Silver Price Forecast 2014: Monetary Collapse and Silver’s Not So Orderly Rise

Silver Price Forecast 2014: Monetary Collapse and Silver’s Not So Orderly Rise

We are about to see the end of our current international monetary system. Based on much of the evidence that I have written about previously, this appears to be a certainty. The systematic build-up of this current monetary order went together with the gradual phasing out of silver from the monetary order.

This system, by its very nature, has been diverting value away from silver. To understand this, just imagine that silver was actually used as currency (like the paper Dollar is currently used); we would then have much less silver available for sale in the current silver market. Based on the demand and supply economic model, this would then mean that the silver price would rise significantly.

The fact that silver is not held by central banks in significant quantities(or not held at all), puts it at a further disadvantage as compared with gold, in the current monetary regime. This is one of the reasons why silver is often mistakenly ignored as real money.

The rise of silver and the collapse of the monetary system is inescapably linked. Therefore, if the collapse of the monetary system is not orderly, then the rise of silver’s value will not likely be orderly. Collapse by definition suggests: to break or fall suddenly. This would suggest that when the time comes, silver will explode higher suddenly; for example, it could be possible that it rises $10, $20, $100 a day, until you can suddenly not buy it with fiat money. Interestingly, that actually means that silver and gold will reach the same price in fiat currency.

So, if you are buying physical silver to hedge against the collapse of the monetary system, you are not buying it, and looking for the price to rise to about $30 at the end of this year. No, you are expecting a sudden explosion of price, you just do not know exactly when. The approach of the silver “stackers” is therefore, the best approach, given that a monetary collapse is inevitable.

Due to the fractal nature of markets, I believe that what happened to silver during the 70’s was a prelude to this coming “end of the monetary system rally”. Silver went from $8.70 in August 1979 to $50 in January 1980. That was a phenomenal feat. Few goods (if any at all) have seen such a big increase in such a short time.

Here, I will be using the Gold/Silver ratio to illustrate how the 70s price movements for silver (and gold) is a miniature version of price movements from 1980 to 2014. Below, is a 100-year Gold/Silver ratio chart:

silver forecast with gold silver ratio

analysis of sold silver ratio chart

On the chart, I have marked two patterns with points 1 to 5. It appears to be a relevant comparison, since both patterns start from a major peak in silver, 1968 and 1980, respectively. Both patterns started at the bottom of the 100-year range of this ratio, in fact, at a major bottom (1968 & 1980).

The two patterns appear very similar – similar, but not identical. If the similarity continues, then the current pattern may complete at a point much lower than a ratio of 15. This could mean significantly higher silver prices just like it did in 1979/1980.

There are more indicators that support the likelihood of a sudden and massive spike in silver due to collapse of the monetary system.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report.

Hubert

And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Silver Price Forecast: Silver and the Dow

Silver Price Forecast: Silver and the Dow

 

The Dow making new highs is likely to be very good news for silver investors, because nominal silver peaks tend to come after significant nominal peaks in the Dow. These stock market rallies are driven by the expansion of the money supply, causing a big increase in value of paper assets (including stocks) relative to real assets.

When the increase in credit or the money supply has run its course, and is unable to drive paper price higher; value then flees from paper assets to safe assets such as physical gold and silver, causing massive price increases.

The two most significant nominal peaks of the Dow were in 1929 and 1973. Silver made a significant peak in 1935, about six years after the Dow’s major peak in 1929. Again, in 1980, silver made a significant peak, about seven years after the Dow’s major peak in 1973. So, if the Dow is currently forming a major peak (like I think it is), we could possibly expect a major peak in silver, towards the end of this decade to early next decade. This means we are likely to have rising silver prices for many years to come.

In 1929, when the Dow was making its peak, silver was still in a downtrend which only bottomed in 1931. However, in 1973, silver was already in an uptrend by the time the Dow peaked:

 

Dow vs Silver 70s

Dow vs Silver 70s

The top chart is the Dow from 1966 to 1974, and the bottom one is silver during the same period. Silver was already in an uptrend when the Dow peaked. The Dow made a major nominal peak near the beginning of 1973, with silver peaking about a year after that. Furthermore, silver made a major peak in 1980, about seven years after the Dow’s 1973 peak.

Notice that silver was still trapped within a cup formation (lower than the cup’s high), out of which it only broke out after the Dow peaked.

Below is a current comparison between the Dow (top chart) and silver (bottom chart):

 

Dow vs Silver current bull market

Dow vs Silver current bull market

Like in 1973, silver is already in an uptrend long before the Dow’s possible major peak. The uptrend will still be intact, even if price falls further. If the Dow does peak very soon, will we have a silver top close to a year after the Dow’s peak? Also, will we have a major peak in silver coming some years after, like the 1980 peak?

Silver is again trapped within in a cup formation, lower than the cup high. This time the cup is much broader.  Again, can we expect a breakout from the cup’s high sometime soon after the Dow tops – like it did in 1973?

I believe that given the two questions above, the near future of the Dow will be telling for future silver prices.

The Dow’s relationship with the Dow/Gold ratio is highlighting something interesting regarding this current silver bull market compared to the previous two. Below is a 100-year chart of the Dow/Gold ratio:

 

dow gold ratio with Dow nominal peaks

dow gold ratio with Dow nominal peaks

 

In 1929, the Dow peak came at the same time as the Dow/Gold ratio peak; therefore, the nominal peak and the real peak coincided. The 1973 nominal Dow peak came 7 years after the Dow/Gold ratio peak. We are currently almost 14 years past the Dow/Gold ratio peak, and we still have not had a nominal peak in the Dow.

What is this progression in the timing of the Dow’s nominal peak relative to the Dow/Gold ratio telling us? Is this a natural progression or is it proving how increasingly bigger efforts are applied to artificially prop up the stock markets?

Whatever the reason, it has created a setup for a massive financial panic. Value is likely to run from paper assets to silver and gold like never before. While the first part of this collapse of paper assets has been relatively controlled; the last phase is far more likely to result in chaos. This means that the Dow’s collapse could be vicious.

At the same time, after having had a relatively subdued rise since the beginning of this bull market, silver could explode higher like never before, once the bottom is in. The current decline is likely to bring attractive opportunities to increase physical silver positions.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert – hubertmoolman.wordpress.com

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Silver Forecast Video: The Shift To Measuring Wealth In Ounces Instead Of Dollars

Video (Silver Forecast): The Shift To Measuring Wealth In Ounces Instead Of Dollars

 

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free silver and gold newsletter or premium service. I have also recently completed a fractal analysis report for gold and silver .

Warm regards and God bless,

Hubert

Silver Price Forecast And The Shift To Measuring Wealth In Gold Ounces Instead Of Dollars.

Silver Price Forecast:

The debt-based monetary system creates an illusion of wealth. It allows for claims on real goods to significantly exceed the actual amount of real goods. You then have a number of people believing they have wealth, since they have claims (pieces of paper or tokens) showing that they have these real assets, whereas, in reality, if everyone was to claim the real goods, there would not be enough to go around.

The high debt levels, in some way, represent the extent to which there are more claims than the actual underlying real assets.

During the period of credit extension – that has been for at least 80 years – most businesses are set up to take advantage of this system. The system allows for an easier way to increase wealth (illusionary), since only claims on real assets need to be increased, instead of the actual real assets.

As you come to the end of the credit extension cycle, most businesses are dependent on this credit extension, either directly or indirectly. When the debts become too heavy to bear (no one knows the day or the hour, but there are signs), the debt bubble will burst, and over time eliminate all those business opportunities brought about by the debt-based system, as well as the businesses dependent on it.

When this process reverses, there is little opportunity to trade the claim on an asset instead of the actual asset, and also few opportunities to increase the amount of real assets. Furthermore, instead of measuring wealth in terms of claims on real assets (as is now the case), people are more likely to measure wealth in terms of real assets, especially gold.

Today, after a consistent period of credit extension, we have exactly the situation where most businesses are dependent on the debt-based monetary system. I believe we are moving past the point, where any benefit can be achieved from credit extension; therefore, we have the ideal set up for a massive collapse in the world economy.

The increase in the gold price, in real terms, is the clearest signal that it is becoming more and more difficult to increase real wealth (wealth in gold ounces). It will become even more difficult as the economic decline sets in; eliminating businesses very dependent on the debt-based monetary system. Financial institutions like banks would be at the top of this list, but will not be the only ones.

The shift from measuring wealth in terms of paper claims (dollars) to gold ounces, and the limited means to increase gold ounces, will change the business and investment world significantly, and will create a massive rush into those opportunities that increase gold ounces. The shift is already evident, with some countries possibly trading oil for gold.

