14th & 15th November, 2011 – Luna Park, Sydney Australia
Sydney greeted delegates & presenters, on the first day of the event, with a heatwave. Perhaps there is an analogy here with the current global financial system?
David Evans kicked off the keynotes for the 2 day event. His address was entitled: Banks and Governments Blew It!. Regarding the debt crisis: “Banks & governments have blown it…they’ve created a massive debt crisis…we are in it now. The way they did it? Three parts:
- “First of all, the central bankers have a policy of keeping interest rates as low as possible, consistent with a CPI that didn’t rise above a set amount, usually around 2 or 3 per cent. Central bankers now admit that they should’ve kept track of asset prices as well…
- Several times during the last 3 decades they have changed the rules to make manufacture of money ever easier. If you were around in the 1980’s and had to get a home loan, you basically had to suck up to your bank manager, because they only had a certain amount of loans they could make…and you had to be nice to them, but nowadays, they give a loan to anyone with a pulse and they think you can repay it.
- And they’ve responded to every crisis by bailing everyone out with new money. You repeat those three steps often enough and you get to where we are today…”
On the current bubble monetary system since 1982: “…Total US debt to GDP…this graph runs from about 1870 to 2010…the last couple of years are missing, but this has been about a plateau…still roughly about 370%… Two features of this graph are obviously immediately apparent…the level is generally around 150% give or take 20 or 30%. it’s just the 2 episodes, first one was the depression, where we got a build-up of credit in the 1920’s, the market crashed when it reached 235%…the GDP plummeted which pushed the ratio up even further which is just an artifact, then after a while it got reset and we started again… In 1982, we started the bubble again, we went through a series of …where it stalled for a while just after the recession in 1990…Interestingly enough, when the ratio reach the 235% we had the market crash of 1987, so it’s history repeated all over again. Money manufacture stalled there for a few years…Clinton got it going again … we reached about 385% in 2008, and then we got a bit of a problem…. The central banks didn’t change their strategy, what happened was that the world just ran low on borrowing capacity. We found out where the end of the line was. There wasn’t enough money to service the debt. You can work it out roughly: debt’s about 400% of GDP, interest rates say 4% for the big guys, so the interest payments are about 16% of GDP. When the economy is paying 16% of all the turnover that year in interest, things grind to a halt…”
Price & time forecasts for gold: “…here are some nominal prices in US Dollars per oz…in 1980 the gold price was about 850 dollars, in today’s value that’s about 3300 dollars if you use money supply to track back…in 2001 it bottomed at around 260 per oz, and that’s where the 21% per year growth started, currently 1750, 2015 I think it will reach about 3800, by 2020 it will reach 10,000 per oz…BUT…that will only be about 4600 in today’s money. 25,000 an oz in 2025, and by the time you blow it off at the end it will be about 50,000 per oz in 2028, BUT…that will only be about 8600 in today’s money because the US Dollar of today will only be worth 17 cents then.”
Eric Sprott did not provide a specific price target or timeframe. He offered Jim Sinclair’s admission of a US$12,000 target should gold trade decisively at or higher than $1764. He mentioned that gold was the asset to own in the first 10 years of the 21st Century, whilst he hoped that silver will be the asset to own in the second 10 years of the 21st Century. Eric Sprott believes that the historical low of 16:1 for the ratio will be reached, with an overshoot, down into the 10:1 – 5:1 range: “…But the fact is that…you see…I call it following the money…And if you follow the money here, the money is going into silver…”. Some of the changes since 2000 highlighted by Eric Sprott are that: central banks were net sellers in 2000, whilst this year it is estimated that they will be net buyers of 500 metric tonnes; and that ETF’s did not exist in 2000, whereas today they take down approximately 100 tonnes net per year on average, so where is the supply coming from? He concluded: “I believe the market has already determined that gold is the reserve currency…The market’s decided that…not the central banks…and not the treasuries. The market’s made up their mind that gold is the reserve currency…It’s up 600% versus almost every currency… and this diatribe of stuff we have to listen to everyday about the dollar versus the euro… the yen versus the dollar…the pound sterling…whatever. They’re all crap! It’s like “who’s the prettiest horse in the glue factory?” And they’re all lucky…that it’s a close competition. But if they ever start reporting: “Well…all currencies are down today against gold…Imagine if you put on your “telly” on Saturday, and they said “All currencies are down 2% against gold on Friday”…and they kept repeating that day after day after day. Would you get the message? Would we finally get the message? But we don’t report that…”
Louis Boulanger’s speech: Gold Rises Against Fiat Abuse: Why Paper Currencies are in Rapid Decline. Some highlights: “People used to be able to escape from one currency to another currency that had a better measure of value, that was managed more responsibly, that were…let’s say…gold backed. Today there’s none. So, there’s no escape…within currencies, that is. And I don’t call gold a currency. Gold is money. It’s not a currency. Gold’s essential role is really something that everybody…well, probably not in this room, I get the feeling that people here are much more aware of what gold is…but then again, maybe not…I don’t know…maybe your more interested in buying shares and speculate on the equity market on the prospects of the gold price rising, and that’s not a bad thing necessarily to do either, but I’m more interested in gold in terms of its role in the financial system. And gold’s money…nothing else. That’s what gold is. It’s role is to instil discipline on human nature. Cos if you give anybody the power or the right to create money, then they’ll do it ad infinitum…unless they have something to hold them in check. That’s what a gold standard is for….”
