No endorsements here, just some interesting food for thought.
ORO (4/19/2000; 0:05:39MDT - Msg ID:29003)
Oldgold stirring the pot
Oldgold, thanks for stirring our little pot of soup. Some stuff has gottent
stuck at the bottom.
Rather that try to put Trail Guide's point across for him, which he does
very well himself, I will just point out this:
1. There has been a gold standard in effect through the 80s.
The US overdrew its gold and the system collapsed.
2. There has been a dual physical gold and paper gold standard since 1989
or so. The US and UK overdrew this by 1997.
3. The Asian collapse, though it would have happened eventually anyway, was
a planned event that saved our sorry @$$es for three years.
4. The bulk of the dollar support mechanism (remember that we did not have
a current account surplus in three decades) was a series of debt traps for
various emerging nations that were indebted by tricks and by force. These
debtors needed dollars to pay off interest on dollar loans so that they could
buy life's basics on the global markets.
5. The idea of a debt derived money offering stability in economic function
and in prices is an absurdity on the scale of defying gravity, absolving the
world from Newton's law. Without an anchor in a commodity money, all debt money
spirals out of control and into worthlessness. No conceivable system can make it
otherwise. Gold is to finance and money as the speed of light is to Einstein's
law of relativity. Gold answers the question "relative to what?".
In short: for a monetary system to work, someone, somewhere, must be able
to exchange the currency for gold AT A FIXED RATE. We call this parity.
6. The global dollar debt system is collapsing. Soon, only the US and a few
"friends" will be left owing dollars and owning the "bag" - our debt.
7. The system could not work if it was well known even among the top
bankers, because their attempts to get into gold for defense against this would
have killed the system. Even now, when it is apparent, bankers refuse to believe
that their product is as toxic as RJR's and Columbia's main export combined (and
they work in remarkably simillar ways).
Finally, say thanks for the low gold and silver prices you are getting and
pray that it can continue. Next thanksgiving tell your familly to give thanks to
the Germans, Japanese, Koreans, Chinese, Indians, Italians and others who feed
and clothe us half the time (actually 56% in 1998, 60% in 1999).
Some details and discussion follow:
We have fought a war and have lost it. The war that was fought was for
financial hegemony through the issue of the reserve currency for the world. In
essence making the US serve the role of banker to the world. The war was lost in
1968 and defeat conceded in 1971 and again in 1973. With much support from a
world scared of a complete freeze-up of commerce, the dollar was resuscitated
just in the nick of time and a new gold convertibility standard was put together
by the same bankers that pushed for and got the Fed and then Bretton Woods. JP
Morgan said "gold is the only money". He said so well into the Fed's life when
gold was no longer circulating in great volumes.
Fiat debt money is incapable of maintaining value without a fix to a real
item - notably the precious metals, and the most prominent of them, gold. The
dollar is two different things at the same time. Within the US is only a product
of debt, the IOUs of all us credit card using and mortgage and car loan paying
people that the bank sells to the producers of the houses, goods, autos we buy
with "credit". Outside the US, the dollar is much the same, until it meets the
BIS for transnational settlements of imbalances. There, the central banks trade
gold for dollars at an unknown exchange rate much greater than that in the
(This is a premium that is payed for the right to buy gold rather than the
gold itself - this way it is kept off the books). The private markets provide
the non-US private bankers an opportunity to hedge their dollar assets and
those of their clients. The US banks and their UK allies produce the paper gold
needed for settlements of dollars into gold debt.
The fact that someone - somewhere - can settle over $100 billion dollars in
unbalance "imbalance of payments" every year with gold, is what makes the
dollar's value relatively stable.
The US and UK bankers had completely overstepped their bounds in the
process and issued way more paper gold than there could ever be redeemed (the
BIS and OCC statistics just deal with derivative contracts, these are just
mirrors of a much larger gold banking system which underlies trade and at which
gold settles the dollar through the SDR). So long as the gold credits were
believed to be redeemable, the system was credible.
