Gold as a theme in Fiction and Gold facts:
One of the themes in the novel is that governments throughout history issue paper currency for profit,which is called seigniorage and after many years of malinvestment due to corruption these paper issued bank notes over time devalue, since there is a correlation
in credit growth and rising prices. At first when governments issue these fiat
notes, there is a credit Boom, the economy takes off but over time in slows
down and a credit crunch happens and then people, banks or governments default
and then the government or bank prints money to make up the difference or paper
over the debt. This in turn makes the money worthless and inflation spirals due
to the fact that the amount of money in circulation devalues in a non-linear fashion.
This whole global credit crisis has happened over 30 times in history on
smaller scales and this time its’ no different. In the end the debt is burned
off due to an “inflationary Jubilee.”
That brings me to the theme of Gold in the Novel: Gold obviously represents money that holds its value from the time the Fortuneteller had her coin taken to the ending of the
novel in which gold was used as a medium of exchange. What is not said in the
BIASED media are two issues in regards to Gold. First off it’s a currency with
no counter-party risk. Look at Lehman, Bear Sterns, MF Global, Dexia and Long
Term Capital Management and now look at Governments hyper inflating like Russia
and Brazil during the 1990’s or Iceland a few years ago. It’s all counter-party
risk! When one deposits money in a bank there is counter party risk, when you
purchase bonds or stocks there’s counter party risk, and the governments that
sell you the currency that they print up which is “backed” by the political
stability and taxation receipts of that country that money has counter-party
risk. This is why bonds in Switzerland pay so low since you pay a premium on
their bonds. Gold doesn’t have that risk and that fact is lost on the likes of
the Krugman’s and the Roubini’s of the world. Gold in essence is a stateless currency
with no counter-party risk.
So with all of that said here is some facts on Gold listed below:
MB: Base money or total
currency and central bank credit,
M0 (base money issued by central bank),
M1 (coins and bills),
(checks are M1 AND M2 money)
M2: Travelers checks,
M3: Savings deposits and
CD’s and money markets, long term deposits.
MZM: Money with Zero
Now if one measure’s the
amount of money against gold
One comes up with vs.
one ounce of Gold
US M1 40% Gold backing
US M0 40% Gold $3,337
US M1 100% Gold $6475
US, China, ECB M1 40% gold $6993
US M0 100% gold backing $8342
US M2 40% gold backing $12,350
US, China and ECB 100% gold Backing $44,552
-From Jim Rickard’s
Excellent book Currency Wars
In 2010 Central Bank holdings comprised of 13.4 $ of Gold reserves and if one removes the USA it drops to 7.4%
The US has 100% debt to GDP
There is 200 trillion in total credit market debt (From Kyle Bass)
The US has 3% trade deficit which means that the US dollar must go down in value 10% for every 1% of trade debt to correct the imbalance.- Eichengreen
There is a 90% correlation between the price of Gold and the increase in GDP of China and India.
Chinese demand has risen
178% since 2008 1.1 million to 7.5 million troy oz
There is an 81 to 90%
inverse correlation with the US Dollar and the price of Gold
Gold investor holdings are .9% of total Global assets! Not even close to bubble terrority!
5 billion oz or 160,000 tonnes of Gold were ever mined and half is in treasures, artifacts and heirlooms
If interest rates go up in the US by 1 percent thats an additional 140 billion dollars in payment costs.
US is already paying approx 450 billion in interest out of 2.1 trillion in tax receipts and thats with record low interest rates.
Over 40% of US debt is short term debt that can rapidly rise and force the FED to further purchase bonds if rates rise like they did in Italy in Oct and Nov of 2011.
Kyle Bass stated that Comex has approx 80 billion in option and futures contracts and yet only 2.7 billion in Gold bullion
this is a fractional reserve exchange and if 4% or more ask for delivery Comex will default.
A senior Obama admin official has stated to a Hedgefunder that to help exports they plan to “Kill the US dollar”
The US government has recently given 100 billion to the IMF (Created out of thin air)
Why Gold and not other elements?
Gold is rare but not too rare
Gold is not a gas or radioactive
Gold is not chemically reactive
Gold doesnt corrode and its very durable and not too hard and easy to work with as a metal
Gold is safe and not poisonious
Has a lower melting point then Platinum
Gold, unlike a deposit, bonds, stocks or a loan, is no one else’s liability.
Democritus, ancient greek thinker, “Gold is the sovereign of sovereigns.
“Gold and Silver is real money, everything else is just credit.” JP Morgan.
“What was revealed
in the audit was startling: $16,000,000,000,000.00 had been secretly given out
to US banks and corporations and foreign banks everywhere from France to
Scotland. From the period between December 2007 and June 2010, the Federal
Reserve had secretly bailed out many of the world’s banks, corporations, and
governments. The Federal Reserve likes to refer to these secret bailouts as an
all-inclusive loan program, but virtually none of the money has been returned
and it was loaned out at 0% interest. “- Bloomberg News
final words go to Richard Russell, La Jolla-based writer of the 52-year-old Dow
Theory Letters: “I’m looking at gold as ‘the last man standing.’ Since gold is
pure intrinsic wealth and it is outside the system, it can’t go bankrupt and it
can’t go down to a level of zero value.”