Our time is running out - Money vs Gold - 2016-09

PDF: tinyurl.com/Money-vs-Gold Our time is running out … The inevitable collapse of an inherently flawed systemOur financial system, our whole economy even, is in the middle of an alarming crisis.That’s probably not a big surprise to anyone who is watching our world and currentevents somewhat critically. Yes, even our politicians and the professional economicresearchers and scholars have been lamenting and discussing that something has to bedone about these problems for so long that nobody is even listening anymore. This isthe new normal after all. …Occasionally during the past few decades they even tried todo something about it, with one reform after the other. It obviously did not do muchgood, quite the contrary. We are still suffering from the same structural problems of ourfinancial and monetary system we already had to experience so vividly during the latestfinancial crisis of 2008. Today, as in 2008 and way before then, these ever-worseningproblems and crises always have the same origins.Slowly but surely our financial and economic systems are going down the drain and theresponsible problems have been plaguing us for many years. Even though or maybebecause these problems are rather obvious no one is talking about them; is calling themby their real name and bringing them to light. That would be rather inconvenient after alland rocking the boat does not tend to make you a lot of friends. On the other hand whatpoliticians, experts and the media love to talk about are all the apparent symptoms wehave to endure on an increasing scale and also provide an abundance of material fornever ending debates, blame, denials, political promises and lots of sold newspapers…By now, we are all too familiar with all the popular buzzwords and these topics are ofcourse important, but it is imperative that we keep the difference in mind between thereal – but almost religiously ignored – causes and the superficial symptoms that arepresented to us by politics and the media, as well as their so called cures or solutions. -1- Summer 2016

National debt, debt bubbles, financial & economic crisis, bank failure, quantitativeeasing, ban on cash, deposit insurance, negative interest rates, inflation/deflation, bail-out and bail-in, … The list of these buzzwords that are circulating in the media withincreasing frequency since 2008 is as long as it is for most people cryptic. This situationis also being regularly exploited and even encouraged by policy makers and the powerelite on the highest political and financial levels. Primarily of course because an obscureand incomprehensible financial and monetary policy can be implemented by thelegislature with much more ease and less questions and resistance. Usually for the benefitof the same power elite on the highest levels while the common citizens and savers haveto foot the bill, directly or indirectly, for the increasing costs of these policies.The frequency and intensity of said symptoms is increasing noticeably and illustratesclearly the alarming deterioration of our global financial system, resulting in ever moredrastic panic reactions both in politics and high finance. Besides the worrying, almostsurreal efforts to limit the use of cash more and more, there are also extremely troublingdevelopments regarding deposit insurance and joint liability of private savings in favor ofthe big European banks.While the complete abolition of cash is most probably not a real and tangible danger(yet), there are observable trends and intentions to discredit cash as outdated andirrelevant. Even a partial marginalization of actual cash for the benefit of digital bankdeposits and transfers would represent a substantial damage for the already poorpreservation of the value of our currencies and savings.1Special risks arise due to the de facto surrender of private savings to political whims ofmonetary and fiscal policies, i.e. inflation, negative interest rates or even bail-ins.Additionally these policies will result in further risks and threats for our civil rights dueto increased limitation and even invalidation of our privacy. (cf. „surveillance society”)Much more concrete on the other hand is the threat for the capital and wealth of the(European) citizens, most recently originating from developments in Germany. In anofficial and therefore for banks legally valid interview with the German newspaper FAZ(January 25th, 2016)2 the minister of finance, Mr. Schäuble stated that the so called“common deposit guarantee scheme” or “mutual deposit guarantees” will happen.Effectively allowing all European banks to consider the entire German private capitaland savings in their accounts, about 2.000 billion Euros, as security or collateral. Thisstatement and decision was most definitely much appreciated by the ailing banks in Italyand other heavily indebted, practically insolvent countries, since it saved themtemporarily from an otherwise certain collapse while the German saver – without evenknowing anything about it – is liable for the considerable risk and eventually also theimmense cost of such a rash decision.3 (cf. „moral hazard“)1 http://dailyreckoning.com/heres-where-nirp-leads/ or http://www.misesde.org/?p=11929 (German - Prof. Polleit)2 http://www.bundesfinanzministerium.de/Content/EN/Interviews/2016/2016-02-08-faz-europe-between-vision-and- reality.html3 http://deutsche-wirtschafts-nachrichten.de/2016/01/26/schaeuble-gibt-deutsche-sparguthaben-als-pfand-fuer-euro-risiken-frei/ -2- Summer 2016

