Picasso Dreams

Gerald Celente: John Corzine and The Great U.S. Bank Holiday

There are many insiders who believe that January will be the biggest ever market crash leading to a bank holiday.  Gerald Celente has a very good track record.

Alan Greenspan: Gold and Economic Freedom

"Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."  

Gold and Economic Freedom

by Alan Greenspan

Published in Ayn Rand's "Objectivist" newsletter in 1966, and reprinted in her book, Capitalism: The Unknown Ideal, in 1967.

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one — so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World War I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline — argued economic interventionists — why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely — it was claimed — there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form — from a growing number of welfare-state advocates — was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which — through a complex series of steps — the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

U.S. asset managers worried Obama could confiscate gold

Speaking at the FT Silver conference in London yesterday, lead-off speaker John Levin, HSBC Bank's Managing Director, Global Metals and Trading (HSBC is one of the world's top precious metals traders and its vaults in the U.S. and Europe hold huge holdings of gold and silver bullion) recounted conversations with some of the U.S.'s top asset managers controlling massive amounts of capital asking if HSBC had the capacity in its vaults to store major gold purchases.  On being told that the bank's U.S. vaults had sufficient space available he was told that they did not want their gold stored in the U.S.A. but preferably in Europe because they feared that at some stage the U.S. Administration might follow the path set by Franklin D. Roosevelt in 1933 and confiscate all U.S. gold holdings as part of the country's strategy in dealing with the nation's economic problems.

Read the full story here.

Gerald Celente: Crash of 2010 inevitable

Collapsing the House of Cards: Derivatives Meltdown and War on the Horizon

I found this long, fascinating and frightening article on Pimpin Turtle and I think it's something everyone must read, despite the length and the language.  Time is of the essence.  In the meantime, buy as much gold and silver as possible, load up on essential survival items, get ammo while you can (most places are sold out), and be prepared.  D-Day is about to come.  It might take a few days or weeks to fully unravel, but October is going to be hell.  The dollar is officially dead in October.  Get out of the currency while you  still can.

The first issue involves the house of cards made up of derivatives.  Pimpin Turtle has done a great job of explaining the situation:  

Derivatives Meaning = Lets say: A bank has a deposit of $1000 - they are suppose to only lend up to 90% of that deposit out. So they then lend $900 out to someone, now they add that $900 loan to "deposits" - because it is seen as money in the bank. So, now they took that $1000 and made it to $1900 as deposits. So now they are able to loan 90% of $1900 - so they loan $1710 to someone else. Once that happens, again they can add that $1710 as money in the bank. The cycles goes on and on - until the reality is quadtrillion - some sayquintrillions is loaned out - in money that is not actually there. Thus we have a house of cards that has no base and that is WHY the banks - don't actually have all the money that are in deposits in the banks. So that means - what you think you have in the bank in the form of money - is NOT THERE!

Are you with me? Do you understand how Derivatives work now - in the most simple terms?  Do you now understand, banks have not put those derivatives on their books - but come Sept. 30th 2009 - due to new banking standards - derivatives need to be put on the books and when that happens - the banking industry will most likely come crashing down.

There is lots more info on the site.  I would prefer to just put a link to it all, but most people are adverse to clicking on a bunch of links, preferring to peruse headlines, so here are a few more words of wisdom from the PT.

Question: Have you heard on MSM the following:

China is defaulting on their derivatives contracts - they say it was done illegally and a scam from the banks?

China is pushing gold and silver to it's citizens to buy - the Chinese government are runningcommercials like it is soap on their T.V. constantly?

Hong Kong, Dubai, and Germany have called their gold in from storage from the U.K. and the U.S. - for the first time ever?

The U.S. State Dept. informed all of the Embassies to have local currencies on hand, that will last them a year by Sept. 30th?

The U.S. bond market has been missing China and other countries - they have stopped purchasing our debt? Besides how our bond buyers are now "indirect" buyers? ( in other words the Fed is printing the money as no tomorrow and buying the U.S. debt themselves through "friends")

The amount of money that has been printed up since Sept. 08, that is now new paper of Trillions and Trillions of dollars, created out of thin air?

You need to be aware that this is the derivatives time bomb that Warren Buffet warned us about, though he didn't listen to his own advice.

While I am on my high horse, I just found this post from Washington's Blog, alleging that the US may be using hedge funds to buy its own debt.

Everyone knows that the American government is gaming the market for treasury bonds to some extent.

For example, the government has itself bought some U.S. Treasuries.

