Gold went into to backwardation recently. Backwardation is the name for the condition that the market quotes a lower price for a more distant delivery date, and a higher price for a nearby delivery date. This means that people want the delivery of gold now rather than later in the futures market. Why? There is developing an expectation that delivery might not occur later and the settlement could take place in cash instead. Trust is leaving the system. People are now getting concerned there might be a shortage of physical gold available for sale and delivery.
Consider this, the global economy is worse off today than it was in 2008 and the stock markets are at record highs. Why? The central banks keep pumping money into the system but the underlying system is not improving. Can the U.S., Britain, Japan, and other large European countries ever pay off their accumulated debt? Not in today’s currency value. Only by further depreciating the currencies can they attempt to pay off debt. Yes, you can print enough dollars to pay off outstanding debt but the currency would severely devalue as you complete the process. Your creditors would be the losers. Do you think bondholders will tolerate a severe depreciation of value of their holdings? No, they will demand higher interest rates to offset devaluation. If this happens then the United States will have a severe increase in interest expense and consume much of its tax revenue. The Federal Reserve manipulated the interest rate down to cap the nation’s interest obligations. The Fed is between a rock and a hard place.
As I have written in the past, the price of gold is the canary in the mine. If the price shoots up, it is an indication that currencies are depreciating at a higher rate. This is why the central banks have committed to manipulating the price of gold, especially in the last two years. This can only happen to a point before the global investors as a whole see through the scam. Once that happens, the paper price of gold (futures market) will decouple from the physical price of gold. Backwardation is the first sign of this occurring. Premiums for physical gold are beginning to increase. At some point you will not be able to reconcile the paper market with the physical market. When this day arrives, the paper market will crash and the physical market will take over in pricing. I would expect us to see dramatic increases in the price of gold on a daily basis.
In the last seven years, the U.S. official debt has gone from $8 Trillion to $17 Trillion. Employment numbers do not reflect any true improvement thus the tax base cannot pay off the increased debt. It took the country 200 years to get to $8 Trillion.
Government bonds will collapse and pension funds will suffer dramatically. Expect to see additional cities and municipalities file bankruptcy when this occurs. Wealthy investors’ bond portfolios will dramatically contract which will cause them to quit spending. This will have a cascading affect further affecting the Gross Domestic Product and reducing tax receipts. In turn, the government will have to borrow more money. There is not a positive outcome to this situation for the current system.
Currently in most countries, governments are the only buyers of their own debt. What’s wrong with this picture? This means that debt is increased simply by printing more money with no backing. A decline in purchasing power is assured for those holding that currency. Isn’t this fraud at the highest level? This satisfies the Ponzi scheme definition.
A hyperinflationary depression is a likely outcome. This is where prices increase even though demand from lower output decreases. It’s a double whammy. Higher prices with less people employed. This would ultimately cause a reset to the system. A system of equal weights and measures is the only plausible alternative once you have lost trust in the current system. If people no longer trust the current money being issued, they will flock to an alternative store of value. Gold backwardation is the first sign that this could be happening on a large scale.
John Williams of www.shadowstats.com stated in his July 17th newsletter:
Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system. The financial system still remains in the throes and aftershocks of the 2008 panic and near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government. Further panic is possible and hyperinflation remains inevitable.
Our Heavenly Father is the only One with the path of deliverance from this mess we are in.