Egon von Greyerz delivered a rather dark & foreboding address to the crowd: “Times are unique right now…History’s going to be made in the next few years…and we will all be part of it…because never, ever before in history have we had a situation where major sovereign states…most of the major sovereign states are bankrupt and the major banks are bankrupt. This is totally unique…and sadly…the repercussions will be unique also…and we will be experiencing that.” And this: “In 1911, you could buy 50 ounces of gold for a thousand US dollars, at 20 dollars per oz. Even in ’71 you could buy 28 ounces for 35 dollars per oz. I show 2002 here when you could buy three ounces at 300 dollars, because in 2002, our company…we decided…that this is going to end in disaster. We told our advisors to put up to 50% of their liquid assets into gold…physical gold stored outside the banking system because we saw that…I’m not a gold bug…one day we’ll get out of gold, but right now it’s the only way to protect your assets. When I say gold…I agree with previous speakers…that ahhh…Eric sitting here particularly… that silver will most likely outperform gold, but you got to have iron in your stomach to buy silver, and when you’re an asset manager, you don’t like something to go up to 21 down to 8, up to 50 down to 26, if you’re managing other people’s money or advising other people…Everybody can’t take those wild fluctuations…. Right now with the gold & silver ratio at 50…it’s quite heavy to carry these 1000 ounce bars around… and the other thing that we have in Europe is VAT added tax on silver so there’s a bigger problem to owning silver in Europe…. Anyway, today for a thousand dollars you get a half an ounce of gold… This is again, another sign of the destruction of money that we’ve seen…”
Dan Denning’s presentation was entitled: How a return to the gold standard will lead to social justice & fairness in Australia. He defined fair money as: “Fair money does not lie about its value. It is not counterfeit. It is honest. For money to be fair it must have universal physical properties—as gold does—or it will always be subject to the use and abuse of people who seek to control the money system in order to gain political power and hack away at individual liberty.”
On Social justice:
- “People who seek political mastery over others use words to manipulate public opinion to their advantage use this term.
- “Social justice” is not an alternative form of justice. Justice is justice.
- “Social Justice” is a critique of the free market system that implies it is fundamentally unfair and seeks to correct perceived wrongs through taxation, regulation, and prohibition“.
On misdiagnosing the problem:
- “The problem is not profit or the free market.
- The problem is that the market is not free and money is not sound.
- The economy has been hijacked by a banking system while relies on fiat money.”
He also outlined why “gold promotes economic fairness”, why “gold promotes equality (of opportunity vs. of outcome)”, why “gold rewards productive labour” and is the friend of the working men & women around the world. He even defined a new phrase of “Austrian Ecologist”, which is related to the observation that an irredeemable fiat currency regime promotes the accelerated depletion of the planet’s non-renewable resources, whilst a system based on fair money promotes “good stewardship” of the planet’s resources, instead of wastefulness under the current system.
