Monday, July 18, 2011

Central Banks Choose Gold Over Paper

The Street
Jeff Nielson

NEW YORK (Bullion Bulls Canada) -- After the Western banking cabal engineered the "crash" of the global gold market in 1980, Western central banks spent more than a quarter-century perpetrating the lie that gold was a "barbarous relic" -- which was supposedly "inferior" to the worthless, un-backed paper they were cranking out (in record amounts) on their privately-owned printing presses.

Their incentive was obvious. In getting the entire world to believe that lie, they were able to enrich themselves by tens of trillions of dollars. This was done by creating those tens of trillions ("out of thin air"), pretending that this paper actually represented real wealth -- and then getting people all over the world to give them trillions more paying interest on worthless paper which never represented any real wealth in the first place.

While it was the largest fraud (and theft) in the history of the world (by a factor of more than 1,000), it was by no means an original act of fraud -- being nothing more than the same scam which all bankers always perpetrate, whenever they are (foolishly) granted the privilege of inventing "money" out of thin air, going back a thousand years.

During the first 25 years of this institutionalized fraud/theft, the bankers supported their fraud by dumping their vast hoards of gold onto the market (in the largest quantities in history). "Look," they would say, pointing with their evil talons, "Even we bankers, the greediest creatures ever hatched on this planet, have no use for this archaic, yellow metal -- so why would any of you want to own it?"

It was a very successful strategy. The price of gold was pushed to an all-time low (in real dollars), so low that more than 90% of the world's gold mines were forced to close since they couldn't manage to break even at those fraud-induced prices. And individual holdings of gold (especially in the West) fell to their lowest level in history.

Obviously, with that privilege to print money not having been revoked yet (a literal "license to steal"), their incentive to continue this fraud/theft is as strong as ever. However, over the past five years a funny thing has occurred. First these central banks rapidly slowed their dumping of gold, then they stopped it altogether, and now they are the single largest bloc of gold-buyers on the planet.

Recent statistics released by the World Gold Council allow us to go even further. Over the past two years, the world's central banks have demonstrated a 100% unanimous preference for gold over their own banker-paper (i.e., all those un-backed "fiat currencies"). During that span of time, only three nations have been modest "net sellers" of gold -- and all three instances were related to "long term sales agreements" (i.e. old obligations). During the past two years, not one single central bank on the face of the Earth has chosen to be a net seller of gold over that time.

Let me construct an analogy here. A person goes shopping for a car. He goes to a Ford dealership, and after getting the full "sales pitch" on what wonderful vehicles all Ford products are, the shopper asks the salesman "what kind of car do you drive?" And the salesman answers "I drive a Toyota."

The car-shopper then goes to a GM dealership, a Chrysler dealership, a Volkswagen dealership, and every other auto dealership he can find. At each dealership, the salesman tells the shopper what "wonderful vehicles" they make, but when the shopper asks each one what car they drive themselves, every one replies "Toyota." The obvious question to ask is that, armed with such data, is there a single (rational) auto-buyer who would buy anything other than a Toyota?

The equally obvious answer is that "no," no rational buyer would ever choose any vehicle other than a Toyota -- unless he/she simply couldn't afford the purchase price.

The most charitable statement we can make about the world's central bankers is that they are the world's "sellers of money." Indeed, since I have already pointed out that what they are selling is worthless, we could obviously come up with a long list of terms less-neutral than "sellers."

Unquestionably, with armies of statisticians and data-gatherers at their disposal, they are the world's foremost experts on "money" (assuming we generously include their fiat currencies with that label).

Much like a hypothetical world where all the sellers of automobiles (who know these cars the best) all buy a single brand of automobile themselves, all of the world's foremost experts on "money" are showing a 100% preference for one kind of money: gold. The message from the world's central bankers is absolutely unequivocal: only chumps would choose to hold paper over gold.

Clearly, the massive paper-fraud of these banksters is in its final stages of decay: a Ponzi-scheme of unimaginable proportions, where people willingly funneled trillions of their own wealth into the clutches of Western bankers -- only to ultimately end up with zero (or near-zero, or less-than-zero). We know this, because the scammers themselves are now publicly fleeing from their own scam.

Ironically, the same, semi-comatose mainstream media which still alerts us when "insiders" in our equity markets are "dumping" their shares, has been 100% oblivious to the insiders in our monetary markets dumping their banker-paper (in favor of gold). The parallel cannot be missed: when corporate insiders are unanimously dumping their shares, only the "mother of all fools" would be a buyer in equity markets. When all of the world's monetary insiders are dumping their banker-paper in favor of gold, only an equivalent "fool" would attempt to swim against that tide.

To avoid getting "lynched" by all of the silver bulls who follow my work, let me take a moment to include silver in this analysis. To begin with, if anything the bankers have even more fear/hatred of silver than gold. However, their hatred/aversion to silver is so extreme that rather than merely lie about silver (so people would not want to hold it), and then hoarding as much as possible themselves, they decided on the "nuclear option": destroying the world's stockpiles of silver.

The only reason why the world's central banks have shown no interest in silver is because inventories have been decimated to such an extreme (more than 90% lower than 15 years ago) that (relative to gold) there is no silver for the central banks to start hoarding.

At the household level, the world's silver shortage is not yet that extreme. We can still buy what we want/need as individuals -- and at "sale" prices, thanks to the recent ambush of the silver market by the CME Group. Of particular relevance, for those small investors who are finding the price of gold moving out of their reach, silver remains accessible -- and a fantastic bargain.

Short of B.S. Bernanke starting to walk around with a neon sign hanging around his neck saying "Buy Gold," it is impossible for ordinary investors to get any clearer warning that "cash is trash" and bullion is "golden." Ignore such a warning at your own peril.

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