Some writers, such as Rob Kirby and Ellen Brown, go much further, alleging that Bernanke and the boys have also used hedge funds in the Cayman Islands to secretly buy huge sums of U.S. treasuries using dollars printed by the Federal Reserve, while pretending that independent "Caribbean banks" are doing the buying. See this, this and this. I have no idea whether or not they are right.

Perhaps most dramatically, Keith Fitz-Gerald (Contributing Editor to Money Morning, Investment Director of the Money Map Report and editor of the New China Trader) - who has seemed like a very level-headed guy in the past - is now claiming that the U.S. government has recently changed the rules so that the Fed can itself buy U.S. treasuries but claim that the buyers are foreign:

The U.S. Government wants the public to believe that China, Japan and Europe are still happily buying U.S. debt to fund the American economic turnaround. The only problem is - they're not...

The reality is that the Treasury changed the way U.S. debt is accounted for when purchased on the open market. U.S. debt selling on the open market can be considered as having been sold to "foreigners" even if the purchaser was the Federal Reserve! Voila! A sleight of hand by the U.S. Government, and China and Japan can appear to be buying debt while at the same time selling debt.

If Fitz-Gerald is right, then the story that China was a net seller of U.S. Treasury bonds for the first time ever in June takes on added significance. And the claim that China's bond purchases have increased recently loses credibility.

And via Bloomberg:  

Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.

“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”

The powers that control the world need a scapegoat.  I believe Part One is manufacturing a pandemic like Swine Flu (lets blame economic collapse on a man-made influenza virus, not the bankers).  It gives the government the ability to seal borders and declare martial law.

Part Two is war with Iran.  This is because ISrael wants war and doesn't give a flying fuck about the US of A because , after all, Israelis are "the Chosen Ones", or at least they believe so.  Israel knows that the US has no money left for wars and no public support for a war against Iran.  Mossad will be up to its usual tricks, creating a false flag incident to mobilize Americans to attack Iran.  It will have to be something big, with more deaths than their past actions on September 11, 2001.  Some have prognosticated that this action will be blowing up several U.S. carriers in the Persian Gulf.  We know that it will probably involve Germany, because despite Germany's lack of support for Iraq and Afghanistan, the boobs at the Pentagon and Mossad offices are carting out Osama "I have been dead for eight years" bin Laden, who from the grave states that Germany will be next.  We cannot forget our Canadian friends, since hey have more resources than their southern neighbor and this crucial in funding Armageddon in the Middle East, so there will likely be some attack against Canada/Canadians, too.

Since time is of the essence, expect these false flags and manufactured pandemics (whether they are real or not, Baxter created the virus and possibly others) in the next seven weeks, if not sooner.

Please, I ask those reading these words to have an alternative to dollars (go to the bank and order euros or Swiss Francs or Danish Krone).  If you are broke, use every bit of your last resources to secure survival essentials - medicines (preferably alternative), food (rice, flour, grains - and keep them in sealed containers to avoid bugs (but bugs are protein and just so you know, US cereal manufacturers can have up to 10 percent bugs in their cereals per FDA guidelines, so chances are pretty high you have been eating bugs for years), water purification tablets, water, guns and ammo, a good knife, maps of your local area, passports handy, and a good bug out bag.  A bug out bag is something you create so that in the event of an emergency, you just grab your bag and go.  It has non-perishable food, flashlights, copies of important documents, money, appropriate clothing, tools to build shelters, etc.   Google survivalism and you will find all you need and more.

You have the freedom to choose not to do anything, to assume that this is just hysteria from a long-time bear.  If you think economic recovery is possible any time soon, please don't base your ideas on the lies told by the bankers and politicians.  If you haven't trusted them in the past, you have no reason to take what they have to say about war and finance at face value.  

Today, Obama said, "Although I will never be satisfied while people are out of work and our financial system is weakened, we can be confident that the storms of the past two years are beginning to break," said Obama. "In fact, while there continues to be a need for government involvement to stabilize the financial system, that necessity is waning."  (Source:  CNN)

That flies in the face of the words from Nobel-winning economist Joseph Stiglitz.  Who do you believe, a lying politician or Nobel-winning economist?

Not much else to say.  Take care.  Be safe.  Prepare for the worst and hope for the best.

New Monetary System?

The G-20’s Secret Debt Solution
11-13-08

by Larry Edelson  

If you think this weekend’s G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks … think again.

Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.

I’ve been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I’m about to tell you now is not on the G-20 table this weekend.

Furthermore, I believe the end result will make my $2,270 price target for gold look conservative, to say the least. You’ll see why in a minute.

First, the G-20’s motive for a new monetary system: It’s driven by and based upon this very simple proposition …

    “If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”

I call it …
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.

