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Ron Paul: Why Gold is Good Money


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I WAS told last year by the Chairman of the Federal Reserve that gold is not money, a position which central banks, governments, and mainstream economists have claimed is the consensus for decades, writes Congressman Ron Paul.

But lately there have been some high-profile defections from that consensus. As Forbes recently reported, the president of the Bundesbank (Germany's central bank) and two highly-respected analysts at Deutsche Bank have praised gold as good money.

Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history. Gold rose to nearly $1800 an ounce after the Fed's most recent round of quantitative easing because the people know that gold is money when fiat money fails.

Central bankers recognize this too, even if they officially deny it. Some analysts have speculated that the International Monetary Fund's real clout is due to its large holdings of gold. And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.

Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.

This is why it is so important to allow people the freedom to choose stable money. Earlier this Congress I introduced the Free Competition in Currency Act (H.R. 1098) to permit people to use gold as money again. By eliminating taxes on gold and other precious metals and repealing legal tender laws, people are given the option between using good money or fiat money. If the government persists in debasing the Dollar – as money monopolists have always done – then the people would be able to protect themselves by using alternatives such as gold that are both sound and stable.

As the fiat money pyramid crumbles, gold retains its luster. Rather than being the barbarous relic Keynesians have tried to lead us to believe it is, gold is, as the Bundesbank president put it, "a timeless classic." The defamation of gold wrought by central banks and governments is because gold exposes the devaluation of fiat currencies and the flawed policies of government. Governments hate gold because the people cannot be fooled by it.

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money used to be made out of gold .. but it isnt any more ..

thats like saying paper is money because money is made out of paper now

gold retains its luster as fiat currencys devalue .. well so does a cheesburger retain its luster .. probably more than gold does ..

the fiat structure doesnt crumble it just restructures as needed ...

if they would quit giving money away for free it wouldnt lose value

democrats social policies giving away hard earned dollars for free are whats devaluing our currency

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we can always start giving away gold for free to the bums and see how it retains its luster ..just for an experiment ..,

if the money system fails which i dont think it can .. but if it fails ,, do ya think the democrats will just give up giving away things for votes .. like gold .. if gold is money .. they will be saying ok we need to raise gold taxes again and give it to those who dont have any .. then they will vote for them of course .. .. once everyone has gold ..then what ,...they spend it .. all that does is make money out of gold .. instead of paper .. thats it .... cows are money ..now what .. ron paul isnt very bright he just thinks he is .. and he preys on those who have no proper education .. hes an activist ..

go buy some gold .. then go sell it a hour later .. you will most likely lose money.. because gold is not money ..its something that profits are made from.. like a cheesburger.. you need food ,, but you dont need gold

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Dontlop Good Luck With Your Cheese Burgers!!! biggrin.giflaugh.giftongue.gif

Ron Paul Knows That The Fed Reserve Is Giving Bogus Paper DIRECTLY To The Big Banks... The Poor People Never Touch It, Or See It.

QE III Is A Last Minute "Money Grab" By The US Banks And The Government... I'll Bet They ARE Buying Gold For Themselves. Not Cheese Burgers. LOL

That Is What Is Crashing Our Dollar And The Rest Of The World Knows It. Sorry You Haven't Figured It Out Yet... But You Will. rolleyes.gif

"Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow."

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qe3 is nothing more than redistribution of the wealth .. its an obama thing ..

they print up money which devalues all the rest of the money by the same percentage of money supply they print.. obamas goal is 4.6 trillion all together.. hes already printed over a trillion in qe1 and qe2 .. ..

his philosophy is if the rich wont come off their money piles ,, he will devalue the money by printing more .. so its simple math from there

if you had a hundred billion dollars and obama devalued it by 20% .. you would still have the hundred billion dollars but its only worth 80 billion now .. and the newly printed bills will be distributed through the us treasury to the federal reserve and on to the banks .. each step of the way adding to the interest on that money .. im not sure what the fed is loaning money for these days .. but they loan to banks very cheaply at small interest rates ..the banks increase their rates to the customer .. they make money off the interest rates thats why they scoop it up as you say ..to make money ...and at thoselow interest rates its hard to get a loan.. everyone wants to borrow it all ..look at all the smaller loan places .. that charge 15 to 18% interest rates .. they want it all.. funny how ya cant get a loan from a bank .. but you can get a credit card almost instantly .. and in some cases you can get them instanntly

its your money .. if you want to buy gold and pass it around that the fiat currency system is going to fail .. thats up tro you .. join up with those who are putting out those articles and pass it around to buy gold ..

show me one government website that says the fiat system is going to fail ..

i know i know .. its the govt thats behind it .. ok go buy gold and put it in a pile .. that will make everything work ...lol.. guess what all those dollars you spent on the gold are now recirculating back in the system .... but you got a pile of gold to look at till you sell it back for dollars again .. wasnt that fun.

all those gold dealers are selling gold .. for what ? ,,>>>>money thats what ...the stuff you say is worthless ....your money is worthless but we will take it .. here go hold on to this gold and when you want your money back bring in your gold and we will give you the going rate of exchange..

