I have spent the better part of the past two weeks ignoring "silly season". NOTHING that occurred in the financial markets the the last two weeks of 2011 was representative of anything outside of blatant manipulation of not only the Precious Metals markets, but of all commodities in general, global currencies, AND most definitely the equity markets.
Blatant manipulation is all that remains of our once "free market" financial system. The Free Market went buh-bye on August 15, 1971 when President Richard Nixon closed the Gold window at the US Treasury, and halted the redemption of US Dollars for Gold.
"There are no markets anymore, just interventions."
For the past 6,000 years, gold has been universally utilized as money, while all fiat currency systems have since failed. Few people realize the U.S. itself has already lost two currencies to hyperinflation: the Continental during the Revolutionary War and the Confederate dollar during the Civil War. Moreover, Abraham Lincoln’s “Greenback” dollar was on its way to hyperinflation when the Civil War ended – in other words, with another year or two of war, it, too, likely would have been destroyed.
If the Federal Reserve, ECB, BOE, BOJ, and PBOC were constrained by gold standards, as was the case with all successful currency regimes throughout history, none would have been able to print trillions of un-backed dollars, Euros, Pounds, Yen, or Yuan, respectively, thus avoiding the catastrophic global debt contagion seen today. When Nixon abandoned the U.S. gold standard in August 1971, it represented the first time in history that not a single nation had a gold-backed currency. In my view, this global “fiat standard” is the direct cause of the current financial crisis, which I expect will continue for many years to come.
Since 2002, I have advocated the purchase of gold and silver as protection against the inflationary monetary policies of the world’s Central Banks. Understandably, my message is not always well-received, as it suggests further devaluation of the dollar. However, based on the lessons of history and the conclusions of my research, gold and silver are the best hedges against inflationary monetary policies. Consequently, it is no coincidence the current gold bull market commenced in 2000, simultaneous with the end of the dollar’s multi-decade bull market, in terms of both PAPER currencies, as depicted by the “U.S. dollar index…
…and REAL money, i.e. PHYSICAL gold…
Despite propaganda to the contrary, created by bankers and politicians seeking to control your lives, and assets, via immoral, mathematical impossible confidence-based currency systems, an immutable fact of human existence is that gold is money. This is the dark secret of Central Bankers, who utilize all available means to hinder the public from realizing this time-tested truth. J.P. Morgan himself, testifying to Congress in 1912, stated “Gold is money, everything else is credit,” while Alan Greenspan, the most notorious monetary inflationist in history, at one point vociferously advocated these same principles, particularly in his 1966 treatise “Gold and Economic Freedom.” Here are some of the more famous quotes from this piece:
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
Central bankers and politicians thrive in a system where they control the power to print money, as opposed to a gold standard, in which the money supply, by definition, is constrained by the amount of government-owned gold. As evidenced by the inexorable rise of consumer prices since the gold standard was abandoned in 1971, and consequently the gargantuan global increase in all categories of debt, clearly the current fiat standard is miserably failing.
This is why “The Powers That Be” (said central bankers and politicians) surreptitiously manipulate financial markets, particularly Precious Metals as they are widely viewed as “inflation barometers.” Due to such actions, including the suppression of gold prices and support of the stock, bond, and U.S. dollar currency markets, they have been successful in quelling mass opinion, enabling the monetarist charade to continue despite its obvious deleterious effects on the global financial system.
It is truly amazing, in my view, that the population-at-large still believes the gold market to be immune from government intervention, when all other markets are regularly intervened in, both overtly and covertly. To wit:
In March 1988, directly following the October 1987 stock market crash, the “President’s Working Group on Financial Markets” (i.e. the PPT) was created to support the stock market in times of crisis, or, in its own words, to “enhance the…orderliness… of… markets and maintain investor confidence…” As you can see below, it is a real U.S. government entity, consisting of the Secretary of the Treasury and Chairmen of the Federal Reserve, SEC, and CFTC. Yet, most believe it does not exist.
Working Group on Financial Markets – Wikipedia
Moreover, it has been admitted to exist publicly by no less than George Stephanoupolos, speaking of his time working as White House Communications Director with Bill Clinton, and Hank Paulson, while acting as George W. Bush’s Treasury Secretary.
George Stephanoupolos – TheCenterLane.com
Monday view: Paulson re-activates secretive support team to prevent markets meltdown
In the bond market, not only does the Federal Reserve manipulate markets by determining official interest rates (enjoyed only by primary dealers), but executes “open market operations” to precisely peg interest rates every business day. In fact, “Quantitative Easing” by definition refers to direct Federal Reserve intervention to support the U.S. government and mortgage bond markets.
Moreover, in the currency markets, the dollar’s exchange rate is openly manipulated in concert with numerous nations worldwide, via the “Exchange Stabilization Fund”, a U.S.-government committee established in 1934 with the intent of intervening in both the foreign exchange and gold markets.
Exchange Stabilization Fund
Additionally, the shadowy Bank of International Settlements, or BIS, known commonly as the “central bank’s Central Bank,” is mandated to intervene in global currency and gold markets, per this quote from William White of the BIS in 2005:
Among the five objectives of central bank cooperation is the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.
…a mandate validated by the following newswire published on December 7th, 2011, just minutes after gold surged above $1,750/oz following an ECB rate cut to 1.00% from 1.25%, which was subsequently retracted by the (German) newswire service but never denied, despite the fact that the “official market footprint” was quite visible in gold’s trading activity on the New York COMEX futures market.
MNI NEWS via BLOOMBERG – MARKET SOURCES REPORT BIS, BOE & FEDERAL RESERVE WERE SELLING GOLD AFTER IT POPPED TO SESSION HIGH AT GMT 1335
Regarding gold itself, in the 1960s an overt manipulation organization existed, attempting to peg the price at $35/ounce in much the same manner which the Fed pegs interest rates. The “London Gold Pool”, also led by the U.S. government, failed in 1968 when demand overwhelmed their manipulative selling, a game that recommenced at the onset of the current gold bull market in 2000. Only this time around, the suppression is executed covertly to prevent erosion of confidence in the now global fiat standard.
London Gold Pool
For people like myself who research this topic in detail, there are countless admissions of gold market suppression over the years. I could supply numerous such statements, but these two alone are all one needs to understand how black and white the issue really is:
We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.
-Sir Eddie George, Governor, Bank of England (1999)
Central banks stand ready to lease gold in increasing quantities should the price rise.
-Alan Greenspan; Chairman, Federal Reserve (1998)
Regarding Real Estate, the government has done everything in its power to promote an “Ownership Society” in which everybody owns a large mortgage and by association, limited equity. Deregulation of the mortgage industry, quasi- and then full ownership of Freddie Mac and Fannie Mae (the largest mortgage holders in the country), and government decree such as the 2003 American Dream Downpayment Act have lured millions to bankruptcy via ill-advised purchases or management of Real Estate investments.
