Gold’s Longest Winning Streak Since 1920.
I haven’t actually checked the facts to prove it, after all it is New Year’s Day, but it was the headline of an article carried by Bloomberg on the evening of December 31 2012. Bloomberg cited buying from the fear of the central banks continuously printing money to try to get some economic growth, from America, through the Eurozone and the UK, and all the way out to China and Japan. Who am I to argue with the likes of the writers and researchers of Bloomberg, especially since President Obama and the US Senate, may have or may not have just averted America falling over the “fiscal cliff,” via yet more monetisation, depending on quite what happens later today, once the fudge gets to be approved, amended or rejected in the House of Congress.
Either way, America, Europe and much of Asia, have entered a race to the bottom to debase their fiat currencies, in a misguided and probably futile attempt to stimulate economic growth. Quantitative Easing to infinity and beyond, comes with a bad ending at some point ahead, in either the greatest bout of inflation the world has ever seen, (success,) or the greatest amount of unrepayable debt ever accumulated by the central banks in a policy that ultimately failed, (failure.) As of this month, America’s Federal Reserve alone, under a program announced December 12th, is about to add in another 85 billion a month of quantitative easing, over a trillion dollars a year, until US unemployment falls back below 6.5%. With voodoo economics like this, who wouldn’t want to trade in some unbacked paper currency for physical gold and silver.
“All that money printing across the globe put a bid under gold,” Matt Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “There is overall optimism about the fiscal deal so we are seeing buying across the counter.”
—-Holdings in gold-backed ETPs rose 0.2 metric ton to 2,631.8 tons on Dec. 28, less than 1 ton below the record set Dec. 20, data compiled by Bloomberg show. Nations from Brazil to Iraq to Russia are buying metal to add to reserves. Prices will reach $2,000 next year, according to a Bloomberg survey of 49 traders, investors and analysts in mid-December. Bullion in London set an all-time high of $1,921.15 in September 2011.
Adding to the upward pressure on gold at year end, a new nationalist government took power in Japan on December 26th, promising to force the Bank of Japan into a policy of unlimited monetisation, and promising to start a new war with China if necessary, to back up its claim of sovereignty over the uninhabited Senkaku Islands in the East China Sea. Called the Diaoyu Islands by China, who would seem to have the second strongest claim to Taiwan, by virtue of the treaties that ended World War Two, China claims sovereignty in its own right under those treaties, in addition to claiming sovereignty by claiming sovereignty over Taiwan under their “one country, two systems” policy. With China surging for the last 3 decades and likely to continue to do so, and Japan’s demographics unfavourable in the decade’s ahead, Japan probably prefers a showdown sooner rather than later. As in 2013 rather than 2023. In late November the US Senate wrote Japan a blank cheque:
“The United States reaffirms its commitment to the government of Japan under Article V of the Treaty of Mutual Cooperation and Security.”
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“While the United States takes no position on the ultimate sovereignty of the Senkaku Islands, the United States acknowledges the administration of Japan over the Senkaku Islands,” the bill said, adding, “The unilateral actions of a third party will not affect United States acknowledgement of the administration of Japan over the Senkaku Islands.”
Under the Japan-U.S. security treaty, the United States would defend Japan in the event of an armed attack. President Barack Obama is expected to sign the bill after passage in the House of Representatives. We can only hope that America’s blank cheque works out better than Germany’s to Austria in July 1914.
Germany’s Blank Cheque. July 6th 1914. link.
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