Why the 2013 Gold Swoon?
Since late in 2011, gold has been in a “swoon”. First, it went down from the $1900s to about $1750 in early 2012. The possible reasons were: deflation; government manipulation to keep the dollar strong; or, a combination of deflation and manipulation. Since late in 2012, and still continuing, gold has been hammered. The possible reasons could still be the previously stated reasons. I have had a feeling for some time that these explanations in 2013 are inadequate. I had the strong feeling that powerful insiders had access to information that the dollar’s valuation would, for some unknown reason, collapse, and were powerful enough to drive the price of gold down so that they and their powerful backers could purchase the maximum amount of gold at the lowest possible price. But, as I stated, this was just a hunch.
Along came three blogs posted in 2013 by www.zerohedge.com regarding QBAMCO:
- “QBAMCY On The Fed’s Exit” 03/13/2013
- “QBAMCO On Unreserved Credit Growth And Imperial Constraints” 04-21-2013 (the article has a link for one to read the full article)
- “QBAMCO On Precious Metals And The Coming ‘Great Reset’” 04/29/2013
My attempt to summarize the three papers is as follows:
1. The FED is controlled by the big banks, and functions in a way that maximizes big bank profits.
2. Up to 2007, the U.S. was in an inflationary leveraging mode. Hence, the enormous debt build-up by consumers, and federal, state, and local governments. Banks took on a lot of risk, but were very profitable to key people via bonuses.
3. In 2008, the U.S. entered a deflationary deleveraging mode. This is a disastrous mode , and can be the death-knell for an economy. This is what the 1930s was all about.
4. Sometime since 2008 and after all kinds of “stimulus” or reflation, such as, QE 1, QE 2, etc., the U.S. entered an inflationary deleveraging mode. Armageddon was avoided, but the deleveraging did not bring prosperity.
5. Late in 2012, the big banks decided that a new course of action was needed to get the banks profitable. Always, one needs to consider that the FED is a tool for the bank’s goals. The need was to get back to the pre-2007 inflationary leveraging mode, and the prevailing course of action was not successful. What is needed is a shedding of debt by consumers, government, and business. A good way is to default on most of the debt via currency devaluation, and when the debt burden is sufficiently reduced, initiate a new monetary system based on gold in the Bretton Woods principle. This was a G-7 decision, and this is what QAMCO calls the ‘Great Reset’.
6. Thanks to the so called “stimulus”, the U.S. banks balance sheets are in good shape.
Europe through first austerity in the periphery and, now, by seizure of bank deposits
(the Cyprus fiasco) is getting the core country bank balance sheets in good shape. Next,
Japan under Abe is now acting as if it wants to significantly destroy the yen. Then, it
would be Europe’s turn. The last would be the U.S. QBAMCO thesis is that in the
second half of 2013, the U.S. banks will have engineered a dollar collapse. To insure
that the proper person then becomes the FED head and becomes the hero, Bernanke is
out. The likely hero will be Tim Geithner who will engineer the “Great Reset”. The
dollar will be significantly devalued, and the “new” dollar will be based on gold. (There
is a lot of speculation that China, in the same time frame, is planning to do the same
with the yuan.) With the dollar significantly devalued, debt issues in the U.S. will be so
minor, that a new inflationary leveraging period can take place, and, hence, bank
If the QAMCO thesis is correct, it goes a long way in explaining the recent, sharp drop in the
price of gold. The entities that would have decided on the “Great Reset” are smart enough
to buy all the gold that they can, and also significantly drive down the gold price in order to
enhance the future profitability of their gold holdings. This would suggest that sometime in
2013, the banks will want the price to rise as high as humanly possible.
QAMCO’s thesis is coherent, and can be the explanation for what has happened and what
will happen in 2013. Several months ago, Marc Faber in an interview predicted major
financial problems in the latter part of 2013. Within the last two weeks, Faber stated that
he buys gold every month, and has purchased gold at the current low price. Financial
observers are starting to comment that something unknown but very important happened
in the latter part of 2012.
While I have absolutely no knowledge of when and how the dollar will collapse, the
continuous “printing” of money by the FED will eventually destroy the dollar, and the value
of gold will sky-rocket. It looks as if the smart money thinks the shit will hit the fan during
the latter part of 2013.
S.J. Kowalski, May 20, 2013