Currently, in my opinion, silver bullion and gold miners present some of the best opportunities to increase the amount of real wealth as measured in gold ounces.

Both, silver bullion and gold miners are still trading lower or at its 1980 high, and also at relatively historic lows against gold. Silver offers the best opportunity, at the moment, since it offers less risk than shares in gold miners. However, as the gold/silver ratio falls (which is expected), gold miners will become more and more attractive.

Silver Chart Update:

Below, is a 6 year silver chart:

Silver is making its intention to pass the $50 level clear. It is continuing in a pattern similar to gold did, before it cleared its 1980 high (see here). The next important obstacle is to get out of the flag (at about $35 currently). If it continues the pattern that gold made, then it will blast past $50.

For more guidance on silver and gold miners, I have prepared a Long-term Silver Fractal Report ,as well as a Gold Mining Fractal Analysis Report. You are also welcome to consider subscribing to my free newsletter (enter email on side-bar).

Warm regards and God bless,

Hubert

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Dow’s Bubble To Burst With The 60yr + Debt Bubble?

You may have noticed that I have just started my latest blog: picturegoldandsilver, which contains gold and silver analysis through use of images  – less reading -:).

You can see or follow it on twitter: https://twitter.com/picturegold as well as find this post:  Dow’s Bubble To Burst With The 60yr + Debt Bubble?

If you have a twitter account (or not), please feel free to follow picturegoldandsilver. I will be posting a lot of unique analysis there.

Warm regards,

Hubert

Is A Gold Parabolic Blow-off Long Due?

Gold Forecast 2012

The last three major bull markets of the Dow were followed by a bull market in gold. This is no coincidence, since these massive bull markets have been mostly driven by the huge expansion of the money supply. When this expansion of credit is exhausted, the confidence in all things (like stocks) inflated by this expansion of credit fails, causing a massive rush to gold.

There are many similarities between the period around the current bull market in gold, the period around the 70s bull market in gold and that of the Great Depression. The main difference between the period of the 70s versus those of the Great Depression and the current period is the fact that debt levels relative to GDP were much lower in the 70s.

Total US Debt as a percentage of GDP was at about 299% at its peak in the 30s, and at about 369% in 2009, versus a level of just lower than 160% during the 70s. In my opinion, this is probably one of the main reasons why the crisis of the 70s did not lead to a full-scale depression like in the 30s.

Below, is a chart by which I illustrate the similarities between the current period and that of the Great Depression:

original charts by gold-eagle.com and from finance.yahoo.com

The top chart, of the above graphic, features the Dow from 1924 to 1935. During the 20’s the Dow rallied significantly, mainly because of the expansion of the money supply. The Dow finally topped in 1929, at the time when debt levels were at all-time highs, with the Dow gold ratio also peaking. At the same time, Total US Debt as a percentage of GDP started spiking significantly, until it peaked in 1933. At about the same time when the stock market peaked, the demand for gold started increasing, putting pressure on the US gold reserves and eventually forcing Government to increase the price of gold. The real price of gold had been increasing steadily since 1929, until it started to accelerate at about 1932.

The bottom chart, of the above graphic, features the Dow from 1987 to 2011. The pattern of events is similar to that of before and after the 1929 Dow peak. The Dow rallied significantly during the 80s and 90s, mainly driven by the expansion of the money supply. The Dow eventually topped in 1999, at the time when debt levels were at all-time highs, with the Dow gold ratio also peaking. At the same time, Total US Debt as a percentage of GDP also started spiking significantly. At about the same time when the stock market peaked, the demand for gold started increasing, pushing the price progressively higher.

The above should make it clear that there is a relationship between the expansion of the money supply, bull markets in stocks and bull markets in gold. It is my believe that the extent of the bull market in gold is mainly determined by the extent to which credit was expanded in the years prior to the gold bull market, and the extent to which it led to an increase in things like stock values.

Based on my research, I believe we are now at a period which is similar to the end of 1932, with the worst years of the Depression, like during 1933 and 1934, almost upon us. This period will likely be longer than that of the Great Depression, bringing significant economic decline and a lower standard of living.

Gold should significantly increase the speed of its rise since 1999/2001, starting this month, December 2011, just like it did in 1932/33 (increase in gold’s real price), after increasing steadily since 1929. Just like during 1933 and 1934, gold stocks are likely to be the best performing assets, over the coming years.

I have created the following charts to illustrate how the bull markets in gold could be related to that of stocks:

The above chart features the Dow from 1942 to 1966, and gold from 1966 to 1980. The starting and final points for both bull markets were chosen, since they represent the significant turnaround points, based on the Dow/gold ratio.

After a 24 year bull market in the Dow, and a 10.8 fold increase from top to bottom, gold started a bull market which lasted 14 years, with a 24.8 fold increase from top to bottom. Notice how different the bull market in gold developed compared to that of the Dow.

The Dow had a fairly steady rise throughout its entire bull market, whereas the gold price rose violently towards the end of the entire bull market, with a parabolic blow-off top. Also, notice that the gold price increased much faster than the Dow (14 years vs 24 years), as well as to a greater extent (24.8 years vs 10.8 years).

The above chart features the Dow from 1980 to 1999, and gold from 1999 to November 2011. The starting and final points for both bull markets were chosen, since they represent the significant turnaround points, based on the Dow/gold ratio.

The latest Dow bull market was 20 years long, increasing the Dow about 16.3 fold. Will gold have a more significant increase compared to its 24.8 fold increase, due to the fact that the Dow’s increase was more than its previous bull market increase? If gold only matches its 1970s bull market increase, it could go to $6 200 ($250*24.8). Will the gold bull market have a similar parabolic blow-off like it did at the end of the 70s?

Notice that the gold bull market is already 12 years old. The 1970s gold bull market was about 58.3% the duration of the Dow’s bull market before that. At 12 years, the current gold bull market is already 60% the duration of the last Dow bull market.

Could this mean that the gold bull market is over? Or, Could it mean that this gold bull market is not just related to the 1980 – 1999 Dow bull market, but the entire Dow bull market since silver and gold was demonetized? The end of a huge cycle. If this (the latter) is the case, then could it mean that the Gold bull market could still last for many more years, with gold going to extreme highs or even not being available for sale in Dollars? Or/and, could this further support the possibility that a parabolic blow-off is due almost immediately?

For possible answers to these questions and more, as well as analysis of gold, silver and gold stocks, you are welcome to subscribe to my premium or free service (subscribe on the side bar by entering email address), or more detailed analysis of gold consider my Gold Fractal Analysis Report.

Warm regards and God bless,

Hubert

https://hubertmoolman.wordpress.com/

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Silver Price Forecast: Why Silver For A Monetary Collapse? Part 1

Silver Price Forecast:

We are at the edge of a major economic crisis. Our monetary system is the underlying cause of this major crisis. The massive debt bubble created by our monetary system is about to burst. The demonetization of gold and silver, has over the years diverted value from these metals, to all paper assets (such as bonds) linked to the debt-based monetary system.

The process of the devaluation of gold and silver, started by the demonetization of gold and silver, is about to reverse at a greater speed than ever before. This is similar to what happened during the late 70s, when the gold and silver price increased significantly. However, what happened in the 70’s was just a prelude to this coming rally. The 70’s was the end of a cycle, this is likely the end of a major cycle; an end of an era of the debt-based monetary system (dishonest money).

This era of dishonest money, has filled the economic world with many promises that will never be fulfilled. There will be a massive flight out of paper promises, into the ideal safe haven assets that would offer protection.

The type of assets that people will flee to depends on the extent to which the assets offer protection against the specific crisis. For example, if people are extremely thirsty, then most would likely go for water, instead of milk or soft drinks. They would therefore rank water higher than soft drinks or milk. The reason that they would go for water is due to its superior properties, for countering the thirst crisis.

In a similar manner, people will run to the assets that have the ideal properties to counter risks and issues brought about by this economic crisis. Most people in the  hard-money camp will agree that gold is the asset that people will flee to in this economic crisis, but for some reason, there  are those (sometimes respected analysts) that believe that silver is not that safe-haven asset.

I believe that people will (and are) running to gold, not because gold was ordained by some divine providence or something, but: because it has those specific properties to offer protection against the crisis – properties given by God. It follows naturally that whatever assets have similar properties, will be similarly in big demand, as a safe- haven.

What are the properties of gold that offers so much protection against this crisis?

Simplified, it is important to understand that the true nature of this crisis is monetary; therefore, assets that possess monetary properties will be the premier assets. The issue here is not whether gold, silver or other assets are money or not. It is whether they have monetary properties, because that is what people will be after.

