Today I shall be explaining exactly what gold (permanent) backwardation is, and why itwill be a historic tragedy that will send the western world back to the dark ages.
What is it?
Bakwardation is used generically to define a market where the price of futures is below the spot price. In the gold market, this means that the price of gold today is higher than the price tomorrow. This is not a normal condition for this market. Backwardation, is a sign of short-supply. Gold, however, is one of the most abundant things on the surface of this planet. It cannot be destroyed, or consumed in any proccesses. This is why its value is stable. Of course the value and price of gold are two different things. The price can change depending on peoples expectations.And that is exactly the beauty of gold. Because, what can you expect from a chunk of yellow metal?
So, back to backwardation. This s an abherration of the market. Through arbitrage, people should be able to confidently sell their gold today and buy gold in the future, like this, taking advantage of the price differential and setting things back to normal. The normal, being contango, where the futures price is higher due to carry charges.
So backwardation, if it occurs should be limited in time. The real problem, comes with permanent gold backwardation. When the gold market reaches an irreversible point where the future price just keeps falling and falling.
Why is this happening?
Permanent gold backwardation, is the result of the terribly corrupt institutions surrounding and proping up our monetary systems. The central banks, haven’t stopped at printing money.No. They have also taken a liking to printing gold. What does this mean? Flooding the market with gold futures. Making promises to pay gold in the future, in order to reign in growing demand and keep the price from inreasing.Are they really doing this? Yes, I’m 100% sure. Why would they be doing this? To maintain the illusion that their currencies are woth something. To stop the inevitable effects from non-stop money “printing”, a loss of value in the currency. After all, the dollar has lost over 90% of its value since it completely abandonded gold redemability in 1971.Evidence of this is all around us. Gold repatriations have been occuring ever more likely, especially since Germany asked for its gold and was denied it. The amount of gold claims to actual physical, real gold, is about 100:1.
The Central Banks, however, are not alone on their tyranical crusade. They are aided all the way by some of the biggest “street” banks, who help them play the marekt and maintain prices low by using derivatives. This system is incredibly fragile, and when all collapses, the trillions of losses in derivatives will send many banks tumbling down.
Where will this take us?
Obviously, the situation is not sustainable. As more and more people abandon fiat currencies in favour of gold, the ability of the U.S. Fed and ECB to reign in price increases will be limited. It will become obvious, that gold futures are but empty promises. People will sell their futures in favour of physical gold. The futures price will collapse, they will be sold at great discounts, since they are truly insolvent, unpayable, promises.
Eventually, everyone will be wanting to buy gold, and no orders to sell will be on the market. At that point, not even all the euros and dollars in the world will be able to buy a single ounce of gold. Gold will go into hiding, and this will bring about the demise of the dollar and euro, and will force our complex exchange economy to return to barter, where goods are exhanged for one another.
Worst of all, when gold goes into hiding, progress cannot occur. When people cannot trust their wealth into the hands of others; to invest, to innovate, entreprenurial activity becomes crippled.
What will happen, is akin to the demise of the Western part of the Roman Empire, followed by the Dark Ages. People believethat growth as we know it is a constant, but this has not been the case historically.
Who knows how things will play out. There is talk of the BRICS starting a new currency using gold. What Europe and the U.S. should do, is simply open their mint to gold. That is, allow people to take their gold to be minted into money. One of the facilities the U.S. constitution demanded from the government. Indeed, that is the only way to keep the power of creating money in the hands of the people.
The situation we have today, is the result of just over a century of monetary mismanagement. What we have today is a true abherration of how a true monetary system should work. It is corrupt, evil, inmoral, and illegal, and its constant abuse by the people who control it will set a high price for all of us to pay.
All you can do now, is protect yourself and loved ones. Buy gold while you can, before all wealth in currency is obliterated.
Gold has and always will be the only way to protest against the corrupt regime of paper currency.
Embrace it today, for a more prosperous tomorrow.