A report from the Federal Reserve Bank of New York suggests that the
bulk of equity returns for more than a decade are due to actions by the
US central bank.
Theoretically, the S&P 500 would be more than 50 percent lower—at the 600 level—if the bullish price action preceding Fed announcements was excluded, the study showed. Posted on the New York Fed’s web site Wednesday, the study sought out to explain why equities receive such a high premium over less risky assets such as bonds.
What they found was that the Federal Reserve has had an outsized impact on equities relative to other asset classes. For example, the market has a tendency to rise in the 24-hour period before the release of the Fed’s statement on interest rates and the economy, presumably on expectations Chairman Ben Bernanke and his predecessor, Alan Greenspan, would discuss or implement a stimulus measure to lift asset prices. Read more >>
Showing posts with label Alan Greenspan. Show all posts
Showing posts with label Alan Greenspan. Show all posts
Monday, July 16, 2012
Monday, November 8, 2010
BS from the BLS: Things are a Lot Worse than They are Telling Us
Dave Lindorff
Many Americans simply assume that the government and politicians lie when they are talking about things like cutting taxes, or eliminating waste. But somehow, we tend to believe official government reports about things like economic “growth” or unemployment rates, or even cost-of-living increases.
The truth, sadly, is that the government is lying about these things too.
Take jobs and unemployment. Right after the election, the Obama administration’s Bureau of Labor Statistics proudly trumpeted that the economy had added 151,000 new jobs in October. President Obama, about to head off to India, land, where many American jobs have moved for good, made it sound like maybe the American economy had finally turned a corner. The news led to a jump in the stock market and everyone breathed a sigh of relief, because finally, we had a number that was greater than the 100,000 new jobs that we have been repeatedly told are needed “just to keep pace with the new workers who join the labor force every month.”
Only the number is a fraud. It turns out that this job number is a fictional construct created by BLS statisticians who are using outdated estimates for the number of new small businesses supposedly created every month, and also outdated estimates for the number of small businesses that go bankrupt every month. The reality is that in this deep recession, few new businesses are being started. No surprise there. It takes capital to start a business, and banks aren’t lending these days, especially to risky new start-ups. The reality too is that existing small businesses are folding at a high rate. The pace of bankruptcies of small companies is down from the record 2009 level, but is still extremely high by historical standards.
The real story on employment is told by the BLS’s household survey, which is taken every month and looks at 60,000 randomly selected households. That survey shows that far from the US economy adding jobs, 330,000 jobs were lost in October.
Lying about unemployment has been going on for a long time. It started to get bad back in 1981, when the new Reagan White House got the BLS to change the methodology for calculating the figure. If we used the earlier methodology from 1980 to calculate today’s unemployment rate, which would mean including all those who have taken part-time jobs while looking for full-time work, and those who have given up trying to look because no jobs are available (those currently considered to be “out of the labor force), unemployment today would be 22.5%! That’s more than double the official 9.6% rate.
But it gets worse.
With very little real economic good news to talk about, the government and the Federal Reserve have liked to cite the stock market, which has now returned to pre-economic crisis levels. That should make us feel good, right?
Except that unmentioned is that insiders--the executives of America’s companies, who have to report any trading in their companies’ stock to the Securities & Exchange Commission -- have been selling their holdings at a record pace this year, and especially in the last few months. Bloomberg reports that in October, insiders sold an all-time record of $662 million in shares of their own companies, while buying only $1.6 million of stocks in their companies. That’s a sell:buy ratio of 423:1
Among the largest companies, executives were unloading their company shares at a ratio of 3177:1.
You have to ask: what do these insiders know about the future direction of their businesses, and of our economy, that we don’t know? My guess is they are all dutifully telling analysts and investors that things are just great, but you’ve gotta wonder: Why are they all getting out now?
Today’s Wall Street Journal notes that after pulling their money out of equities, and staying on the sidelines for over two years, small investors are finally starting to invest in the stock market again. The article’s headline, though, is: “‘Dumb Money’ Tests Bullish View of Stocks.” The article goes on to state that with what Wall Street experts mockingly refer to as the “dumb money” coming into the market, it “argues for caution.” The small investor, the article notes, is a “lagging indicator, reacting to past performance rather than predicting future gains.”
The other thing that they don’t talk about is that some 70 percent of the trading on Wall Street these days is now automated trading, with big investment banks like JP MorganChase and Goldman Sachs using big mainframe computers to buy and sell stocks, holding them literally for seconds or less. Take a look some time at a day’s trading graph. You will see almost every day a straight vertical line as millions of shares are bought or sold simultaneously at the opening of markets at 9:30 am Eastern Time, followed almost always by a reversal of direction as those whose computers made a collective, instant buy or sell decision take their profits and run. This is a new phenomenon, and hardly one that offers any predictive insights, or that bodes well for those who see the markets as an “efficient” way to allocate capital.
Moving to the cost of getting by, the Consumer Price Index, of CPI, has also been fatally tampered with because so many things are linked to it that end up costing companies or governments money. When the CPI goes up, workers naturally want their pay to go up accordingly, so their families can stay afloat. Social Security checks to the elderly and disabled, and to widows and orphaned children, are also raised when the CPI increases. Not surprisingly, back in the early 1980s, the Reagan administration, acting on the advice of a “blue-ribbon commission” on Social Security “reform” headed by future Federal Reserve Chairman and Ayn Rand accolyte Alan Greenspan, changed the way the CPI is calculated, making it much less reflective of reality--and much slower to rise. If you listen to the reports each month, you’ll often hear it noted that the figure doesn’t include energy costs, housing costs, or food costs, which the reporters blithely explain are “volatile”. Well yeah, but they are also a huge part of our all to real cost of living. More...
Many Americans simply assume that the government and politicians lie when they are talking about things like cutting taxes, or eliminating waste. But somehow, we tend to believe official government reports about things like economic “growth” or unemployment rates, or even cost-of-living increases.
The truth, sadly, is that the government is lying about these things too.
Take jobs and unemployment. Right after the election, the Obama administration’s Bureau of Labor Statistics proudly trumpeted that the economy had added 151,000 new jobs in October. President Obama, about to head off to India, land, where many American jobs have moved for good, made it sound like maybe the American economy had finally turned a corner. The news led to a jump in the stock market and everyone breathed a sigh of relief, because finally, we had a number that was greater than the 100,000 new jobs that we have been repeatedly told are needed “just to keep pace with the new workers who join the labor force every month.”
Only the number is a fraud. It turns out that this job number is a fictional construct created by BLS statisticians who are using outdated estimates for the number of new small businesses supposedly created every month, and also outdated estimates for the number of small businesses that go bankrupt every month. The reality is that in this deep recession, few new businesses are being started. No surprise there. It takes capital to start a business, and banks aren’t lending these days, especially to risky new start-ups. The reality too is that existing small businesses are folding at a high rate. The pace of bankruptcies of small companies is down from the record 2009 level, but is still extremely high by historical standards.
The real story on employment is told by the BLS’s household survey, which is taken every month and looks at 60,000 randomly selected households. That survey shows that far from the US economy adding jobs, 330,000 jobs were lost in October.
Lying about unemployment has been going on for a long time. It started to get bad back in 1981, when the new Reagan White House got the BLS to change the methodology for calculating the figure. If we used the earlier methodology from 1980 to calculate today’s unemployment rate, which would mean including all those who have taken part-time jobs while looking for full-time work, and those who have given up trying to look because no jobs are available (those currently considered to be “out of the labor force), unemployment today would be 22.5%! That’s more than double the official 9.6% rate.
But it gets worse.
With very little real economic good news to talk about, the government and the Federal Reserve have liked to cite the stock market, which has now returned to pre-economic crisis levels. That should make us feel good, right?
Except that unmentioned is that insiders--the executives of America’s companies, who have to report any trading in their companies’ stock to the Securities & Exchange Commission -- have been selling their holdings at a record pace this year, and especially in the last few months. Bloomberg reports that in October, insiders sold an all-time record of $662 million in shares of their own companies, while buying only $1.6 million of stocks in their companies. That’s a sell:buy ratio of 423:1
Among the largest companies, executives were unloading their company shares at a ratio of 3177:1.
You have to ask: what do these insiders know about the future direction of their businesses, and of our economy, that we don’t know? My guess is they are all dutifully telling analysts and investors that things are just great, but you’ve gotta wonder: Why are they all getting out now?
Today’s Wall Street Journal notes that after pulling their money out of equities, and staying on the sidelines for over two years, small investors are finally starting to invest in the stock market again. The article’s headline, though, is: “‘Dumb Money’ Tests Bullish View of Stocks.” The article goes on to state that with what Wall Street experts mockingly refer to as the “dumb money” coming into the market, it “argues for caution.” The small investor, the article notes, is a “lagging indicator, reacting to past performance rather than predicting future gains.”
The other thing that they don’t talk about is that some 70 percent of the trading on Wall Street these days is now automated trading, with big investment banks like JP MorganChase and Goldman Sachs using big mainframe computers to buy and sell stocks, holding them literally for seconds or less. Take a look some time at a day’s trading graph. You will see almost every day a straight vertical line as millions of shares are bought or sold simultaneously at the opening of markets at 9:30 am Eastern Time, followed almost always by a reversal of direction as those whose computers made a collective, instant buy or sell decision take their profits and run. This is a new phenomenon, and hardly one that offers any predictive insights, or that bodes well for those who see the markets as an “efficient” way to allocate capital.