Good money should be effective as a store of value, a medium of exchange as well as a unit of account. In order for money to be effective in the above it has to have the following properties:

  • divisible – should be divisible in smaller units
  • portable – able to carry it around therefore a high value should be able to be contained in a small space and weight
  • homogenous – one unit should be the same as any another unit
  • durable – should not be able to be easily destroyed or eroded
  • valuable – should have intrinsic value, normally because it is desirable. Should not be able to be created or discovered without reasonable effort.  normally a commodity itself.

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Gold has all the above properties. It is almost a perfect fit. How about silver? Is it not also a perfect fit?  In fact, silver is a perfect fit as much as gold is; there is not much to choose between the two. Gold and silver are the two assets that best fit the above properties; therefore, both will be the assets in most demand. If someone tries to convince otherwise (that silver will not offer protection like gold), he has to show how silver does not fit the properties that will offer protection against this crisis (the above listed properties).

Personally, I prefer silver over gold. Mainly because: silver offers better value as a result of it being one of the most undervalued assets today, it is less likely to be confiscated (at least for a while), it is more accessible for now due to its lower price. However, I recommend both.

Chart Analysis

Below, I have put together two great long-term charts. The top one, is from minefund.com, and features the gold-silver ratio from 1791 to present. The bottom chart, is from sharelynx.com, and features the Dow-gold ratio from 1800 to present.

I have lined-up the two charts. I will only point out a few things here. The first thing is the double-top in the gold-silver ratio, and the recent failed attempt (at the 80 level) to test the highs. This makes a test of the all-time highs very unlikely and a test of 16 (the bottom between the two tops) very likely.

I have drawn a vertical blue line, approximately where silver was demonetized (1870s). Notice how the gold-silver ratio started rising, becoming very volatile with three massive peaks eventually forming.  The Dow/gold ratio also made three massive peaks after the blue line.

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The Dow/gold ratio (when high) is in some way, a proxy for the extent to which value is diverted from real money to paper assets. The 80 years before the blue line, silver and gold was generally still money. The gold-silver ratio was reasonably stable and lower than 20, and the Dow-gold ratio was at lower levels.

After the blue line, the gold–silver ratio rises significantly, and becomes very volatile. The Dow-gold ratio also rises significantly, showing the extent to which value is being diverted from real money (silver) to paper assets. After, gold is demonetized (by the 30s), the Dow/gold ratio rises even more, making higher peaks, and showing the extent to which value is being diverted from both gold and silver, to paper assets.

This trend has been reversing since about 1999, and it is likely that the speed of the reversal will soon intensify. Notice how the Dow-gold ratio tested the 1 level in 1980. That level is incidentally the key- level at which it broke out of during the 1870s, which is exactly when silver was demonetized. At the same time, in 1980, the gold-silver ratio also made a significant low of about 16. Both ratios were attempting to go back to pre-1870s levels. Was it a co-incidence that both ratios tested the 1870 levels?

After the double-top, it is almost certain that the gold-silver ratio will go back to the 16 level, and even look to touch an extreme level, lower at possibly 7. Technically, based on the extreme highs of the two peaks of the double-top, a ratio of 1:1 is not impossible.

Based on the true fundamentals, it is reasonable to expect things to settle at pre-1870’s levels – eventually. That is, that gold and silver will be used as money, with the gold-silver ratio at between a possible 10 and 16.

For more detailed silver analysis and silver price forecast, I have prepared a Silver Fractal Analysis Report. For more details, see  here.

Subscribe to this blog or to my Youtube channel: FractalSigns for regular gold and silver commentary and updates.

You might also like the following:

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Warm regards and God bless,

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Similarities Between Current Crisis And Great Depression

My latest video update: Great Depression vs Now

 

For more of this kind of analysis to help you navigate the financial markets, subscribe to my premium service .

Warm regards and God bless,

Hubert

Gold Signals The End…By Hubert Moolman

Gold remains our best means of economic measurement. It is not a perfect or 100% consistent measure of wealth, but it is our best. Due to its monetary properties, gold can be used to measure wealth across generations. Just like we have the sun and moon to discern the times and seasons, I believe, we have gold to discern changes in wealth. It is interesting that the sun is often compared to gold, and the moon to silver. Just like a day in the Middle Ages is comparable to a day in this century, an ounce of gold in the Middle Ages is comparable to one today.

Currently we use fiat currency, like the dollar, for economic measurement. However, this creates a huge distortion due to the fiat currency being highly unstable. Can you imagine what would be the effect on our planet if we did not use the normal cycles that the sun and moon provides us with? Our ability to produce food for example, could be severely disrupted, leading to famine or possible extinction of mankind.

By using a highly unreliable measure like the US dollar, our ability to make proper economic decisions is severely impaired, since we (the common man) are not easily able to distinguish between a real increase or decrease in wealth , for example. This causes a great misallocation of wealth and will lead to a severe economic depression.

When you look at a chart of the average day’s wages in dollars compared to the average day’s wages in gold ounces, with some analysis, you will understand why the dollar cannot be used as an economic measure. These charts show that the average daily wage for Americans, have gone from about $20 in 1964 to about $152 in 2010, whereas in gold it has fallen from just short of 60% of an ounce  of gold in 1964 to just 12,67% of an ounce of gold in 2010.

Gold is telling us that people are now earning less money than they did in 1964, whereas the dollar is telling us the opposite. Which measure is telling the truth?  This bizarre situation is evident in our “economic” and “accounting” language, when we talk about a real and nominal increase in prices. An example would be when an economist tells you that house prices have increased in nominal terms, but decreased in real terms. What? How can something go up and down at the very same time? Using a proper measure, there would be no need to have a “nominal” as well as a “real” analysis.

These bizarre and illogical concepts in our economic language are as a result of the bizarre measure of value called fiat money. We have to look at the right signs to discern the times. I prefer to look at the “behaviour” of gold to discern the economic times.

What is gold’s “behaviour” telling me?

Gold Rallies and Debt

Since 1900, we have had three major rallies in the gold price. The first started during the Great Depression, the second since about 1968, and the current since about 2001. Note, the gold price went up during the Great Depression, since most things as measured in currency (gold) depreciated. Further to that, in 1933, due to increased demand, the gold price was increased from $20.67 to $35. During the first two rallies, there were major economic declines. The economic decline during the Great Depression was much worse than that of the 70s. This is mostly due to the difference in debt levels during the two periods. The debt level during the Great Depression was far greater than that of the 70s. The greater number of defaults, due to the bigger debt, took a bigger chunk of value out of the economy.

The current gold rally is still in progress. Debt levels now are greater than during both the previous major gold rallies. It is believed that in 2008, total debt as a percentage of GDP in the US stood at more than 340% compared to 265% during the Great Depression. At some point during the Great Depression, debt levels collapsed, causing a major economic decline. The rally in gold is a way reflection of how debt levels collapse. The current major rally in gold is thus telling me that we are likely to have an economic decline far greater than that of the Great Depression, in the US and most parts of the world. This economic decline has already started, and is about to intensify.

New Monetary Order

In 1933, Franklin D. Roosevelt changed the monetary order in the US, with Executive Order 6102. Fundamentally the dollar changed its nature due to this order, and was therefore no longer backed by gold – for US citizens.  As mentioned earlier, this and the revaluation of gold was done, due to the increased demand for gold. The principle is: people became aware that there were far more claims on gold (read dollars) issued than the gold available, and therefore demanded their gold. This was mainly the result of the increase in credit during the 20s. As explained above, this run to real money (gold) is basically the flip side of the contraction of credit or debt.

So, the revaluation of gold was done to halt or slow the debt contraction, with those who handed their gold to the government, paying the bill for this decrease in debt contraction. Also, it prevented the banking system from leaking more gold, due this increased demand for gold. The system was recharged, and ready to go, as we know, for another 38 years.

The late 60s to early 70’s (start of the second gold rally) brought the same problem, however, this time it was sovereign nations that became aware that there were far more claims on gold (or dollars) circulating than the gold that the US had available. Some nations requested their gold because of this fact, and the US banking system was once again leaking gold like it did during the Great Depression.

Like in the 30s, the US knew that it would not be able to deliver the demand for gold, due to this “gold run”, and it therefore decided to close the “gold window”. Just like the US citizens, nations could no longer exchange their dollars for gold. This stopped more gold from leaking out of the US reserves, and the system was yet again recharged. The bankruptcy of the US was now well hidden, and it seemed like the perfect con. No more demand for gold from neither citizens nor sovereign nations that might expose the bankruptcy (too many dollars), too few ounces of gold.

Dollar could now be printed without any accountability to those users of dollars (basically the whole world). They have done it: the perfect con.  Or have they?

No, there might be no one that will be able to bring the bankruptcy to light, due to the seemingly faultless plan; however, it is the natural laws that will bring this con to an end.

