Tweets by realDonaldTrump

Online:
Visits:
Stories:

By The News Doctors
Contributor profile | More stories

Story Views
Now:
Last Hour:
Last 24 Hours:
Total:

Gresham’s Law Predicts the LBMA’s End – David Jensen and Jay Taylor

Saturday, February 14, 2015 3:28

% of readers think this story is Fact. Add your two cents.

(Before It's News)

TND Podcast Spotlight: Turning Hard Times Into Good Times w/ Jay Taylor |

1. Definition: Gresham’s Law

Gresham’s Law is a monetary principle stating simply that “bad money drives out good.” In currency valuation, Gresham’s Law states that if a new coin (“bad money”) is assigned the same face value as an older coin containing a higher amount of precious metal (“good money”), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation because of its greater inherent value.

By definition, gold and silver are money.

Alan Greenspan in the fall of 2014 said that gold is superior money to all fiat currencies including the USD.

2. The LBMA is trading digital or fiat gold (unallocated gold) that the LBMA states accounts for the vast majority of spot gold trading.

The LBMA represents 85% of global daily gold trading volume and the LBMA’s (and LPPM ) daily pricing is, according to the LBMA, the basis for “virtually all transactions in gold, silver, platinum and palladium”. What happens on the LBMA impacts the global price of silver and gold, so it is our focus.

The open interest in London can be varied to digitally increase and decrease gold and silver positions creating supply of gold and silver to market when account holders hold their ‘positions’ in the LBMA. Due to the leverage of claims vs fractional metal available for satisfaction of the claims, this dictates ulitimate market dislocation.

According to Gresham’s Law, by creating and trading virtual ‘bad money’ (i.e. unallocated or virtual gold and silver positions ), the LBMA is guaranteeing its own demise as the ‘good money’ (i.e. real gold and silver physical bars) will simply disappear from the exchange resulting in market dislocation. Virtual metal created on the LBMA short-circuits the pricing mechanism for precious metals by creating artificial supply.

The markets flow and choose a path to solve problems and the markets will flow around the LBMA and leave it stranded as it is a trading platform that has been used to short-circuit market pricing of gold and silver.

We can see from our discussion last week that the LBMA has an estimated open interest position (claims) of 400M to 600M oz of gold and 3.5 to 5.0 billion oz of silver. These open positions are completely unsustainable as the impossibility of delivery into these positions is clear to the market.

# # # #

About Jay Taylor:

Mr. Taylor is editor of J Taylor’s Gold & Technology Stocks newsletter (click here to learn more) and host for the popular radio show, Turning Hard Times into Good Times on the Voice America network. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. In 1981 he began publishing North American Gold Mining Stocks, which preceded his current newsletter. His continuing interest in gold mining prompted him to study geology at Hunter College in New York City, supplementing his MBA in Finance & Investments from Baruch College, NYC. Throughout his career Mr. Taylor worked as a commercial, then as an investment banker. Most recently, he worked in the mining and metals group of ING Barings in New York. Prior to that he was involved in the first gold loan made in modern times in the U.S. to Amax Minerals, a 250,000 oz. loan facility led by Citicorp. In 1997 he resigned from ING Barings to devote himself full time to researching mining & technology stocks, writing his newsletter and assisting companies in raising venture capital. Along with the publishing of his newsletter he currently also hosts the web-based radio show “Turning Hard Times Into Good Times.”