Thursday, May 31, 2012

Wealth Is Changing Hands; Fast

The reports out of Europe are revealing that a massive transfer in wealth is now underway.

Germany has once again resurrected a plan, once deemed too offensive, to deal with the debt of overstretched countries in the EU. In this plan, and couched in the language of financial jargon, is a little clause that should cause all of Europe's indebted perifery much concern.

The Germans are wanting something tangible from these indebted nations before they will commit to dealing with the debt. They want a nice, shiny, physical asset. Yes, you guessed it; gold.

In order to provide a guarantee that these nations will pay the debt back, the Germans, and other strong nations, want collateral. Italy has over 2451 tonnes, Greece 111 tonnes and Spain 281 tonnes. Not worth a lot, except perhaps in Italy's case. But that is if you value it at current prices in USDs.

So you could probably factor in that the price of gold will need to be increased to a higher, true value for the maximum extraction of wealth to be made. On this note, the BIS (Bank of International Settlements) is moving to reclassify gold as a tier one asset, that is equal to cash in definition. Currently it is a tier 3 asset class, about one-half the value of cash holdings. Now can you see how much gold needs to rise to make this wealth transfer work in favour of the lenders?

And of course what this will do to gold is bring it quickly back into the general publics eye and into reckoning as the asset of wealth transfer. The beginnings of this are seen in the massive uptake of physical gold by large central banks (not NZ, mores the pity) who are buying physical at a fast rate. China alone purchased over 124 tonnes last quarter.The general public always see these actions far too late, way after the wealth transfer process has begun.

We also read that the Rothschild and Rockefeller families are teaming up to buy distressed assets. Assets that used to be in public ownership and are now, and in the near future, going to be selling at bargain basement prices.

The way of the world is simple really. Spend above your means and those who lent to you get first option on that which you own. Good on the two big R's for taking the opportunity? Are they greedy or smart, you choose. But remember, if you own gold, you too can have a tier one asset and be like the big boys.  In readiness for the largest wealth transfer in history.

Gold in New Zealand dollars: $2075.16 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $37.03 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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