The Gold Standard Can Solve The Current Economic Mess: Keith Weiner (exclusive interview!)

The Global Financial Intelligence blog is pleased to present the next interview with Keith Weiner.

Weiner is president of the Gold Standard Institute USA in Phoenix, AZ, and CEO of precious metals fund manager Monetary Metals. He created DiamondWare, a technology company that he sold to Nortel Networks in 2008. He writes about money, credit, and gold.

Visit his links.

The Gold Standard Institute www.goldstandardinstitute.org

Monetary Metals www.monetary-metals.com

Keith's personal blog www.keithweinereconomics.com

(Guillermo Barba, GB) Keith, thanks for accepting this interview.

(Keith Weiner, KW) Thanks for the opportunity! I am glad to do it.

-          (GB) In your opinion, what’s the root of the current financial and economic mess in the world?

(KW) The short answer is: rising debt. It’s not only rising, but rising exponentially—the debt doubles about every 8 years.

The medium answer is: In 1971, President Nixon defaulted on the US government’s gold obligations. This plunged us into a worldwide regime of irredeemable paper currency. Gold was banished from the monetary system, no longer allowed to fulfill its function as extinguisher of debt. The dollar was turned into a mere IOU. You cannot pay off your debt by issuing IOUs, as you cannot get out of a hole by digging deeper. You can only service the debt. This is why the debt must grow faster and faster.

At the same time, the interest rate was unhinged. It was free to shoot the moon, as it did until 1981. It was equally free to fall into the black hole of zero, which it has been doing since 1981. Falling interest causes massive, but mostly hidden, capital destruction.

The longer answer is: we have central planning. Before I address the economic failings of it, I need to make a moral point. Central planning means: commanding people’s lives, forcing them to do what you want. It is a prominent feature of every kind of totalitarianism, from communism to fascism. Karl Marx included a central bank as one of his 10 planks, it was that important. None other than Benito Mussolini (fascist dictator of Italy during WWII) praised one of Keynes’ books as a good introduction to the economics of fascism.

And the historical record of central planning is always and everywhere, abysmal failure. Why? Mises wrote about this. Ayn Rand wrote about this. Hayek wrote about this. And many others. Even if you concede that the central planners are really smart, wise, and incorruptibly honest, they have no idea what they are doing!

Without people buying apples, and not buying pears, without a market bidding up the price of credit and selling off the price of houses, how is the central planner to know what we need more of, and what is already in a glut? He cannot. Based on this principle, Mises was able to predict the collapse of the Soviet Union, which he did in 1922 in his book Socialism: An Economic and Sociological Analysis.

Most people realize, at least after the USSR collapses, that central planning of corn does not work. Corn is simple, with an annual cycle. It amazes me that they still have faith in central planning of the most complex thing of all: credit. It has cycles of years or decades.

-          (GB) Could the gold standard help us to solve these problems? How could we have a 21st-century gold standard?

(KW) Yes. :)

OK, on a more serious note, gold solves both of the problems I described above. Debts can be paid off, which is important. Otherwise they accumulate until they bury us alive. Also, under gold, the interest rate is set in the free market, and it’s a simple process. If savers feel the rate is too low, they withdraw their gold coin and take it home. Or if entrepreneurs find the rate too high, they stop borrowing. The rate of interest is stable, within these lower and upper bounds, respectively. You cannot have zero interest (much less negative, as in Switzerland) or 15.7% on the 10-year Treasury as occurred in 1981. In fact, if you look at the historical interest rate data it was extraordinarily stable by our modern standards. All this without central planning!

I am for a free market in money and credit. You never had to force people to accept gold or silver in payment. Quite the opposite. Let people be free to choose what to use and accept for payment, and more importantly what to lend and borrow. They will choose gold. They always have, for thousands of years.

In the 21^st century, people will not wear sackcloth robes. They will not cinch their waists with rope belts. They will not have leather purses, jingling with gold and silver coins. The gold standard does not mean going back to the 17^th century.