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qe3 is nothing more than redistribution of the wealth .. its an obama thing ..

they print up money which devalues all the rest of the money by the same percentage of money supply they print.. obamas goal is 4.6 trillion all together.. hes already printed over a trillion in qe1 and qe2 .. ..

his philosophy is if the rich wont come off their money piles ,, he will devalue the money by printing more .. so its simple math from there

if you had a hundred billion dollars and obama devalued it by 20% .. you would still have the hundred billion dollars but its only worth 80 billion now .. and the newly printed bills will be distributed through the us treasury to the federal reserve and on to the banks .. each step of the way adding to the interest on that money .. im not sure what the fed is loaning money for these days .. but they loan to banks very cheaply at small interest rates ..the banks increase their rates to the customer .. they make money off the interest rates thats why they scoop it up as you say ..to make money ...and at thoselow interest rates its hard to get a loan.. everyone wants to borrow it all ..look at all the smaller loan places .. that charge 15 to 18% interest rates .. they want it all.. funny how ya cant get a loan from a bank .. but you can get a credit card almost instantly .. and in some cases you can get them instanntly

its your money .. if you want to buy gold and pass it around that the fiat currency system is going to fail .. thats up tro you .. join up with those who are putting out those articles and pass it around to buy gold ..

show me one government website that says the fiat system is going to fail ..

i know i know .. its the govt thats behind it .. ok go buy gold and put it in a pile .. that will make everything work ...lol.. guess what all those dollars you spent on the gold are now recirculating back in the system .... but you got a pile of gold to look at till you sell it back for dollars again .. wasnt that fun.

all those gold dealers are selling gold .. for what ? ,,>>>>money thats what ...the stuff you say is worthless ....your money is worthless but we will take it .. here go hold on to this gold and when you want your money back bring in your gold and we will give you the going rate of exchange..

Unfortunately Dontlop, Those Dollars your in love with are buying less and less gold and All of those Big Dollar people are buying guess what?.... GOLD. China and Russia and several other countries are stockpiling Gold. China is spending All of those Dollars it holds, that are losing value, on guess what?.... Gold. China is also preparing to issue gold backed currency. that ought to put a Dent in the Dollar value. It's obvious that fiat currency is convenient but it also IS NOT YOUR CURRENCY, it's theirs. You only borrow it. These central banks run the world right now but that system is running out of gas. The real problem is that the People don't own ANYTHING, the PTB, the Virginia company and the Northern Trust own EVERYTHING. So when the currency Crashes the people will have absolutely NOTHING unless they have some Gold and some Lead!

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Unfortunately Dontlop, Those Dollars your in love with are buying less and less gold and All of those Big Dollar people are buying guess what?.... GOLD. China and Russia and several other countries are stockpiling Gold. China is spending All of those Dollars it holds, that are losing value, on guess what?.... Gold. China is also preparing to issue gold backed currency. that ought to put a Dent in the Dollar value. It's obvious that fiat currency is convenient but it also IS NOT YOUR CURRENCY, it's theirs. You only borrow it. These central banks run the world right now but that system is running out of gas. The real problem is that the People don't own ANYTHING, the PTB, the Virginia company and the Northern Trust own EVERYTHING. So when the currency Crashes the people will have absolutely NOTHING unless they have some Gold and some Lead!

lol

id rather have something of lesser value to trade "if " the monetary system were to fail .... having gold would be like walking up to a childs lemon aid stand with a hundred dollar bill to buy a 2 cent cup of lemon aid ..

gold is not currency .. currency used to be made out of gold .. but its supply is limited .. theres not enough to go around to use it for currency ..

say you have hundreds of trillions of dollars worth of fiat currency existing in the world .. but only 10 trillion worth of gold .. now what ..

gold is being bought up for manufacturing purposes .. and being used for manufacturing.. .. so these countrys stock pile it ..russia and china ..lol.. did you ever stop and think about how much gold goes into the landfills each day .. year after year ?

india likes to wear it as costume jewlery .. they are buying gold too .as their economy grows in india more people have jobs and want to buy their jewlery .. its the thing to do over there ..

every computer . every cell phone .. i know each unit only has a small piece of gold in it . along with all the gold plated discarded jewlery watchs ect. .. but those little pieces add up to tons ..

i do like the monetary system .. but being in love with it ...lol not the case ..

it works ..

gold will not be used as money any more whether some people want to or not .... every thing has value ..not just gold .. money is backed by >>>>goods <<<< and services .. the goods part also includes gold .. but it also includes everything else of value ..some things have more value than others ..

did you know land is being talked about for comodity backing of currency ?

yes land .. by the acre . some land being more valuable in terms of minerals , location ect.

i dont go for the gold myself ive seen it go up and down way to many times in my lifetime ..next year the gold price could be 800 dollars ..

when gold shot up in the 80s .. anmd while it was at its high levels .. i heard the same thing from all the "experts" .. then it dropped its value in half over the next couple years .. ..

