Central Banks Buying Gold - Big Time
Central banks are moving into the premier hard asset at an almost unprecedented rate suggesting waning confidence in the world's reserve currency
Perpetual annual deficits in excess of a trillion dollars driving continued massive US Treasury debt issuance plus a multiple of outstanding Treasury debt in US government unfunded liabilities (Medicare, Social Security, Federal pensions, etc.) may finally be cracking confidence in the US dollar. A nearly tenfold increase of the Federal Reserve balance sheet (explosive fiat money creation) since 2008 may have world central banks and foreign governments seeing the writing on the wall; meaning they understand US fiat currency creation must continue at an accelerating rate to forestall deflationary collapse amid profound US monetary and fiscal distortions. Furthermore at this point Geopolitical issues, beyond the scope of this note, may be acting as a trigger. While we can really only speculate as to the precise motives for central banks choosing gold at recent remarkable rates the fact is they are taking large positions in the precious metal and that doesn’t bode well for the current world reserve currency.
Nick Giambruno addressed the situation within a historical context in an article at International Man:
Did you know that central banks bought more gold last year than any year in the past 55 years—since 1967?
Though most don’t realize it, 1967 was a significant year in financial history, mainly due to the events at the London Gold Pool.
The London Gold Pool was an agreement among central banks of the United States and Western European countries to stabilize the price of gold. The goal was to maintain the price of gold at $35 per ounce by collectively buying or selling gold as needed.
However, in 1967 the London Gold Pool collapsed due to a shortage of gold and increased demand for the metal. That’s because European central banks bought massive amounts of gold as they began to doubt the US government’s promise to back the dollar to gold at $35/ounce. The buying depleted the London Gold Pool’s reserves and pushed the price of gold higher.
In short, 1967 was the beginning of the end of the Bretton Woods international monetary system that had been in place since the end of World War 2. It ultimately led to severing the US dollar’s last link to gold in 1971. The dollar has been unbacked fiat confetti ever since—though the petrodollar system and coercion have propped it up.
The point is large global gold flows can be a sign that a paradigm shift in the international monetary system is imminent.
We are all susceptible to normalcy bias to one degree or another hence I’m shining a light on factors which, while they can’t inform us of ultimate timing, are now providing fair warning that a major inflection point should be anticipated. History evidences that confidence in fiat currencies, and paper financial assets denominated in those currencies, tends to break suddenly. Positioning oneself in a timely fashion to survive, or even thrive, amid a major financial crisis is key. Tangible assets offer refuge, particularly liquid tangibles (liquid in the financial sense).
Wishing every innocent soul peace and wellbeing.
Cruising Economist
Kenny Chesney’s “Old Blue Chair”, with a mellow island vibe, may afford some peace of mind.
Big Red Flag they're buying gold. Close to proof positive that CBDC will be enforced on humanity.