Finally, the U.S. “Strong Dollar Policy” has been promoted by every President and Treasury Secretary for the past 15 years, proved by inaction to be more of a propaganda tool than an actual policy. During this period, the U.S. dollar index has fallen 35% in value while the CRB Commodity Index has risen 35%, depicting just how weak the dollar’s fundamentals are in the face of concerted government efforts (including the surreptitious sale of gold) to boost the perception of its value.
Of course, the “U.S. dollar index” is just a gauge of the dollar’s value against its main competitor, the equally un-backed, debt-infested Euro. Compared to the value of real money, however, the dollar has fallen much further. Gold has risen from $250/oz in 2000 to $1,900/ounce during the past decade, and silver from $4/oz to $50/ounce.
In countless missives over the past four years, I have written about Precious Metals market manipulation. However, the gist of my work is documented in the five supporting documents below, which I view as “primers” on the topic:
5/29/11 Cartel Secrets Revealed, Pt. I
6/01/11 Cartel Secrets Revealed, Pt. II
6/08/11 2010 COMEX Gold Manipulation Pictorial
6/06/11 2011 COMEX Gold Manipulation Pictorial #1
11/28/11 2011 COMEX Gold Manipulation Pictorial #2
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It should come as NO SURPRISE to anybody the extent to which the financial markets are manipulated by The Powers That Be. That "trust" in the financial markets has only now been called into question, if not completely lost, is the real surprise here.
Ron Paul, candidate for President of the United States, way back in 2006 addressed the US House of Representatives and exposed the lie that is our financial system today: US DOLLAR HEGEMONY.
Ron Paul knows the TRUTH, and he is making every effort to share that truth today with a nation in denial.
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The End of Dollar Hegemony
by Ron Paul
A hundred years ago it was called “dollar diplomacy.” After World War II, and especially after the fall of the Soviet Union in 1989, that policy evolved into “dollar hegemony.” But after all these many years of great success, our dollar dominance is coming to an end.
It has been said, rightly, that he who holds the gold makes the rules. In earlier times it was readily accepted that fair and honest trade required an exchange for something of real value.
First it was simply barter of goods. Then it was discovered that gold held a universal attraction, and was a convenient substitute for more cumbersome barter transactions. Not only did gold facilitate exchange of goods and services, it served as a store of value for those who wanted to save for a rainy day.
Though money developed naturally in the marketplace, as governments grew in power they assumed monopoly control over money. Sometimes governments succeeded in guaranteeing the quality and purity of gold, but in time governments learned to outspend their revenues. New or higher taxes always incurred the disapproval of the people, so it wasn't long before Kings and Caesars learned how to inflate their currencies by reducing the amount of gold in each coin — always hoping their subjects wouldn't discover the fraud. But the people always did, and they strenuously objected.
This helped pressure leaders to seek more gold by conquering other nations. The people became accustomed to living beyond their means, and enjoyed the circuses and bread. Financing extravagances by conquering foreign lands seemed a logical alternative to working harder and producing more. Besides, conquering nations not only brought home gold, they brought home slaves as well. Taxing the people in conquered territories also provided an incentive to build empires. This system of government worked well for a while, but the moral decline of the people led to an unwillingness to produce for themselves. There was a limit to the number of countries that could be sacked for their wealth, and this always brought empires to an end. When gold no longer could be obtained, their military might crumbled. In those days those who held the gold truly wrote the rules and lived well.
That general rule has held fast throughout the ages. When gold was used, and the rules protected honest commerce, productive nations thrived. Whenever wealthy nations — those with powerful armies and gold — strived only for empire and easy fortunes to support welfare at home, those nations failed.
Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: “He who prints the money makes the rules” — at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.
Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation's people — just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.
The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one's actions is rejected.
When paper money is rejected, or when gold runs out, wealth and political stability are lost. The country then must go from living beyond its means to living beneath its means, until the economic and political systems adjust to the new rules — rules no longer written by those who ran the now defunct printing press.
“Dollar Diplomacy,” a policy instituted by William Howard Taft and his Secretary of State Philander C. Knox, was designed to enhance U.S. commercial investments in Latin America and the Far East. McKinley concocted a war against Spain in 1898, and (Teddy) Roosevelt's corollary to the Monroe Doctrine preceded Taft's aggressive approach to using the U.S. dollar and diplomatic influence to secure U.S. investments abroad. This earned the popular title of “Dollar Diplomacy.” The significance of Roosevelt's change was that our intervention now could be justified by the mere “appearance” that a country of interest to us was politically or fiscally vulnerable to European control. Not only did we claim a right, but even an official U.S. government “obligation” to protect our commercial interests from Europeans.
This new policy came on the heels of the “gunboat” diplomacy of the late 19th century, and it meant we could buy influence before resorting to the threat of force. By the time the “dollar diplomacy” of William Howard Taft was clearly articulated, the seeds of American empire were planted. And they were destined to grow in the fertile political soil of a country that lost its love and respect for the republic bequeathed to us by the authors of the Constitution. And indeed they did. It wasn't too long before dollar “diplomacy” became dollar “hegemony” in the second half of the 20th century.
This transition only could have occurred with a dramatic change in monetary policy and the nature of the dollar itself.
Congress created the Federal Reserve System in 1913. Between then and 1971 the principle of sound money was systematically undermined. Between 1913 and 1971, the Federal Reserve found it much easier to expand the money supply at will for financing war or manipulating the economy with little resistance from Congress — while benefiting the special interests that influence government.
Dollar dominance got a huge boost after World War II. We were spared the destruction that so many other nations suffered, and our coffers were filled with the world's gold. But the world chose not to return to the discipline of the gold standard, and the politicians applauded. Printing money to pay the bills was a lot more popular than taxing or restraining unnecessary spending. In spite of the short-term benefits, imbalances were institutionalized for decades to come.
The 1944 Bretton Woods agreement solidified the dollar as the preeminent world reserve currency, replacing the British pound. Due to our political and military muscle, and because we had a huge amount of physical gold, the world readily accepted our dollar (defined as 1/35th of an ounce of gold) as the world's reserve currency. The dollar was said to be “as good as gold,” and convertible to all foreign central banks at that rate. For American citizens, however, it remained illegal to own. This was a gold-exchange standard that from inception was doomed to fail.
The U.S. did exactly what many predicted she would do. She printed more dollars for which there was no gold backing. But the world was content to accept those dollars for more than 25 years with little question — until the French and others in the late 1960s demanded we fulfill our promise to pay one ounce of gold for each $35 they delivered to the U.S. Treasury. This resulted in a huge gold drain that brought an end to a very poorly devised pseudo-gold standard.
