This past week my sister flew in to see us for a few days. I had not seen her in a couple of years so it was great to catch up and spend some face time. She had not been to see us since we returned from Costa Rica and since the wildfire took our home in 2011. We drove through the burn zone to show her how large it was and how extensive. It’s been nearly a year since I had driven through simply because I don’t really like the memory and how depressing it is to see. This past Friday was different, there are literally MILLIONS of new pine saplings sprouting up everywhere! It took three years but Mother Nature has not failed us once again.
It is in this theme I’d like to write today. Without going into the mechanics and logic of “why” or really even how the current Ponzi schemes will fail, I will assume that you understand the current “dollar system” is untenable, unfair, unstable and will fail in very grand fashion. If you do not believe this, you might stop reading here. If you don’t believe this and do continue to read, the following math will be quite scary but is correct in both numbers and logic.
After “failure”, after a wildfire, forests regrow saplings and new vegetation. Is it a miracle? Yes, absolutely yes! Is it something we should come to expect? Again, yes. The very same holds true for economies and financial systems. After every popped bubble, after every deflationary default wave, hyperinflation and currency collapse, and even after every war …as long as humans still exist there will always be a new economy and financial system that “rises from the ashes”. ALWAYS!
Without trying to bore you, forests will not regrow if there is no rain nor sunshine. Financial regrowth cannot flourish unless there is “money”, the equivalent of rain. But we already have money now, plenty of it if not too much of it. Globally, the world is glutted with central bank created “money”. I would submit to you, there is far too much of it …and it is “poisonous”. The fire hose spigots of money were opened in 2008, more and more of it was produced …but, it was “bad” money. It is this revelation the world is now struggling with and why the BRICS and rest of the world are looking to move away from the dollar and towards gold, “clean” or even “good” money. The important thing here is that gold is money you can trust no matter what language you speak or read, no matter what form of economy or government you have or what religion you practice. Gold is “universal money” and this is the beauty of it!
Doing just a little bit of math compared to today’s gold price of $1,200, we can see at what price level “gold” can (and will eventually) extinguish debt. Let’s look at Greece for example. They have just over $4 billion worth of gold in relation to $350 billion worth of debt. Gold would need to be priced at nearly $100,000 for their debt to be covered by their gold holdings. We could do the same exercise for the U.S., we supposedly have over 8,000 tons (262 million ounces), in order to cover $18 trillion worth of debt, gold would need to be priced at nearly $68,000 per ounce. If we did the math on total obligations we arrive at an unthinkable number. Covering all debt and derivatives outstanding brings us to a number with “lots of zeroes”, I won’t go there because too many brains will shut down from disbelief.
I know what you might be thinking, “but gold isn’t money and who says the debt has to be ‘covered’?”. You may be right but if debt isn’t covered by gold, then what is it covered with? Another way of saying this and easier to understand it that the “debt must be paid back and if it isn’t …someone is going to lose a lot of money”. Do you see how this works? The “money” (debt currency) must have value in order to pay back the original loan, if it does not then there is a loser somewhere (the debt holder). If the Treasury or the central bank wants to make good on the borrowed money, then by what means do they have? The ONLY true asset that central banks hold is gold. If this is the only thing they can truly extinguish their debt with, then we can do these calculations all over the world and with all central banks.
Going another step forward and equating the financial to the natural, once the pyramid falls over, by necessity “something” will be needed to fill the black holes of default. Can the Fed, the ECB, BOJ, Bank of England and all the rest just “print” to pay off the debts? Can’t they just “give” money to banks or even drop it from helicopters and enrich the population? They can try but the one thing they cannot do is “force the confidence” in this new money. As I mentioned above, gold is THE only money with universal confidence and willfully rather than forcefully (as fiat is) accepted for transactional settlement.
Fortunately, economic and financial collapse unlike a forest fire leaves production capacity and infrastructure intact…but, with new owners. A soap factory will still be capable of producing soap. The soap will still have value relative to other goods, however, after default there will be a new owner. I have written many times regarding Harry Dent’s deflation/dollar is king theory and will not rehash it here except to say dollars are debt… debt is the core problem and dollars will lead, join and follow debt into this deflationary hole that he foretells of. Dollars will need to be created in the $ trillions upon $ trillions to “settle” all of the trades outstanding, over $1.5 quadrillion of derivatives on top of $100 trillion of sovereign debt.
Please remember this, we are talking about the “dollar price” of gold. I am not saying your gold ounces will all of a sudden start to puff up like an excited horse on steroids and become bigger than an ounce. What I am saying here is that the dollar is headed into oblivion. It very well could be a number like $10 million per ounce turns out to be ridiculously low! This entire saga is and has been about the dollar and its forced global use. Do not write me to say this is ridiculous as all historical fiats have gone to zero …which means they went “no offer” in terms of gold. Simply put, gold has gone to infinity in all historical fiat currencies, the dollar will ultimately be no different.
