Saturday , 23 September 2017

Rickards: “$10,000 Number For Gold Well Grounded Analytically”

.James Rickards..I am often asked how I can say gold prices will rise to $10,000 without knowing developments in the world economy, or even what actions will be taken by the Federal Reserve. [The answer is that]…it’s the implied non-deflationary price of gold…What is the non-deflationary price? [It is the] price gold would have to be in order to support global trade and commerce, and bank balance sheets, without reducing the money supply and that’s $10,000 a [troy] ounce… 

This article is an edited ([ ]) and revised (…) version of the original article (written by Jim Rickards) to ensure a faster & easier read. It may be re-posted as long as it includes a hyperlink back to this revised version to avoid copyright infringement.

If you take the global M1 of the major economies, times 40% (I use 40% backing. A lot of people don’t agree with that. The Austrians say it’s got to be 100%.) and divide that by the amount of official gold in the world, the answer is approximately $10,000 a [troy] ounce.

…Now, if you go to 100%, using M1, you’re going to get…$25,000 a [troy] ounce. If you use M2 at 100%, you’re going to get $50,000 a [troy] ounce. If you use 20% backing with M1, you’re going to get $5,000 a [troy] ounce. All those numbers are going to be different based on the inputs, but just to state my inputs, I’m using global major economy M1, 40% backing, and official gold supply of about 35,000 tons. Change the input, you’ll change the output, but there’s no mystery. It’s not a made-up number. The math is eighth grade math, it’s not calculus.

The above is where I get the $10,000 figure. It is also worth noting that you don’t have to have a gold standard, but if you do, this will be the price.

The now impending question is, are we going to have a gold standard? That’s a function of collapse of confidence in central bank money…Each bailout gets bigger than the one before. Yes, they do the bailouts, building upon “truncation.” Yes, governments don’t go down without a fight. Policy-makers will truncate a global financial crisis, but then take the analysis a step further…

If the next crisis is bigger than the last one, which I expect, and the central banks are tapped out, where is the money coming from? How will they re-liquify the world? The answer is, the IMF is going to print a massive amount of dollars of SDRs. Is that inflationary? Of course it is.

If you flood the market in dollars of SDRs, one of two things is going to happen:

  1. either that’s going to work, and will be highly inflationary, which is going to take gold to $10,000 a [troy] ounce, or
  2. it’s not going to work, in which case you’re going to have to go back to a gold standard, in which case it’s going to be $10,000 a [troy] ounce.

You can have multiple paths, and timing has to be watched, but the $10,000 number for gold is very well grounded analytically.

Scroll to very bottom of page & add your comments on this article. We want to share what you have to say!

 munKNEE should be in everybody’s inbox and MONEY in everybody’s wallet!

If you want more articles like the one above sign up in the top right hand corner of this page and receive our FREE bi-weekly newsletter (see sample here). – ” The internet’s most unique site for financial articles! Here’s why