Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

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

© 2005-2019 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