Gavin Thomas focused on the Western-Pacific “Rim of Fire” as the area of the world where we will next find the 10+ million oz. gold deposits during the next 50 years using Epithermal Geology as his guide, since it was this geology which guided the discovery of Lihir Island, a find which he was instrumental in: “Most countries around the world have negative interest rates, Turkey. Switzerland and Japan is virtually zero or slightly positive. Basically, there are real negative interest rates around the world, and that is what’s going to drive people into hard assets. Whether it be property or gold & silver, we can all have a guess at that, but gold & silver will be an important part of it…we’re back to the old days of Bretton Woods…We’ve been in a de facto gold standard for several years…5 years, but at least since Fannie Mae & Freddie Mac if not before…all that has happened is that we are talking about it…openly talking about turning into a gold standard…we’re already there ladies & gentlemen.” In discussing mine supply: “We cannot satisfy the demand from the growing disposable income that’s coming out of China, let alone what’s there in India, and what is in South East Asia, the Asian Tigers, and we’ve just heard from Olympus Pacific, they are also going to be wanting gold…and we just physically, cannot get enough of it to them…They’re buying whatever we want to sell them.”
Richard Karn kicked off proceedings at the start of the 2nd day. He focused on real wage growth since 1965, which is the start of adult life for most baby boomers, gold & silver, as well as energy, agriculture & specialty metals. On real wage growth: “Since 1965…the dollar has lost either 86.2% or 96% of its purchasing power just in the last 46 years, now that adds up to either a negative 4.22% compound annual decline rate or a 6.78% compound annual decline rate. Now why is this important? You better keep these last figures in red here, in mind…OK? This negative 4.22% and negative 6.78% decline rate…why is it important? Because now, we’re going to look at wage growth over this… What we’re seeing here, you can see average wages in the United States from 1965 til now have gone from 4600 dollars a year to 41,000 dollars a year..that’s not bad, that’s five percent annual compound growth rate…but think back…you just lost 4.22% or 6.78% of that through your loss of purchasing power…so what this does…that means that over this 46 year period you either had a less than 1 percent compound annual growth rate in real wages, or you had an almost 2 percent compound annual decline rate…this is a very important concept for people to remember…if you don’t remember anything else I tell you today, I hope you remember this,…Earning more money of less value disguises the loss of purchasing power…This is one of the most important aspects of fiat currency regimes you have to understand…what else? Well, during that time in your life you had a 7.04% compound annual growth rate in debt.”
Alf Fields came out of retirement to deliver his once-off speech. It was entitled: “The Moses Principle”. Some quotes: “The Moses Principle is an irreverent theory based on the question of why Moses spent 40 years traversing the Sinai desert before leading the Israelites to the “promised land”… Why did Moses spend 40 years traversing the barren desert before leading the Israelites to the “promised land”? Here is the irreverent theory. Every Israelite over middle age when they left Egypt probably died during the ensuing 40 years. The younger people were born in the desert or spent their adult lives in the desert. After 40 years the life experience of the survivors consisted of living in the desert. When they finally got to the “promised land” it appeared to be “flowing with milk and honey” when compared to their prior desert existence.
A total generational change had taken place so that the survivors had no knowledge of anything other than the desert. There was nobody who could remember what Egypt was like. The Moses Principle recognizes the fact that over any 40 year period, a generational change takes place…
Recently we passed the 40th anniversary of 15 August 1971, the date when the last link between currencies and gold was ended by President Nixon. This launched an era of floating “I owe you nothing” currencies. Money was what any government deemed it to be, generally something that the government could create in unlimited quantities. That system, plus the fractional reserve banking system, launched an era of ever increasing debt and credit. It was an era where debt was desirable and money lost its purchasing power. Everyone in this room has spent their adult lives living under this system. Most have had no exposure to monetary history or what money really is. The new “Moses” generation will have to re- learn the lessons of monetary history before the world can enter a new era of sound money and stable economic growth…”
“The distortions that have grown out of the 40 year period since 1971 have reached proportions that demand change. The problem is that the current generation does not understand that the root cause of the GFC is unsound money created at will by governments, combined with a banking system that has enabled the creation of an unsustainable mountain of debt. The modern generation is groping with the problem and gradually working towards understanding that the underlying cause of the crisis is monetary. The modern generation will have to face some brutal truths as the world deals with the ongoing global financial crisis. The following are the brutal truths that apply to the USA and the world:
THE BRUTAL TRUTHS
- The slate needs to be wiped clean and a new sound monetary system introduced.
- That will require the elimination of all debt, deficits, unfunded social entitlements, the US Dollar as Reserve currency, and the big one, the $600 trillion of derivatives.
- To eliminate these problems by default and deflation will cause a banking collapse and untold economic pain, leading to riots and political change.
- Politicians are appointed for relatively short terms and opt for the easy solutions.
- While politicians continue to have the ability to create new money at will, they will do so in order to prevent a melt down on their watch.