“The G-20’s Secret Debt Solution”

It would be a strategy designed to ease the burden of ALL debts — by simultaneously devaluing ALL currencies … and re-inflating ALL asset prices.

That’s what central banks and governments around the world are going to start talking about this weekend — a new financial order that includes new monetary units that helps to wipe clean the world’s debt ledgers.

It won’t be an easy deal to broker, since the U.S. is the world’s largest debtor. But remember: Debts are now going bad all over the world. So everyone would benefit.

Fed Chairman Ben Bernanke … Treasury Secretary Paulson … President Bush … President-elect Obama … former Fed Chairman Paul Volcker … Warren Buffett … and central bankers and politicians all over the world agree a new monetary system is needed.
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.

So they’ll start hashing out the details to get the new financial architecture deployed as quickly as possible.

If you think I’m crazy or propagating some kind of conspiracy theory, then consider the historical precedent …

To end the Great Depression in 1933 Franklin Roosevelt devalued the dollar via Executive Order #6102, confiscating gold and raising its price 69.3%, effectively kick starting asset reflation.

Only this time, it won’t be just the U.S. that devalues its currency. The world is too interconnected. Instead, the world’s leading countries will propose a simultaneous and universal currency devaluation.

This time, they will NOT confiscate gold. There would be riots all over the globe if they even mentioned the “C” word.

But they don’t have to confiscate gold. Here’s one scenario …

They cease all gold sales and instead, raise the current official central bank price of gold from its booked value of $42.22 an ounce — to a price that monetizes a large enough portion of the world’s outstanding debts.
Internal Sponsorship

Legendary hedge fund manager GEORGE SOROS warns:

6,600 Hedge Funds Set to FAIL!

Massive forced sale of up to $1.3 TRILLION in hedge fund assests to slam stocks! YOUR DEADLINE to PROFIT: THIS Sunday, November 17!

INSIDE: The next shoe to drop in this crisis — and how it could hand you gains of 46.1% … 89.9% … 106.7% or more … WITHOUT options, margin or short-selling … Exclusively with ETFs that are as easy to buy or sell as Microsoft or IBM … All for the price of a single gallon of gas: As little as $2.47 per day!

Click here for more information …
 

That way, just like in 1933, the debts become a fraction of re-inflated asset prices (led higher by the gold price).

And this time, instead of staying with the dollar as a reserve currency, the G-20 issues three new monetary units of exchange, each with equal reserve status.

The three currencies will essentially be a new dollar, new euro, and a new pan-Asian currency. (The Chinese yuan may survive as a fourth currency, but it will be linked to a basket of the three new currencies.)

The new fiat monetary units would be worth less than the old ones. For instance, it could take 10 new units of money to buy 1 old dollar or euro.

New names would be given to the new currencies to help rid the world of the ghost of a system that failed. Additional regulations and programs would be designed and implemented to ease the transition to a new monetary system.
The IMF would be at the center of the new monetary system.
The IMF would be at the center of the new monetary system.

The International Monetary Fund (IMF) would implement the new financial system in conjunction with central banks and governments around the world.

Keep in mind that the IMF is already set up to handle the transition, and has had contingency plans allowing for it since the institution was formed in 1944.

Included in the design and transition to a new monetary system …

A. A new fixed-rate currency regime. Immediately upon upping the price of gold and introducing the new currencies, a new fixed exchange rate system would be re-introduced. The floating exchange rate system would be tossed into the dust bin along with the old currencies.

This would kill any speculation about further devaluations in the currency markets, and drastically reduce market volatility.

B. To sell the program to savers and protect them from the currency devaluation, compensatory measures would be enacted. For instance, a one-time windfall tax-free deposit could be issued by governments directly to citizens’ accounts, or, to employer-sponsored pensions, to IRAs, or Social Security accounts.

Income taxes may subsequently be raised to pay for the give-away, or a nominal global type of sales tax could be enacted to help pay for the new system and the compensatory measures.

C. Additional programs would be designed to protect lenders and creditors. Lenders stand a much higher chance of getting paid off under the new monetary system — but with a currency whose purchasing power would now be a fraction of what it was when the loans were originated.

So programs would have to be designed to help lenders offset the inflationary costs of their devalued loans, probably via the tax code.

Naturally, all this is a bit more complicated than I’ve spelled out above. But that gives you a big-picture outline of what the plan could look like. And I think major changes like these are going to be set in motion at this weekend’s G-20 meetings in Washington.

Would they work?

Yes. They would help avoid a repeat of the deflationary Great Depression. But don’t expect even a new monetary system to put the U.S. or the global economy back on track toward the high rates of real growth that we’ve seen over the last several years. That’s simply not going to happen. Not for a while.