Another grave „problem“ (although actually ‘only’ a symptom) we all have to endure assavers and taxpayers is also rather well known by now and has been discussed at length,but by no means productively or even successfully: The exponentially increasing nationaldebts on a global scale are one of the biggest challenges for our societies, but like withmost other related topics they are perfectly content to just tinker around on the surface,primarily for the benefit and with almost full support of a compliant media, and to justkeep blaming each other in public spectacles. Far be it for them to actually investigatethese issues and getting to the bottom of the real problems.It might sound tremendously tempting but the astronomic mountains of debt of ourgovernments simply can’t be explained solely by their incompetence (which would bebad enough) or the wasteful nature of politics in general. It might be very well true thatthere are hardly any politicians (at all) who wouldn’t support any program or any kind ofspending of public or rather taxpayers money as long as he (or she) gets a few morevotes or a nice contribution for the next election, sometimes even a little something forthe personal bank account. But even these troubling practices cannot be held solelyaccountable for the continuing explosion of our national debts.4Nevertheless, it would be prudent to also include the mentioned weaknesses and flawsof the nature of politics or rather of human nature into our considerations, since they arealso able to help us discover and understand the historic origins of our current financialcrisis… After all, we all know that, if you want to solve a crime – and that’s what we aretalking about here – one has to follow the money: „Who profits?” “Toward gold throng all, To gold cling all” Expression freely adapted from Johann Wolfgang von GoetheNow, if we ask ourselves who is actually profiting from our current global monetarysystem and subsequently also how this system came into existence in the first place wesoon discover several very interesting facts. Facts that are usually only whispered aboutbehind closed doors in very private rooms.The first rather obvious clue points us to one of the central causes of our perpetualfinancial crisis, a crisis that has, in fact, been going on for many decades. This clue hasbeen hiding quite inconspicuously in plain sight; to be precise it can be found in thepiggy banks, bank accounts and wallets of us all. The coins and banknotes issued by thegovernments and banks, known to us as Euros, Dollars, Pounds, Francs and so on,commonly referred to as ‘Money’, are at the very source of most of the problems wehave and had to deal with at an increasing frequency. Surely not because it is somethingbad or even evil by itself, as some people are trying to convince us pleadingly. No, as amatter of fact the opposite is the case.4 http://staatsschulden.at - http://www.staatsverschuldung.de/ - http://www.usdebtclock.org http://demonocracy.info/infographics/usa/world_debt/world_debt.html http://www.nationaldebtclocks.org/debtclock/slovenia -3- Summer 2016

