Monday, April 13, 2015

Just Around The Corner

Followers of the golden trail may recall that Saudi Arabia, India, Russia and China were admitted to the BIS back in 1996, just months before the LBMA first published its daily clearing volumes and the iconic "Thoughts of Another" began germinating at the USA Gold Forum.

For some of us that seems like a lifetime ago. For others it seems like yesterday. For the world of global finance, it seems like a slow but steady course change toward transition from a debt-based to an equity-based systemic foundation.

I have to credit FOFOA for pointing out the IMF's sudden, recent love affair with "Islamic Finance" even though many sources cite the "industry" as being rather young (30 years or so?). Yet the core principles behind it are not - only this most recent iteration.

We have long considered physical gold to be the wealth reserve foundation of an asset or equity based global monetary system - one that offers a time-proven solution, following each inevitable demise of every former debt-based system preceding it.

It is no coincidence that gold has been flowing to countries with an "equity based template" for finance, now under international scrutiny. Of course, the families have always played the gold card close to their chest, but this Friday, "Gold, the Renminbi and the Multi-Currency Reserve System" will be discussed.

The consensus forming is to further "socialize" debt by blending debt-backed fiat with equity-backed fiat using a hybridized SDR of currencies and a dash of gold perhaps. This is partly an extend and pretend tactic, but also a "collapse buffer" available through the cooperation of producer nations like China.

And yet ... some CBs do not seem so happy to accommodate. Notably Russia and perhaps the Saudis? When one notes the recent performance of the Ruble and Russian equity markets, we can see how geopolitical irreverence has even more power than gold in the realm of expectations and sentiment. A good measure of "future" value here comes through pure defiance. Speculators believe that Putin is not bluffing, so Russia's markets are both "strong in that belief" as well as "strong in gold".

That said, expectations, sentiment, opinions and whims belong to the realm of contractual futures. To keep that realm systemically important requires confidence in debt performance. So this plan is a continuation effort based on the mutual cooperation of all (even Greece and Germany).

What a wonderful world we live in, where the debt ridden currencies and their flagship exorbitant privilege are welcomed with open arms by the producer nation economies, furiously stacking gold just to have a say in the matter.

And there is peace and tranquility, harmony and prosperity as far as the eye can see. If we can just keep things the way they are today, I'm sure prosperity and growth lie JUST around the corner.

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