Leeb:  “The world now finds itself in a tremendous mess.  It’s not a pretty picture.  Conflict is developing all over the world.  But in the midst of all of this escalating conflict and uncertainty, China continues accumulating gold....

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“And despite the negative press, China continues to run their economy in a tremendously efficient way.  Yes, China is having problems just like any emerging world powerhouse, but they will work their way through the problems as their historic rise to global dominance continues.

It seems to be a pattern that at the beginning of every year everyone has nothing but bad things to say about China.  They talk about the problems with labor, the banking system, etc.  So everybody starts to feel like China is going to collapse. 

This talk usually continues for several months at the beginning of each year, and then everybody realizes that China is not going to collapse.  Instead, they are going to continue to grow.  And one of these years, within the next 2 to 4 (years), they are going to pass the United States and have the largest economy in the world.

China’s total trade position is already greater than ours.  And if you are looking for a measure of what makes a country’s currency valuable as a reserve currency, you can’t do better than that.  What country has the greatest amount of trade, in and out?  That country is no longer the United Sates.  It’s China.  So in one of the most important areas there is, China has already overtaken the United States. 

And if you look at the flow of gold from West to East, it is unprecedented in all of human history.  All the while pundits in the West say this can’t continue because China is going to collapse.  So the Western pundits say, ‘This accumulation of gold makes no sense whatsoever.’  But nothing could be further from the truth.

History doesn’t lie.  And if you look at the history of the United States and the history of the world’s economy while we were on a gold standard, post World War II through the early 1970s, those were years of great prosperity. 

And when I research what is wrong with the US today, everything comes back to a lack of discipline.  The US spends twice as much per capita for health care vs all of the other developed nations.  Yet the life expectancy is toward the bottom of the list of developed countries.  One of the reasons is there is no preventive medicine in this country because we don’t care.  We just keep writing checks.

We feel like the US has the reserve currency of the world, no one can bother us, and we can write checks for anything we want.  So there is no discipline whatsoever.  We need real discipline in this country if we are going to get anywhere.

Also, I read things from Scientific American, to editorials in the Wall Street Journal saying, ‘Don’t worry about rare earths.  We now have a supply of rare earths.’  We don’t!  None.  Zero.  China still has 100% of the market.  But somehow we’ve convinced ourselves that we don’t have to worry about rare earths any more.  Nothing could be further from the truth.

We don’t have any rare earths in this country.  We’re utterly and completely dependent on the Chinese.  That’s no way to run the US.  We need these rare earths because they are the most powerful magnets in the world.  We need them for everything from wind turbines to very sophisticated defense equipment.

And our Defense Department has the naiveté to say, ‘Well, we’ve partnered with a company called Molycorp and our problems are solved.’  Molycorp doesn’t have any heavy rare earths.  And even if they did -- they don’t -- they would still have to ship them off to China in order to be refined and turned into powder.

This is no way to run a country.  We need discipline in this country, Eric.  And this is going to hit us in the face very quickly.  The only way I’ve seen in modern times that you create a world with discipline is with something called the Gold Standard.  Gold must be included in the monetary system once again.

Eventually, when the global basket of currencies is created it will have a big chunk of gold in it.  It will also have a lot of the Chinese yuan built into it as well.  One of the reasons you see the Chinese with $4 trillion of reserves is because they have to keep issuing more yuan in order to keep the yuan from appreciating even faster.  Everybody wants to hold yuan at this point, but they can’t get it because of the controls.  Gradually the Chinese are letting go of these controls.

But every day we get closer to the takeoff point for the price of gold.  Gold may have dips, but you have to own it.  The next 400% to 500% move in gold is going to be to the upside as the price of gold hurdles toward the $10,000 level.  It’s just a question of when this gold move will happen, not whether.”

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