How? Debt levels are once again at historically high levels. The level of debt that this system can carry is limited. The level that it is limited to might not be known, however, one can look at natural laws in order to estimate a possible limit. It is my believe that the natural cycle (limits) for these type of systems (man-made systems) are linked to the human cycles of 40 years , 70 years and 80 years, as per the Holy Scripture.

The period of 40 years is associated with middle age, judgment, as well as a generation. The period of 70 years is associated with a life-time and judgment. The period of 80 years is associated with an extended life-time, two 40 year periods and also judgment.

The history of this dollar monetary system appears to follow these natural cycles with an almost scary accuracy. From the period of the Great Depression (gold revaluation) to Nixon closing the gold window is more or less 40 years. That is the period of 1929 to 1933 to 1971.

The period from 1929 peak in the Dow – when the stock market crashed, as well as the peak in the Dow/Gold ratio – to 1999 when the stock market made a peak (1st of 2 peaks), and the Dow/Gold ratio peaked, is 70 years. Remember, the Dow/Gold ratio is a significant indicator of the extent to which claims on real assets exceed the actual real assets; therefore, it is an extremely important signal when determining turning points in the current fiat money system.

The year 2014 will be 70 years since the Bretton Woods agreement that brought about the current monetary system, with the dollar as reserve currency. This is how the relationship with the US and the gold of other nation states in the US came about.

We are already in the period that marks 80 years since the Great Depression. The year 2013 will mark 80 years since the 1933 gold revaluation. It is currently 40 years since the closing of the gold window.

The point here is that the natural cycles appears to be very relevant to this man-made monetary system, and that it is very likely that we are extremely close to the end.

The end of the monetary system is likely to come before a peak in gold, if by decree (creation of a new monetary system), but still forced by natural law. If the system is ended by natural law, then it is likely to come at the peak in gold or after. The peak in gold I refer to is gold as measured against other real assets (not paper money).

Another possibility to keep in mind is the fact that gold could also be outlawed by most governments. I am not saying that this will happen, however it is a possibility, and should be watched for. If this comes to being, I believe we have entered the period when this might happen.

Again, the nature of gold allows us to keep track of the times and seasons of this corrupt system, by studying the behaviour of gold.

Gold Fractal Analysis

Based on the above analysis and long-term fractal analysis, it appears that we are close to a top in gold (in terms of fiat currency and real assets). However, let this not confuse you to think that we are close to a top in the price of gold in terms of the dollar or other currency amount.

We are close in terms of time (as early as the end of 2012 to the beginning of 2013), but $ 1920 is not close to $10 000, should $10 000 be the peak in the gold price, for example. It is also likely that gold will not have a peak in fiat currency as such, but instead, just discontinue trading in fiat currency. That means we might come to a point where gold will only be exchanged for real assets.

Below is a 38yr gold chart (thanks to goldprice.org):

I have done some fractal analysis on this chart. I published this analysis the first time when gold was well under $ 1200 dollars. The fractals indicated have astonishingly continued to keep its similarity as we have progressed during this gold bull market.

On the chart I have indicated two patterns marked by the numbers 1 to 3. The first pattern (fractal) forms a small cup between 1974 and 1978, compared to the second pattern which forms a big cup between 1980 and 2008. If the bigger pattern continues it similarity to the smaller pattern, then the parabolic (based on a long-term scale) move in gold should continue, taking gold to multiples of the current price. I have indicated the point in the 70s that is similar to point where we are at now.

What I wanted to highlight here is the fact that according to my fractal analysis, it appears that gold has reached a critical point where it is expected to rise really fast. Also, this analysis suggests that we could peak as early as the end of 2012 to 2013, and we should as a minimum reach $ 4000 by then. This is consistent with the above analysis regarding gold and the monetary system.

Please note, the above fractal analysis is just a very big picture analysis, as well as a simplistic analysis prepared for this article. One has to also look at the context in which both patterns exist as well as look at confirmation standards.

My premium subscription service and long-term fractal analysis report provides more usable information regarding the price of gold and silver. Please contact me for details as well as a free current edition of my premium service.

Other Important Points

I believe there are enough signs that indicate that we have entered a period where we should expect the worst. We should thus prepare for the worst, with the hope that we would be able to cope with whatever comes our way.

Due to the great probability that the fiat money system might come to an end soon, it is not desirable to exchange physical gold and silver for fiat money. Where possible it is better to exchange them for real goods and services and productive assets.

An economic depression is virtually assured due to the bankrupt monetary system as well as the extreme debt levels.

For more analysis, subscribe to my blog or premium service.

I have prepared a report: Gold Mining Special Report, which highlights the ideal conditions for gold stocks to rally. The report also covers Fractal Analysis of the HUI, XAU and GDX with usable targets for these indices. This is an extremely useful report that should help the reader to benefit from the coming gold stocks rally. For more information on the report see this article.  The report is $50 ($30 for subscribers of my premium service), and I believe it will prove to be worth every dollar.

Warm regards

Hubert

hubert@hgmandassociates.co.za

https://hubertmoolman.wordpress.com/

Visit my Youtube Channel for my video updates on gold and silver

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Gold/Platinum Ratio And Economic Weakness… by Hubert Moolman

Most people are mainly concerned with what is going on right now and are less concerned with what happened yesterday, last week or last year. The further in the past an event or development, the less are we concerned about (or aware of) it, and the less is our understanding of it. This appears to be our nature, and it causes many to miss important “big picture” developments.

Here, I would like to discuss one such development and at the same time highlight the outlook for economic conditions over the next few years.

Platinum has been a star performer since the beginning of this century. From about the year 2000 to 2008 it went from just under $400 to a high of $2200. That is an incredible rally, and possibly unrivaled during that period by any other metal or investment class. What is discussed here for platinum holds true for many other assets, even fiat money, but in different aspects, and to various degrees.

Since about the turn of the century, platinum has become the prestige metal. Even credit card companies got into the act by replacing gold cards with platinum cards as their premier credit cards. This, together with platinum’s subsequent rise, ensured that the world became almost platinum crazy.

Even here in South Africa, where we have such an exciting gold history, it became evident that platinum was considered the “new” gold. It appeared that gold took the backseat and platinum enjoyed a new elevated status.

A lot of this fascination with platinum was due to it again becoming more valuable than gold. This platinum mania was indeed justified due to its stellar price performance, especially versus gold. However, it is this very fascination and mania that prevents many from seeing what has been developing over the last 40 years or more, and is now about to conclude (over the remainder of gold’s bull market). Many will be surprised at the impressive gold miner rallies, straight ahead, which will come despite weak general markets.

To understand this development, it is important to understand what the outlook is for the world economy over the next decade. I refer you to my view of the world economy for the next several years.

It is even more important to understand the underlying fundamental cause of this development, since most other factors, like the state of the world economy, are merely symptoms of the “wrong.” This and other articles on my website should help you understand the underlying cause of most of our economic problems.

For most of the last century we have had a corrupt monetary system. This corrupt debt-based monetary system has been suppressing the price of gold for at least the last 80 years. Fiat money and fractional reserve banking are main features of this system, which is the chief underlying cause of most of our economic problems.

This system is now in its 11th hour, and so are all those trends that have come about due to its existence. One such trend is: platinum consistently getting more valuable than gold. There are many more, such as gold and gold mining shares as a percentage of global assets decreasing significantly since at least 1981, having plummeted from 26% of global (investment) assets in 1981 to just 0.8% in 2009, according to Sprott Asset Management.

It is important to note that there will always be such trends, such as increase or decrease between gold and other asset classes; however, under a proper monetary system they will not be as out of balance to the extreme that they are under a debt-based monetary system.

Below is a long-term gold/platinum ratio chart.

 

chart comes from sharelynx.com

During the gold bull market of the 1970s, it is clear that this ratio was in a significant uptrend. It went from about 0.2 to 1.4 over a 12 year period. That is a seven-fold increase. I have said it before, the same conditions that propelled gold and other commodities higher during the 70s are present now.

These factors are pushing gold higher now and will continue to do so for many years to come. I certainly expect the gold/platinum ratio to trend higher, just as it did in the 70s. As you can see on the chart, the trend for this ratio has begun moving higher in 2008, and like it did in the 70s, it will accelerate as we move along in this bull market.

The great debt bubble of the last century peaked in 1999, when the Dow/gold ratio peaked. This was the tipping point, which signaled the end of the prosperity that was built by this debt. This was soon confirmed, when gold bottomed, and started an uptrend that continues to accelerate. Likewise, in the middle of the 60s, the Dow/gold ratio peaked, whereafter the link of the dollar to gold was removed and gold started its upward march in the 70s.

We are on a downward economic activity trend, and this should accelerate and continue until debt levels are acceptable for a new economic boom. I believe this will take at least 10 years.

