read as it is essential to your understanding of the Golden End Game.
Lars, our investigative reporter in the field of economics, published a long interview full of good reading and fact, but the following is in my opinion something you must print read and read again.
My purpose is to teach you practical monetary science in terms of the Golden End Game certain to occur and thereby transit you from this time of evolution of money into the future safe and sound. The present reaction of the gold price in the market today is almost comical if you know what is in store and in fact taking place right now.
The mark to market of gold that is taking place on at least half of the globe is the beginning of a ground swell that will in the cash market for gold provide the means of balancing the balance sheets of the worst offenders of the exponential growth in debt up to today and well beyond.
Those who think the Goldmans or Morgans are stupid and clumsy are the ones demonstrating those traits. I see and know the same things these greatest of all time manipulators of price see and know. This is 1979 in the gold market right before the greatest price appreciation took place over the shortest period of time then. The most money over the shortest period of time in the gold bull market of the 70s was not made by the gold crowd but rather by the mega powers of Establishment Wall Street after doing the same things they are now doing.
The gold price can be pushed around like any market can be, but the purpose is to take away yours, increase theirs and then do exactly what is being done now on the upside.
In years to comes you will dismiss all my efforts based on my $3500 and beyond number. The reason for this is that number will have only been a start in the gold price towards the new era of industrial expansion based on sound money and major nation’s balance sheets having been balanced by gold.
Note that even UBS hinted at that last week. I would post their article but every time I do I am handling lawyer’s letters screaming about copyrights. One wonders how many people I am teaching the end game to?
Gold Gives You Extremely Important Signals
February 17th, 2013
(Excerpts from article)
L.S.: However, you support a commodity price rule for monetary policy connected to gold.
D.P.G.: Yes, sure.
L.S.: Could you explain the concept behind that and why you support it, please?
D.P.G.: This is an idea that was advanced by Robert Mundell, but actually it goes all the way back to David Ricardo’s idea of the gold standard. Robert Mundell, of course, is the father of the euro and the father of supply-side economics, he’s a Nobel Prize winner, and he has been the most prominent economist advancing this idea; he has talked about it for roughly the last thirty to forty years. The idea is pretty simple: to create some kind of objective market-based rule which would limit the ability of central banks to create money and to debase their currencies, or on the other hand to act as a break against deflation. In other words: to use market observations of auction prices that reflect expectations of the overall price level in order to correct central bank errors.
There has been an enormous amount of debate for centuries now about what the criterias should be for central bank money creation and how important that is. Mundell’s argument is that the quantity of money is much less important than the way the market responds to central bank increases in high-powered money or in bank reserves and how that affects expectations of the price levels. So central banks should listen much more to the market.
And gold among all the commodities probably gives you the purest signal about future price expectations. There is a very simple reason for that: the amount of gold in stockpiles is many times – 25 to 30 times – annual consumption. So a change in desire to hold gold as an investment is a much more important determinate of the gold price than changes in current mining supply or changes in current consumption of jewelry or industrial applications. If you use copper or platinum or bauxite or other commodities, the stockpiles are extremely low relative to current use. And you also might have a technological change or an economic slump or a big increase of demand which would drastically affect the prices. So it’s much more difficult to interpret price signals from industrial commodities as an indication of expectations about the future price level. Gold gives you much better information. So it certainly has pride of place among all commodities as an indicator of expectations about the price level and as a guide to central bank activity.
That idea of a commodity-based standard which is to create confidence in the market place and to correct for central bank errors is the core of Mundell’s concept. I think it is an extremely good idea and I firmly believe monetary management in general would have done much better if we would have followed Mundell’s view and not the guess work of central bankers.
Certainly errors committed by the Federal Reserve in monetary policy contributed to the development of the financial bubble during the 2000s. During 2003, as you recall, the Federal Reserve eased because they were afraid of deflation – there was a big drop in the bond yield and they saw it as a deflationary signal. At the time my department at Bank of America produced a large body of research, arguing that this was not a deflationary signal, that the Federal Reserve was in error, and the Federal Reserve’s ease was mistaken. Therefore, I can think of a number of instances where the Federal Reserve would have been much better off to watch the gold price rather than bond yields or consumer price indexes or other things that they were watching.