“People are not stupid; when they see emergency measures going on for nearly a decade it undermines their confidence in authorities, who they think have lost the plot.” – William Hague
“Pumping up the prices of stock markets and houses without an underlying improvement in economic performance becomes ever more difficult to unwind and ultimately threatens an almighty crash whenever it does come to an end – wiping out business and home buyers who got used to ultra-low rates for too long.
I am not an economist but I have come to the conclusion that central banks collectively have now indeed lost the plot. The whole point of their independence was that they could be brave enough to make people confront reality. Yet in reality, they are blowing up a bubble of make-believe money to avoid immediate pain, except for penalising the poor and the prudent.” (The Telegraph, 18th October 2016)
If central banks have lost the plot, how deep have they lost it? I’m pretty sure many of you noticed this piece of staggering information; earlier this month the I.M.F. released a current figure of total world debt. Now, I have come to the point where I take some of the financial opinions of the I.M.F. with a pinch of salt.
But financial figures are different – it’s easier to assume they are at face value: “Eight years after colossal amounts of bad loans caused a financial meltdown that almost sunk the global economy, total debt has hit a new record level of $152tn, the International Monetary Fund said. The amount is equivalent to two and a quarter times the size of the world economy, and is rising. The IMF said the world is now in a “vicious feedback loop” in which economies aren’t growing fast enough to pay off the debt they have accumulated, and the rising debt pile exacerbates the slowdown, because less money is available to invest. “Excessive private debt is a major headwind against the global recovery and a risk to financial stability,” IMF fiscal chief Vitor Gaspar said. “History has taught us that it is very easy to underestimate the risks associated with private debt during the upswing.” (The Independent, 5th October 2016)
I’m not sure if that is just a release of financial figures or a warning that interest rates will go up in the near future.
Interestingly, whereas the I.M.F. blame much of the problem on “excessive private debt” and they repeat the words “private debt” in the very next sentence to drive that message home, Sprott Money believe the opposite is actually true;
“Much of this debt has been purchased by none other than the big central banks. Sunday, Bloomberg reported that central bank assets have grown at the fastest pace in five years, topping $21 trillion: The world’s biggest central banks are bulking up their balance sheets this year at the fastest pace since 2011’s European debt crisis to boost lackluster economic recoveries with asset purchases that are supporting stock and bond prices. The 10 largest lenders now own assets totaling $21.4 trillion, a 10 percent increase from the end of last year, data collected by Bloomberg show. Their combined holdings grew by 3 percent or less in both 2015 and 2014.” (Sprott Money, 18th October 2016).
To be honest, it’s probably a combination of both. I come from the legal world where it was often said that the truth usually lay somewhere between the opposing arguments. Both the private and public banking sector each have the human tendency towards an abnegation of responsibility, because both are comprised of, well, humans with all our shared humanity.
But, whether it is private household spending, banking avarice or government over-use of loose monetary policy, each is a crisis in waiting, which each benefit the rising price-trend of Gold and Silver.
And what happens when two of those three go to war with each other? I was astonished to read on Monday of this week that ” NatWest bank is to close the accounts of Russia’s state-run broadcaster, RT. Editor-in-chief Margarita Simonyan tweeted: “They’ve closed our accounts in Britain. All our accounts. ‘The decision is not subject to review.’ Praise be to freedom of speech!” The bank said the decision was “not taken lightly” and that the accounts were “still operative” at present. An MP from Russia’s ruling party has said its parliament will demand an explanation from the UK.” That’s not good, that’s not good at all. I – along with many of our readers – have watched the sabre-rattling increase between Obama and Putin but I didn’t expect that rattling to jump across the pond so quickly: “RT says the entire Royal Bank of Scotland (RBS) Group, of which NatWest is part, is refusing to provide its services. The broadcaster, previously known as Russia Today, says NatWest wrote to its London office saying: “We have recently undertaken a review of your banking arrangements with us and reached the conclusion that we will no longer provide these facilities.” (BBC, 17th October 2016)
Russia are key in the global signs as to the sheer importance of Gold over the coming decades, as we’ve explored several times in these blogs. Business Insider reported this month that “Russia is hoarding gold at an alarming pace.”
