Dow Gold and the Market-Based Monetary System
After a few more days like this, we’ll all start to believe that the Dow-gold ratio might reach 2:1 or perhaps even 1:1 in fairly short order. The desperation continues to deepen as nothing but a fleet of helicopters appears capable of stopping the fear at this point. The wise people at the Fed and Treasury are now considering nationalizing the U.S. banks. They should really read Professor Fekete’s thoughts on the subject:
The Gold Standard Strikes Back … With a 36-Year Lag (Part 2 of 2) [PDF]
The way to resolve the credit crisis: Recapitalize the banks with gold
As much as I like the Professor’s approach, I actually don’t think it could be the entire solution. So, please allow me to summarize the proposal I have been working on but have been unable to finish because I keep getting interrupted by pesky unprecedented central bank interventions.
The First Step Toward A Market-Based Monetary System
- Take the pledged U.S. gold reserves back from the Fed. This gold is being used to collateralize $11 billion of outstanding Federal Reserve Notes at a statutory rate of $42.22 per ounce. Thus, it would take just $11 billion of Treasury securities to do the swap. The gold is doing no good pledged to the Fed considering that nobody is (yet) afraid to hold Federal Reserve Notes. That is why the dollar is still rallying. Rather, people are afraid to hold the (Exter) pyramid of fractional reserve money supply that has been built on the back of the greenback over the past few decades.
- Cancel the existing gold certificates that were historically issued and are currently fixed at a ratio of $42.22 ($380 per 9 troy ounces) by Public Law 93?110, 87 Stat. 152.
- Issue new Treasury gold certificates without a fixed dollar value. These gold certificates shall be denominated by weight of gold, not fiat.
- Make contracts with gold clauses unenforceable again (see my prior post) but carve out an exception for Treasury gold certificates.
- Open the U.S. Mint to persons who wish to turn in gold bullion in exchange for Treasury gold certificates. The (fiat) exchange rate shall be determined by the market (but the Treasury gold certificates would maintain a stated value of weight in gold).
- Treasury gold certificates backed by whatever U.S. gold reserves still remain in Ft. Knox, West Point, etc. shall be used to conduct liquidity operations to stabilize the market. Such operations could include the proposal offered by Professor Fekete, direct purchases of assets or whatever other means are necessary. The point would be to drop gold from helicopters, which will have a much more noticeable effect than dropping paper dollars. For one, paper will take its time fluttering to the ground whereas gold, being among the most compact materials in the world, will plunge to the ground very quickly.
I realize this is not a complete plan, nor is it pretty, but it has one quality that every other plan so far has lacked: it might actually work. It also avoids the need to confiscate gold, which would obviously be quite bad for us gold investors and probably wouldn’t work anyway.
By the way, I think silver could also be part of the solution but it would probably involve the same steps as gold. That is, ban silver in contracts and issue silver certificates in exchange for bullion delivered to the U.S. Mint.
For those confused by the banning of gold in contracts, the purpose for that would be to force people to use Treasury gold certificates instead. This would create instant liquidity because it would be nothing less than monetizing gold (and silver to the extent Treasury silver certificates would be issued).
Your thoughts?
Tom,
“I love it when a plan comes together” quote from the 80`s show The A-Team.
My thoughts,……. in your previous essay ‘Gold basis falling’ in my reply was how much gold in Fort Knox and West Point depository?
If US Treasury gold is NOT gold plated lead bars then i’m with you on this plan.
Tom…….daily events have got you working overtime maybe you should turn off the tv and computer and listen to some classical music.
I think this plan is for a later date when things are absolutely dire. I think the fiat money drops will be done first. The US government isn’t going to give up its gold right away. It will have to be desperate beyond belief. The US dollar will have to lose 90%+ of its value from todays level before that happens.
So far the dollar is rising as people rush out to raise cash to pay dollar denominated debts. The inflation from the helicopter drops is still in the future. Probably next year or in 2010 if this keeps up.
Tom, I can’t help but wonder if the public would participate in depositing gold with the Treasury in any meaningful way. It would take great faith to trust the federal government not to default on its gold obligations once again.
Also, gold would first have to find itself in a truly free market where it has realized its actual price, which would presumably be many multiples of the current price.
Tom, I agree with you that it would be wiser to include silver in this system. I also agree with eddy sharpe and Jim Sinclair who say it will take more time before the GOVT makes this move. The BIG QUESTION is at WHAT PRICE will GOLD and SILVER be traded for CERTIFICATES. There is no way that PRECIOUS METAL investors or home owners of gold and silver items are going to HOCK them in for these current prices. Of course the market will determine this….but I imagine it will be many factors higher….and silver many factors higher than gold. If gold is backed at 2-3 times value….silver should be at least 5-10.
Also…..Tom, I noticed you included information on your previous article on the GOLD and SILVER BASIS….without a password. I do not know if this was a ONE TIME EVENT. I don’t believe the other commentors realized what you had done. I just wanted to let you know, I appreciated that information…..regardless if it will not be posted again.
These are interesting times……and I believe as Jim Sinclair states, we will have Bank Closures and Bank Holidays soon. Once this occurs, the paper price of gold and silver will really move upwards, while phycial bullion will be even more difficult to obtain at even higher premiums.
If the pace of this COLLAPSE in the BANKING and STOCK MARKETS continue, I would not be surprised to see a PAPER DEFAULT of the SILVER and GOLD COMEX before the end of the month. One year gold and silver lease rates have gone up exponentially now that BANKS and GOVT’s are reluctant to lend their metal holdings.