In day to day practice, I don’t think it would look much different to the average person. Already, the trend is away from carrying any coins or even paper bills, towards using plastic. It certainly lets you have a slim and light wallet. People will spend and earn, mostly not having to touch actual gold metal.

The key is that they have this right. I think most people would have a little gold, and some silver, at home. Gold is the truly risk-free asset (the government bond is not risk-free, just ask citizens of Cyprus, Greece, or Iceland). Having the right to redeem credit in gold keeps the debtors honest (and also provides a mechanism for retiring debt at the end of its useful life). Few will redeem, unless a debtor is getting into trouble. Then the redemptions will occur in rising amounts. Just knowing that it can happen will provide important incentives to banks and other financial intermediaries.

And of course long-term planning becomes possible again. With a stable currency and interest rate, long-term contracts are feasible. Think of leases and insurance. Think of pension funds.

Finally, we would get back to real economic growth and rising prosperity for all, including the unskilled and low-skilled workers.

-          (GB) Let’s talk about the precious metals markets. Why do gold and silver prices keep falling in a context of world-wide money printing? Supply and demand issues or market manipulation?

(KW) First, let me address manipulation. It is natural to develop a theory to explain what one observes. We do observe both financial distress (to put it mildly) and enormous increases in the quantity of dollars, euros, etc. At first glance, it is reasonable to expect the price of gold to go up. But it is not going up, and indeed it’s falling for a few years.

One popular explanation is that the price is manipulated. However, when you try to study the mechanics of how this manipulation is supposed to work, it falls apart. The manipulators are supposed to sell paper gold—i.e. futures contracts. They can’t be selling metal, at least not in silver. And the silver price has dropped far more as a percentage. So it must be futures.

OK, well, if this is so, how would it work? It would drive the price of a futures contract way below the price of real metal. There would be a total divorce of these two prices. I study the spread between spot and futures gold, and I can tell you that it just isn’t so.

The data we see in the market does not fit the theory. I have written many articles about this, and showed my data.

So we need a new theory.

I propose that, to start, one should look at gold as money and the dollar as failing credit. You cannot measure money in terms of the dollar. This would be like measuring a steel meter stick using rubber bands. How long is the meter stick today? 3.8 bands long. And tomorrow it is 3.9 bands long. Why did it get longer? :)

You have to measure the dollar in gold. Very few people do this. When I give a talk, usually the audience is very interested in gold. I ask them to raise their hands if they know the current gold price. Every hand goes up. I say OK, gold is money right? Yes. Raise your hand if you know the price of the dollar, measured in gold. This time, no hands go up (it’s currently 28.6mg gold).

When the Federal Reserve was created, the dollar was over 1500mg. In 2011, it made a low for the move of around 16mg. Its long-term price target is 0mg.

This is a paradigm shift, to stop thinking of gold in dollar terms and start thinking of the dollar in gold terms. As with all good paradigm shifts, things get sharper and clearer.

Now we can ask, why is the dollar going up? Isn’t that an easier question? I think the answer is that debtors are squeezed by the weight of their debts. And of course, speculators are wildly bullish on the dollar. I have to emphasize here that I do not refer to the price of the dollar as measured in euros or pounds. I mean in terms of gold. This is simply the same phenomenon of the mainstream dismissing gold as a “pet rock” (as one Wall Street Journal reporter did recently). These folks are telling you to go all-in on the dollar.

That’s self-serving advice, at best. However, while it holds sway, people buy the dollar (i.e. sell gold) who would not otherwise.

I have developed a model to calculate the fundamental price of gold. This model shows this sentiment, and it is saying that the gold price should be around $1,200.

I think something is going to change, something in the world of credit. A major default could occur almost anywhere, from shale oil junk bonds to a larger sovereign debtor, to a major bank. If governments cannot or will not bail out depositors, and they take real losses, sentiment will turn. People could begin to realize that, unlike a dollar or euro or yuan, gold has no counterparty. It’s a lump of metal, and it cannot default.

When that happens, I suspect the price of the dollar will rapidly move towards its former low of 16mg and there’s no reason why it couldn’t plunge right through and make new lows.

