These financial industry giants lived through all the wealth cycles of the past 100 years and more. What used to be long term wealth investments evolved to the day-trading, making money activities, with a top in the year 2000. Then the financial industry morphed rapidly into the absurd High Frequency Trading. All wealth is now a spooky derivative of what it once was. Debt rules!
The US was the biggest gold reserve holder in the entire world, with 28,000 metric tons of gold in its vaults (60% of the world’s total gold reserves). Most, if not all, of that gold disappeared from the UST, whilst the financial industry and the debt driven economy, expanded. First there was the London Gold Pool selling central bank gold reserves, then in 1974 Louise Auchincloss Boyer discovered that N. Rockefeller was selling UST Fort Knox gold. Three days later she fell out of her window (July 3, 1974).
Immediately afterwards a Fort Knox propaganda tour was organized. All gold fever stopped in 1980. Stock markets started their rise to the moon. Fifteen years later, the European System of Central Banks started their gold sales. Stock markets reached for the stars and suddenly The Queen made a propaganda tour through the London gold vaults (Dec, 2012). Now, China, Russia and other pro gold states (BRICS Development Bank) are accumulating the scarce residues of available physical gold. The debt driven Western economy is in stagnation and the global debt crisis remains unsolved.
Where has all the physical bullion gold gone? Where is it concentrated after 45 years of distribution and very low paper gold prices? Hard to say, but the main flow of physical gold went certainly from West to East. Simply because the Western financial (pseudo) wealth industry was rising since 1980 and that made physical gold obsolete, in particular for the average Western man on the street.
The MSCI emerging market index is declining and never reached the Dow/Nasdaq/S&P heights. Physical gold has flown to these Eastern emerging (mostly surplus producing) markets whilst Western deficits are still rising. An upside down world,…or not. European banks have a $ 3.4 trillion exposure to the weak emerging markets who are suffering from brutal $ withdrawals. China’s shadow banking is enormous and dangerous. The entire world has multiple fundamental reasons to embrace physical gold as a wealth asset, but only an extremely small minority keeps accumulating physical gold. The bulk of physical gold is now in the very strong hands of Western and Eastern giant dynasties and a relative very small group of gold wealth connected individuals. They all continue to accumulate, whatever the paper price of gold may discourage. They all anticipate the same looming catastrophe: pseudo-wealth destruction!
The Far & Middle East stores its wealth in physical gold and the West keeps going for financial industry pseudo-wealth and paper gold for making more (debt) money. This gold imbalance will increase strongly the more the gold price declines! Declining gold prices must encourage the further accumulation of risk assets. The Western giants don’t care that Joe sixpack has no gold. They must feed their financial industry pseudo-wealth (buy stocks and debt paper). The Western giants, with trainloads of physical gold, don’t care that the scarce left-overs of available physical gold flows cheaply to the East. When the pseudo-wealth comes to an end and the East will say physical gold is the real store of wealth, the Western giants with gold in their vaults, remain wealthy. Then the whole (political) economic story restarts from scratch.
The giant dynasties *are* the financial industry. They produce and control the bulk of the debt-driven pseudo-wealth. The FED is even providing liquidity for Mario’s ECB (swaps). That’s why their balance sheet is diverging. Euro-land is in fact still $-land.
China’s present gold policies are building a base to take over the paper gold pricing from the dollar’s financial regime. The valuation of physical gold must be totally delinked from currency and risk assets. China wants an orderly and open Renminbi gold market with satisfactory gold market laws as to protect all wealth assets. A gold market where all underground speculative activities are strictly forbidden. They invite all foreigners to gradually participate in this gold market with emphasis on the free floating valuation of physical gold. This is in 100% contrast with the de facto dollar’s gold pricing and gold policies. The dollar system doesn’t want your wealth assets to be protected with gold. One day, the masses will embrace China’s gold policies and leave the international $-reserve for what it never was (hard currency). The Western giants, indeed anticipated this all along with stealth accumulation of physical gold in their private vaults. They know the day of reckoning comes near.
This article was written by Koos Jansen and originally published at In Gold We Trust