i watched the price of beef go up over the last 40 years ..if i had 10 ounces of gold in 1960 .. about 350 dollars worth .. and i owned 10 cows in 1960 ... about 350 dollars worth in baby calfs ... id have 15,000 dollars worth of gold right now .. but my cows would double each year .. id be a billionare right now ... and the price of beef also went up.. id choose the beef every time.. if you want to buy gold ..go ahead ..just remember .. if gold is in such demand .. why all the advertising ? you wouldnt need to advertise if gold is in such demand ..there are lots of people pushing gold .. and some people fall for it .... propaganda exists in every market by greedy profiteers ... its not your government telling you to buy gold .. its the dealers .. they dont sell it because they are good sameritans

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LOL but the Currency is backed by Nothing right now. I understand that it could be backed by commodities, land etc. but right now it's not. the only reason there talking about backing it with something is because it's losing favor, being printed to the point of eventually being worthless. The Gold you don't like will exchange for the appropriate value / amount of Currency so you can go buy your bread or whatever. The other thing that needs to be changed is to make it Legal again for Gold and silver to be used as money. Right now it's illegal because the Banksters want you to use their fiat currency. If you don't want to buy Gold or Silver as a hedge that's your prerogative but anything you have saved up might just become the crap that it is.

You bring up the 80's as the last time Gold Spiked. Have you seen a chart of the debt at that time compared to the Present day debt? In 1980 the debt was less than 1 Trillion today were going on 16 Trillion and since we're Debt based economy, that Debt will NEVER Reverse it's course. Every time you buy something and sign you create more Debt, it never gets repaid anymore because our productivity has been stripped out many years ago. It obviously can't continue forever. The whole system is Fraud anyway and I could write a book on here about it. The people for the most part are clueless. Ever heard of the Virginia Company? They own the U.S. government Corporation, The Northern Trust owns everything else even your house and your car. They own the Courts, the BAR association, the IRS, the Banks, everything. Guess who the Northern Trust and the Virginia Company are? The British Crown. Funny.... I thought we won the revolution! My link This is only the Northern Trust. As far as Gold goes, suit yourself!

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Here's a little tidbit on the Virginia Corporation, I know I'm getting off the subject but it's important to know what has gone on here and who controls the Currency.

My link Many of you will call it a conspiracy, but these are facts plain and simple.

dude your on your own . you do as you please .. i stand with my comments . you stand with yours .. it makes no difference to me .. this opinion of mine is not addressed to you personally .. you take and leave anything you want with it ..

Edited by dontlop
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Here's a little tidbit on the Virginia Corporation, I know I'm getting off the subject but it's important to know what has gone on here and who controls the Currency.

My link Many of you will call it a conspiracy, but these are facts plain and simple.

lol you give me a link that is TITLED >>> CONSPIRACY TV .. i hope your not wondering why someone would call it a consspiracy theory .. then you call it facts .. .. lol.. i stand with everything i have said here on this link :D

Edited by dontlop
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qe3 is nothing more than redistribution of the wealth .. its an obama thing ..

:lmao: :lmao: :lmao: :

It's an Obama thing??? Are you serious??? Did Obama do all of the money printing since 1913??? And furthermore, QE3 is a redistribution of wealth. But a redistribution of wealth from the poor, middle class & wealthy to the Uber wealthy.

they print up money which devalues all the rest of the money by the same percentage of money supply they print.. obamas goal is 4.6 trillion all together.. hes already printed over a trillion in qe1 and qe2 .. ..

Replace "Obama" with "Rotschild, Rockefeller & co", and then you're correct.

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:lmao: :lmao: :lmao: :

It's an Obama thing??? Are you serious??? Did Obama do all of the money printing since 1913??? And furthermore, QE3 is a redistribution of wealth. But a redistribution of wealth from the poor, middle class & wealthy to the Uber wealthy.

Replace "Obama" with "Rotschild, Rockefeller & co", and then you're correct.

qe3 didnt happen in 1930 ..it happened this year ..

if the govt decides to take wealth away for redistribution .. they just have quantive easing .. they devalue the dollar by a certain percentage .. and take that percentage and reprint money to loan out for certain things ,, like obama care .. student loans .. what ever the govt decides they want to invest in ..they dont just print money and say it has the same value as the money did the day before it happened .. the dollar loses all that value that they are printing

if their is 10 trillion dollars and they print up one trillion new dollars all the rest of the dollars lose 10% of their value .. and that 10% is now in the hands of the govt . and distributed through the treasury dept .. on to the federal reserve . and on to the banking sector .. but not avaliable for any purpose .. but the purposes intended.. its redistributed .. and yes qe3 is being done under obama ..his goal is to reprint over 4 trillion dollars total in qe1 ,,, qe2 ... and qe3 ..

that devalues all the money the rich are holding ..for redistribution .. the top 1% hold 40% of our nations wealth .. .. the rich..lol .. many of the rich are alot of peoples money pooled together for investment purposes .. like 401k money .. it sits in different investment groups to invest .. and they are concidered :"the rich"..

why do ya think the dow went up the day qe3 was announced ..

its because your dolar was devalued ...it cost more dollars to buy that share of stock than it did the day before it was announced ,, becase your dollar isnt worth as much.. instant rise in share price .. wait till next month when the next round of qe3 is announced .. the share prices will go up again .. along with the price of everything .. in the end the working class pays for all of it

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qe3 didnt happen in 1930 ..it happened this year ..

