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The Mega Commodity Move: Why it’s Happening

Courtesy of www.adenforecast.com

The precious metals have been soaring. Gold, silver, platinum, palladium… you name it. If it’s a metal, it’s been booming. The same is true of other commodities too.

So are commodities the new bubble? Have they replaced the real estate bubble, which replaced the tech stock bubble, as investors move from one bubble to another? It sure looks like it. But the big difference is that this metals and commodities bubble has a lot further to go. Why?

THE PERFECT STORM

Basically, the perfect storm has been gathering and it’s going to fuel a mega rise that will likely last for years to come. We’ve often discussed the most important reasons why but since these markets have been picking up steam, we’ll review these basics again.

Most important is China and other growing nations, which are keeping demand and prices super strong. But also important are spending, soaring global money creation, inflation, the falling U.S. dollar and international tensions. But let’s take China first…

China power

China’s growth has been astounding at over 9% each year for more than 25 years. During that time, China has lifted 300 million people out of poverty and it’s quadrupled the average income.

This is the fastest economic growth in recorded world history. Many felt it couldn’t last, but year after year it has, and it’s going to continue.

Since wages are higher in urban areas, 500 million rural Chinese are expected to move to the cities over the next couple of decades in search of the good life that former migrants have already found. This growing middle class is proudly spending money on homes, cars and other consumer goods.

Retail sales, for instance, recently soared 20% and China has become the world’s second largest oil consumer. This huge demand for all things, from food, to oil, gasoline, metals and other commodities has been one of the main factors driving these markets higher.

The Chinese government’s top priority is to close the gap between rich and poor. And they want to make a big splash on the world stage as a major power during this year’s Olympics. But something more important is also happening.

As Time magazine points out, comparing China to the U.S., China is cramming two important eras into one. The post World War II prosperity that fueled the flight to the suburbs is coinciding with the 19th century Industrial Revolution that lured people from the farms to the cities.

THE PROPOSED IRANIAN OIL BOURSE

by Krassimir Petrov, Ph.D.

Austrian Macro Economist/Investment Strategist

Commissioned by: J. Douglas Bowey and Associates

Abstract

The American Empire depends on the U.S. dollar. The proposed Iranian Oil Bourse

will accelerate the fall of the U.S. dollar and hence the fall of the American Empire.

I. Economics of Empires

A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations or of their subjects. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military that peacefully or militarily enforced the tax. One part of those taxes went to improve the living standards of the empire and the other part went to reinforce the military dominance necessary to enforce those taxes.

Historically, taxing the subject state has been in various forms, usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, the taxation has always been direct: the subject state handed over the money (gold/silver) or the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly—not by enforcing the direct payment of taxes like all of its predecessor empires did, but by distributing its own currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of devaluing over time those dollars and paying back later each dollar with less economic goods. The difference between the value of the dollar during the initial purchase and the devalued dollar during the repayment was the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. At the time the U.S. dollar was tied to gold, so that the dollar neither increased, nor decreased its value, but was always convertible into the same amount of gold. The Great Depression with its the preceding inflation from 1921 to 1929 substantially increased the amount of paper money in circulation without the correspondent increase in gold. This rendered the effective backing of the U.S. dollar by gold impossible. As a consequence, President Franklin Delano Roosevelt decoupled the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not technically an empire. The fixed value of the dollar for gold did not allow the Americans to extract economic benefits from other countries by supplying them with gold-backed dollars.

Economically, the American Empire was born with the establishment of the Bretton Woods system in 1945. The dollar was made only partially convertible to gold—convertibility to gold was available to foreign governments only, but not to private institutions. At this time the US dollar was established as the international reserve currency. This was possible, because during WWII, the United States had supplied its allies with food and military provisions, accepting gold as payment, thus accumulating significant portion of the world’s gold.

Half of gold in central banks gone?
Watchdog: ‘We want to expose and stop the manipulation’

U.S. central banks may have less than half the gold they claim to possess in their vaults, charges a watchdog group in an ad scheduled for publication in the Wall Street Journal this week.

As WND reported, the Gold Anti-Trust Action Committee, or GATA, claims the Federal Reserve and the U.S. Treasury are surreptitiously manipulating the country’s gold reserves by participating in undisclosed leases, according to an advance copy WND obtained of the ad running in Thursday’s edition of the Journal.

GATA believes much of the borrowed gold out on lease will never be returned to the central banks.

“With the demand for gold so strong worldwide, it has become impossible to return much of the leased gold without driving the price to the moon,” said GATA’s chairman, William J. Murphy III.

“Most observers calculate central bank reserves are supposed to have about 30,000 tons of gold worldwide in their vaults, but we believe the amount of gold actually there may be more like 15,000 tons,” Murphy said. “The rest of the gold is gone.”

