Commodity Trade Mantra

How Much Gold Is Really Out There? …Not Enough!

How Much Gold Is Really Out There? …Not Enough!

How Much Gold Is Really Out There? …Not Enough!

How much gold is really out there?  This is a good question and rather than debate whether the “official” statistics are correct or not I will assume they are.  I will make this assumption because even if they are true (which they are not), the financial ship is seriously out of balance and listing badly.

The official total number on a global basis is estimated to be just over 170,000 tons.  Of this figure, the tally comes to around 32,000 tons held by central banks.  At the current price of gold, the total above ground supply comes to a little over $6 trillion and central banks hold a little over $1 trillion.  If we break this down further and look at it from a U.S. centric standpoint, we claim to have 8,133 tons, let’s call this $300+ billion.

The title’s question “how much gold is out there?” is misleading.  I say “misleading” because there are two (as many as there are currencies) numbers, one by weight and the other by dollars (or whatever currency you use).  Looking at this from a dollar standpoint is the easiest way to gain perspective.  If total above ground supply comes to little more than $6 trillion, we can make some comparisons.  For instance, the Fed’s balance sheet is over $4 trillion, or the U.S. economy is now about $17 trillion in size and our “funded” national debt is close to $18 trillion.  I have seen studies where if you include “un” funded debt and promises, the U.S. is on the hook for $200 trillion in total but this number is too out of control to compare to our “gold held.”

So the U.S. holds $300 billion in gold …or maybe not, but assuming this is the case, let’s put it in perspective.  Our “family jewels” that amount to $300 billion is about 1/15th of the $4+ trillion Fed balance sheet.  If we compare our gold hoard to the economy in total we come to a number just under 1/60th.  More importantly, if we compare gold held to our national debt we also get a number of 1/60th.  If we compared the amount of U.S. gold to our total of funded and unfunded obligations we get a really foolish number of close to 700.  In other words, we “owe” almost 700 times as much “money” as we have gold.

In my opinion, the most shocking comparison of “gold to our obligations” is when you look at the amount of gold we hold versus the amount of interest we pay each year.  Last year we paid $415 billion worth of interest.  This number is interesting because it is actually less than we paid out in 2008 when our debt was $7 trillion lower than it is now.  Because interest rates have been forced down we are actually paying less interest today than were 6 years ago even though total debt has grown by 80%.  This just goes to show one of the “why’s” interest rates have been crushed…so Uncle Sam can afford to pay his interest …but I digress.

So, we are now paying more in interest each and every year than the sum total of ALL the gold that we claim to hold.  Do you see a problem with this?  Yes I know, some will say “it doesn’t matter and is meaningless.”  Well, maybe it is and maybe it isn’t.  Remember, interest paid today is far less than it would be under a “normalized” interest rate scenario.  Said another way, under a normalized interest rate, the U.S. would be paying $800 billion per year just alone in interest.  In case you missed it or scanned over it, the important phrase in the previous sentence is “PER YEAR” with an exclamation point!!!

Getting back to my original thought and title, “how much gold is really out there?” …the answer is “not enough.”  I only made comparisons to the U.S. and I did this because we are the ones who issue the world’s “reserve currency” and whos debt is considered “risk free.”  After seeing the above numbers, you now might understand “why” the U.S. went off the gold standard and defaulted to foreigners …we were running out of gold (after having 20,000 tons at one point) and simply didn’t have enough to continue making deliveries.

It is a funny thing though, this concept of “not enough” gold.  In today’s financial world and numbers …there really isn’t enough.  There’s not enough to back currency with.  There’s surely not enough to cover or back debt with.  Heck, there’s not even enough for the U.S. to pay their interest FOR ONE YEAR! Ah, but dear reader, you are far smarter than this and are already calling BS on me aren’t you? There is not enough gold “at current prices” to cover anything.  The total amount of gold “at current prices” won’t cover most country’s currencies, debt or even interest payments.  There is either not enough gold …or it is not priced properly to do its job?  Which is it?

This is why I have written multiple times about the system going through a “re set”.  Either gold prices need to be marked up or paper prices marked down (the same thing) in order for there to be “enough gold” to act as a foundation with any sort of thickness or stability.  This I guess you could say is one of the laws of nature.  A markup in gold will either be done by man in order to support his edifice of debt …or by Mother Nature where man’s paper edifice collapses to a point where “there is enough gold” at whatever “price” it happens to be at the time.

This is not original thought or even close to rocket science.  This has happened many times before all throughout history.  The only differences between “then and now” is that this time around even (and especially) the reserve currency itself is fake, fiat and Ponzified as opposed to periphery currencies.  In the old days, the peripheries were the fakes, now even the reserve currency is fake.  The problem now is the issuer of the reserve currency is broke and paying out more in interest in one year than was saved in gold over 238 years!  I will leave you with a thought, what if the U.S. really has dishoarded their gold in an effort to suppress the price?  What if the crazy comparisons I did for you above are really just a rosy scenario and “rosy” by a factor of 10?  Or by 100?  Or if ALL of the gold has been dishoarded?  Then what price in dollars should gold be?

 
Courtesy: Bill Holter

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