QE is merely an euphemism for "printing money out of thin air." QE1, QE2 and QE3 are.

It's something the Federal Reserve has been doing since 1913. The U.S. dollar has lost at least 97% of it's value since 1913. Long before Obama was even born.

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QE is merely an euphemism for "printing money out of thin air." QE1, QE2 and QE3 are.

It's something the Federal Reserve has been doing since 1913. The U.S. dollar has lost at least 97% of it's value since 1913. Long before Obama was even born.

quantive easing is where our govt is selling debt and paying interest .. securities bonds ect. but they buy the debt off themselves .. ive never seen this before ...buying our own debt from ourselves

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http://www.silverbearcafe.com/private/10.10/easing.html

It simply means that they're buying their own debt, because no one else will buy it.

Imagine your kids have a lemonade stand, they get no customers, and they buy their own lemonade, and then say they did a good business or made a profit. They sold lemonade to themselves with their own money. That would be 'quantitative easing' of a lemonade stand

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The main problem with the fiat currency of the US (USD) is not just an issue relegated to the US. In other words, we're not just talking about a partisan caused disaster here that only pertains to the good ole US of A. What we are seeing today in the US (QE1, QE2, QE3) is being employed by pretty much every major economy in the world (ie. China, Europe, Japan, etc.).... it's almost like it's a race to currency debasement, or "da"basement (sorry, couldn't resist). What we are seeing today has never been seen before in the history of the world in terms of scale. The amount of world wide debt that has been created in recent history is unprecedented and can only lead to a period of extreme uncomfortability for many around the world and, yes, that includes many in the US. Which is why many are encouraging holding physical gold and silver.... but maybe I'm getting of myself a little.

To say that gold is not money is, I guess, to not understand what money is. The Webster's definition of currency is a medium of exchange. If a currency becomes completely debased than please explain how gold and/ or silver will not be accepted as a medium of exchange? The only reason gold and silver aren't seen as a medium of exchange in the US at this time (minus a few states, ie. Utah and South Carolina) is because they are taxed when they are purchased with USD's. Remove the taxes from purchasing gold and silver (which is Ron Paul's argument) and gold and silver can absolutely be used as a medium of exchange. Why not? This is not prohibited by US Federal law....

Again, maybe I'm getting ahead of myself a little.... maybe. To understand why the current state of US monetary policy is in so much trouble it is important to understand what OTC derivatives are. And for that explanation I defer to my mentor, Jim Sinclair:

The Hera Research Newsletter (HRN) is pleased to present an in-depth interview with Jim Sinclair, Chairman and CEO of Tanzanian Royalty Exploration and founder of Jim Sinclair’s MineSet, which hosts his gold commentary as a free service to the gold investment community.

....

Hera Research Newsletter (HRN): Thank you for speaking with us today. You are one of very few people who have tried to warn investors about OTC derivatives. Why are OTC derivatives a problem in your opinion?

Jim Sinclair: Over the counter (OTC) derivatives are the reason we are going through what we are going through now. An OTC derivative is a kind of wager on what something will do. Up until 2009, most of these wagers had very little, if any, money behind them and, if the direction you bet on didn’t come to fruition, the amount of leverage resulted in extraordinary losses. There was a major rollover in derivatives tied to real estate in 2008, as well as in other types, such as those tied to sub-prime auto loans.

HRN: Did OTC derivatives destabilize the financial system in 2008?

Jim Sinclair: Absolutely.

HRN: Don’t financial institutions use risk cancellation models to hedge risks using OTC derivatives?

Jim Sinclair: Before the failure of Lehman Brothers, OTC derivatives losses would have almost netted out to zero. You can consider derivatives like a string in a circle with various knots representing all the derivatives transactions. When Lehman went broke, the string broke. When Lehman couldn’t meet its obligations on derivatives, they could no longer be netted out to zero. That’s why the banks went down, and that’s why you had the government bailouts and quantitative easing (QE).

HRN: OTC derivatives are the real reason for the bank bailouts?

Jim Sinclair: That is a fact which can in no way be argued away.

HRN: Hasn’t the problem been cleaned up by the Dodd–Frank Wall Street Reform and Consumer Protection Act?

Jim Sinclair: The pile of OTC derivatives is over $1 quadrillion. After 2008, the International Monetary Fund (IMF) adopted a new method of valuing them called value to maturity. Value to maturity assumes all of them will function, which is a cartoon. The derivatives pile hasn’t contracted. Basically, it has expanded, but value to maturity reduced the notional value from over $1 quadrillion to under $700 trillion. The amount outstanding is the same as it was in the first place.

The flavor of the present moment is credit default swaps against the solvency, or lack thereof, of sovereign nations. New derivatives have some margin behind them, but they only work if they are not called upon. If a nation’s debt was in fact to default, it would happen very quickly without a great deal of run up before. Most people would expect a rescue to be coming. Let’s say a rescue didn’t come, those credit default swaps would simply not be able to function and down again would come the banking system.

HRN: Are you saying that the financial system is less stable today than it was in 2008?