South Africa has announced a 23% drop of gold production year over year…….The World Gold Hedge Book has dropped significantly in one year:
2007 Q2 = 34,450,686
2008 Q2 = 18,981,361
DECLINE of 15,469,325 ounces
Comex Gold open interest is still falling off a cliff hitting the lowest levels in more than 2 years. http://www.jsmineset.com/cwsimages/M…d1230pmCDT.pdf
This is the PERFECT PRECIOUS METALS BULLION STORM in the making. No one can REASONABLY make any prediction of where these paper markets are heading….except they are heading into an ABYSS.
Once MAIN STREAM and the BABY BOOMERS get a WIFF of this continued IMPLOSION of the BANKS and STOCK MARKETS, there will be a explosion in the numbers trying to obtain physical metal as well as the metal ETFS.
How about shut down the Fed and Treasury and let the free market do its thing? Which, obviously, would mean a return to sound money, since people are going to want Fred’s Gold Certificates and not Fred’s Confetti.
Tom, feel free to delete if you feel inappropriate. i am not trying to start rumours, but if true, now would be the time to get some cash and food. You don’t have to get crazy, just buy food that will not go bad, that you use anyways.
um, not to start a panic. please put your tinfoil hat on if you want to believe this.
first the rules:
1. Do NOT panic.
2. If you do Panic, Panic FIRST.
From lemetropole cafe, rumours that Hungary is defaulting and that gold is either not available or is being banned for sale in Europe. Another blog said that Bank of Nova Scotia ( the market maker here ) says they are not selling gold at this time. They do in fact have gold. Check it out.
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSL919882320081009
http://www.investorvillage.com/mbthread.asp?mb=4245&pm=331726&nm=331750&sync=1&tid=5834867&showall=1
Your plan makes far more sense than any of the
current government “solutions”. Alas though, they
will only do something of this sort as an absolute last
resort. Perhaps it will come as a response to some
other major nation which takes the inititive in creating
a Gold backed national currency. Who ever does
it first will be the financial center of the world as long
as they have the only such currency. They will lead by
example, others will follow out of sheer necessity.
I don’t see the United States, the world charnel house
of fiat infection, the Typhoid Annie of money debasement,
taking the lead in this ultimately inevitable undertaking.
For one thing, no one knows how much gold is really
in Fort Knox or in the Fed vaults.
Perhaps the Germans, French and Russians together have enough
of the yellow metal to come up with a workable system.
The Germans experienced the Weimar Republic; they have
first hand experience with run away inflation. They have an
institutional memory of how that inflation was ended almost
overnight with the issue of the Gold backed Rentenmark.
They also remember that that inflation was ended too late
to save the millions who were impoverished by it… they
remember the political consequence; the rise of National
Socialism, Hitler, the war, the destruction of Europe.
All Europe suffered, all Europe remembers.
Whatever the actual U.S. Gold ounce count is, valuing it at $42.22 an ounce is laughable. Why should the Fed even want to hold this
barbarous relic when they have trillions in good rock
solid, paper securities? That $11 billion of Gold is
a pittance…pocket change. The Fed should indeed
be true to its long held scorn for the metal and give the
hoard back to the Treasury! Mabe the Treasury can make some
use of it once the Fed is no more, once the Fed chokes to death
on its trillions in rock solid paper.
Why does the public need paper gold certificates? What is wrong with coin? I am not willing to turn my coin into the US Mint for paper certificates. Are you?
There is no need to devise a plan. The guidelines are already written in the Constitution.
So we’re talikng 5 figure gold and 3 figure silver right?
Would the treasury certs be like bonds and currency notes backed by silver?
I’d rather turn in my gold for gold certificates than FRNs-which is what they’ll probably force us to do.
Remember the end game for gold is either confiscation or strict control. Barring total collapse of civilization we all still need an exit plan for our PM.
David: I would guess that Gold is too valuable to circulate in
everyday commerce. If we consider it to be worth about
$5,000 an ounce in terms of today’s buying power of FRN’s,
how tiny would the coin need to be in order to have a
value small enough to cover everyday purchases and for
which merchants could make change? At $5,000/ounce,
$20 would be 1/250 ounce, or about 1/8 gram! Today’s
penny is about 3 grams, so that $20 gold coin would be about
1/24 the weight of a common cent! A whole in the pocket
you put such gold coins into would be a financial tragedy indeed!
It is for this reason that Gold has never circulated in everyday
commerce. Silver coins have filled that role in sound money
systems. Gold for large settlements, silver for the everyday
individual purchases. Paper certificates work fine…if they are
truly backed by physical and are readily redeemable on demand.
We are in the crisis of a lifetime and yet the BASIS remains silent. Why? Because GOLD is the most manipulated entity on the planet and therefore the BASIS is a faulty indicator.
GOLD WILL EXPLODE beyond all reaonable explantions because of this. WATCH IT HAPPEN!
Tom,
I agree with your first point:
“Take the pledged U.S. gold reserves back from the Fed.”
However, I would not give the Fed even Treasuries.
I have a better solution: as Congress has the power to create money, gold or silver. So they should authorize the mint to create one round (preferably of silver as it is still cheaper) with the nomination of 11 billion and give that, generously, to the Fed. By the way, they could do this with all the lenders, foreign and domestic.
With the other points, I can not see what is the difference between your proposal and simple confiscation. We do not trust the Treasury now, why should we trust them the day after tomorrow? They are the government for Pete’s sake, they are crooks, they operate with force and they can do whatever they want. They will promise one thing today and they will do who knows what tomorrow. Would you trust your gold on Obama?
However hard is to come to the conclusion, I think, a viable system has to be built from the roots up. There is no royal way!
JohnSt wrote:
“At $5,000/ounce, $20 would be 1/250 ounce, or about 1/8 gram!”
You can take microgram quantities as medications. I can not see why can not we have minute quantities as money. You just need to dilute it. You could easily do it with a combination of plastic and gold. You can create goldfumes and goldparticles down to micrometer sizes. You can dilute it to infinity. And with plastic you can easily recycle it with burning. And plastic can has the advantage that it is durable and has forms that is hard to counterfeit.
