No Way Back
Gold and silver will both rise far above their current levels. “When” is unknowable. “Why” is due to the unremitting and insolent amorality of central bankers and their practices. If not Simple Ben at the Fed, his compatriots across the globe are a daily source of confusion, contradiction, and stupidity.
The stupidity may be real or it may have evolved from an unwillingness to think, as George Orwell wrote of Stanley Baldwin’s and Neville Chamberlain’s abdication of responsibility in the 1930s: “What is to be expected of them is not treachery or physical cowardice, but stupidity, unconscious sabotage, an infallible instinct for doing the wrong thing… Only when their money and power are gone will the younger among them begin to grasp what century they are living in.”
It is important — for those who care about the ascent of gold — to understand it does not matter why they are stupid. It matters that their stupor will continue until the current monetary and credit system is paralyzed. We can be sure of that. Orwell explained: “Clearly there was only one escape for them — into stupidity. They could keep society in its existing shape only by being unable to grasp that any improvement was necessary.”
The central bankers have no other policy than to support asset prices. They have elevated and taken control of markets beyond the point of withdrawal. There is no way back.
As discussed in “Peak Imbalances are Falling,” foreign central banks have bought over $5.5 trillion of US Treasury securities: the reason 10-year US Treasury bonds yield 2.0%. Interest rate suppression is also fundamental to Eurocrat domination. The two attempts at salvaging the European banking system (over one trillion euros lent by the ECB to European banks in December 2011 and February 2012) have failed. The stock price of Banco Santander, the Spanish bank advertised as not exposed to Spanish real estate, has fallen back to the level of mid-December 2011. The country’s banking system is kaput. Again, there is no way back.
Bianco Research in Chicago calculates the balance sheets of the world’s six largest central banks are now twice the size of 2006. With $13.2 trillion of assets, they will double their size again, if they can. For as long as they can, there will be times when confidence in Bernanke and Draghi knock gold and silver for a loop. At some point (“When”), the emperor will wear no clothes. Central banking currencies will be rejected. Gold and gold stocks (hang in there, any day now), will be the currency of choice.
In Frozen Desire (1997), James Buchan wrote: “I have watched the most able men and women in my generation, who might have created unexampled monuments in moral philosophy, mathematics, or engineering, waste their time in a prattle of non-accelerating inflation rates of unemployment… [E]conomics…has retreated into algebra. A profession that begins with priests [alchemists]…ends with hermits. Political economy is now, I suspect, in the same condition in which Scholastic learning found itself on the eve of the Discoveries. It is about to explode.”