Instead, I’m talking about a massive asset price reflation, negative real economic growth in the U.S. and Europe — but continued real GDP gains in Asia.

The Big Question: What gold price would be legislated to reflate the U.S. and global economy?

I can’t tell you what gold price the G-20 would ultimately agree to. But here’s what they will be looking at …

    * To monetize 100% of the outstanding public and private sector debt in the U.S., the official government price of gold would have to be raised to about $53,000 per ounce.

    * To monetize 50%, the price of gold would have to be raised to around $26,500 an ounce.

    * To monetize 20% would require a gold price a hair over $10,600 an ounce.

    * To monetize just 10%, gold would have to be priced just over $5,300 an ounce.

Those figures are just based on the U.S. debt structure and do not factor in global debts gone bad. But since the U.S. is the world’s largest debtor and the epicenter of the crisis, the G-20 will likely base their final decision mostly on the U.S. debt structure.

So how much debt do I think would be monetized via an executive order that raises the official price of gold? What kind of currency devaluation would I expect as a result?

I would not be surprised to see the G-20 monetize at least 20% of the U.S. debt markets. THAT MEANS …

    * Gold would be priced at over $10,000 an ounce.

    * Currencies would be devalued by a factor of at least 12 to 1, meaning it would take 12 new dollars or euros to equal 1 old dollar or euro.

The return of the Gold Standard?

“But Larry,” you ask, “how could this be accomplished when we no longer have a gold standard? Further, are you advocating a gold standard?”  If the G-20 monetizes at least 20% of the U.S. debt markets, gold could easily hit $10,000 an ounce.

My answers:

First, you don’t need a gold standard to accomplish a devaluation of currencies and revaluation of the monetary system.

By offering to pay over $10,000 an ounce for gold, central banks can effectively accomplish the same end goal — monetizing and reducing the burden of debts, via inflating asset prices in fiat money terms.

Naturally, hoards of gold investors will cash in their gold. The central banks will pile it up. At the same time, other hoards of investors will not sell their gold, even at $10,000 an ounce. But the actual movement of the gold will not matter. It is the psychological impact and the devaluation of paper currencies that matters.

Second, I do NOT advocate a fully convertible gold standard. Never have. There isn’t enough gold in the world to make currencies convertible into gold. It would end up backfiring, restricting the supply of money and credit.

What should you do to prepare for these possibilities?

It’s obvious: Make sure you own some core gold, as much as 25% of your investable funds.

Also, as I’ve noted in past Money and Markets issues, you will want to own key natural resource stocks, and even select blue-chip stocks that will participate in the reflation scheme.

For more details and specific recommendations to follow, be sure to subscribe to my Real Wealth Report.

Best wishes,

Larry

Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

    This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

The Bush-Putin-Gold Connection

When someone is asked to remove something from the Internet for national security purposes, I sit up and take note.  Then I immediately scour archives for the offending piece of information in hope that it will not be lost forever.  (First place to look:  The Memory Hole.)  Naturally, I was concerned when I read Al Martin's weekly column in which he wrote:

“Readers should be advised that I am withdrawing a previous story, now in the archives of Al Martin Raw.com, at the request of the US State Department. The article in question revealed an ongoing conspiracy, between the Bush and Putin Regimes, to illicitly manipulate the price of certain high value metals and to further, and unlawfully, allow certain Russian corporations to purchase US corporation's involved in the production of domestic natural resources.”

I searched the archives and found the offending post, which I have quoted liberally.  Very liberally, but not technically in its entirety.  It's something that everyone should read.   Al has a subscription service for $6.95 a month.  It's one of the few sites that I find worthy of a monthly subscription, even though the content scares me at times.

Russia: The Best Enemy US Taxpayers Can Buy – Again; The Bush-Putin Conspiracy

(Mar 15) For the first time in 24 years, on March 1, platinum traded above $900 an ounce, having doubled its price over the past 18 months. This event bespeaks of the conspiracy that the Bush Regime and the Russian government have entered, in order to force the price of platinum higher. Russia, it should be noted, produces 3/5 of the world’s platinum, and it is a substantial export earner for Russia. And this is how the conspiracy has been orchestrated...

 The Bush-Cheney Regime has passed a series of discreet laws regarding the mining industry. These laws have acted to discourage platinum production in the United States. It’s often forgotten that the United States, although not a large platinum producer, accounts for about 10% of the world’s platinum production. To further aid this conspiracy, last year the Bush Cheney Regime unlawfully allowed a Russian company Norilsk secretly controlled by the Russian government to purchase Stillwater Mining which is the largest platinum producer in the United States. In fact it mines 90% of all US platinum. Stillwater is headquartered in Denver and its primary mining operations are in Montana. The company does both hard rock and leach platinum mining.