Despite the fact that commodities, like platinum, will outperform most asset classes over the next years, I believe that they will still depreciate significantly as compared to gold (and silver). This is basically what happened during the 70s and is also what happened during the great depression. I have written about  the similarities of the great depression, the 70s and today.

Below is a chart that shows the cyclical downturn(s) of industrial production in the US over the last 50 years.

 

You will notice that during the two parts (70 to 75 and then 76 to 80) of the gold bull market, industrial production turned  down significantly. Also, note that the downturn occurred towards the end of those gold rallies and, in the case of the second one, continued until after the end of the gold rally.

Back to the long-term gold/platinum ratio chart

On the chart, you will see a 25-year down-trend resistance line, which was broken in 2008. In textbook fashion, the ratio has moved up quickly since then, whereafter it has returned to test the breakout area. A quick move to 1 is expected very soon, and it would go a long way in confirming that the trend in this ratio is unfolding very much like the one of the 70s and is likely to continue throughout this decade. 

I believe that the ratio will reach the 1.4 level faster than many would believe (if they believe at all) and that it will go on to reach levels unimaginable for many, because they are unable to comprehend the long-term developments. I just wonder whether banks will revert back to gold credit cards as their premier card. Actually, I wonder if banks will still be around.

Warm regards and God bless–

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Please visit my blog and website for more of my work, as well as my free and premium service.

http://hgmandassociates.com/

You can email any comments to hubert@hgmandassociates.co.za

Dollar Gold, Rand Gold, DOW, JSE Gold and HUI – by Hubert Moolman

Let’s start with a big picture view. Below is a long term Dow/gold ratio chart. As you can see on the chart, it has just been one-way traffic the last ten years, with the ratio moving down from almost 45 to about 8.16. It seems that the next temporary stop might be between the 4 and 6 level. I have previously written how the 10 Dow/gold ratio level has been a pivot point back all the way to 1930.

This number has acted like a “golden ratio” in that things really start to happen before or after the Dow/gold ratio breaches 10, in either direction. In the past it was the level from where either the gold price or the Dow increased spectacularly while the other went nowhere to down.

 Chart generated on the stockcharts.com website

As you can see on the chart, in 2009 the ratio went through the 10 level (going down), touching 7, from where it went back to test the 10 level. Since April 2010, it has resumed the downward move and appears ready to accelerate its fall.

So, in my opinion conditions will continue to favour gold, relative to the Dow.

What will be the effect of conditions on gold, going forward?

Higher—much higher—prices. That will be the major effect on the gold price, going forward. From a shorter term perspective, things are much like they were in 2007. This can be seen from the following chart:

 chart generated on the fxstreet.com website

More information and analysis of this chart is available to subscribers to my premium service.

From a longer term perspective (see my Long Term Gold Fractal Analysis), conditions are much more like the 70s, when gold was continuously making all time highs. The similarities to the 70s are likely to continue throughout this decade, with conditions propelling gold higher on a parabolic path, whereas the world economy and the Dow in particular will be going nowhere. The world’s great debt bubble will continue deflating, and until it has appropriately deflated there can be no recovery. Along with gold and silver, much higher prices should eventually be expected for commodities, whereas paper and all things inflated by the great debt bubble of the last century should lose significant value relative to gold, silver and commodities.

What will be the effect of conditions on the Dow, going forward?

As I have said, I expect the world economy to go nowhere over the next decade. It can only recover when we are at the end of this huge debt crisis, which could take another 10 years or more. A peak in the gold price will likely be a good signal that the end of the world debt crisis is only a few years away. I believe we are still far from a peak in the gold price, however, which means we’re even further from having conditions suitable for a growing world economy and a Dow worth investing in.

I wrote previously: “Debt levels have become a huge burden and will strangle the world economy for at least the next 10 years. The debt will have to be settled eventually, either voluntarily (unlikely) or by force (death of all fiat denominated debt).  All future production will be severely reduced by the debt obligation and the effects will be a world economy in chaos and possibly with life threatening phenomena like starvation being the order of the day.

That is just how it works when you have huge debt – you will have less of your future income/production available due to the debt obligation that has to be met every month.”

From a shorter term perspective, the 11000 level could prove to be a barrier to the Dow, and it could fall to the 9000 level or below.

The Rand Gold Price

Below is a chart of the South African rand gold price.

 chart generated on the goldprice.org website

I have indicated a possible symmetrical triangle. In textbook fashion, the price broke out of the triangle, advanced for a few weeks, and has returned to a support at nearly the same level where it broke out. It is now at a point where it could spike significantly higher. This is a great signal for the SA gold miners, as well as possible evidence that the HUI breakout will have “legs”. For more analysis on JSE gold miners and the HUI index, please visit my website (premium service).

Conclusion

I believe gold and silver are the assets to own throughout the next several years. They might be the most functional assets with which to protect one’s wealth during the coming storm. I encourage you to look after yourself and your loved ones, and please obtain the most functional assets to protect your wealth.

Warm regards and God bless

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Please visit my blog (http://blogs.fin24.com/hubertmooolman) for older but informative articles.

My premium service is $10 per article.It covers various topics like the dollar gold price, silver price, rand gold price, HUI, JSE gold miners and Dow individually Please email me for more information.

You can email any comments to hubert@hgmandassociates.co.za

How to Benefit from the Greatest Transfer of Wealth – Must Read

by Hubert Moolman

 

Originally published on 16 February 2009

 

 During the 7 years of famine in Egypt, in the time of Joseph, one of the greatest transfers of wealth in the history of this world took place. The Pharaoh of Egypt obtained great wealth in the amount of land and people who became his servants. “And Joseph bought all the land of Egypt for Pharaoh: for the Egyptians sold every man his field, because the famine prevailed over them: so the land became Pharaoh’s” –Gen 47:20 

Not only did he buy every man’s field but also every man as a servant. With what did he buy every man and his field? With bread – “buy us and our land for bread, and we and our land will be servants unto Pharaoh” –Gen 47:19 

I believe that we have reached a time where the greatest wealth transfer in our lifetime as well as possibly in the history of this world is about to happen. Some people ask: “why the gloom and doom?” What they do not understand is the fact that this great transfer of wealth or collapse of the world’s monetary system (which they call gloom and doom) is inevitable due to past events. 

Some of these people go on the say: “what about the poor people?” and they want to make you feel that you do not care when you are warning of the coming collapse. What they do not understand – in addition to the fact that these events (which they call gloom and doom) is inevitable due to past events  and not because you want it – is the fact that they do not have to suffer this supposed gloom and doom. 

Anyone who makes a point of seeking the truth, educating himself, obtaining knowledge about the issues that face us, will not suffer, and in many cases will actually benefit from such events. The ones that will suffer are those who refuse to educate themselves by seeking and obtaining the required knowledge. “My people are destroyed for lack of knowledge” – Hosea 4:6 

There are so many people that are economically illiterate and they are not who many might think they are. They can be rich or poor, young or old, doctors or unschooled, financial advisors or whatever. 

Many people want to hang on to a system (world monetary system) that really brings gloom and doom. They get worked up when someone warns of the flaws of the current monetary system and what gloom and doom it already brings as well as the worse to come as result of the flawed system. They will do and say whatever to protect the flawed system, whether they are major benefactors of the flawed system or not. 

They continue to believe the lie, because it is “politically correct” or “socially acceptable” and they want to keep the so called peace – protecting evil in order to do good. 

Many people still follow or believe their leaders despite all the problems they find themselves in which, in most cases, is directly as a result of the actions of those leader. They deny (don’t want see) the truth and rather seek familiarity. 

The Pharaoh in the time of Joseph was definitely not like such. No, this man was very wise. He did seek truth, not familiarity. When Joseph explained to the Pharaoh what his dream meant, the Pharaoh believed him despite the fact that he did not even know him. 

How was the Pharaoh able to distinguish truth from error? Simple – he looked at the track record of the man. Joseph has had success interpreting dreams and this was witnessed to Pharaoh – “and I have heard say of thee, that thou canst understand a dream to interpret it” Gen 41:15 

Also, when Joseph explained the meaning of the dream, he also offered some advice as to what to do about it. Again, Pharaoh did not go back to familiarity, he did not follow his own advisors, but he again went to a man with a track record of truth and success with work. Remember Joseph was working for Potiphar, an officer of Pharaoh, and eventually became overseer over Pothiphar’s house due to his success. 

