The Paper Paradigm Does Not Equal Physical Reality (Video)

David Morgan from the Morgan Report explained to USAWatchdog why he believes that a shortage of physical gold and silver is inevitable. Morgan begins by giving some technical analysis of the gold and silver prices. He moves on to explain his rationale for $10,000 an ounce gold when looking at the true money supply.

Highlights from the interview:

“I try to let the market tell us [what is going to happen]… Basically, gold has been in a 3% bandwidth. It goes up, gets above $1200, starts pushing toward $1250, the gold bugs get excited, then it falls back in the channel below $1200, scrapes along $1180 – it’s like a sine wave almost, back and forth, back and forth. Silver has a similar pattern for the past three or four months…

“When there is a cry for physical, they’re going to have to meet that demand… When the public and institutions and silver users all demand physical, is there enough to meet that demand? The answer is we don’t know yet. I expect not. If you have 100 million ounces available to you, you certainly can quell it for a while…

“That day [of a silver shortage] is coming, in my view. I used to always believe it would be in the silver market. I’m not so convinced anymore. I think it could be in the gold market, that’s a given. It could start in the gold market first… That day’s going to come, and it could be with China, when they don’t get the physical and they get some kind of excuse that says, ‘Hold on, two week delay.’ And they wait two weeks, and then two more weeks. Whatever happens. Of course, that probably won’t be public information until after the fact. But the market will tell us, because there will be a price surge and it won’t slow down. Or there will be some obfuscation in the public, mainstream press telling us, ‘Don’t worry, there was a misunderstanding. China didn’t want this many tons, they only wanted this many tons.’ They’ll try to paper over it. The fact is… that the paper paradigm does not equal physical reality. That day is approaching…

“It’s going to go down in financial record books… There’s an infinite demand for money. There’s a direct correlation between free markets and free money. The market [for] a thousand years has always chosen gold and silver as the ultimate, top-tier money. So when there’s a panic in currency markets… they, the populace, everybody, the rich, the poor, the in-between are all going to seek one thing, and that’s “my” money… They’re going seek the safest thing they can trust. The most trustworthy thing for thousands of years is gold, secondly silver…

“There’s going to be a panic buy into the metals, and there’s only so much to go around. That’s when a lot of these people that think that they own metal, that have a certificate from like a JP Morgan or these other major banks, and they say, ‘I want to cash in this piece of paper and pick up my silver.’ – ‘Hahaha. Get it line. We don’t have it. Wait a few more months.’ Or whatever the heck they say…

“Remember, whenever you have a lot of something, it has no value. If there’s a bazillion paper clips on the street, do you think you can sell any in the store? No! It’s the same thing as money. Money is like potatoes. The more of it you have, the less value it has. At some point, people wake up and say, ‘I don’t want this stuff. It’s worthless.’ That’s the problem with the fiat money system. They always collapse…

“As Mike Maloney and others have said, a fiat system, once you cut it from gold or from gold-silver, it usually goes about 40 years. So, August 15th, 1971, when Nixon cut the international gold standard for settlement of nation state to nation state – you add 40 to that, you get 2011. So is it 40 years exact? No, none of these markets move exactly. That’s why I’m not a huge cycle guy, because there’s variances. Nonetheless, the idea is sound… Can it go another 10 years? I truly doubt it. Can it go another 4? Probably. I think that this ball is going to start to fall…

“There’s no way that everyone can get out… If you look at the theoretical price of gold and silver based upon just the true money supply is, you’re looking at something like $10,000 gold. That’s getting rid of all the credit… The true money supply is basically if they printed all the dollars that are absolutely in the bank. There are savings accounts and there are checking accounts. That is basically the true money supply (I’m trying to keep this simple). All of that is printed into physical dollars. You take that divided by the amount of gold the Treasury says we have, which I question and you come out roughly $10,000 an ounce gold. That’s without any credit being available…”

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