Moving to the cost of getting by, the Consumer Price Index, of CPI, has also been fatally tampered with because so many things are linked to it that end up costing companies or governments money. When the CPI goes up, workers naturally want their pay to go up accordingly, so their families can stay afloat. Social Security checks to the elderly and disabled, and to widows and orphaned children, are also raised when the CPI increases. Not surprisingly, back in the early 1980s, the Reagan administration, acting on the advice of a “blue-ribbon commission” on Social Security “reform” headed by future Federal Reserve Chairman and Ayn Rand accolyte Alan Greenspan, changed the way the CPI is calculated, making it much less reflective of reality--and much slower to rise. If you listen to the reports each month, you’ll often hear it noted that the figure doesn’t include energy costs, housing costs, or food costs, which the reporters blithely explain are “volatile”. Well yeah, but they are also a huge part of our all to real cost of living. More...
Saturday, February 13, 2010
Why Is All This Happening? It’s the War Between Bankers
The public may have casually become aware of recent news announcements about an agreed upon goal between bankers to reach an 8-percent cash reserve requirement in their institutions. A list was recently published showing few banks currently have reached this reserve requirement. This list was obviously issued to apply public pressure via the public’s ability to direct their deposits to more stable banks, thus nudging other banks to increase their reserves.
Banks deploy depositors’ money into interest-bearing loans in order to generate profits and keep a portion in reserve to meet depositors’ immediate needs. Recall that withdrawal of $16.7 billion in cash from Washington Mutual bank over a 9-day period is what drove that bank into insolvency even though it had $307 billion of (over-valued) assets and deposits of $188 billion at the time. So cash reserves are of greater importance into today’s unstable financial environment.
It all sounds so collegiate – a bunch of the world’s bankers have agreed to stabilize their institutions so as to better withstand current economic challenges and create greater public confidence in banks. News reports make it sound like bankers are cooperative. But in reality, there is a war going on between bankers, in particular central bankers, those bankers who supply money to depository banks where the public banks their money.
First shots fired
The first shots in this war were apparently fired by banks in Japan a number of years ago. This dispute between bankers is what has led to the current worldwide financial crisis.
Bruce Wiseman makes us aware of this war in his report A Look Behind The Wizard’s Curtain: The Financial Crisis: The Hidden Beginning. Wiseman’s upcoming book and movie on this topic are scheduled for release in 2010.
Wiseman reports that the top ten banks in the world in the 1970s were American banks. But in the 1980s six Japanese banks rose into the top-ten ranking. Wiseman explains this sudden rise, which was said to shift the center of world banking from New York to Tokyo, was due to the low reserves (said to be as low as 3%) kept by bankers in Japan.
With lower reserve requirements, Japanese banks had more available funds to loan than competing banks throughout the globe. These Nippon bankers could establish branch banks throughout the world and dominate the world’s financial markets.
The 8-percent reserve requirement agreed upon in the Basel I agreement, named for the location of its signing at the Bank of International Settlements in Basel, Switzerland, is intended to put the world’s banks on a level playing field when it comes to doing business outside their own countries.
Wiseman says this low-reserve requirement practiced by banks in Japan was perceived as drawing a samurai sword against the rest of the world’s bankers and this didn’t rest well with Alan Greenspan, then chairman of the US Federal Reserve Bank and Board Member of the International Bank of Settlements, a bank for the world’s central bankers headquartered in Basel, Switzerland. Something had to be done about unfair competition in the banking arena.
Bankers in Japan were informed via the Bank of International Settlements, the "central bankers’ bank," that they would not be allowed to continue their operations in major foreign markets unless they agreed to a minimum reserve requirement – the 8% rule. Japanese bankers were coerced to agree to what has become known as the Basel I accord which was signed in 1988.
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Foot dragging over reforms
But it’s now 21 years later, and bankers are still dragging their feet to comply with a stability measure that, had it been implemented, may have staved off part of the current economic crisis long before it occurred.
Don’t get a false impression that Japanese banks are solely to blame for bank instability. Five investment banks in the U.S. (Goldman Sachs, Lehman Brothers, Bear Stearns, Merrill-Lynch and Morgan Stanley) appealed to the Securities Exchange Commission (SEC) and won the privilege to carry a 20-to-1 or even 30-to-1 ratio of capital to loans (not the same as cash reserves, as mentioned above).
For example, instead of these investment banks employing a more traditional capital-to-loan ratio of 10-to-1 (let’s say $1 billion of capital to issue $10 billion in loans), they were given the green light to loan at the ratio of 20-to-1 or even 30-to-1 ($1 billion of capital to issue $20 billion or even $30 billion in loans). This was a conscious decision by the SEC that probably was coerced by political influence.
Basel II spawns real estate bubble
This bankers’ war continued over the following decade and a half, culminating in Basel II in 2004, another agreement between banks to standardize reporting requirements for credit worthiness and capital that each depository bank holds. This is when the so-called "mark-to-market" rules were established. The Bank of International Settlements is attempting to get banks to value their real estate assets on real market value and to reveal all of the non-performing loans (foreclosures) they have on their books. Such revelations and transparency would doom many banks, including some of the world’s largest banks.
Basel II also made provision for reduced reserve requirements for mortgage-backed home loans. This made home loans more profitable and is set off the explosive false growth in residential real estate and created the financial bubble that finally popped in 2008. Central bankers are to blame for setting off this wild fire in the real estate market.
How many banks intend to comply?
A recent survey conducted by the Financial Stability Institute attempted to determine how many banks in 115 jurisdictions in less developed nations in Africa, Asia, Latin America and the Middle East intend to comply with Basel II. The survey was not sent to banks in Japan, possibly for good reason. The 2004 survey revealed 95 countries currently plan to comply with Basel II reporting requirements, and even more countries said they intended to comply with Basel II in a 2006 survey.
However, according to a report in Risk Magazine, the banking industry is fighting finalized reforms in the Basel II mandates, claiming the amount of capital required cannot be raised within the allotted time framework. Finance ministers and central bank governors of the 20 leading economies (called the Group of 20) wants full implementation by 2012.
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Prudent banking
Prudent banking is not beyond the capability of bankers. For example, according to a Wall Street Journal article, while Basel II requires a capital to loan ratio of 9%, banks in India are required to have a 12% standard.
Bankers in China have been even more prudent. Chinese banks adhere to a cap on loan-to-deposit ratios of about 75% (the actual ratio is more like 67%), and leverage ratios (capital-to-loan ratios) in the single digits – considerably below what the big U.S. banks have been allowed to accumulate. Furthermore, in China, home buyers can only borrow up to 70% of the value of their property (60% if it's a second purchase).
Fang Xinghai, director-general of Shanghai's financial-services office, recently described the difference between the Chinese and U.S. approaches to bank regulation in the Wall Street Journal: "In the U.S., the regulators don't believe in regulation to begin with," he said, and pointed a finger at former Federal Reserve Chairman Alan Greenspan's belief that the Fed's job wasn't to prevent or deflate assets bubbles, but to "deal with the consequences."
The Wall Street Journal report goes on to say that bankers in Spain certainly incurred exposure to an overbuilt real estate market (an estimated 1.2 million unsold new homes), but they avoided further trouble by consolidating all their assets, even non-performing home loans, onto their balance sheets. For comparison, "Special investment vehicles," employed by American banks, "cooked the books" and keep risky debt off of bank ledgers.
Resorting to the unthinkable
Unable to create a level competitive field for banking, the bank reform effort has now shifted away from cooperation to a master plan to take down the world’s economies and exercise complete control in the aftermath by introduction of a master plan to control banking and currency.
According to Wiseman, the plan underway now is to intentionally "take down the United States and the U.S. dollar as the stable datum of planetary finance and replace it with something called a Global Monetary Authority" that will issue a single global currency via the world’s central bankers, who in turn distribute money to depository and investment banks.
What Wiseman is talking about here is that a small group of less than a dozen central bankers are likely to rule the world via control of currency.
As confirmation of Wiseman’s claim, the call for a "global monetary authority" was echoed by a Yale professor in the Financial Times in 2008.
What looms is a single global currency, probably issued by the International Monetary Fund (IMF), which will then exert control over the world’s banks. A more complete picture of what is likely being planned is provided here and here.
The intentional take-down of the world’s economies and establishment of a world currency will be spawned out of planned chaos which would provoke the planet’s masses to beg for relief. The new currency and its new central bank will be offered up as the quickest solution to the world’s economic turmoil.
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But will world control be lost?
However, the bankers and elites risk losing control of the world that they now hold. As investigative journalist Daniel Estulin reports, "One of Bilderberg’s primary concerns accordingly is the danger that their zeal to reshape the world by engineering chaos in order to implement their long term agenda could cause the situation to spiral out of control and eventually lead to a scenario where Bilderberg and the global elite in general are overwhelmed by events and end up losing their control over the planet." (The Bilderberg Group, comprised of over 100 influential people, meets annually to discuss issues of world concern.)
Yet central bankers and elitists plod ahead, all the while attempting to tighten their grip on the masses. Following the G20 (20 leading countries of the world) meeting at the beginning of April, 2009, it was reported that, "The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity." A communiqué released by the G20 leaders stated that, "We have agreed to support a general standard drawing rights (SDR) allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity," and that, "SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century." Essentially, "they are putting a de facto world currency into play. It is outside the control of any sovereign body."
IMF plants an agent in our midst
The IMF has the right man in place to do the job in the U.S. Timothy Geithner, U.S. Treasury Secretary, was director of the Policy Development and Review Department (2001–2003) at the IMF. Geithner is also well connected in other circles. He was also part of a consulting firm in the 1980s owned by former Secretary of State Henry Kissinger. Furthermore, Geithner was also president of the Federal Reserve Bank of New York and a staffer at the Council on Foreign Relations.
Geithner, as U.S. Secretary of the Treasury, apparently sees no conflict between his duty to uphold the U.S. Constitution and a one-world currency. He goes along with the agenda to abolish the US dollar in favor of a global medium of exchange. Geithner was quoted to say: "Our hope is that we can work with Europe on a global framework, a global infrastructure which has appropriate global oversight."