Back to Today 

We have a huge problem today in that debt levels worldwide are extremely high and even worse, it is incalculable. Now, it is imperative to understand that debt cannot be paid with debt. And when I say debt, I mean all debt: government, personal, corporate etc. Instead of reducing the debt it will just increase the amount of debt. Even when payment is made using money (non real paper money) one does not know to what extent the debt is discharged. This is because paper money is a promise to pay (various things from previously gold to future taxes, future production and even nothing) and one does not know to what extent those promises will be met, if at all. This is clearly understood when you understand that paper money is not an honest or consistent measure. You can read my article on “how do you measure wealth” for more on this. 

So actually one is just adding to the debt by creating more paper money to pay debt. It might not be so apparent but the debt will still be somewhere in the system. 

The debt incurred is the past events that will lead (and is already starting to do so) to the events that will translate into this great transfer of wealth. The coming world monetary system collapse is inevitable because the debt is heavy and it is real. 

Debt can only be properly settled with real assets, this is inescapable.  So if you borrow a car from someone, you are indebted to that person. You can settle that debt only by returning the car. The only real alternative to paying with that car is paying with what we call money (real money) which is itself a real asset. Like I explained in previous articles, real money is a capital claim on assets not a debt claim like paper money. To fully appreciate this one has to understand the function of money as well as what properties money should have.  Various commentators as well as I have written about the function and properties of real money. 

So it follows naturally that if debt is huge and it has to be paid by specific real asset or real money which is itself a real asset, real assets acceptable as full payment of debt would be in huge demand when debt is being paid off the proper way. However, I am not seeing the big debtors of this world paying their debt in specific real assets or real money. No, they are rather paying their debt with more debt (newly created money and other credit instruments). When they do this, the paper prices of real assets (more generally) eventually rise. 

To keep things simple, it would be acceptable to say that paying debt with real assets is deflationary whereas paying debts with debt is inflationary. Now you can see why governments are so scared of deflation. They don’t want to pay debts the proper way. 

I hope that it is now also clear why it is high inflation and hyperinflation that one should expect going forward. To expect the contrary is to bet that the US and others will actually start paying their debt with real assets like the kind that you have to dig deep into the bowels of the earth for. 

However it is not to say that certain assets cannot deflate significantly going forward. 

So, having specific real assets that are acceptable as full payment of debt is how you will prepare yourself for this coming great transfer of wealth.  This is because they eventually win both ways. It is really as simple as that. The Pharaoh simply accumulated food because he knew a big famine was coming, and throughout that famine he was not only protected but he gained enormously. Nobody knew how big the famine was going to be and therefore how much food had to be stored.  That is why Joseph collected as much food as possible. 

Savings is what saved Egypt and what will save you and I. A previous article of mine called “The truth about our money” will give you more insights about the importance of a store of wealth and how it is relevant to protect us from the coming events. 

Some real assets will be of course better than others. Food for example is the only thing that will get rid of hunger or water of thirst. It is important that you have the relevant goods or services when it is required. Since it is not possible to store everything that you might need in the future, it is essential that you have an ability to obtain the required goods and services when required, and this is why you have to have the best store of wealth. The best store of wealth is quite simply gold and silver and therefore they are a must have. And of course they are also assets that are acceptable as full payment of debt. 

Which real assets to accumulate, when and how to accumulate them are the big questions. I have given you some tips with regard to this now. However, this is where your quest for truth becomes very important. You have got to educate yourself; you have to get the designation EL (economically literate) behind your name. By reading sites like these (you are probably reading from one of the great informative sites where my work is published), where many knowledgeable writers share their knowledge, you are already making a great start. I hope to cover the importance of knowledge-sharing in a future newsletter. 

You have to be as wise as the Pharaoh. You have to distinguish truth from error. Do not be afraid to separate yourself from familiarity when it is flawed with lies or error. When choosing leaders or seeking advice, look at people’s track record. Where and how have they led people before? Do they have any success? Like I said Joseph had had success and therefore the Pharaoh trusted his advice. 

I would like to close by quoting the President of America, Barack Obama: 

“we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you” 

I would like to use his quote to send a warning to him and all world leaders out there, for if they are lying to us or plan to lie to us about money and the economy: 

we say to you now that the spirit of truth is stronger than you and any lie and cannot be broken; you and any lies cannot outlast the truth, and the truth will defeat you and any lie; therefore do not lie to us” 

 If you find this information useful, please forward it to friends or family so that I can continue to reach people that would not normally read such informative sites as this one. If you would like to subscribe to my newsletter please send me an email. My newsletter is free and I send it out whenever I have something to “say”.  I do accept donations though, so that I can continue to research and write; email me for how. 

To read more of my work you can read the rest of my blog: http://blogs.24.com/hubertmooolman 

You can also find my articles at www.oreconsulting.co.za 

May God bless you. 

Hubert Moolman EL (Economically Literate) 

You can email any comments to hubert@hgmandassociates.co.za 

Money As Debt by Paul Grignon

Money As Debt by By Paul Grignon (http://www.moneyasdebt.net/)

HOW DO YOU MEASURE WEALTH? – Hubert Moolman

1 December 2008

How do you measure your wealth? Do you measure it in rands, dollars or pounds like so many people do?  Or do you measure it in physical (real) assets? Does it really matter? In fact it does, because the measure of wealth you use is most probably what you will accumulate.

People measure various things like time, weight, distance etc. What is extremely important when measuring something is the actual measure one uses. The measure needs to be consistent, that is it should be the same today as it was yesterday. If the measure changes then one will draw incorrect conclusions or make bad decisions.

For example, we measure time in seconds, minutes and hours. These measures are consistent since the time we started using them. Imagine your watch is running slow. You will be late for meetings if you use your watch as a measure of time whereas you would probably be on time if you were using a watch that is displaying the correct time.

The difference between the two watches is that the measure (seconds, minutes etc.) of the “correct time” watch is consistent whereas the measure of your slow watch is always changing (the minutes and seconds are probably getting longer).

Fraud is also often committed by using a false or inconsistent measure. This happens for example when a fruit seller uses a scale that is flawed and thus sells his fruit at inflated prices. The fruit seller deceives the buyer by using a flawed scale, and the buyer then gets less than what he thought he was getting.

No wonder God says the following about measures: “Ye shall do no unrighteousness in judgment, in meteyard, in weight, or in measure. Just balances, just weights, a just ephah, and a just hin, shall ye have” – Lev 19:35-36.

Is paper money a good measure of wealth, is it a consistent measure? NO IT IS NOT, IT IS UNRIGHTEOUSNESS, IT IS FRAUD, IT CHANGES ALL THE TIME. Therefore also, any other measure that uses the rand or other paper money is in fact flawed; this includes measures such as the inflation rate, GDP, wages, salary etc.

Let me prove with an example why paper money is not a good(honest) measure.

Until about 1967, all one rand coins had an 80% silver content. There was also a R1 paper note in circulation. That is already a problem since one R1 is not the same as another just like one minute is the same as another.

Suppose you had kept one of each. Today the paper note would be worth R1 (they are apparently still legal tender) and the coin would be worth about R35 (that is the approximate silver value today). Now it is even clearer that they are not the same. The issuer (Reserve Bank Governor) of both the paper R1 and the R1 coin was in fact deceiving you because he was assigning the same value to both. The fraud only became apparent some years after.

On the surface (when looking at rand amount) it seems as if the paper rand is consistent and that the rand coin is not. However that is not true, the coin is still the same silver weight and it is that which in reality made it a measure. The paper R1 is also still the same weight however it was not this feature that made it a measure, but notional features (its perceived value) instead. Notions change all the time and indeed it has changed significantly since 1967 (the difference between R1 and R35 today, that is how much it has changed).

The wise man would have measured wealth in silver weight and would therefore have accumulated silver. He would not care for the rand value but instead the silver weight of the silver rand. He would have understood the difference between a paper rand and a silver rand. The wise man knows that one measures wealth in real assets, and not in notional values.

The foolish would have measured wealth in rand and would have collected any rands and even given up his silver rands for paper rands. The foolish would have been a victim of the fraud due to lack of knowledge of what a real measure of wealth is.

Therefore do not measure your wealth in the number of rands you have, but instead measure it in the real assets you have. Do not become a victim of the fraud; rather educate yourself.

If you find this information useful, please forward it to friends or family. If you would like to subscribe to my news letter please send me an email. My news letter is free and I send it out whenever I have something to “say”.  I do accept donations though; email me for how.

You can also find my articles at www.oreconsulting.co.za

May God bless you.

Hubert Moolman CA(SA)

You can email any comments to hubert@hgmandassociates.co.za

Fake Money Dead Money and Fake Leaders – Hubert Moolman – Must Read

15 January 2009

 

  Thanks to reading one of the websites (www.aheadoftheherd.com ) on which some of my articles are published; I’ve recently discovered the benefits of water purifiers, for drinking as well as showering water. Since using these purifiers, my skin and hair is not so dry anymore as well as my breathing is much improved. I am hoping to see more improvement in other areas in the future. 

