- In times of severe instability, monetary crisis, financial stress, whether inflation or deflation, gold will do very very well. People who think that gold is an ancient relic and should be relegated to history are totally wrong! When the masses realize that fiat currencies are just pieces of paper and a confidence game foisted on them by profligate governments, they will rush to precious metals. That time is coming soon! Egon von Greyerz opines :
There is really only one government in the world that understands the virtues of gold – China. Not only is the country buying all the gold that they can without pushing the price up but they are also encouraging the Chinese people via the media to buy gold and silver.
Let us first look at the US and ex Fed Chairman Greenspan to demonstrate how sound individuals become totally corrupt and dishonest once they become politicians. (Yes, the chairman of the Fed is political position which permits no integrity).
In 1966 Greenspan wrote an essay – “Gold and Economic Freedom”- in which he spells out the importance of gold. Here is a quote from the essay:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”
Then 21 years later Greenspan started his 19 year reign as chairman of the Fed. During that period he was instrumental in creating or exacerbating one financial crisis after the other. First the stock market and Nasdaq bubble, then the housing bubble, the credit bubble, the derivatives bubble and finally the banking and financial system bubble. Greenspan fuelled one bubble after the next by printing more money and lowering interest rates each time there was pressure in the economy.
Every time there was a hearing in front of congressmen or senators Greenspan spoke his gobbledygook that no one understood. But they all (except for Ron Paul) licked his boots and loved him since his money printing and unsound monetary policies created a false prosperity which all their voters believed was real.
Now, 43 years after his essay praising the virtues of gold, Greenspan just said in a speech that “Gold is the ultimate currency”. But during his 19 years as chairman of the Fed he acted like printed paper was the ultimate currency. This is why you can never, ever trust a politician. Political power totally corrupts human beings and whatever integrity, honesty or soundness they had before totally disappears as soon as they take on the political mantle. Bernanke who was once an honest academic is continuing in exactly the same tracks and is doing all he can to make the financial crisis bigger by printing trillions of dollars.
China understands gold
China has recently announced that they have increased their gold reserves by 76% to 1054 tons. But that is just the beginning. China is likely to be a major buyer of gold for the foreseeable future. Chinese government officials who normally keep a low profile have recently become more vociferous about the total mismanagement of the US economy and the US dollar. China is now openly criticising US monetary policy. The former vice-chairman of the Standing Committee, Mr Cheng Siwei, that China is dismayed by the Fed’s credit easing (as reported by Ambrose Evans-Pritchard in the Telegraph). Mr Cheng said: “If they keep printing money to buy bonds it will lead to inflation and after a year or two the dollar will fall hard”. He went on to say: ” We will diversify incremental reserves into Euros, Yen and other currencies. Gold is definitively an alternative but when we buy the price goes up. We have to do it carefully so as not to stimulate markets”.
So China buys other currencies, they use their reserves to buy real assets, especially in the ground, in Africa, South America and other continents and they buy gold. The Chinese government understands what is happening in the world and they have a long term plan to apply their reserves to areas which have real value and which will benefit their economy for years to come. Of course, they have the advantage of not having to worry about short term pressures such as being re-elected.
China is promoting gold and silver on state television. They are urging their people to buy gold and especially silver which they consider very cheap currently (we agree). They are also buying gold with their reserves and they are getting out of the dollar as quickly as they can. The message can’t be more clear. China with its $2 trillion of reserves and with a population of 1.3 billion are major buyers of gold and silver. The effect of this is that the gold price is underwritten for some time to come.
Asia versus the USA
China is a major buyer of gold as we have just outlined. So is India where the tradition to buy gold makes the country the biggest jewellery buyer in the world by a big margin. In 2008 India bought circa 700 tons of gold or 25% of total supplies.
China and India together have a population of almost 2.5 billion people who buy gold and put their savings in gold and jewellery. In addition the Chinese government is a major buyer of gold. Against that, there are 300 million Americans and most of them don’t understand gold or the value of it. Add to that the US government which hasn’t got a clue about real money. Instead they believe that all their financial problems, all their deficits and all their bubbles can be solved by pressing a button and creating a few more $ trillions of paper that they call money.
So who should we back, the 2.5 billion responsible and thrifty Chinese and Indians or the irresponsible US government? Not a very difficult choice!
“Paper money eventually returns to its intrinsic value – ZERO” - Voltaire 1729
Disclaimer – I am not a financial advisor. This is not an advice to buy, sell or hold any stocks or bonds or any precious metals.
- Is this 50+% stock market rally sustainable? Is it a real or manipulated rally? There are persistent rumors of banking collapse 2.0 and a new monetary (gold back?) system. Draw your own conclusions. CNNMoney.com reports :
Can hundreds of stock-selling insiders be wrong? The stock market has mounted an historic rally since it hit a low in March. The S&P 500 is up 55%, as U.S. job losses have slowed and credit markets have stabilized. But against that improving backdrop, one indicator has turned distinctly bearish: Corporate officers and directors have been selling shares at a pace last seen just before the onset of the subprime malaise two years ago.
While a wave of insider selling doesn’t necessarily foretell a stock market downturn, it suggests that those with the first read on business trends don’t believe current stock prices are justified by economic fundamentals. “It’s not a very complicated story,” said Charles Biderman, who runs market research firm Trim Tabs. “Insiders know better than you and me. If prices are too high, they sell.”
Biderman, who says there were $31 worth of insider stock sales in August for every $1 of insider buys, isn’t the only one who has taken note. Ben Silverman, director of research at the InsiderScore.com web site that tracks trading action, said insiders are selling at their most aggressive clip since the summer of 2007.
Silverman said the “orgy of selling” is noteworthy because corporate insiders were aggressive buyers of the market’s spring dip. The S&P 500 dropped as low as 666 in early March before the recent rally took it back above 1,000. “That was a great call,” Silverman said. “They were buying when prices were low, so it makes sense to look at what they’re doing now that prices are higher.”
Adding to the flurry of stock sales, companies are selling stock to the public at a brisk clip while buybacks have tailed off. All told, U.S. corporations have been net sellers of $105 billion of stock over the past four months, Biderman said.
Insiders have managed to cash in on some of those offerings. Healthcare payment administrator Emdeon (EM), for instance, last month raised $155 million in an initial public offering. At the same time, selling shareholders led by private equity investor General Atlantic Partners raised $188 million. Though the wave of selling by insiders doesn’t necessarily predict a pullback in their stocks or the market as a whole, it’s hard to put a happy spin on the recent trends.
“The disparity between buyers and sellers right now is vast,” said Silverman. “That’s the beauty of following insider trading — these guys are talking with their checkbooks.”
- 27 February 1933, Hitler’s false flag Reichstag fire was used to override the German Constitution, blame the communists/terrorists and bring in fascism!
- Doesn’t this sounds like what is happening to America since 9/11? None so blind as those who refuse to see. Those who don’t learn from history are bound to repeat it! Keep in mind that the same Wall Street banksters, who financed Hitler, and their progeny are still in power. The Illuminati banksters!
- Truth or lies? We will know soon!