Today a 40-year market veteran sent
King World News an incredibly important piece that warns the elites are
now consolidating their power. This piece exclusively for KWN also covers what is happening in the war in the gold and silver markets.
May 10 (King World News) – While
the world guesses as to how much gold China has accumulated since the
early 2000s, a look into their affection for precious metals reveals a
rich history of amassing huge quantities of silver as the primary form
of currency and as a store of wealth….
The path to a silver standard began with
the discovery and exploitation of the “New World” by the Spanish
Conquistadores. Enormous quantities of silver were extracted from what
is now Mexico. Europe had a voracious appetite for Chinese goods, but
the money to expand that trade was missing. The New World Silver fit the
bill.
Much Of The World's Silver Flowed Into China
It has been estimated that as much as a
staggering 40% of the New World silver eventually wound up in China. As
the inventors of paper money, the Chinese also had a long history of
various rulers imposing a paper standard on the population. We know that
in every case, the paper money worked for a time, but then crashed and
burned in value as the power to print money became abused.
The problem for the Europeans was the
combination of an unlimited desire for the Chinese goods combined with
the cost of incessant wars, particularly in the 18th and 19th centuries
(an earlier version of the “Guns and Butter” dilemma). As the supplies
of new silver diminished and the requirement to pay armies mushroomed,
the Europeans exported something that they did have in ever-increasing
quantities, opium.
The death knell for the Chinese silver
standard came about in the mid-1930s. The price of silver had risen
substantially by 1919. Vast quantities of silver left China in response
to the much higher world price and demand. Unable to maintain the status
quo, the Chinese government banned the private ownership of silver and
the circulation of coins in 1935.
Few People Know Roosevelt Nationalized All Private U.S. Holdings Of Silver
China was not the only place in the
world rejiggering their monetary system and engaging in hostile acts
against precious metals. We all know about Franklin Roosevelt
confiscating gold in the U.S. during the 1930s and then arbitrarily
revaluing it to $35 per ounce. But few people know that Roosevelt also
confiscated all of the private holdings of silver as well (see image
above).
Even Fewer People Know That Roosevelt Also Did This
Another act among many in history occurred during World War II in the U.S. It was disdainfully called “L-208”. The
formal name was the “War Production Board Limitation Order L-208”. This
act virtually shut down gold mining operations in the United
States. During the Depression, communities involved in mining for gold
did relatively well. Mining costs had fallen significantly and
Roosevelt’s revaluation made the activity even more lucrative.
L-208 was billed as redirecting
“unnecessary” resources needed for the war effort to mining for base
metals to make shell casings and the like. There was little real impact
of the production of base metals, but it did succeed in the closing of
most mines and the dispersion of the people involved.
It would not be until the 1970s before
the miners in the U.S. began to recover. When people ask in the current
day “How can they get away with this?” referring to manipulation of
prices and overbearing legislation, the answer is that governments have
been engaging in such activities since records have been kept.
Elites Consolidating Power
Next week promises to bring more Kabuki
Theater, volatility or both. We got good theater last week with the
very odd election results in the United Kingdom. Great drama about the
outcome drove the headlines right up until election day, but what
emerged was a massive victory for the status quo and Scotland. It should
not be a surprise. Elections are becoming more and more perfunctory as
the elites consolidate and grow their power.
Greece will be front and center on
Tuesday as the deadline arrives for repaying a large tranche of Euros
owed to the IMF. The drama set up for this event is whether or not the
Greeks and the elites will hold to their demands and who will bend.
There is always the chance of an outright default, but until the Greek
deposits have been bailed-in, it is more likely for a gradual
confiscation than some dramatic event. However, one cannot rule out a
surprise.
The investment scorecard continues to
show the HUI Index way ahead of the pack for both the current quarter
and year-to-date. It is especially impressive given the incessant
attacks on the metals. The HUI is 8% ahead of the S&P 500 and NASDAQ
Indexes and a whopping 15% ahead of the bond proxy, TLT, since the
start of the quarter. The latter comparison is also very interesting as
longer-dated fixed income and the HUI were strange bedfellows for quite
some time. No longer.
The War In Gold And Silver
The central bank computers, driven by
their algorithms, continue to exercise a dampening effect on the prices
for gold and silver. Investors should consider what JP Morgan is
reportedly doing. If the reports are correct, JP Morgan has been
amassing a horde of silver greater than Warren Buffet’s foray into
silver ownership and the Hunt episode in the late 1970s, combined. JP
Morgan must have a very solid reason for doing so. Long-term investors
should tag along and continue to build up positions in both metals as
well as the miners.
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