My name is Shawn Ozbun, and our goal is to keep you up to date with what’s going on in the world of Gold and Silver by providing you with current news and precious metals pricing.
The Silvertowne Vault Cast is brought to you by www.Silvertowne.com
Welcome back to another episode of the vault cast. Today we are going to discuss the return of the age of gold and talk a little bit about the global markets and then I’ll share some of my thoughts about the so called economic collapse that we are all anticipating.
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Gold - $1691.75 down $2.67
Silver - $32.68 down $0.14
Platinum - $1579.00 down $0.50
Palladium - $678.00 down $1.30
Financial News:
Return of the Age of Gold
In Germany, gold is now available from vending machines in airports and railway stations – Gold to Go. Shoppers can buy a 1-gram wafer of gold or a larger 10g bar. Seeking safety for their savings, individuals have purchased 150 tons of gold, mainly in the form of coins. Investors poured money into special funds (known as exchange traded funds (ETFs)) which pool investor monies to buy over 1,000 tons of gold. Having earlier sold off their holding, some central banks are now re-building their gold reserves.
Refiners are unable to keep up with demand for gold bars and coins. New gold vaults are being built to accommodate demands for secure storage.
As the Global Financial Crisis continues and the cure of easy money proves as dangerous as the disease, the gold price has increased from around $250 per troy ounce in 2001 to a peak of over $1,900 in 2011. It now trades at around $1,750 per ounce.
As poet John Milton wrote: “Time will run back and fetch the age of gold.”
Monetary Status
In the 19th and early 20th centuries gold played a key role in the international monetary system, being used to back currencies. The international value of each nation’s currency was determined by its fixed relationship to gold, with the precious metal being used to settle international accounts.
The Return of Gold
Since the replacement of the gold standard with the dollar standard, the gold price has fluctuated widely. In January 1980, the gold price reached a [then] high of $850/ounce reflecting high rates of inflation and economic uncertainty. Subsequently, the recovery of the global economy saw the gold price fall for nearly 20 years, reaching a low of $253/oz ($8,131/kg) in June, 1999.
From 2001, the gold price began to rise due to a number of factors. One was increased demand, especially from emerging nations such as India and China. In 2007/2008, gold received an additional boost from the onset of the global financial crisis. Concern about a banking system collapse drove gold prices higher with gold prices finally passing the 1980 high reaching $865/ounce in January 2008.
In late 2009, gold price renewed its rise passing $1,200 in December 2009 on its way to over $1,913/ounce in August 2011. The 500% increase in the gold price since April 2001 prompted gold bugs to speculate about a new age of gold.
In reality, the rise was driven by fear. The depth of the financial crisis, concern about the security of other assets including once risk-free governments bonds, and a fragile banking system prompted a flight to gold as a safe haven. The monetary policies of governments and central banks, emphasizing low interest rates and printing money to restart the global economy, also underpinned the gold price.
Germans wanted the return of their deutsche mark, now replaced by the euro, pining for when “Mark gelich mark – paper or gold, a mark is a mark.” The nightmare of Weimar, the erosion of the value of money, hovered in background. As governments borrowed ever larger sums, ordinary citizens feared that even gilt-edged government securities would become worthless.
A weak US dollar and the questionable prospects of other major currencies, such as the euro and yen, also drove demand for gold, as de facto currency. Read More...
The Coming Derivatives Panic That Will Destroy Global Financial Markets
When financial markets in the United States crash, so does the U.S. economy. Just remember what happened back in 2008. The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest. Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic. Sadly, most Americans don't even understand what derivatives are. Unlike stocks and bonds, a derivative is not an investment in anything real. Rather, a derivative is a legal bet on the future value or performance of something else. Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default. Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine. This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years. For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout? It was because of derivatives. Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe. But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets. The largest casino in the history of the world is going to go "bust" and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.
There is a reason why Warren Buffett once referred to derivatives as "financial weapons of mass destruction". Nobody really knows the total value of all the derivatives that are floating around out there, but estimates place the notional value of the global derivatives market anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars.
Keep in mind that global GDP is somewhere around 70 trillion dollars for an entire year. So we are talking about an amount of money that is absolutely mind blowing.
So who is buying and selling all of these derivatives?
Well, would it surprise you to learn that it is mostly the biggest banks?
According to the federal government, four very large U.S. banks "represent 93% of the total banking industry notional amounts and 81% of industry net current credit exposure."
These four banks have an overwhelming share of the derivatives market in the United States. You might not be very fond of "the too big to fail banks", but keep in mind that if a derivatives crisis were to cause them to crash and burn it would almost certainly cause the entire U.S. economy to crash and burn. Just remember what we saw back in 2008. What is coming is going to be even worse.
It would have been really nice if we had not allowed these banks to get so large and if we had not allowed them to make trillions of dollars of reckless bets. But we stood aside and let it happen. Now these banks are so important to our economic system that their destruction would also destroy the U.S. economy. It is kind of like when cancer becomes so advanced that killing the cancer would also kill the patient. That is essentially the situation that we are facing with these banks. Read More...
My thoughts on the so called Economic collapse
One mistake that I think those of us who are paying attention, including myself are making is that we are waiting and watching for an economic collapse. We see the fall out in Europe and we see the people in Greece in the streets rioting and we think to ourselves, when is this coming to the United States of America?
I think the collapse is already happening. It’s already among us. I don’t think there is a day that we will be able to point at on the calendar sometime in the future and say “that’s the day the economic collapse happened”.
If we look around we can see that it’s already coming down all around us. We have cities all over the country that are bankrupt. Detroit has signs and the police are saying enter at your own risk. The crime has just exploded in Detroit and the city can not afford enough law enforcement to contain it. They have had to lay off a large percent of their force do to simply not having enough money.
We have a similar issue in Chicago. Many articles I’ve read are saying that Chicago now has the highest crime rate of any city in the world. Murders, home invasions and theft are at an all time high. People are with out work, with out food and are getting desperate. There is not enough money to pay for law enforcement so those who mean to harm and steel from others have free reign. Chicago is reported to only have 200 officers tasked to deal with the gangs who number around 100,000 members.
Food prices, energy prices, taxes are all way up do to inflation and the reasonable paying jobs are no where to be found. We are already collapsing.
I say this often. Now is the time to own something of real value. Right now silver is still in the low thirty’s. It’s still possible to get your hands on some. I also want to be clear that owning silver or gold may save you from hard times but like I’ve also said, history has shown us that precious metals have always held value. History has also shown that fiat currency or fake money has always failed. Every single time.
Thanks for listening to the Silvertowne vault cast. You can find our show on YouTube and I would love it if you would subscribe and as always our show can also be found in the iTunes store.
For the best source for acquiring gold and silver please contact Silvertowne at 1-877-477- coin, that’s 1-877-477-2646 or you can visit us at www.silvertowne.com. Silvertowne has been a trusted precious metals and numismatics dealer since 1949.
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[Disclaimer] Shawn Ozbun is not a licensed financial adviser, there is risk associated with all investment including gold and silver. You should seek advise from a licensed financial expert before making a purchase.
