The Road to Bullion Default: Part I

Momentous events have taken place in global markets. With both the U.S. and EU announcing “open-ended”/”unlimited” money-printing (respectively); the exponentially increasing money-printing taking place in bankrupt Western economies has escalated to simply infinite money-printing.

This is nothing less than a death-knell for all Western fiat currencies, and our final warning that hyperinflation is now an inevitable fate. All that remains is for the (currently) clueless masses to realize that the paper they are carrying in their wallets is (in fact) nothing but paper – and then our own, modern Tulipmania will come to an ignominious end.

Gold and silver prices naturally reacted to this monetary insanity by jumping higher, reflecting the explosion which must take place in most asset prices; as our paper currencies plunge to their real value: zero. However, the rally was halted by a desperate counter-attack on bullion markets – with the result being that bullion prices have now trended sideways to lower for the past several weeks.

It’s important for readers to understand that there is no way the newly-announced money-printing has been (or could ever be) “priced into” metals markets. As the simplest of tautologies, you can never “price in” infinity into any market. Open-ended/unlimited money-printing means nothing less than an endless spiral higher in asset prices – until all this banker-paper meets the same fate as all previous fiat currencies: utter worthlessness.

Obviously, over the short term asset prices have not been allowed to move higher.  The mechanisms for this manipulation are now well-known to sophisticated investors. While manipulative automated-trading algorithms allow the banksters to lead market Sheep around like the Pied Piper; the banksters’ massive derivatives casino literally allows the bankers’ gambling on our markets to dominate the markets themselves.

However, as I have explained on several previous occasions; there is a (huge) price to pay for such manipulation. The low prices resulting from the banker-manipulation in their derivatives casino must lead to the destruction of inventories; with the long-term result being even higher prices than if no manipulation had taken place in the market at all.

This naturally leads inquisitive readers to ask the obvious question: as inventories collapse, how/when will a default occur in bullion markets? Here we must make a broad distinction between the gold and silver markets.

In the gold market, gold’s status as the world’s best money has resulted in near-perfect conservation of this metal. Put another way, it is at least theoretically possible for nearly every ounce of gold ever refined to be collected into a single stockpile. On a practical basis, much (most?) of the world’s gold is contained in precious cultural artifacts and/or heirloom jewelry; and would/could never come onto the market at any price. However, there can be no question that large stockpiles of gold do exist that could come onto the market.

The situation is entirely opposite with the silver market. Nearly a half-century of concerted manipulation of this market has resulted in most of the world’s silver (literally) being “consumed”. It has been used in a plethora of industrial products – generally in tiny amounts – and most of that silver is now scattered around the world’s landfills, in microscopic concentrations.