June 21, 2024

Gold and Silver Recap: The Fed Gives a Helping Hand

So the Fed decides that quantitative easing was going to boost the economy, as if the way to prove that you’re really clever is to do the thing that wasn’t working before, just all over again.  This is naturally going to give precious metals a boost as investors realize that whether or not QE2 works for the economy, it’s definitely going to work for inflation.

Silver has always been a purer inflation hedge than gold, apart from in the days of the bi-metallic agitation, but no one’s really sure what that was about.  Those were the days, when to be a money crank was the minimum standard of a self-educated mind.  Of course the biggest money cranks of all, the fiat currency crowd, won.

But while gold is an inflation hedge as well, it’s also an “OMG the whole world’s going to end and I’m going to be living my life in a bunker” hedge.

The smart money is starting to notice silver, which could make things interesting.  The argument for gold to go up is that not every one’s really bought it yet.  How much more true is that of silver?

Anyway the crucial thing here is the gold to silver ratio.  Currently 52 ounces of silver will buy one ounce of gold (or pounds if you want to think big).  Historically it has been around 30 ounces of silver for every ounce of gold.  But recently there’s been manipulation that’s kept the price down through deliberate manipulation of silver short positions.  Well that’s what some investors are claiming and have named HSBC and JP Morgan in a lawsuit.

Well silver’s been the tearaway kid this week but there’s still some action in gold.  Diwali is over and the Republicans have been elected, which means both Indian jewelery buying and US government spending are going to take a short breather.  Although the dollar went up against a basket of currencies it really looks like these events have suppressed demand for gold.

Central banks are starting to notice gold with countries as diverse as the Philippines and South Africa slowly increasing their reserves.  How long will it be before the foreign currency giants such as China, Japan, Taiwan and the oil states start looking at the only currencies that are still standing five thousand years later?


  1. For us to understand gold and the American monetary policy, it is crucial to understand the Federal Reserve. In 1913 when the Federal Reserve was formed, it was granted, as an unregulated, unaccountable, unauditable, non-tax paying, completely private institution, the exclusive monopoly to issue its own “bank” note which would be used as the U.S. currency (can you believe that). Their note was to be backed by (amongst other things) the U.S. gold and silver reserves and payable to them in gold or silver by the American Government! Try THAT at your local bank or any financial institution these days. Take a twenty dollar bill into the bank and ask the teller for $20 worth of silver. I HAVE !!! They laughed at me. How interesting. I would much rather own in my possession silver or gold, REAL money, rather than that green paper that is so frequently printed. Now, a proper audit of the Gold reserve has not been made since the late 1950’s during the Eisenhower administration. That means we have absolutely no idea how much gold is actually in there. They do, and I’d be willing to waiger a whole lot of REAL money it doesn’t take long for them to count, meaning not much at all, if any gold IS left. It has all been sent overseas to countries in debt, countries we owe, countries who own us ! The bottom line is there is probably ZERO “good-delivery” gold (.995) in Fort Knox. Just as with other issues in this day, U.S. Treasury could completely embarrass us critics any day of the week by throwing the doors open to the press and showing mountains of good-delivery gold being assayed. An annual physical audit of U.S. gold reserves is required by law. However, the last time one was done was 1957. Gold and silver were such a powerful money during the founding of the United states of America, that the founding fathers declared that only gold or silver coins can be “money” in America. Since gold and silver coinage were heavy and inconvenient for a lot of transactions, they were stored in banks and a claim check was issued as a money substitute. People traded their coupons as money, or “currency.” Currency is not money, but a money
    substitute. Redeemable currency must promise to pay a dollar equivalent in gold or silver money. Federal Reserve Notes make no such promises, and are not “money.” A Federal Reserve Note is a debt obligation of the federal United States government, not “money”. The federal U.S. government and the U.S. Congress were not and have never been authorized by the Constitution for the united states of America to issue currency of any kind, but only lawful money, gold and silver coin. Federal Reserve Notes are unsigned checks written on a closed account. FRNs are an inflatable paper system designed to create debt through inflation (devaluation of currency). When ever there is an increase of the supply of a money substitute in the economy without a corresponding increase in the gold and silver backing, inflation occurs. It is time we as Americans wake up, smell the coffee, light the home fires, and become educated on what has and is really going on in this country, and around the globe. This is not a message of “gloom and doom”, but simply one American trying to reach others. God bless you God bless the U.S.A.

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