Here comes Hugo Chavez demanding the return of 211 tons of Venezuelan gold from the criminal bankers of London and New York. Max Keiser said today that the Bank of England does not have the Venezuelan gold and will be forced to go into the markets and buy it at increasingly higher prices.
Hugo Chavez has sent the gold market into backwardation. That means that the price of physical bullion delivered today is worth more than a paper promise of a delivery at some future date. That has driven the gold market higher since yesterday. $1,900 and $2,000 gold are in sight.
There is a difference between paper and physical gold. The US and UK governments lease their gold out to banks. They are not supposed to deliver the bullion. For example, they deliver a piece of paper saying you owe the government one million ounces of gold. This is mistakenly treated as an asset. Stock analysts report a bank in New York just bought a million ounces of gold. Then that bank sells that same paper gold five times. The proceeds of those five sales generate cash from the sales which also adds to revenues. But the original bank still shows the paper gold as an asset on its books. Then banks like HSBC and JP Morgan open ETFs (Exchange Traded Funds) GLD and SLV. People deposit real money into these ETFs thinking they own gold and silver. These funds have a mixture of bullion and lots of paper derivatives. (A derivative is a bet on the future value of a bond or a commodity like gold or oil.)
To make the dollar look good the Federal Reserve creates hundreds of billions of dollars which it gives to the banks to sell short the paper price of gold and silver. Note the US Plunge Protection team through the Treasury has a conference call every morning to 27 brokers and banks. The The Treasury and the FED ask these groups to manipulate all the markets with all losses to be picked up by the Federal Reserve printing more money. That is why I do tell the average investor to stay out of the futures markets.
A few weeks ago the run up in silver was stopped temporarily by 5 raises in margin requirements and by a bank selling short one third of the world’s entire silver production for the whole year in just one minute in the futures market with a potential loss of ten billion dollars. The banks do not care if they lose ten billion dollars a minute because it is your money and not theirs they are playing with.
Enter Jeff Christian and Alan Greenspan. Jeff Christian is infamous for saying there is and should be 50 to a 100 dollars of paper gold and silver for every dollar of bullion. Alan Greenspan’s is now most famous for saying that the US will never default on its debt because we can print lots and lots of money.
Investors all over the world now clearly understand the banks are playing musical chairs with tens of trillions of dollars in currencies and bonds and more than a quadrillion dollars in derivatives and Credit Default Swaps. A CDS is a hybrid between a derivative and insurance. It insures the values of your financial bets. A few US banks have insured the world for 6oo trillion dollars in potential losses. In theory you are supposed to pay of a few hundred trillion dollars in banker gambling losses by being willing to accept a 100% tax rate for a century or two.
This game of musical chairs will end very badly and very soon with 90% of all savings and 99% of all paper gold and silver and 100% of all CDS going to zero value.
We are in gold backwardation. There are gold runs, bank runs and multiple currency runs. This will take down the banks and the dollar. Bernanke will print even more money and we will soon have a 25% American inflation rate which will go from there to 50%.
Compare this to the September 21, 1931 English default. A deflation of this magnitude is a default of a reserve currency and will grind the world economy to a halt as it did in the last Great Depression. Please note that the Last Great Depression was only solved by World War II. Also please note that we are already over loaded with both public and private debt so a war or any massive increase in debts will mean hyperinflation.
Let us put the last Great Depression in a time frame. The American stock market crashed on October 24, 1929. There were indications of a recovery until the Rothschild owned Credit-Anstalt bank of Austria went bankrupt on May 11, 1931 and England effectively defaulted on its debts by going off the gold standard on September 21, 1931. Then markets froze, international trade plummeted, unemployment soared to new highs and hundreds of millions of people were thrown out of their previously good lives into abject poverty and war.
Zero Hedge told us that there are rumors of a bank holiday in Europe. This has sent stock markets all over the world into a slide. There have been bank runs in Italy. Max Keiser said one of France’s largest banks Societe General is insolvent due to hundreds of trillions of dollars in derivatives. That is hundreds of trillions and not hundreds of billions. JP Morgan has 90 trillion dollars (not 90 billion dollars) in derivatives. JP Morgan sells all of its bad paper to the Federal Reserve. The FED finance this by printing money which allows you to subsidize Morgan and Goldman Sachs every time the price of food goes up at the store where you shop.
As I said previously, the euro is printed with markers clearly indicating which country printed it. That means when Italy, Greece, Spain, Portugal and Belgium pull out of the euro, the people will be given lira, drachma, escudos and francs. That means a 30% cut in the value of a European’s savings and pensions could happen as soon as September. That is why so many Europeans are bailing out of euros into Swiss francs and gold bullion. This will accelerate after the Europeans return from their August vacations.
Hugo Chavez and Fidel Castro subscribe to Bob Chapman’s newsletter as do a lot of US military and the organizers of the Greek riots. Bob Chapman, Max Keiser, Michael Hudson, Alex Jones and Birgitta Jonsdottir are well known on European radio and TV. They have been telling the Europeans from Latvia to Ireland to England to France to Italy to Spain and to Greece to default on your debts and to pull out of the euro. You owe the banks nothing.
The above is a short explanation why there are runs on bullion, on banks and on currencies.
Many of us no longer believe in the fallacy of the Left Right paradigm. Others are beginning to see the world as being split into two political parties. There are the bankers and there is everyone else.
Go beyond who is Right and who is Wrong. Get to What is Right and What is Wrong.
Until further notice the bankers are always wrong.
Update: No gold deliveries as yet to Venezuela. But JP Morgan has just received some gold from HSBC as per this Headline from Zero Hedge:
9,173 Ounces Of Gold Transferred From HSBC To JP Morgan Gold Vaults Overnight
There are 32,000 ounces in one ton so clearly this is not enough to pay Mr Chavez but it does indicate a gold squeeze. Gold is currently trading at $1,826.80. If anyone wants to buy ten tons or more, he will be paying a lot more than that.