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Ben Davies: Gold Wars - A Golden Renaissance
Ben Davies, CEO of Hinde Capital put together this piece exclusively for the King World News blog which gives an outstanding synopsis of both the 41 page slideshow presentation and 23 page speech from the rising star out of London. It discusses US government suppression of the gold price and the unsustainable debt of the US & UK. It gives some staggering potential price figures for gold and it is a must read:
September 9, 2010
Gold Wars – A Golden Renaissance
By Ben Davies, CEO of Hinde Capital
September 9 (King World News) - We are at War. It may not feel like it, but we are. This is no ordinary war. It is not a military war but it is just as damaging because it has brought about a loss of freedom, poverty and an imbalance in wealth. The War I refer to is a Gold War.
There has been a long running battle between governments and gold. Gold as the “currency of first resort”, as we have coined it at Hinde, is in a state of permanent competition with fiat or paper money, created by governments. Gold is in a permanent state of war with governments themselves.
Gold is the vital barometer of the health of a nation’s underlying currency. The suppression of the gold price by government allows them to mask the mismanagement of their paper currency.
This past century the US government has arguably been the leading culprit of suppression. They have consistently abused their currency status, by printing more and more IOUs. For countries to fund what they need by taxation alone is not possible without civil unrest. The printing of IOUs has helped to fund not only a coercive welfare system, but has aided the continual funding of armed conflicts around the world.
The US is not the only culprit. The world has been on a fiat currency system these past 40 years and throughout that time the war on gold has raged, resulting in the
unrivalled accumulation of debt this century.
If one accounts for all the unfunded liabilities of social security, medical care and public pensions, the total debt of the US and UK runs at 800% and over 1000% respectively and the rest of the leading G10 countries exceeds 500%. We have surpassed the point at which this is sustainable. Our debt service bill exceeds that which revenue or output can ever hope to attain. We have hit the Keynesian debt end point. So the question is; will the current fiat currency system prevail or will free market money triumph, ie will gold re-assert itself to its rightful place as International monetary numeraire?
We at Hinde contend that we are at inflection point, much as we were in the late 1960s and early 70s. In 1971, after a decade of concerted gold suppression to maintain what was becoming an artificially low gold fix at $35 a troy ounce, Nixon reneged on the US’s promise to make delivery of gold in payment of trade. The gold window was closed in the biggest testament in history to gold’s true worth. As gold rose rapidly in price then, so will it continue to do so today.
Years of government gold suppression and propaganda has left gold sorely undervalued, underowned and misunderstood. Whereas the London Gold Pool of the 1960s was an overt attempt to maintain a fixed price of gold, recent events suggest that possibly central bankers and some 'gold price managers' are working harder than ever to covertly fix an ostensibly free price.
If the US wanted to eradicate all its unfunded liabilities a revaluation of gold to $36,000 would not be totally unrealistic. But for now they chose not to pursue this course of action. May be they are tempted, as Roosevelt was in the 1930s? But pressure is growing on the establishment shorts of the modern day gold pool.
As other market participants have pointed out when the 1968 London Gold Pool failed, gold saw an appreciation of the gold price from $35 to $850 per ounce. A similar percentage today would carry gold to almost $30,000 per ounce. Again $36,000 a troy ounce gold price does not seem so obtuse a suggestion. Both these prices are not forecasts but an indication that when free market forces have been consistently frustrated by market manipulation and allowed the accumulation of unrivalled debt, the market will typically rise rapidly. We could be about to witness an explosive event in the gold markets as free markets seek to reassert the appropriate equilibrium price and quell the suppression once and for all.
To view the 41 page slideshow presentation from Hinde Capital’s Ben Davies CLICK HERE.
To view the Mining Journal Seminar Speech (A Tribute to Ferdinand Lips 1931-2005) CLICK HERE.