Several countries were bombed, toppled and their rulers murdered because they tried to move off of the dollar standard and toward gold. Can this happen were Russia to move off of using dollars and ratio back the ruble? What about the Chinese? Or better yet, what about the BRICS nations …and if they are followed by some 135 other countries? What about the Middle East’s new gold dinar? Will they go along with the paper markets of West valuing gold and thus their money? Gold is being remonetized right before our eyes, not by the U.S. but by the rest of the world. Western paper markets where 100 paper ounces are sold for every one real ounce will be exposed as the frauds they are, foreigners will see to it. (After penning this piece, it looks like our regulators may try to get out in front of this but I’m not holding my breath).
As I started with, Mother Nature and human nature will together decide and price “where” and at what level “money” will be priced at. They will also decide what is “good money and bad”, what to use and what not to use. We are now in my opinion well past the point in time where the U.S. can militarily force the rest of the world to use dollars. If the powers in the U.S. do not believe this then war will follow, may God help us all and all bets are off. If we somehow do avoid war, the world will because of human nature, soon demand fair money with which to settle…and no longer trade with those who refuse. Just as the millions of little pine saplings have popped up in the burnt forest need rain, gold will be a very key element to the regrowth of the world economy and financial systems! Gold is honest settlement. At the correct “price” it is plentiful enough to give the financial ground a good soaking to restart growth and commerce. It’s merely Mother Nature’s way. Her forest fire to cleanse the system of bad debt will be furious and complete, gold and silver will survive this intact. Holding gold now will make you a charter member of the next global central bank, this is also Mother Nature’s way.
Bill, your thesis that gold could equal many tens of thousands per ounce is not only spot on, but I believe will happen at some point in the future. I think it will reach at least $312,000 per ounce during the lives of anyone born today.
Consider the fellow on the street back in 1932 with a Double Eagle in his pocket. It was worth $20 to him. Let’s say he gives it to his newborn baby that year, and that coin is kept by that child, who is now 73 years old.
Fast forward 73 years later, and the gold in that Double Eagle is worth around $1200 today. (Forget the numismatic value of that coin – that’s not the point.) The gold in that Double Eagle is worth 60x today what it was in 1932, in dollar terms.
73 years from now, in the year 2088, gold could easily be worth (1200 x 60) $72,000. Had we made this calculation when gold topped $1900 a few years ago, the future value of gold would have been 95x the 1932 value
(95 x 1900), equaling $180,500.
Just based on these nominally low dollar prices we’ve seen for gold in the past 3-4 years, I’d say gold will land somewhere between $72K and $180K over the next several decades, at a minimum.
If reality were to come into play, and gold today were valued at a reasonable dollar price, let’s say $2,500 per ounce, which is 125 times the dollar value of that Double Eagle back in 1932, then I could put gold at $312,500 per ounce in another 73 years. (2500 x 125) And that’s without any discussion over $18 Trillion in debt backed by gold.
Your thesis is spot on. No fellow walking around in 1932 with a $20 gold piece would have ever dreamed it could be worth 60 times its value today (72,000), and no one walking around today would believe their one-ounce eagle could be valued in dollars at 125 times what it is today. The possible calculations of future values are unlimited, and indeed, infinite.
all will happen fast when financial panic sets in.
Another Excellent commentary, Thank You!
I must have missed something somewhere. Where did this some 135 other countries line come from? This number 135 must mean something, I am assuming.
“Or better yet, what about the BRICS nations …and if they are followed by some 135 other countries”?
Regarding our bought and paid regulators, not a chance they will get in front of the gold fraud.
I would bet you some Gold that they will conclude “Move along, there’s Nothing to see here”
dig for it, it’s out there.
Hey Bill, I have been following your writings for a bit after listening to one of your interviews. Any books you could recommend to understand gold historically as money? Any other books you recommend in general?
“Crazy chicken”, I would go back through http://www.jsmineset.com archives or purchase Sinclair’s compendiums, some very good stuff.
Hey Polo – Watch Mike Maloney’s “Hidden Secrets of Money” video series. It’s on youtube for free.
” Gold is honest settlement. At the correct “price” it is plentiful enough to give the financial ground a good soaking to restart growth and commerce.”
What if the Gold isn’t there – that means war right?!
The Dollar is backed by oil. If this will fail its still backed by the most powerful army in the world.
Thats quite scary.
if there is just one ounce of gold left, a price can be calculated.
Armies have been known to just melt away when there is no money to pay them for dying.
true, they also have been known to loot their own countrymen when they don’t get paid.
Gresham’s Law states;
“When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation”.
It is commonly stated as;
“Bad money drives out good”.
I know I’m preaching to the choir here Bill, but there are still some folks who are beginning to wake up and need to hear the truth.
yes, bad money gets spent and good money goes into hiding.
What about silver, Bill? Will it follow gold or go its own way?
I think they are locked at the hip though silver will have a dose or two of Viagra in its blood.
Bill, As always great article—this(& many of you others) may help push all those in my family that still “doubt”. But not holding my breath, nor should any of us about DOJ/big banks/& gold rigging. We are old MF customers & appreciate all the valuable info in the “Daily G&S Summary”—first read each day, thanks. Peggy & Ron
thanks guys, appreciate the kind words!