Jim Sinclair: It appears more stable but that’s only an appearance. The entire equity rally took place almost to the day from when the Financial Accounting Standards Board (FASB) relaxed the mark to market rule. It allowed financial institutions to make up whatever value they wanted for their worthless pieces of paper. If they used the real values, the banks would have come down.

HRN: Wasn’t the FASB change a temporary measure to halt the decline in mortgage-backed securities?

Jim Sinclair: It wasn’t just mortgage-backed securities. It was all the paper on bank balance sheets. The balance sheets of banks appear to be in good shape but they’re not. In fact, they will need a lot more funds.

HRN: Then the financial system is still vulnerable?

Jim Sinclair: They’ve kicked the can down the road. The purpose of QE, in other words the printing of money, is to maintain some degree of integrity in the financial system. Bear in mind that the grease for the wheels of equity markets is liquidity, meaning that if you create a lot of money, it goes into the hands of banking institutions and international investment houses. So, the equity out of thin air market has been sustained by QE.

HRN: What can the government do to prevent another crisis?

Jim Sinclair: You can assume that what’s been done already will be done again. There are no other tools in a practical sense. The idea that there won’t be a continuation of QE is nonsense.

HRN: Can the government bail out the banks again?

Jim Sinclair: The central banks will buy the government debt. That’s called quantitative easing.

HRN: Doesn’t QE undermine the dollar?

Jim Sinclair: The dollar is an exercise in psychology. It’s a piece of paper with a promise to pay but there’s nothing in which it can be paid. It’s legal settlement for debt but there’s nothing that it’s convertible into. To maintain confidence, it’s necessary to maintain the stature of a currency. In an arithmetic sense, if you go into a market to sell a supply of apples, and if you’re the only seller, you can get a nice price. If more sellers, meaning more apples, come into the market, there goes the price of apples. QE creates more dollars, which increases the supply.

HRN: If the dollar is loosing value because of QE, what about the Euro?

Jim Sinclair: If you look at the dollar or the Euro or the Yen, or even the Swiss franc, it’s a race to the bottom amongst all currencies. All countries everywhere are creating more paper every day. It’s a relative valuation, rather than a valuation based on an objective reference. What happens in the European Union immediately affects the dollar.

....

HRN: Do you mean the overall affect of currency interventions is to create new money?

Jim Sinclair: Anything that happens around the world, for instance, the Bank of Japan’s response to the horrible disaster in Japan, was to go straight to QE. Money is being created everywhere without any discipline but the problems of financial institutions remain because they have make-believe balance sheets with improper values for their OTC derivatives.

HRN: Doesn’t the suspension of the FASB mark to market rule buy time for banks to repair their balance sheets?

Jim Sinclair: There are five million homes for sale in the United States if you include the off-market shadow inventory, which is a real inventory. There’s no repair coming in the real estate market, therefore, there’s no repair coming in the OTC derivatives based on that. That means there’s no repair coming in the underlying paper that the banks now value at much higher levels than they could possibly sell them for, if they could sell them at all.

HRN: Will bank balance sheets eventually get better?

Jim Sinclair: As long as confidence remains in place, which depends on the equity market and that comes back to QE.

HRN: Are you saying that the U.S. stock market rally is driven by QE?

Jim Sinclair: There’s an inability to stop QE without the whole house of cards coming down on itself. There’s no other choice. It’s the only tool left. The Federal Reserve can’t take a hawkish position on monetary policy and interest rates without this whole thing rolling over. They can talk about it constantly and might have more back door QE than front door QE.

HRN: If QE doesn’t stop soon, what will happen?

Jim Sinclair: The end game is a virtual reserve currency linked to gold. It will be based on an average of major currencies, which will slow down the movement in the index. The International Monetary Fund (IMF) is moving in that direction with Special Drawing Rights (SDRs). The dollar will be just another currency. The dollar’s not going to zero. It could loose a significant part of its buying power, which it already has and could again.

HRN: How would a virtual currency work?

Jim Sinclair: There would have to be a broad measure of the money supply, such as M3 used to be for the U.S. dollar, but on an international basis. The price of gold would be related to that measure. Central banks would have to value their gold according to their contribution to or extraction of international liquidity, so the price of gold would rise or fall on its own.

HRN: Wouldn’t that be a gold standard?

Jim Sinclair: There’ll never be a return to a gold standard in my opinion. The end of all hyperinflations has been a commodity currency. That’s exactly what happened in Germany, for example. Gold has the capacity to give confidence to people if there’s some relationship between the currency and gold. The virtual currency will be linked to gold but not convertible into gold.

HRN: So, a gold component will restore confidence?

Jim Sinclair: The answer is a commodity currency. That’s what happened every time there was this type of situation in monetary history. The rentenmark, which ended the German hyperinflation in 1923, was supposedly backed by all the real estate in Germany, but the government didn’t own that real estate. The point is that it wasn’t true. There was no great commodity backing for the rentenmark, but it was enough. It was a period when people were searching for anything to restore confidence in the currency.

....

HRN: America is becoming like Mexico?

Jim Sinclair: The standard of living is going much lower. People have to realize that the damage is already done. It’s not a question of whether the U.S. can be pushed over the edge. We are over the edge. We are watching the consequences play out now.

HRN: What can people do to protect their wealth from inflation?