There is one other benefit to seeing gold as money, and the dollar as credit priced in gold. You don’t cheer a falling dollar. You realize that it is a horrible and destructive process that will hurt (and eventually kill) people. This is nothing to cheer. And you also realize that there is no profit to be had in owning gold. You simply avoid the losses of holding dollars. One can make capital gains by holding silver at the right times (this is the basis of the fund I manage), when silver is rising in gold terms. But gold itself is unmoving.

-          (GB) Could you please explain why gold and silver are in backwardation and what it means?

(KW) I hinted at backwardation earlier, without defining it. It is when the price of the metal in the futures market is below the price in the spot market. In an ordinary commodity, like wheat, it means scarcity. However, it should never occur in gold or silver (I discuss this often on my company’s blog at http://monetary-metals.com). It is a sign that the monetary system is in decay, failing.

Another benefit to thinking of gold as money comes up here. Whenever there is stress or crisis, it always the bid that is withdrawn. There is no lack of offers to sell, but suddenly no bid.

Since 2008, we have had intermittent temporary backwardations. This is my term for the small backwardations that occur as each contract approaches expiration. By small, I mean around a dollar an ounce in gold, or a few pennies in silver.

We are witnessing the process of the withdrawal of the gold bid on the dollar. Here is a link to one of the most important papers I have written, discussing the consequences when backwardation becomes permanent.

As I write this, there is backwardation in the October and December gold contracts, about 0.45% and 0.2% annualized. The February 2016 contract is close, but not in backwardation.

While this is not (yet) alarming in our post-2008 new normal, it is a sign of a growing shortage of gold metal. I believe the shortage will dissipate when the price rises, and that has been the pattern every time so far.

In silver, there is backwardation in the September contract. But December is not even close. The silver market is not loose, but it’s hardly tight either.

-          (GB) Do you think that the worst is still to come in terms of financial and economic crises?

(KW) Yes.

Even if we ignore the debt, which is far, far past the point where we could ever hope to repay it, the interest rate is both signaling and causing enormous destruction. What does it mean that the interest rate in Switzerland and other countries is negative? Well the obvious meaning is that you pay the government to lend your francs or euros. But what does that mean?

There are no creditworthy borrowers willing to pay a decent rate. Why not? It’s like a failing farm, with crop yields falling every year. Except there’s nothing wrong with the soil. The failure is across the whole economy. If businesses had opportunities to grow profitably, they would be bidding up the price of credit at these absurdly low rates. Yet the fact is, they are not. With few exceptions, they borrow only for financial engineering such as share buybacks and acquisitions.

Meanwhile, wage earners cannot save for retirement. They used to depend on compounded interest. And retirees cannot live on the interest. Ultimately, interest is paid out of corporate productivity. Now, without interest, retirees are forced to consume their capital. It’s like selling off bits of the farm to buy groceries, rather than using the farm to grow food. That cannot last forever.

And what of the 1%? They think they are getting rich. If pressed, they assume the wealth comes from the poor and middle class. There’s just one flaw in this theory. The poor don’t have any wealth in the first place, so whatever it is the rich are getting it is not the poor’s wealth. It could be the middle class, except the middle class is doing the same things as the rich—borrowing to buy assets. And getting the same results.

The rich aren’t getting richer. They are getting rising asset prices, which is not the same thing. This makes them think they are richer, so they can spend more. They are consuming their capital. This is a very insidious process, of hollowing out the very capital on which our civilization depends. And as the price of capital assets keeps rising, they consume the capital via borrowing against assets.

Suppose you own a house free and clear. But you notice that the market price keeps rising, and of course all your friends are living like they are rich. So you start by borrowing $100,000 secured against your home. And you spend it. That was fun, but it’s quickly gone. So you borrow another $200,000. And so on. It lasts as long as prices keep rising.

What is borrowing? It is consuming today what you would otherwise consume tomorrow. What if you consume more than you can ever hope to repay? What if an entire society does it?