Basically these water filters take out chlorine, among other things, which is added to water to “purify” it, or take out other harmful substances. 

Chlorine does a good job in killing or taking out these harmful contents in our water, however, it comes with its own problems. I have found these quotes that explain the use of chlorine in water purification as well as some of its associated problems: 

“Why we use chlorine is not because it’s the safest or even the most effective means of disinfectant, we use it because it is the cheapest. The long-term effects of using chlorinated drinking water have been recognized only recently. According to the U.S. Council of Environmental Quality, “Cancer risk among people drinking chlorinated water is 93% higher than among those who use non chlorinated water. The highly controversial book titled “Coronaries/Cholesterol/Chlorine” by Dr. Joseph Price, written in the late sixties concluded that nothing could negate the incontrovertible fact, the basic cause of arteriosclerosis and resulting entities such as heart attacks and stroke, is chlorine. Dr. Price later headed up a study using chickens as test subjects, where two groups of several hundred birds were observed throughout their span to maturity..” [1]  

One group was given water with chlorine and the other without. The group given chlorine water, when autopsied, showed some level of heart or circulatory disease in every specimen, the group without had no occurrence of disease. In winter conditions the group with chlorine showed outward signs of poor circulation, shivering, drooped feathers and a reduced level of activity. 

The group without chlorine enjoyed rapid growth and displayed vigorous health. This study received well by the poultry industry then, continues to be used as a reference even today. As a result, most large poultry producers use de-chlorinated water. It would be a common sense conclusion to think for that regular chlorinated tap water if not good enough for the chickens, then it probably is not good enough for human consumption either 

It (chlorine) has a disagreeable, suffocating odor that is detectable in concentrations as low as 1 ppm, and is choking and poisonous.” [2]   

Chlorine gas was also used by the Nazis, among other, as a chemical weapon. 

Chlorinated water looks basically just like pure or de-chlorinated water; however it does not have exactly the same effects as water, as explained above. Our world is filled with things that appear like the real thing, but in reality is anything but the real thing. Either they optically look like the real thing or people accept or use them as the real thing.  These things, instead of working like the real things, they work in opposite of the real things or they cause other problems (side-effects). 

We have bread made with bleached flour, adulterated fuels, soft drinks, coffee, and energy drinks that for many in part takes the place of pure water etc. These things cause health problems which are not immediately apparent, but take time to manifest. Do your own research regarding these things and form your own conclusions. Some of these could be the cause of some long term health problems you might have. 

My field is money and the economy, and it is my goal to expose lies and share the truths regarding this field. We also have non-real money that seems just like real in that it is used as a medium of exchange, a unit of account and a store of wealth. Just like chlorinated water, instead of providing confidence to economic transactions or decisions, it destabilizes the level of confidence. 

Use of this non-real money (paper or digital money) also has other serious consequences (disease in society). These are best explained by first understanding what I previously wrote on the difference between a debt claim and a capital claim. 

Money essentially represents a claim (capital claim) on a tangible asset or service.  In our modern economy we have fake claims which were created by debt (debt claim), but they are circulating just like capital claims. These debt claims on assets can only become a real claim ones this debt has been paid off, and in many cases these fake claims will never become real claims because the debt is just too big to pay off. 

After many years of using primarily fake claims as if they are real claims, in our economy, we have caused the ascension to power of fake leaders, trustees that cannot be trusted. These leaders appear like the real thing (good leaders or trustworthy trustees), but they are anything but the real thing. They work against the best interest of people. They seek to take peoples freedom or autonomy away.   

Many years of using fake money has also changed people to such an extent that they do not know what reality is anymore and are economically illiterate. 

Here are just a few examples of how the use of fake money has affected society: 

President Bush is justifying his economic intervention by saying that “I’ve abandoned free market principles to save the free market system.”- RTTNews 

US President Elect Obama and other world leaders want to spend America and the world out of the mess that was caused by excessive spending in the first place. 

French President Sarkozy and others believe that they know the best time for you to relieve yourself in the toilet. Central planning is their solution to running the world economy. Addressing the European Parliament French President Nicolas Sarkozy has called for a European “economic government”. – Eurotopics 

The world also has a lot of people who control a lot of resources (are rich) but do not understand real economics or understand real economics but mislead others through “doublespeak”. Not to say that all people who are rich are like such. Many people look up to these people, or worship them. I have written about some of these people in the past. Some commentators have aptly referred to them as the paper aristocracy. They gain their so-called success through information and privileges obtained as insiders and by misleading others. Their success is based on a formula of stealing from the poor. 

The number of people who want to eat but do not want to work has increased significantly (The welfare state has many supporters and willing leaders). 

Many people believe that government has endless resources. They think/act like government cannot default on debt obligations. 

Many people believe that one piece of paper of roughly the same size and quality is significantly more valuable than another. (For example: Zim dollar vs US dollar) 

Many people believe that real gains can be had, by passive means such as investing in a stock market or putting money in a bank. Real gains can only come by men working (such as planting and watering), and God giving the increase. 

Conclusion 

The effects of using non real money can only be addressed if we start using real money. There is no other cure.  I believe that money cannot be decided upon by government or any authority. Just like since the beginning of time, people should be allowed to use things that are acceptable (acceptable by the participants in the economy) as money and eventually one or a few things will become widely accepted and eventually replace all other forms of money. 

Because of gold and silver’s superior features, they will eventually replace all other forms of money. Note that when I say gold and silver, I mean using the actual metal as money (like coins). Not the gold or silver standard. The gold or silver standard is just another opportunity for government to  steal peoples gold and increase the number of claims on tangible assets relative to the tangible assets in the economy, the same as can be done under a fractional reserve banking system. (For those people who wrongly suggest that I support/prefer a gold standard, here it is clear and simple) 

It (gold or silver standard) also creates an unnatural concentrated position of gold and silver and this normally leads to manipulation and fraud. This is no different to having one issuer of money as under the paper money system. 

 And yes, there is enough gold or enough silver in the world to use as money. Some people use one of paper money’s short comings (the fact that there is unlimited or too much) to justify why gold or silver cannot be used as money; how ironic is that? 

Death of the world monetary system 

The central banks and world leaders know that their system (world monetary system) cannot continue for much longer without gold giving that system credibility and confidence, as it has done for the dollar when it was created. They will therefore have to start using the gold word as a possible solution. The so called current “financial crisis” is testament to the fact that the world’s current monetary system is about to end. 

What also supports this is the following: According to an article by Mike Hewitt published on DollarDaze the median age of 559 world currencies no longer in circulation is only 15 years whereas the median age for all currencies (176 in total) currently in circulation is 39 years. From this article it is clear that on average currencies (paper) do not last long. 

They do not last long because there is much competition to get the power to print (counterfeit) money; therefore so many end by acts of war and acts of independence. Also, the power to print, inevitably leads to abuse, therefore so many currencies end by hyperinflation. 

It would seem that the dollar as well as the other longest running currencies are different, because they have beaten the trend of 15 years for dead currencies and even the average of currencies still in circulation (39 years). How are the dollar and other longest running currencies still in existence able to beat the trend? By exercising better monetary prudence than in the past? I think not. Could there be anything different, in a positive way? I also think not. 

The main reason why these currencies have been running for so long is because they were mostly backed by gold or silver or were itself to an extent actual gold or silver or a combination of both. The dollar for example is backed by nothing for only about 38 years of its 217 year life. 

Another reason possibly is more successful manipulation and collusion, which is due to the significant power that the central banks and governments of these currencies exercise. For example, the USA can exercise more power than say Argentina, therefore is able to keep the monetary fraud going for longer. 

The current world system of currencies, with the dollar as the pivot, is 38 years old and if you compare that to the 15 years for dead currencies as well as consider that other than the reasons given above, nothing is different (in a positive way) about these currencies, it seems that the system is way past its sell by date. 

Well, the point is, that because the current world monetary system seems way past its sell by date and because collapse is imminent, due to the nature of paper currency, the end of this system is at hand and could end as soon as the next 1 to 2 years. 

The end of this monetary system will most likely come by way of hyperinflation or a new settlement such as a new “Bretton Woods”. This is because most, if not all paper currencies in the past, had their “natural” deaths by way of hyperinflation, and the world leaders and central banks know that their monetary system is basically already dead. That is why they had the G20 meeting on November 14-15, 2008. 

The question is really to what extent will a new monetary system be fraudulent? For I believe that it would be wishful thinking that we would have a system that uses honest and real money, while we have such fake leaders and so many economically illiterate people. 

