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Many erroneously view gains in absolute terms, forgetting one’s financial standing is more relevant in relative terms to “competing” investors.  For example, even when gold fell 30% in late 2008 (entirely due to the Cartel, I might add), it dramatically outperformed stocks, real estate, and ALL commodities.  Not that investors strive for “less losses” – as opposed to “more gains” – but markets cannot be controlled, particularly when government intervention is a key systemic factor.

PM investors have been put through sheer agony over the past decade, with many destroyed by the Cartel and others – like myself –scarred but better for the experience.  However, gold and silver prices have risen more than any asset class over this period, doing so while others – residential real estate, for example – actually declined.  Thus, PM holders were rewarded for their mettle with the double jackpot of superior absolute and relative returns.

Better yet, after twelve years of rising prices, PM fundamentals are stronger than ever, thanks to GLOBAL MONEY PRINTING rising faster than gold production AND a Cartel that has suppressed prices below market-clearing levels.  Not to mention, those who survived this long have become STRONG HANDS – i.e., unlikely to sell under any circumstance – particularly if they were wise enough to convert a significant portion of their PM “investments” into PHYSICAL gold and silver.  Remember, PAPER gold and silver (GLD, SLV, futures, mining shares) are “investments” that fluctuate in value, while PHYSICAL bullion is “savings” that CANNOT be lost unless required to be sold for near-term financial obligations.

Once again, I want to note the secular nature of most investors’ thought processes, focusing solely on absolute price levels, ignoring countless, equally important factors.  The first is the aforementioned relative returns, the second is real returns (adjusting for inflation), and finally, “seismic shifts” in global investment trends such as the movement out of PAPER assets and into REAL ITEMS OF VALUE – PHYSICAL gold and silver, ENERGY, and AGRICULTURAL PRODUCTS, to name a few.

Throughout history, politicians have always succumbed to the temptation of fiat currency, lured by rich, charismatic bankers that bribe them with campaign contributions and other perks in exchange for the monetary reigns.  This is why we have seen a series of debt-fueled booms over the centuries, with the same inevitable result – exponential MONEY PRINTING, financial collapse, and hyperinflation.

Such busts occurred “microcosmically” in the 1930s and 1970s due to loose monetary policy (i.e., isolated to certain nations), but in both cases yielded dramatic increases in gold as a percentage of global assets, per the chart below.  In 1932, gold prices were fixed at $20.67/oz, so its growth to 20% of ALL GLOBAL ASSETS was due to the aforementioned “relative effect” – i.e., gold stood still while everything else crashed; while in the late 1970s, gold and mining shares surged while other assets stagnated, particularly in real terms as inflation was a major factor.  Remember, in the 1930s, the U.S. and other nations were still on gold standards – thus, inflation was not an issue – as opposed to the 1970s, when all gold standards had been effectively abandoned.

Due to the incredible, still expanding bubble in PAPER assets fostered by acceptance of a WORLDWIDE FIAT STANDARD in 1971, gold still represents just 1% of global assets.  This is truly an incredible statement – as gold has outperformed ALL asset classes by many multiples over the past decade – demonstrating just how much PAPER has been created.  As you can see above, gold was calculated to be 0.8% of global assets in 2009, and still remained around 1.0% two years later.  Given the catastrophic failure we have seen in PAPER assets since the music stopped in mid-2008, it should be quite obvious to any unbiased, sentient being that this asset allocation imbalance will not continue for long, no matter how hard TPTB fight to “extend and pretend” the current system.

Will gold return to 20%-25% of global assets as it did in the 1930s and 1980s, or will it continue to be considered a “barbarous relic” by the Western world?  Frankly, it doesn’t matter what the West thinks, as the East has the capital and industrial base, as well as far greater respect for PM’s historical monetary properties.

And again, it is not absolute returns that necessarily matter, but relative returns, and – in the upcoming hyperinflationary environment – real returns.  A good way of measuring the former – and in some ways the latter – is the Dow/Gold ratio, per below.  In many ways, it is an arbitrary measure, but does an excellent job depicting the boom/bust cycles of PAPER stocks compared to PHYSICAL assets, and I have no doubt it will continue to serve this function in the coming years.  I have ZERO doubt this ratio will return to 1:1 (or below) this decade, the only question being will the Dow and gold cross at 2,000, 10,000, or 100,000?  Frankly, I don’t think it could cross at 100,000, as such values suggest all-out hyperinflation, likely yielding shuttered stock exchanges and social chaos.

All bubbles burst, and none have been so profound and destructive as that of the same financial institutions noted above, who lobbied and bribed their PAPER Ponzi scheme into existence over the past four decades.  The MASSIVE “head and shoulders” top in financials as a percentage of the S&P 500 (coincidentally, at 20%-25%) will crash in the coming years to low single-digits, either via deflationary crash or relative underperformance to materials stocks during hyperinflation.  I cannot vouch for what will happen to mining stocks in such a scenario, as nationalization and windfall taxes could destroy them as soundly as financial stocks, but I KNOW what the Dow/Gold ratio will do, and I KNOW fortunes will be lost – and gained – by understanding these immutable truths.

There is no way of knowing how things will happen, but thanks to the machinations of global Central banks and the gold Cartel, the end result is set in stone.  The ONLY proven way to protect oneself from the upcoming financial horrors will be PHYSICAL gold and silver, with ALL other investments possessing substantial risks, be they absolute, relative, or real.