07 August 2014

Gold Daily and Silver Weekly Charts - And the Times, They Are a Changin'

"In times of change learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists."

Eric Hoffer

There was intraday commentary here.   I was struck by the continuing erosion of gold from Western trusts and funds, in stark contrast to silver.   I like both metals, but gold is the deffest dog.  And from my perspective the reasons are pretty obvious.

We have come to the end of the informal Bretton Woods II agreement, which was to stay with the US dollar as the primary basis for world trade, an arrangement that had been in place since the end of WW II.  The US dollar based on a relationship to gold became the petrodollar when Nixon unilaterally closed the gold window in 1971. 

The banks agreed to continue to use it as the de facto standard for international currency valuation  The 'management' of gold as just another currency was carried out through leasing arrangements and targeted sales.  By 2004 at the latest, a number of the world's central banks broke from this arrangement, which started quickly falling apart. By 2006 the central banks turned from net sellers of gold to net buyers. 

The agreement finally succumbed to the Greenspan Fed, and the band of Merry Pranksters in the government, who finally played one too many one-sided games with the other sovereign nations.  The credibility of the US hit a virtual brick wall in the aftermath of the obtuse behaviour that followed the world's outpouring of favourable sentiment for the US after 9/11. 

Bush laid the egg, and Obama hatched it, to borrow a historical metaphor about another Reformation that came after a long period of abuses and a rising tide of nationalism after the long fall of an Empire.

We know who these central banks are, and we have a good idea of why they are doing it, if we are still a little rough on the details, which is understandable given the strategic nature of their actions.

There are still a range of outcomes, obviously, even if all these assumptions and estimations we are making are correct.  One outcome, that is very much desired by many in power, is to have a one world financial and currency system based on the dollar as it is defined and managed by a small elite group of bankers.  That deal has been on the table for so long that it might have died of old age.

The greedy shenanigans of Wall Street, and the slavish acquiescence of their friends at the Fed and in the government, have thrown a serious monkey wrench into those longer term aspirations. Propaganda may serves to persuade and relieve your own people in their confusion and anxiety, and make them more compliant in believing just about anything, but it doesn't always fool those who are looking in from the outside, and see things more objectively.

This seems to me to be one of those periods of very significant evolutionary change, that happen infrequently enough so that they do not seem to have much of a place in most people's models and mindsets.  And of course since they threaten the status quo, many of our modern King Canutes are standing on the shore, command the tide to stand fast, and exclaiming, "It ain't happening man, it ain't happening.'  Wait until the bloodbath in high yield garbage assets starts. 

I have taken the liberty of using a good general revolutionary change chart, and include it below.

Have a pleasant evening.