What lies ahead
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Foot dragging by the world’s bankers to comply with banking standards and the intentional collapse of world economies to force bank reform has dragged the world into a quagmire that could lead to mass starvation, suicide and even war. A former top British bank regulator recently called for the formation of an international bank police agency to bring the bankers into line. But such an idea appears to be too late. Efforts to usher in an IMF-issued currency appear to be steaming forward.
Such plans, to usher in a one-world government and a single currency, were made decades ago by elitists and central bankers, but they were waiting for world events to be engineered in a manner to create the perfect storm that would cause Americans to give up their sovereignty, and their greenbacks, in exchange for a new type of play money and subservience to another rule of law outside the U.S. Constitution. Professor Carroll Quigley described this covert plan in the 1960s in his book entitled Tragedy and Hope: A History Of The World In Our Time. Another broad description of this plan is found here.
World control
Few Americans catch on to the fact that central bankers, not elected representatives, have controlled America for some time now. It was the British banker Mayer Amschel Bauer Rothschild who said in 1791: "Allow me to issue and control a nation's currency, and I care not who makes its laws."
The world exists for the central bankers to plunder, and no one else. What is good for the central bankers is good enough for the rest of the world. It’s like the world is a tiger that is being slung around by its tail. If central bankers aren’t paid their dues, the world must suffer. Yet the bankers must not be deprived of their seven, eight and even nine-figure commission checks amidst the turmoil. The world is being slung into economic chaos over a long-standing war between central bankers. If the masses only knew.
December 14, 2009
Bill Sardi [send him mail] is a frequent writer on health and political topics. His health writings can be found at www.naturalhealthlibrarian.com. He is the author of You Don’t Have To Be Afraid Of Cancer Anymore.
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Thursday, December 24, 2009
U.S. CRASHING INTO A BRICK WALL AT HIGH SPEED
Louis James
International Speculator
L: So, Ben Bernanke just got named “Person of the Year” by Time magazine. I know you must have some thoughts in response to this auspicious event?
Doug: I just don’t know where they find these people... On the other hand, Slime magazine has always said that those named Person of the Year are not necessarily the most laudable people, but those who’ve had the greatest impact on the events in a given year. That would explain Hitler’s achievement of the same honor, and Stalin getting the nod twice.
L: Not to mention Bin Laden.
Doug: Yes, let’s not mention him. This is different: Bernanke isn’t being held up as a villain, but as a hero.
L: The tagline Time puts on it is: “The story of the year was a weak economy that could have been much, much weaker. How the mild-mannered man who runs the Federal Reserve prevented an economic catastrophe.”
Doug: Right. And Bernanke is always presented as a Ph.D., a scholar of the Great Depression, its causes, and how to cure such an economic downturn. But he hasn’t prevented an economic catastrophe – he’s done just the opposite of what needs to be done, and there’s going to be hell to pay.
It’s quite perverse. Look at Alan Greenspan. In the 1960s, he was an acolyte of Ayn Rand and wrote a famous essay defending the gold standard, which I read in her book, Capitalism: The Unknown Ideal. And then he goes on to become the most inflationary Fed chairman in history – until Bernanke superseded him.
The really shameful thing about Greenspan is, not only were his policies the igniters of the giant bubbles we saw in the stock market and then in real estate, but since he was associated with pure capitalism through Rand, his failures through government intervention in the market have falsely discredited capitalism as a system in many people’s view.
L: The same could be said of Ronald Reagan. He got elected on a libertarian platform, speaking of free enterprise and getting the government off the back of the little guy. So now many people think that the chronic deficits and other problems of the Reagan years proved that limited government doesn’t work. It’s the same swindle you see in intro economics courses that teach young people that the Great Depression proved that laissez-faire capitalism doesn’t work – when it was, again, government intervention in the market that created the Great Depression.
Doug: That’s right. Reagan allowed Congress to run gigantic, greater-than-ever-seen-before deficits that still have to be paid for, either through higher taxes or debasing the currency, or both – or selling off the assets of the United States to foreign creditors. The Reagan deficits are nothing, of course, compared to the current ones.
L: I wonder how much we could get for the Statue of Liberty? She’s got to be feeling uncomfortable in a country that no longer wants anyone’s tired, poor, huddled masses, yearning to breathe free.
Doug: That’s a good question. The copper alone is worth a lot of money at this point.
L: A quick web search shows two frequently cited figures for Miss Liberty’s copper skin: one of about 60,000 pounds, the other 179,000 pounds. At three bucks a pound of copper, that’s either $180,000 or something over half a million bucks – a drop in the ocean of America’s national debt.
Doug: I would have thought it was more, but of course the dollar isn’t worth a damn anymore. The real value would be as a work of art, of course. Although it must be said that considerations like that didn’t stop peasants in the Middle Ages from melting down Roman bronzes and disassembling classical buildings because they needed the raw materials. I wonder what it would fetch at a Sotheby’s auction? I’d guess the Chinese might be willing to pay half a billion or even a billion dollars to take the lady home. It’d be a good deal, since the ideals behind the statue are as dead as the Constitution itself.
L: Yes… we’re not using the Constitution either, maybe we should sell that to them as well. But even a billion dollars would still be a drop in America’s ocean of debt.
Doug: A billion is only a thousandth of a trillion, and they’re now thinking in trillions. Obama may soon have to ask his science czar what comes after a trillion.
Getting back to Bernanke, the situation just shows one more time how corrupt the U.S. educational system is. That someone can get a Ph.D. and become known as a scholar of the depression era, and draw exactly the wrong conclusions about absolutely everything concerning it – what caused it, how to cure it – and then be held up as a model of relevant and useful academics… It just goes to show how utterly beyond hope the situation is.
L: Well, given what you’ve said about the education system teaching mostly worthless BS, especially when it comes to business and economics, why should we expect anything other than BS from someone who’s got it Piled High & Deep?
Doug: [Chuckles] Yes, that is what Ph.D. stands for, after all. In areas other than hard science, it has value mostly as a trade credential with the chattering classes. Its value in the real world is usually negative.
L: Is it possible that he actually does know what really caused the Great Depression and our current economic difficulties, but is caught by politics and can’t do or say anything other than what he is doing? Back in Greenspan’s day, there were people who thought Greenspan still believed everything he wrote in his essay on the gold standard and was trying to balance what was politically feasible with what he knew to be right – that he was doing things he knew were harmful because if he didn’t do them, someone worse would do much more harm.
Doug: I asked Barbara Branden that one time, and that was her opinion. She thought he still believed in the free market and gold money. But a person who believes one thing and does another is usually called a hypocrite.
L: I think it was Ron Paul who once told me that he’d asked Greenspan about his essay defending the gold standard, and that Greenspan had told him that he still believed everything he wrote in the essay.
Doug: I think I’ve heard that story too. It’s an interesting conundrum. I’ve thought about what I’d do if I were president of the United States, or chairman of the Fed, if my choices were limited to what’s politically possible. The right thing now, which is to bring on a deflationary collapse that would liquidate much of the malinvestment of recent decades, is not politically possible. With more than 50% of the people in the United States being net recipients of government largesse, no one can get elected, nor stay elected, who applies the breaks to the gravy train. The system is totally corrupt at this point.
I think I read the other day that something like 15% of the population is now on some level of food stamp subsidy, and another 15% are eligible but don’t know it, or are not yet willing to accept the stigma. In the face of these kinds of facts, if anyone in power did what was necessary to liquidate past mistakes and get the economy back on a sound and sustainable path upwards, it would probably bring on a social revolution.
We’re going to have a social revolution anyway, and it’s probably better to have it sooner rather than later. This whole house of cards should have been collapsed back in the ‘60s, as opposed to having been built 40 stories higher since then. That just means it’ll be an even bigger mess when it does collapse. But it would take immense courage to set that collapse off deliberately. Whoever did it might well end up dead. And the same people who are cheerleading the current leadership’s disastrous moves would blame that courageous person for bringing on the United States’ second and Greater Depression. So, from at least a personal point of view, there’s nothing to be gained by doing the right thing. Although history would vindicate you, you’d be ostracized now.
L: That just raises an already impossibly high bar. The U.S. won’t be able to pay, when the bill comes due.
Doug: Yes. One of the most distressing things about this whole debacle is the total lack of intellectual honesty among any of the participants and decision-makers responsible for what’s going on – with Bernanke being perhaps the worst of all.
On July 1, 2005, Bernanke stated with great confidence that the U.S. was not experiencing a housing bubble, saying: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”
L: Wow – could he possibly have been more wrong about anything more important?
Doug: In November of the same year, he talked about derivatives, saying, “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” He also said, “The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”
And a couple months after that, back on housing again, he said, “Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
L: So much for the wisdom of the expert…
Doug: Well, he’s not stupid, not in the sense of being unintelligent – he’s obviously very intelligent – but I would say he’s stupid in a better, more sophisticated sense of the word. One that I think is more useful, that being: an unwitting tendency towards self-destruction. And I’m afraid his stupidity is not just going to drag down the U.S. financial system, but the U.S. itself with it.
What he said about the housing and derivatives bubbles shows that he either has no idea what’s going on, or he’s a pathological liar. Reality was totally absent from those two statements.
And in February of 2008, he said, “I expect there will be some failures of smaller banks.” Bear Stearns collapsed just a couple weeks later…
L: You’re kidding!
Doug: I wish I were. I’d like to believe the second most powerful man in the world weren’t either a knave, or a fool, or both. Remember, this is the same guy who told the world that Fannie and Freddie were “adequately capitalized” and “in no danger of failing.”
Earlier this year he said, “Currently, we don’t think [the unemployment rate] will get to 10 percent." Wrong again – and if you actually count people who are out of work, rather than the government’s phony subset of that number, we already have over 17% unemployment.
This guy is truly pathetic – but nobody points any of this stuff out. That he can be so dead wrong about so many vital things and not get called on it is simply amazing to me – it makes me feel like I’m living in some sort of demented parallel universe.
L: This has to be the worst case of “the emperor’s new clothes” on record.