 After they bought it, the Russians closed down Stillwater mining operations, using the lie that the market was over saturated with platinum. The Russian government had been withholding the metal in order to force up prices.

 It should be once again noted that the purchase of Stillwater Mining by the Russian government (granted, it was through a supposedly private company, but the Russian government was behind it) is unlawful in that platinum is classified as a strategic metal.

  It is against the law for a Russian firm, controlled by the Russian government, to purchase any mining company in the United States which produces any strategic metal or mineral. “Strategic” in this case means that besides any precious metal value it has and its normal industrial value, it is a metal which is needed to build certain weapons systems, principally strategic weapons systems.

 So what is the purpose of this conspiracy? Why is the Bush Cheney Regime interested in helping Russia dramatically increase the price of one of its prime exports?

 It is simply to help the Russian government t earn as much revenue as possible to aid the Russian government in its re-arming – to make Russia once again a strategic threat to the United States in order to justify Bush-Cheney Regimes intentions (as can be seen on their PNAC website) of constructing a new American military empire in the 21st century. By recreating enemies of the past. By redividing the world behind “Curtains” both “Iron” and “Bamboo,” in order to justify a second enormous military build-up a la 1984-1987.

 The US military build-up ultimately has to be justified, and you can’t justify doubled defense expenditures on “terrorism.”

 This is especially so, when $200 billion a year is being spent to build strategic weapons system which have no value in any war against “terrorism.”

 The reasons why this instance stands out is that the Bush-Cheney Regime late last year 2003 had expressed “concerns” over Russia’s continuing development of their TOPOL-M strategic missile system, which is supposedly the most advanced such system ever developed.

 According to the Bush-Cheney Regime, it is a decade ahead of our own MX missile program. They said that they didn’t expect it to be built until 2010, due to the shortage of hard currency. The Russians announced over the weekend that they had completed the development and had begin to deploy the TOPOL-M missile system that the Bush Cheney Regime was “so concerned” about. They said that they had been able to accelerate and complete the program due to increases in the price of platinum and the explosion in export revenue they had earned from that price increase.

 Then the Bush-Cheney Regime comes out with an announcement expressing extreme surprise, shock and concern, adding that we will now have to spend an additional $58 billion of the American taxpayers’ money to accelerate the development of the ABM missile program. This puts the whole conspiracy into a different light. Of that $58 billion, most of it will go to the Rockwell consortium. In fact, the chairman of Rockwell said on CNBC that in 2004 Rockwell will be increasing its contribution to the Republican Party by $30 million. And that’s the nuts and bolts of the conspiracy.

 (Meanwhile the thousands of employees of Stillwater Mining who were laid off and who were picketing, trying to bring to the attention of the press that the Stillwater sale to Norilsk was illegal -- and not one mainstream media outlet in the United States would cover their demonstration. These employees should sue the US government for the loss of their jobs in that the sale of this company was illegal. The Russian government did not even apply for the necessary waivers in order to get out of the strategic metals and minerals ban. The laid off employees have a cause of action against the United States government.)

 The Bush Cheney Regime is thus deliberately increasing the cost to American consumers in order to help the rearming of Russia and China. People are aware of how this is being done with China. In fact, only six weeks after coming into office, the Bush Cheney Regime granted China Most Favored Nation trade status. This is something the Clinton administration refused to do. Then they also reversed the Clinton position and supported the entrance of China into the World Trade Organization (WTO), without requiring the Chinese to meet WTO or BIS (Bank of International Settlement) mandates, in terms of making the Chinese Yuan convertible.

 This debate goes on every day about how the Bush administration gets pressured even from its own supporters in business and industry, who are always hammering on the Bush Regime to exert pressure on China to make the Yuan free to trade. This is something the Chinese aren’t going to do, because they know if they do, the Chinese Yuan would rise sharply in value. This would then diminish their export capability.

 But this is talked about all the time. What isn’t discussed is how the Bush Cheney Regime has covertly entered into conspiracies with the Putin government in order to increase commodity prices which directly affect American consumers. One of these conspiracies has caused the price of platinum to increase dramatically, the price having doubled over the past two years.

 A secondary conspiracy which has worked between the two regime’s concerns the effort to increase the price of palladium. Palladium is called platinum’s weak sister or little brother, simply because it’s a cheaper metal. Not only is Russia the world’s largest producer of platinum, it is also the largest producer of palladium on the planet.