Why would i turn in my gold/silver for paper ? Isn’t that the idea of having physical. They could buy on the market. Issue a gold/silver backed paper & coin system. HAVE THE METAL AUDITED MONTHLY BY AN INDEPENDANT COMPANY/AUDITOR ! Maybe then the world would trust them !
I agree with the others who question the wisdom of giving physical PMs to the guv’ment and suggest that the constitution already contains the solution. But more specifically, Tom, I see a contradiction between points 3 and 5:
“3. Issue new Treasury gold certificates without a fixed dollar value. These gold certificates shall be denominated by weight of gold, not fiat.”
“5. Open the U.S. Mint to persons who wish to turn in gold bullion in exchange for Treasury gold certificates. The exchange rate shall be determined by the market.”
What “exchange rate” do you mean if the certificates are denominated by weight? The exchange rate with current FRNs?
My opinion: If we really need paper certificates (and/or electronic transactions), why not let private gold certificates develop (ie., private banks)? Indeed, they already have, like goldmoney.com - it allows electronic gold transactions right now. Instant currency, already exists!
Great, governments did us the favor of minting a bunch of silver and gold coins in standardized denominations (private mints could also do this, and could develop safeguards to allow us to trust them - we already trust that a one ounce round from a dealer really has one ounce .999, right?). We can run with it from here.
I haven’t read Fekete’s two most recent articles yet, so maybe I’m missing something, but why try to save what’s going on now? Why do we (or some of us) insist on thinking of the current monetary system’s collapse as a necessarily bad thing?
P.S. - of course we’ll want to keep our eyes on any “private banks” to make sure that they still hold the bullion we give them, lest they succumb to the temptation to practice fractional reserve lending. (Auditing, right.) Too bad history seems to show that they inevitably will succumb, and will gain enough wealth and then political power thereby to institutionalize their fraud. I’ll have more to write about this issue at a later date on my (just getting started) website.
Tom, for the first time in over two years of reading your commentaries, I believe you’ve lost it. Positing such a common semse, workable plam, one that might actually work, ignores political realities. The financial powers that be (banks, hedge funds, investment banks, the Fed) would have to cede their power to manipulate and steal from the economy. It would make them subject to the discipline of the marketplace.
If some powerful group of altruistic, high minded politicians pushed for something like you’re proposing, they would likely be involved in a “tragic” plane crash, or have a series of sudden strokes or heart attacks.
When the dollar finally goes into hyperinflationary freefall, with gold and silver skyrocketing, the populace will again clamor for something to be done. If there is someone at the Fed who understands how a gold anchored monetary system works and has the ear of the right people, we might see a limited role for gold on a central bank to central bank basis, but never on a domestic level. Well, maybe not never, since current events prove that the concept of “never” is obsolete in the financial world.
Freddy Krugerand: Thanks, I do need a break, I sure hope these silly dolts at the Fed and Treasury will finally do something, anything to calm things down. I’m in the camp that prefers a slow destruction.
eddy sharpe: You might be correct but don’t underestimate the desperation that is out there right now!
Stefan: You are correct that gold would have to find its market price. The beauty of this proposal is that it would actually be to the government’s benefit for that to happen since that provides more ammunition (also might allow them to pay off the national debt if gold goes high enough). Regarding people voluntarily turning in gold, of course they wouldn’t do that. This is why the government would have to make gold contracts unenforceable. You want to hold gold? Fine. You want to use gold in commerce? You need a gold certificate.
SRSRocco: Agree with many of your points, the gold and silver price would have to float free, that is why the gold certificates cannot be denominated in dollars, that would never work. Regarding the basis post I meant to provide that without a password, I’m not saving the discussion itself for GSUL attendees, only the tools and mechanics. On bank failures, holidays, COMEX closing, etc. we’ll just have to wait and see.
Jimbo: The market doing its thing can sometimes be very ugly, I personally favor some limited and efficient regulation that keeps the crooks from spoiling the party. There will always be something like a Treasury and/or Fed as long as there is government.
tim: I’m Hungarian so this is sad to hear but I don’t think it’s the end there though the forint is getting hammered. I hope the good Professor–he lives in Budapest–keeps all his funds in gold and silver! Still, Russia which is a much larger economy has been shutting down its stock market and banks all week and I actually think they have even bigger problems. Regarding gold availability in Canada, this is sort of old news; things have been getting tighter and tighter for months so it was only a matter of time.
JohnSt: I find myself disagreeing with the idea that anybody but the U.S. can introduce a gold-based money. For one, I do honestly believe (call me a rube if you must) the U.S. still has the gold in Ft. Knox, etc. and this is the single largest stockpile in the world. One reason I have this belief is that a large portion of the U.S. gold reserves is actually 90% not .999 due to the melting down of the gold confiscated in the 1930’s. These are very, very unusual bars and it they ever came to market or appeared at a smelter that would be very noticeable. Which brings up the bigger problem–this 90% gold isn’t exactly fit for trading on the world markets. In fact, it’s highest and best use is probably to back up gold certificates. The second reason I doubt anybody else could succeed with introducing a gold-based money is the very issue of trust. Nobody in their right mind would give their gold to government unless they were forced or they needed funds to conduct a transaction (thus the ban on gold in contracts) and this creates some very big confidence issues. For example, would you believe in a gold currency backed by Russia? Bolivia? Iran? Turkey? China? Heck, the UK? It’s the least of all evils theory until something better comes along than the U.S. government.
