Martin Armstrong On The Fed, QE2, Bernanke, Buffett & Goldman Sachs
EVERY ONCE IN A WHILE, we end up with a catastrophic event I call a PANIC CYCLE. The silver thread that ties all economies and markets together; the Pandora's Box of economic contagion. Nothing, but nothing can ever be analyzed in isolation. Everything is interlinked to everything else. Only once you see the world in such a light, will you see the face of this amazing process. Like looking at the clouds when suddenly you see the face that the sum of the patterns combine to form.
I have been conservative in what is possible for the years ahead. I have given a number of $5,000 gold that is VERY CONSERVATIVE. If we take the USA gold reserve 262 million ounces and we divide that into the national debt at $14 trillion, that yields a staggering price of $53,639 per ounce. Even taking the whole world official gold reserves and dividing that into the US National Debt of $14 trillion, we still end up with $15,873 per ounce. If gold matched the Dow Industrial gain from 1,000 in 1980 to 14,000 we come up with the number $12,250 per ounce. So why are we trading at $1,400? As always, it is a matter of both time and perception. We are on the verge of watching Western Civilization crumble into dust because the politicians will not listen and the bankers are too greedy to save the nation while licking their lips at going short government bonds.
Comparison like these are what gave birth to the absurd "Efficient Market Theory". The Theory upon which the SEC and others went around criminally charging people for defrauding the markets by either overpricing or under-pricing some stock. These types of prosecutions are no different than the Witch Trials at Salem.
I investigated the markets manipulated by the NY Bankers very closely. It became clear that they were able to accelerate the trend in motion but they could not turn a bear market into a bull market. They could get a rally, tell everyone silver would rise to $10, and then dump it at $7 as the buyers came in. There was the silver manipulation where Warren Buffet came out and admitted he bought $1 billion worth of silver, yet it still fell to new lows.
When we look at gold, we are truly looking at just one facet of the whole diamond. It is not a single market in isolation. It is connected to everything else. The symbol of Chaos Theory was if a butterfly flapped its wings at the right time in Asia, he could set in motion a combination of events that culminated in a hurricane that smashes the East Coast of the USA. It may be an extreme example, but what it is trying to reveal is that tiny subtle changes in one market can filter through the silver thread that binds everything together.
During the 1980s and 1990s, the amount of gold sold by Central Banks was 4,500 metric tonnes (144.6 million troy ounces). This helped to make the 1999 low in gold 19 years after the intraday high at $875 on January 21, 1980. Those days are now gone. The central banks do not have enough gold to create a bear market.
China deregulated gold in 2008 and that opened another vast consumer market. The gold reserves of China have risen from 17 tonnes in 2008 to 143 tonnes in 2010. If China were smart, it should take half of its Foreign Exchange Reserves of $2.4 trillion and buy gold IN NEW YORK! This would help them in two ways.
(1) It would reduce their trade surplus helping to politically sterilize criticism
(2) It would help transform China into the new financial capital of the world.
Read the full article here