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Perspectives on America, Short Takes on Wealth – 115
G O L D
“In the long run, the gold price has to go up in relation to paper miney. There is no other way. To what price? That depends on the scale of inflation – and we know that inflation will continue.” – Nicholas L. Deak
This is Jeff Bennett for the Preparedness Podcast, with another installment of Perspectives on America, ‘Short Takes on Wealth – 115’
Today’s topic, “G O L D – Part II”
Nearly half of the homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out. A new report issued Friday by the Treasury Department said that about 630,000 people who had tried to get their monthly mortgage payments lowered through the effort have been cut loose through July.
In the wake of news about a spike in new applications for unemployment benefits comes another potentially troubling sign: A record number of workers made hardship withdrawals from their retirement accounts in the second quarter. What’s more, the number of workers borrowing from their accounts reached a 10-year high.
And you think it can’t happen here??? The austerity measures that were supposed to fix Greece’s problems are dragging down the country’s economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places.
A must-read article that begins with this quotation: “From now on, depressions will be scientifically created.” – Congressman Charles A. Lindbergh Sr., 1913 (Read Full Story)
Dumping Bush Tax Cuts May Bring Depression. Many economists are worried about the possibility of a double-dip recession, but former Bank of England official David Blanchflower thinks it could be much worse than that if the Bush tax cuts aren’t extended. “If we don’t act fast, a plunge into Depression is a growing risk in . . . the U.S..”
The country got some more disappointing news about jobs on Thursday. Initial claims for unemployment rose last week to a seasonally adjusted half a million.
Imagine that you had a pile of wood put together to make a camp fire. Your goal is to create the hottest fire imaginable, one that will last for quite some time. You start with the smallest pieces, a few leaves, a couple of pine cones, and a few small sticks. Next you throw on the larger timber. A few logs and some old fence posts will do here. Now, in the spirit of getting this camp fire going, you add a few gallons of pure gasoline. That should be enough to do it, right? Wait, what’s that? You forgot the matches?! The above scenario is exactly what is occurring in the Federal Reserve. (Read Full Story)
Prospects for U.S. economic growth took a hit this week after reports showed the trade deficit swelled and consumers reined in spending. Economists at Morgan Stanley reduced their estimate for third-quarter consumer spending following a report showing retail sales rose less than forecast in July. A record jump in the trade gap for June capped figures that indicated the world’s biggest economy grew at least a percentage point less than the 2.4 percent pace the government estimated last month.
GOLD: Part II
How much gold is available for investment?
Of course, it would be wise to know how much gold actually exists, and how much is actually available as investment gold, so you can ascertain the true value of gold on a supply and demand basis.
How much gold is there in the world? The World Gold Council estimates, at the end of 2009, that all the gold ever mined amounted to about 165,000 tons. But the majority of it is not available for investment.
First, central bankers own gold as reserves. The World Gold Council reports that the international average is about 10.2% at current market prices but, in the European Union it is over 50% and the USA holds around 75% of its reserves in gold. This gold is not in play for investment.
While it is true that the US is the largest single holder of gold at 8135 tons, at the time EURO banknotes and coins were first put in circulation (2002) all the central banks in the Eurosystem held gold that aggregately totaled 12,574 tons (or 404.3 million troy ounces), considerably more than the US. Of course these numbers have changed since that time. According to the March 5, 2010 European Central Bank (ECB) report, the ECB held 268.1 EURO-billions of gold. While gold reserves of the national central banks remain in their possession, all gold and foreign exchange reserves are, under the terms of the Maastricht treaty, at the disposal of the European Central Bank.
Second, the International Monetary Fund holds tons of gold. At the end of January 2010 the IMF held 96.6 million ounces (3,005.3 metric tons) of gold at designated depositories, valued at $6.9 billion. By February of 2010 the IMF, attempting to build its cash reserves to aid in lending to needy countries, had reduced it holdings of gold to about $105.0 billion at current market prices.
Third, gold is also held by nations. The International Monetary Fund publishes a list of how much gold each country holds.
Official World Gold Holdings – WORLD GOLD COUNCIL June 2009
Tons % of reserves
1. European Union 12574.0 - -
2. United States 8133.5 78.3%
3. Germany 3412.6 69.5%
4. International Monetary Fund 3217.3 - -
5. Italy 2451.8 66.1%
6. France 2450.7 73.0%
7. China 1054.0 1.8%
8. Switzerland 1040.1 37.1%
9. Japan 765.2 2.1%
10. Netherlands 612.5 61.4%
11. Russia 536.9 4.0%
Gold is also used for industrial and medical purposes and to make jewelry. According to The World Gold Council, the demand for gold in 2009 was as follows:
Jewelry consumption – 1747 tons
Industrial and dental – 367 tons
Investment gold - 1270 tons
Source: World Gold Council
Ton = 1,000 kilograms (2.2 lbs) or 32,151 troy oz of fine gold (2009 lbs)
In the investment gold category, 594 tons were swooped up by exchange-traded funds, and only 234 tons went for coin making (Source: World Gold Council)
Maybe only about 7–9% of gold is available to make bars and coins.