The U.S. Treasury denies the claim, insisting the stock is accounted for regularly.

(Story continues below)

“We want to expose and stop the manipulation of the gold market by the United States Treasury and Federal Reserve right now,” Murphy said.

“The purpose of this ad is to wake people up in the investment world as to what is going on behind the scenes in the U.S. gold and financial markets,” Murphy told WND.

He explained GATA has decided to pay the Wall Street Journal $264,000 for a one-time placement of the full page ad in the national edition because the financial press has not covered the story.

“We have had two major international conferences since 2001; the mainstream financial press has blackballed our message,” Murphy explained.

“Anybody Seen Our Gold?” the ad is titled, charging U.S. gold reserves held at depositories such as Fort Knox or West Point may have been seriously depleted as they are shipped overseas to settle complex transactions utilized by the Federal Reserve and the U.S. Treasury to suppress prices.

GATA further charges the U.S. government strategy to manipulate the price of gold has begun to fail.

What is Money?“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.” — Thomas JeffersonToo few Americans realize why our nation’s founders wrote into Article I, Section 8 of the U.S. Constitution: Congress shall have the Power to Coin Money and Regulate the Value Thereof.Since 1913, with the creation of the Fractional (Federal) Reserve Banking system, the United States Congress no longer possesses this power. On December 23, 1913, President Woodrow Wilson signed into law the Federal Reserve Banking Act, delegating this power to a collection of privately owned banks that are governed and regulated by what is known simply as the Federal Reserve – a parent corporation. “The regional Federal Reserve banks are not government agencies… but are independent,
privately owned and locally controlled corporations.” – Lewis vs. United States, 680 F. 2d 1239 9th Circuit 1982An Adequate Money Supply Money, the means of all commercial trade except simple barter, is the measure and the instrument by which one product is sold and another purchased. Remove money or even reduce the supply below that which is necessary to carry on current levels of trade, and the results can be catastrophic. For an example, we need only look at America’s Great Depression of the 1930’s, which was also worldwide. In 1930, America did not lack

Feb 25 2008 11:41AM

An Overview of Gold’s Supply & Demand

During the fourth quarter of 2007, the gold price rose a healthy 12.4% from US$742.80 to $834.90. Obviously there was strong demand for gold during the quarter for it to achieve this gain. So I was somewhat bemused when I read a recent headline on Mineweb.com announcing that “Gold demand falls 17 percent in fourth quarter”. How is it possible that demand fell when gold’s price rose 12.4%?

Price is of course a function of supply and demand, but the supply of gold didn’t drop during the quarter and make gold more scarce. Its supply actually rose by approximately 620 tonnes, which is the amount of newly mined gold added to its aboveground stock. It is therefore self-evident that for gold’s price to rise during the quarter, demand rose too.

I therefore ‘clicked’ the article to read Mineweb’s analysis to see how it reached its erroneous conclusion about demand. It turns out that Mineweb was just reporting information from a press release of the World Gold Council.

Gold is one of the world’s most misunderstood asset classes. This press release by the World Gold Council no doubt added to that confusion, which arises because so many people – including many people within the gold industry – refuse to acknowledge that gold is money. They attempt to analyze gold as if it was a mere commodity with some jewelry fabrication and unimportant industrial application instead of what it really is – money.

Any good, service or commodity has value if it is useful. Gold’s value derives from its usefulness as money. In other words, gold’s value arises from its usefulness in economic calculation. This point is self-evident from the following chart, which presents a Base-100 analysis of the price of crude oil in terms of US dollars and goldgrams.

When viewed in terms of gold, the price of crude oil is essentially unchanged throughout the six decades presented in this chart. It is the dollar that is volatile, not gold. Economic calculation becomes sensible when prices are viewed in terms of gold, which provides a stable purchasing power over long periods of time.

So what makes gold money? In a nutshell, we do. Each and everyone one of us who recognize gold’s usefulness in economic calculation makes it money. We therefore hoard gold. It is accumulated, in contrast to all other commodities as these are consumed. But gold doesn’t disappear. All the gold mined throughout history still exists in its aboveground stock, except the minute amount lost along the way in shipwrecks, coin abrasion and the inconsequential weight of gold used in industrial applications which is not recycled. Gold’s supply is therefore its aboveground stock because newly mined gold is indistinguishable from gold mined hundreds or even thousands of years ago.

On the other side the equation, the demand for gold comes from each and everyone of us who hold it because of its usefulness. That usefulness arises – as shown in the above chart – from gold being money.

Given the above, there is only one way to determine gold’s price. It requires analyzing four forces. These are the aboveground stock of gold, the stock of national currency, and the respective demands for gold or currency. The interaction of these four forces determines the price of gold, or to be precise, gold’s rate of exchange to a national currency.