If you find this information useful, please forward it to friends or family. If you would like to subscribe to my news letter please send me an email. My news letter is free and I send it out whenever I have something to “say”.  I do accept donations though; email me for how. 

visit my blog: http://blogs.fin24.com/hubertmooolman 

May God bless you. 

Hubert Moolman CA(SA) 

You can email any comments to hubert@hgmandassociates.co.za

THE TRUTH ABOUT OUR MONEY – Hubert Moolman

24 November 2008

Highlights 

The Rand “lost 86.8% of its value against the pound in the last 47 years

The Rand “has lost 92.91% of its value in dollar terms since 1971″

The Rand “has thus lost 99.77% of its value against gold since 1967. That is almost all of its value”

“We are thus paying real value in taxation that is based on non-real profits”

Should a family make a long journey, they would need things like water, food, transport, information, accommodation etc. to make the journey successful. What is important is to have or obtain these things when they need them, in the right quantities and in the required condition.

 They will either take the actual things with them if possible or they will acquire the actual things later during the trip when they need them. Therefore, where they take actual things with them, they are storing the actual things and where they will acquire the actual things later during the trip, they are in fact storing an ability to obtain the actual things. To illustrate this let’s use the examples of water and accommodation.

 Water

They may decide to take enough water with them on the trip. To make this possible they therefore store water in cooling water containers. Should the family need water during the trip (assuming no other water is obtainable) and find that the stored water is in good condition and that the quantity is as was first stored, they can then use it as required. The store of water would thus have been effective. On the contrary, if there is no water left or significant water loss both due to leakage, or the quality of the water is not adequately preserved, the store of water would have been ineffective. The family could then possibly die due to lack of water or the condition of that water, their journey could be seriously delayed, or they could develop serious illnesses due to lack or quality of the water and so on.

 Accommodation

They may decide to stay at hotels during their journey; therefore they store something of value which hotel owners would accept in exchange for a room at the hotel. I call this something of value an ability to obtain the hotel accommodation.  Let’s say that hotel owners like flour and accept only quantities of flour in exchange for hotel accommodation, thus the family store flour with them during the journey for future exchange to obtain accommodation. Like in the case of the water, the effectiveness of the store of flour would determine whether the family would be able to obtain the needed hotel accommodation. If they are unable to obtain hotel accommodation they would be exposed to additional risks that could be detrimental to them successfully completing their journey.

  One can then conclude that for their journey to be successful it is imperative that their store of required things (let’s call it goods and services) or store of an ability to get the required goods and services is effective.

 Our family: South Africa

If the people of South Africa were this family and the store of goods and services (or ability to obtain goods and services) represents our money, it becomes clear that for us to be successful economically in our journey of life as a nation it is imperative that our money as a real store of value is effective.

 Let us look at the performance of our nation’s main store of value, the South African rand.

 We all know that the buying power of our rand has been deteriorating over the years and is still deteriorating. Generally the inflation rate indicates to what extent this is happening. Whether it accurately indicates the extent of this loss of buying power is another question though. Hopefully we can look at this in the future.

 For now let us look at the rand’s performance as a store of value against the performance of other popular or most used forms of money as a store of value. This comparison would give us a good idea of the extent of the loss or gain of purchasing power of the rand.

 Rand in British pound terms – The British pound used to be the world’s so called reserve currency during the 18th and 19th century, meaning that governments used it as a store of value for their international reserves.  Today a significant portion of the world’s currency reserves are still held in British pound. It is thus useful to compare the performance of our store of value to the performance of the pound.

  The rand was introduced in 1961 and at that time 1 rand was equal to 50% of a pound. Today more than 47 years later 1 rand equals about 6,6% of a pound. That means that today it represents 13.2 % of its initial value (1961 value) in pound terms or put another way it has lost 86.8% of its value against the pound in the last 47 years. Not a very convincing performance by the rand against the pound.

 Rand in US dollar terms – The US dollar is currently the world’s reserve currency. Therefore it is used by most governments and central banks of the world as a store of value for their international reserves. It is probably the most popular store of value today, therefore comparison to its performance will be very useful.

  In 1971 one rand was equal to 139% of a Dollar. Today 1 rand equals about 9.86% of a dollar. Therefore It now represents about 7.09% of its dollar value in 1971, so it has lost 92.91% of its value in dollar terms since 1971. Again, the performance of the rand is not convincing.

 Rand in Gold terms (Krugerrand) – Gold has been used as a store of value for thousands of years. Today almost all central banks keep a part of their reserves in gold. When the US dollar became the world’s reserve currency it was actually 100% backed by gold, meaning that it was convertible into gold. People used to say that the US dollar is as good as gold. Gold is arguably man’s most successful store of value as well as most popular when we take at least more than a couple of thousand years to judge. So let us see how the rand does against a store of value with such a pedigree.

 In 1967 a 1 ounce Krugerrand cost R 27, today it will cost you about R 8200 (note, that a 1 ounce Krugerrand  cost about the spot price of gold plus a small premium).  Therefore a Rand is worth 0.33% (1/8200 divide by 1/27) of the value it was in gold terms in 1967 and it has thus lost 99.77% of its value against gold since 1967. That is almost all of its value.

 Conclusion on the rand’s performance as a store of wealth

 As a store of value/wealth the rand has been unsuccessful. It has lost almost all of its value against the world’s most successful currency, gold and a significant portion as measured against the British pound and the US dollar.

 Some clever economists or banker may tell me that if you had stored your wealth in rand say since 1961 (assuming in a bank) you would have been compensated for this loss of value by the interest that is higher than that offered by British or American banks and much higher than gold which apparently pays no interest. I would then reply that this does not work for me. The ability of my store of value to do its job should not be dependent on decisions or actions by others such as the reserve bank.

 The store of value that I use should do its job inherently. In my journey example where water is the value, I would rather use a store of water that enables me to access my water in sufficient quantity at the time I require it, without outside influence or intervention. Using the Rand is like having a store of water that leaks a significant amount of water most of the time and along the way someone else (Reserve bank or others) decides the quantity of water it will top me up with. The risk here is that the “top ups” might be too late or insufficient (which it probably is)etc. I might die, develop a serious condition and never successfully complete my journey. The increased uncertainty that this flawed store of value brings, makes financial planning and survival a nightmare.

 Sometime at the beginning and during the current world credit /financial crisis I read that Mr Trevor Manuel, our Finance minister and others say that we as South Africans are not saving enough. I completely agree; however, Mr Manuel you and the powers that be are not giving us an effective store of value. You are giving us a “leaking water bottle”.  How can we possibly be expected to store our wealth using such a flawed store of value?

 What makes this even worse is that in many cases we measure the performance of our investments in this very flawed store of value thereby recording gains in our investment whereas if we were to measure it in a stable and effective store of value, like gold, we would actually be reporting a loss. We are thus paying real value in taxation that is based on non-real profits. That is certainly a quick and effective road to bankruptcy.

 Reasons why the rand fails as a store of value

Let us look at the underlying reasons why the rand has not been a successful store of value. To understand the reasons we first need to know what properties good money should have to be effective as a store of value, a medium of exchange as well as a unit of account.

Money should be:

  1. Divisible- should be divisible in smaller units
  2. Portable – able to carry it around therefore a high value should be able to be contained in a small space and weight
  3. Homogenous – one unit should be the same as any another unit
  4. Durable – should not be able to be easily destroyed or eroded
  5. Valuable – should have intrinsic value, normally because it is desirable. Should not be able to be created or discovered without reasonable effort. Thus it has to be a commodity itself.

The reason the rand does not comply with good money is because it is a paper currency. It is a fiat currency. A fiat currency is created by government decree (it is money because the government says so). The Rand is not alone; virtually all the world’s currencies are paper and fiat currency. The major flaw with paper /fiat currency is that it does not comply with point 5 above which is that it is not valuable in itself; its intrinsic value is zero.

 The issuer can create it in unlimited quantities without reasonable effort, and this is what mainly deflates its buying power (it is easy to increase the quantity of money faster than the quantity of the goods and services that it is buying). So just like the flawed store of water, a fiat currency’s ability to do its job is dependent on decisions, actions and integrity of the central banks and others. In fact the use of paper/fiat currency gives the issuers power to redistribute wealth the way they desire. Eventually the people who print the money will print it in such quantities that it will hyper deflate its buying power. By Government decree it is given a so called value and by government decree it eventually finds its real value of zero.

 “Paper money eventually returns to its intrinsic value – zero.” (Voltaire, 1694-1778)

If you find this information useful, please forward it to friends or family. If you would like to subscribe to my news letter please send me an email. My news letter is free and I send it out whenever I have something to “say”.  I do accept donations though; email me for how.

May God bless you.

Hubert Moolman CA(SA)

email: hubert@hgmandassociates.co.za