It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.
Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it — not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.
Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.
This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo—gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.
During the 1970s the dollar nearly collapsed, as oil prices surged and gold skyrocketed to $800 an ounce. By 1979 interest rates of 21% were required to rescue the system. The pressure on the dollar in the 1970s, in spite of the benefits accrued to it, reflected reckless budget deficits and monetary inflation during the 1960s. The markets were not fooled by LBJ's claim that we could afford both “guns and butter.”
Once again the dollar was rescued, and this ushered in the age of true dollar hegemony lasting from the early 1980s to the present. With tremendous cooperation coming from the central banks and international commercial banks, the dollar was accepted as if it were gold.
Fed Chair Alan Greenspan, on several occasions before the House Banking Committee, answered my challenges to him about his previously held favorable views on gold by claiming that he and other central bankers had gotten paper money — i.e. the dollar system — to respond as if it were gold. Each time I strongly disagreed, and pointed out that if they had achieved such a feat they would have defied centuries of economic history regarding the need for money to be something of real value. He smugly and confidently concurred with this.
In recent years central banks and various financial institutions, all with vested interests in maintaining a workable fiat dollar standard, were not secretive about selling and loaning large amounts of gold to the market even while decreasing gold prices raised serious questions about the wisdom of such a policy. They never admitted to gold price fixing, but the evidence is abundant that they believed if the gold price fell it would convey a sense of confidence to the market, confidence that they indeed had achieved amazing success in turning paper into gold.
Increasing gold prices historically are viewed as an indicator of distrust in paper currency. This recent effort was not a whole lot different than the U.S. Treasury selling gold at $35 an ounce in the 1960s, in an attempt to convince the world the dollar was sound and as good as gold. Even during the Depression, one of Roosevelt's first acts was to remove free market gold pricing as an indication of a flawed monetary system by making it illegal for American citizens to own gold. Economic law eventually limited that effort, as it did in the early 1970s when our Treasury and the IMF tried to fix the price of gold by dumping tons into the market to dampen the enthusiasm of those seeking a safe haven for a falling dollar after gold ownership was re-legalized.
Once again the effort between 1980 and 2000 to fool the market as to the true value of the dollar proved unsuccessful. In the past 5 years the dollar has been devalued in terms of gold by more than 50%. You just can't fool all the people all the time, even with the power of the mighty printing press and money creating system of the Federal Reserve.
Even with all the shortcomings of the fiat monetary system, dollar influence thrived. The results seemed beneficial, but gross distortions built into the system remained. And true to form, Washington politicians are only too anxious to solve the problems cropping up with window dressing, while failing to understand and deal with the underlying flawed policy. Protectionism, fixing exchange rates, punitive tariffs, politically motivated sanctions, corporate subsidies, international trade management, price controls, interest rate and wage controls, super-nationalist sentiments, threats of force, and even war are resorted to — all to solve the problems artificially created by deeply flawed monetary and economic systems.
In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that's the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.
It sounds like a great deal for everyone, except the time will come when our dollars — due to their depreciation — will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.
The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.
The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can't last.
Price inflation is raising its ugly head, and the NASDAQ bubble — generated by easy money — has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and federal spending is out of sight with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world's rejection of the dollar. It's bound to come and create conditions worse than 1979—1980, which required 21% interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.
Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism, and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF surely will do everything conceivable to soak up the dollars in hope of restoring stability. Eventually they will fail.
Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged — as it already has been.
In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O'Neill, the major topic was how we would get rid of Saddam Hussein — though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O'Neill.
It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.
There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.
In 2001, Venezuela's ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.
After these attempts to nudge the Euro toward replacing the dollar as the world's reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.
It's become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez, and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported.
Now, a new attempt is being made against the petrodollar system. Iran, another member of the “axis of evil,” has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.
Most Americans forget how our policies have systematically and needlessly antagonized the Iranians over the years. In 1953 the CIA helped overthrow a democratically elected president, Mohammed Mossadeqh, and install the authoritarian Shah, who was friendly to the U.S. The Iranians were still fuming over this when the hostages were seized in 1979. Our alliance with Saddam Hussein in his invasion of Iran in the early 1980s did not help matters, and obviously did not do much for our relationship with Saddam Hussein. The administration announcement in 2001 that Iran was part of the axis of evil didn't do much to improve the diplomatic relationship between our two countries. Recent threats over nuclear power, while ignoring the fact that they are surrounded by countries with nuclear weapons, doesn't seem to register with those who continue to provoke Iran. With what most Muslims perceive as our war against Islam, and this recent history, there's little wonder why Iran might choose to harm America by undermining the dollar. Iran, like Iraq, has zero capability to attack us. But that didn't stop us from turning Saddam Hussein into a modern day Hitler ready to take over the world. Now Iran, especially since she's made plans for pricing oil in Euros, has been on the receiving end of a propaganda war not unlike that waged against Iraq before our invasion.
It's not likely that maintaining dollar supremacy was the only motivating factor for the war against Iraq, nor for agitating against Iran. Though the real reasons for going to war are complex, we now know the reasons given before the war started, like the presence of weapons of mass destruction and Saddam Hussein's connection to 9/11, were false. The dollar's importance is obvious, but this does not diminish the influence of the distinct plans laid out years ago by the neo-conservatives to remake the Middle East. Israel's influence, as well as that of the Christian Zionists, likewise played a role in prosecuting this war. Protecting “our” oil supplies has influenced our Middle East policy for decades.
But the truth is that paying the bills for this aggressive intervention is impossible the old-fashioned way, with more taxes, more savings, and more production by the American people. Much of the expense of the Persian Gulf War in 1991 was shouldered by many of our willing allies. That's not so today. Now, more than ever, the dollar hegemony — it's dominance as the world reserve currency — is required to finance our huge war expenditures. This $2 trillion never-ending war must be paid for, one way or another. Dollar hegemony provides the vehicle to do just that.
For the most part the true victims aren't aware of how they pay the bills. The license to create money out of thin air allows the bills to be paid through price inflation. American citizens, as well as average citizens of Japan, China, and other countries suffer from price inflation, which represents the “tax” that pays the bills for our military adventures. That is, until the fraud is discovered, and the foreign producers decide not to take dollars nor hold them very long in payment for their goods. Everything possible is done to prevent the fraud of the monetary system from being exposed to the masses who suffer from it. If oil markets replace dollars with Euros, it would in time curtail our ability to continue to print, without restraint, the world's reserve currency.