My point is that Russia’s most potent weapon may not be its nuclear warheads. The fastest-evolving “weapon” in Russia’s geopolitical arsenal is that nation’s hoard of gold, along with Russia’s national currency, the ruble. Since 2006 the year-on-year change has been constantly positive and shows a significant upward trend. This demonstrates clear state policy to add significant amounts of precious metals to the overall base of state monetary assets. Most of the gold mined in Russia stays in Russia. Russia’s government is converting state rubles into state gold assets. And Russia has dramatically increased its gold holdings over the past year.”
“There’s nothing accidental about it. Gold is part of Russia’s national plan. In his 2011 book Currency Wars, Jim used an example of “what if” Russia and China combined their gold reserves to form a gold-backed currency to compete against the dollar. Take current Russian reserves of about 1,500 tonnes and add Chinese reserves, which total over 1,800 tonnes (or so the Chinese say — it’s likely more). That’s a combined 3,300 tonnes of gold, or about the same amount as Germany.
Now consider that in the months to come, the U.S. is about to lose overarching control of policymaking within the International Monetary Fund (IMF). The U.S. lockup on global gold is about to vanish. So let’s consider the real possibility that Russia-China could exercise indirect (or even direct) control over the IMF’s gold reserve of over 2,800 tonnes. Between Russian, Chinese and IMF gold, we have 6,100 tonnes of gold, potentially in competition with the U.S. hoard of 8,100 tonnes. That situation does not bode well for the future of the dollar. It’s right up the alley of Jim’s predictions of severe dollar problems ahead.
The takeaway from this is to own gold and silver — buy it and take custody while you can, because we’ll eventually reach a time when you cannot.”
I like this article precisely because it is not written by a Gold commentator but by a geologist and former Naval officer. He “served during some of the coldest days of the Cold War. In the 1980s, I was a naval flight officer. I flew a carrier-based aircraft designed for antisubmarine warfare (ASW).” My grandfather and brother both spent time in the British Armed Forces, so I like a level-headed, strategic approach this author also exudes. It makes complete sense that modern warfare is worked out through “law-fare”, “resolutions”, and “gold.” (Business Insider, October 2016)
But, is his concern of “the real possibility that Russia-China could exercise indirect (or even direct) control over the IMF’s gold reserve” far fetched and just plain alarmist? No, not really, considering that this month “China’s yuan joins the International Monetary Fund’s basket of reserve currencies in a milestone for the government’s campaign for recognition as a global economic power.” (Reuters, 3rd October 2016)
All of which gives us something to go on regarding our own decision on owning physical Gold and Silver bars and coins as part of our monetary protection against the bumpy road ahead. And what could the timing of this all be? I’m no expert but I do like to research. Back in 1988 The Economist produced a front cover that is still striking today, with the even more perplexing headline “Get Ready for a World Reserve Currency.”
With Market Watch publishing a piece at the beginning of this week entitled, “The stock market is turning into a sloppy, ugly mess – and it could get worse:”
“If the Dow posts a loss in October it would be the first time the blue-chip index logged three consecutive monthly declines since the period ended in September 2011. The S&P 500 notched three consecutive monthly loses earlier this year, ended February. A number of analysts are pointing to the possibility of a big selloff in stocks, citing bearish technical patterns. Murray Gunn, technical analyst at HSBC, in a Wednesday note said investors should look out below if the S&P 500 closes between 2,116-1,991 and if the Dow industrials breach the 17,992-17,063 level. The thinking behind that call is those levels represent recent lows that may trigger buying by computer-driven traders and other investors. In other words, those levels then tend to act as so-called support. But slipping below them can mean a painful dip into darkness.”
It may be time to browse the Gold and Silver bars and coins on offer at Bleyer. Bleyer aim to help their clients access physical gold, silver, platinum, palladium & rhodium in person and online with absolute security. They dispatch orders daily across the country using our discreet and secure, fully insured delivery service, you may also choose to take advantage of their state-of-the-art secure storage in an allocated account either within the UK mainland or off-shore. Alternatively Bleyer now offer a range of top quality home storage solutions in our new safes and storage shop. Anyone can purchase Physical Gold and Silver, now could be the perfect time to begin investing. To make an appointment, talk through pros and cons of different metals and products, or to simply find out more about owning Physical precious metals, call one of Bleyer’s friendly professional team on 01769 618618/579287.