Precious Metals and Financial Blasphemy, Part 2

Fiat money does not have any intrinsic value. What value it has depends on public confidence in the currency's issuer. Legal tender is any currency declared legal by a government. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for repaying debt. – “Investopedia”

Hedging against a currency collapse is one of the primary reasons to hold precious metals is physical form. 

In part 2 of our “religious financialization’ series continues with the objections that emerge out of the real blasphemy – that fiat is the ultimate ruler of value. 

“There is no meaningful correlation between Asian demand for precious metals and the current price of gold / its short term trajectory: in 2013 the price tanked and the Chinese loaded up on the stuff, during 2014 the price has risen and Chinese demand has slackened slightly…” 

I would tend to agree, but only because price discovery is still centered on U.S. futures markets. 

The Chinese are plausibly, and probably involved too. 

Besides, Asian demand has shifted within Asia itself – from Hong Kong to Shanghai. 

Also, the BRICS have been accumulating (net buyers of) gold for going on a decade. Central banks are still net buyers despite the allure of printing press. 

“The same is true of geopolitical drivers: since 2014 we have seen Ebola, ISIS, Ukraine, Gaza, the collapse of Bulgarian and Portuguese banks and the worst US GDP print in living memory, domestic social unrest, and yet the gold price is still $100 below where it was at the recent peak…” 

Yes. And the stock markets are at all time highs. 

How did they ever accomplish this? 

From the manipulation of interest rates, enabling precious metals price suppression and/or the direct buying of equities. 

This spawns and perpetuates the ‘religion of financialization’ as the fiduciary clergyman of others people’s money (by technically oriented trading mantra) are continually sacrificed at the altar by the central banking priests. 

All the while pillaging the socio-cultural landscape in the aftermath. 

“From a chart perspective gold – and particularly silver – is range bound and currently going nowhere, with a bias towards the downside. There may indeed be consequences from massive expansion of the Money Supply, there may be economic hardship and unemployment, and there may ultimately be a collapse of confidence in the USD. But there is no indication of any of these things occurring any time soon, and even less of them having a benign influence on the price of gold”. 

This is the same old boring rationalization disguised as an indiscriminate attack against anyone who advocates allocating some amount of wealth toward a hard money asset. 

From a tea leave perspective where the leaves are placed before you ahead of time. 

Anyone who dares to suggest that prices are managed immediately falls into a category of price prediction fringe conspiracy commentary.   

The old adage that when you point one finger at someone else, you are in essence pointing four more back at yourself works here. 

Isn’t it ironic? 

A trader who specializes in reading charts, and at the same time backs presumptions tethered to ’fundamentals’.

Professionals who have figured out a way to make fiat by gaming the broken system walk around feeling threatened by any and all. 

And once again, ‘there is no sign of imminent threat of a dollar crisis’. 

That’s the best one can muster for a takedown of a worn out meme. 

The state of all monetary systems has never before existed in a moment such as this. 

Money velocity is the last variable in the currency equation. Deficits like a cancer, incomprehensible toxic debt loads, and an ever-diminishing ability to stoke new economic under those conditions are the landscape.  

Velocity can only be measured in retrospect, and therefore it doesn’t exist, until it does, and by then it’s too late. The best proxy for it’s potential is the mountain of financial derivatives. 

This time around is different because media consolidation and information technology make it much easier to herd sheep and confine perception. 

The methods of propaganda have grown in lock step with the methods that create the illusions these guide read in the tape. 

When the black swan arrives, and the system buckles, you get a different type of collapse. 

The ensuing financial panic will lead to currency non reflate-able currency crisis. 

And the rush to safety will ignite the long-awaited move that will have us speaking in terms ounces, rather than dollars. 

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