Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver: Safe-havens in Troubled Times?

Commodities / Gold & Silver Aug 05, 2008 - 02:10 PM GMT

By: Julian_DW_Phillips

Commodities Each day we hear another piece of bad news on the banking front. It was called the sub-prime crisis, then it was the credit crunch; what we have in reality is a full blown banking crisis . Where in the past credit was easily given, full-blown consumer spending was encouraged and when it went too far, bankers saw asset values were dropping below loans against them and banks started to go bust. We are now seeing banks sued by the New York Attorney General. Hardly an environment in which confidence in the banking and financial systems can be retained?


The banks are now retreating into the old-fashioned credit criteria before issuing loans in the hope that they will recover the massive losses of the last year. This is shrinking credit far faster than the Administration can pump new money into the system through spending incentives. All of this has to lead to such a degree of credit deflation that it is causing a shrinkage of money overall. The entire exercise is a statement of just how much banks have become part of everyone's life. The days when one used banks simply for loans went long ago. Today banks take a small slice out of every single transaction we make. Cash is now expensive and abhorred by banks, because it cuts them out. After a generation of inserting themselves into every aspect of our financial lives and vigorously promoting the "live now, pay later" culture in Western Society, the tribulations of easy money are eating into all our lives, as the banks beat a retreat into conservative lending, taking growth with them.

Is it any wonder that investors are seaching for a place away from this shrinking money envirnment into precious metals and commodities that are out of the reach of debt obligations? The joy of precious metals is they cannot be printed; they are nobody's promise of payment. A glance at a banknote shows that that note is simply a piece of paper, entirely dependent on the banking system that issued it. And if the issuer's promises become suspect, then a move has to be made away from them.

But as we have all been drawn into them, where does one go? The precious metals market cannot surely replace the banking system's paper money? Of course not, but for those decisive enough it has, is and will, prove a "safe haven" for those holding them in these extreme days. Until these extreme days turn back into confident growth, precious metals will continue to be favored by a broad spread of investors. In 2004 gold was at $300 now it is facing up to $1,000. Is the rise over? Are the problems of the financial system over?

Banks are such a fundamental part of our lives having become the heart of the modern commercial system. The sight of the Bush Administration and the Federal Reserve frantically trying to keep our levels of confidence in the system up is frightening, as we see fear sap confidence persistently. And confidence once it starts to decay is a delicate commodity. Mr. Paulson is leading the Bush administration's struggle to contain an economic contagion stemming from a disintegrating housing sector, volatile financial markets and frozen credit, skyrocketing energy and food prices, widening job losses, and a steadily falling $. What a burden to fall on him and Mr. Ben Bernake!

Paulson, who stood against "excessive regulation" of the financial sector, is being forced to oversee sweeping government intervention in the economy from now on, in attempts to contain the gaping holes through which asset values are draining away. To counter this the printing presses of money are being used [as never before] to replace the losses the credit collapse is causing, simply in an attempt to keep money supply flowing through the economy like blood in the veins, as Banks struggle to recover multibillion-$ losses on real estate by curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

The credit crunch has moved away from simply a housing problem to every aspect of the commercial world including basic commercial and industrial loans from banks, and short-term "commercial paper" not backed by collateral. These types of financing have already dropped almost 3% over last year, to $3.27 trillion from $3.36 trillion. The scarcity of credit is infecting growth whittling away what remains of the healthy economy by withholding capital from many sound companies, aiding the growing loss of jobs and decimating consumer spendng, the foundation of the growth of the last five years in the U.S.

Real growth turns to the development of productive assets for sustainability, but this is now seeing the delay of cancellation of expansion plans as finance for these dries up. By mid-June, bank credit was declining at an annualized pace of more than 6%. That is a drop of nearly $150 billion, an amount much larger than the value of the tax rebates the government has sent to households this year in an effort to spur economic activity. So forget the boost from that quarter and the big fuss that was made when it was pushed through, this crisis has already overwhelmed such stimuli.

And the decay is becoming global, not just limited to the States! Britain's Bank of England is part of a rescue of their housing sector and is soon to issue billions of pounds to that end. Over in Europe, in Spain in particular, the housing crisis is frightening that economy so dependent on retirees coming to Spain for their golden years.

The atrophy of money is crossing the globe. Until last summer, banks lent freely, because they sold most of the loans they issued, making them less concerned about whether the customer could handle repayment. Not so, anymore.

Now add to the decay of money the decreasing value it is facing as inflation rises. Caught between two destructive forces, money as we know it is not providing the hope and security it was intended to. That is why gold was used in the past, as money.

The huge gap between the value of gold and the value of money must narrow. Whether it is through the rise in the value of gold and silver or through the fall of the value of money dictates the future of the financial system. Either way, gold and silver will prove to be the safe-haven it has been since money was part of man's world. And the second half of this year is likely to be as dramatic as the first half but with a golden or silver sheen to it.

Is your wealth effectively structured to avoid the pernicious effects of the regulatory climate we have moved into? It should be and we can help you to do that effectively and within the law. Please contact us for any help regarding these issues at gold-authenticmoney@iafrica.com .

Subscribers will be briefed again on this subject in our weekly newsletter. For our regular weekly newsletter, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2008 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in