When it lost credibility, in 1996 - 1997, the imperative became the classic
wildcat bank strategy of moving the gold in the back door when the inspector
comes to look at your reserves, and transfering it to the next bank just as the
inspector is on his way there. The whole dynamic is now the satisfaction of gold
demand by whatever means necessary so as to maintain credibility of the paper
and thus prevent a "bank run". The Washington Agreement was the statement by the
EU that they will not put in jeopardy any more of their gold, that their part in
the dollar support system is over. Since that date, the US has been exporting
some 800 tons of gold (annual rate) officially, and an unknown ammount "below
In the meantime, the bankers in the EU and the UK have been redeeming their
gold liabilities to their clients with American gold liabilities. When actual
gold ran out and gold yet to be mined (or found or explored for) was used for
settlement, some time in the late 80s, this part of the dollar support system
was born. The part US banks played was (at first) small, US market share in gold
banking was some 20% in 1995. By 1997, it passed 35%, by mid 99- over 42%, now
it probably passed the 50% mark according to OCC numbers (BIS numbers for the
end of 99 will only come out in June).
This process reflects the change of responsibility for managing the dollar
from the losers of WWII to the "winner". The Fed is responsible for the
viability of the liabilities of US banks. These liabilities are what we call
dollars if banks can't supply dollars they owe, the Fed supplies them through
the treasury and directly.
The gold liabilities of US banks are quickly growing so that they will soon
hold all of the dollar side of the global dollar-gold settlement system. When
the transfer of gold liability from the UK to the US is complete, there will no
longer be any reason for Europe and the Oil nations, nor China to assist in
controling the gold ecxhange rate. At that point, the gold obligations will be
terminated and gold contracts and accounts drawn on US banks will be settled in
The time for that is not here yet. I would venture a guess at the time
frame of the end of this year. At current rates, the transfer should be finished
The terms for the end of the game were set, in part, in the early 80s.
Since then, there had been a tremendous effort by the US government to stop use
of American resources by American and foreign consumers. Major finds of gas, and
particularly, oil were capped and not allowed to go into production. Forest
lands were set aside from loggers. Gold mines were induced not to explore nor
produce gold within the US. Why? So that when the end does come, the US will
have cash traded commodities to sell - so that when the US can't buy on dollar
credit anymore, it will have something to trade while the country is
The US tried to play the technology card by assisting US tech companies in
gaining investments, that was done by making them appear more attractive to
investors through SEC and IRS accounting rules regarding ESOPs and merger
accounting that lower the cash costs of top talent and make losses seem like
earnings. But the "social adjustment" oriented school system produces mostly
good salespeople and hamburger flippers. India has more programmers than Silicon
Valley, and Taiwan and Singapore produce more chips. The best computer and
software design is done in Ireland and the Norse countries, and wireless
technology is mostly a Finnish, British and German industry. The only way to
eliminate the disadvatage in education is to import as many tech pros as we can
before they stop wanting to come here. If 10 million 30-35 year old techies can
be imported over the next 5-10 years, the US may have a chance to survive as the
The bank debt reports published by the BIS and the IMF tell the story in
all of its gorey statistical details. The dollar debt outside the US is
collapsing as it is turned from emerging market and transnational corporate debt
into American debt. The US imports produce a flood of dollars that pay off the
liabilities of Emerging nation's corporations, governments and banks. It is the
need by these to repay dollar loans that has produced demand for dollars abroad.
Now that they no longer borrow in quantity and have been reducing their debt,
these countries are slowly reducing the international value of the dollar and
adding themselves to the long list of dollar creditors. The only dollar debtors
left are the UK, some HIPCs, and the greatest debtor ever, the US.
The story is simple. The debt trap set for the emerging markets by 3%
dollar interest rates in the early nineties, was sprung in 1997 by a joint
effort of the Fed, the IMF and the BIS. The IMF demanded self destructive
policies from the countries it was supposed to help, the BIS raised their bank's
reserve requirements (actually it was their net asset ratios - a.k.a. ccapital
adequacy - but few understand what that is and reserves are a close enough
descriptor), and the Fed raised interest rates by all of 1/4% and the whole
Asian economic system collapsed.
This generated the requisite dollar demand, stopped Asian gold demand,
produced an Asian gold supply, and allowed EU and US banks to buy out many Asian
corporation's assets that they were barred from owning before. Hyena and Vulture
LP had their day. We were spared disaster for another three years.
-- Forrest Bishop Manager, Interworld Productions, LLC Chairman, Institute of Atomic-Scale Engineering http://www.speakeasy.org/~forrestb
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