It is an unbelievable benefit to us to import valuable goods and export depreciating dollars. The exporting countries have become addicted to our purchases for their economic growth. This dependency makes them allies in continuing the fraud, and their participation keeps the dollar's value artificially high. If this system were workable long term, American citizens would never have to work again. We too could enjoy “bread and circuses” just as the Romans did, but their gold finally ran out and the inability of Rome to continue to plunder conquered nations brought an end to her empire.
The same thing will happen to us if we don't change our ways. Though we don't occupy foreign countries to directly plunder, we nevertheless have spread our troops across 130 nations of the world. Our intense effort to spread our power in the oil-rich Middle East is not a coincidence. But unlike the old days, we don't declare direct ownership of the natural resources — we just insist that we can buy what we want and pay for it with our paper money. Any country that challenges our authority does so at great risk.
Once again Congress has bought into the war propaganda against Iran, just as it did against Iraq. Arguments are now made for attacking Iran economically, and militarily if necessary. These arguments are all based on the same false reasons given for the ill-fated and costly occupation of Iraq.
Our whole economic system depends on continuing the current monetary arrangement, which means recycling the dollar is crucial. Currently, we borrow over $700 billion every year from our gracious benefactors, who work hard and take our paper for their goods. Then we borrow all the money we need to secure the empire (DOD budget $450 billion) plus more. The military might we enjoy becomes the “backing” of our currency. There are no other countries that can challenge our military superiority, and therefore they have little choice but to accept the dollars we declare are today's “gold.” This is why countries that challenge the system — like Iraq, Iran and Venezuela — become targets of our plans for regime change.
Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become.
But real threats come from our political adversaries who are incapable of confronting us militarily, yet are not bashful about confronting us economically. That's why we see the new challenge from Iran being taken so seriously. The urgent arguments about Iran posing a military threat to the security of the United States are no more plausible than the false charges levied against Iraq. Yet there is no effort to resist this march to confrontation by those who grandstand for political reasons against the Iraq war.
It seems that the people and Congress are easily persuaded by the jingoism of the preemptive war promoters. It's only after the cost in human life and dollars are tallied up that the people object to unwise militarism.
The strange thing is that the failure in Iraq is now apparent to a large majority of American people, yet they and Congress are acquiescing to the call for a needless and dangerous confrontation with Iran.
But then again, our failure to find Osama bin Laden and destroy his network did not dissuade us from taking on the Iraqis in a war totally unrelated to 9/11.
Concern for pricing oil only in dollars helps explain our willingness to drop everything and teach Saddam Hussein a lesson for his defiance in demanding Euros for oil.
And once again there's this urgent call for sanctions and threats of force against Iran at the precise time Iran is opening a new oil exchange with all transactions in Euros.
Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.
The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.
Criminals Determine Gold's Future
Blatant manipulation is all that remains of our once "free market" financial system. The Free Market went buh-bye on August 15, 1971 when President Richard Nixon closed the Gold window at the US Treasury, and halted the redemption of US Dollars for Gold.
"There are no markets anymore, just interventions."
-Chris Powell, Secretary/Treasurer Gold Anti-Trust Action
Committee Inc.
Upon reflection, the greatest accomplishment of the 2011 "global" market manipulation was the
spinning up of a cocoon of denial to shroud the truth about the United States sovereign insolvency. America has been in denial regarding it's insolvency since that fateful day in August 1971 when President Nixon defaulted on America's debt by closing the US Treasury's Gold window, and thus backed the US Dollar with nothing more than the "full faith and credit" of the us government.
There were no winners in 2011...except the St. Louis Cardinals. 2011 was a year for losers. Homes lost to foreclosure, jobs lost to a "jobless recovery", and wealth lost to crooks like Jon Corzine at MF Global. But the biggest loser of all in 2011 was TRUST...and folks, once you lose "trust", it is damn near impossible to regain that trust. And with the loss of trust, TRUTH took a beating.
TRUTH, with regards to the global financial system, is simple.
GOLD AND SILVER ARE THE TRUTH
"The truth will set you free, but first it will make you miserable."
~Attributed
to James A. Garfield
"Every truth passes through three stages before it is recognized. In the first,
it is ridiculed, in the second it is opposed, in the third it is regarded as
self-evident."
~Arthur Schopenhauer
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"Ranting" Andy Hoffman, Miles Franklin Precious Metals Investments
For those of you trying to convince difficult-to-budge people who are turned off by flowery language and aggressive accusations, I submit the following, brief summary of Precious Metals fundamentals and the nefarious forces aiming to undermine the natural forces of economic Mother Nature by suppressing their prices.
For the past 6,000 years, gold has been universally utilized as money, while all fiat currency systems have since failed. Few people realize the U.S. itself has already lost two currencies to hyperinflation: the Continental during the Revolutionary War and the Confederate dollar during the Civil War. Moreover, Abraham Lincoln’s “Greenback” dollar was on its way to hyperinflation when the Civil War ended – in other words, with another year or two of war, it, too, likely would have been destroyed.
If the Federal Reserve, ECB, BOE, BOJ, and PBOC were constrained by gold standards, as was the case with all successful currency regimes throughout history, none would have been able to print trillions of un-backed dollars, Euros, Pounds, Yen, or Yuan, respectively, thus avoiding the catastrophic global debt contagion seen today. When Nixon abandoned the U.S. gold standard in August 1971, it represented the first time in history that not a single nation had a gold-backed currency. In my view, this global “fiat standard” is the direct cause of the current financial crisis, which I expect will continue for many years to come.
Since 2002, I have advocated the purchase of gold and silver as protection against the inflationary monetary policies of the world’s Central Banks. Understandably, my message is not always well-received, as it suggests further devaluation of the dollar. However, based on the lessons of history and the conclusions of my research, gold and silver are the best hedges against inflationary monetary policies. Consequently, it is no coincidence the current gold bull market commenced in 2000, simultaneous with the end of the dollar’s multi-decade bull market, in terms of both PAPER currencies, as depicted by the “U.S. dollar index…
…and REAL money, i.e. PHYSICAL gold…
Despite propaganda to the contrary, created by bankers and politicians seeking to control your lives, and assets, via immoral, mathematical impossible confidence-based currency systems, an immutable fact of human existence is that gold is money. This is the dark secret of Central Bankers, who utilize all available means to hinder the public from realizing this time-tested truth. J.P. Morgan himself, testifying to Congress in 1912, stated “Gold is money, everything else is credit,” while Alan Greenspan, the most notorious monetary inflationist in history, at one point vociferously advocated these same principles, particularly in his 1966 treatise “Gold and Economic Freedom.” Here are some of the more famous quotes from this piece:
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
Central bankers and politicians thrive in a system where they control the power to print money, as opposed to a gold standard, in which the money supply, by definition, is constrained by the amount of government-owned gold. As evidenced by the inexorable rise of consumer prices since the gold standard was abandoned in 1971, and consequently the gargantuan global increase in all categories of debt, clearly the current fiat standard is miserably failing.
