is a leading indicator of monetary distress
No matter what
confidence game is being run, confidence is the necessary pre-requisite. This is why confidence indicators are so closely monitored
by central bankers. If consumers
and businesses lack confidence, they
will not partake of the
central banker’s credit;
a necessary step in the indebting of otherwise willing victims.
The credit trap
is at the core of the bankers’ ponzi-scheme of credit and debt; and although today’s markets are awash with liquidity,
bankers are increasingly loath to lend and customers are increasingly reluctant to borrow.
Central bankers are well aware of the precarious health of their illicit franchise. Credit and debt-based economies must constantly expand to pay constantly compounding debts; but now, instead of expanding, economies around the world are slowing and contracting.
This is why
central bankers are concerned
with a rising price of gold. After gold exploded upwards in 1980 during a virulent episode of inflation, the price
of gold was understood to
be an indicator of monetary distress.
more distressed the bankers’
They’re far less
likely to borrow today
explosive ascent in 1980,
central bankers began seriously ‘manage’ the price
of gold. A lower price of
gold would indicate not only an abatement of monetary problems but investors would be less inclined
to trade their paper banknotes for the safety of gold when they could more profitably leverage their paper banknotes
in the bankers’ paper
Since the early
1980s, supplies of newly mined
gold have constantly fallen
short of market demand
for gold; but notwithstanding supply
and demand fundamentals,
gold prices nonetheless fell for 20 straight years. In 1980, the average price of gold was $615. By
2001, it was only $271. Clearly, the free market price of gold was being distorted
by ‘outside’ forces.
This anomaly in the supply and demand dynamic that exists in free markets is explained by the research of Frank Veneroso, a little-known but very influential analyst. In my book, Time
of the Vulture: How to Survive the Crisis and Prosper in the Process,
I tell how Veneroso explained
central banks’ collusion with
to suppress gold.
This highly profitable collusion
incentivized bullion banks to borrow large amounts of central bank gold; then sell it
on the market allowing
the banks to invest the funds in the interim and profitably exit the trade when the gold price was lower because
of the artificial depression
caused by the additional
supplies of gold.
This constant downward pressure
on the gold price continued
from 1981 until 2001.
Indications that the profitable gold-carry trade was coming
to an end happened in
1999 when the Bank of England
415 tons of gold reserves at
the then bottom of the market.
The sale of almost half, i.e. 40 %, of England’s
gold reserves has been subsequently
revealed to have been triggered
by a large—probably American and probably Goldman Sachs—investment
bank’s short position in the gold market.
The bank, expecting
to profit from the continually
falling price of gold, had made a large bet that gold prices would continue to fall; but, prices had stopped
falling. This exposed the
bank to losses so large that the bankers’ prevailed upon the Bank of England to sell 410 tons of its gold to
force gold prices lower.
Cropped photo of Bank of England gold vault
The photo of the Bank of England’s
gold reserves is intended to bolster the
confidence of investors as to the supplies of gold held by central banks. In truth, the photo is cropped to make it appear that
the bank’s gold supplies are larger than they
version of perhaps the more likely
size of Bank of England gold vault
The empty space
to the left of the rows
of gold bullion were once
filled with rows of gold bars sold in 1999 to insure that bullion banks could exit their gold trades without taking massive losses. A photo of gold vaults at Fort Knox—and/or the New York Fed—would show an even greater erosion of gold stocks
and similarly vacant storage
In 1949, US gold reserves totaled 21,775 tons. In 1971 when the US was forced to end the convertibility
of US dollars to gold because of diminishing supplies, US gold reserves
had declined to only 7,000 - 8,000 tons; the loss
of America’s gold was
due solely to the post-war US global military presence and to the overseas
expansion of US corporations.
2001: GOLD BEGINS MOVING UP
Even the sale of 415 tons of England’s gold in 1999 was unable to contain the growing demand for gold. This demand was exacerbated by the collapse
of the US dot.com bubble in
2000. In the next few years,
central bankers responded
by selling 1300 tons of gold owned
by the Swiss National Bank to suppress
the now rising price of gold but to no avail—gold
continued to rise.
2012: GOLD ENCOUNTERS RESISTANCE AT $1800
a leading indicator of monetary distress
The price of gold has risen for 10 years as systemic monetary stress has increased. In July 2011, because
of EU monetary disarray,
the price of gold rose from
$1500 to $1900 in only two
months, an almost
vertical 27% rise.
2011, however, gold has been in an extended trough. This is not due, however, to an abatement of systemic stress.
It is due to measures
central bankers put in place to prevent
a wholesale flight to gold from
developing at that time.
What happened in
July and August 2011 is what
central bankers had feared, an almost vertical ascent in the price of gold that could cause investors to exit the bankers’
paper markets and turn to gold in a lemming-like
rush for the safety of gold bullion.
This would be
the death knell in the bankers’ confidence game.
In my article, Gold: Stage Three Up Down Up Down Up (October
22, 2012), I explained how the bankers
moved to prevent this feared event
from coming true. It worked—for awhile
In December 2012, it is clear
the bankers drew a
‘line in the sand’ in September 2011 to prevent another rapid ascent in the price of gold. To
some, this ‘line in
the sand’ presents
a major barrier to gold’s
advance. But, in reality, the bankers’
line in the sand represents
the bankers’ desperate
last ditch attempt to prevent the inevitable from happening.
The systemic distress
that drove gold’s 27 % rise between July and September to
$1900 has not abated although
the lower price of gold would imply otherwise.
The present price of gold
below $1800 is due solely to central bank
emergency measures to contain
the price of gold and China’s
reluctance to let gold rise too
far too fast before China can buy as much gold as possible before the next economic crisis.
2013: GOLD WAITS FOR THE END OF THE BANKERS’
Speculation abounds as
to the trigger event that
will set off gold’s
vertical ascent. It could
be the collapse of the global derivatives
market or a credit event such as Credit-Anstalt’s collapse in
1931, the Austrian bank owned by the Rothschilds or perhaps Japan’s inevitable descent into the deflationary
conflagration it has resisted
It could be
any number of events or causes. It could be triggered by a black swan event, a geopolitical crisis or a natural disaster on the level of the earthquake that struck off the coast of Japan in March 2011. Whatever the trigger, in the end the banker’s
300 hundred year-old con game will collapse from a simple lack of
In my current
youtube video, The Collapse and the Better
World to Come, I explain why
I’m so optimistic about what is about to happen.
Buy gold, buy silver, have faith.
Darryl Robert Schoon