Gold / Fiat Money

---

Wars are Fought to Keep Oil Under Dollars Control
March 24, 2004

By John Wilmerding

Enron, telecom, and the other unprecedented U.S. corporate
financial scandals were the warning sign. But government didn't
act, partly because Enron and the windfall profits generated by
manipulating California fuel prices in 2000 helped (s)elect Bush
into the White House. And everything the president has done
since then has been in favor of profits for the big corporate
entities that now essentially run the U.S. government.

The president's handler and chain-man, Vice President Richard
Cheney, rakes in illegal profits from Halliburton's massive
exploitation of the Iraq attack while almost no one seems to
notice. Rock-ribbed reactionary Supreme Court Justice Antonin
Scalia goes duck-hunting with people he has to sit in judgment
on the next week.

The rich everywhere seem to be on the take, winking at each
other right and left, but they are wrongly taking us for sitting
ducks. The poor are getting ready to eat them alive, and we
will have the state for dessert.

For years the wiser on why gold prices aren't going up, GATA,
the Gold Anti-Trust Action Committee, is trying to break the
Federal Reserve's and others' cartel-manipulation (downward)
of gold prices. Ironically, they are trying to do it on as
rationale of smart investment.

The operative theory says that the Federal Reserve, which
controls U.S. financial policies, is in cahoots with people who
know that the dollar would drop hugely in value if its gold-price
value were allowed to truly float in the commodities market.
So the Fed grabs huge chunks of the U.S. gold reserves in
Fort Knox and elsewhere and mortgages them -- commits
them to futures contract sales -- to keep gold prices down.
This is illegal and done in a clandestine fashion.

Another way the dollar's value has been propped up in recent
months is by huge Japanese buying of dollars. Basically they
are minting yen like crazy just for the purpose of buying dollars,
hoping either to save the U.S. economy or perhaps to buy
everything of value in the United States, depending upon your
point of view, or perhaps your fear.

So in recent months when other precious metals and
commodities have been going up in price to reflect the
several-years-long decrease in the dollar's buying value, the
price of gold has held rock-steady ... until now, that is. There
is speculation that finally a critical mass of investor
understands the statistical proofs of market manipulations,
and we are beginning to see a run on gold (people buying
lots of gold futures) that is becoming consistent.

If GATA's theories are correct and the gold market has been
held way low for a long time to keep U.S. inflation manageable,
it is possible that the price of gold in dollars could even
double or triple go beyond even that. If the value of the dollar
starts to become truly elastic to gold, then the dollar may have
to lose 50 to 75 percent of its buying power.

The result for U.S. consumers will be a deep, deep recession
or maybe even a depression as the U.S. economy finally
re-gears away from "services" and back to the production of
the food, clothing, shelter, and other necessities that the
U.S. populace needs. Long-term, this will be a very healthy
thing for the United States, but in the short term we could see
drastic shortages of gasoline, fuel oil, and other pricey and
limited commodities and consumer products that will flee the
United States and begin to chase the newfound buying power
of Europeans and people elsewhere.

We in the Committee for Equity-Restorative Justice observe
that this is why wars are fought: to maintain the dollar's
hegemony over oil, the primary strategic (read: military)
commodity. The theory here goes that the Saudis and others
rely on the United States to prop up their autocratic regimes
and in return support the 30-year-old fiat that has them
accepting only dollars to buy oil. This means that other
countries have to maintain significant reserves of dollars in
order to keep their oil market share. But if the bottom falls
out of the dollar's buying power, then the petro-dollar -- the
dollar as oil's fiat currency -- is doomed. This will also spell
the doom of the U.S. neo-cons' admitted plans for global
military and economic domination for the rest of the century.

Bottom line? If gold's value increases to some of the higher
estimates -- goes from $400 to perhaps $1,700 an ounce --
we in the United States will be looking at gasoline and heating
oil that runs between $5 and $10 a gallon.

Unthinkable? Think again; it's very possible. People in many
other countries, including Europe and Britain, for years have
been paying two, three, or even four times as much for
gasoline as we do here in the United States. Why? Because
our dollars have had such unwarranted buying power for so long.

Serious economists note that the United States produces little
of its essential commodities and industrial goods anymore,
and consequently is running up a monumental
balance-of-payments deficit. There are signs that the United
States is now truly desperate to prop up its economic statistics
and maintain the confidence of international financiers.

One of these signs is the recent reclassification of burger flippers
in fast-food restaurants as "manufacturing jobs." That should
boggle the mind. So many real U.S. factory jobs have been
exported that the country is propping up the job statistics with the
lie that burger flippers are manufacturers.

More to the point, about 2,000 tons of gold in storage at West
Point were recently reclassified from "deep storage" to "custodial
storage," which can mean that it is being held there for delivery
to a buyer or series of buyers.

It is this kind of thinking that caused the Enron and telecom
debacles -- accounting sleight-of hand to operate huge confidence
games that are robbing us and our children of future security and
opportunities. That and mortgaging our children's futures to
prosecute immoral wars that we can only lose.

