I know that you’re probably wondering about the title “…And It’s Gone.” I wanted to write further about the “missing metals” in China and how quickly we could see the machine go into reverse because of the leverage, size and amount of players involved. After writing the title and thinking about how to start off I realized that it could and does apply to so many different facets in the world today, and not just the financial world. To refresh your memory and give you a 90 second chuckle, here is the South Park video that made the phrase “…And it’s gone” so famous.
In the non-financial category you must include common sense, integrity, work ethic and the rule of law amongst others. They are all gone. Maybe not completely because there are still some smart, hardworking and honest people out there but when you look at the “top,” yeah, it’s pretty much all gone. When I say the “top,” I am talking about the places that wield the power and make the decisions.
I could have used this title for the recent revelation by Christine LaGarde that the IMF may someday move from Washington to Beijing. The title fits Crimea, it fits the depositors in Cyprus, and it fits the proposed use (or lack of) of dollars that Gazprom will be using for settlement. I could have certainly used it for the coming “bail ins” all over the world. And it also fits the Chinese businessman who opened his 1 ton crate of gold from Ghana only to find worthless steel.
OK, yes, apparently “it” is gone, “it” being the collateral. All along I have said that the entire system which is “credit based” is a daisy chain and that no link, anywhere could “break” …or the whole system would break. The situation in China’s Qingdao port looks to be the link that is breaking. If there are 80,000 tons of aluminum and 20,000 tons of copper missing here, what about other ports? Then of course the thought process leads your mind to the banks and the lenders themselves. These institutions are not just Chinese banks. If you recall, JP Morgan offloaded their commodities arm to Mercuria back in March. Swiss based Mercuria was a big lender to this market; good timing by Morgan and Mercuria now holds part of the bag? Citigroup was also another big lender in this market, can they or do they have the strength to eat loans that were made in retrospect with “less” or even no collateral?
Please understand that this situation is going to bring trust into the equation and just as any receding tide does, all of the bad deals and frauds will be exposed. I could have titled this piece “show me the money” because this is where all of this will lead. “Receipts” everywhere will be questioned and not just for aluminum and copper. There will be questions raised between banks, between sovereigns and of exchanges themselves. “Trust me” will not cut it anymore and we will soon find out who really has what.
Does GLD really have the 800 tons of gold that they say? What about the LBMA and COMEX? Oh heck, what about Ft. Knox, West Point and of course the Federal Reserve Board of NY? Do you see the danger here? We have shown you so many bits and pieces of anecdotal evidence where common sense told you that there was no way that the amounts of physical gold “claimed” could never be true, how could all of these pieces be pure coincidence?
This is where I believe we are headed, “show me the money” so to speak. I think that we are at a very big crossroads where “trust” will be supplanted by “fact,” as in you either have it or you don’t. Please understand that when you couple in the recent revelations that the U.S. has spied on everyone, everywhere, the U.S. “trust meter” is running very low with foreigners. Dollars are being shunned and supplanted with each new deal and even here in the U.S. there is growth in “non” dollar settlement. I will be shocked if we do not see other countries asking to repatriate more gold reserves held in NY and I also believe that the world collectively will demand that the U.S. show an authentic audit of the gold reserves that we claim to have. It will be put up or shut up time.
Yes, the “problem” is in China currently and looks to be a fraud of their making, not ours. But …fraud is fraud and everyone will question everyone else no matter who they are, where they are or what reputation they are riding on. I cannot tell you how important it is to understand that this situation could blow up in such a short period of time and change the entire world of finance literally overnight. I can say this because of the leverage involved in not just in commodities, gold, stocks, bonds or real estate. There is leverage (debt, credit) everywhere; it is the basis of “wealth.” (Can you imagine telling your great grandfather that “debt is wealth,” yeah that would go over well).
Global trade must have credit to settle, internal trade must have credit to settle and so does distribution. You absolutely must understand that in a world where “just in time inventory” rules, the “shelves” are not very deep because they don’t have to be. However, without credit nothing will work. You see, this event no matter how else you view it is a credit “tightening” onto an economy that is already weak and a financial system that is walking a tightrope. This is how all “credit contractions” of pyramid schemes or Ponzi schemes happen. First you see or smell a teeny tiny fraud (the current situation is not so small) that grows and infects other players in other countries and in other markets. It keeps on growing until everything is infected. The situation today is that almost everyone is over leveraged, there is no “free” collateral that is left to borrow against and we have computers. I use the word “computers” because they are fast, REALLY FAST. If you are a student of history and have read about the Credit Anstalt collapse in 1931, then you know just how fast a credit contraction can turn into an all-out collapse without computers. In today’s world where instant news and instant trading is the norm, markets may not be able to stay open for even one full day.
Before finishing, I do want to mention that this revelation of missing collateral could possibly even be a ploy by the Chinese. As I have said many times, I don’t think that they worry about the paper markets or their collapse. They have already built out their infrastructure and inked supply deals for decades to come (PAYING with dollars of course). I believe that it is quite possible that China is pricking the credit balloon here. Remember, they do have well over $1 trillion worth of treasury bonds that they can “use” to sell in the middle of a panic to buy hard assets with. They could kill two birds with one stone by dumping their paper treasuries and scooping up some more assets at fire sale prices. This is the way it has always been done, just ask the Rothschilds.
I am not trying to be alarmist here; I am just trying to alert you to the likelihoods that can arise from “missing collateral” in a world where credit is “everything.” No matter your own situation, whether you are debt free or not this will affect your life. I also want to point out that gold is “money” that has no credit or anyone’s liability attached to it unless you “own” it in non-physical form. What is coming will affect every financial asset everywhere and the phrase “…and it’s gone” can come into play before you can even say it. Gold in physical form on the other hand is not only “immune” to this coming infection, it will benefit from it when all is said and done.
