It really should be clear that a major international banking crisis is
inevitable, and likely to occur fairly soon. Due to the extreme debt levels, many
banks are close to that point of failure.
An event like a stock market crash is likely to push many banks to that
point of failure, since the pressure it would create (on cash resources),
would expose their inability to fulfill their obligations.
Cash (not bank credits/digits) is still the means by which banks have to
settle liabilities and obligations (especially amongst each other). If a bank
goes down, it will be due to the lack of cash (not bank credits/digits). It
is for this reason that there is a campaign to ban cash (for the general
public) or limit the use of it.
The banks are in competition for the available cash resources, and they do
not want you to be an obstacle. This is similar to what happened during the
Great Depression (1933) when gold was confiscated. Then, banks proved their
solvency with gold; therefore, the general public was prevented from
competing for the limited amount of gold resources.
It is for this reason that I believe it is very unlikely that gold would
be confiscated during this crisis. Today, it is cash that is the cornerstone
of the banking system (especially the US dollar), since it is cash that is
promised, not gold.
However, gold is still relevant when it comes to warning us of the
imminent collapse, and of course, providing some protection against potential
financial loss as a result of it.
Previously, I have shown how the gold price relative to the US currency in
circulation is possibly warning of a major monetary event. It now appears
that we could be either at, or very close to, such a possible event.
Below, is a chart (from macrotrends.com)
that shows the ratio of the gold price to the St. Louis Adjusted Monetary
Base back to 1918. That is the gold price in US dollars divided by the St.
Louis Adjusted Monetary Base in billions of US dollars. So, for example,
currently the ratio is at 0.34 [$1 346 (current gold price)/ $3 942 (which
represents 3 942 billions of US dollars)].
On the chart, I have indicated the three red points (a) where the Dow/Gold
ratio peaked. These all came after a period of credit extension, which
effectively put downward pressure on the gold price. Points 2 (green) were
placed just to show the similarities of the three patterns.
After the peak in the Dow/Gold ratio and point 2, the Gold/Monetary Base
chart made a bottom at point 3 (green) on each pattern. It is at these points
that the monetary base could not expand relatively faster than the gold price
increased. Today, this could mean the point at which the game is up for those
who are short gold.
It appears that we are just past point 3 on the current pattern, so it
would be very unwise to be short gold.
In 1933, after point 3 was in, the gold confiscation order was passed
(point b). This came about due to the pressure to fulfill gold obligations.
This was confirmed later by Roosevelt when he justified Gold Reserve Act 1934
by saying that, “Since there was not enough gold to pay all holders of gold
obligations, . . . the federal government should expropriate and keep all of the
gold”. Remember, today this could mean cash as it relates to the banking
system.
Again in 1971, after the relevant point 3, due to being unable to cover
all the foreign holdings of US dollars with the related amount of gold, the
US suspended (really ended) the convertibility of the US dollar into gold, on
13 August 1971 (point b). Today, this means a devaluation of the US dollar.
Now, we are possibly at point b (or very close to it), where a major
monetary event could happen. Whatever happens, gold and silver is likely to
spike much higher over the coming months.
For more on this, and similar analysis you are welcome to subscribe to my premium service.
I have also recently completed a Silver
Fractal Analysis Report as well as a Gold Fractal
Analysis Report.
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