Doug: Quite possibly. After all, who can gainsay the word of the second most powerful man on the planet? And a Ph.D. expert on the Great Depression to boot. Which makes perverse sense, as only an expert can screw things up as royally as he has.
I’m afraid the U.S. dollar is going to be totally destroyed. The consequences of that are going to make everything that’s going on now pale by comparison. I mean, as bad as the consequences of propping up all these dinosaurs like General Motors and AIG – and General Electric and Goldman Sachs, among many others, might be next – through direct theft from the U.S. taxpayer are, that’s nothing compared to what will happen when things get really bad, which they haven’t yet.
It’s really going to be bad when they destroy the dollar – that’s when it’s really going to hit the fan. Runaway inflation is bad enough in a place like Zimbabwe, where most of the people are still living on a subsistence level. And it was bad enough in Germany in the 1920s, when most Germans were still living on farms or making things with their own hands. But in an advanced industrial society, as heavily urbanized as the U.S. is, runaway inflation is going to be unbelievably disastrous. As dim as the average American is, he’s bound to get perturbed when his quality of life nosedives, and who knows what the social consequences of that will be.
L: Social revolution… Massive social change.
Doug: Yes. Runaway inflation in the U.S. would be the ultimate disaster. Think about all those people who have dollars set aside, which is to say the prudent middle class; they’ll be totally wiped out. Even huge corporations that have massive cash reserves, like Microsoft and McDonald’s, if they don’t hedge that cash with the utmost skill, could find those hoards wiped out and themselves bankrupted as well. Remember that people all over the world are holding U.S. dollars. There’s far more U.S. currency outside the U.S. than there is inside the U.S., and all those foreigners are going to resent it personally and hold it against Americans when their U.S. dollars are wiped out. On top of that, most central banks around the world hold U.S. dollars as their main asset, and that will be wiped out as well. It’s going to be a complete, worldwide disaster.
It’s going to be much worse than what happened in Germany or Zimbabwe. This is a couple orders of magnitude greater seriousness – and it seems to me that this is almost certain to happen with a monumentally stupid person like Bernanke steering the ship of state into a reef.
L: Is there really any possible way he could not see the reef he’s got the U.S. pointed straight at?
Doug: Another interesting question, because, as I say, he’s not an unintelligent man but a stupid man, as I use the word.
L: But some people don’t see the world the way we do. Is it possible that he actually believes his own spin? Some people see price destruction and asset devaluation in some areas offsetting the inflation of the money supply, and believe there is some super-economic formula that really smart people like Bernanke can figure out, for the U.S. to spend its way back into prosperity.
Doug: I just don’t see how someone who’s studied the history of economics can so completely set aside its most pertinent lessons. It’s possible that he knows he’s caught between a rock and a hard place – in technical economic terms, that he knows he and the economy are totally screwed – and sees no choice but to carry on as long as he can and hope for a miracle. He probably knows that giving the economy the medicine it really needs would bring on a deflationary collapse, and losing his job would be the least of his worries.
As I’ve explained before, deflation is not only not a bad thing, it can be a very good thing. In a deflationary environment, the purchasing unit – the dollar – becomes worth more. That rewards people who have saved dollars, the prudent middle class upon which so much in modern society depends, and makes them prone to save more. Inflation makes people very loathe to save because what they’re saving is going down in value. And the solution to this depression we’re entering is not more spending, it’s not more consumption, it’s just the opposite of what these morons in Washington are saying: it’s less consumption and more savings. Savings are capital accumulation, and that’s what’s needed to start new businesses, create more jobs, and so forth in a sustainable way. Creating phony make-work jobs with more debt only serves to make things worse, come reckoning day.
So, switching from an inflationary policy to a deflationary one would be the right thing to do, but it would be such a sharp adjustment, this whiplash would hurt a huge number of people in the short term. And though most people don’t see it, the U.S. is on such a shaky political foundation at this point… It’s really become a question of “Do you want to die by fire or by ice?” Either way, the U.S. is going to crash into a brick wall at high speed.
L: So, caught between the rock and the hard place, maybe he doesn’t believe anything he’s saying – he’s just trying to hold off the noose as long as he can.
Doug: That’s a possibility. You and I will never get an interview with him, of course, and whoever does get an interview with him will get the kind of meaningless convoluted answers that Fed chairmen are notorious for giving. Answers so opaque as to be worthless. The only solution to this problem is, ultimately, to abolish the Federal Reserve. As we’ve argued many times in The Casey Report, it serves no useful purpose whatsoever – it’s nothing more than a convenient instrument for inflation, which is to say, indirect taxation. But is that going to happen? I don’t think so. And that’s why I think the whole socio-political system in the U.S. is on the ragged edge of being overturned at this point.
L: The hollow oak that looks so mighty to all but is so rotten through its core that it collapses in the next storm. Do you suppose Bernanke could be doing it on purpose? Could he and Greenspan before him (who apparently claims to still believe in the gold standard) be orchestrating this crash on purpose, deliberately doing everything opposite of what’s necessary, carefully postponing the catastrophe each time to make it bigger and bigger, so that when it finally does all come crashing down, it does so in such a spectacular way, it teaches the world an unforgettable lesson on why you should never ever use paper for money?
Doug: That might explain their actions, but the odds on that scenario are slim to none. And Slim is out of town. Besides, I’m not a fan of conspiracy theories. I don’t think anyone could pull such a scheme off… But the bankruptcy of the U.S. government is baked in the cake. And that’s a good thing, in that they’ll have less ability to intervene in everyone’s lives domestically and in foreign countries. The bad news is that the government may bankrupt the country in a vain effort to keep itself alive.
L: So… Investment implications?
Doug: Everything we’ve been saying for years now – and as Casey Report readers know, we did see and write about a credit crisis leading to a currency crisis before it happened – about rigging for stormy weather is all the more vital now that the storm is upon us.
What, specifically, does that mean?
First and foremost, all of your savings, money that you don’t want to lose but need in a liquid form, should be in gold or gold proxies. To a lesser degree, silver as well – silver being a sort of poor man’s gold. That’s number one. You should have a very large position in these two things.
Second, regarding the speculative funds that you have, remember how much money Washington is creating. That’s definitely going to inflate other speculative bubbles to be on the watch for. I think it’s possible to make serious money spotting these early and cashing in before they pop. That’s number two: position yourself for taking advantage of speculative opportunities.
Third – and I can’t emphasize this enough – is that since what we’re really looking at is a political disaster causing the economic disaster, you must diversify your assets politically. And since the epicenter of this meltdown is the U.S., it’s absolutely vital that you diversify your assets, including the gold and the speculative investments, outside the U.S. That’s number three, but not third in importance – there will be foreign exchange controls, and once we have those, your alternatives will be severely circumscribed.
These are the three most critical pieces of advice I can think of to give to anyone.
L: Heavy stuff, Doug – thanks for laying it out so clearly.
Doug: You’re welcome. I just hope our readers will actually act on this, because it can not only make the difference between going under and surviving, but this basic approach and the details we spell out in The Casey Report can help them to turn crisis into opportunity. Some people will prosper during these difficult times – I hope it’s our readers who do.
International Speculator
L: So, Ben Bernanke just got named “Person of the Year” by Time magazine. I know you must have some thoughts in response to this auspicious event?
Doug: I just don’t know where they find these people... On the other hand, Slime magazine has always said that those named Person of the Year are not necessarily the most laudable people, but those who’ve had the greatest impact on the events in a given year. That would explain Hitler’s achievement of the same honor, and Stalin getting the nod twice.
L: Not to mention Bin Laden.
Doug: Yes, let’s not mention him. This is different: Bernanke isn’t being held up as a villain, but as a hero.
L: The tagline Time puts on it is: “The story of the year was a weak economy that could have been much, much weaker. How the mild-mannered man who runs the Federal Reserve prevented an economic catastrophe.”
Doug: Right. And Bernanke is always presented as a Ph.D., a scholar of the Great Depression, its causes, and how to cure such an economic downturn. But he hasn’t prevented an economic catastrophe – he’s done just the opposite of what needs to be done, and there’s going to be hell to pay.
It’s quite perverse. Look at Alan Greenspan. In the 1960s, he was an acolyte of Ayn Rand and wrote a famous essay defending the gold standard, which I read in her book, Capitalism: The Unknown Ideal. And then he goes on to become the most inflationary Fed chairman in history – until Bernanke superseded him.
The really shameful thing about Greenspan is, not only were his policies the igniters of the giant bubbles we saw in the stock market and then in real estate, but since he was associated with pure capitalism through Rand, his failures through government intervention in the market have falsely discredited capitalism as a system in many people’s view.
L: The same could be said of Ronald Reagan. He got elected on a libertarian platform, speaking of free enterprise and getting the government off the back of the little guy. So now many people think that the chronic deficits and other problems of the Reagan years proved that limited government doesn’t work. It’s the same swindle you see in intro economics courses that teach young people that the Great Depression proved that laissez-faire capitalism doesn’t work – when it was, again, government intervention in the market that created the Great Depression.
Doug: That’s right. Reagan allowed Congress to run gigantic, greater-than-ever-seen-before deficits that still have to be paid for, either through higher taxes or debasing the currency, or both – or selling off the assets of the United States to foreign creditors. The Reagan deficits are nothing, of course, compared to the current ones.
L: I wonder how much we could get for the Statue of Liberty? She’s got to be feeling uncomfortable in a country that no longer wants anyone’s tired, poor, huddled masses, yearning to breathe free.
Doug: That’s a good question. The copper alone is worth a lot of money at this point.
L: A quick web search shows two frequently cited figures for Miss Liberty’s copper skin: one of about 60,000 pounds, the other 179,000 pounds. At three bucks a pound of copper, that’s either $180,000 or something over half a million bucks – a drop in the ocean of America’s national debt.