Gold is free-market money, which stands in marked contrast to national currencies which circulate by force of legal tender laws and similar heavy-handed government edicts. It isn’t governments that make gold become money – we do that. Collectively we give gold its value, and given its rising price, we know that the demand for national currencies is falling while the demand for gold is rising. I expect that relationship to continue, which means that rising demand for gold will continue to drive its price higher in the months and years ahead.

*****

by James Turk
Copyright © 2007 by James Turk. All rights reserved.

Buying Gold Bars

The following article is an original from the Superior Gold Group, you can contact us for all of your precious metals investment needs.

Since gold is one of the purest forms of wealth, those wanting to diversify an investment portfolio may look to buying gold bars. The value of gold bars has increased over the years making it an excellent and solid choice as an investment purchase.  In fact over the past seven years the cost has almost tripled.  Considering the price of gold and the value of gold is based on buy sell tactics, gold bars are an excellent asset to an investment portfolio. It is important however to determine what the long term investment goals are as well as expectations prior to investing in precious metals. 

Gold bars are priced according to weight. All gold bars must be.999 pure gold. In addition authentic gold bars have a government mint or a brand approved by Comex. Examples of approved brands include Credit Suisse, Degussa, and Engelhard to name a few. Research the completed list of approved brands prior to purchasing. Do not hesitate to ask the investment firm about the brand. A well informed investor is a wise investor.  Generally the brand of gold bar you may receive may be based on the inventory available.  

Therefore the brand of gold bar you receive in your depository may be different from what you think you are investing in. Again ask the representative with which business is being transacted.  There are brands of gold bars which are more recognizable than others even for beginning investors. For example the world famous Credit Suisse brand gold bars are generally sold in one ounce size bars. The 24-Karat Credit Suisse gold bar is .9999 pure gold and is stamped with the official logo as well as the weight of the gold bar.

The Royal Canadian Mint gold bar is another brand easily recognizable by expert and novice investors. Like the Credit Suisse brand gold bar, the Royal Canadian Mint gold bar is also .9999 pure gold and is recognizable by the Royal Canadian Mint hallmarks which it bears.  This particular brand of gold bar is guaranteed by the Canadian government. It is prudent to become familiar with the different brands of gold bars prior to investment

Though one will want to research the different investment firms with which business will be conducted, the actual process of purchasing gold is a fairly simple one. Gold buillion bars can be purchased directly from a mint, a dealer, or an investment firm. 

Once the decision has been made to invest in gold bars, and the designated investment firm has been selected, the next step is to request the necessary forms. Once the forms are completed and returned to the firm, the selection of the acquisition will be made. Some firms offer the complete service of acquisition, delivery, and storage to a designated depository.

There are many sites that allow investors to bid on gold bars. It is advisable for new investors to invest wisely by working with a reputable firm or mint. By working directly with an established dealer, investment firm or representative of a mint, investors can acquire information and obtain a bit of education regarding a precious metal investment.

Physical Gold IRA vs Traditional IRA

With today’s economy and the state of the nation, the consideration of Physical Gold IRA’s compared to Traditional IRA’s are something to be considered. Where Traditional IRA’s are tied into the value of other papers and funds, this is not the case with a Physical Gold. The value and price of gold is based on the buying and selling of the investors.

Traditional IRA’s are tied into the value of stocks, bonds, and other papers that by theory offer a return on the value. Physical Gold IRA’s on the other hand is considered a store of value.  Gold is said to be the perfect investment

It doesn’t take a savvy investor to recognize what is going on with the economy. Consumer watch daily as the stocks dive and rise leaving investors confused as to their next strategic move. More people are turning to a more reliable and whole form of investment in buying gold bullion.

There are several high points to buying gold bullion. First of all and most importantly Gold Bullion is a tangible asset. Secondly the value and price of gold bullion increases

How to Put Gold and Silver in an IRA

Considering today’s economy and the state of the nation, now is an excellent time to consider putting gold and silver into an IRA. In fact there are several different types of precious metals which one might consider to back an IRA.

Gold Eagles were actually earmarked specially with IRA’s in mind. This particular group of gold coins is instantly liquid and is exempt from confiscation under the act instituted by Franklin Delano Roosevelt in 1933. Additional coins which may be considered to back IRA’s are the Perth Mint’s Lunar Series, Gold Harmonikers, the Gold Maple Leaf, Philharmonikers, and Kangaroo Nuggets. These coins are allowed because of their degree of pureness and the fact that they are considered legal tender. There is one silver coin which currently may be used to back IRA’s and that is the Silver Eagle.

Once research has been done on the type of precious metals one wants