Jim Sinclair: People have to try to maintain their buying power. Each person can become their own central bank and, to the best of their abilities, focus on the assets that benefit from the disorder that’s taking place and that will continue to take place.

HRN: Do you mean buying precious metals or commodities?

Jim Sinclair: I’ve spoken to people who, over the last ten years, have had this perspective. They have done very well. Even doing it now could protect your wealth.

HRN: What about gold? Do you see gold as a currency that can’t be debased?

Jim Sinclair: What is real money? Gold is a currency that has no liability attached to it. It’s a measure of value and a store of wealth that’s universally acceptable.

HRN: So, gold is an alternative to dollars or Euros?

Jim Sinclair: Physical gold is the answer. An individual who holds gold will have more time and ability to function.

HRN: How much higher do you think the price of gold could go?

Jim Sinclair: What’s the exchange rate of a currency with no liability attached to it? Gold is going much higher. We could see shocking gold prices, maybe Alf Fields’ target of $10,000 per ounce or Martin Armstrong’s target of $12,000 per ounce. I think that my price target of $1,650 per ounce gold is going to be so low it will be considered silly.

HRN: Thank you for your time today.

Jim Sinclair: It was my pleasure.

Link: http://www.financialsense.com/contributors/ron-hera/interview-jim-sinclair-on-gold-and-the-world-financial-system

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I found this easier explanation of just how much trouble the world is in at the present:

Printing Money – Price of Gold – Preservation of Wealth

October 9th, 2012 by admin golds

by Egon von Greyerz – October 2012

1. Worldwide money printing continues unabated

2. Just In 10 years $120 trillion have been printed making global debt $200 trillion

3. World GDP has gone from $32 trillion to $70 trillion 2001-2011

4. Thus $120 trillion debt is required to produce a $38 trillion annual increase in GDP

5. The marginal return on printed money is negative in real terms

6. Thus the world is living on an illusion of paper that people believe is money

7. This illusionary paper wealth will implode in the next few years

8. The initial trigger will be the collapse of the world’s reserve currency – the US dollar

9. The dollar is backed by $120 trillion of US government debt and probably NO gold

10. All currencies will continue their race to the bottom and lose 100% in real terms against gold

11. This will create a worldwide hyperinflationary depression

12. All assets financed by the credit bubble will go down in real terms

13. This includes stocks, bonds, property and paper money of course

14. The financial system is unlikely to survive in its present form

15. The banking system including derivatives has total liabilities of around $1.2 quadrillion

16. With world GDP of $70 trillion, the world is too small to save a financial system which is 17x greater

17. This is why there will be unlimited money printing and hyperinflation

18. The only asset that will maintain its purchasing power is gold http://goldswitzerland.com/wp-content/uploads/2012/10/GLOBAL-LIQUIDITY-TO-GOLD.jpg

19. Gold has been money for 5,000 years and will continue to be the only currency with integrity

20. Western countries’ 23,000 tons of gold is probably gone. See recent article by Eric Sprott.

21. The consequence is that most of the gold in the banking system is likely to be encumbered

22. This means that Central Banks one day will claim it back against worthless paper gold IOUs

23. Thus gold and all other assets within the banking system involve an unacceptable counterparty risk

24. Gold should be held in physical form and stored outside the banking system

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Here's an interesting article for the gold is not money crowd...... I wonder how important this case will become as we speed down the tracks of monetary debasement. The entire article is a good read but of particular interest are paragraphs 6 - 8 and the final paragraph:

Is Legal Tender Next?

Editorial of The New York Sun | October 8, 2012

It’s going to be illuminating to see whether the government appeals the big ruling on judges’ pay that was handed down last week at Washington. The case is called Beer v. United States. The Sun has written about it here and the editor of the Sun here. The plaintiffs are Judge Peter Beer and a rainbow coalition of some of the most distinguished judges on the federal bench. They have just won a ruling that prohibits Congress from suspending a system of automatic pay increases designed to protect their honors from inflation.

The United States Court of Appeals for the Federal Circuit, sitting en banc, handed down the ruling on Friday. The ruling hasn’t received much coverage in the press, though — at least in our view — it’s one of the most important cases of our time. The reason is that it has to do not only with the question of need for Congress to keep its promises and the need to attract a first class judiciary but also the question of constitutional money.

The judges turn out to be a special case because it is unconstitutional ever to diminish their pay. This is American bedrock that was laid down by the Founders because of the British tyrant George III. The king made judges dependent “on his Will alone, for the tenure of their offices, and the amount and payment of their salaries,” as America’s revolutionaries put it in the Declaration of Independence. So it was written into the United States Constitution that the compensation of judges “shall not be diminished during their Continuance in Office.”

In Beer, the judges sued under that clause after Congress suspended automatic pay increases it had established to protect their honors from inflation. What the appeals court just ruled is that Congress, in suspending the automatic pay increases, diminished the judges pay, particularly because when Congress legislated the automatic pay increases, it also established limits on the outside income judges are permitted to earn.

