Tennessee Ernie Ford sang about the plight of coal miners decades ago. His song remains relevant in today’s increasingly crazy world.
“You load sixteen tons, what do to you get
Another day older and deeper in debt
Saint Peter don’t you call me ‘cause I can’t go
I owe my soul to the company store.”
The owners paid in script which coal miners used as currency. Script had no intrinsic value and was only good at the company store. The owners increased profits by coercing miners to buy goods at higher prices. Script cost next to nothing to produce.
We use dollar bills (paper and digital) that have no intrinsic value as currency in the U.S. The dollars cost next to nothing to produce and are used because of ‘legal tender’ laws.
Coal miner Average American
Load 16 tons Work for wages
Deeper in debt Deeper in debt
Company store Debt based economy
16 TONS OF COAL AND GOLD:
Sixteen tons of coal is a huge quantity of concentrated fossil fuel energy.
Sixteen tons of gold results from a tremendous effort to mine and refine gold ore into 16,000 one-kilo bars, about 514,000 ounces. At $1,500 per ounce, it is worth $771 million.
Sixteen thousand kilo bars of gold are a fortune, representing wealth that is valued everywhere in the world, especially Asia. They accumulate gold.
But wait, 16 tons of gold sells for about $771 million, while the Fed recently conjured about $300 billion in “printed” digital dollars to feed into banks for overnight repos.
For perspective, the Fed created, at a cost of next to nothing, about 400 times as many dollars, in a few days, as 16 tons of gold cost.
Annual global production of gold is about 3,200 tons, 102 million ounces, or $154 billion dollars, if valued at current COMEX (paper gold) prices. The Fed created at the end of September more than the equivalent annual production of gold—in a few days.
It’s good to be a central banker. Wave your magic wand and create endless quantities of digital script with no intrinsic value.
A stage illusionist waves his magic wand. A pretty girl and a panther switch from inside locked boxes. The illusionist amazes the audience, but they know a distraction created the illusion.
Central bankers created $20+ trillion in new currency since 2000, bailed out banks, and made monetary illusions look real. Debt, interest expenses and prices rose. The monetary, fiscal and political illusions, including impeachment, continue.
Question: If digital dollars have no intrinsic value and are easy to produce, what is a dollar worth? Is a kilo of gold worth $48,000 or far more, knowing that the Fed often creates $48,000 in a heartbeat?
Repeat: It’s good to be a central banker but expect gold to cost much more in the next decade.
WHAT ABOUT A BRIEFCASE FULL OF CURRENCY UNITS?
A four-inch briefcase holds about 10,000 paper bills—debts payable by the Fed to the holder. Those 10,000 bills, whether $1 or $100, each weigh about 1 gram. The briefcase contains 10 kilos of bills or about 22 pounds of bills with no intrinsic value. If it were 10 kilos of gold the current value would be nearly $500,000 at current prices.
Examine a history of briefcases containing cash or gold. Assume the cases contain 10 kilos of gold or 10,000 Federal Reserve Notes. Rounded values are listed below.
Year Gold Price Gold Value Federal Reserve Notes:
1971 $40 $13,000 comparable to $1 bills
1999 $310 $99,000 comparable to $10 bills
2019 $1,550 $498,000 comparable to $50 bills
2025? $3,100 $996,000 comparable to $100 bills
The Fed and commercial banks “print” billions of dollars each year. Those new dollars devalue every other dollar in existence. Each dollar buys less and… you know the drill.
In 1971 a briefcase of $1 bills was about equal to 10 kilos of gold.
In 1999 a briefcase of $10 bills was about equal to 10 kilos of gold.
In 2019 a briefcase of $50 bills was about equal to 10 kilos of gold.
When will a briefcase containing $1,000 bills be equal to 10 kilos of gold? (Yes, I know, the Treasury no longer prints them, but the question is relevant.)
From Alasdair Macleod:
“As night follows day, another banking crisis will rapidly escalate, this time likely to be on a greater scale than ten years ago. And the evidence from failures in the dollar repo market in recent weeks points to the banking system beginning to unravel now.”
From SRSROCCO Report: “More Than 50% of the Mighty Permian’s 2018 Oil Production Has Vaporized.”
“When U.S. shale oil production peaks and begins to collapse, there is no Plan B for the Fed and central banks. Printing money when oil production heads south will look a lot more similar to what is taking place in Venezuela than what we experienced since the last 2008 financial crisis.”
From David Stockman: “This Bubble, Too, Shall Collapse.”
“When the real correction comes – and our monetary central planners are revealed to be impotent and powerless – everything is going to collapse.” [Except silver and gold which have no counter-party risk.]
- It is easier to print script with no intrinsic value, whether the printer is the owner of a coal mine or the Treasury, than it is to mine and refine gold.
- Bankers and governments prefer digital and paper currencies with no intrinsic value rather than gold.
- Asian countries understand the importance of gold. They mine and import tons of it every month.
- Sixteen tons of gold is worth, at $1,500 per ounce, about $771 million. The Fed created over $300 billion in the last three weeks. They announced they will continue “overnight repos” until early November… so far. Think of their actions as QE4 or “Inflate or Die!”
- Dollars have been devalued by about 50 to one since 1971 when compared to gold. The next 50 to one devaluation will occur quickly. A fifty to one devaluation would put gold at $75,000 per ounce.
- What’s surprising is not that gold will be priced at $50,000 or $100,000, but that congress and the American public allow this devaluation nonsense to continue.
Miles Franklin does not mine coal or distribute briefcases full of cash. They will convert digital and paper currency units into real money—gold and silver. Protect your assets with a purchase of 16 tons of silver.
I encourage you to buy silver and gold, not the paper stuff, but real physical metal bullion and coins. A correction/crash/collapse that will implode the “everything bubble” is coming, regardless of Fed printing, trade deals, monetary illusions, tariffs, hot wars, elections, ZIRP, QE, media reassurances, and Presidential tweets.
The Deviant Investor