I ensure you there is movement in “waking up” around here (Germany) in a speed I wouldnt have expected.
We really want out of this so badly. – but it wom t happen … our leaders, the elite…
Now Warren B. is buying private owned companies, the real backbone of our industry, with his Paperdollars,… you know what the Euro did recently – its cheap … so you get hard assets, for paper yet again …
paper always debases.
Are you all a little not understanding this nonsense? We have been hearing the same story for such a long time plus it was only a few weeks ago when we were being told that this is it blah blah blah watch gold as the usual suspects maipulate the price and yet here we are Gold is on its way down… come on please get real everybody and wake up to the fact thst its in this companys interest to sell us gold!!
no Paul, I assure you it is more in YOUR best interest to buy it than ours to broker it to you!
Bill, bet some are under 40yo, and have no recollection of hard money in circulation, and dont get it at all. I recall, in 63, a gas war, flying A v Phillips, 1 dime got you a gallon. The same is true today. Preserve your wealth, buy gold/silver and Miles Franklyn has a good reputation is as good any other bullion sellers. STACK IT UP!!
about .14 cents worth of junk silver today.
ah, the impatience of youth. They look at gold/silver as trading opportunities for profits, short-sighted, naive, the wall street bankster influence, no doubt, and the 100 year political con job, as surely, the relative price will go up and down, and after a remarkable 12 year bull run from 250 to 1910$/oz, a correct is just fine, and desirable, but the printing presses of fiat run 24/7 and the relative trend is higher, as night follows day. If you are a trader in bullion, well aint that just special, and good luck to you, but if you want to preserve your hard earned wealth over the long term, and particularly in uncertain times as these, gold/silver IS the only sure bet.
This ponzi is still going, but it WILL end.
History always repeats and the good old USA will be just like 1923 Weimar, Germany.
Our USA currency is not superior to the previous 599 before it. Why would it be when we are the largest debtor nation in the history of the world?
Can any one give me an example of the largest bankrupt company in the world that continued on forever? It must end.
If you think it won’t, then get all the credit cards you can and keep maxing them out, and then get more credit cards and do the same, and let’s see how long you last at it !!!
90% or more of Americans are betting on it lasting forever and they will be on the wrong side when SHTF.
More older and mature countries and their citizens are betting on gold and silver. I bet the younger and dumber country (can you say USA) will lose the bet !!!
mentioned this for my Q+A for tomorrow.
mentioned this in my Q+A for tomorrow.
Bill, good piece. Possible solutions to solve the countries ills, would include a return to the gold standard, and if the US revalues gold, to 1B$/oz, just flip China 1000 oz, and call it even. They accepted fiat in trade, and are stuck with it. So be it.
Thanks Derrick, would be nice but doesn’t work this way.
Let me dare shut down my brain with numbers:
(1.5x10E15 + 100x10E12) / 1200 = $917,000,000,000 per oz
Do I get a Nobel prize for math?
now I’m even more confundido!
Nobelprizes are invalid for economics. Mr. Nobel never allowed Nobelprizes for a Cargo-cukt science. Nobelprizes for economics have been invented and paid for by bankers.
Derivatives are not equivalent to money. They merely represent bets between two individuals: one loses what the partner is gaining. It is a zero-zero play. If a partner goes bankrupt both have lost their money.
In fact fractional banking is another form of derivatives. It is a zero-zero play. Only the silver and gold coins represent money. The rest is junk.
You may give my Nobeprize for economics to the poor victims of this gambling game.
and they don’t even know they are victims.
Thank goodness for fire proof safes and Mother Nature re-set proof currency.
“fire proof” safes are not fire proof, only fire retardant. I know this from personal experience.
I should have divided by 262 million ounces to arrive at $6,106,870 per ounce. Any way we look at it, it’s a lot of fiat stash.
if they exist.
You and Andy H. are writing animals. Both of you have so much information in each article. Each one should be required reading of all college economics students. Call it Common Sense 101 compulsory reading. Each time I read your articles I think of the Far side cartoon where the student is raising his hand and asks the teacher “My brain is full can I go home now” Ron L calculated an oz could be 917 billion. That might be so although I would not give a Zimbabwe Trillion for an oz and the dollar may end up in the condition. Maybe we should consider simple commodity and tangibles buying power as good measure such as how many acres or how many tons of wheat. Maybe we will have a calorie based economy that could be traded in PMs. One oz of silver for 100000 calories? Thanks to both of you for the hard work and trying to help those that will listen.
you’re very welcome Andrew.
Thanks Bill for your writings. They are always a pleasure to read. I’m glad your area is returning to its natural state. I live in Houston and remember that dreadful year.
it was really cool to see!
Great piece Bill. Unfortunately my country Canada ditched all its gold (unless it has some hidden stores), so it isn’t looking good up here.
thanks Richard, you Canadians have what is called “deep storage gold” …gold in the ground.