More broadly, at least by our lights, the ruling says, in effect, that the legal tender laws don’t apply to judges’ salaries. That is, the court is suggesting that, at least in the case of judges, 100,000 dollar bills will not suffice in 2012 for a contract to pay $100,000 that was entered into in, say, 2000. The Appeals Court packed its opinion with some prime language from the founding era.

“[N] othing can contribute more to the independence of the judges than a fixed provision for their support,” the Court quoted Alexander Hamilton as writing in 79 Federalist. It noted that at the constitutional convention at Philadelphia, where the Founders sat that summer in 1787, James Madison urged that variations in the value of money could be “guarded agst. by taking for a standard wheat or some other thing of permanent value.”

Madison’s wheat gambit was rejected, the court noted, and Founders did not tie judges pay to “any commodity.” Quoth the United States Court of Appeals for the Federal Circuit: “The framers instead acknowledged that ‘fluctuations in the value of money, and in the state of society, rendered a fixed rate of compensation [for judges] in the Constitution inadmissible.’” It was quoting 79 Federalist again. It noted that the constitutional convention voiced concerns “to protect judicial compensation against economic fluctuation.”

It turns out, though, that the historical record is clear what the Founders thought dollars were. They used the word “dollars” twice in the Constitution. By a dollar they meant 371 and ¼ grains of pure silver or a 15th as many grains of gold. That’s the way Congress defined a dollar in law under the Articles of Confederation and the way Congress defined it in law in the first Coinage Act of the constitutional era.

The idea that a dollar could be worth a different number of grains of silver or gold at the end of a contract than it meant at the beginning of a contract would have horrified George Washington and nearly all of the other Founders (Benjamin Franklin, a printer, had a vested interest in paper money). So would the idea that the dollar would be permitted to decline over a decade to but a sixth of the number of grains of gold at which it was valued at the start of a decade. That is what has just happened in America.

The court deciding Beer didn’t get into legal tender per se. But the legal tender question is the elephant in the courtroom, so to speak. If a dollar can’t be diminished for judges — that is, if the legal tender laws are not good enough for judges — why should they be good enough for the rest of us? If they are not good enough for the contract between the government and judges, why should they be good enough for contracts between private parties?

Or, to put it another way, the rest of us folk might as well be amici as the courts start to grapple with constitutional money. The diminishment of their salaries has driven the federal judges nearly to distraction, and understandably so, precisely because they are honest men and women. The chief justices — most recently Chief Justices Roberts and Rehnquist — have been warning about it for decades. The Great Scalia issued an impassioned warning about the problem here in New York just the other day.

We don’t know whether the Supreme Court will be asked to hear an appeal of Beer. If it is asked, it may decline. But if the nine are asked to take a final look at the case, the question for them to start thinking about is less the promises of Congress — although breaking such a promise is enough of a diminishment for us — and more about the meaning of money. The fact is that Americans are just as upset about the harm being done to them by fiat money as the judges are.

Link: http://www.nysun.com...der-next/88019/

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if the dollar is not valid than nothing else is either .. almost every currency in the world is a fiat currency .. and it will remain that way ..every law on the books is not valid .. if the dollar is not valid .... every regulation .. every tax .. all gone ..

.. the monetary system is here to stay and has been validated by the world and our congress .. end your kooky ron pauls wild accusations .. .. they no longer use gold to make money .. its used in electronics .. why do you think china buys so much gold .. they are a world hub for electronic manufacturing .. .. your gold is a mere product for sale like any other.. gues what gold is sold for ...the us dollars are buying gold ..along with many other fiat currencys

Edited by dontlop
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if the dollar is not valid than nothing else is either (I'm sure many Brits felt this way when the British Pound Sterling was the WRC).. almost every currency in the world is a fiat currency (You're making my point for me here.... did you read anything that I posted? Just as pretty much all major currencies of the world are fiat (actually, I can't think of one that isn't) they are all employed in same the same practice of QE leading to a simultaneous debasement of all currencies of the world, hence a world wide monetary debasement) .. and it will remain that way (Again, please read carefully what I posted. History does not support your statement here) ..every law on the books is not valid .. if the dollar is not valid .... every regulation .. every tax .. all gone (Thanks again for making my point.... again. This is why it is so critical to own precious metals as the world transfers to a new financial system after this one collapses)..

.. the monetary system is here to stay and has been validated by the world and our congress (Man, again, it's like you didn't read a single thing I posted. Please explain to me how a world GDP of $70 trillion will be able to rescue a world that has $1.2 quadrillion of soverign debt).. end your kooky ron pauls wild accusations (I am not a Ron Paul supporter but that doesn't mean I discount all of his ideas) .. .. they no longer use gold to make money (gold is money.... did you not read the final article I just posted about Judicial pay? Probably not.... sorry I asked).. its used in electronics (I think you are confusing gold with silver. Silver is heavily used in elctronics whereas gold is used sparingly. Why do you think the price of silver is so heavily manipulated. Manufacturers could not afford to use too much gold in industry because the price is prohibitive. Besides, silver is a much better metal, functionally speaking, for industry. As an example silver crushes copper in conductivity applications.) .. why do you think china buys so much gold (That's an easy one, they are trying to set up their own gold exchange so they can hedge themselves against manipulation at the London Exchange and the COMEX).. they are a world hub for electronic manufacturing .. .. your gold is a mere product for sale like any other.. gues what gold is sold for ...the us dollars are buying gold ..along with many other fiat currencys

Apparently you are not too good at reading and comprehension. How can a world financial system continue that is $1.2 quadrillion in debt? Please explain.....