The article at the link below states that China recently reported that it had 8,200 tons of gold as of the end of 2012. Have you seen this?
I tried to email you the article at the link below last night, but my email didn’t go through.
I do not know where they got their numbers from.
The ‘reserves’ are a mis-translation, the reserves they refer to are in ground gold resource estimates.
Just had to write to say how thrilled I am that you are front and center on the jsmineset.com website, one I’ve been following since ’01. Just saw your byline and haven’t even read it! But I will!
In the last 10 days I have written to goldseek.com and jsmineset.com (the Editor), extolling the virtues of the Bill Holter missives and asking that your articles start appearing on those premier gold sites. Was hoping I didn’t sound to them like another form of tinfoil hat bug.
The long-suffering gold community is lucky to have you and I’m glad you’re getting the wider exposure you deserve.
thank you Sally. Jim has picked up on my work before this one.
Some have speculated/postulated that this “unwind” will also affect Gold, as that will “unwind” (read: lower prices) as /if/when it is found out that it is paper-leveraged with non-existent gold. what is your opinion on that topic? It’s counter-intuitive, but nearly everything that happens in today’s financial markets seems to be counter intuitive! 🙁
if price has been held down by selling 100 paper ounces for every one real ounce, what do you think will happen when they “buy” those 100 ounces back? Gold is not copper, do you think that physical holders will be selling their insurance policies? I believe gold will unwind FAR higher than current levels.
Thanks. That’s what I “thought” would happen, but for the last 6 years or so, everything I’ve thought has been wrong so far LOL
yes, because you used “logic” which has been thwarted at every turn by derivatives papering over past lies. In the end you are looking at a true price for gold and silver which are multiples of what they are today.
There exists the possibility that when the unwind occurs there will be a ‘flash crash ‘ in gold on the paper exchanges. This will occur as credit unwinds and people are forced to sell futures contracts, failure to deliver will trigger or compound the credit collapse as people realise that their futures contracts are written against fresh air rather than physical gold and silver, as they dump their contracts the paper price could plummet, but only until the paper exchanges stopped trading when physical prices would dictate price and price would explode vertically for the real metal. We will see how it plays out in the next year or two
in theory you could see the paper exchanges go to zero and physical go to infinity in terms of dollars.
How might this all affect the miners? I’d appreciate any perspectives on that, as again, all of my own “logic” doesn’t seem to work 😉
my opinion is for miners with metals in the ground: higher prices will equal higher prices.
Thanks for your opinion. One last question, not for lack of due diligence, but how can one “try” to locate the best minors that might survive? Are there analysts that cover this area that you can TRUST?
Sprott does a lot of research in this area.
If people understand the importance of your article they will IMMEDIATELY trade their soon to be worthless paper dollars for silver and gold.
A bank account, savings and checking account, IRA, Money Market, CD’s, etc. are soon to be worth the paper they are represented by, which will be ZERO.
When it all hits the fan I don’t care if you have billions in paper assets; NO ONE will exchange their silver and gold for them.
When China finds those responsible for the missing metals, the won’t be walking around like Jon Corzine !!!
The worlds rich are ditching their fiat paper currency as fast as they can. Look at recent auctions. Cars, art, jewellery, wine, real estate, farmland, etc. etc.
Asset inflation is big here, as the worlds rich attempt to outbid each other for any and all tangible asset of wealth protection.
They fully realize that paper fiat currencies are heading to their ultimate value of zero. And are hurrying with ever increasing desperation, to trade this ever worthless paper for anything of tangible value before its too late.
Bill: we will look back at these collateral-questioning events as the beginning of the end. Once TRUST disappears (especially among the criminal elite) it will be a mad rush to grab the last chair in the room and all bank asset bases will come into question, over and above the “mark to myth” fraud. This could also be Rickart’s snowflake that causes the derivative avalanche. I can’t overemphasize how important these revelations are.
correct Andy, and it will be lightning fast once underway.
In the current system, all money is backed by debt that must be paid back with interest. So money supply must continuously be expanded as a percentage, which is exponential due to the compounding effect. Otherwise the system collapses. However, what is to keep the fed from printing money WITHOUT simultaneously buying debt? What if, covertly, money is printed to make payments or hand out, and no new debt is created as a result. Clearly, recognition of this would harm confidence and trust, to put it mildly. But given the alternative of certain collapse as debt is increased, could this covert creation of money keep the ponzi afloat longer? In the end, TPTB will do whatever can keep those saucers and cups in the air.
yes, mathematically it by definition must collapse.
“This is the way it has always been done, just ask the Rothschilds”.
Actually Bill, the Chinese have talked to the Rothschilds and The Rothchild are the custodians of the Chinese gold. I saw that in a video and below is and article to support it. The Rothschild is who set helped to up the Bank of China. This is all a coup. The Rothschild had to hide their identity through another nation. They are stealing the world’s gold through China and destroying America in the process. Remember George Soros wants China to be the model for the world? Who do you think he is? His blood is as good as Rothschilds. He also said gold is the ultimate bubble. These demons have already stolen the worlds gold and I believe they are using China and Russia as false enemies.
This whole entire scheme is conjured up by the one world system that is coming about. All these nations who are at the top are playing and vying for who will be the leader(i.e which man or nationality will lead the entire plan). You mentioned Trust, well the problem is that will lead to the destruction of the NWO system. For if we can see there is lack of trust now, when power is established, that Trust will wane even more as others will want to have that power position for themselves. Trust not China or Russia, for those are the models the NWO wants the world to live by. Being under a communist dictatorship just like they showed in the Batman Movie. These two countries GOG and MAGOG will not set the world up to be any different from what they are, but it will be worst.