Paper Money Hides The Truth

The world has no idea what’s going to hit it. The majority of people today in the West are living in debt and have no assets to protect, but for the people with savings and wealth and for the managers of funds, they don’t realize that they have lost 60% to 80% in real terms over the last 13 years.

Not only has cash in the bank gone down by 80% in real terms, which is against gold, but so have stocks, housing, commercial property, and many other assets. So people live under the false illusion that paper money is a true measure of their wealth. As we know, nothing is further from the truth...

Paper money hides the truth, and the truth is that most of the increase we have seen in paper wealth is illusory both for individuals and for the world. But it suits the governments to fool their people. This gives them the best chance of being reelected and they also engage in theft through inflation.

So as we have discussed many times, not only have investors’ assets gone down by 60% to 80% in real terms over the last 13 years, but they are likely to decline another 90% in the next few years vs gold. The Dow for example, which now has a 10/1 ratio vs gold, is likely to go down to a 1/1 ratio or even below. 

Will the level be $10,000 for gold or $100,000 or $100,000,000? Well, that depends on how much money will be printed and what the level of hyperinflation will be. But regardless, all assets that have been fueled by the credit bubble will decline in real terms.

In spite of a massive erosion of wealth in real terms in this century, only 1% of investors own physical gold. That is absolutely amazing. There will be no better hedge against the destruction of paper money and asset values in the next few years.

This hedge of physical gold by investors must be a meaningful percentage in my view. We recommended up to 50% of assets be put into physical gold in 2002 when gold was only $300. Today we have investors who have anywhere from 20% to virtually 100% in precious metals. So I would say that as a hedge or insurance 20% to 25% is a minimum, but personally I believe it should be a lot higher. I see no better way of preserving wealth against what is going to happen.

In the short-term we are seeing massive demand for gold. It is continuing at very, very high levels. The US Mint just declared that demand is unprecedented and they have problems getting hold of gold for minting. Some of our Swiss refiners now have delays of up to a remarkable 5 weeks. 

If you look at what’s happening in China, the imports are continuing at extremely high levels into China from Hong Kong. In April the imports were 126 tons, which is the second highest month ever. In 2013 for the first four months total imports were 500 tons vs 240 tons for the same period in 2012. So that’s up over 100%.

If you look at India, they bought over 162 tons of gold in May which is double the normal amount. Just as the truth always prevails in the long-run, so will the physical gold market. The current manipulation in the paper market will fail, and soon this unprecedented physical demand will be reflected in significantly higher prices.”

Silver will outperform gold. We will see the silver/gold ratio going down from current levels to below 30, and maybe 20. So to talk about silver over $100 is just the beginning. As an investment the move in silver will be spectacular going forward.”