-- Published: Tuesday, 12 September 2017 | Print | Disqus
By Hubert Moolman
It really should be clear that a major international banking crisis is inevitable, and likely to occur fairly soon. Due to the extreme debt levels, many banks are close to that point of failure.
An event like a stock market crash is likely to push many banks to that point of failure, since the pressure it would create (on cash resources), would expose their inability to fulfill their obligations.
Cash (not bank credits/digits) is still the means by which banks have to settle liabilities and obligations (especially amongst each other). If a bank goes down, it will be due to the lack of cash (not bank credits/digits). It is for this reason that there is a campaign to ban cash (for the general public) or limit the use of it.
The banks are in competition for the available cash resources, and they do not want you to be an obstacle. This is similar to what happened during the Great Depression (1933) when gold was confiscated. Then, banks proved their solvency with gold; therefore, the general public was prevented from competing for the limited amount of gold resources.
It is for this reason that I believe it is very unlikely that gold would be confiscated during this crisis. Today, it is cash that is the cornerstone of the banking system (especially the US dollar), since it is cash that is promised, not gold.
However, gold is still relevant when it comes to warning us of the imminent collapse, and of course, providing some protection against potential financial loss as a result of it.
Previously, I have shown how the gold price relative to the US currency in circulation is possibly warning of a major monetary event. It now appears that we could be either at, or very close to, such a possible event.
Below, is a chart (from macrotrends.com) that shows the ratio of the gold price to the St. Louis Adjusted Monetary Base back to 1918. That is the gold price in US dollars divided by the St. Louis Adjusted Monetary Base in billions of US dollars. So, for example, currently the ratio is at 0.34 [$1 346 (current gold price)/ $3 942 (which represents 3 942 billions of US dollars)].
On the chart, I have indicated the three red points (a) where the Dow/Gold ratio peaked. These all came after a period of credit extension, which effectively put downward pressure on the gold price. Points 2 (green) were placed just to show the similarities of the three patterns.
After the peak in the Dow/Gold ratio and point 2, the Gold/Monetary Base chart made a bottom at point 3 (green) on each pattern. It is at these points that the monetary base could not expand relatively faster than the gold price increased. Today, this could mean the point at which the game is up for those who are short gold.
It appears that we are just past point 3 on the current pattern, so it would be very unwise to be short gold.
In 1933, after point 3 was in, the gold confiscation order was passed (point b). This came about due to the pressure to fulfill gold obligations. This was confirmed later by Roosevelt when he justified Gold Reserve Act 1934 by saying that, “Since there was not enough gold to pay all holders of gold obligations, . . . the federal government should expropriate and keep all of the gold”. Remember, today this could mean cash as it relates to the banking system.
Again in 1971, after the relevant point 3, due to being unable to cover all the foreign holdings of US dollars with the related amount of gold, the US suspended (really ended) the convertibility of the US dollar into gold, on 13 August 1971 (point b). Today, this means a devaluation of the US dollar.
Now, we are possibly at point b (or very close to it), where a major monetary event could happen. Whatever happens, gold and silver is likely to spike much higher over the coming months.
For more on this, and similar analysis you are welcome to subscribe to my premium service. I have also recently completed a Silver Fractal Analysis Report as well as a Gold Fractal Analysis Report.
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-- Published: Tuesday, 12 September 2017 | E-Mail | Print | Source: GoldSeek.com