Money, sound Money, is a necessary requirement for a healthy and fair economy andsociety. Sadly, the banknotes and coins issued by today’s national Fiat currencies (seebox) and used by us all on a daily basis only have some superficial similarities left withactual and sound money. Our currencies might have had their origins in real money along time ago but over the years and decades they have been continuously altered andperverted until even the last tender connection was lost in the 1970s. Thus also finallylosing the ability to fulfill their original and most important function as a reliable andstable medium of exchange and store of value.But since we have all been told the same story or rather Fiat currency (or Fiatmyth over and over again that our banknotes and coins money) refers to stateare still “real money” it doesn’t even occur to most issued and unsecuredpeople to think about or question our currencies and paper money since itstheir legitimacy. If more people understood the fact that validity only rests on aour so called money is nothing but an empty Fiat legal decree [Lat. fiat =currency anymore and what the dire consequences of „Let there be“] and doesthis elemental difference for our financial system, our not have any intrinsicsociety and daily lives are “…there would be a revolution value by itself.before tomorrow morning.” [Henry Ford, american Paper MoneyIndustrialist] (Fiat Currencies)On August 15th 1971 the last fragile bond, that our Medium of Exchangeglobal currencies had to physical Gold (through the US Unit of Account PortabilityDollar) was separated and caused them to transform or (Limited) Durabilityrather mutate from sound money, backed by real values, Divisibleinto hollow Fiat currencies and the Bretton Woods FungibleSystem that has been in effect until then finally +collapsed.5 Escalating Money Supply InflationAs a result of this monetary degeneration the citizens Long-term Depreciationhad to practically surrender themselves financially andeconomically to the arbitrary power and mercy of banks Historically a 100% Default Rateand politicians. If you then include the mentionedweaknesses and flaws of the political system (i.e. of Goldhuman nature) and that the value of our ‘money’ is not (Real Money) Medium of Exchange Unit of Account Portabilitydetermined anymore by its intrinsic value but depends Durabilityon the political trust in the government and its ability to Divisiblemanage a country effectively and sustainably and of Fungiblecourse also the power to tax their citizens, theunavoidable long-term consequences should become +perfectly obvious. Limited Supply Stable Purchasing Power Long-term Store of Value Accepted Worldwide5 http://wiki.mises.org/wiki/Bretton_Woods_System -4-Summer 2016

The end of the gold standard also removed the last obstacle for certain influential peopleat the private US central bank (the “Federal Reserve”) and the political elite who, drivenby rather questionable motives, preferred to implement a much more casual, evenindifferent policy regarding the national money supply as well as the management of thenational debt. Regrettably this forced every other country around the globe, sooner orlater, to practice the same flawed monetary policies to keep their own economiesrunning in an increasingly global world.The highly interesting and fascinating tale about the history of this landmark eventshould be a required part of our general knowledge, especially today. Sadly, even a meresuperficial explanation of this topic would be way too extensive for the current purpose.But I would at least like to point to two books that offer excellent narrations of thiscolored story and have been considered true classics for many years, a true requiredreading on many levels.6 „What Has Government Done to Our Money“ by Murray N. Rothbard „The Creature From Jekyll Island“ by G. Edward GriffinSince money is playing an important role in almost every aspect of our personal andsocial lives, the inherent consequences of this global Fiat money system can be felt incountless areas, even though we cannot always recognize their true origins right away.One of the most obvious effects is surely the continuous depreciation of our ‘money’since the Federal Reserve started to play God with it over a hundred years ago…6 What Has Government Done to Our Money?: https://www.amazon.com/dp/1987817931/ https://mises.org/library/what-has-government-done-our-money (free of charge) The Creature From Jekyll Island: https://www.amazon.com/dp/091298645X/ https://archive.org/details/CreatureFromJekyllIslandByG.EdwardGriffin (free of charge) -5- Summer 2016

Since the founding of the Federal Reserve in 1913 and the subsequent beginning of theirefforts to implement a monetary policy best described as ever more casual and surelymore profitable for the big banks, the US Dollar (as the longest existing currency) hasalready lost more than 97% of its true value and purchasing power.For example in 1914 the price for a regular car like the Ford ‘Tin Lizzy’ was about 370Dollar while in 2014 a regular car like the Ford ‘Galaxy’ would cost almost 24.000Dollar! We need to bear in mind that both amounts equal at their time about 18,5ounces of Gold. In spite of or rather thanks to the immense technological progress bothcars still represent approximately the same real value, just not in Dollars.It is not enough that we are forced to helplessly watch the continuous depreciation ofour capital or having to try to compensate this loss by Inflation:working more and longer and by getting an occasional pay The general andraise. No, since this depreciation always happens with a ongoing expansion ofdelay, those who happen to receive the new money from the the money supply.central banks first (i.e. the big banks and the government) are The general rise ofable to profit from it while we, the regular employees or even prices is the result ofretirees, receive this money last and have to bear the whole Inflation.inflationary loss of value.This depreciation becomes especially obvious with the formation of the modern Fiatmoney system in 1971 (see above), since it allowed for the nearly unnoticeable butalmost full compensation of the occasional pay rise and the rising productivity with thecontinuing inflation. A big advantage for the big corporations and the even bigger bankssince it put them in the unique position to fully profit from the rising productivity whiletheir expenses for higher salaries did not change much in real terms. -6- Summer 2016