Doug: I would have thought it was more, but of course the dollar isn’t worth a damn anymore. The real value would be as a work of art, of course. Although it must be said that considerations like that didn’t stop peasants in the Middle Ages from melting down Roman bronzes and disassembling classical buildings because they needed the raw materials. I wonder what it would fetch at a Sotheby’s auction? I’d guess the Chinese might be willing to pay half a billion or even a billion dollars to take the lady home. It’d be a good deal, since the ideals behind the statue are as dead as the Constitution itself.
L: Yes… we’re not using the Constitution either, maybe we should sell that to them as well. But even a billion dollars would still be a drop in America’s ocean of debt.
Doug: A billion is only a thousandth of a trillion, and they’re now thinking in trillions. Obama may soon have to ask his science czar what comes after a trillion.
Getting back to Bernanke, the situation just shows one more time how corrupt the U.S. educational system is. That someone can get a Ph.D. and become known as a scholar of the depression era, and draw exactly the wrong conclusions about absolutely everything concerning it – what caused it, how to cure it – and then be held up as a model of relevant and useful academics… It just goes to show how utterly beyond hope the situation is.
L: Well, given what you’ve said about the education system teaching mostly worthless BS, especially when it comes to business and economics, why should we expect anything other than BS from someone who’s got it Piled High & Deep?
Doug: [Chuckles] Yes, that is what Ph.D. stands for, after all. In areas other than hard science, it has value mostly as a trade credential with the chattering classes. Its value in the real world is usually negative.
L: Is it possible that he actually does know what really caused the Great Depression and our current economic difficulties, but is caught by politics and can’t do or say anything other than what he is doing? Back in Greenspan’s day, there were people who thought Greenspan still believed everything he wrote in his essay on the gold standard and was trying to balance what was politically feasible with what he knew to be right – that he was doing things he knew were harmful because if he didn’t do them, someone worse would do much more harm.
Doug: I asked Barbara Branden that one time, and that was her opinion. She thought he still believed in the free market and gold money. But a person who believes one thing and does another is usually called a hypocrite.
L: I think it was Ron Paul who once told me that he’d asked Greenspan about his essay defending the gold standard, and that Greenspan had told him that he still believed everything he wrote in the essay.
Doug: I think I’ve heard that story too. It’s an interesting conundrum. I’ve thought about what I’d do if I were president of the United States, or chairman of the Fed, if my choices were limited to what’s politically possible. The right thing now, which is to bring on a deflationary collapse that would liquidate much of the malinvestment of recent decades, is not politically possible. With more than 50% of the people in the United States being net recipients of government largesse, no one can get elected, nor stay elected, who applies the breaks to the gravy train. The system is totally corrupt at this point.
I think I read the other day that something like 15% of the population is now on some level of food stamp subsidy, and another 15% are eligible but don’t know it, or are not yet willing to accept the stigma. In the face of these kinds of facts, if anyone in power did what was necessary to liquidate past mistakes and get the economy back on a sound and sustainable path upwards, it would probably bring on a social revolution.
We’re going to have a social revolution anyway, and it’s probably better to have it sooner rather than later. This whole house of cards should have been collapsed back in the ‘60s, as opposed to having been built 40 stories higher since then. That just means it’ll be an even bigger mess when it does collapse. But it would take immense courage to set that collapse off deliberately. Whoever did it might well end up dead. And the same people who are cheerleading the current leadership’s disastrous moves would blame that courageous person for bringing on the United States’ second and Greater Depression. So, from at least a personal point of view, there’s nothing to be gained by doing the right thing. Although history would vindicate you, you’d be ostracized now.
L: That just raises an already impossibly high bar. The U.S. won’t be able to pay, when the bill comes due.
Doug: Yes. One of the most distressing things about this whole debacle is the total lack of intellectual honesty among any of the participants and decision-makers responsible for what’s going on – with Bernanke being perhaps the worst of all.
On July 1, 2005, Bernanke stated with great confidence that the U.S. was not experiencing a housing bubble, saying: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”
L: Wow – could he possibly have been more wrong about anything more important?
Doug: In November of the same year, he talked about derivatives, saying, “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” He also said, “The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”
And a couple months after that, back on housing again, he said, “Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
L: So much for the wisdom of the expert…
Doug: Well, he’s not stupid, not in the sense of being unintelligent – he’s obviously very intelligent – but I would say he’s stupid in a better, more sophisticated sense of the word. One that I think is more useful, that being: an unwitting tendency towards self-destruction. And I’m afraid his stupidity is not just going to drag down the U.S. financial system, but the U.S. itself with it.
What he said about the housing and derivatives bubbles shows that he either has no idea what’s going on, or he’s a pathological liar. Reality was totally absent from those two statements.
And in February of 2008, he said, “I expect there will be some failures of smaller banks.” Bear Stearns collapsed just a couple weeks later…
L: You’re kidding!
Doug: I wish I were. I’d like to believe the second most powerful man in the world weren’t either a knave, or a fool, or both. Remember, this is the same guy who told the world that Fannie and Freddie were “adequately capitalized” and “in no danger of failing.”
Earlier this year he said, “Currently, we don’t think [the unemployment rate] will get to 10 percent." Wrong again – and if you actually count people who are out of work, rather than the government’s phony subset of that number, we already have over 17% unemployment.
This guy is truly pathetic – but nobody points any of this stuff out. That he can be so dead wrong about so many vital things and not get called on it is simply amazing to me – it makes me feel like I’m living in some sort of demented parallel universe.
L: This has to be the worst case of “the emperor’s new clothes” on record.
Doug: Quite possibly. After all, who can gainsay the word of the second most powerful man on the planet? And a Ph.D. expert on the Great Depression to boot. Which makes perverse sense, as only an expert can screw things up as royally as he has.
I’m afraid the U.S. dollar is going to be totally destroyed. The consequences of that are going to make everything that’s going on now pale by comparison. I mean, as bad as the consequences of propping up all these dinosaurs like General Motors and AIG – and General Electric and Goldman Sachs, among many others, might be next – through direct theft from the U.S. taxpayer are, that’s nothing compared to what will happen when things get really bad, which they haven’t yet.
It’s really going to be bad when they destroy the dollar – that’s when it’s really going to hit the fan. Runaway inflation is bad enough in a place like Zimbabwe, where most of the people are still living on a subsistence level. And it was bad enough in Germany in the 1920s, when most Germans were still living on farms or making things with their own hands. But in an advanced industrial society, as heavily urbanized as the U.S. is, runaway inflation is going to be unbelievably disastrous. As dim as the average American is, he’s bound to get perturbed when his quality of life nosedives, and who knows what the social consequences of that will be.
L: Social revolution… Massive social change.
Doug: Yes. Runaway inflation in the U.S. would be the ultimate disaster. Think about all those people who have dollars set aside, which is to say the prudent middle class; they’ll be totally wiped out. Even huge corporations that have massive cash reserves, like Microsoft and McDonald’s, if they don’t hedge that cash with the utmost skill, could find those hoards wiped out and themselves bankrupted as well. Remember that people all over the world are holding U.S. dollars. There’s far more U.S. currency outside the U.S. than there is inside the U.S., and all those foreigners are going to resent it personally and hold it against Americans when their U.S. dollars are wiped out. On top of that, most central banks around the world hold U.S. dollars as their main asset, and that will be wiped out as well. It’s going to be a complete, worldwide disaster.
It’s going to be much worse than what happened in Germany or Zimbabwe. This is a couple orders of magnitude greater seriousness – and it seems to me that this is almost certain to happen with a monumentally stupid person like Bernanke steering the ship of state into a reef.
L: Is there really any possible way he could not see the reef he’s got the U.S. pointed straight at?
Doug: Another interesting question, because, as I say, he’s not an unintelligent man but a stupid man, as I use the word.
L: But some people don’t see the world the way we do. Is it possible that he actually believes his own spin? Some people see price destruction and asset devaluation in some areas offsetting the inflation of the money supply, and believe there is some super-economic formula that really smart people like Bernanke can figure out, for the U.S. to spend its way back into prosperity.
Doug: I just don’t see how someone who’s studied the history of economics can so completely set aside its most pertinent lessons. It’s possible that he knows he’s caught between a rock and a hard place – in technical economic terms, that he knows he and the economy are totally screwed – and sees no choice but to carry on as long as he can and hope for a miracle. He probably knows that giving the economy the medicine it really needs would bring on a deflationary collapse, and losing his job would be the least of his worries.
As I’ve explained before, deflation is not only not a bad thing, it can be a very good thing. In a deflationary environment, the purchasing unit – the dollar – becomes worth more. That rewards people who have saved dollars, the prudent middle class upon which so much in modern society depends, and makes them prone to save more. Inflation makes people very loathe to save because what they’re saving is going down in value. And the solution to this depression we’re entering is not more spending, it’s not more consumption, it’s just the opposite of what these morons in Washington are saying: it’s less consumption and more savings. Savings are capital accumulation, and that’s what’s needed to start new businesses, create more jobs, and so forth in a sustainable way. Creating phony make-work jobs with more debt only serves to make things worse, come reckoning day.
So, switching from an inflationary policy to a deflationary one would be the right thing to do, but it would be such a sharp adjustment, this whiplash would hurt a huge number of people in the short term. And though most people don’t see it, the U.S. is on such a shaky political foundation at this point… It’s really become a question of “Do you want to die by fire or by ice?” Either way, the U.S. is going to crash into a brick wall at high speed.
L: So, caught between the rock and the hard place, maybe he doesn’t believe anything he’s saying – he’s just trying to hold off the noose as long as he can.
Doug: That’s a possibility. You and I will never get an interview with him, of course, and whoever does get an interview with him will get the kind of meaningless convoluted answers that Fed chairmen are notorious for giving. Answers so opaque as to be worthless. The only solution to this problem is, ultimately, to abolish the Federal Reserve. As we’ve argued many times in The Casey Report, it serves no useful purpose whatsoever – it’s nothing more than a convenient instrument for inflation, which is to say, indirect taxation. But is that going to happen? I don’t think so. And that’s why I think the whole socio-political system in the U.S. is on the ragged edge of being overturned at this point.