At some point, defaults begin to occur. Creditors are leveraged, so the default of a debtor can force the creditor to default. This process could keep cascading.

What most people think of as money is really credit. It is someone else’s liability. What happens to your money when that counterparty defaults? Poof!

-          (GB) What can people do to protect themselves against that coming economic collapse?

(KW) It is, of course, better to own gold than not when living through a collapse. However, that does not provide any guarantees.

I think everyone should become familiar with the collapse of Rome. We are not headed to another 1929, but more like 476AD.

If they have land, and can really be motivated to farm without diesel power, without insecticides, without fertilizers, and without purchased seeds, they can prepare to be subsistence farmers.

Personally, I would rather put my effort into working to avert this disaster, than to plan how I could eke out a substance living after it occurs.

-          (GB) What should governments and central banks do? Stimulate the economy? Do we need more, or less intervention in the markets?

(KW) First, stop taking more of the poison that has sickened us to this point! Stop borrowing to consume, borrowing to spend. Stop trying to centrally plan.

Governments should focus on three problems. One, how to repay the debts in nominal terms (repayment in real terms is hopeless). Two, ensure the solvency of the financial system. It’s not just banks, but pension funds, insurers, annuities, and employers. Three, get gold and silver to begin to circulate.

I just wrote an open letter to Greek PM Alexis Tsipras, outlining my proposal for how Greece could do this. They should begin issuing gold bonds. These are not gold collateral for a regular paper bond, but denominated in gold, paying coupons on gold, and principal in gold.

To bid on these gold bonds, the buyer does not say how many dollars he wants to pay. Nor ounces of gold. He says how much outstanding paper bonds he will redeem. Everyone assumes that governments can pay off their debts with inflation.

This is the mechanism by which debtor governments can leverage the falling value of their currencies to actually get out of debt. By remonetizing gold. Otherwise, they are simply borrowing more to make payments, but that is not the same thing at all.

-          (GB) Is the status of the dollar as the global reserve currency in danger?

(KW) There is no paper currency that can replace it. All of the paper currencies are actually dollar derivatives.

There is something that can and will replace the dollar. It’s not the IOU of Brussels, London, or Beijing.

Gold.

-          (GB) Do you think that China and the yuan will overtake the US? 

(KW) No.

Not too long ago, Mike Shedlock posted to his blog some statistics on trading volumes. The yuan was just ahead of the Mexican peso.

The yuan has capital controls. Until these are lifted, I don’t see why anyone would even discuss it.

And, as is beginning to become clear, China has committed such massive abuse of its credit that it staggers the mind. All of those empty cities, and unnecessary capacity in everything from smelting to shipping, was built on credit. These unproductive assets cannot generate the cash flow to service the debt.

I don’t know the precise timing, but I think the yuan peg to the dollar will break, perhaps snapping violently. China today (Aug 11) devalued the yuan by 1.8%. Its value could go a lot lower.

Thanks for this interview, Keith. 

More Important Than the Price of #Gold! (video blog)

Hi!

This is the latest edition of my video blog.

I hope you enjoy!

WARNING: IGNORE GOLD… AT YOUR OWN RISK

The sentiment towards gold has become so negative that it’s the right moment to call attention to it. The warning is very clear: ignore gold, at your own risk.

It could not be otherwise, because it is sending us evident signals that are hidden from the eyes of the majority, who pay attention just to the falling prices and not to something quite more important: the gold Basis and Co-basis.

They are more important than the mere prices, because they express the true value of gold, and over all, the actual weak conditions of the current global monetary system. There’s no recovery, just money printing.

The gold Basis and Co-basis are without any doubt, the best kept secret of the “king” of metals.

This important discovery was made ​​by the founder of the New Austrian School of Economics, Prof. Antal Fekete, and of course it has not yet achieved much diffusion and acceptance by the "mainstream".

They are very busy trying to “rescue” and stimulate the economy, with their failed monetarist and Keynesian theories which keep sinking the world towards the 21^st Century Great Depression.

Fekete's teachings retake the original method and philosophy of Carl Menger, the cornerstone of the old Austrian School.

