Since my return from Cabo, I’ve learned that Gold production is declining. Production is estimated to fall from around 2500 tons to 2000 tons over the next ten years.
The reason for this was a lack of Exploration during the 1997 – 2002 period. During this period Exploration budgets had been cut by 67% simply due to the fact that Exploration programs weren’t profitable with a Gold price below $350 / ounce. No Exploration means no new Gold deposits !
Like so many products that become short in supply, it takes 4 to 10 years to correct the imbalance. Think not only gold mines, but paper mills and refineries.
Last month the trade deficit for just the month was $58 Billion. That is almost $2 Billion per day! If a tonne of gold costs $14 Million, our daily deficit is equal to 143 tonnes per day or 4290 tonnes a month, 51,480 tonnes a year! Why would anyone accept our paper for over 50,000 tons of gold that is in short supply?
Germany’s Bundesbank was expected to sell 120 tonnes of gold into the world market, but decided to sell only 8 tonnes. Argentina is increasing their gold reserves as are Russia, China and the Middle East.
The big news for me that I heard about while in Mexico: Mexico is moving toward the remonetization of silver Hugo Salinas Price — businessman, philosopher, and Mexican patriot — describes in an essay the progress of monitization:
This November 30 the 31 governors of all the
states that make up the Mexican Republic sent
a communiquÃ© to the Ways and Means Committee
of the Mexican House of Representatives,
expressing their unanimous approval of the
monetization of silver and urging the committee
to approve a bill which aims to achieve precisely
A poll by national TV Azteca revealed that
96 percent of viewers approved of the
monetization of the silver ounce.
The Bank of Mexico, Mexico’s Central Bank,
is adamantly opposed to this measure. The
bank does not want the public to have the
opportunity of saving in monetized silver.
It wants to maintain its monopoly on the
printing of Mexico’s money, which has no
intrinsic value and does not want the
public to have any alternative for its
savings, other than bills or bank deposits. (emphasis added)
We insist we are a capitalist country, yet other countries practice what we preach. They value gold, they privatize Social security (Chile), they have no capital gains tax (Japan or Canada), they are moving to a precious metal backed currency (Mexico and China). Meantime we squander our resources. Isn’t it amazing how we can spend $200+ Billions in Iraq, but can’t find $100 million to contribute to the global food aid programs.