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Gold Prices, Fort Knox, Debt…And The Twilight Zone Story at a Glance: Gold rose $58 to $1,840 (recent low about $1,760) for the week ended December 6, while silver rose $1.66 to $24.21 (recent low around $22.00) for the week. As we descend into the Twilight Zone, the major stock indices made new highs this week, showing, once again, that fake money encourages fake prices. Stock market capitalization reached an all-time high compared to GDP. 1929 and 2000 peaks come to mind…. Gold and silver prices are inexpensive relative to “paper” prices—see below. Jeremy Grantham:
Yes, the U.S. has slipped over the edge into the twilight zone of fiscal, monetary, political, and social craziness. Crazy behavior and policies have consequences. Fiscal Craziness: Official national debt exceeds $27 trillion, about $200,000 per employed adult in the U.S. Practically speaking, no one cares. Congress will pass another (expensive) COVID bailout, tax revenues are falling, expenditures are up, and debt will blast higher. No one cares, yet. Feds Admit $2.3 trillion in Improper Payments Possible Head of Office of Budget and Management:
Monetary Craziness: Global central banks have created over $28 trillion in “fake money,” which boosted stocks and bonds to extreme heights. That “fake money” lifted the wealth of billionaires while millions of Americans lost jobs, and thousands of small businesses closed their doors forever. Bankruptcies escalated because of lockdowns. Political craziness: Election fraud has been prevalent for decades. Politicians play fast and loose with the truth. Pervasive lies, loss of trust, and delusions (regardless of political affiliation) will extract a large price. Social craziness: Lockdowns, required masks while exercising outside, wearing a mask between bites of food (California), children are asked to report parental mask and multi-family violations (Vermont), not wearing a mask is an “act of domestic terrorism (L.A.), churches rebranded as “family friendly strip clubs” (the virus is communicable in California churches, but not strip clubs), Mayor of Austin, TX “We need to stay home… this is not the time to relax.” [He was in Mexico.] Add suicides, drug abuse, alcoholism, spousal abuse, and other consequences of government mandated confinement. CRAZINESS IS RELATIVE TO THE OBSERVER:
Who can we depend upon? What is real? What reduces craziness? Where is the vaccine that protects people from dishonest money? Consider the following comparisons.
SLIPPING OVER THE EDGE INTO THE TWILIGHT ZONE: Let’s loosen our grasp on the official narrative, leave the beaten path, and tumble into the Twilight Zone. There we might find:
Once we have delved into the Twilight Zone, what do we discover regarding gold, silver, paper currency units, and unpayable debts? GOLD, FORT KNOX, DEBT, AND M3 Compare the price of gold to population adjusted National Debt and M3, a measure of currency units in circulation. Gold prices are inexpensive compared to five decades of national debt and M3. More importantly, gold prices compared to national debt are as inexpensive as they were in 1970 and 2001. The decades from 1970 to 1980 and from 2001 to 2011 experienced enormous increases in gold prices. Assume the 147,000,000 ounces of Fort Knox gold are real, unencumbered, not stolen, and have not been replaced with tungsten. [The last audit was in the 1950s.] But in the Twilight Zone, 147,000,000 ounces of real gold still exist. Assume that Fort Knox gold is valued at market prices and compare that value to national debt and M3. The graphs over five decades show that debt and M3 increase more rapidly than the market value of Fort Knox Gold. The abundance of currency units and massive debt make the gold stored in Fort Knox appear tiny and irrelevant—until that gold is required to stabilize a failing monetary system. Descending deeper into the Twilight Zone, assume The Federal Reserve loses control (someday) over confidence in the dollar, bond markets, and demand for dollars in world trade. Hyper-inflation could occur after enough months or years of QE4ever. WHAT TO DO? If few people trust Federal Reserve Notes (dollars), then the Fed must back the dollar with something people trust. What could the Fed use to back the dollar?
But, the naysayers scream, there is not enough gold to back a national currency. Nonsense! Price gold high enough to compensate for the trillions of digital dollars created since 1971. Read: Central Bank of Uzbekistan Introduces Parallel Currency - Gold How high? Suppose that 20% of dollars in circulation, as measured by M3, were backed by the gold in Fort Knox. Ignore the other smaller depositories where gold is supposedly stored. Honest money should be backed 100% by gold, but assume ONLY 20% backing. Graph the required price of gold per ounce for the 147,000,000 ounces of Fort Knox gold to back ONLY 20% of M3. Suppose the Fed backs the national debt with gold at the same 20% rate. What would the price of gold be if 147,000,000 ounces of gold backed the national debt? Thoughts: If they must price gold at $25,000 to $40,000 (in late 2020) to back only 20% of M3 or national debt, then gold prices at less than $2,000 are inexpensive. In a monetary or hyper-inflationary crisis, gold prices will be reset far higher, to create faith in a new gold backed currency after they have printed Federal Reserve Notes into oblivion. From Technical Traders: Gold Wave Forecast $3,750 or higher CONCLUSIONS
Miles Franklin sells real money—gold and silver bullion and coins. Owning gold and silver makes sense unless you trust the powers-that-be to protect your assets and purchasing power, and you expect they will reverse the craziness. I do not.
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