This is why “The Powers That Be” (said central bankers and politicians) surreptitiously manipulate financial markets, particularly Precious Metals as they are widely viewed as “inflation barometers.” Due to such actions, including the suppression of gold prices and support of the stock, bond, and U.S. dollar currency markets, they have been successful in quelling mass opinion, enabling the monetarist charade to continue despite its obvious deleterious effects on the global financial system.
It is truly amazing, in my view, that the population-at-large still believes the gold market to be immune from government intervention, when all other markets are regularly intervened in, both overtly and covertly. To wit:
In March 1988, directly following the October 1987 stock market crash, the “President’s Working Group on Financial Markets” (i.e. the PPT) was created to support the stock market in times of crisis, or, in its own words, to “enhance the…orderliness… of… markets and maintain investor confidence…” As you can see below, it is a real U.S. government entity, consisting of the Secretary of the Treasury and Chairmen of the Federal Reserve, SEC, and CFTC. Yet, most believe it does not exist.
Working Group on Financial Markets – Wikipedia
Moreover, it has been admitted to exist publicly by no less than George Stephanoupolos, speaking of his time working as White House Communications Director with Bill Clinton, and Hank Paulson, while acting as George W. Bush’s Treasury Secretary.
George Stephanoupolos – TheCenterLane.com
Monday view: Paulson re-activates secretive support team to prevent markets meltdown
In the bond market, not only does the Federal Reserve manipulate markets by determining official interest rates (enjoyed only by primary dealers), but executes “open market operations” to precisely peg interest rates every business day. In fact, “Quantitative Easing” by definition refers to direct Federal Reserve intervention to support the U.S. government and mortgage bond markets.
Moreover, in the currency markets, the dollar’s exchange rate is openly manipulated in concert with numerous nations worldwide, via the “Exchange Stabilization Fund”, a U.S.-government committee established in 1934 with the intent of intervening in both the foreign exchange and gold markets.
Exchange Stabilization Fund
Additionally, the shadowy Bank of International Settlements, or BIS, known commonly as the “central bank’s Central Bank,” is mandated to intervene in global currency and gold markets, per this quote from William White of the BIS in 2005:
Among the five objectives of central bank cooperation is the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.
…a mandate validated by the following newswire published on December 7th, 2011, just minutes after gold surged above $1,750/oz following an ECB rate cut to 1.00% from 1.25%, which was subsequently retracted by the (German) newswire service but never denied, despite the fact that the “official market footprint” was quite visible in gold’s trading activity on the New York COMEX futures market.
MNI NEWS via BLOOMBERG – MARKET SOURCES REPORT BIS, BOE & FEDERAL RESERVE WERE SELLING GOLD AFTER IT POPPED TO SESSION HIGH AT GMT 1335
Regarding gold itself, in the 1960s an overt manipulation organization existed, attempting to peg the price at $35/ounce in much the same manner which the Fed pegs interest rates. The “London Gold Pool”, also led by the U.S. government, failed in 1968 when demand overwhelmed their manipulative selling, a game that recommenced at the onset of the current gold bull market in 2000. Only this time around, the suppression is executed covertly to prevent erosion of confidence in the now global fiat standard.
London Gold Pool
For people like myself who research this topic in detail, there are countless admissions of gold market suppression over the years. I could supply numerous such statements, but these two alone are all one needs to understand how black and white the issue really is:
We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.
-Sir Eddie George, Governor, Bank of England (1999)
Central banks stand ready to lease gold in increasing quantities should the price rise.
-Alan Greenspan; Chairman, Federal Reserve (1998)
Regarding Real Estate, the government has done everything in its power to promote an “Ownership Society” in which everybody owns a large mortgage and by association, limited equity. Deregulation of the mortgage industry, quasi- and then full ownership of Freddie Mac and Fannie Mae (the largest mortgage holders in the country), and government decree such as the 2003 American Dream Downpayment Act have lured millions to bankruptcy via ill-advised purchases or management of Real Estate investments.
Finally, the U.S. “Strong Dollar Policy” has been promoted by every President and Treasury Secretary for the past 15 years, proved by inaction to be more of a propaganda tool than an actual policy. During this period, the U.S. dollar index has fallen 35% in value while the CRB Commodity Index has risen 35%, depicting just how weak the dollar’s fundamentals are in the face of concerted government efforts (including the surreptitious sale of gold) to boost the perception of its value.
Of course, the “U.S. dollar index” is just a gauge of the dollar’s value against its main competitor, the equally un-backed, debt-infested Euro. Compared to the value of real money, however, the dollar has fallen much further. Gold has risen from $250/oz in 2000 to $1,900/ounce during the past decade, and silver from $4/oz to $50/ounce.
In countless missives over the past four years, I have written about Precious Metals market manipulation. However, the gist of my work is documented in the five supporting documents below, which I view as “primers” on the topic:
5/29/11 Cartel Secrets Revealed, Pt. I
6/01/11 Cartel Secrets Revealed, Pt. II
6/08/11 2010 COMEX Gold Manipulation Pictorial
6/06/11 2011 COMEX Gold Manipulation Pictorial #1
11/28/11 2011 COMEX Gold Manipulation Pictorial #2
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Uploaded by ElevationGroupTV on Dec 20, 2011
http://TheElevationGroup.net - With the recent
price drop around the precious metals over the past month, many people are
wondering if the precious metals bull market is coming to an end... If they
should sell now at a loss before the price dives even more...
So... Are they right? Should you sell your metals, or buy more? Is the price going to increase or decrease from here?
Michael Maloney joins us via video with the answer...
So... Are they right? Should you sell your metals, or buy more? Is the price going to increase or decrease from here?
Michael Maloney joins us via video with the answer...
___________________________
It should come as NO SURPRISE to anybody the extent to which the financial markets are manipulated by The Powers That Be. That "trust" in the financial markets has only now been called into question, if not completely lost, is the real surprise here.
Ron Paul, candidate for President of the United States, way back in 2006 addressed the US House of Representatives and exposed the lie that is our financial system today: US DOLLAR HEGEMONY.
Ron Paul knows the TRUTH, and he is making every effort to share that truth today with a nation in denial.
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The End of Dollar Hegemony
by Ron Paul
Before the US House of Representatives,
February 15, 2006
It has been said, rightly, that he who holds the gold makes the rules. In earlier times it was readily accepted that fair and honest trade required an exchange for something of real value.
First it was simply barter of goods. Then it was discovered that gold held a universal attraction, and was a convenient substitute for more cumbersome barter transactions. Not only did gold facilitate exchange of goods and services, it served as a store of value for those who wanted to save for a rainy day.