David: What is wrong with coin? What about shaking a bag of gold and silver coins to collect the metal dust? These days they even have machines that can do this! I predict that any and all gold and silver coins in modern circulation would have a life of about a week before they become too worn for use. This is why simply “opening the mint to gold and silver” would never work in our crooked and technologically enabled modern world. Also, what about people having to worry about getting robbed? I’d never in a million years want to carry around gold coins. Perhaps there is a utopia in the future where we don’t have to worry about human nature asserting itself, but I’m not holding my breath. No, I think we have come far enough as a civilization to be able to intelligently substitute for gold and silver coins while still having a true gold and silver backing.
Rob: It would be the same as the old gold and silver certificates except there would be no monetary denomination other than the strict definition of dollar as a weight. I’d also hope they wouldn’t try something as stupid as fixing an exchange ratio between gold and silver. Yes, if gold will be money in the future you can bet government will exert control, and this is probably one of the least noxious ways.
JohnSt: You said: “It is for this reason that Gold has never circulated in everyday commerce. Silver coins have filled that role in sound money
systems. Gold for large settlements, silver for the everyday
individual purchases. Paper certificates work fine?if they are
truly backed by physical and are readily redeemable on demand.” Hurray, I couldn’t have said it better myself!!
Joe M.: The basis is not silent! It has been moving toward backwardation. Permanent backwardation will occur only in hindsight! I have two sets of charts that I have provided to GSUL attendees, both of which are/were screaming that something would be happening. One set of charts did so several days before the AIG and Lehman disasters. These charts used the basis, the basis is/was/cannot be suppressed. I really think you should go to the Canberra in November, the Professor, I and the others will help you see.
Andras: Who said anything about giving something to the Fed? I just said the Treasury would swap the $11 billion statutory value of gold (at $42.22/oz.) for $11 billion of Treasuries (worth $0.00). Fair is fair! Regarding the Treasury, you are dreaming if you think there will ever be a future monetary system in the U.S. (or anywhere else for that matter) that does not involve either a central bank or the treasury. How is what I’m saying different from confiscation? BECAUSE IT GIVES PEOPLE A CHOICE: (1) Hoard gold to your little miserly content and get as wealthy as you want, but you can’t buy anything with it; (2) Trade gold that you would have used to buy something for gold certificates. Since you are already using the gold to buy, what do you care if it is gold itself or a piece of paper representing gold? As for the party accepting the gold certificate, they would have the choice of U.S. dollars or Treasury gold certificates. Gee, I wonder which they would choose?
Andras (second comment): That’s more like it!
chris k: You would turn in your gold and silver for paper only when you wanted to buy something. Otherwise you could continue hoarding like a modern day scrooge. “They could buy on the market”. Really? Pray tell, what would they pay with? Trust has nothing to do with being audited daily, weekly or monthly. Indeed, that is a sign of a lack of trust. Trust is created only by keeping to your word regardless of the exigencies.
You guys are keeping me busy!
Brian: The constitution may contain the solution but it simply didn’t, and won’t, work. Just because some guys in white wigs come up with something doesn’t mean it will stand the test of time. Recall these were the same guys who felt it was okay to claim that “all men are created equal” yet keep slaves. The right to life, liberty and happiness applied only to certain citizens while a slave was 3/5ths of a person when it came to the right of representation (that right being held by the slave owner). Women could not vote because … because … oh, I suppose because the framers of the constitution were absolutely 100% right in everything they said or wrote down. There is no contradiction between points 3 & 5 — I merely included a dangling concept where I shouldn’t have. The point is that the price of gold would float free against the U.S. dollar as well as other fiat currencies but would be anchored to gold certificates by weight. Your opinion concerning “private gold certificates” has already been tried more than a century ago. It was called free banking. “Free” is actually a misnomer since these banks were all state chartered. Even though regulated, fraud was widespread. I’m sure you’ve heard the term “wildcat”, well it originated with banking prior to national regulation. SO the better description of “private mints” should probably be “wildcat mints”. As for why the destruction of the current system is a problem, it’s not, it will happen at some point one way or another. But if there was a way to have an orderly transition, who in their right mind would wish for a disorderly one in which thousand, perhaps millions of people could die? Not me, so call me a humanist if you must.
Brian (second comment): Actually, history shows that most banks got greedy and failed, or become regulated so they would stop fleecing the public so blatantly (I suppose the devil’s bargain was they could still do their fleecing secretly).
Windbag Arthur: Hmmmm…(adjusting tinfoil hat to block the sun)…I believe you might be right! So much for trying to suggest something practical, I sure wouldn’t want to be responsible for anybody meeting with a fatal misfortune!
I doubt dramatic changes in money will occur in a vacuum. Prices of consumer staples can rise dramatically, blowing away the argument against pm coinage as being too large or cumbersome for everyday purchases. Does anyone really believe this economic paradigm of cheap money, cheap energy, cheap abundance, and living beyond our present (and future) means can continue indefinitely?
It is likely the cost of living will radically adjust along with precious metals.
However, the discussion of whether official pm coinage is workable or not seems as pointless as asking the banking/gov syndicate to castrate itself. As long as they continue to issue some kind of paper, constitutional money (gold and silver specie) will be hoarded and not freely circulate.
Precious metal coinage cannot coexist with government of this magnitude.
Until we see the money elite and many of the politicians/crooks swinging from trees before a cheering crowd concurrent with dramatic popular downsizing in government, gold and silver will not flow.
I suspect that few will get ?rich? off gold, but those who have it might eat, medicate and shelter a bit better.
Regarding new monetary paper gold schemes, it would indeed take quite a bit of coercion/incentive to overcome distrust of government and their paper to hand over physical. Tom, I wonder how much of that heavy metal dropped to the earth would bore its way to Asia? It will likely go to the highest bidder.
Tom,
Under your proposal there are not two but three choices.
“(1) Hoard gold to your little miserly content and get as wealthy as you want, but you can?t buy anything with it;
(2) Trade gold that you would have used to buy something for gold certificates.”