Thus, it is assumed the original and indisputable role of gold as money. The reason is that this role was not given by any government or political decision, but by the free and spontaneous will of people in the market. Menger explains this in his book, “On the Origins of Money”.

This way, a demonetization of gold (and silver) by State laws is irrelevant for its monetary essence, which remains intact.

The main reason for that demonetization “by decree” was that governments and central banks wanted a kind of “money” that could be created, and of course, manipulated (debased) at will.

In spite of that, gold will always remain the commodity with the highest stock-to-flow ratio, hence its quality of money is inherent. It means too that it will not be consumed but hoarded, because of its value.

Many detractors who claim that it is “insane” to mine something “useless” as gold, “just to keep it in vaults” ignore this fact.

That’s why almost all of the gold ever mined on planet Earth (175,000 tons) is still here with us in one way or another (jewelry, bars, coins, etc.)

Menger's genius discovered, analyzed and described the process of discrimination among all commodities ever used as money. He observed this process concluded the same way in different times and places, with the use of the most “saleable” ones: gold and silver.

Responsible for this was the human almost infinite appetite for them, thanks to what they had the least difference (spread) between the bid and ask prices of all commodities, i.e. their “marginal utility” was practically constant.

This feature made them acceptable at almost any quantity, and thus gold and silver became the common medium of exchange in the market, in one word, money.

For this reason those who get surprised that gold, an asset with no cashflow is so valuable, show their ignorance that its main role is just the monetary one, and this way it serves as the ultimate extinguisher of debt.

In contrast, paper (government) “money” is exactly the opposite: a debt in itself, a mere promise to pay that needs to be redeemed as soon as possible acquiring goods and services.

But there is another problem. Unlike gold and silver, paper “money” can be created without limits, which offers an advantage to those who receive it first, but sacrifices those found at the base of the pyramid.

This condition is leading the world into a global economic collapse, by expanding something that cannot be expanded forever: consumption and credit.

The corruption of the system is detected in the initially commented gold Basis and Co-basis.

Both show in different ways the relationship or spread between the gold “spot” price, and futures price.

Menger’s analysis is based upon the study of “spread” as opposed to “price”, because there is no such a thing as “unique” or “equilibrium” prices. There is always a bid-offer spread.

The basis has its origin in the agricultural commodities market. A rising basis indicates that there are more than enough supplies, and a falling basis the opposite.

Prof. Fekete was the first to point out the importance of observing the basis in the gold market, i.e. the real money market, to properly identify the signs of sickness in the financial system.

In simplified terms, the Basis is the difference between the futures price and the “spot” price of gold. The Co-basis, vice versa.

If the basis is positive, which is normal, the market condition is "contango", and if it’s negative, where we are now in the gold market, "backwardation".

The graph below (courtesy of Sandeep Jaitly of Feketeresearch.com), charts the basis for the August Gold futures contract.  Notice that as the contract's expiration approaches, the basis (blue line) declines and even goes into negative territory.    

Conversely, the Co-basis (red line) becomes positive.

click to enlarge

This is a symptom of an apparent "shortage" of gold, an abnormality. Gold is not “scarce” in the market because their inventories always pile up.

So, this shortage can only be possible if “strong hands”, the ones who keep hoarding it, are every day less willing to sell it at bargain prices in a moment of financial distress, like today.

In other words, this backwardation tends to become permanent and is a sign of distrust in the fiat monetary system. This way sooner o later, the collapse of the futures market is unavoidable: the delivery of gold will become impossible.

We cannot know with certainty when it will happen, but there is enough evidence to anticipate this event.

This backwardation can also be viewed in the form of high premiums in the physical market.

Some people are preferring to pay more and take delivery of the metal today rather than to acquire a cheaper promise of delivery in the future. Even so, they know they are getting high value at a bargain price.

After all, governments and central banks are losing the war against gold behind the curtains. This is true even when they are trying by all means to diminish people’s preference for gold over their currencies.

