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DJ - Did You Know??? 2/4/19

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DJ - Did You Know??? 2/4/19

Post by Ssmith on Tue Feb 05, 2019 8:24 am

DID YOU KNOW?



Good Evening, Staying with the “Did You Know” theme,+ we the public, as whole, tend to take events and circumstances at face value without thinking through their real meaning, history and relevance. C.I.P.S., BRICS, QFS, GCR/RV, NESARA, GESARA, AIIB, FATCA, CRYPTO Currency etc.



Another such item is the Gold Standard. We have a rudimentary perception of what the Gold Standard actually means but why is it the lowest common denominator required for a GCR/RV to occur? The “Cabal” created financial systems of the world were doomed from their inception.



The biggest issue is that there is only so much one can squeeze out of a debt cycle. With each cycle, deficits pile up. The need to re-structure the global currencies is no longer just an intriguing concept but a necessity. It has been the manipulation of currencies throughout the decades that is at the root of all debt creation and ultimately a dysfunctional financial system becomes a tail spin. Sovereign debt, corporate debt and consumer debt are all at all-time highs.



The US government has $22 trillion of debt and is running $1 trillion+ deficits every year. There’s a record $15 trillion of corporate debt. And the US consumer has racked up around $4 trillion of debt (not including mortgages). In addition to debt levels, we have to worry about the increasing social unrest and the public’s inability to decipher who is telling the truth these days between politicians and the media, both of which make it difficult to make rational decisions, survive and thrive.



So, $22 trillion in the hole and a $1 trillion deficit in a good year. Not to mention, interest rates are rising, which means all of this debt is just getting more expensive. Eventually, people will simply refuse to lend the U.S. or other debt heavy countries any more money because they know there’s no way they’ll be repaid.



Our government already spends 28% of its revenue just on interest and at a time when interest rates are near all-time lows. Just think what happens when interest rates go up. According to the Wall Street Journal, in the first eight months of 2018, overseas buyers of US Treasuries only bought half the amount they did over the same period in 2017. And while this all goes down, the central banks (who control the printing press) have been buying gold at the fastest pace in years.



It would be like you and I buying up water because we know a drought is coming. The price of gold is up more than 300% in the past 15yrs, gold has never been worth $0 and is a hedge against inflation.



Physical gold is easy to buy and simple to sell, making it the go-to safe haven of investors for when markets are turbulent. When interest rates move higher, the price of gold tends to fall, since it costs more to carry the metal. In other words, other assets will command more demand because of their interest rate component.



As a rule, when the value of the dollar increases relative to other currencies around the world, the price of gold tends to fall in U.S. dollar terms. It is because gold becomes more expensive in other currencies. As the price of any commodity moves higher, there tend to be fewer buyers, in other words, demand recedes.



Conversely, as the value of the U.S. dollar moves lower, gold tends to appreciate as it becomes cheaper in other currencies. There is also a psychological factor attached to the value of gold. The price of gold is often sensitive to the overall perceived value of fiat or paper currencies in general terms.



During times of fear or geopolitical turmoil, the price of gold tends to rise as faith in governments falls. (We are seeing an 8 month high over 1300 per/oz. as of this post date). During times of calm, the price of gold tends to fall.



Gold is an important barometer in terms of global economic and political well-being. While the relationship between the value of the U.S. dollar and gold is important, the dollar is not the only factor that affects the price of the metal. Interest rates also affect the price of gold.



Gold does not yield interest in itself; therefore, it must compete with interest-bearing assets for demand. While the U.S. dollar gold price is a widely accepted benchmark, 95 percent of the world must translate the value of the metal to their local exchange rates. The launch of the Shanghai Gold Exchange (SGE) in 2014 is shifting the means by which gold is valued.



The exchange provides a new benchmark price for gold bullion with a much higher backing of contracts by actual physical metal. This new price benchmark will challenge or one day replace the Western price benchmarks that are widely believed to be manipulated. The Shanghai Exchange, is really just an extension of the Chinese government and benchmarks are actually priced in the local currency, the yuan.



It is a natural occurrence in that all of the gold is migrating to the East so therefore the pricing power should be migrating to the East as well. The new Shanghai Gold Benchmark auction “concentrates” supply and demand twice every working day, aiming to find the one single price at each event that matches the most business from buyers and sellers.



While physical demand has always provided underlying support to gold prices, speculative paper trading has been the main driver of prices. With China’s push for an international physical exchange, physical demand could begin to have a stronger influence over the gold price. According to some estimates, global demand for gold is 1,000 tons more than the supply. With no new mining capacity coming through, most of the gold is being recycled. Non-declared gold reserves (China, Zimbabwe, Vietnam, Iraq, and many other countries) will soon be making their appearance as the pricing mechanisms shift from arbitraged paper in the West and physical gold in the East.



Adam Smith in his landmark publication “The Wealth of Nations” published in 1776 wrote about mercantilism. This system of economics basically assumes that one country can only get rich if another gets poor. It’s a system of winners and losers, so every country tries as hard as possible to bring money into its borders without letting any escape.



The prevailing view was that gold and silver was wealth, and that countries should boost exports and resist imports in order to maximize this metal wealth. Smith’s insight was that a nation’s wealth is really the stream of goods and services that it creates. Today, we would call it gross national product According to Smith, the mercantilist thought rests on the idea that wealth consists in gold and silver and that a country lacking mines has to follow a set course in order to increase its wealth, i.e. to accumulate precious metals through a constant surplus on its balance of trade.



Thus the underlying argument against a “Gold Standard”. Those who do NOT have the gold will constantly be in conflict with those that do. Only free trade with less restrictions will allow those lacking countries the opportunities to build a surplus to sponsor future economic growth (Gold- back their currency as the demand dictates)



So when we hear about going back to a “Gold Standard” let’s consider all the implications and verticals involved. It is not that simple to just “gold back” a currency. Also consider the U.S. doesn’t have the gold production within its borders and territories and will have to gain its surpluses through other means. Lease it or trade for it.
Ssmith
Ssmith
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