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Thank you very much Stephen I'd like to call their shit thank you. Good afternoon it's a pleasure to speak once again. The investment look for 2012 today I'd like to focus on one important idea the direct relationship between rising price gold and the rising levels of government that that result in currency debasement sense we measure investment performance. Currencies clear understanding the outlook for currencies is essential in order to understand Colts relationship it's important to understand.
Gold is money it's not simply an industrial commodities like copper and zinc. Trades on the currency tasks most major banks not the commodity tasks turnover at the London bullion market association is over 37 billion a day volume is estimated at five to seven times that amount clearly this is not your treatment the world central banks no gold is money after decades modest sales they have become net buyers since 2009 strain strengthened in 2010 and gained further momentum in 2011. They're buying gold as a counterbalance to their valuing currencies. Has money dole has provided the most stable form wealth preservation for over three thousand years. Still does today gold is outperform all other asset classes since 2002.
This chart clearly shows that the US Federal debt which isn't purple and the price of gold are now moving in lock-step the red line represents that repeatedly violated government debt ceilings this correlation is likely to continue for the foreseeable future based on official estimates. America's debt is projected to reach twenty three trillion in 2015 and if this correlation remains the same indicate prices called would be twenty six hundred dollars per ounce. However if history is any example it's a safe bet government expenditure estimates will be greatly exceeded and the gold price left for much higher it's not just the US most Western economies have reached unsustainable levels of debt and that will be impossible to pay off it's worth noting that the US Federal Reserve. Unlike the European Central Bank can create money without restriction.
US dollar has been a defacto world reserve currency for over half a century the rest of the world currencies are sexually just a relative's. US dollar globaldata's in Euros or Special Drawing Rights issued by the IMF the Fed and thus indirectly US taxpayer will become the lender of last resort. Therefore possible ways to deal with this unsustainable debt one is to grow. I have it through increase productivity. Increased exports this is highly unlikely as Western economies in even China poised for recession to. You can introduce strict austerity measures to reduced spending says the unwanted short term effect increasing unemployment reducing GDP and resulting in even higher deficits.
Number three you can simply default on the debt so make it difficult. However to raise future bond issues and number four is the issue even more debt have the central bank questions. Simply create whatever amount of currency is needed. Most politicians will select option 4. Since if you have the political will to choose austerity cutbacks for economic accountability or simply trading more and more currency. Inevitably they will choose to postpone the problem and leave it for someone else to deal with in the future. Last august the world watched as the US government struggle to come to an agreement on raising its debt ceiling. I was forced to compromise and delegate the final solution to a super committee. Its lack of political will turned the country an immediate downgrade from the S&P and subsequently caseli conveying supercommittee fail to reach a solution as well.
In Europe matters were even worse restate try to write off half its debt. Germany and France reminded them effort that no one would buy the bonds. The British in me Irish implemented austerity measures raised unemployment reduced GDP and resulted in even higher deficits. Italians watch the bond yields rise to 7 percent. Father soon ami and related nuclear incident deflected tension from Japan's financial problems as a temporary low because Japan has the highest debt to GDP. Have any of the developed countries in order to compensate for slower growth governments attempt to devalue their currencies and ice improve export competitiveness. This can lead to a global currency war that author and wall street and sorta washington insider James records discusses his best-selling book currency wars the process is now well underway.
A recent Congressional Budget Office report predicted that the US federal government's publicly-held yet what type and unsustainable 101 percent GDP by 2021. Currently the official US that is an astronomical 15 trillion yet this is only current debt used if the US government use the same accrual accounting principles that public companies must use unfunded liabilities like Social Security and Medicare. Make the real debt more than 120 trillion misrepresents over a million dollars per taxpayer. Obviously this amount is impossible to repay. Interesting note that in almost every recorded case hyper-inflation appointment inflation exceeds 50 percent month was caused by governments trying to compensate for slowing growth. 34 throttle currency creation this is exactly what we're seeing today. These events came in Econ confidence too tight on my new book ten thousand dollar an ounce gold. The book connects to many trains that will be responsible for both rising dad and rising gold prices over the next five years to be published later this year.
To make matters worse irreversible macro trends. I discussed last year are still very much in place today. These include the added costs to retiring baby boomers systemic unemployment do outsourcing. Western jobs through globalization and rising oil prices due to peak oil. These irreversible trains will increase unemployment. Lortie reduced tax revenues increased deficit even further and force governments to borrow. Ever increasing amounts might governments find themselves between the proverbial rock and a hard place as even austerity measures tend to be naked tend to negatively impact a as GAAP false and debt increases credit downgrades are likely to follow. Resulting in higher bond yields followed by even greater deficits becomes an unstoppable descending spiral lhasa purchasing power against Gold continued unabated last year. The US dollar in the British Pound have lost over eighty percent have the purchasing power against gold over the past decade.
Yemen Iran the Canadian dollar have lost over seventy percent as we remind our clients this is not a typical bill bull market in gold. Gold is not rising in value currencies are losing purchasing power against gold and therefore gold can rise as high as currencies can fall since currencies are following case for increasing day. Gold could rise as high as government Dec crow. Sovereign wealth funds as well as the more conservative central banks will have little choice but to reallocate to gold. In order to outpace currency depreciation is why some central banks particularly those China and India accelerated gold buying 2011 for a third year in a row to nearly five hundred times about 115 mine production. A central banks are being met purchasers gold since 2009. Real game changers will be the pension funds and insurance funds which at this point only hold 0 point percent have their vast assets and gold.
Gold mining shares continuing losses and growing pension deficits will make it mandatory for them. To eventually include gold. The one asset class that is negatively correlated to financial assets such as stocks and bonds. This happens or be a massive shift from over 200 trillion in global financial assets to the less than $2 trillion probably helpful considering our goal will be at the end of 2012 look back to life First Empire club speech in 2005. I said then it didn't really matter gold close the year at four hundred dollars an ounce or five hundred dollars an ounce transferring place to ensure have much further to rise seven years later we can say the same thing. It doesn't matter whether golden's 2012 at two thousand or 2500 cats goats final destination make today's price: insignificant is can be frightening times but gold always offers hope. May not be able to change global economic problems or government debt individuals can protect increased our wealth.
Three gold ownership. Gold bullion ownership mining shares ETF so other proxies ownership as insurance against accelerating currency debasement. Use the analogy that in case of fire was rather have a real fire extinguisher a picture. Number for number people approach me recently and said they wished they had less than five years ago. Feel they've missed the boat x2 right to buy gold. For those I feel that way let me close with Chinese proper. Best time to plant a tree is twenty years ago the second-best time today. Thank you. Thank you like to call upon.
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