And now for the big kicker question – how much physical gold is actually in the vaults of the gold exchanges? It has been estimated that just one ounce of gold backs 20 ounces of gold sales. The banksters have done it again. They have sold more gold on paper than is actually being held in the vault.
There are irregularities and delays in the delivery of physical gold by the New York Mercantile Exchange and Commodity Exchange, Inc (COMEX) which is the world’s largest physical commodity futures exchange. It appears that COMEX vault doesn’t have all the gold it claims on its books. Some holders of gold IOUs are being offered cash instead.
You’re going to miss the major significance of all this fraud because you probably aren’t an investor in gold and think these developments will not touch your financial nest eggs.
On a supply-and-demand basis, if gold is not in vaults, then the gold supply has been artificially inflated. If it is revealed that gold supplies are in fact much lower, then physical gold will rise in value beyond comprehension and the value of paper money will crash. Investors will rapidly move to gold and out of the stock market, which will crash pension funds, etc. Such a collapse could cause a complete loss of confidence in paper money, which has no backing whatsoever, no more than the phony gold IOUs. It is no wonder these phony gold IOUs are such a guarded secret.
Investment advisor Marc Faber argues the price of gold today at $1100 an ounce is comparatively less than when it was sold for $300 per ounce a few years ago because it is in greater demand and far more scarce. Read Faber’s remarks here.
As the price of gold soars, don’t get distracted with invitations to buy into start-up gold mines. You need to think twice about startup gold mine stocks.
Whether you are interested in selling your gold jewelry, or interested in learning about gold for investment purposes, a good source is The World Gold Council’s online list of frequently-asked questions.
Gold is scarce. You read here about tons of gold, which is deceiving. Gold has a specific gravity of 19.3, meaning that it is 19.3 times heavier than water. So gold weighs 19.3 kilograms (42.46 lbs) per liter. The world produces a cube of gold that is about 4.3 meters (about 14 feet) on each side every year. In other words, all of the gold produced worldwide in one year could just about fit in the average person’s living room! If you could gather every scrap of gold that man has ever mined into one place, you could only build about one-third of the Washington Monument.
Many have recognized and made physical gold, gold ETFs and gold equities part of their investment portfolio. Should this be acted upon, the limited supply of gold and gold equities may present an option for mitigating growing uncertainty in the near-term for the systematic risk posed by government solutions. As more nations around the globe liberalize their economies, the U.S. and western nations may come under increasing competitive pressure, and for residents in these economies gold may be an even more important antidote for what ails their wealth. (Read Full Story)
What ever happens to foreign economies, credit and banking along with the American vote in November… could be a major turning point in world affairs affecting all citizens world-wide. This is a generational changing series of events. It might be prolonged but we think not. Prepare for several smashes and crashes from later in this month of August through nasty springs and falls all the way to 2012 when I predict World War III begins over energy, economics and settlement of several old grudges; some of them being 5,000 years old. The US Dollar and American standard of living shall be cut in half over the next few years.
Precious metals are currently up a large amount. Gold has been bouncing around at about $1,200 per ounce for the last couple of months. It spent all of the 1990s at about $300 to $400. Silver has been bouncing around about $18 per ounce. Silver spent all of the 1990s at about $4.50 per ounce. Why? Is the smart person buying or selling?
In summary:
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Most Americans feel investment decisions should be delegated to others and often, when they have decided to invest their own money, don’t have the gumption to stand up to their stock brokers and investment counselors to pull out of their eroding 401k plans Americans have lost nearly a third of their wealth in 401k plans in the recent economic downturn. Americans will not be able to rely upon Social Security checks in their retirement and most private pension plans are under-funded.
Get some.
March 11, 2010
Bill Sardi [send him mail] is a frequent writer on health and political topics. His health writings can be found at www.naturalhealthlibrarian.com. He is the author of You Don’t Have To Be Afraid Of Cancer Anymore. His latest book is Downsizing Your Body.
Copyright © 2010 Bill Sardi Word of Knowledge Agency, San Dimas, California.
http://www.lewrockwell.com/sardi/sardi157.html
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Until then, I am Jeffrey Bennett.