The astronomical national debts around the world that have also largely been possiblebecause of the abandonment of the gold standard and all the other mentionedsymptoms that are haunting us today more than ever, are effectively part of a fataldisease pattern. To get a comprehensive picture of the ongoing situation and the furtherdevelopments we also have to include the currently offered and favored ‘solutions’…  Governments are drowning in debt (which can only be serviced anymore thanks to the Zero-Interest-Rate-Policy 7)  Private and corporate credit bubbles (also a consequence of the low interest rates) are expanding at an equally alarming rate.  Numerous banks are close to insolvency due to debt overload.  Along with the growing mountains of debt the global money supply is also reaching higher and higher peaks on a regular basis.8 The logical consequence of…  the practice of the central banks to print more and more (digital) Fiat money with increasing frequency in an effort to save the economy (i.e. the big banks und governments) a bit longer from likely collapse (see also „Quantitative Easing“ 9) and  the Fractional Reserve System of the private banking industry.10  Governments and central banks plan to limit or even ban the use of cash to enforce their Negative-Interest-Rate-Policies. 1  The equally ailing public deposit insurance schemes have been replaced by private ‘deposit insurance’ reserves of the banks which, once fully funded in 2024, will cover not even 1% of the our national savings.11  As a consequence of the forthcoming „common deposit guarantee scheme“ private(!) savings will be automatically used as collateral for credit and leverage transactions of already shaky banks.3  Our governments are no longer in a position to afford any further bail- outs for the banks, which is why from now on, their customers are supposed to be paying for their recklessness and incompetence by way of so called bail-ins and negative interest rates.12 …7 http://www.cbrates.com/ - http://www.finanzen.net/leitzins/8 See Graph on Page 59 http://wiki.mises.org/wiki/Quantitative_easing10 http://wiki.mises.org/wiki/Fractional_reserve_banking and http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=30054211 http://www.efdi.eu/ - https://www.einlagensicherung.at/ (Austria)12 https://mises.org/blog/bail-ins-go-global and http://www.goldcore.com/us/gold-blog/bank-bail-ins-pose-risks-to-retail-investors-and-depositors/ -7- Summer 2016

If we examine these developments separately as well as in their clearly discerniblecommon context, an inevitable conclusion becomes quite clear.The experts of the central banks, academia and the political elite are losing more andmore control over the system they created and while they are still trying to save the shipfrom its inevitable demise they also started to panic at some point and appear to beunable to stop themselves. There seems to be no other possible explanation for most ofthe mentioned ‘solutions’, considering their absolutely abysmal success rate. Negativeinterest rates for example are an absolute first in our monetary history, a desperate cryfor help by ‘experts’ who simply do not know what they could or should to do anymore(without having to capitulate publicly since they just don’t have a clue about what’s goingon anymore).As is often the case once it becomes clear that our esteemed politicians made a mistakethis will result in serious problems and suffering for the people while the actuallyresponsible parties will deny any liability since this was “completely unpredictable”.What discerns the current situation from the usual stupidity of our politicians is thesheer magnitude of the current mess. For a bit more than hundred years we have to liveunder an economic and financial system that has been imposed on us. A system withtremendous flaws and a predictable conclusion, both of which have been deliberatelyignored since it also represented an irresistible chance for exorbitant profits for a smalland elite group of people. Furthermore this Fiat system was spread over the wholeglobe, ensuring that the entire world economy will have to suffer the consequences thistime. It is also rather likely that the full scope of these consequences won’t be apparentuntil reality has caught up with the numerous systemic errors and the global Fiat moneysystem has finally collapsed. „Gold and Silver always end up compensating the expansion of the currency supplies and the following debasement of a currency by inflationary policies. At this point the people sense the loss of their purchasing power, rush back to Gold and Silver and bid the value in their currency up until it meets or exceeds the value of all the currency in circulation. This is a process that’s been going on over and over again throughout history except today it’s happening on a global scale for the first time.“ ~ Michael Maloney ~For some deeper insights into our monetary history and a proverbial backstage pass forour modern financial system I highly recommend the excellent video series„Hidden Secrets Of Money“, produced by Mike Maloney.1313 Hidden Secrets Of Money: http://snip.ly/PO2p -8- Summer 2016

