That's the thing the global economy has been trying to come to grips with since 2008. We still haven't solved these debt problems. In fact, they've become worse since 2008 because the total quantity of debt in the world is up substantially from the levels that prevailed in 2008.
Mr. Turk references 2008 on three occasions in these two statements. In the past seven years, what must be understood is everything has changed. Everything is far worse than it was in 2008. Consumer debt is much higher, student loans are beginning to default at ever escalating levels, and inflation, according to model that was used during the Reagan administration, is running at approximately 6-7%. China is no longer supporting our national credit card habit (national debt) in the way that it did just a few years ago.
If you own the gold, you are in a much better position than if you don't own the gold…taking it down to the trade level, and I think that's very, very important. They take the I.O.U.'s of countries that can't fulfill on that promise; because at the end of the day, goods and services are paid for with goods and services. If you pay someone with an I.O.U. for a good that you receive the person that is giving you that good isn't really being paid. He's not being paid until he converts that I.O.U. into some good or service that he needs or he wants.
We've got this huge accumulation of I.O.U.'s around the world expressed in global reserves and a lot of the global reserves, the I.O.U.'s, are going to be defaulted upon.
That is basic economics 101. The United States has not practiced basic economics 101 for over 40 years. Since Nixon "temporarily" closed the gold window on August 15, 1971, the United States has not fulfilled our obligation to the rest of the world in actually paying, in really money, for our goods and services that we have received from around the world. The world is tired of being broke and destitute while we, the ones that are actually indebted, live high-on-the-hog.
I think London has been pretty much emptied out – I don't think there's a lot gold left in London that's available for shipment elsewhere. – James Turk, Shadow of Truth podcast – LINK
The rate of the flow of gold from western bank and investment vaults into Asia accelerated in the first quarter of 2015. India just announced that it imported 125 tonnes of gold in March, more than double the amount imported in March 2014. And 625 tonnes of gold was withdrawn from the Shanghai Gold Exchange during Q1, up 10.8% from Q1 2014. In that all gold purchased in China – other than the gold purchased by the PBOC – must pass through the SGE, withdrawals from the SGE represent the China's gold demand (not including the PBOC). China only produces 400 tonnes per year, or 100 tonnes per quarter. This means recycled gold plus imports must account for balance of demand.
Just from combined demand from India and China, there is a supply deficit of gold. In fact, the global gold market has been functioning with a supply deficit since at least the mid-1990's. Frank Veneroso was the first analyst/consultant to figure this out based on conversations in his meetings as a consultant with the world's Central Banks. Veneroso predicted that eventually the price of gold would have to explode higher once the demand completely overwhelmed the supply.
GATA picked up on Veneroso's work and began a campaign to educate the world about the western Central Bank schemes being used to keep the price of gold suppressed in order to prop up the legitimacy of paper fiat currencies.
James Turk has been a long time consultant to GATA and, in my opinion, knows as much about the global gold market as anyone. Turk was the first analyst to look at the original GLD prospectus in 2004 and conclude that it was little more than paper gold:
The GLD prospectus is quite clear that the shares are not backed by gold. It says the structure was designed to track the price of gold.
Dave Kranzler (Investment Research Dynamics) and I hosted James Turk on our Shadow of Truth project. We cover the latest developments in the Greece/EU saga, the condition of "backwardation" in the London gold market and the catastrophic level of debt globally. We also discuss in-depth why GLD likely has very little physical gold sitting in its vault that is legally owned by the Trust and the reasons why the supply/demand deficit will lead, eventually, to much higher prices for gold.
I try to read/listen anytime Turk is willing to share his knowledge with the public. This is an incredible interview with someone whom I consider to be as knowledgeable about the gold market as anyone in the world (other than maybe BIS insiders). We think you'll find it time well-spent to listen to the entire podcast:
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