Though money developed naturally in the marketplace, as governments grew in power they assumed monopoly control over money. Sometimes governments succeeded in guaranteeing the quality and purity of gold, but in time governments learned to outspend their revenues. New or higher taxes always incurred the disapproval of the people, so it wasn't long before Kings and Caesars learned how to inflate their currencies by reducing the amount of gold in each coin — always hoping their subjects wouldn't discover the fraud. But the people always did, and they strenuously objected.
This helped pressure leaders to seek more gold by conquering other nations. The people became accustomed to living beyond their means, and enjoyed the circuses and bread. Financing extravagances by conquering foreign lands seemed a logical alternative to working harder and producing more. Besides, conquering nations not only brought home gold, they brought home slaves as well. Taxing the people in conquered territories also provided an incentive to build empires. This system of government worked well for a while, but the moral decline of the people led to an unwillingness to produce for themselves. There was a limit to the number of countries that could be sacked for their wealth, and this always brought empires to an end. When gold no longer could be obtained, their military might crumbled. In those days those who held the gold truly wrote the rules and lived well.
That general rule has held fast throughout the ages. When gold was used, and the rules protected honest commerce, productive nations thrived. Whenever wealthy nations — those with powerful armies and gold — strived only for empire and easy fortunes to support welfare at home, those nations failed.
Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: “He who prints the money makes the rules” — at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.
Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation's people — just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.
The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one's actions is rejected.
When paper money is rejected, or when gold runs out, wealth and political stability are lost. The country then must go from living beyond its means to living beneath its means, until the economic and political systems adjust to the new rules — rules no longer written by those who ran the now defunct printing press.
“Dollar Diplomacy,” a policy instituted by William Howard Taft and his Secretary of State Philander C. Knox, was designed to enhance U.S. commercial investments in Latin America and the Far East. McKinley concocted a war against Spain in 1898, and (Teddy) Roosevelt's corollary to the Monroe Doctrine preceded Taft's aggressive approach to using the U.S. dollar and diplomatic influence to secure U.S. investments abroad. This earned the popular title of “Dollar Diplomacy.” The significance of Roosevelt's change was that our intervention now could be justified by the mere “appearance” that a country of interest to us was politically or fiscally vulnerable to European control. Not only did we claim a right, but even an official U.S. government “obligation” to protect our commercial interests from Europeans.
This new policy came on the heels of the “gunboat” diplomacy of the late 19th century, and it meant we could buy influence before resorting to the threat of force. By the time the “dollar diplomacy” of William Howard Taft was clearly articulated, the seeds of American empire were planted. And they were destined to grow in the fertile political soil of a country that lost its love and respect for the republic bequeathed to us by the authors of the Constitution. And indeed they did. It wasn't too long before dollar “diplomacy” became dollar “hegemony” in the second half of the 20th century.
This transition only could have occurred with a dramatic change in monetary policy and the nature of the dollar itself.
Congress created the Federal Reserve System in 1913. Between then and 1971 the principle of sound money was systematically undermined. Between 1913 and 1971, the Federal Reserve found it much easier to expand the money supply at will for financing war or manipulating the economy with little resistance from Congress — while benefiting the special interests that influence government.
Dollar dominance got a huge boost after World War II. We were spared the destruction that so many other nations suffered, and our coffers were filled with the world's gold. But the world chose not to return to the discipline of the gold standard, and the politicians applauded. Printing money to pay the bills was a lot more popular than taxing or restraining unnecessary spending. In spite of the short-term benefits, imbalances were institutionalized for decades to come.
The 1944 Bretton Woods agreement solidified the dollar as the preeminent world reserve currency, replacing the British pound. Due to our political and military muscle, and because we had a huge amount of physical gold, the world readily accepted our dollar (defined as 1/35th of an ounce of gold) as the world's reserve currency. The dollar was said to be “as good as gold,” and convertible to all foreign central banks at that rate. For American citizens, however, it remained illegal to own. This was a gold-exchange standard that from inception was doomed to fail.
The U.S. did exactly what many predicted she would do. She printed more dollars for which there was no gold backing. But the world was content to accept those dollars for more than 25 years with little question — until the French and others in the late 1960s demanded we fulfill our promise to pay one ounce of gold for each $35 they delivered to the U.S. Treasury. This resulted in a huge gold drain that brought an end to a very poorly devised pseudo-gold standard.
It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.
Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it — not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.
Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.
This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo—gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.
During the 1970s the dollar nearly collapsed, as oil prices surged and gold skyrocketed to $800 an ounce. By 1979 interest rates of 21% were required to rescue the system. The pressure on the dollar in the 1970s, in spite of the benefits accrued to it, reflected reckless budget deficits and monetary inflation during the 1960s. The markets were not fooled by LBJ's claim that we could afford both “guns and butter.”
Once again the dollar was rescued, and this ushered in the age of true dollar hegemony lasting from the early 1980s to the present. With tremendous cooperation coming from the central banks and international commercial banks, the dollar was accepted as if it were gold.
Fed Chair Alan Greenspan, on several occasions before the House Banking Committee, answered my challenges to him about his previously held favorable views on gold by claiming that he and other central bankers had gotten paper money — i.e. the dollar system — to respond as if it were gold. Each time I strongly disagreed, and pointed out that if they had achieved such a feat they would have defied centuries of economic history regarding the need for money to be something of real value. He smugly and confidently concurred with this.
In recent years central banks and various financial institutions, all with vested interests in maintaining a workable fiat dollar standard, were not secretive about selling and loaning large amounts of gold to the market even while decreasing gold prices raised serious questions about the wisdom of such a policy. They never admitted to gold price fixing, but the evidence is abundant that they believed if the gold price fell it would convey a sense of confidence to the market, confidence that they indeed had achieved amazing success in turning paper into gold.
Increasing gold prices historically are viewed as an indicator of distrust in paper currency. This recent effort was not a whole lot different than the U.S. Treasury selling gold at $35 an ounce in the 1960s, in an attempt to convince the world the dollar was sound and as good as gold. Even during the Depression, one of Roosevelt's first acts was to remove free market gold pricing as an indication of a flawed monetary system by making it illegal for American citizens to own gold. Economic law eventually limited that effort, as it did in the early 1970s when our Treasury and the IMF tried to fix the price of gold by dumping tons into the market to dampen the enthusiasm of those seeking a safe haven for a falling dollar after gold ownership was re-legalized.
Once again the effort between 1980 and 2000 to fool the market as to the true value of the dollar proved unsuccessful. In the past 5 years the dollar has been devalued in terms of gold by more than 50%. You just can't fool all the people all the time, even with the power of the mighty printing press and money creating system of the Federal Reserve.
