The Secret Manipulation Of Gold (Part 2)
Picking up where we left off yesterday, let’s get back into fractional reserve banking, and the history that got us to where we are today…
Much of the global banking system runs on what is known as fractional reserve banking—a system that has been running the world for thousands of years. The following is a simple explanation of the system.
A thousand years ago, you are a shop owner. You have 10 gold coins. You need to travel a thousand miles, through rough country with the likelihood you’ll run into some bad people, to buy goods for your store.
You go to a local “banker” who agrees to hold your 10 gold coins in his safe. The “banker” issues you a piece of paper saying that you have deposited 10 gold coins with him.
You then travel a thousand miles through rough country with only a piece of paper. Your gold coins are safe.
You then buy new merchandise for your store, give your piece of paper to the person who sold you the merchandise, and head home.
The person who sold you your merchandise goes to his “bank” and collects his gold.
After a while, both you and the person who sold you your merchandise realize that paper is much more convenient than gold coins. You both leave your gold with your bankers and use your bankers’ CDs, or certiﬁcates of deposit, as paper money.
People who need money go to your banker and ask for a “loan.” The banker lends out nine of your 10 gold coins. The one gold coin he holds in his vault is the “fractional reserve.” In this example, the fractional reserve is one coin, or 10 percent.
This is where it gets exciting. The person who borrowed 9 of your 10 gold coins goes to his bank and deposits your 9 gold coins. His banker then lends out 8.1 of the 9 coins to other borrowers, who do the same thing with their bank.
Your 10 (real) gold coins could easily become 1,000 (fake) gold coins. And everything is ﬁne—as long as no one wants real gold coins. This is the modern banking system.
The fractional reserve banking system of banking applies to everything, not only money or gold. The entire banking system is based on counter-party trust.
This fractional-reserve gold banking system has worked very well for governments for many years. But in recent months with the virus epidemic shutting down economies, there has been a much increased demand for real metal.
This, we believe, is collapsing the fractional-reserve gold banking system because they don’t have the metal to back up all the paper gold that they sold.
Why not paper gold and silver exchange traded funds (ETFs)?
Anything paper is a derivative, a fake, something that requires a counterparty for value.
The reason I want my real gold coins in my own private vault, and not paper gold coins in an exchange-traded fund (ETF) vault, is because ETFs can legally sell gold and silver they do not own. It is estimated that for every ounce of real gold an ETF has, the ETF may possibly sell a hundred ounces of fake gold.
I know this because I have taken companies public. While taking companies public and getting them listed on stock exchanges, I learned that most paper assets sold on the stock exchanges are fake.
The reason hard money people like myself and my friends don’t like GLD and SLV is simple. Let’s say the price of gold goes to $10,000 and we say, “Okay, we want our gold,” and they say, “No, we’ll give you $10,000 in cash.” Ordinary investors can’t convert from GLD or SLV.
Those guys are hard currency people, like us. That’s why when you go to a Coinstar to buy gold and silver, they’ll never recommend silver or gold ETFs…but if you go to a stockbroker, they’ll always recommend you buy gold and silver ETFs.
Any investor who invests in those two ETFs might as well flush his money down the toilet because those funds are used to shoot the market.
When the banks need to knock the price down, they will borrow gold, borrow shares out of the ETFs, and hit the future market with it.
Here’s my final word of advice:
If you can’t hold it in your hand or if you can’t get access to it, you don’t own it.
That’s why investing in commodities requires trust in your broker, perhaps more than any other asset class. Agora Financial has a partner who can help you with this.
Invest in Real Assets
Rich dad’s simple definition of assets and liabilities is this: Assets put money in your pocket. Liabilities take money from your pocket.
After realizing what the government was up to in 1971, rich dad came up with his lesson #1, which is:
“The rich do not work for money.”
My rich dad realized money was toxic, designed to steal the wealth of anyone who worked for money, saved money, or invested money in government sponsored investments such as 401(k)s, IRAs, stocks, mutual funds, and ETFs.
As I said, all paper assets are a form of derivatives. They are not real assets. They are fake assets.
One reason Kim and I were able to retire young is that we invested in real assets, not Wall Street’s financially-engineered, fake assets.
I invest in real assets where the government wants me to be a partner. By investing in real assets the government wants me to invest in, I pay little to zero taxes, legally.
Get on Your Own Gold Standard
My friend Jim Rickards uses the metaphor of an avalanche to describe the coming crash and possible collapse of the dollar.
For years, snow accumulates on the mountain peaks above a village. Rather than detonate small charges, causing small avalanches that would ruin the ski season, the powers that be keep building barricades to attract more skiers as more and more snow accumulates, and the threat of the “big one,” a catastrophic avalanche, grows every year.
Then one day, a tiny snowﬂake lands on a mountain peak and the village is buried under tons of snow.
This avalanche metaphor has been going on since 1971, the year President Richard Nixon took the U.S. dollar off the gold standard.
After each market crash, rather than ﬁx the problem, our leaders print more fake money—and the mountain of debt grows taller and deeper, and the problem grows more ominous every year.
Rather than snow, the world village is about to be buried under an avalanche of debt, fake investments, and fake money.
Today, billions of people are living beneath the avalanche. They are trapped in a central banking system owned by the mega-rich. The central banks are not elected by the people and do not have to answer to the people. That is why gold and Bitcoin are a threat to central bankers.
Getting on your own gold and silver standard—before the last snowﬂake, before the avalanche—gives you a way off the mountain. If the avalanche knocks out the electrical system, government money and people’s money are toast. ATMs will shut down, Wall Street will close, and people’s money will disappear when the World Wide Web disappears.
Always remember, gold and silver were here when the Earth was formed, and gold and silver will be here when we are all gone.
Editor, Rich Dad Poor Dad Daily