Strongest Gold “Buy” Signal In 16 Years

by Dave Kranzler, Investment Research Dynamics:

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. – Alan Greenspan, “Gold And Economic Freedom,” 1966

Anyone who was involved in the financial markets during Greenspan’s tenure as Chairman of the Federal Reserve would be shocked to see that comment above coming from Greenspan. He was, after all, the king of the printing press until his successor, Ben Bernanke took over the role of chief money and credit creator.

While it might not show up in the Fed’s “M” accounts, which are various measures of the “money supply,” Greenspan’s Fed shepherded in an era of unprecedented growth in systemic debt – private and Government – and unprecedented decline in credit standards. By the end of Greenspan’s reign of monetary terror, anyone with no more than two nickels to rub together could qualify for a credit card or mortgage.

The graph above shows total debt outstanding system-wide in the U.S. during Greenspan’s Fed. The level debt increased 400%. GDP? Not so much. Real GDP is said to have grown about 85%, but this metric is overstated by the amount that the Government underestimates the true inflation rate and by gimmicked changes to the GDP calculation for purposes of political expediency.

Debt issued behaves like printed money until that debt is payed back. That’s the dirty little secret that bona fide economists don’t discuss, at least in public. See the problem in the graph above? The level of debt NEVER declines. The small blip down in 2010 was a result of $100’s of billions in bank write-offs for defaulted mortgages, credit cards and auto loans. In order to measure the true money supply, it’s necessary to add to together the Fed’s “M” accounts plus the incremental increase in the level of debt each year.

But all of this is unnecessary in a system backed by gold. “Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset” (Greenspan, ibid).

In other words, the massive credit-induced bubbles that occurred during the Greenspan/Bernanke era, each progressively worse with worse consequences when they burst, could never have occurred if a gold standard were in place. AND THEREIN LIES THE REASON GOLD IS REVILED BY WALL STREET AND SUBJECTED TO GOVERNMENT/CENTRAL BANK PRICE CONTROLS: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation…This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard” (Greenspan, ibid).

In this last episode of the Shadow of Truth, we discuss the manipulation of gold, directly and via targeted fake news reports about the gold market, and explain why gold is signalling one of its strongest “buy” signals in the last 16 years:

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