Even with all the shortcomings of the fiat monetary system, dollar influence thrived. The results seemed beneficial, but gross distortions built into the system remained. And true to form, Washington politicians are only too anxious to solve the problems cropping up with window dressing, while failing to understand and deal with the underlying flawed policy. Protectionism, fixing exchange rates, punitive tariffs, politically motivated sanctions, corporate subsidies, international trade management, price controls, interest rate and wage controls, super-nationalist sentiments, threats of force, and even war are resorted to — all to solve the problems artificially created by deeply flawed monetary and economic systems.
In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that's the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.
It sounds like a great deal for everyone, except the time will come when our dollars — due to their depreciation — will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.
The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.
The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can't last.
Price inflation is raising its ugly head, and the NASDAQ bubble — generated by easy money — has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and federal spending is out of sight with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world's rejection of the dollar. It's bound to come and create conditions worse than 1979—1980, which required 21% interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.
Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism, and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF surely will do everything conceivable to soak up the dollars in hope of restoring stability. Eventually they will fail.
Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged — as it already has been.
In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O'Neill, the major topic was how we would get rid of Saddam Hussein — though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O'Neill.
It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.
There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.
In 2001, Venezuela's ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.
After these attempts to nudge the Euro toward replacing the dollar as the world's reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.
It's become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez, and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported.
Now, a new attempt is being made against the petrodollar system. Iran, another member of the “axis of evil,” has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.
Most Americans forget how our policies have systematically and needlessly antagonized the Iranians over the years. In 1953 the CIA helped overthrow a democratically elected president, Mohammed Mossadeqh, and install the authoritarian Shah, who was friendly to the U.S. The Iranians were still fuming over this when the hostages were seized in 1979. Our alliance with Saddam Hussein in his invasion of Iran in the early 1980s did not help matters, and obviously did not do much for our relationship with Saddam Hussein. The administration announcement in 2001 that Iran was part of the axis of evil didn't do much to improve the diplomatic relationship between our two countries. Recent threats over nuclear power, while ignoring the fact that they are surrounded by countries with nuclear weapons, doesn't seem to register with those who continue to provoke Iran. With what most Muslims perceive as our war against Islam, and this recent history, there's little wonder why Iran might choose to harm America by undermining the dollar. Iran, like Iraq, has zero capability to attack us. But that didn't stop us from turning Saddam Hussein into a modern day Hitler ready to take over the world. Now Iran, especially since she's made plans for pricing oil in Euros, has been on the receiving end of a propaganda war not unlike that waged against Iraq before our invasion.
It's not likely that maintaining dollar supremacy was the only motivating factor for the war against Iraq, nor for agitating against Iran. Though the real reasons for going to war are complex, we now know the reasons given before the war started, like the presence of weapons of mass destruction and Saddam Hussein's connection to 9/11, were false. The dollar's importance is obvious, but this does not diminish the influence of the distinct plans laid out years ago by the neo-conservatives to remake the Middle East. Israel's influence, as well as that of the Christian Zionists, likewise played a role in prosecuting this war. Protecting “our” oil supplies has influenced our Middle East policy for decades.
But the truth is that paying the bills for this aggressive intervention is impossible the old-fashioned way, with more taxes, more savings, and more production by the American people. Much of the expense of the Persian Gulf War in 1991 was shouldered by many of our willing allies. That's not so today. Now, more than ever, the dollar hegemony — it's dominance as the world reserve currency — is required to finance our huge war expenditures. This $2 trillion never-ending war must be paid for, one way or another. Dollar hegemony provides the vehicle to do just that.
For the most part the true victims aren't aware of how they pay the bills. The license to create money out of thin air allows the bills to be paid through price inflation. American citizens, as well as average citizens of Japan, China, and other countries suffer from price inflation, which represents the “tax” that pays the bills for our military adventures. That is, until the fraud is discovered, and the foreign producers decide not to take dollars nor hold them very long in payment for their goods. Everything possible is done to prevent the fraud of the monetary system from being exposed to the masses who suffer from it. If oil markets replace dollars with Euros, it would in time curtail our ability to continue to print, without restraint, the world's reserve currency.
It is an unbelievable benefit to us to import valuable goods and export depreciating dollars. The exporting countries have become addicted to our purchases for their economic growth. This dependency makes them allies in continuing the fraud, and their participation keeps the dollar's value artificially high. If this system were workable long term, American citizens would never have to work again. We too could enjoy “bread and circuses” just as the Romans did, but their gold finally ran out and the inability of Rome to continue to plunder conquered nations brought an end to her empire.
The same thing will happen to us if we don't change our ways. Though we don't occupy foreign countries to directly plunder, we nevertheless have spread our troops across 130 nations of the world. Our intense effort to spread our power in the oil-rich Middle East is not a coincidence. But unlike the old days, we don't declare direct ownership of the natural resources — we just insist that we can buy what we want and pay for it with our paper money. Any country that challenges our authority does so at great risk.
Once again Congress has bought into the war propaganda against Iran, just as it did against Iraq. Arguments are now made for attacking Iran economically, and militarily if necessary. These arguments are all based on the same false reasons given for the ill-fated and costly occupation of Iraq.
Our whole economic system depends on continuing the current monetary arrangement, which means recycling the dollar is crucial. Currently, we borrow over $700 billion every year from our gracious benefactors, who work hard and take our paper for their goods. Then we borrow all the money we need to secure the empire (DOD budget $450 billion) plus more. The military might we enjoy becomes the “backing” of our currency. There are no other countries that can challenge our military superiority, and therefore they have little choice but to accept the dollars we declare are today's “gold.” This is why countries that challenge the system — like Iraq, Iran and Venezuela — become targets of our plans for regime change.
Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become.
But real threats come from our political adversaries who are incapable of confronting us militarily, yet are not bashful about confronting us economically. That's why we see the new challenge from Iran being taken so seriously. The urgent arguments about Iran posing a military threat to the security of the United States are no more plausible than the false charges levied against Iraq. Yet there is no effort to resist this march to confrontation by those who grandstand for political reasons against the Iraq war.
It seems that the people and Congress are easily persuaded by the jingoism of the preemptive war promoters. It's only after the cost in human life and dollars are tallied up that the people object to unwise militarism.
The strange thing is that the failure in Iraq is now apparent to a large majority of American people, yet they and Congress are acquiescing to the call for a needless and dangerous confrontation with Iran.
But then again, our failure to find Osama bin Laden and destroy his network did not dissuade us from taking on the Iraqis in a war totally unrelated to 9/11.
Concern for pricing oil only in dollars helps explain our willingness to drop everything and teach Saddam Hussein a lesson for his defiance in demanding Euros for oil.
And once again there's this urgent call for sanctions and threats of force against Iran at the precise time Iran is opening a new oil exchange with all transactions in Euros.
Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.
The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.
