The greatest trick ever conceived and executed by bankers is the illusion that paper is in short supply.
Have you ever read about Holland's tulip bulb craze some 500 years ago?
This weekend I noted that Twitter stock is trading at 69 bucks- not only is this nearly a 200% gain in less than 6 months- but it supports my greater fool theory perfectly.
By creating the illusion that Twitter can actually turn a profit and provide some essential life sustaining function- you can find thousands of people willing to buy this corporate ass wipe on the theory that there will be a greater fool willing to buy Twitter stock at say 90- because bankers and corporate America have convinced people that this is what has "value." A piece of paper issued by a company that provides nothing essential or useful, has no profit, and if it disappeared tomorrow-we'd all be better off.
This is the insanity currently gripping our American landscape. People actually buy this shit. And they make money because there is always a greater fool willing to pay more. That's how it works up until such point when it doesn't work. Like 1929 or 2008.
Years ago, I had a guy who followed this blog named Rawmuse. Sometime in 2010, while I was lamenting the insanity of QE and the impending economic collapse which included the now 4 trillion in money printing by the FED which has driven our stock market to insane and ridiculous levels- Rawmuse pointed out the painfully obvious to me.
A lot of people are making a lot of money in the stock market and they didn't seem too worried about any economic collapse. Like mice at an overturned cheese truck, they were busy gorging themselves on this new supply of money.
I had to cringe because Rawmuse was right. It has been 2 or 3 years and the banker bastards just keep winning, the market keeps going up, and the greater fools just keep rubbing my nose in it. I haven't seen Rawmuse around here in a very long time. And then...
A very odd thing happened in 2012-2013. Not many noticed...
Right after Venezuela demanded that 100 tons of their gold be returned- suddenly the price of gold went down 200 bucks. Several months later, Germany demanded the return of 700 tons of their gold and what do you suppose happened? The price of gold went down another 500 bucks.
Removing supply should drive the price up, don'tcha think? Well not if you don't actually have unencumbered physical gold. The bankers, realizing that they'd have to return that which was never theirs in the first place, used paper futures to drive the price of gold down to a level that was cheap enough to start buying newly mined gold which they could then buy and deliver to satisfy these claims.
Another couple of odd things happened. Not only did the US say they couldn't return Germany's gold for 7 years- gold allegedly stored in safekeeping- but Germany's request did not bring about a flood of new requests for repatriation. This is quite interesting. Common sense might say "Hey, I better jump in line and get my gold before it runs out." We call these things "bank runs." Banks hate bank runs especially when you are demanding a commodity that they cannot produce nor can they simply fire up the printing press and make some.
What I am saying is this. Bankers have been caught red handed loaning out and hy-pothecating gold that was never theirs to begin with. When I say bankers I mean specifically the bullion banks which are all members of the US FED. Most importantly this includes the world's central banks and the Bank of International Settlement or BIS aka the mother ship of all bankers.
I believe that the BIS and the world's central banks are busy behind the scenes- swapping gold and settling gold claims with cash- telling countries to be patient while they purchase new supply for delivery. Which is precisely why the NY FED can't deliver Germany's gold for 7 years.
One last HUGE point. There are only two sources of gold supply. Existing or unearthed supply and gold which has yet to be unearthed. Not only is gold hard to find but it is ungawdly expensive to mine. So when bankers drive the price too low, the miners will just quit mining. That means bankers will have to use their own gold reserves to settle claims if they can't buy new supply. They don't want that.
An absolute floor on the gold price in any scenario will not be less than 1000 an oz. I can't see a lesser price even in a horrible deflation scenario and certainly not in an inflationary scenario. Gold at 1000 will cause mines to shutter. Bankers can't kill new supply or they will be forced to deplete already dwindling reserves.
Gold has never failed as a currency. Gold is money.
The tulip craze ended in Holland when it finally dawned on someone that tulip bulbs were pretty much non essential- kind of like Twitter stock. By that time they had run out of fools with newly mortgaged farms willing to speculate on astronomically priced tulip bulbs anyway.
Eventually the same thing will happen here particularly when the FED stops QE altogether. There will be another collapse, Twitter stock will go to 2 bucks and the bankers will be busy trying to seize assets and save their hides like they did when they hijacked the US tax coffers in 2008. This time around- there will be a huge fight. The bankers think they have the power with their bought and paid for political lapdogs- but I think their position at that point will be utterly defenseless.
In the meantime Rawmuse- where ever you are in Marin County- I miss you. I got a feeling this run is about over. There has always been a generous supply of paper and a scarcity of gold. I think this will be the year when that fact gets proven out once again despite the bankers best efforts to convince you that paper is in such short supply that the DJIA will be bid up to 20,000. Really.