Something interesting about "GOLD PRICES"

You will often read how various experts in the financial press will say that the Gold price "should be" about $2000/oz., to $3000/oz., or slightly higher. But what they almost never say is how they arrived at their figures, and what assumptions they are making. The reality is that the gold price, today, given today's conditions, should be about what it is right now.

But conditions are likely to change, and change dramatically, and can change very quickly. The conditions that are mostly like to change the most quickly are people's perceptions and understanding of the reality of the dangers of theft due to inflation.

The US Federal Government is spending about $1.6 trillion more than they take in from taxes, which is $1600 billion, which is $1,600,000 million, which is $1,600,000,000,000 dollars. The news on TV this morning said that the US national debt increased by $400 billion in the last 3 months, which confirms the numbers. They are not able to fix this problem any time soon. This problem could not be fixed even if they taxed incomes at rates of 100% per year. And they are mostly just printing this money, which creates inflation, which means that prices will go up, for everything, including, and especially, for Silver and gold.

Today, very few people in the USA understand that they need silver and gold, and that is likely to change, and historically, those kinds of attitude changes happen very quickly, which result in dramatic and very sudden increases in the prices of silver and gold.

Today, in the USA, only about $3.5 billion is being spent annually on silver, (estimated at 100 million oz. x about $35/oz.) and only about $3.4 billion is being spent annually on physical gold (estimated at 2 million oz. at about $1700/oz.), for a total of only about $7 billion spent on precious metals to protect itself from inflation.

But the USA has about $18 trillion of cash, savings, and short term bonds in the banking system, which can also be expressed as $18,000 billion, $18,000,000 million, or $18,000,000,000,000 dollars.

So, mathematically the reality is that new money creation is about $1600 billion, out of $18,000 billion, which is an annual increase of nearly 9%, and yet only $7 billion out of $1600 billion of new money creation is being spent on precious metals, which is only 0.4%, or expressed another way, is only $1 out of every $229 dollars of newly created money being spent on silver and gold, and only $1 out of $2,571 of money in the banks is being spent on silver and gold, which is only 4% of 1%.

So, currently, this is next to nothing compared to the avalanche of money that is going to be spent on silver and gold.

So, we could ask ourselves the following question“What if 100% of US paper money had to be backed by all the US gold that the US government is likely to have left?"

What happens when the entire US money supply is spent on Silverand gold, over a nice, slow pace, of over an entire year. Now, think about that again. This is still well before hyperinflation really kicks in, well before people are spending their entire paychecks on silver and Gold the instant that they get paid, and well before the government starts printing new money with several more zeroes at the end of it.

So, coming back to the question, what if 100% of US money is spent on silver and gold in a year? $18 trillion or $18,000 billion. Half for gold is $9,000 billion, spent on, say 2/3rds of world gold production of 75 million oz., and would be 50 million oz. $9,000,000 million spent on 50 million oz. leads to a price of $180,000/oz.for gold. And if $9,000 billion is spent on 2/3 of world annual silver production of 700 million oz., which is 467 million oz., that would be $19,272/oz. for silver.

But let's assume that the US government tried to prevent that from happening. Let's assume that the government would be smart enough to back all US currency with the official US gold, at a rate that would give the dollar a 100% gold backing. (I know, kind of a crazy assumption to assume that the government would be smart, but let's assume anyway.) The point of considering these numbers is that, in theory, the US government could stop runaway inflation with a 100% gold backing and a balanced budget, but given today's political climate, that's currently impossible.

But let's say the Tea Party wins a full sweep of both houses of congress and we get Ron Paul as president, and let's assume that instead of trying to return to the gold standard, he tries to simply prevent runaway inflation with full 100% gold backing all dollars in all US bank accounts.It's a very simple calculation $18 trillion divided by 261 million oz. of official US gold = $68,966/oz. Given the previous calculations, silver could hit a 10 to 1 ratio to gold, which would be about $7,000/oz. This is what the gold and silver prices "should" be, given the givens of honesty, and living up to the basic pledge of FDIC "government" insurance on all bank accounts.

Ah, but finally, many people reasonably expect that the US has already sold off a lot of the official gold to protect and defend the dollar at current low gold prices, which is more consistent with government reality and stupidity and rising gold prices. In that event, the dollar is like burnt toast, and there will be no stopping the coming runaway gold price increases.

The reality is that we live in an age of deception, because the dollar is a deception.