L: The hollow oak that looks so mighty to all but is so rotten through its core that it collapses in the next storm. Do you suppose Bernanke could be doing it on purpose? Could he and Greenspan before him (who apparently claims to still believe in the gold standard) be orchestrating this crash on purpose, deliberately doing everything opposite of what’s necessary, carefully postponing the catastrophe each time to make it bigger and bigger, so that when it finally does all come crashing down, it does so in such a spectacular way, it teaches the world an unforgettable lesson on why you should never ever use paper for money?
Doug: That might explain their actions, but the odds on that scenario are slim to none. And Slim is out of town. Besides, I’m not a fan of conspiracy theories. I don’t think anyone could pull such a scheme off… But the bankruptcy of the U.S. government is baked in the cake. And that’s a good thing, in that they’ll have less ability to intervene in everyone’s lives domestically and in foreign countries. The bad news is that the government may bankrupt the country in a vain effort to keep itself alive.
L: So… Investment implications?
Doug: Everything we’ve been saying for years now – and as Casey Report readers know, we did see and write about a credit crisis leading to a currency crisis before it happened – about rigging for stormy weather is all the more vital now that the storm is upon us.
What, specifically, does that mean?
First and foremost, all of your savings, money that you don’t want to lose but need in a liquid form, should be in gold or gold proxies. To a lesser degree, silver as well – silver being a sort of poor man’s gold. That’s number one. You should have a very large position in these two things.
Second, regarding the speculative funds that you have, remember how much money Washington is creating. That’s definitely going to inflate other speculative bubbles to be on the watch for. I think it’s possible to make serious money spotting these early and cashing in before they pop. That’s number two: position yourself for taking advantage of speculative opportunities.
Third – and I can’t emphasize this enough – is that since what we’re really looking at is a political disaster causing the economic disaster, you must diversify your assets politically. And since the epicenter of this meltdown is the U.S., it’s absolutely vital that you diversify your assets, including the gold and the speculative investments, outside the U.S. That’s number three, but not third in importance – there will be foreign exchange controls, and once we have those, your alternatives will be severely circumscribed.
These are the three most critical pieces of advice I can think of to give to anyone.
L: Heavy stuff, Doug – thanks for laying it out so clearly.
Doug: You’re welcome. I just hope our readers will actually act on this, because it can not only make the difference between going under and surviving, but this basic approach and the details we spell out in The Casey Report can help them to turn crisis into opportunity. Some people will prosper during these difficult times – I hope it’s our readers who do.
Wednesday, November 25, 2009
GLD ETF WARNING
This is potentially chilling news for the gold markets -- word of tungsten filled gold bars coming from the Market Oracle site. As Before It's News has warned, there are many issues with "owning" any gold that is a paper product, as opposed to physical gold and if this story is true, you could see a huge spike in the price of gold in the near future as people scramble to own the real thing. Two issues have come to the forefront, according to Rob Kirby at Kirby Analytics...
1] - irregularities in the publication of the gold ETF - GLD’s bar list from Sept. 25 – Oct.14 where the length of the bar list went from 1,381 pages to under 200 pages and then back up to 800 or so pages.
2] - reports of 400 oz. “good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.
The reason to use tungsten to fill bars, as opposed to say lead or silver is based entirely on Physics and Economics 101. Tungsten, density of 19.35 g/cm3 is a near perfect match for the density of gold at 19.32 g/cm3. A bar of tungsten coated with gold would be very close to the same size and weight as a real solid gold bar. The main reason to use tungsten is the cost, which at $20 per pound is a small fraction of gold's $16,000 per pound. Large 400 ounce cast bars are easiest to fake because they can be cast, but coins would need to be stamped, something difficult to achieve with tungsten owing to its legendary hardness -- it's got a very high melting point and is difficult to work. Gold is soft, malleable and ductile, which is why it has been treasured for millennia. It will be difficult to spot the fake gold bars without sophisticated assaying equipment.
Here's where the story gets fun...
The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes].
This was apparently all highly orchestrated by an extremely well financed criminal operation.
Within mere hours of this scam being identified – Chinese officials had many of the perpetrators in custody.
And here’s what the Chinese allegedly uncovered:
Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.
The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly “sold” into the international market.
Apparently, the global market is literally “stuffed full of 400 oz salted bars”.
If the market is stuffed full of 400 oz. salted bars, what are the chances that the GLD ETF has more than their share? Their prospectus contains this legal out...
Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.
...it's buyer beware in the gold market, no question. Work with a reputable dealer and own physical coins. Should you intend to take delivery of COMEX 400 ounce bars, send them directly to a trustworthy assay lab to verify you are getting what you paid for. If even half of this turns out to be true, the price of real, physical gold could rocket.
UPDATE: The Central Bank in Ethiopia discovered a fake gold bar problem a couple of years ago, as this article in the Museum of Hoaxes attests.
Sunday, November 22, 2009
Naomi Klein And Joseph Stiglitz Discuss The Cause And Effect Of The Financial Crisis
Tyler Durden/ZeroHedge
Alan Greenspan's economic legacy is slowly but surely deteriorating from that of one created by a "Maestro", to the deranged hungover flashbacks of the most inept monetarst dilettante and plutocrat puppet in the history of fiat capitalism. And with ever increasing honest and truthful observations as those shared by Naomi Klein and Joseph Stiglitz in the 1 hour + program attached, courtesy of Fora TV, only the remnants of the quickly evaporating close circle of Bernanke and Co., will have anything favorable left to say for the man who took the mundane task of building bubbles and converted it into rocket science so complex that only a few people at Goldman Sachs figured out how to benefit from it. We encourage all readers to spend some time watching the program before, just like Barney Frank and other bribed politicans, deciding that changing the status quo vis-a-vis the Fed is a step in the "wrong direction."
10 minute excerpt below:
Watch the full program or select from the following clips. We would like to draw your attention to clips 2, 7, 11 and 13
01. Introduction
02. Flawed Economic Model
03. Economic Power and Ideology
04. Collapse of Trust in Legal System
05. Legal Means of Assistance
06. Effects of Bailout
07. How This Crisis Came About
08. New Unregulated Markets
09. Modern Capitalism Separates Ownership and Control
10. Control
11. Government Controlled by Banking Interest
12. Property Information System
13. Protection of Wealthy and Powerful
14. Documentation of Who Owns What
15. New Orleans Troubles
16. Foreclosures are Economic Katrinas
Saturday, November 21, 2009
Hong Kong bankers discover fake gold bars shipped from US
Jim Willie
In 1964 the USGovt introduced the zinc dimes clad with silver. They at least admitted the debauchery publicly. Now pre-1964 silver coins are all considered different, and valued differently too, higher. Rome committed the same coinage fraud 1900 years ago. Their Empire went bust as the city burned almost concurrently. Ayn Rand is a guiding light for Alan Greenspan, the enabling destroyer of the US banking system, destroyer of the US household archipelago, and dispatcher of the US industrial base to Asia. He is the hero icon worshipped by Wall Street. The irony is thick, that his career was spent following Old Europe orders that delivered the slow motion coup de grace to the American Empire. Ayn Rand wrote "If you want to know when a society is set to vanish, watch the money. Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of moral existence. Destroyers seize gold and leave to its owner a counterfeit pile of papers." The Chinese are learning this lesson the hard way, challenged to convert their USTreasury Bonds and USAgency Mortgage Bonds into true wealth before the paper becomes worthless and untradable. Actually, the bonds will eventually be redeemed by the USFed with newly printed money, when an avalanche occurs of foreigners seeking redemption en masse. For almost ten years they have been exchanging their finished products to the US & West for paper with ink on it, a veritable counterfeit pile of papers. The Chinese are cashing in on their paper, trading it for new global power.
NEW TUNGSTEN MINE DISCOVERY
The tungsten deposits come in very high grade ore, located in shallow rectangular deposits dispersed widely across the world, segregated in unusual vault heap leach mineralizations. Yes, these guys are leeches! In October, the Hong Kong bankers discovered some gold bars shipped from the United States were actually tungsten with gold plating. This is the exact same Modus Operandi as the silver clad zinc dimes from 45 years ago. History repeats itself. The parallels to mortgage bond fraud with either subprime borrowers or multiple property titles used in bond securitization is easy to spot. A consistent theme runs through the American management of finance and dissemination of fraudulent assets on a global basis. Tungsten gold bars is a feat difficult to surpass. Credit must be given for not leaving any potential for fraud untapped. The Goldman Sachs front running of NYSE trades with their Unix box is just icing on the cake. Fortunately for them, the FBI hustled the whistle blower off and painted him as a Russian marauder of criminal type. Actually, the front running flash trade device is more like icing on the cake whose main body is the naked shorting of bank stocks done by Wall Street firms, whose protector in the USDept Treasury ordered a halt in the practice after they had finished shorting and needed help from the market in covering. Thus the Banned Bank Short List. What a complete comedy of corruption the US financial assets have become. So word comes of tungsten permeating the banking system. It appears the syndicate might be opening the floodgates for the bankers of the world to begin an attempt to corner the light bulb market!!
No disrespect is intended for the trillion$ counterfeits of superstar grade. Refer to the missing $2.3 trillion Pentagon appropriations announced on 10 September 2001. Actually that is just theft, at least done by patriots and certain allies. Refer to the JPMorgan recorded sales of $2.2 trillion in USTreasury Bonds over and above the total issuance by the USDept Treasury itself. That is counterfeit, by definition, at least done by the financial envy of the world. Refer to the missing $1.9 trillion in Fannie Mae funds documented by USDept Housing & Urban Devmt between the years of 1988 and 2000. That gutting was a presidential skeet shooting mission, maybe to fund libraries for memorabilia. These are dastardly deeds of distinction. These are legacy crimes.