 Palladium has fewer applications and the market is thus smaller. Thanks to this collusion between the Bush Regime and there Putin Regime, the price of palladium has in fact risen 50% within the last 12 months. At the end of February 2003, for the first time in 20 years, palladium traded above $250 an ounce. This has also profited Russia enormously in that it is the largest producer and exporter of palladium.

 This was the key measure undertaken by the Bush Regime in this conspiracy with the Russian government in order to push palladium prices higher domestically, since the United States is the largest consumer of palladium industrially.

 Over the last twelve months, the Putin government was concerned that General Motors was very close to successfully developing the technology to substitute silver for palladium in catalytic converters. By the way, catalytic converter technology is not only used in cars, trucks and other vehicles, it also spans the entire industrial spectrum. This technology is used to effectively reduce hydrocarbon emissions, specifically sulfur, in any hydrocarbon fueled power generation plants. They are also used in so-called industrial plant scrubber technology.

 After General Motors announced last march that its technical division was very close in working out the science necessary to substitute silver for palladium, which would have reduced the cost of producing catalytic converters by more than 50%. That was one of the big reasons to do it. It wasn’t the hydrocarbon emissions as it was the enormous profit potential for reducing the price of catalytic converters and thus making them more saleable, particularly to the utility industry, which is the biggest market, even larger than the automotive market. There is a hundred times more metal used in one catalytic converter on one smokestack of an old coal burning utility plant than there is building 10,000 cars.

 In order to prevent this from happening, General Motors was using some of the technology developed by a Monsanto consortium. General Motors had actually licensed this technology and developed it further.

 Meanwhile the Bush Cheney Regime, in order to help the Russians and ensure that palladium prices would stay firm and even increase in price, undertook measures of their own

 In March 2003, the Bush Cheney Regime had become aware that GM had made the necessary breakthroughs to make the substitution of silver for palladium in catalytic converters possible

 In April 2003, the Bush Cheney Regime quietly withdrew the tax incentives that were given to the R&D companies for the conversion of palladium to silver. These were the tax incentives that firms were relying on to further their R&D work.

 At the same time the Monsanto consortium which had granted an effective put option on the licensing of the basic technology, went back to General Motors and said you either effectuate this option to buy this technology from us for $35 billion, which happened to be ten times the agreed upon price – or we’ll take the technology back.

 The reason this offer was made was due to the coziness of Monsanto and the Bushonian Cabal. It was done to pressure GM out of it. Like most technology license deals, it was an either-or deal – at the option of the licensor not the licensee. Usually the licensor would get a percentage, a certain number of dollars for every new catalytic converter produced with this new technology. Monsanto however made it clear that they would opt out of that kind of deal. Instead they said you’re going to have to buy the patent-licensing rights from us.

 General Motors had an independent estimate done, what the technology was actually worth, by the National Academy of Sciences, which told them that the technology, in terms of its commercial application was worth $3.5 billion.

 Monsanto meanwhile had told GM that they wanted $35 billion – not $3.5 billion. There was nothing GM could do about it. GM passed.

 Now here’s how the conspiracy kills more than two birds with one stone. Monsanto does not have a big environmental controls business. They had no way to really profit from the technology. They’ve had to get involved with others or sell it. It only cost Monsanto about $240 million to develop it because they just stumbled into it. It cost them hardly anything and they had no real use for it.

 Monsanto then took the technology back and resold for $435 million (not $35 billion) to guess who?

 Halliburton Environmental Controls Corporation, a subsidiary of the Halliburton Corporation.

 After the sale to Halliburton was effectuated in September through its offshore global environmental post office box based division in Vaduz, Liechtenstein for $435 million. Of which they only had to come up with $85 million in cash. The other $350 million was a senior non-subordinated debenture from Monsanto.

 Do you think that other $350 million is going to get paid anytime soon?

 Cue up the laugh track once again.

 Furthermore after the sale was effectuated to a shadowy offshore division of Halliburton in Liechtenstein which isn’t reportable to any US agency, including the Securities and Exchange Commission. Its not reportable to any US agency for anything.

 Then guess what happened? Two days later on September 12,. there was only one paper in the world that reports this sale. It was the Zurich issue of the Journal of Industrial Metals or Commerce or some publication with a similar title. Some incredibly esoteric publication that probably has a subscription of only 3000 people on the entire planet.

 Then on September 14, the Bush Cheney Regime announces that suddenly the tax incentives are back for the conversion technology. But now the conversion technology is a Monsanto Halliburton deal. And get this – as always with the Bush tax incentives, hey you bought it through a shadowy offshore corporation, don’t worry. You still want your tax incentive? The only thing you need to do is have a post office box in Washington DC and a registered agent (not even a corporate counsel of record).