And (3) you can trade with it in the black (free) market.
If you made gold illegal you would just make it more precious, more expensive on the free market.
I grant if government earns my trust they might get my gold but forcing is hardly the way. And right now they are far from being trusted.
While gold is over $900, silver is just $12. Thats a 75 to 1 ratio. Why are we talking about gold doing well? We should be talking about what JPM did to silver. If you remember, they hacked it down to $12.20 during a late night raid, 2 days after shorting 135,000,000 ounces. Guess what, it’s still there.
What has the CTFC done about it? Nothing. Is anybody going to jail, or even admitting wrong doing? No.
JPM has scared away investors from silver with illegal manipulative tactics, and effectively ” de-coupled” paper silver from gold, and even real silver. On a site dedicated to silver, this should be what we are talking about.
“black” market, count on it.
In the not too distant future those who can smuggle pm out of the country to higher bidders might do well.
mark: I beg to disagree that JPM scared people away from silver–look at all the physical buying in retail and in ETFs. If and when this comes back around, it will be a sight to behold.
The Dollar is likely to be de-monetarised in the next 12 months, with the Amero ready and waiting at an official conversion rate which is tbc. I am sure that they will try to avoid a Gold backed currency with a vengence, as this is contra to the principles of a usurian fiat currency, but in my view a backing with physical PM’s is essential to return confidence. As silver for investment is rarer than gold then the price could be much higher if not nationalised (ie confiscated) by then. Jim Sinclair says that if gold closes above $930 then COMEX will be broken. I believe they will fight a default tooth and nail, flying physical metal in if needed. They will not be able to stop a soft default though as open interest continues to fall. I will be transfering out of the silver ETF into PM shares if the DI goes into freefall as exchange controls and confiscation of PM’s will be probable, although this is not an easy decision to make or to time!
TOM,
MY MY MY
Take al look at Volkswagon AG stock trading on the german DAX30 bourse……..up over 7%today……..yesterday……up 3% while the financial system implodes.
I own Randgold Resources which i have been trading for years even this almost this bulletproof paper asset is underperforming an automanufactor such as Volkswagon.
Maybe the next trade is to short gold and gold related stocks and go long Volkswagon.
I would welcome any explanation on this anomaly.
Hitler would have been proud if he was around today!
ALERT !
Gold movin down after being up $45 ….. massive interventions by THE CB’s, G7, IMF.
Deception and intervention are moving into overdrive.
Volkswagon still positive…… up over 7%!!!
Tom
Gold up $27 dollars, silver down .27 cents, down .50 from $12.20 last night.
If people still thought of silver as a safe haven, or money, this wouldn’t happen. We were at 18 the last time gold was $930. This is all aftermath of the 135,000,000 share short, and late night hack job.
I don’t see why it isn’t the main subject of conversation on a silver related site.
Well Tom, silver is down to 11.35, after being 12.20 8 hours ago. What’s your explanation? I also see the ETF has lost 3 million ounces lately. We should be gaining like crazy, but people are scared off silver, and buying only gold. The ratio is a new all time high, near 80 to 1.
I say this is all a result of the manipulation. Silver is no longer considered a safe haven, thanks to crooks.
In my opinion, none of the practical solutions offered here will work for one simple reason - it makes too much sense. And that is the reason it wont work or be implemented; because your proposals transfer power back to commoners. When did ever the ruling class, in our times bankers (owners of Fed), gave up their power willingly?
Not too many noticed that what ever the Fed (Goldman Sachs, et al.) does appear to work or solve the present crisis. Paulson, Bernanke, et. al., the agents of Goldman Sachs, JPmorgan, etc., are the ultimate, knowledgeable and extremely experienced insiders with ulterior motives and superb skills to manipulate and shape public opinion to their advantage. These agents are no dummies; make no mistake. They are extremely intelligent, experienced, focused, successful and mission oriented. What we are seeing, for the first time in our times, is the world financial elite at their best. The ultimate power and wealth transfer into the hands of few. It is fascinating.
I don’t believe in coincidences. I dont believe this crisis is out of control. This crisis was predictable and long coming. Most knew; including and especially GS/JPmorgan agents. It was only a question of timing and pulling the trigger at the most suitable time.
I believe this crisis was orchestrated and is managed to accomplish a well defined plan.
I hate to bring up geopolitical issues as this is not the place, forum or platform for it. Needless to say, you may want to start connecting the dots between the powerful jewish loby in USA, the Goldman Sachs jewish background, the way JPmorgan and GS run and manipulate the US congress and gov and whether that has anything to do with Israel itching to bomb Iran. Every economic depression had its wars, or two. This depression will be no different, except this time we are going nuclear. Black market and bartering within several years? Your guess is as good as mine.
Roland
Take your jew bashing to another board. We are blessed here with a very small grup of talented people and let’s not ruin it with your personal problems.
Tom,
Until we see the demise of Goldman Sachs, JPmorgan and Citigroup these financial alchemists will continue to have major influence over global finance / banking also the government.
The NM Rothchilds must feeling good.
By the way NM Rothchilds Bank exited LBMA back in 2004??.look it up!
Sorry for repeating this commentary.
Roland, i agree with you on this one
Tom.
We now have two jew bashers on board. Where do you stand? I am not of that persuasion but it sickens me to see such ignorant views here.
Just in from Bloomberg - A new Bretton Woods - will it be based on gold though?????
“Oct. 10 (Bloomberg) — Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”
“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”
The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi’s remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.
Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis “in coming days,” he said.
Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”
The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system. “
Tom,
You arguments about “shaking a bag of gold and silver coins to collect the metal dust” and “getting robbed carrying coins” remind me a lot of discussions I have with a friend where he says “We can’t go on a gold standard because there’s not enough gold in the world” or “Gold is too inelastic as a currency” or “The price of gold would have to be tens of thousands of dollars per ounce”. These are all specious arguments for not obeying the Constitution. The Constitution has already set a standard for a monetary system. In the words of Edwin Vieira Jr.:
“The Constitution of the United States adopted a monetary system consisting of silver and gold coin, in which the standard is the “dollar,” containing 371 1/4 grains (troy) of fine silver, with the values of gold coins to be measured in “dollars” according to the free market’s rate of exchange between silver and gold. Neither the general government nor any state is authorized to emit paper currency.”
“These restrictions prevent rogue public officials from turning public debts into currency, as a means for redistributing wealth from society to political elitists and their clients in special-interest groups.”
I also think the words of the late great Harry Browne about the Constitution are relevant:
“If the Constitution didn’t foresee some social condition that you think government must deal with, it is possible to amend the Constitution - and, in fact, it has been amended 27 times. But if we let politicians and judges amend it by fiat, we have no Constitution - only the good intentions of politicians to limit what government can do to us.”
Tom,
Can’t believe my eyes!………………..Volkswagon AG closes up over 15% on DAX30!!!!
The short gold/silver and PM stocks and long Volkswagon AG stock worked perfectly! while the financial system implodes…amazing…huh…Tom.
Could anyone explain this one? because i think am gonna be sick!
Tom,
I agree with MM
Read this for further proof:”Bear Stearns: Murdered at the Golden Gates”:
http://news.goldseek.com/GoldSeek/1223619420.php
It is about how JPMorgan gobbled up Bear-Stearn for their gold (future) We also know how they used them as garbage cans. Goldman-Sux did the same. Now Citi and WellsFargo fight over Wachovia to do the same. They are eating up each other to realize the fascist business model. Do you want to recapitalize these cannibals with our gold?
Why can not we go with the constiutional solution?
Reopen The Mint!!!!As Fekete and Paul suggested.
You give your “junk” gold to the Mint and they fabricate it into sturdy gold “certificates” to be circulated. By sturdy I mean product with minimal wear and tear liability. You can do it with plastic or even with paper if you are so addicted to paper. You can weave gold into kevlar or any plastic (or paper). You can check the steady content with simple spectrometric methods. The technology is there for at least 30 years. What is missing is the will.
The only place for the government in the monetary field is to give its stamp (and compete with private banks) through the Mint. Period!
Mark,
The e-bay price of silver is around $18 so the ratio is around flat 50.
Ebay price isn’t real silver price. I personally think the only way you can truly value real silver is to look at the going price at the largest holding of silver, SLV. That price is real price as it has real silver. Comex silver and LME silver must be following SLV as comex and LME silver doesn’t represent real silver, rather just paper. With real silver coming out of SLV, that tells me that someone is having trouble delivering real silver in the paper market.
Keep an eye on SLV price.
the mint will remain closed. those versed in history of depressions, wars and how wars were financed and by whom will understand that the next war will be very expensive and the “we people” will not finance it. That is the reason why so much wealth, power and capital is now being transferred to few select banks. The mint will not be opened because that would empower the “we people”. The ruling elite will never allow that to happen.
I have never removed a comment so far other than obvious spam and I would ask Roland and others to keep things civil. I do not tolerate racist comments or hate speech and I would appreciate everybody keeping such opinions off this site.
Silver down $1.50?? What the F*CK??
Gold down $52. This take down could be likened to the sea receding before the tsunami hits.
Oh I get it, it is “paper silver” on its way to $0. Physical silver (eBay) still around $20?
Listen up people……. JPMorgan and the Federal Reserve needs to dismantled as soon as possible.
The House of Morgan fingerprints are all over today’s fall in gold and silver after european trading closed.
This just out from Europe (translated from Dutch):
No more gold to be had. Dutch bullion bank HBU cannot deliver any more gold until at least the end of october. Gold coins are not available. Also in Germany, no more gold bars for sale.
http://www.rtl.nl/(/financien/rtlz/nieuws/)/components/financien/rtlz/2008/weken_2008/41/1010_1530_baar_goud_is_op_in_nederland.xml
I have to admit, JPM is good: Gold down $65!
Perhaps “paper gold” also going down to $0! *LOL*
Down $76…
Down $82…
Silver @ $9.74 and going down…
The largest intervention and liquidation in all asset classes and markets is taking place………….historic……monumental……running out of words.
Son’z of B****z’s!!!!
Amma turnin off da T.v. and computer.
So long folks calling it a day !
Can you image: I am on vacation right now and AGAIN behind a screen!
I simply don’t get it - the “flight to safety” thing to both cash & gold simultaneously seemed like a trend. Why the sudden divergence? Why is PM getting laid - as if markets suddenly woke up to the reality of deflation???
If it is your granny’s deflation why isn’t the 10Y UST clearly showing it like the rest of them?
Let me hazard a guess (keep your eggs ready to hit this joker’s face) - Gold will hold $850.
Oops spoke too early - Gold broke $850 & silver broke $10.
How many eggs did I hit - more than 50?
TOM….you have do admit now……ITS PURE MANIPULATION. Dan Norcini, long time gold trader put up a graph and commentary showing that anytime GOLD hits $930 it gets a HUGE SELLING PRESSURE. Last night when I was watching the NIKKEI TANK…..GOLD hit $940 and was then put back on the CRUSH it list. This is by the FED and JPM, some of the worst SCUM on the planet. If you ever saw a picture of the REAL J. P. MORGAN and noticed his GROTESQUE NOSE, you would realize the parallel between the man and his company were the same….it is noted that J. P. Morgan had a VORACIOUS APPETITTE…he ate more in one meal than most do in a DAY. This kind of eating and drinking in such a LARGE and GLUTTONOUS AMOUNT made MORGANS nose as he grew older, quite UGLY and GROTESQUE. They say the lifestyle of a man is shown in his face as he ages.