The initial discovery was something like four gold bars, which the Hong Kong bankers drilled invasively to test the contents. Reminds me of drilling the earth and measuring how many grams of gold per tonne. The HK bankers hoped to have 99% gold yield in their drill program for the resident bars. They found something like 1% instead and 99% tungsten. By the way, tungsten sells for less than $70 per ton, which makes its swaps for gold to be 60x more profitable than silver bar swaps. Another handy usage for the Gold/Silver ratio in calculations. The hunt was on. Now not a single assayer on the planet is available, as all are tied up. They have been commissioned to test the gold bars shipped from the United States of Fraudulent Banker America in their own bullion vaults. They use basic methods of four drill holes with direct assay of shavings, but also less invasive methods like electro-magnetic waves to examine the metal lattice structure. When highest level methods are needed, they turn to mass spectrometry. NOW ALMOST NO GOLD BARS WILL LEAVE THE LONDON OR NEW YORK METALS EXCHANGES WITHOUT SOME AUTHENTICATION, AS DISTRUST IS WIDESPREAD.
The global bankers must deal with toxic bonds and phony gold bars. Yes, New York City is the financial center of world, but for fraud. Talk circulates that a president from yesteryear with his Goldman Sachs Treasury Secretary might have swapped the entire contents of Fort Knox. So did they not only lease the national treasure of gold, but swapped it first, then leased tungsten gold? Time will tell, as evidence is being accumulated and compiled. The assayers have also been commissioned to assist in authentication of gold bar delivery the world over from the US exchanges. Current estimates among the gold trader community run well past a few hundred thousand 'salted' gold bars, maybe over a million. When the Jackass inquired from a reliable gold trader source as to the timespan for the swaps, the late 1990 decade was the reply for dates on almost the entire false batches. Actually it is a mountainous batch. So the introduction to sophisticated Wall Street methods of currency management during the Decade of Prosperity had a side game running that were profitable indeed to the guys running the USDept Treasury and White House. In an age where the lines between patriotism and treason are blurred, this tungsten episode brings new meaning to the word HEIST.
For some excellent forensic financial analysis on the fake gold project, called Operation Grand Slam, see Rob Kirby's article. It is entitled "On Doing God's Work: Gold Finger, A New Take On Operation Grand Slam With A Tungsten Twist" (CLICK HEREdated 12 November 2009.
BREAKDOWN AT GOLD EXCHANGES
A Jackass article was posted entitled "Hitmen Contracts to Bust COMEX" in May (CLICK HERE), not without a little stir, even a removal of the article 24 hours later by one website due to its controversial subject matter. The article gave warning. The bust cometh, and it will be spectacular. Enemies come to address the state corruption with syndicate entrenched. The stories told in the press will be peculiar, since told by the victimized establishment. The headlines might be a comedy, with phony reports of foreign subterfuge, when the perpetrators are American and English, who operate from the new Axis of Fascism. The focal point for attacks is actually London at their metals exchange. The early October events included numerous offers by exchange officials to settle gold contract deliveries in cash with a 25% extra vig bonus. Or was it a bribe? Much gold was drained from London on demanded delivery, thanks to a small army of lawyers, a small blizzard of contracts, and a few key judges at the courts. Gold was taken, thus enforcing futures contracts, which happen to be binding contracts. The pressure at the end of November will be worse to make good on gold contract deliveries. Recall the stories back in April for a Deutsche Bank rescue by the Euro Central Bank with a very large (over one million oz gold position) provision made. DBank was in trouble. The pressures are mounting every couple months. Next March will be a climax of the breakdown, or else June.
Some say naively, or rather ignorantly, that nothing in the news points to any breakdowns or extreme pressures. Each delivery month event includes more gold removed from the London exchange, more gold demanded from it, and more movement toward a breakdown. So the next events have even more pressure, with less gold supply and continued relentless demand. Recall also that the exchange, along with the COMEX in the Untied States, exempt the big banks from maintaining 80% collateral when they short gold & silver with paper contracts. Thus the name suppression, or better yet corruption. They are being caught in their naked shorting game. The December 1st events surrounding settlement delivery demands will be more contentious and stressful than October 1st. In sequential manner, the March event will be even more pressure packed, with precious little physical gold in store and more targeted Chinese delivery demanded. The June event will be even more pressure packed still, a backup date for a potential breakdown if it does not occur in March.
The common denominator for the parties demanding gold delivery in London is simple: they are all Asians, all, as in all, and the great majority are Chinese. To say the Chinese are trying to bust the government gold gamers who defend the USDollar is a gross understatement. They use USTreasury Bond credit supply somewhat as leverage, to silence the opposition and critics. One can safely conclude that the US and British banks will be broken with the nexus being their gold management, which underpins the USDollar. Other pressure is sure to mount. Not the kind of pressure you might imagine. Pressure is mounting for senior bank executives and politicians to start revealing the identities, deeds, locations, and dates of the gold tungsten swap, the mortgage bond firehose, and other pervasive frauds protected by the USGovt and British Govt. It might even include producing the true location of the Madoff funds.
GOLD & SILVER BREAKOUTS
The gold & silver prices are moving in lead fashion, and have done so among the currencies for at least the last three months. The major currencies fiddle and diddle (as Johnny Most used to say during Boston Celtic basketball game broadcasts), but gold & silver continue to rise. The Chinese, according to word from connected sources, intend to push the gold price and the silver price relentless upward without explosive parabolic moves and without painful huge selloff corrections. That way, the army of public investors will not lose heart, and will remain on the path, in full phalanx support of the Chinese Govt initiative. The Euro currency has hit the 150 level in mid-October and in mid-November, only to fall back a little. The Euro is not ready for a powerful move to 160 just yet. Such an advance would bring with it a painful effect to German exporters again, not desired. As a result, the gold price in Europe has made significant moves, and is in the process of challenging the 785 high from February. The key to a massive gold bull market is confirmation in terms of other currencies. The gold breakout is being led globally in US$ terms, since the American Peso is the weakest currency on earth outside Zimbabwe. It is being recognized as a Third World banana republic currency. Even the Costa Rican colone currency has made little gains against the USDollar in the last couple months. Bananas are a chief export of Costa Rica. Pura vida! GOLD IS TAKING ITS RIGHTFUL PLACE AS THE PREMIER GLOBAL CURRENCY, AFTER A BREAKDOWN IN THE MONETARY SYSTEM AND INSOLVENCY IN THE BANKING SYSTEM. More...
In 1964 the USGovt introduced the zinc dimes clad with silver. They at least admitted the debauchery publicly. Now pre-1964 silver coins are all considered different, and valued differently too, higher. Rome committed the same coinage fraud 1900 years ago. Their Empire went bust as the city burned almost concurrently. Ayn Rand is a guiding light for Alan Greenspan, the enabling destroyer of the US banking system, destroyer of the US household archipelago, and dispatcher of the US industrial base to Asia. He is the hero icon worshipped by Wall Street. The irony is thick, that his career was spent following Old Europe orders that delivered the slow motion coup de grace to the American Empire. Ayn Rand wrote "If you want to know when a society is set to vanish, watch the money. Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of moral existence. Destroyers seize gold and leave to its owner a counterfeit pile of papers." The Chinese are learning this lesson the hard way, challenged to convert their USTreasury Bonds and USAgency Mortgage Bonds into true wealth before the paper becomes worthless and untradable. Actually, the bonds will eventually be redeemed by the USFed with newly printed money, when an avalanche occurs of foreigners seeking redemption en masse. For almost ten years they have been exchanging their finished products to the US & West for paper with ink on it, a veritable counterfeit pile of papers. The Chinese are cashing in on their paper, trading it for new global power.
NEW TUNGSTEN MINE DISCOVERY
The tungsten deposits come in very high grade ore, located in shallow rectangular deposits dispersed widely across the world, segregated in unusual vault heap leach mineralizations. Yes, these guys are leeches! In October, the Hong Kong bankers discovered some gold bars shipped from the United States were actually tungsten with gold plating. This is the exact same Modus Operandi as the silver clad zinc dimes from 45 years ago. History repeats itself. The parallels to mortgage bond fraud with either subprime borrowers or multiple property titles used in bond securitization is easy to spot. A consistent theme runs through the American management of finance and dissemination of fraudulent assets on a global basis. Tungsten gold bars is a feat difficult to surpass. Credit must be given for not leaving any potential for fraud untapped. The Goldman Sachs front running of NYSE trades with their Unix box is just icing on the cake. Fortunately for them, the FBI hustled the whistle blower off and painted him as a Russian marauder of criminal type. Actually, the front running flash trade device is more like icing on the cake whose main body is the naked shorting of bank stocks done by Wall Street firms, whose protector in the USDept Treasury ordered a halt in the practice after they had finished shorting and needed help from the market in covering. Thus the Banned Bank Short List. What a complete comedy of corruption the US financial assets have become. So word comes of tungsten permeating the banking system. It appears the syndicate might be opening the floodgates for the bankers of the world to begin an attempt to corner the light bulb market!!
No disrespect is intended for the trillion$ counterfeits of superstar grade. Refer to the missing $2.3 trillion Pentagon appropriations announced on 10 September 2001. Actually that is just theft, at least done by patriots and certain allies. Refer to the JPMorgan recorded sales of $2.2 trillion in USTreasury Bonds over and above the total issuance by the USDept Treasury itself. That is counterfeit, by definition, at least done by the financial envy of the world. Refer to the missing $1.9 trillion in Fannie Mae funds documented by USDept Housing & Urban Devmt between the years of 1988 and 2000. That gutting was a presidential skeet shooting mission, maybe to fund libraries for memorabilia. These are dastardly deeds of distinction. These are legacy crimes.