 Halliburton Global Environmental Services Division Ltd opens up a Halliburton Global Environmental Systems (USA), which exists as an office of convenience in the international building in Washington at 1800 I Street NW, where all the offices of convenience are . So a post office box, a drop box and an office elf convenience, then suddenly the Monsanto Halliburton consortium is entitled to a $150 million taxpayer funded tax incentive to produce the technology.

 To make it even sweeter, Halliburton than says to the Russian government, with whom it does much more business than is commonly presumed, since Halliburton is a primary partner in this new Novosibirsk oil field deal - - look when Halliburton develops this technology, we will give you a fixed price put option to sell to us all the palladium you can produce. In other words, don’t worry about it; we’ll protect you.

 These seemingly esoteric transactions accomplish three or four very large items on a macro scale. This series of shadowy transactions were not widely reported because there are so few people who are really interested.

 That’s how it all works (and how it worked during the Reagan-Bush Regime) was by making it all so esoteric, knowing that nobody’s really interested in even reading about it. Can you imagine Wolf Blitzer on CNN trying to explain the intricacies of catalytic converter technology and substitution of metals? Everybody watching it would turn the channels.

 At last count Halliburton itself has 1,734 global subsidiaries. That was actually reported on Cayman Island News, which did a story that followed up on the 60 Minutes piece about Halliburton scams. Of these subsidiaries, 1,558 were offices of convenience and drop boxes, i.e., they were paper front companies, in that they exist nowhere except in an attorney's file drawer.

 This conspiracy between the Bush regime and the Putin Regime then is to help increase commodity prices for which Russia is the largest producer and exporter in order for Russia to gain additional hard currency to devote to military spending, specifically to rebuilding and modernizing their strategic forces.

 The Russian defense minister admitted that it was the dramatic increase in the price of platinum that provided them the additional revenue to develop their new TOPOL-M strategic missile system ahead of schedule. Then the Bush Cheney Regime made a big deal about it because this system is supposed to be more advanced than the anticipated capability of our ABM system to provide an effective strategic deterrence.

 By the way, the current ABM system has been tested and the only flying objects it was able to shoot down thus far was a flock of seagulls, which its targeting systems mistook for a mock incoming Russian missile. (The Patriot Missile scam is another one, also recently covered on the 60 Minutes show.) Rumsfeld then announced that the Russians developed a new system despite our pressure. How disingenuous it is for Rumsfeld to say this – after the Bush Cheney Regime entered into a conspiracy to increase the price of platinum and palladium which gave Russia the revenue not only to speed up the development of the missile system, but to complete it 18 months ahead of schedule. Then Rumsfeld uses the completion of the system as a reason to devote $200 billion to accelerate ultimate deployment of our anti-ballistic missile program. There’s the complete circle.

 By the way, the ABM (Anti-Ballistic Missile) program, which successive regimes since 1979 have attempted to develop, has cost $2.2 trillion of the American taxpayers’ money thus far, according to DoD statistics. This ABM system fraud has been ongoing. It was the same one, which then DARPA head Jack Verona in 1985 attempted to disclose by releasing the report which ultimately cost him his job. They set Verona up and tried to discredit him by saying he was a drunk who slept with a Russian agent – after he leaked out the DARPA report on the ABM system, which said that the technology necessary to perfect the system would not exist until 2012 at the earliest.

 And yet $2.2 trillion of the American taxpayers money has been wasted on it already. It should also be noted that of that total expenditure from 1979 to date, the Department of Defense cannot account for $1.4 trillion, as reported in GAO audits. That ABM weapons fraud has been the greatest single weapons fraud ever perpetrated against American taxpayers in the history of the republic.”

Added to the archives:

SPECIAL BULLETIN (3-17-04)

Re: Al Martin Raw.Com’s column called "Russia: The Best Enemy US Taxpayers Can Buy – Again; The Bush-Putin Conspiracy" (3-15-04)about the unlawful conspiracy by the Bush-Cheney and Putin regimes with the intent being to push the price of platinum higher.

  It has now been “suggested” to Al Martin Raw.com by the US State Department that this story be “corrected” regarding certain pertinent details.

 To wit:

 A. Neither the Bush-Cheney nor the Putin Regime acted to foster an unlawful conspiracy to push the price of platinum higher.

 B. The Norilsk mining corporation is not secretly controlled by the Russian government and indeed has no affiliation with said government

 C. Pursuant to this transaction, no monies were paid into the Bush Family controlled shadowy offshore Panama-registered “Pilgrim Investment Trust,” nor were monies paid into any such shadowy offshore trusts or corporations controlled by any members of the Bush Family

 D. Pursuant to this transaction, no monies were paid into the shadowy Panama-registered DLC Trust, S.A. Ltd (Dick and Lynne Cheney Trust) nor any shadowy offshore trust or coporation controlled by the Vice President or his family

 E. The international consulting firm owned by Neil Bush was not involved in this transaction and hence received no consulting “fees” thereunto.

