Wednesday, September 30, 2009

Is The Gold Cartel Facing Destruction?

When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see money flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed.
-Ayn Rand
Atlas Shrugged, page 413

Well, well, well... The third quarter has ended. For many, the financial fiscal year has ended. Gold began the quarter at $955, and ended it at $1007, up 5.5%. Silver began the quarter at $14.07, and end it at $16.62, up 18%. Gold might be the place to be to "insure" your wealth, but Silver is the place to be to "increase" your wealth.

Both Gold and Silver roared back to life today at precisely 10AM when the Chicago Purchasing Managers Index for September came out not only FAR below expectations, but below the Mendoza Line of growth versus contraction. This negative Chicago PMI news shot out of the sky a budding Dollar rally on the back of unexpectedly negative employment numbers from the always inaccurate ADP Employment report for September. Bad news is that was good for the Dollar gave way to bad news that was bad for the Dollar...go figure. The Precious Metals were the prime beneficiary of today's mix of bad news.

It would appear that the bottoms may be in now on both Gold and Silver as both exploded off their recent lows on expanding volume. The short squeeze we suggested may develop on the massive short position in the COT may have bubbled to life today. Chart technicals suggest that this may be the case. A break above 1009 in Gold and 16.91 in Silver should confirm as much.

Surmounting The Cartels’ ‘End Game’ Juggernaut, An Overview & Update Of Cartel Strategy
By: DeepCaster_LLC
Various international private banks, several of which are headquartered in Europe, own the “United States” Federal Reserve Bank. The European Banks were among the founding banks whose representatives, including Paul Warburg who wrote the charter at the Jekyll Island Georgia meeting, as documented in “The Creature from Jekyll Island”, by G. Edward Griffin.

These International Bankers, acting through their “U.S.” Fed, make money by creating money out of “thin air” as eloquently described by the Dean of the Newsletter Writers, Richard Russell:

“I still can’t get over the whole Federal Reserve racket.

Consider the following - - let’s take a situation where the U.S. government needs money. The U.S. doesn’t just issue United States Notes, which, of course it could. These notes would be dollars backed by the full faith and credit of the United States. No, the U.S. doesn’t issue dollars straight out of the U.S. Treasury.

This is what the U.S. does - - it issues Treasury Bonds. The U.S. then sells these bonds to the Fed. The Fed buys the bonds. Wait, how does the Fed pay for the bonds? The Fed simply creates money “out of thin air” (book-keeping entry) with which it buys the bonds. The money that the Fed creates from nowhere then goes to the U.S. The Fed holds the U.S. bonds, and the unbelievable irony is that the U.S. then pays interest on the very bonds that the U.S. itself issued. (With great profit to the private owners of The Fed - - Ed. Note) The mind boggles.

The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is …not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt - - or I should say in increasing debt along with ever rising interest payments.

How did the Fed get away with this outrage? A tiny secretive group of bankers sneaked through a bill in 1913 at a time when many in Congress were absent. Those who were there and voted for the bill didn’t realize (as so often happens) what they were voting for (shades of the shameful 2002 vote to hand over to President Bush the power to decide on war with Iraq).”

Richard Russell, “Richards Remarks,”, March 27 2007

After President Wilson signed the Federal Reserve Act into law in 1913, he reportedly said, “I am a most unhappy man, I have unwittingly ruined my country…a great industrial nation is now controlled by its system of credit…the growth of the nation, therefore, and all of our activities are in the hands of a few men…” Thus we have an early statement about the threat to “democracy” occasioned by The Fed.

The Supply of Oxen at the IMF
Antal E. Fekete
Professor of Money and Banking
San Francisco School of Economics
The IMF is trotting out its old war-horse, the threat of auctioning off its monetary gold. This time it appears to be for real. The IMF is making preparations to get rid of a sizeable chunk of that part of its capital that has no counterparty liability attached in the form of central bank IOU-nothings, or government bonds alias certificates of guaranteed confiscation.

The IMF sounds very emphatic about its intentions of doing the self-mutilation in such a delicate manner as not to disrupt the gold markets. Pity the IMF. It is worried about upsetting the gold market, not about frittering its capital away. The IMF promises to do the auctions in a “transparent” fashion. It is true that the gold market is small in todays’ metric where the trillion-dollar unit will soon appear inadequate. Still, the IMF’s sting operation, and the accompanying soothing words sound more like the mosquito saying to the elephant before the blood-meal: “baby, my darling, it won’t hurt”.

It is abundantly clear that the IMF and its puppet-masters behind the screen want to hurt the gold bugs, and hurt them badly. As paper currencies without exceptions are engaged in a game of “all fall down”, and do it impulsively and competitively, gold is the only money that stands up. It must be clubbed down, or else. That has been the rule of the game ever since president Nixon on the advice of Milton Friedman “made the gold markets free” in 1971. In the beginning it was US Treasury gold that was auctioned off in order to club down the rising gold price. But then the managers of the paper dollar found it cheaper to auction off other people’s gold for that purpose through arm-twisting tactics. The selling of paper gold through futures markets and the leasing of gold through bullion bank intermediaries has been thoroughly discredited. Only fools believe that those outstanding forward contracts will be settled in specie. Holders of paper gold will be lucky if their contracts will be settled in paper. The market is crying for physical gold. Nothing less will pacify it. By now the US Treasury has run out of arms to twist, after it has twisted the arms of smaller countries holding gold such as Belgium, the Netherlands, and Switzerland making them to sell their gold reserve. The recalcitrant Congressmen who had blocked the IMF gold sales in the past have been bought off. The IMF gold is now ripe for the picking. Not to see the life-and-death struggle of the managers of global paper money fighting gold — the stern taskmaster of all banks, real or virtual, and of all governments — is tantamount to turning a blind eye to reality.

The question is whether the IMF — like the proverbial kid in the forest playing false alarm on the lumberjacks — “has cried wolf” once too many times. The wolf around the corner may be real this time, ready to devour the prankster. To be sure, the gold price will fall on the news that the gold auction has started in earnest. The market will obligingly bring down the price to make it easier for the IMF to unload its burden. But after the IMF relieved itself, the price will go back and on to new records. It’s inevitable. It can be predicted with the certainty of science.

Why will the price of gold reach new highs after the IMF gold auctions have been completed? There is a very simple reason: the assets backing the dollar, against which the gold is being sold, has been diluted. The IMF is exchanging its hard asset, that is nobody’s liability, for the soft: the liability of the Fed printing money as if there is no tomorrow. Under these circumstances it is suicidal to sell hard assets. Yet there it is: IMF gold is on the block.

The excuse the IMF uses to justify the gold sale is to raise funds for bailing out over-indebted countries. It is a lame excuse indeed. A bank, if it is run on a rational basis, will worry about its capital structure before embarking upon a course of extended lending, especially lending to bankrupt governments. You never ever dilute your capital base.

This does not mean that gold bugs will not be fooled — again. Some, perhaps many, will be. They will sell their gold into weakness making it look like the bloom is off the golden roses. But all what this game of hoopla means is that gold is passing from weaker into stronger hands. The weak hands are fading into oblivion, as they must.

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