Great international economic "corrections" are now the only way
that the world will lurch toward economic justice and reduce the
disparity in wealth and resources between the rich and the poor.
And millions upon millions of people -- possibly even billions of
people -- may die unless we begin to manage our economic
affairs better.

If the media begin to report things fairly, the scandals of this
presidency will include the bankrupting of the United States. I
predict here that this will be illustrated will be through
revelations of how many U.S. military service people are dying
of wounds and illnesses incurred in Iraq.

The U.S. economy today is a one-trick-pony, its only trick being
its efficient machinery for killing people, a nation of predatory
weapons of mass destruction. And we, the doves, are going to
put them out of business.

Non-violently, of course!

Gold / Fiat Money

---

Meltdown Near? Open Thread
March 11, 2004

Rich Lancaster notes: This is interesting.

Almost everyone over 5 years is at or below ZERO and Citi are up 60%, what
is wrong with this picture!!!??

Here's a piece of conjecture for you, using Machiavellian deduction logic:

JPMC has been using Freddie and Fannie as losing counter parts in their derivatives scamming! Every derivative contract needs a counter party, and in the case of JPMC and Citi clearly their counterparts are the losers so the banks can win.

I suspect there are many of the Fortune 100 that are controlled indirectly by these two banks - who have tremendous leverage due to the debt burden of the Fortune 100 (I'd love to see a report on the bankers who sit on the boards of these companies - it would tell a story fer sure). The companies, like Enron, allow a JPMC to come in and set up, with the help of bank consultants (like Arthur Andersen), offshore money laundering facilities in the form of derivative and currency trading.

Of course the bank is then in reciept of massive insider knowledge on the trading movements of the company and due to their ownership and indirect control of the Fed they are also aware of interst rate policy, etc. This is how they are able to weave together $50 Trillion in derivatives without fear of a massive blow out, they own or indirectly control all of the moving parts.

I'm sure I've got aspects of this wrong, but the general picture I think is OK.

Gold / Fiat Money

---

Gold All Comers Invitational
January 06, 2004

With gold at a 14 year high and the dollar crumbling, its a great time to own the yellow metal! Share your favorite gold stocks, mutual funds, tips, opinions and any other ways you see to profit off the rise in gold. Your tips will be seen by thousands of readers each day! Go Gold! Power to the POG!!!

Gold / Fiat Money

---

Inflation v. Deflation
December 09, 2003

Inflation and deflation are monetary phenomenon. The fact that prices rise or fall is not inflation or deflation per se, that is just the visible effect. The Feds thinks that they can contain deflation, because they think they're in charge of the money supply. Just print more money and the problem is solved, right? That is what they have been talking about and doing for the past few years. They think lowering interest rates will inject money back into the system. And it has, so far, via the home refinance market, lower credit card payments, increased margin debt etc. Thus we have had a nice recovery. Business is booming, commodity prices are high, and the POG is high, which would seem to signal inflation.

But if you look at these Steve Puetz charts, and listen to him, he's saying that it is just a temporary phenomenon. Like throwing gasoline onto your dying campfire. Nice and bright for a few minutes, but then it will die back down to embers, and you've used the gas that you need to get yourself home in the morning!

So everyone has taken on debt because it was easy and that really juiced the economy, but people can't take on any more. Can you? So that's why M3 is falling. Money supply was first increased, then it was borrowed, spent, and now it is gone. Debts? How do you pay them off if you didn't have any money in the first place? If people are unable to keep up with their payments on debt -- which becomes likely once interest rates start to rise -- the cycle is reversed right down the chain. People default, causing others to tighten, loans stop, loans are called, liquidation begins in earnest and the money supply growth goes negative, like it is right now (see chart above).

But there is a lag between the change in the money suppy and its effects. We're just seeing the effects of the increase in money supply, and its already falling been falling for some time now! So we should start to see the effects of the falling money supply shortly. The gas on the fire has made everyone optimistic. Look at how pretty the economy is - best in 20 years! The Dow is near 10K, Nasdaq 2K, unemployment is down, growth is up. But if times are so good, why is the price of gold so high? Because the money washed over all asset classes indiscriminately, like gasoline, and is making them burn brightly. Don't believe the good news for a second, this economy and this system are gravely ill. The economy is rotting from the inside out, and the foul stench of decay is still hidden from most people's perception.

When prices start to collapse in the market, people will sell for liquidity. This will drive markets down further - the whole cycle in reverse. The anti-bubble. "Investors" wil sell their gold, because in the end, they were just speculating -- out to make a quick buck. The gold bugs will hold, but it is the marginal buyers who affect the price. Same for commodities. There are engineers here in Taiwan who are speculating in the DRAM market -- locking in prices on a contract, then quietly dumping it on the spot market, and making a nice profit. The economy here is 'good' too.

