Gold, Credit And The Coming Financial Collapse / Commodities / Gold & Silver 2019

Since 2016, the US Monetary Base hasdeclined by about 23.68%. This is the deepest and longest decline since theFederal Reserve was formed. This should not be ignored.

The last time there was a decline close tothis magnitude,there was a sharp deflationary recession. That was the one thatoccurred from 1920 to 1921.

Below, is a long-term chart of the Monetarybase that goes back to 1918:

During the 1920-1921 recession the declinein the monetary base eventually made it into the broader money supply and thiscaused a significant drop in price levels (between 13% and 18%) during therecession, with wholesale prices dropping as much as 36%.

The current decline in the monetary base hasnot evolved into a decline of the money supply yet, but it will likely soon doso. Especially if the economy goes into a recession and the stock marketcollapses.

The monetary base is the foundation part ofthe money supply, and represents the most liquid part of it. It basically actslike gold in a 100% funded gold standard: it represents the final settlement ofa transaction.

If the monetary base is declining then lessmeans to service debt is available and could trigger mass defaults. Cashbecomes scarce and suddenly you have a situation where the Fed has to intervenein the repo market like it has been over the last couple of weeks, just to keepthe system going.

This problem is not just going to go awaywithout a major crisis and some severe consequences. By my estimation thebanking system is broken and is unable to continue creating new credit in itscurrent form, just like a bank is unable to increase its gold holdings under agold standard when there is distrust  ofthe banking system or that particular bank.

Believe it or not, the reserve banks do notcontrol all the elements in the system: they are not all powerful andunstoppable. The appetite or ability to take on new credit is just not thereanymore.

In my opinion, their intervention is notabout making the crisis go away (because it won’t), but to protect theirinterest during the crisis.

This is likely the beginnings of theexpected monetary event I have pointed out before:

The chart shows the ratio of the gold priceto the St. Louis Adjusted Monetary Base back to 1918. That is the gold price inUS dollars divided by the St. Louis Adjusted Monetary Base in billions of USdollars.(from macrotrends.com)

More details about thechart and original commentary here.

The bottom at point 3 is now virtuallyconfirmed and we could soon have an event similar to the 1933 gold confiscation(bankruptcy) and the 1971 announcement where the US ended the dollarconvertibility to gold (at a fixed rate).

Although both of the historic events weresignificant, they did not occur during a stock market crash or during arecession. There is a huge potential that the coming event could happen duringa major stock market crash and recession.

Therefore, the coming monetary event couldbe the cause (or at the center) of the coming crisis, whereas with the previoustwo they were as a result of an ongoing crisis, and came towards the end to“correct” the situation.

Note that a sharp move from point 3 to point4 on the chart is akin to a bank run on gold holding banks in a gold standard.With the decline in the monetary base and a rising gold price this is exactlywhat is happening.

For more on this, andsimilar analysis you are welcome to subscribe to my premium service. Ihave also recently completed a Silver Fractal Analysis Report as well as a Gold Fractal Analysis Report.

Warm regards,

Hubert

“And it shall come to pass, that whosoevershall call on the name of the Lord shall be saved”

http://hubertmoolman.wordpress.com/

You can email any comments to hubert@hgmandassociates.co.za

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