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By James West
According to faulty interpretations
of Mayan calendars, 2012 is supposed to bring with it the demise of humanity.
Fortunately for us, this apocalyptic myth, like so many, is based on a
superficial interpretation of the Mayan calendar. Like many stories based on a
lie, this one nonetheless gains traction in the popular imagination thanks to
our fascination with anything apocalyptic.
Besides Mayan disinformation, there
are many commentators who advise selling all gold, while acknowledging that gold
is going higher in 2012. The lunacy of such advice is self-evident to me, and I
presume, to the vast majority of readers. But lets not dwell on mainstream
financial media: the credibility of that institution is non-existent going into
2012, and most intelligent people understand that story assignments originate in
board room conversations and on golf courses, and filter down through editorial
management. Thus, whose who sit on the boards of directors of banks and media
conglomerates are easily able to transmit their requirement for negative
sentiment towards precious metals easily and without public
scrutiny.
There is no point in arguing
whether gold and silver price manipulation exist – even Bart Chilton
acknowledges that it does. But we are forced now to consider that manipulation
as a “fundamental” influence on the future price of gold. The problem is that as
a fundamental factor, is not quantifiable like supply and demand metrics,
because its intensity is arbitrarily (at least, to public view) decided, and so
all we can say for sure is that supply and demand drivers are, in the futures
market, seconded to the fundamental influence of futures market manipulation.
And since the futures market is exponentially greater than the spot markets, the
spot price is determined by such manipulative shenanigans.
I often wonder when I hear people
like Dennis Gartman, Jon Nadler and others for whom it would seem that it should
be within their interest to be bullish on gold, are bearish because they have
factored in that fundamental and participate on the short side more so than the
long. How else to justify the main commentator on a site that sells gold being
uniformly and relentlessly negative in his comments about
it?
Thus, despite the fact that
Europe’s Quantitative Easing ship has been launched, and the U.S. QE3 stands by
in a hidden harbour, those fundamental facts that are intensely gold price
positive must considered in the light of certain facts pertaining to the futures
market. These are:
1. Oversight of the futures and
derivatives market, presently the domain of the Commodities Futures Trading
Commission, is in reality a collusive accomplice in the exploitation of futures
markets along with the major financial institutions who represent that vast
majority of futures contacts each month. In the future, this criminal activity
will be identified and exposed publicly, and properly categorized as criminal
manipulation. Nobody will be indicted, however, as the United States government
is also an accomplice in shielding the perpetrators from
prosecution.
2. Whereas the original purpose of
the continued downward manipulation of the gold price was to induce a general
perception that the U.S. dollar was and is a sound currency, the major banks who
are regularly short silver and gold in significant volume have since understood
that through the control of markets and associated volatility, they can
regularly reap huge profits, but continuously rolling over losing contracts in
their “dark” market, while waiting until the price can be driven downward
sufficiently to put short contracts in the red into the
black.
3. There is no intention nor
interest in curbing the manipulative schemes on the part of the CFTC, because
while they have been tasked with oversight, their powers of investigation, and
most importantly, their ability to indict or even investigate such criminal
activity is limited.
Europe is already printing money
technically, in that it is purchasing weak sister bonds where no private entity
dare wade in for less than 7% risk premium. While the line item accounting might
trace the cash for the purchase of the bonds from a pre-existing balance,
following the money leads to a quagmire of murky road forks that wear obscurity
as a mark of intention. That the ECB has already decided to yoke its last resort
bank backstop to the most larcenous countries’ bad loans is, to some, proof
positive that solving the problem is not the priority: keeping the game going is
the number one goal of current Eurozone management.
As the European Central Bank
prepares to launch a program to replace frozen bank lending with thinly and
delusionally configured quantitative easing as a last-option defense against the
seizing up of the European banking system, markets rally, alebeit temporarily,
lending the impression that there is a solution to the problem available. Quite
the opposite is true. Succumbing to the last ditch fabrication and distribution
of capital in a system that is choking on an excess of capital is merely
deferring the inevitable while amplifying the severity of future market
implosion on the near horizon.
The blinking red light on this
latest ham-fisted implementation of perception management was the absence of
confirmation that systemic risk appetite was back in the form of anemic bond
market activity. If there was a real rise in confidence unfolding, then interest
rates should arguably be dropping and private appetite for sovereign bonds
materializing. Neither is the case.
If it were possible to stimulate
real economic growth (as opposed to nominal economic growth that appears as
profit on bank and financial sector-related companies as a direct result of free
government money), then stimulus and government lending might be considered
advisable.
Consider the effect of TARP,
Bailouts, and the various QE’s that started in 2008 in the U.S. in repsonse to
the freeze-up of credit markets. At the onset of the stimulus, stocks rallied
and the “recovery” was declared officially underway.
But after injecting a total of $1.5
trillion into bank bailouts and stimulus, we are three years down that road with
zero economic growth, banks who used the funds mostly for proprietary
transactions that have created the illusion of market stability through reported
earnings, and a fabulously expanded Fed balance sheet. The debt crisis in Europe
is on a par with the debt crisis in the United States, and the value of money is
in terminal decline. The lesson is that while QE and other forms of stimulus are
superficially satisfactory treatments for the symptoms, they are far from a
cure, and at the end of the day, have only compounded the problem. The
effectiveness of stimulus and easing, most importantly, exponentially increasing
the quantity of currency in the system, is now known to have a finite window of
influence, and, once exhausted, begins to affect the economy negatively. That’s
because the emergent perception is that stimulus only benefits the top layer of
the financial system, and benefits the broader economy
negligibly.
Extending credit facilities and
replacing private sector capital sources with public ones, while at the same
time inflicting austerity measures on the general population, is a recipe for
absolute disaster in the long term, for the weaker economies. A population that
finds itself expected to work harder, pay higher taxes, amid diminished
infrastructure, services, and opportunities is going to respond with outrage,
and will not work harder, or pay higher taxes, or tolerate social safety net
destruction. They are going to take to the streets, and further paralyze
economic activity.
We’ve seen riots in France, Spain
and Greece, and as economies continue to deteriorate in 2012, violence and
protests will escalate, and at some point, it may pass the threshold of public
protest into civil war.
If the Occupy Wall Street movement
were to seek some relevance, targeting the causes of economic disparity –
primarily the protection of predatory financial institutions who control
governments in North America and Europe through corrupt and collusive political
systems – would yield a far more effective dividend than protesting against the
outcome of such activity.
Maybe that’s what we can look
forward to in 2012…an end to the corrupt governments of the United States and
Europe, and a dismantling of the largest financial institutions, whose boots
rest on all of our throats.
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Gold has been there and it will always be. It's more of a currency than a commodity that is known around the world.
ReplyDeletesell silver