This situation we have been put in over the past decades is, as we have established,several levels beyond precarious and without drastic and most certainly painful changesof the current system there will be no realistic chance for a lasting improvement or evena “Happy End”. Which is why it is definitely not recommended to just ignore thisproblem and to bury your head in the sand. That would only exacerbate the situation,individually as well as collectively. It is very likely that the current status quo is notsustainable for much longer. Sooner or later these changes will have to happen, theresimply is no way around it. What is much more challenging is to figure out how they willactually look like in the end. Last but not least of course because the supporters andbeneficiaries of the existing system will certainly not quietly disappear into the sunset butwill try to cling to their power and influence with all the tricks and means that areavailable to them.14However you want to look at it, in any case we will have to expect the next few years oreven decades to be rather bumpy and uncertain. In the true sense of the word a time ofchange and even upheaval that will cause significant challenges and problems for mostpeople. But just as during almost every other crisis there will be those among us who willbe able to navigate and weather the coming years relatively unscathed and even turn thiscrisis into a profitable opportunity. The information contained in these pages willprovide you with the basic knowledge how to do so. An Outlook for Gold and SilverOur entire political and economic environment is verifiably stuck in a massive globalcrisis that is pretty much self-inflicted but will also have unforeseeable ramifications wewill have to prepare for individually. There are legitimate concerns that every ‘solution’our politicians and their friends will come up with are first and foremost yet anotherscheme to ensure further benefits for them while the population, at best, will be left tofend for themselves.We also determined that this crisis really got started when our once sound moneybecame a Fiat currency in 1971. Sure, there were plenty other developments before toworry about15, but once our currencies lost their last bond with Gold our fate was prettymuch sealed, whether we knew or approved it or not. But this crucial event alsoprovides us with the logical solution that will enable us to protect ourselves from thisludicrous and dangerous monetary experiment and the national debt policies, that ourcentral banks and governments have invented.Even though our governments and central banks have abandoned the gold standard along time ago, Gold is today, as it was for the past 5000 years, the most effective tool to14 http://dailyreckoning.com/triffins-dilemma-and-the-future-of-sdrs/15 See Graph on Page 5 -9- Summer 2016

protect yourself as an individual from the exponential depreciation of government issuedFiat currencies and to preserve the value of your hard-earned capital and savings for thelong term.The huge long term impact of such a depreciation of the price of any product orcommodity can, for example, be clearly seen in this historic chart of the inflation-adjusted price for Gold in US Dollars…Although the price of Gold reached a new nominal all-time high of 1.900 US Dollar afew years ago (twice as much as the past peak of 800 Dollars during 1980) it is of coursenecessary to also account for the continuous and expanding inflation. Especially sincethe consumer price index (CPI) that is used to calculate the inflation continuouslychanges according to the whims and desires of the government economists andbureaucrats so they can present the political or economic result of their choiceIf we use the original CPI of 1980 to calculate this inflationary effect the difference forthe actual historic value of Gold becomes glaringly obvious. As the chart above showsthe actual peak in 1980 (inflation-adjusted) was at about 9.000 US Dollar in real terms.This should also clearly demonstrate that Gold is evidently not in a “bubble” but isactually still quite affordable, cheap even.However, the expanding inflation is only one of many factors that are influencing theprice of Gold. Gold still obeys the same basic economic laws of supply16 and demand17,just like any other product or commodity but on the gold market, similar to several othermarkets, periodic ‚interventions‘ (i.e. manipulations) are rather common. On the one16 http://demonocracy.info/infographics/world/gold/gold.html17 www.insignitus.com/de/gold-vs-geld/der-goldmarkt-angebot-und-nachfrage/?x=Janus (German) - 10 - Summer 2016