It does not matter if they make it impossible to buy gold in India or some other places, the physical demand will grow up in other countries, even in black markets if necessary.

In sum, our monetary system is directed into the abyss, in silence, while the "mainstream" and opponents to gold try to hide the seriousness of its esoteric message: this time the fall in prices have not taken it out of the backwardation, but it is now more pronounced.

Let’s make more eyes see, and ears hear. Tomorrow, it could be too late.

THE WARS AGAINST GOLD (ROUBINI, WRONG AGAIN)

The war against gold is going on. Some days ago, New York University professor, Nouriel Roubini, published another article with singular aggressiveness, in which he said that by 2015, its price will collapse to a thousand dollars an ounce.

It is not the first time he says something like that, as he is a well known Keynesian and always refers to gold as a "barbarous relic".

Roubini became famous as one of the few economists who predicted the financial crisis that erupted in 2008, and since then, the mainstream media echoes his words every time he utters an outrageous prediction.

This is not surprising, since the interests of the so called "mainstream media" are usually –not by mere coincidence, the same ones as those of the monetarists and Keynesians: the monetary stimulus (QE), public deficits, bank bailouts, etc.

In other words, Roubini has become one of the favorite analysts of the Powers that be.

Nevertheless, this fantastic "guru" as some call him, has been wrong before on his perceptions about gold, and exhibits an enormous ignorance of the condition and quality gold has as real money, which he accuses, "has no intrinsic value ".

It is worth remembering how in December 2009, when its price months ago barely had exceeded once again 1,000 dollars an ounce, Roubini wrote on his website an article entitled "The New Bubble in the Barbarous Relic That is gold".

On it, he listed five reasons why it was ready to slump into a bear market.

Well, his prediction was so flawed that in September 2011, gold reached its all-time high of $1,923.70. Roubini, as a “specialist”, is a terrible market timer.

On the other hand, it is true that thereafter gold entered into a correction period that has been here for 21 months, but in no way, was it even close to forming a bubble.

It is clear that Mr. Roubini does not understand the markets. The gold bull market is not over.

Bubbles occur only when "everybody" is investing in a particular asset class, it is spoken everywhere and new all-time highs are seen on a daily basis.

It should be noted that in real terms gold was never close to a new record, because measured by official inflation, the old 1980 price ($850) is still well over $2,300 at 2011 prices.

September 6^th, 2011, will be marked as the turning point, the date on which the interests of the powers that move (manipulate) gold prices, decided that it had gone up too much.

Since then, we should see the gold market from two perspectives: the purely technical and the political one.

The former showed signs that a healthy and necessary correction was coming, and finally happened.

The latter, much more important, is responsible that it occurred in a very drastic way, and that every hike in gold prices is now repelled by a massive attack of paper “gold” sales in the futures market.

The major offensives unleashed on April 12^th and 15^th, are paradigmatic.

Now that the price is around $ 1.400 an ounce, Roubini is attacking again. He states that the 30% correction in gold ensures that it will fall even lower.

Of course this is possible if, on one hand, we consider that a typical correction means a 40% fall from highs, and on the other, we observe that gold is still in "backwardation" (the price of spot gold is more expensive than the futures price, and not vice versa as it is normal) in a deflationary context.

Former attacks have been increasingly severe in the attempt to take gold out of that "backwardation", so the bearish (artificial) pressures could continue for a while.

The bad news for the manipulators is that they worsen everything.

The "backwardation" condition emphasizes that the physical metal is “scarce”, and every time they knock down the price, instead of scaring smart investors out of gold, they run to buy all they can. For the “strong hands”, it is a very good way of acquiring high value at very low prices.

“Scarce” appears in quotes, because there is no such thing as a gold “shortage”. Almost all of the gold ever mined on planet Earth is still here with us in one way or another (175,000 tons), so one of the reasons why gold is in "backwardation", is because people are “hiding” more and more their physical holdings.

By the way, it would be a mistake to overlook the enormous increase in Asian demand for jewelry, bars and coins. There is no doubt that much of those inventories are leaving Western hands to go to the Far East, from where they will never come back.