Also, I am not a Ron Paul supporter but I also do not discount all of his ideas.

If China does not view gold as money please explain these articles:

Sanctions dodge: India to pay gold for Iran oil, China may follow

India has reportedly agreed to pay Tehran in gold for the oil it buys, in a move aimed at protecting Delhi from US-sanctions targeting countries who trade with Iran. China, another buyer of Iranian oil, may follow Delhi’s lead.

The report, by the Israeli-based news website DEBKAfile, states that Iran and India are negotiating backup alternatives with China and Russia, should the US and EU find a way to block the gold payment mechanism.

Delhi’s move is seen as surprising, as earlier India and Iran said they would switch to yen and rupees. China, another major importer of Iranian oil, may follow Delhi’s lead, the report adds.

India and China need to switch from the dollar in bilateral trade, since the US and EU have issued unilateral sanctions against the Iranian oil industry and financial institutions. The sanctions would ban any bank involved in oil trade with Iran from dealing with American and European counterparts.

Link: http://rt.com/news/i...a-gold-oil-543/

The Best Reason in the World to Buy Gold

Beijing is planning to avoid U.S. financial sanctions on Iran by paying for oil with gold. China’s imports of the metal are already large, and you can guess what additional purchases are going to do to prices.

On the last day of 2011, President Obama signed the National Defense Authorization Act for Fiscal Year 2012. The NDAA, as it is called, attempts to reduce Iran’s revenue from the sale of petroleum by imposing sanctions on foreign financial institutions conducting transactions with Iranian financial institutions in connection with those sales. This provision, which essentially cuts off sanctioned institutions from the U.S. financial system, takes effect on June 28.

The NDAA gives the president the power to waive the sanctions depending on the availability and price of supplies from non-Iranian sources. He can also exempt financial institutions from countries that have significantly cut back purchases of Iranian petroleum. Last month, the State Department announced waivers for Japan and ten European countries. China, which has received American waivers in the past under other Iran legislation, is now Tehran’s largest oil customer and investor as well as its largest trading partner. Given the new mood in Washington, Beijing cannot count on getting more exceptions in the future.

Link: http://www.forbes.co...ld-to-buy-gold/

Why Are the Chinese Buying Record Quantities of Gold?

This month, the Hong Kong Census and Statistics Department reported that China imported 102,779 kilograms of gold from Hong Kong in November, an increase from October’s 86,299 kilograms. Beijing does not release gold trade figures, so for this and other reasons the Hong Kong numbers are considered the best indication of China’s gold imports.

Analysts believe China bought as much as 490 tons of gold in 2011, double the estimated 245 tons in 2010. “The thing that’s caught people’s minds is the massive increase in Chinese buying,” remarked Ross Norman of Sharps Pixley, a London gold brokerage, this month.

So who in China is buying all this gold?

The People’s Bank of China, the central bank, has been hinting that it is purchasing. “No asset is safe now,” said the PBOC’s Zhang Jianhua at the end of last month. “The only choice to hedge risks is to hold hard currency—gold.” He also said it was smart strategy to buy on market dips. Analysts naturally jumped on his comment as proof that China, the world’s fifth-largest holder of the metal, is in the market for more.

Link: http://www.forbes.co...tities-of-gold/

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Hey WW great to see u back, haven't seen anything from you in a while.

I wouldn't bother with dontlop he doesn't seem to read anything and comments on everything either making the same point you have already made (thinking he is countering your argument ) or something completely off the wall.

Good to see you back though

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Hey WW great to see u back, haven't seen anything from you in a while.

I wouldn't bother with dontlop he doesn't seem to read anything and comments on everything either making the same point you have already made (thinking he is countering your argument ) or something completely off the wall.

Good to see you back though

Hey M., thanks for the kind words, friend. Actually, as I'm sure you can relate, sometimes life can get busy. Unfortunately I have been forced to slow down a bit because I wrecked my motorcycle in the last week of August. I broke my shoulder, fractured some ribs, and broke my right hand so now I have plenty of time to hang out on DV. I'm not expected to return back to work until December so I imagine I'll be on here quite a bit....

And thanks for the advice on dealing with dontlop. I kind of figured that was going to be the case but I figured I would give it one more college try.

Glad to see you're still around. It seems like DV is not as active as it used to be with membership participation.

WW.

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you can buy all the gold you want .. i will not spend a nickle on it , it is funny that the thing they accept for gold is money "the us dollar",, but those must all be stupid people selling their gold for dollars ,, they have it .. but they sell it for dollars .. those dummies.. gold is in such demand they feel its necessary to advertise all day long every day for you to give them your dollars for their gold .. people buy gasoline all day every day .. it truly has a great demand .. i dont see them out their advertising to buy gasoline on the radio and television .. it sells itself .i dont believe gold is in as much demand as they would like you to believe .but you go ahead and buy all the gold you want .. im stupid ..your smart

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