So everything will fall in value - but what will rise? Curiously, the dollar. Why? Because everyone's debt is denominated in dollars, so there is demand for them because people need them to pay off their debts. Even though it is ultimately worthless, people are fooled by the illusion. Their perceptions have not yet caught up with reality.

At some point in the cycle, however, the illusion is broken, and people forget about their debts. They realize they'll never be able to pay them off. Instead, they'll use what money they have, or better yet, use borrowed money to buy commodities, real estate, gold, etc. because they're switching out the bad money for good. This is where the hyperinflation begins.

In the end, the question of inflation or deflation has to do with how people feel about paying off their debts. If they think they still can do it, we'll have deflation because people will demand dollars. If they give up hope, that is when the free for all will start with inflation then hyperinflation.

My vote is that people will try to fool themselves for a little longer. It is much easier than facing up to the ugly truth.

On that cheery note, never forget the two fundamental rules of speculation: (which I learned from a late 20th Century issue of Esquire magazine)

1) Don't Panic!
2) Panic First!

Cheerio!

Michael

Economics

---

What Would You Do?
November 19, 2003

What would you do if you woke up one morning, fired up your browser, and were faced with the strange creature above staring back at you? No matter what you did, you couldn’t get out to the internet. This cheerfully sinister little space bug man was blocking your path.

This is what happened to me on Monday, and it was a terrible surprise. I thought I’d been hacked, and this little man hardly looked cute to me after trying again and again to get through him. In truth, this was some kind of a new security feature by my ISP here in Taiwan. I don’t know if you’ve ever been locked out of the internet, but it is a terrible experience.

I was so happy to be back online that I thought I’d finally put up a new entry on the new blog. Life has been busy lately for both me and my partner Rich Lancaster. We run the site together from opposite sides of the planet – Rich in Seattle and me in Hsinchu, Taiwan. We meet out here in cyberspace. This was my week to put up the links on the homepage, but I was locked out, so I couldn’t. My apologies!!

Taiwan
I’ve been in Taiwan for about 3 months now, and it is interesting since I don’t speak Chinese. But it is not really necessary to function, since Taiwan is part of Western Civilization, and Western Civilization is basically ‘plug and play.’ I’m basically a functional illiterate here, but you don’t have to be able to read in the plug and play world. All the elements of western society are here: Roads, cars, busses, modern department stores and grocery stores.

I have been thinking about the signatures of Western Civilization – what are some of the defining characteristics? Feel free to add your comments below on what you think. To me, it has to do with roads and the internal combustion engine, allowing for the expansion outward. Western Civilization is characterized by sprawl, even in a country as tiny as Taiwan. One thing is certain, though. Western Civilization is huge. It encompasses the planet.

And you know what they say, ‘The bigger they come, the harder they fall.’

China
Being so close to China, I hear a lot more news. The problem for Taiwanese manufacturers is the same as for American or European ones. China is simply flat out the cheapest place to make anything, so all production is moving there. I didn’t know how much until I moved here, but Taiwan makes a lot of computer equipment. They are number one in market share for 14 computer products, including:

Notebook PCs, LCD Monitors CD-R Drives, CD-RW Drives, the disks themselves, DVD Drives, PC Cameras, Ethernet Cards, Ports, Hubs, ADSL Modems, Wireless LAN devices, Analog Modems, IC Foundry, Mask ROM and IC Packaging

Amazing for a tiny country of only 22 million. But alas, all of this production will be moving to China. What will Taiwan do? What will we all do? This is the great hollowing out of industry that is happening all over the world so that China may work hard and join the ranks of Western Civilization with the rest of us.

I just wonder if China joining the party will be the end of the party for everyone. How will planetary systems deal with a billion more cars, refrigerators, air conditioners, and all the other trappings of the good life? We’ve already taxed global resources to the max. To say nothing of the fiat currency system upon which it is all based. Gold is really heating up now. She kissed $400 yesterday. Rich and I have had the debate going since our predictions last year. I didn’t think Gold would get past $400 this year, while he predicted a high of $450. He’s got a month & a half for a 12% rise or so…

It is early for you, but it is late for me. 10:30 pm is bedtime in Taiwan, but market open time in the U.S. Stocks are off to a positive start…barely. Gold has stood back down to 397. She’d have to fall a long way for my prediction to come true. The winds of inflation and uncertainty seem to blowing too hard for that to happen.

Cheers.
Michael

Gold / Fiat Money

---

Tipping Point for Gold
November 15, 2003

Gold still hovering around the mid to high 390's - I think in the grand scheme of things the $400 mark will be considered from an historical perspective as the Tipping Point for the POG.

I've not written off a total collapse in commidity prices yet - ANYTHING CAN HAPPEN - but I am detecting inflation starting to really make a difference. A friend of mine in construction said lumber and other products are rising astronomically right now and he's being told to expect more of the same by his suppliers. I think the monetary stimulus is really kicking in for good and bad - the veneer will come off completely over time but for now no one is putting it all together in the mainstream. We're living off the rarified exhaust given off by the super heated monetary engine - called the US$.

RL