Now, even Roubini can perceive the global deflationary phenomenon, and therefore predicts a disastrous outlook for gold, which is considered the ultimate safe haven in times of high inflation.

That’s a typical error of monetarist and Keynesian schools, unlike the New Austrian School of Economics. It is much more important to observe the gold Basis (in over simplified terms the Futures Price- Spot price) and Cobasis (Spot price – Futures price) than to look at the simple price.

The gold Basis and Cobasis are telling us with the "backwardation" (positive Cobasis), that every day less and less smart investors or "strong hands" are willing to sell their holdings, which anticipates that the futures market, eventually, will collapse. This “backwardation” in gold tends to become permanent, the trend is very clear.

In this deflationary scenario, the big losers will be those paper “gold” owners. They will be paid in devalued fiat currency (dollars, euros, pounds, etc.) that central banks will print to bailout the system, as usual. There is no enough physical gold for all.

So, will people sell their gold for $1,000 as Roubini says? Would anybody sell their treasures at bargain prices?

No. Gold is necessary in inflationary periods, but indispensable in deflation, where the direct exchange or barter is the end of the way. The entire planet will understand then that the value of gold as real money has not changed at all.

Of course, Roubini says gold is not money simply because “you cannot pay for your groceries with it”. Actually, his statement tries to deceive people.

The quality of money for gold and silver was acquired by the free and spontaneous will of human beings interacting in the market, without state intervention.

Therefore it is irrelevant that the laws of the state have demonetized them by force, as their essence remains intact. This irrationality will be corrected one day, by market forces, and the consequences will be dire.

In the next article, we will discuss this cunning demonetization plan, first for silver in 1873 and one hundred years later for gold, which made possible the true anomaly: the existence of a fiat monetary system. 

In the end, like all the times this has been attempted, the result will be a great crisis that will end in disaster. The market forces will put things in their right place, and of course, the big scam in the gold market will be unveiled.

READ MY LATEST UPDATE ON #GOLD BACKWARDATION:

IGNORE GOLD... AT YOUR OWN RISK  (JULY 12TH, 2013)

ALERTA: NO HAY ORO SUFICIENTE PARA TODOS

Imagen: bullionstreet.com

Hace unos días el ministro de finanzas de India, P Chidambaram, pidió  a los ciudadanos de su país que contuvieran su “pasión descontrolada” por el oro, y en cambio, ahorraran en instrumentos financieros tradicionales. “Tengan fe en nuestro sector financiero”, les dijo, con la esperanza de que dejen de adquirirlo.

Acusa que su creciente consumo está afectando al déficit de  Cuenta Corriente de su país, y ofreció que pronto se lanzarían “lucrativas” opciones de bonos indexados a la inflación, como alternativa. Fracaso garantizado.

Cabe recordar que India junto con China, son los mayores consumidores de este metal en el mundo, situación que al menos a las autoridades indias no le gusta en absoluto.

La frustración de Chidambaram, es paradigmática.

Muchos políticos y banqueros centrales de todo el mundo, y principalmente en la Reserva Federal estadounidense, deben estar sintiéndose como él.

Todas sus acciones, por tanto, están encaminadas a reforzar a cualquier costo, el rol predominante de sus respectivas divisas, por lo que se entenderá muy bien por qué la Fed, emisora de la principal moneda “de reserva”, es la más activa en esta materia.

Si para ello tiene que tumbar el precio del oro, sin duda lo hará por todos los medios posibles. Y lo hace. La forma ideal es vendiendo grandes cantidades de “oro” papel en el mercado de futuros a través de sus intermediarios, los “Bullion Banks”. Tan simple como eso.

En este sentido, la bien aceitada maquinaria propagandística anti oro, está rindiendo frutos entre muchos inversionistas “sofisticados” y académicos con doctorados, pero no parece estar teniendo mucho eco en las personas que, tal vez más por intuición que por conocimiento, siguen haciendo lo correcto atesorando al rey de los metales y a su compañera la plata.

