The world’s central banks, large investors & financial houses are all buying gold. This kind…
Not this kind..
“Gold certificates” are understood as worthless by serious gold investors. This is because a gold certificate has no use value, while precious metals do.
So why this gold buying spree? The short answer is the global financial elite see the next crash coming, and are bailing out on the US dollar to hedge with gold & other precious metals. Governments see global conflict coming, and want physical gold in their banks.
For the vast majority of the world’s population, there was never a recovery from the 2007-08 economic crash. For workers it’s been suppressed wages, high debt, and an ever eroding standard-of-living. The cost-of living, particularly for housing, real food, and health care has skyrocketed.
Now, US sanctions on Iran have allowed Saudi Arabia’s barbaric monarchy to effectively control the global oil supply, so expect record gasoline prices by this summer. Oil is “black gold,” the most important commodity in modern capitalism– outside of human labor.
The US Federal Reserve’s stock market disaster of December 2018, after the beginning “quantitative tightening,” signaled the end is near. The financial markets are comparable to junkies, who need ever-increasing doses of smack (free money) to sustain themselves. They can never quit, or else they’ll die.
The Trump team now advocates more injections for corporate America, further inflating this stock market bubble. Trump’s hopes in 2020 depend on it, but it is questionable whether we will even reach 2020 before this entire house of cards collapses, and a revolutionary situation presents itself. There is mass discontent among America’s workers & youth. Everything in the media is meant to deflect from this reality.
Getting back to real gold, its demand has never been greater, and the reasons are obvious. Gold is always a safe haven for store-of-value, and never depreciates naturally. The same goes for silver, platinum, palladium, and all other precious metals.
As discussed in an earlier article, the fact that precious metals don’t tarnish, makes them useful in chip circuitry, electronics, and a wide range of technological applications. Technology is a major battlefield among competing nation states. Under US capitalism, Russia & China are considered “strategic competitors” to be crushed.
Gold is limited in supply, as there’s only a finite amount of it in the Earth, so everyone with money is looking to obtain this invaluable resource. It appears that Africa has become the major global supplier of raw gold ore. Reuters just reported on this global black market which funnels through the United Arab Eremites (UAE). For reference, the UAE is closely tied to the House of Saud– and thus Washington, Wall Street & Langley.
The environmental cost of this illicit mining & refining is devastating, and just another unaccounted cost of capitalism. Black market means no taxes are paid to the governments of these African nations on the gold that is being smuggled out. This is how 95% of Africans are being cruelly exploited & poisoned by this new age gold rush.
The World Gold Council reports that central bank gold buying is at the highest levels since 1971. Of course, this is when US President Richard Nixon (advised by Henry Kissinger) took the US off the gold standard. Gold prices had been held at $35/ounce since Breton Woods, the post-WW2 global economic agreement among the winners.
By January 1980, gold traded at $850 an ounce, proving the US had been suppressing the value of gold for decades. This had the convenient effect of inflating the value of the dollar, which held unquestioned predominance as the global reserve currency through the second half of the 20th century.
Since early 1980, monetarists such as Fed Chairman Paul Volcker have adopted the theory that stock markets are the true measure of economic health. The market crash of 1987, due to junk bonds, established the “plunge protection team” and the “Fed put” which meant big investors would always be bailed out in times of crisis. This is where the term “too big to fail” came into being.
But the crash of 2008, and the rise of China as an economic superpower has called US predominance into question. A decade later, nothing has been resolved. The US government still insists on maintaining its economic hegemony, while electronically printing trillions of dollars for their well-connected banker cronies. The result has been the inflation of the largest financial bubble in history, the stock & bond markets.
Trump’s chief economic advisor Larry Kudlow (above) is now calling for interest rate cuts, with an immediate cut of half a point. The Fed funds rate (bank overnight lending rate) is currently ~2.4%. Any Econ 101 student would surmise that if a 2.4% Fed rate is too high, then the economy is dead. Especially when ordinary people can’t get a business loan for less than 10-12%.
Consider that ~12% of student loans are now in default, as 45 million Americans carry student loan debt. Those loans start at 8-10%, and go up from there. Student loan borrowers must “carry on,” while bankers & hedge fund speculators can’t manage their businesses with overnight loans at 2.4%!
All this reaches into the murky world of financial debt, where much is unknown (by design), with modern capitalist theory always assumed to be good coin. Let’s go back to Econ 101. Currently US national debt is officially over $22 trillion. For comparison, US GDP was calculated to be ~$19 trillion in 2017.
This GDP is an over-estimate, as the DJIA, S&P 500 & NASDAQ are all littered with zombie companies that are underwater in debt, yet counted as net contributors to America’s economy. It’s estimated that globally, one-in-six corporations are zombies. Thus, negating the fictitious value of these zombies removes over $3 trillion from the current US GDP.
By definition, zombies suck up resources, while contributing nothing of value to a society. Tesla, Netflix, Uber and just about any bank you can name are real-world examples of zombie corporations.
