This Will Trigger Major Dislocations In World Financial Markets

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/8/16_This_Will_Trigger_Major_Dislocations_In_World_Financial_Markets.html

The Global Run On Silver & What It Means Going Forward

This essay on the difference between silver and paper currencies is brilliant due to its simplicity.  It clarifies the two functions of silver:  as a medium of exchange and a store of value.  If I sound redundant, it's because people may hear it, but they aren't internalizing it.  Perhaps after reading this piece, they will finally put this debate to rest.  Own the physical.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/6_The_Global_Run_On_Silver_%26_What_It_Means_Going_Forward.html

Gold As A Store Of Value

http://www.zerohedge.com/news/gold-store-value

The Oldest-Established Store Of Value Moves To Center Stage

http://www.zerohedge.com/article/don-coxe-dissects-gold-oldest-established-store-value-moves-center-stage

That gold and the dollar are fundamentally inversely correlated to each other is obvious. One bets on gold because one is deeply skeptical that governments will fulfill their promises.

So why are they both in a mini-bull market?

So why didn’t inflation come roaring back when Bernanke doubled the Monetary Base and M-2 was climbing at double-digit rates?

And why didn’t inflation come back when central banks across the OECD were growing their monetary bases and money supplies were climbing? And why did gold take off to record levels when money supply growth began to dwindle and actually turn negative?

We believe that Gold’s recent rise began when investors sought a classic inflation hedge, but its real run came when deflation risks were far more obvious than any evidence of inflation.

As we have written in these pages, gold is the classic store of value. It should retain its value under both inflationary and deflationary conditions.

That means a great time to buy gold to make capital gains is when inflation is rising.

It also means a great time to buy gold to conserve existing wealth is when (1) prospective risk-adjusted returns on bonds and stocks look unattractive because the economic outlook is for slow growth with (2) a risk of a renewed downturn that would hammer the value of stocks—particularly financial stocks—and real estate anew, and (3) bond yields are too low given the endogenous risks in the currencies in which they are issued and (4) the range of future fiscal deficit forecasts is from grim to ghastly.

What we believe is unfolding is a rush into gold by individual investors who look at the astronomic growth in financial derivatives—particularly collateralized debt swaps—and government deficits at a time when the effects of demographic collapse are finally being understood. According to some guesstimates we have heard, the supply of outstanding financial derivatives may be in the $70 trillion range, dwarfing the combined value of money supplies and debts. The total value of gold is so minuscule in comparison to the supply of these software-spawned instruments that it cannot be any real help in stabilizing global finances—but it can be a haven for investors seeking to protect themselves against an implosion of majestic proportions.

That is why gold and the dollar can—if only for a brief time—rise together, as investors see that the only major currency alternatives to the dollar—the yen and the euro—are backed by rising national debts, rising numbers of pensioners, falling working-age populations, falling real estate prices, and a falling OECD share of global GDP.

So…as a store of value for future generations,

If you can no longer believe in residential real estate,
and you can no longer believe in bank deposits,
and you can no longer believe in the dollar,
and you can no longer believe in the yen,
and you can no longer believe in the euro…
What can you believe in?
How about gold?

It’s so old, it’s new again.

It can’t be synthesized.

It’s been despised by every liberal economist since Keynes.

Why investors should resist gold frenzy

In an attempt to balance out opinions on financial assets, specifically gold, I have included the following article.

http://finance.yahoo.com/banking-budgeting/article/109557/the-gold-frenzy-why-investors-should-resist

Personally, these financial advisers demonizing gold missed the boat, and are rationalizing the missed opportunity on a decade-long bull market in gold. Their comments ring hollow and illustrate a complete ignorance of history, the role of currencies, and store of value.

Disclosure: long precious metals, and long gold and silver mining shares.

ATM with a gold touch

I'm not making this up.

http://www.nytimes.com/aponline/2010/05/12/world/AP-ML-Emirates-Gold-Machine.html?_r=3

Abu Dhabi's top hotel is upping the ante in the race for Gulf glitz: adding a gold-dispensing machine.

The whole world knows the value of gold, including 3 billion Asian peasants. Add to that savvy group wealthy Swiss bankers, Latin American overlords, Greek shipping tycoons, and Middle Eastern oil sheiks. As usual, the retail American investor is the last to understand gold's store of value.

Robert Reich, former Labor Secretary and current University of California professor of Public Policy, you are completely wrong--again...and so are your colleagues. The scoreboard says so.

Safe havens

The USDollar has been a safe haven asset since the Bretton-Woods agreement in 1945. To many, it still is, when all other assets decline in value in a risk-adverse investment environment. Don't be fooled by Wall Street's head fakes. The US government's finances are stuck between a hard place and a rock. We are not out of the woods--not even close.

Consider precious metals as a haven. Gold and silver got clocked today, much like every other asset. This is a knee jerk reaction as panic selling kicks in during a liquidity crunch. Cooler heads will re-discover gold and silver are historically reliable stores of value. Precious metals were the first to recover in the 2008 liquidity crisis. They'll be the first to recover in the future. Stay the course. Accumulate on dips, if you can. Go watch a movie, and stop watching the daily fluctuations. Because one day, when the debt crisis turns into a currency crisis, your purchasing power will still be protected.

Two good articles:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ay7aVAKL6qYw

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=97226&sn=Detail&pid=1

See disclaimers on the sidebar.

Disclosure: long gold and silver mining shares.

Emerging markets stepping up to the gold window

Foreign central banks are snapping up gold bullion for their reserves for several reasons. Foremost is their diversification away from the USDollar, as too much exposure to the sinking dollar has caused their asset values in reserves to decline. Their economies are stronger relative to developed countries, so they need to boost their gold reserves accordingly to reflect their newfound economic health. In other words, their strong currencies need to be backed by gold vs. the USDollar.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=8970ea5d-3ab9-4ad2-87a8-f76cca63c961

In the past, central banks could sell their gold holdings, in order to suppress the price of gold, as low gold prices enable sovereign governments to borrow at low interest rates. This support allows governments to run perpetual deficits and reduces their debt obligations in the form of low-yielding bond issuance.

But with mounting fears that governments worldwide are reckless in their deficit spending--debasing ALL currencies in the process, gold as re-emerged as a safe haven for monetary store of value.

In another article, the Reserve Bank of India hinted at buying the balance of the IMF's planned 403.3 tons of gold, of which 201.3 tons remain. India purchased 200 tons two weeks ago in a surprise move, as most observers expected China to buy the bulk of the planned sale. However, purchase of the IMF gold by ANY central bank is bullish for the yellow metal, as it further validates central bank net buying--not net selling.

http://www.mydigitalfc.com/plan/india-plans-buy-more-gold-imf-410