The Context For Gold

When I am being the ordinary 'layman-in-the-street,' so to speak, about global markets and money, I look at gold and think 'Oh wow, I just love it and how safe it feels to me, and how solid and how real and how, well, there.'

And then I ask our 'friends' because one of the readers here posed the question - to supply some perspectives on what is possible, when it comes to the price of gold.

So here's the issue: first we require a knowledge and understanding of the history of modern global banking, from the origin of the Bank For International Settlements in 1930 at the Hague Conference, to the first Basel Accord (Basel I) in 1988 and then through Basel's II and III - to date.

In the olden days, when Bahnhofstrasse,
Zurich, actually had real private banks.

The BIS was started to organize the Treaty of Versailles payments to Allied Countries from the German Nation after WWI.

The incipient genesis of the Basel Accord was very probably the Oil Crisis of the 1970's. This crisis is written in standard mainstream history accounts as coming from the 1973 Yom-Kippur war, and then followed in 1979 by the Iran Revolution (although there were plenty of things to do with Iran and the Middle East leading up to that final signal event).

If you look back into those key events of global banking and money history, what you will see is that the only people who were intended to benefit from the initiatives (which were all ratified by the participant countries via actual banking laws), and the only people that did benefit - were national governments and absolutely no one else.

Arguably pre-1970's Oil Crisis automotive design had never been better and never was exceeded afterwards, and with the eventual destruction of the Bretton Woods Agreement and the abandoning of the gold standard by the Richard Nixon Administration, gold became the manipulated item of governments, and no more was the independent test for government and national (currency) solvency.

As the layman in the street, we love to look upon gold with a childish fondness.

But it is a static financial medium. It sits in bank vaults and does not physically flow anywhere; never has done.

And when there was real
meat and potatoes in classic
Paris restaurants.

Sales taxes are employed by governments to skim from circulation velocity - in order to gain revenue to fund government borrowings (debts). But the most rapacious appetite to take money from private sources is by way of land rates and capital taxes on property...

This is because for one thing people who buy real estate buy a capital sum (assumed to be priced-in over many decades), and consequently the through-going land rates are at the term capital value (assessed) and so the money to government is also pro rata of capital value not high volume commodity prices...

The price of gold, regardless that the gold is said to be an item of capital (a material thing that can be held over a long term without depreciating its relative economic value), is only the static 'first sale' (first taken as being a Markov Chain event), and not the presumed multiple of value that real estate and properties are all priced at.

Consequently, there is really no 'value' for governments in gold and the gold trade at large. 

And so once the money system itself is merely a function of governments and agreements of governments (and not absolute in specie solvency or 'backing'), then those agreements are bound to favor those transaction classes which hand easy and continuous flow revenue back to governments - and disfavor all others.

The so-called 'cycle' of interest rates (which is really the cycle of money injected into the economy via debt), goes from the moment where lots of core multiple of value dollars are first injected, through to the stage where the taxation and land rates collection is exhausted on those injections and their secondary circulation (properties reach an impossible and unsustainable pricing level and there is not sufficient base currency - M1 - to allow for any more purchasing at those price levels).

Believe me, I have been
deliberately not 
posting pics of super-cool
stuff - because I want people
here to save their cash and not
go silly buying super-cool
stuff.
If people told me, no no, we can
be trusted not to go stupid, and we have
stax of cash anyway - well, then
I would post pics of stuff you would be
simply amazed by.

And then, the cycle is renewed by massive new money supply through the injection of new credit in wholesale (bulk credit) which happens when government bonds are issued at a huge discount thereby creating the future or maturity projected value upon which credit is created in the meantime.

The Basel Accords together with the Bank For International Settlements processes are there to look at when the international flows of internationally accepted money hit any red lines for liquidity - not at whether or not paper money is safe or genuinely backed or any such thing!

And the gold is still sitting in your bank vault. It is not flowing anywhere.

So even if huge geopolitical crises hit, it is not the price of gold that will react with any multiple of value being obtained.

If the oil and general energy prices really do go up appreciably (more so than they already have been) from here, it is in the property and real estate markets and in consumer price inflation where the multiples will hit home. Because that is where the flows are.

Of course you can buy gold because it seems to have some stable pricing compared with say, computers and micro-chips, or sugar or newspapers.

Also it doesn't deteriorate like butter and milk do.

It doesn't deteriorate but to be very frank it can be made to 'disappear' from the eyes, and evaporate from the hands, of government and their tax-collectors - whereas land and properties do not disappear and can easily be captured into the revenue vacuums of government.

The Pavilion Restaurant
in Zurich. Where all the politicians
and banksters go.
Beautiful place. Food is um,
um...
Expensive.

When the Swiss really were safe and solid bankers, it was in the first place because of the William Tell aspect of the private person finding the strength and the means to take the hands of government off their necks and off their purses.

Be fully assured of this - at the next juncture when governments need to find ways to fund their limitless expenditures (and that will be during this quarter and well prior to Christmas), for absolutely sure and certain they will do it by inflaming a fantasy that the public all-too-readily will swallow, about land and real estate and properties. 

And not about gold.

Meanwhile a lot of people will be bound to lose their shirts in the property markets that were the result of the last currency cycle credit expansion. There can be no further credit expansion of that cycle: that cycle was commenced back when Basel II was abandoned so that countries did not need to have any actual hard-currency backing at all, with the immediate result of new (and more-or-less fake) 'free money' (ludicrously low interest rates) being issued and artificially driven into real estate and those holders are now all exhausted and have no more money to buy anything or pay for anything or even fund their land rates and capital gains taxes. The 'money' has all been spent (used up). Petrol prices are up and interest rates are up and everyone is over-extended anyway. In other words the economies are all broke.

There endeth the lesson for today. But over the coming epistles (lol) we shall deal with where the ludicrous multiples will occur, again - be they 'up,' or, as is quite necessary also, 'down.'