- Consequently the odds point to governments wiping the slate clean by generating enough new money to eventually destroy their currencies.
- The new international monetary system is likely to involve precious metals. It will have to be money that people trust and that governments cannot create at will.”
The 2nd last keynote speaker was Ben Davies, his speech’s entitled: “Singularity – Transcendent Money”. He covered the various “Singularity” examples, the “Exponential vs. Linear Growth Trends”, “Law of Accelerating Returns vs. Law of Diminishing Returns”, “Financial Oppression”, the “Internet Reformation”, “Transcendent Money” and “Monetary Singularity” . His conclusions: “So is money alive or dead?…Monetary Singularity… a summing up of where I’m at. The collapse of an old monetary system & it’s social order, will momentarily give way to an anarchic & chaotic behaviour, that I believe there are 2 sides of a coin that make it a unit…a singular event such as anarchy will be mirrored by order. One money will be dead, the other alive…and initially in coexistence…and that’s a key point. We will witness what I term a monetary singularity…a unique event…This is the point where technology & gold merge…and we can’t carry around gold coins, but we now have the technology that will enable us…when the time comes…and it isn’t now, will enable the transactional use of gold as money in the world…Think wallet cards with android phones…think about backing to that… To date…due to the world wide web, has begun to help create awareness of the diminishing value of paper money…The growth rate of this awareness will become exponential and equal & opposite to the exponential demise of the fiat currency system. The more awareness grows, the faster this discarding of paper money occurs. I consider this a positive feedback loop.
Now why do I think that? Because it takes us nearer to the day when we can begin a sound money system dictated by free market principles and not those of the artificial supply set by government, which destabilises the value of money. The inverse function of this paper demise is commensurate with the rise in the gold price which we’ve depicted. This process of disruption will seem almost imperceptible near the knee of the curve, but when we hit that knee…boom, monetary failure, and a gold succession…the perception will seem very, very immediate. Hyperinflation, equal & opposite reaction of this, will turn hyper-metal criticality is a hyperbolic rise of gold …I’ve shown how that would happen mathematically…you can contest it with my quaint boys at work…But out of this immediate chaos will come order, as the introduction of technological payment systems backed by gold will support the use of gold as money i.e. a media of exchange.
One will be able to transact in gold. A money which transcends the previous corruptible nature of fiat paper money. A transcendent money because today this perception of gold using technologically advanced payment systems seems beyond our own experience…We can’t see that exponential…after all most of us have only known one currency system if you really think about it. “The future can’t be predicted is a common refrain but when this perspective is wrong…it is profoundly wrong” and a very smart man said that: J. Smart. Government will not want to lose access to the unfettered monopoly of money. They will nationalise the gold miners or at a minimum countries will ban exports of gold, they will introduce resource or windfall taxes, they will want to wrest control from the free market, the new money centres as I call it, which will be us.
The power of the internet, it is powerful. I believe the development of singularity in technological terms is far more fascinating & mind boggling than perhaps my narrative of monetary singularity…But even the technological singularity will remain hampered, whilst the value by which it is measured is in an amorphous and corruptible state…what is the true value of a piece of technology or IT software. How can we value it, and plan production safely when we don’t actually know what the true unit or worth of account is? Have I just created a good narrative? I don’t think so… Hyperinflation is a process, but it will appear seemingly overnight in a decaying fiat currency system whilst the state continues to utilise the provisions of ‘casino credit’ to avoid a deflation correction at all costs and it will continue to subvert free market and with it our liberty. Free markets are a misnomer for the current term financial markets…mark my words, because they are incompatible with a fiat paper money…
It is my intention to continue to pursue the free market availability of gold…not as an edict by government…The internet provides the means by which a humble few…that’s all of us in this room, can change the course of events, and history demonstrably to the betterment of mankind…We collectively have a tool… that if we collaborate, can wrest the cynicism from the world and put us on a path of financial fortitude…”
John Embry was the last of the keynotes, his address, and this is not meant to denigrate it at all, was what one could term a “pep talk”. He left us with these final thoughts from his address: “I would like to emphasise again, and it’s been said by others, that over the next few years we’re going to witness the greatest wealth transfer in history…it’s already underway…but it’s going to accelerate..If you are not in real tangible assets, most particularly in the monetary metals gold & silver, you will most assuredly be on the wrong side of the trade…so be forewarned…”
Copyright © – Jacq Ludwig