Zero Hedge put out a piece yesterday that compared China’s “money growth” (newly created) versus that of Japan and the U.S. for the month of November. Surprisingly, China created $200 billion of new debt versus $159 billion for Japan and the U.S. combined. I must say that I was greatly surprised by these numbers but it got me to thinking…
Collectively this is nearly $400 billion, do you realize how much money this is? “A lot” would be a good answer but it’s always best to relate or compare one thing to another for perspective. Do you realize what $400 billion represents? Um…how about more or less 10,000 tons of gold? You know, in round numbers the total amount of gold “supposedly” held in Ft. Knox and our other depositories? Or…maybe a little bit more gold than China has accumulated during their buying spree over the last few years?
Think about this, between Japan, China and the U.S more “money” (debt) was created in just ONE MONTH than the amount of gold held by any one country…in ONE MONTH! Another way to look at this number is that it is roughly equal to the amount of gold mined all over the world…over a FOUR YEAR timeframe! You can look at this from many different angles; I wonder “why” this amount of money needed to be created? Without going into a long spiel of economics, suffice it to say…”because they have to.” They “have to” because if this money is not created then the Ponzi collapses upon itself and “normal” will have a whole new meaning altogether…I might add a not too pleasant meaning either.
So back to the $359 billion in one month. In layman’s terms, let me make the analogy of your credit card versus your bank account. This is similar to borrowing the entire balance of your bank account via credit card in just one month and this assumes you are not lying about your account balance. Do you see how lopsided this has become? How “free” fiat money, debt or whatever you want to call it has become? How “dear” gold really is?
I know it’s hard to see how “dear” gold is right now because in dollars it is priced more or less at just $1,250 per ounce. But wait, what if newly created “money” (debt) grows by the same amount as November…for the next 12 months? This is easy to say but hard to believe, it makes all of the above descriptions and analogies TWELVE TIMES WORSE!
Yes I am a cheerleader for gold so you can read this and say, “There he goes again”…or you can reread this and verify that the math (I rounded numbers so please don’t nit-pick me) and logic are correct. You can reread this piece and put in perspective how incorrectly these currency markets are in relation to gold (and silver). I have written so many times regarding the coming “re set,” can you now see with the above example exactly “why” a re set is not only necessary but mandatory? Can you see the directions of Mother Nature’s push for real goods versus the world’s freely and literally unlimited created paper monies?
Before I finish, I do want to address those who will say that China is either going to collapse, never will, will dominate the globe or whatever. From where I sit, China has only “played the game” that was in progress. They have moved toward capitalism and fractional reserve banking…but…they figured out “how to win the game.” When, not if the current fractional reserve game collapses, you can bet that Chinese banks will go down in flames with all the rest. But guess what? China “has the gold” and will sit at the head of the table when new currencies are discussed (they surely already have been) and new pecking orders are set. When this event unfolds, China WILL… (Not the U.S., not Europe, not the COMEX or LBMA, and not even 5 cigar smoking knuckleheads sitting in an ivory tower in London)… SET THE PRICE OF GOLD.
One last question, were we to get to the point where no gold is available (offered) for sale then what would its price be in dollars, Yen, Euros, Yuan or whatever? This is similar to asking what a gallon of clean drinking water would be worth in the middle of the desert. Of course you could ask the same question of a pound of rice, a bag of potatoes or even a dozen eggs in an economic meltdown. Most will say “you can’t eat gold” so it will be worthless in an economic meltdown. I agree you would never use gold to “eat” because you could never get “change” back. You cannot eat silver either but those thin little 90% Silver dimes will be pretty tasty after exchanging them for food.
Right On, Bill! Can you even believe the sheer number of how many sheople still have not woken up and grasped that right now this very day, physical Gold & Silver are actually available at 80%+ discount to Ponzi Reality headed down the pike?
that’s about right
Re: “Money” In Perspective
Your statement that: “$400 billion represents…10,000 tons of gold” is wrong.
A Metric Ton (Tonne) = 32,000 troy ounces (rounded off).
Therefore $400 billion divided by $1,250 per ounce = 320,000 ounces divided by 32,000 = 10 tonnes
I am sure that you have received many reports of this, but I am sending this comment, because you are my favorite financial author.
Sorry Dr. Fischer, the math is correct. At $1,250 per ounce 1 ton is 32,000 ounces=$40 million. 10 tons=$400 million 100 tons=$4 billion 1,000 tons=$40 billion…….10,000 tons=$400 billion. Global production is more or less 2,500 tons per year which is roughly a whopping $100 billion. This is one of the reasons that Gold will be revalued MUCH higher in my opinion, because at current prices it is too small a number to act as a foundation for the paper pyramid that has been constructed.
I am very sorry, but $1,250/oz x 32,000oz = $40,000,000.00, which is $40 billion.
I totally agree with you that the future fixed price of gold will rise much higher, and to be about 600rmb/gram plus or minus 100rmb @$1:6.00rmb. Thank you for your reply.
Dr., 40,000,000 is 40 million, not billion. If this was so, global production would be $100 trillion instead of $100 billion.
Again I am very, very sorry you were right it should be million, and not billion.
no problem Dr., it’s all good and an honest error. The “problem” with the financial system today is that there are “too many zero’s” when it comes to paper. Or said differently, “not enough zero’s” when it comes to Gold. The point to my article was to make a comparison of what was created in just one month versus Gold supposedly held. It is for this reason that I do not think Gold can “go higher” over a long time period because the paper system will just shut down. An overnight reset in my opinion is the best and least painless way to make the Gold “valued” at a level where it will be large enough to actually act as a foundation.
With millions, billions, trillions and quadrillions it’s hard to keep track of all the zeros. The fact that we are talking about quadrillion dollar derivatives shows that we are on an unsustainable trajectory….
exactly
I totally agree with you that the prices of the monetary precious metals must be initially fixed before future sustainability. The Chinese are moving in that direction.
My guess is that we will see them be fixed before January 1, 2014. The Chinese have a long tradition that states: you must get your affairs orderly and cleaned up before the end of the year, or you will have bad luck during the next year. Since they have the gold, they should be able to make the rules.
not sure when the Chinese New Year starts but I don’t think it is Jan 1. Maybe a few weeks later if I’m not mistaken.
Great debate. Sometimes I am more anxious to get to the question section than to even read the article. The critiques are all interesting and informative.
thanks Willie
This year the Chinese New Year’s eve is January 31, 2014, which is the start of 14 day Lunar Festival that closes most manufacturing, some retail, and many agencies of government.
They also celebrate New Years eve on December 31, 2013, which also ends the 4th financial quarter.
The Chinese New Year is based upon the moon cycle, which is a variable. Last year it was on February 10, 2013.
then maybe we have a 31 day reprieve.
Good logic Bill.
And you are the first one that described China’s role correctly : they have just been playing along indeed but have set the pieces in a winning manner.
Perhaps one thing you forgot but important: either there will be a global reset or there will be a global war…
thanks