Este fenómeno se está presentando en todo el planeta. En este blog, en entregas anteriores hemos dado cuenta puntual del crecimiento de la demanda deoro y plata físicos.

Según el Consejo Mundial del Oro, en el primer trimestre de 2013 la demanda conjunta de joyería, lingotes y monedas tuvo su mayor expansión justo en India, con un crecimiento de 27%, mientras que en China y Estados Unidos escaló 20% con respecto al mismo período del año pasado.

En México, durante abril, explotó también de forma impresionante el apetito por las ya famosas onzas de plata Libertad.

Más y más ejemplos de este tipo, abundan por todas latitudes.

Seguro que Chidambaram y otros tantos como él, no tiene la menor idea de que el oro no obedece las leyes clásicas de la oferta y la demanda.

Por eso no se explica por qué la gente sigue buscando al metal áureo, a pesar de que su precio en rupias, por supuesto, también se ha desplomado. No sabe entonces que a veces mayores precios no solo no traen más oferta, sino que incluso la contraen, por la resistencia de sus tenedores a desprenderse de él en medio de una crisis.

Tampoco que una tendencia de cotizaciones a la baja como la actual no aleja a los inversionistas en valor, sino al contrario, los hace correr por más oro que retiran de la circulación. Al final, ¿con qué se quedarán los tenedores de “oro” y “plata” en papel?

Por eso las noticias recientes respecto a un sentimiento negativo hacia el oro, que se encuentra en máximos de cinco años, no deben ser vistas como una señal negativa sino positiva: ¿acaso un mercado alcista mayor termina cuando el pesimismo prevalece?

Es al revés. Las burbujas y rachas al alza concluyen cuando el optimismo ha convencido a todos de que “esta vez es diferente”, y de que un mercado determinado, seguirá subiendo.

No estamos en ese momento en el oro, pero sí en los principales mercados de valores. Perece que como siempre, se olvidan de la vieja regla del inversor contrario: ser ambicioso cuando otros tienen miedo, y temblar de miedo cuando otros son ambiciosos.

Mucho debería decir a los detractores del rey de los metales, el hecho de que en Londres, como lo reporta el experto James Turk, los tiempos de entrega de grandes volúmenes –entre tres y cinco toneladas, están demorando más de la cuenta, del típico T+2 (dos días después del pago), hasta T+5 (cinco días después).

Por si eso fuera poco, el mejor medidor de escasez que hay en el mercado del oro, sigue ocurriendo: el fenómeno de “backwardation”.

Este sucede cuando el precio al contado (spot) es mayor que el precio de entrega a futuro. Lo normal es que suceda lo contrario: que hoy sea más barato comprar oro que mañana.

¿Por qué sucede la “backwardation”? Porque los vendedores saben que es un muy mal momento para vender, y ante la escasez de existencias, los compradores están dispuestos a pagar mayores premios por el metal contante y sonante hoy, que por una promesa de entrega mañana, aunque sea más barata.

Seguro que esto pondrá nerviosos a más de uno, sobre todo si tiene sus barras o monedas en posesión de terceros o en el sistema bancario, incluso los que lo tienen en Suiza.

Imagen: Telegraph.co.uk

El especialista Egon von Greyerz reporta que cada día más clientes le informan que bancos suizos, argumentan toda clase de pretextos para no mostrar físicamente las barras, e imponen topes arbitrarios en francos, al retiro de las mismas.

Es claro que no tienen todo el metal con el que aseguran contar.

Goldcore comunica que Jean Hilgers, director tesorero del Banco Nacional de Bélgica, ha dicho que 25 toneladas de oro, alrededor del 10% de sus reservas, están dadas en préstamo a los “Bullion Banks”, que debido al sistema de reserva fraccionaria con que operan, expanden de forma exponencial la oferta de “oro” papel, con el consecuente impacto en el precio.

La historia se repite en más y más bancos centrales que no lo hacen público, pero cuyo final se puede resumir de la siguiente manera: el oro que existe en la realidad, no alcanza para todos los que creen tenerlo, más vale que lo reclamen pronto.