Gold Demand Could Become Unlimited According to JP Morgan

Here's an interesting thought.JP Morgan reported today that growing lack of confidence in currencies could create unlimited gold demand.The article draws a comparison between the seemingly limitless supply of currencies and the supply of gold which is very minimal, relatively speaking.

Maybe this is the plan.You print money and buy gold.The more money you print the less the currency is worth.And the more gold you buy, the shorter supply becomes.Gold supply and demand laws then take over and gold goes up while currencies are getting weaker.But it really doesn't matter how weak the currency gets because it's already been exchanged for gold which has gone up.

And the cycle rolls on.Print more currency, buy more gold - I think we may have just figured out how we're getting ourselves out of debt.By the way, where's all that TARP money that got paid back?What if the whole world has figured this out?Look at central banks - what are they doing?Are they printing money?Yes!Are they buying Gold?Yes!

Let's do some math.Let's say there's 100 ounces of gold in the world.And right now just 10 ounces are for sale at $1,250 an ounce.I want it.I don't have the money because I'm already so far in debt I'll never see the light of day.Even worse, all of my debt is owed to people who currently hold all the gold.For the moment, I'm still making my payments so no one really knows how dire my financial condition is.Let's just say I'm $100,000 in debt.

My only choice is to secretly print the money I need to buy the 10 ounces of gold, so I do it.I print $12,500.Now I have 10 ounces of gold and it really cost me nothing because all I did was print the money.Now I want 10 more ounces but because supply has shrunk the gold coins now cost $1,400 each.So I secretly print $14,000 and buy 10 more coins.

In theory, I now have 20 coins worth $1400 each or $28,000 total.But I only had to print $26,500 to own them.Now as supply shrinks even further a few others realize they don't have any gold so they feel they better get in on the act.There's only 80 ounces left, but 10 coins are offered at $1,700 per coin.But the others don't have any money either, so $17,000 is printed, the coins are exchanged for the printed currency and now the 20 coins I bought for $26,500 are worth $34,000.

Then others follow suit, but no one has any money so they all print what they need.By the time all but 10 coins are sold off, the last 10 coins are $5,000 each.But it's the last 10, so another money printer comes along, prints $50,000 and the coins are bought.Now, I have 20 coins worth $5,000 each or $100,000.I only printed $26,500 to own them.

In this scenario, even the last guy to print money to buy gold, is still even.He printed $50,000 and now has $50,000 worth of gold.Enter buyer one again.That's me with 20 coins now worth $100,000 and I say I'm up $73,500 and I want to own some more gold.But to do that I have to go to one of the owners of the 80 ounces I don't have and offer them something more than $5,000 per coin.I bid $7,350 per coin but I don't care, the gold I have is already worth many times the money I printed to buy it.

So now I print/borrow $73,500 against my equity and buy 10 more coins from one of the other owners who cannot refuse the windfall.And the cycle continues.

Do you see where all this is headed?In the end I have all the gold and everyone else holds all the currency.I won't bore you with any more drawn out hypothetical math but you can see how in the end all I need do is sell a teeny little bit of gold to pay back the original $100,000 of debt.

And because I own all the gold in the world, I am the ruler of the world gold order and I decide what everyone else's currency is worth.I am the only with no debt - just gold.

Maybe that's what JP Morgan was thinking when they said gold demand could become unlimited.Because in the end, he who holds the gold makes the rule.

Just a thought!