hand through somewhat covert but incessant interferences by big banks on the goldmarket18 and on the other through considerable sales of Gold by western central banksto Asian buyers19 over the past few years. Thanks to these foolish methods the bankswere and are still able to artificially suppress the price of Gold. After all, Gold was andstill is an important indicator for inflation and panic on the financial markets, which is ofcourse why central banks are trying to keep the markets with such manipulations undertheir alleged control as long as they possibly can. But these efforts are most likely notsustainable for much longer, as we can conclude from the increasing and escalatinganxiety on the global financial markets.Another critical result of these manipulations that also points toward an impending endof the artificially suppressed gold price is the rapidly Derivative:expanding disparity between the existing gold derivatives on A (financial) product,the global financial markets (“Paper Gold”) and the actual whose price isphysical Gold that is available on the markets as collateral dependent on orfor these derivatives. For example, at the bullion market in ‘derived’ from theLondon they now trade contracts for 200% of the global price of an underlyingyearly mining production on a daily basis.20 product or object.A similarly alarming situation is happening at the bullion market in New York, theCOMEX. At the end of last January the combination of a record low for physical goldon hand (only 74.000 ounces!) and open (paper) contracts for 40 million ounces resultedin another new record of 542 owners for each ounce of real physical gold!2118 www.insignitus.com/de/gold-vs-geld/goldpreismanipulation/?x=Janus (German)19 http://dailyreckoning.com/coming-gold-super-spike/20 http://www.safehaven.com/article/39627/londons-lbma-and-new-yorks-comex-gold-markets-in-collapse21 http://www.zerohedge.com/news/2016-01-26/comex-snaps-gold-dilution-hits-record-542-oz-gold-claims-every-ounce-physical - 11 - Summer 2016

As if the chaos on the paper markets was not enough, the fundamental supply anddemand situation on the gold market got even worse because of the falling number ofnewly discovered gold deposits over the past few years. Because of the decreasing priceof gold in the past few decades the amount of capital invested into exploration of newdeposits fell as well. Which is why we already passed “Peak Discovery” in 1995 and theprojected “Peak Production” in 2015. Considering the extremely long developmentcycles of new gold deposits from discovery to full-scale production the projectedproduction rates will therefore also be in considerable decline for several years.2222 www.goldcore.com/us/gold-blog/peak-gold-in-2015-goldman-sachs-research-warns-of-peak-gold-production/In conclusion of this argument we can safely establish that each of the aforementioneddevelopments is already rather compelling in itself. But if we consider the significantconnections between them we simply have to conclude that the overall picture andoutlook for the price of gold will, sooner rather than later, become exceedingly bullish.Because of the exponentiation of these developments the most likely subsequentscenarios will certainly be severe if not even revolutionary – not just for the gold marketbut for all financial markets around the world and hence also for our national economicand monetary policies.Independent of however volatile and uncertain our financial future will be, gold willreclaim its natural role as the one and only true and sound money in this ongoing crisis –as it always did in recorded history. \"There is no better and more effectivealternative than Gold and Silver to protect your wealth! Every person should own a basic minimum of at least 2 - 3 monthly salaries in physical Gold!\" Insignitus GOLD is available in Austria, Germany, Slovenia and Serbia - 12 - Summer 2016