A dirty secret among Wall Street & government insiders is that the $22 trillion of national debt is only the tip of the iceberg. The remaining 90+% is so-called “hidden debt,” in the forms of underfunded (looted) pensions & worthless derivatives.
Social Security, Medicare, IRA’s, etc., are all bills which most taxpayers expect to be paid. These are the paychecks that many, many retirees need to survive. The truth is there is basically no money left in these accounts. They are industry-termed as “unfunded liabilities.” US militarism & Wall Street speculators have drained them for corporate profits.
This money was “borrowed” by Wall Street investors and fueled the derivatives market, which is surely the largest part of this hidden debt financial criminality, with a global estimate of $1.2 to $1.5 quadrillion in toxic “assets.”
These are “futures” contracts which have no market value, yet investors will expect payment– 100 cents on the dollar. This bailout is expected to come from the taxpayers, in case you didn’t know. Except there isn’t anywhere close to enough tax revenue to pay this bill, as Fortune 500 corporations don’t pay taxes, so the US government is now bankrupt.
Once the numbers get this huge, debt service (making just the interest payments) becomes impossible through the magic of compound interest. This is where the financial system is right now, with militarism re-arming to the teeth, trade wars erupting, and central banks scrambling to buy gold and other precious metals, as everyone gears up for war.
What’s happening in investment is a global run on the only resources that truly hold value, particularly precious metals. Gold today is trading today at ~$1,275 per ounce. This is an absurdly low price in US dollars, as discussed, with the Federal Reserve electronically printing money in order to prop up its fake economy. When the crash comes, gold & all other precious metals will skyrocket in value.
Since the US abandoned the gold standard in 1971, precious metals have been manipulated downwards in price, as government policy to discourage widespread investment. Gold is physically heavy, so it is costly to transport. Obviously transportation also requires heavy security. These are the costs & risks of maintaining gold reserves.
Many countries are now calling in their gold bullion from foreign banks, with mixed results– at best. The process of transfer which used to take weeks or a few months, now takes years at minimum. No one wants to give up gold, and possession is nine-tenth ownership– as the saying goes.
For example, Venezuela’s government trying to get its gold, which is “stored” in the UK central bank. This is a sticky example of international finance & diplomacy. It is understood that if world war breaks out, all foreign gold reserves would be confiscated by that nation’s banking system.
The stock markets have boomed, as corporations in every industry (through access to unlimited cash), have eviscerated work forces, imposed wage freezes & austerity, while skimming the surplus value for themselves. There is no longer any capital investment into innovation, R&D, or wages; as money is siphoned out through QE printing for stock buybacks, then it is moved off-shore, until it can be repatriated at an ultra-low tax rate, as happened with the Trump tax cuts.
Billionaires all over the world have their fortunes hoarded in private accounts, which does nothing helpful for the overall economy. They use it to buy more stuff like art, yachts and palatial mansions for themselves. That’s what you do when you lead a fake life, chasing fool’s gold.
The day of reckoning is coming, as the political consciousness of the working masses becomes more socialist. This level of inequality, where rich & poor people are diametrically opposed under capitalism, is not sustainable. These issues have reached the point where they can no longer be ignored, as too many people are adversely affected.
The media’s fake news isn’t working so well anymore either. The primary media narrative of the past two-and-a half years in America has been “Russiagate.” What is this about, really?
The US government & national intelligence establishment has hated Russia since the Revolution of 1917, led by Lenin & Trotsky. Before then, the US never cared about Russia under tsarist feudalism, except in literature. What this means is that all anti-Russian propaganda is about ruling class hatred of socialism.
The reaction of the wealthy class to the upcoming crisis is to hoard cash, and now gold. The working class response must be to arm & organize itself with a socialist program, which recognizes that the labor power of the worker is the only true wealth a society can create.
The only political party that can lead this global revolution is the International Committee for the Fourth International (ICFI), which is represented by the Socialist Equality Parties (SEP) in nations around the world, and can be found online at the World Socialist Web Site (WSWS), which publishes daily.
Every other political tendency which claims a leftist position or socialist/Marxist program is a false-flag organization that flows into liberal capitalism & Stalinist reaction. This includes all the labor unions, the DSA, and the now-defunct ISO.
The ICFI is a legitimate political party, with origins that go directly back to Trotsky’s formation of the 4th International in Paris in 1938, two years before he was assassinated by an agent of Stalin. Any attempts to organize, strike, or politically protest (such as freeing Julian Assange) should be done through (and in sympathy with) this revolutionary organization. The same applies to political contributions.
The ICFI/SEP/WSWS are unique in that they are the only political organization in the world that won’t stab the workers & youth in the back. Instead they seek to educate, unite & lead the oppressed workers of the world in a socialist revolution that will conquer capitalist tyranny, and establish an equal & free global society.
Is that anything to be afraid of? No, it’s something to embrace.