This INDEED is the SUMMATION of JPM today. The Fed could not survive with out JPM, and JPM could not survive without the FED. I agree with Dan Norcini, any credibility of the COMEX to price GOLD or SILVER in SUPPLY and DEMAND is totaly been erased today. Its just a matter of time before the game is over. Physical is were it is at.
Here is Dan Norcini’s Commentary:
http://www.jsmineset.com/cwsimages/Miscfiles/6636_October1008Gold1230pmCDT.pdf
Is it just me or am I seeing SLV trade at a good premium to Comex?
I should say that SLV’s bid is higher than the spot bid. It’s usually at a discount.
Spot silver starting falling after 10:45 AM EDT, then plummeted after 1:45 PM EDT to a low of $9.48 US, according to Kitco Charts.
I am guessing, on the LEH CDS auction horrific news. Big Banks and Funds must have dumped some big accounts in sheer panic mode.
Your comments?
Down to $6, or up to $25, by Christmas?
Andras,
“Mark,
The e-bay price of silver is around $18 so the ratio is around flat 50.”
That makes me, a holder of 12,000 shares of SLV, very mad!!! My 401K is being decimated by ” The Big Short”, with a wink from the CTFC and the Fed.
In all recorded history, gold has never been worth more than 76 times silver, until today. Now it’s 85 times. Tom, explain how this happened.
JPM up big! Silver crushed!!! Is it just me, or does anybody else want to see Jamie Dimon go to jail, along with several CFTC regulators?
I have been somewhat sceptical of the claims that the price of silver (and gold) has been manipulated …. but no longer. Today’s late action is beyond belief. I am no longer a doubter!
Something ‘criminal’ is taking place in the US markets - the price of Ag/Au is always taken down after the London markets and the rest of Europe has closed.
To all Ag/Au investors in the USA - you seriously need to find out what is happening and who is behind this blatant manipulation. They should face criminal charges.
Are Amercian precious metals investors so clueless as to not realise that the only way to stop this is to buy 1000 oz bars of the Comex and hence stop these games once and for all.
Get all the available silver off the Comex!!! At these prices, it’s the bargain of a lifetime.
Kitco is sold out of everything except 1000 oz silver bars.
This post should be to evaluate Tom’s proposal.
Tom, could you open a post where we can lick collectively our wounds?
I would say a few thing, too.
I guess I’m the only one who feels “good” about today’s paper silver rout?
IMO, this had to happen as the big strong shorts are shaking out the weak speculative longs in order to cover. (this week’s Ted Butler article talks about the same thing)
It is also what makes the manipulation all that more obvious. If people really believed in the legitimacy of the paper price reflecting the physical price, would they be paying these huge premiums? Does it make sense that gold and silver have gotten so cheap you can’t find any?
Today’s drop reinforces most every reason I bought silver to begin with. Reality can be delayed for a time, but never denied completely.
Besides, what’s to worry about? I have just as many ounces this evening as I did this morning. I lost nothing!
The only panic comes from those who foolishly convert ounces to dollars as a measure of wealth. Which, can clearly be seen to be an exercise in futility. Not to mention eventually having to divide by zero!
As for SLV’s premium, given the absence of available retail sized silver, I would expect to see it rise substantially as well. That is, assuming SLV is not being used to game the COMEX.
Remember in Hitch when Alex Hitchens taught Albert Brennamen how to dance?
“This is home. You don’t need pizza.”
Get it folks. Fiat money is your home. You don’t need gold and silver.
Remember also the Truman Show? Stay in your cozy fiat money world, managed by the Wise Men. Don’t try to go outside.
Andras, there really isn’t that much about Tom’s proposal to evaluate.
It is a political solution. (can you see the inherent contradiction?)
Criminals not only fail to provide efficient goods and services, they lack the very capacity to do so, as it is simply not their goal.
They may pay lip-service to such proposals, but their actions are nothing but ever more destruction. All in order to increase our dependence upon them.
But that’s what happens when people (voters) refuse to accept responsibility for their actions, and demand to be rescued. Or as Tom puts it, “preferring a slow destruction.”
I guess it all comes down to a belief in Santa Government.
I smell a “surprising” monetary event this weekend. Friday really looks like a final accommodating set up for precious metals. Just a gut hunch, but I wouldn?t be surprised by a weekend reversal in PMs. Could we see gold and silver double overnight with a new monetary scheme announced over the weekend? It would make sense to me to devalue debt in one stroke.
Well GLD added 5 tons, so they (fill in you favorite villain) didn’t get any from them . SLV looks unchanged, not sure on this one.
Chris said:
“Are Amercian precious metals investors so clueless as to not realise that the only way to stop this is to buy 1000 oz bars of the Comex and hence stop these games once and for all.
Get all the available silver off the Comex!!! At these prices, it?s the bargain of a lifetime.”
If anything the disparity between the Comex paper price and the
physical price should serve as a warning to stay away from
the Comex! You are buying a promise that I suspect cannot
be kept. Anyone can pretend to sell you the Brooklyn Bridge,
only a fool would buy it…unless he thought he could pawn it
off on a bigger fool. It may be easy in our American system
to pretend to sell something you don’t have…its not so easy
to deliver it.
Comex futures at $10 ounce may prove to be as over priced as
was Enron at $100. When the dust settles, any real silver availiable
will be spirited away by insiders…the rest of the herd will be standing there
holding their contracts which may or may not be redeeemed
in just what you don’t want….FRNs.
8: I agree with your last two posts.
Tom: Nice post, but outside of Ron Paul there is no one in our government who’s eyes wouldn’t glaze over after sentence number two of your proposal. They din’t lern dat kinda stuff in skool.
