US stocks are still going up. Gold is still dillydallying…
Guest post by Bill Bonner / Rogue Economist
Gold is waiting to see what happens. Japan and the US are pumping up the monetary base – fast. But collectively, their balance sheets actually contracted by $415 billion in the first quarter – led by a $370 billion decline in the ECB’s balance sheet.
Result: slightly less paper money in the developed economies… and a slightly lower gold price. Seems logical. Seems sensible.
You see, since the start of the secular bull market in gold, there has been a nearly perfect correlation between the gold price and the rate of balance sheet expansion (aka money printing) at the Fed, the ECB, the Bank of England and the Bank of Japan.
You can see clearly it in this chart courtesy of our friends at the Sprott Group.
According to Sprott, for every extra $1 trillion in collective balance sheet expansion by these central banks, gold has risen $210 per ounce.
But many mainstream pundits are sure the end of the secular bull market in gold is at hand.
Who knows? Maybe they’re right.
But it seems more likely that when the Japanese get their presses running hot, the price of gold will resume its upward climb.
Based partly on the work of Thomas Szasz (The Manufacture of Madness*) and produced by the Citizens Commission on Human Rights, an anti-psychiatry group - The Marketing of Madness is the definitive documentary on the psychiatric drugging industry. Here is the real story of the high income partnership between psychiatry and drug companies that has created an $80 billion psychotropic drug profit center. (source: TopDocumentaryFilms.com)
But appearances are deceiving. How valid are psychiatrists’ diagnoses – and how safe are their drugs? Digging deep beneath the corporate veneer, this three-part documentary exposes the truth behind the slick marketing schemes and scientific deceit that conceal dangerous and often deadly sales campaigns.
*In his seminal work, The Manufacture of Madness, Dr. Szasz examines the similarities between the Inquisition and institutional psychiatry. His purpose is to show “that the belief in mental illness and the social actions to which it leads have the same moral implications and political consequences as had the belief in witchcraft and the social actions to which it led.”
In this film you’ll discover that… Many of the drugs side effects may actually make your ‘mental illness’ worse. Psychiatric drugs can induce aggression or depression. Some psychotropic drugs prescribed to children are more addictive than cocaine.
Increasingly citizens and their representatives are becoming suspicious of where their gold reserves are being kept.
First Venezuela, then Germany, and now the Netherlands want their gold back. In the wake of this week’s ruling by the German Federal Accountability Office that Germany must repatriate and audit 150 tons of its gold reserves from the NY Fed over the next 3 years, a Netherlands citizens committee has filed a petition demanding that the Dutch Central Bank (DNB) release information ”on the quantity and storage location of the Netherlands’ physical gold, and on the extent and nature of the gold claims.”
In the words of one of the petitioners Tom Lassing: “The last years have seen a loss of trust in the financial system and we have been fooled a lot. So I say: Just let the central banks like DNB show the gold is really there.
Should the citizens committee be successful, we are confident they will discover the vast majority of the country’s gold reserves- 10th largest in the world at 612,000 kilograms, are held in the basement of the NY Fed.
As we have been saying for years ago, the rig up: Central banks and too-big-to-fail financial institutions will not be able to hide the fact that they do not hold the gold they claim to.
See more on this unfolding massive economic scandal-
The “Ron Paul” debate around a return to a gold standard is being revisited after the US Republican Party called for a commission to look at such a system. But there may be too little gold to restore the gold standard, says UBS economist Paul Donovan.
With a gold standard, the regulatory scheme exchanges paper currency for gold at a fixed conversion rate, which would effectively put a set price on the dollar tied to gold. Fans say this would increase confidence in the currency by tying it to something that is in finite supply, thus hobbling the ability of central bankers to create debt-based money at will.
Amid the chorus of opposition to the gold standard, the argument that there is simply not enough gold to do this is well-aired. But that’s not quite the full story, according to Paul Donovan, an economist at UBS.
From The Telegraph UK -
“More accurately, the supply of gold is not growing fast enough,” he says. “This is the fatal flaw.”
As of this this week we have managed to survive four decades of US fiat money, and its anyone’s guess how much longer we can continue. Recently we read that the average life expectancy of a fiat currency is 27 years. The world’s oldest fiat currency, the British Pound, has survived nearly 318 years, but during this term it lost 99.5% of its initial value.
Given the undeniable track record of currencies, it is clear that on a long enough timeline the survival rate of all fiat currencies drops to zero.
And as Jeff Clark points out: History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.
Edmund Conway at Daily Mail writes: On 15 August 1971, with the US public finances near broken by the cost of the war in Vietnam, Richard Nixon cut the final link between the US dollar and gold. Until then, the US Treasury was duty bound to exchange an ounce of gold with central banks willing to pay them $35. Suddenly, for the first time in history, the level of the world’s currencies depended not on the value of gold or some other tangible commodity but on the amount of trust investors had in that currency. Central banks were allowed to set monetary policy based on their instincts rather than on the need to keep their currency in line with gold.
It was one of those seminal moments whose significance has only gradually become apparent, obscured as it was at the time by Vietnam and then Watergate. But the more one examines economic history, the more obvious it is that this was one of the most important policy decisions in modern history.
The term fiat money has been defined variously as:
A- Any money declared by a government to be legal tender.
B- State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
C- Money without intrinsic value.
D- All of the above.
… and stick it to Wall Street at the same time! Sounds like the best of both worlds to us!
In November 2009 Ellen Brown wrote at AlterNet that bailing out the banking system “…has only fixed the economy for bankers and the wealthy; it has not done much to address either the fundamental problem of unemployment or the debt trap so many Americans find themselves in.”
The Bank of North Dakota may seem like a sole-surviving relic of a bygone era. As a “state-owned” bank, it offers discounted loans to farms and agriculture, students and education, andsmall companies. It serves as an important economic development agency and a “banker’s bank” that reduces the loan risks of private banks and assists the private banks to finance bigger business projects.
The Bank of North Dakota had over $5 billion in assets and a $4 billion loan portfolio at the end of 2009, and it made nearly $60 million in profits in that year, setting a record for the seventh straight year. This was at a time when the entire banking and financial sectors were reeling from the collapse. Over the past 10 years, the bank channeled over $300 million in profits to North Dakota’s state treasury.
Our latest findings are in, and while not earth shattering, that many small business owners have learned to work smarter and do more with less.
Latest polls show -
- Nearly seven out of ten (68%) disagreed that healthcare reform efforts would benefit their businesses
- Nine out of ten small business owners agreed that current stimuli do not benefit small businesses
- 62% will invest more in marketing; specifically, lead generation
- More than 60% said they will run their business more aggressively in 2010
Pollsters for the above data included Forbes, Businessweek, and MerchantCircle.