The initial discovery was something like four gold bars, which the Hong Kong bankers drilled invasively to test the contents. Reminds me of drilling the earth and measuring how many grams of gold per tonne. The HK bankers hoped to have 99% gold yield in their drill program for the resident bars. They found something like 1% instead and 99% tungsten. By the way, tungsten sells for less than $70 per ton, which makes its swaps for gold to be 60x more profitable than silver bar swaps. Another handy usage for the Gold/Silver ratio in calculations. The hunt was on. Now not a single assayer on the planet is available, as all are tied up. They have been commissioned to test the gold bars shipped from the United States of Fraudulent Banker America in their own bullion vaults. They use basic methods of four drill holes with direct assay of shavings, but also less invasive methods like electro-magnetic waves to examine the metal lattice structure. When highest level methods are needed, they turn to mass spectrometry. NOW ALMOST NO GOLD BARS WILL LEAVE THE LONDON OR NEW YORK METALS EXCHANGES WITHOUT SOME AUTHENTICATION, AS DISTRUST IS WIDESPREAD.
The global bankers must deal with toxic bonds and phony gold bars. Yes, New York City is the financial center of world, but for fraud. Talk circulates that a president from yesteryear with his Goldman Sachs Treasury Secretary might have swapped the entire contents of Fort Knox. So did they not only lease the national treasure of gold, but swapped it first, then leased tungsten gold? Time will tell, as evidence is being accumulated and compiled. The assayers have also been commissioned to assist in authentication of gold bar delivery the world over from the US exchanges. Current estimates among the gold trader community run well past a few hundred thousand 'salted' gold bars, maybe over a million. When the Jackass inquired from a reliable gold trader source as to the timespan for the swaps, the late 1990 decade was the reply for dates on almost the entire false batches. Actually it is a mountainous batch. So the introduction to sophisticated Wall Street methods of currency management during the Decade of Prosperity had a side game running that were profitable indeed to the guys running the USDept Treasury and White House. In an age where the lines between patriotism and treason are blurred, this tungsten episode brings new meaning to the word HEIST.
For some excellent forensic financial analysis on the fake gold project, called Operation Grand Slam, see Rob Kirby's article. It is entitled "On Doing God's Work: Gold Finger, A New Take On Operation Grand Slam With A Tungsten Twist" (CLICK HEREdated 12 November 2009.
BREAKDOWN AT GOLD EXCHANGES
A Jackass article was posted entitled "Hitmen Contracts to Bust COMEX" in May (CLICK HERE), not without a little stir, even a removal of the article 24 hours later by one website due to its controversial subject matter. The article gave warning. The bust cometh, and it will be spectacular. Enemies come to address the state corruption with syndicate entrenched. The stories told in the press will be peculiar, since told by the victimized establishment. The headlines might be a comedy, with phony reports of foreign subterfuge, when the perpetrators are American and English, who operate from the new Axis of Fascism. The focal point for attacks is actually London at their metals exchange. The early October events included numerous offers by exchange officials to settle gold contract deliveries in cash with a 25% extra vig bonus. Or was it a bribe? Much gold was drained from London on demanded delivery, thanks to a small army of lawyers, a small blizzard of contracts, and a few key judges at the courts. Gold was taken, thus enforcing futures contracts, which happen to be binding contracts. The pressure at the end of November will be worse to make good on gold contract deliveries. Recall the stories back in April for a Deutsche Bank rescue by the Euro Central Bank with a very large (over one million oz gold position) provision made. DBank was in trouble. The pressures are mounting every couple months. Next March will be a climax of the breakdown, or else June.
Some say naively, or rather ignorantly, that nothing in the news points to any breakdowns or extreme pressures. Each delivery month event includes more gold removed from the London exchange, more gold demanded from it, and more movement toward a breakdown. So the next events have even more pressure, with less gold supply and continued relentless demand. Recall also that the exchange, along with the COMEX in the Untied States, exempt the big banks from maintaining 80% collateral when they short gold & silver with paper contracts. Thus the name suppression, or better yet corruption. They are being caught in their naked shorting game. The December 1st events surrounding settlement delivery demands will be more contentious and stressful than October 1st. In sequential manner, the March event will be even more pressure packed, with precious little physical gold in store and more targeted Chinese delivery demanded. The June event will be even more pressure packed still, a backup date for a potential breakdown if it does not occur in March.
The common denominator for the parties demanding gold delivery in London is simple: they are all Asians, all, as in all, and the great majority are Chinese. To say the Chinese are trying to bust the government gold gamers who defend the USDollar is a gross understatement. They use USTreasury Bond credit supply somewhat as leverage, to silence the opposition and critics. One can safely conclude that the US and British banks will be broken with the nexus being their gold management, which underpins the USDollar. Other pressure is sure to mount. Not the kind of pressure you might imagine. Pressure is mounting for senior bank executives and politicians to start revealing the identities, deeds, locations, and dates of the gold tungsten swap, the mortgage bond firehose, and other pervasive frauds protected by the USGovt and British Govt. It might even include producing the true location of the Madoff funds.
GOLD & SILVER BREAKOUTS
The gold & silver prices are moving in lead fashion, and have done so among the currencies for at least the last three months. The major currencies fiddle and diddle (as Johnny Most used to say during Boston Celtic basketball game broadcasts), but gold & silver continue to rise. The Chinese, according to word from connected sources, intend to push the gold price and the silver price relentless upward without explosive parabolic moves and without painful huge selloff corrections. That way, the army of public investors will not lose heart, and will remain on the path, in full phalanx support of the Chinese Govt initiative. The Euro currency has hit the 150 level in mid-October and in mid-November, only to fall back a little. The Euro is not ready for a powerful move to 160 just yet. Such an advance would bring with it a painful effect to German exporters again, not desired. As a result, the gold price in Europe has made significant moves, and is in the process of challenging the 785 high from February. The key to a massive gold bull market is confirmation in terms of other currencies. The gold breakout is being led globally in US$ terms, since the American Peso is the weakest currency on earth outside Zimbabwe. It is being recognized as a Third World banana republic currency. Even the Costa Rican colone currency has made little gains against the USDollar in the last couple months. Bananas are a chief export of Costa Rica. Pura vida! GOLD IS TAKING ITS RIGHTFUL PLACE AS THE PREMIER GLOBAL CURRENCY, AFTER A BREAKDOWN IN THE MONETARY SYSTEM AND INSOLVENCY IN THE BANKING SYSTEM. More...
Wednesday, July 29, 2009
Fed Govt Gold Manipulation 101
Who Stole My Cheese? IMF looting of US gold reserves, Fed’s illegal manipulation of gold market
When the International Monetary Fund was created at the Bretton Woods international conference in 1944, the member nations were asked to chip in a certain quota of money, related to the assessed size of that nation’s economy. This contribution was to be made 75% in that nation’s own currency, and 25% in gold, or in “currency redeemable in gold”—in other words, the dollar. This is how the US dollar became the “reserve currency of the world,” held in great volume by the central banks of the other participating countries. We agreed to redeem these dollars for gold for the other central banks upon demand, at the fixed price of $35 per ounce.
This became quite a problem over the years. The problem was that in order for the system to actually work, the US would need t very strictly control the value of its currency. This would meant that America couldn't go printing money willy-nilly whenever they needed to pay for more social programs, or for military adventures. But of course, that was exactly what the US Congress proceeded to do over the next three decades. By 1971, the dollar had inflated considerably, and foreign central banks had looted the US gold reserves, so the Federal Reserve were only enough to cover 22% of the dollars in existence. West Germany and Switzerland pulled out of the Bretton-Woods system, and the demand for gold payment from other central banks increased even more, because those banks could then turn around and sell this gold on the open market at tremendous profit. The US dollar was standing on a precipice.
This was what motivated President Nixon to make a unilateral decision, without consulting the IMF, to close the “gold window” and stop redeeming dollars in gold. This was the final nail in the coffin of the Bretton Woods system, and unhinged the value of the dollar from gold completely. The international banking elite was enraged. Nonetheless, while it did not stop inflation, it did slow down the looting of Fort Knox and put the dollar on life support for a few more decades.
But “life support” is exactly what has been required ever since then. Because the US still does redeem dollars for gold for foreign central banks, via the IMF’s own currency, SDRs (Special Drawing Rights). Since 1975, gold has again been a legally traded commodity in the United States. And while the price of gold has fluctuated considerably, it has since then always been much higher than $35 an ounce. Presently the market value of an ounce of gold is inching towards $1000 an ounce. Yet the US is still redeeming SDRs for a mere $42.50 per ounce of gold so that they can be sold to large bullion banks and dumped onto the open market (a process technically called “dishoarding”). Our gold reserves are still being looted by the banksters.
But they are doing this for a specific reason. They need to dump gold on the market at below market value to keep the price of gold artificially suppressed, or else the fiat currencies of the world would collapse, and businessmen would begin to insist on doing business only in real money: gold and silver coin. To hide what they are doing, IMF-controlled central banks are allowed to report their gold certificates (paper that represents the gold that they have “leased out” or dishoarded) in the same column on their balance sheets where the gold reserves themselves are reported. So nobody actually knows how much gold is in reserve anymore. The last independent audit of Fort Knox happened in 1955. One was attempted during the Reagan administration, but the Federal Reserve thumbed its nose at the President, and the audit was never completed.
The evidence of dishoarding being used to suppress the price of gold (and thus prop up the fiat currencies) is overwhelming. In fact, Alan Greenspan actually admitted it in front of Congress on July 24, 1998 when he said: “Central banks stand ready to lease gold in increasing quantities should the price rise.” An international organization called the Gold Anti-Trust Association (GATA) has been formed, consisting of gold investors who resent their market being manipulated secretly and illegally by banks with the collusion of government. They even took out a full-page ad in the Wall Street Journal in recent years informing investors of what was going on. Strangely the ad, and all other public pronouncements from the group, have been ignored by the financial press so far. More...
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