To JohnSt - thanks for your thoughts on my comments.
Yes, I understand what you mean, but the really sad thing about all of this is that the average ‘Joe Public’ cannot buy physical silver at $10 - ANYWHERE.
Can you imagine the queues there would be, in the USA and in Europe, if physical silver was available to the public at those prices?
There has to be a way - surely some way - to put an end to this manipulation.
It’s the avarege man in the street who’s being conned yet again and shuit out of the physical market.
There’s about 85 million troy ounces available on the Comex for purchase, supposedly. That’s less than a quarter ounce for each USA citizen, and less than $1 billion in total.
“That?s less than a quarter ounce for each USA citizen, and less than $1 billion in total.”
Gee, wish Warren would buy that instead of goldman…
Final thought Tom it’s a nice idea but no govt. will willingly give up their power to inflate. Look at Zimbabwe, certainly any semi reasonable govt would have gone back to basics but no that meant giving up power. Never happens. Can we elect a ron paul in this country? I doubt it but that would be our only hope. We’re much more likely to go the socialist route with money backed by govt. decree. The economy will be even more controlled and we’ll keep moving down the road towards national socialism. That’s our future sad but true. What that will mean for PM? I’m hoping you’ll help us out with that one.
Freddy, this is only conjecture but I believe the recent strength in VW stock is due to the possibility that they may reintroduce the Schwimmwagen. Because when they lock down the borders, this will be your only means of escape.
What happens to Volkswagen is a little prelude what we can expect for silver when JPM, the Fed or the Comex goes bust. First in line is the Comex!
Here’s the reason for the rise of Volkswagen shares: a short squeeze because Lehman was lending shares to shorters!
Here’s what I found in the press:
http://business.watoday.com.au/business/vw-overtakes-toyota–thanks-to-lehman-20081007-4vd7.html
The failure of Lehman, which lent Volkswagen shares to short-sellers, probably helped trigger a so-called short-squeeze, they said.
“This is a popular, crowded short play that has caused the shares to become disconnected with the company’s fundamentals,” said Renaud Berenguier, who advises hedge funds on equity trading at Aurel BGC in Paris.
“You take one of the biggest prime-brokering lenders, and one of the most shorted stocks in Europe, and this is the result.”
About 15% of Volkswagen’s common shares as of last month were shorted, or borrowed and sold on expectations they can be repurchased later at a lower price, according to London-based research firm Data Explorers. That was the most in Germany’s 30-stock DAX index.
Axel Merck mentioned this too:
Another suggestion that hedge fund liquidation is contributing to the volatility is the intra-day rise of the shares of Volkswagen, the German carmaker, of 55% on October 7, 2008; the carmaker did not reinvent the wheel, but a short-squeeze must have caused the massive rally. For the global deleveraging to succeed, we must see this type of action because hedge funds are one type of leveraged player that must be brought to its knees.
Some things I want to mention about silver:
I don’t trust JPM for a dime/dimon. I think if Comex will default and the naked short position of JPM will become visisble they will confiscate the holdings of the SLV. And if JPM will not confiscate the SLV, the authorities will do when Britain and the US go bankrupt.
I don’t trust anything unless I have it in my hands.
I only own some gold and silver shares in case of total confiscation of gold and silver bullion. In the 1930’s, gold mining shares were not subject of confiscation so a better hold than bullion.
I believe, as some others here on the board, we will soon see a monetary event of historic proportions.
In Germany, there are talks about forbidding people to buy gold.
My own bullion dealer in Brussels thinks there could soon be a black market for gold (prices would triple on the black market if gold becomes illegal to buy, he said.)
I am still able to buy silver and gold near spot. So I hope my dealer will be able to sell some to me on monday. (if governments don’t change the system this weekend or install a banking holiday)
Last week, french gold coins were sold in Paris with a premium of 50%! Since problems hit European banks some rich people buy like crazy. I would not be suprised if the french government is buying gold coins in anticipation of a monetary, new Bretton Woods, event.
Like I said before, these takedowns in gold and silver get me mad. ANd I hate the Fed, Us Treasury and JPM Cartel. But on the other hand: these are subsidized prices!!! Profit because it won’t last for long! It can end by Monday or Sunday evening!!!
I am born in 1982 and I will survive the Fed & JPM Cartel. I mailed Jamie Dimon and the regulators of CFTC and I told him Comex prices of silver will become irrelevant. They cannot suppress this for ages. ANd for sure not in a depression! One day the manipulation will end and it will end overnight. Goldman Sachs is going long gold on the Tocom! WHy did gold got up 45 $ friday morning and got down in us trading. Goldman long in Tokyo, JPM short in New York! What when JPM starts to shift the trade just as Goldman did! gee, we will talk about some other prices in silver, ten years from now!!! What about 20,30 years from here!! This manipulation will stop one day! Sooner than later!
What we will see in the coming years will be historic. The wealth of nations is dissappearing as they try to save the banks. They will rob the people with hyperinflation. It will be a daylight robbery!
The Fed will celebrate there 100 year-anniversary in 2013 with Hyperinflation. There is no other way! Thank you Tom for your articles on the monetary base. Unbelievable work!
Goldspeed to you all.
gold: at around 920 there is a big “giver” to suppress the rising market and getting desperate. with this often seen chart picture they are only raising a bigger bidding volume now because it becomes more and more clear that over this zone everybody and his mother will go long up to the march high. over the march high the big long term bunch will reenter the long side with a goal of more than 1300.
how many gazillions of FED paper will JPM have to reorder for nothing in exchange to fill that hole then ?
silver: get physical stuff and walk away from the paper market (SLV bars are only a promise of JPM London) by taking delivery if its still possible. CRIMEX board will protect their friends and family naked short interest by a rule change to avoid market default as they did 1980 with the Hunts.