 F. The Carlyle investment group was not involved in this transaction and hence its European operations general manager Marvin Bush received no special remuneration.

  G. The approximately 1,300 American employees of Stillwater Mining corporation who lost their jobs as a result of this illegal transaction have absolutely no legal recourse against either the American or Russian governments or the Norilsk mining corporation.

Bullion v. Stocks

More Comfortable with Bullion than Stocks

By John Embry, Sprott Asset Management

For The Gold Report, November 2003

At this juncture I am much more comfortable with gold bullion than I am with gold stocks. I think gold stocks have had an enormous run — they started percolating a bit May and June and then went ballistic. Subsequently, my fund is up 90% [since April]. Clearly stocks have done really well. I think that the stocks are okay only if the gold bullion price can exit this trading range it’s in — currently between $370 and $400 — and clear $400 with some momentum and blast up to $420, which a lot of technicians are calling for.

I’m concerned about two things: First, hedge funds are long . . . and second, the central banks, who are managing the gold market — make no mistake about that — do not want to see the gold price going up significantly here because it would imply more inflation in the system. It might lead to higher rates in the U.S., which would kill the mortgage market. So, there’s a real battle going on right now. So, I really don’t know in the short run what the gold price is going to do.

But I do think that over time the gold price is going up a lot, because it has become evident that the United States, in particular, has no choice but to create as much liquidity as necessary to keep the whole debt picture intact. And at the same time, because the U.S. dollar is vulnerable, I don’t think any of the foreign countries really want their currencies going up a lot against the U.S. dollar, so if the U.S. dollar is showing some overt weakness, I think these countries will print money — they will buy dollars, they will lower their interest rates — they will do everything to prevent their currency from rising sharply against the U.S. dollar, and weakening their competitive position.

So, I see an ongoing, accelerating global monetary debasement as being the major factor in the gold market, and the only currency — and gold is most assuredly a currency and has been for centuries— that can’t be debased is gold. So, as all these other paper currencies are created at an ever more rapid clip, the price of gold as denominated in these currencies is going skyward. It’s just a matter of how long it’s going to take.

As far as stocks are concerned, everything I look at, very simply, is in terms of risk and reward. In the case of gold let’s say the 200-day moving average is in the neighborhood of 360; the current price is just under 380. So, I keep 20 bucks as downside max in my mind, and I see upside over the next 18 months of approximately 120 bucks, and over the next five years, of maybe 600 dollars. So, I look at that; I say, “Gee, that’s not a bad risk/reward.”

I look at a lot of the stocks, right now, and they have had an enormous run; some of them are just trading on the moon, in relation to what their real fundamental assets are worth. And accordingly, I think that I can lose, in the short run anyway, as much money as I can make. So I am a little less comfortable with stocks, certainly since the last time we talked when I was quite bullish about stocks.

But I could be wrong. If the bulls win out, and the gold price roars through $400, stocks are going to do just fine. (November 6, 2003)

Streetwise - The GOLD Report is Copyright © 2003 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material only in whole (and always including this disclaimer), but never in part. The GOLD Report does not render investment advice and does not endorse or recommend the business, products, services or securities of any company mentioned in this report.

Gold Is Dirt Cheap

I wish I had puchased more gold at $300. Gold stocks and bullion are the way to go. Stay away from Freddie Mac. The GSE issue is about to explode and do much harm to the pension funds.

Gold at $400 an Ounce is Dirt Cheap

By Richard Russell

I believe gold (and very probably silver) will make fortunes for those who now take major positions in the precious metals. . .

So this is my position — I believe gold below and even somewhat above 400 dollars an ounce is dirt cheap. In view of the amount of Fed-generated fiat paper that will have to be churned out in coming years (it will be in the multi-trillions of dollars), gold is the cheapest thing around. The U.S. government, states, cities, corporations and individuals are currently loaded with $32 trillion in debt. On top of that, the U.S. government has additional unfunded liabilities of around $44 trillion, all of which will have to be financed.

For these reasons, it’s my thesis that gold at $400 an ounce is ridiculously cheap. As a comparison, gold today is less than half the price it was at its 1980 high.

I believe three or four or five years from now we’ll look back at today’s price of $400 dollar gold and ask ourselves, “Where the devil were we? What were we thinking about? Gold at $400 was cheaper than dirt. What didn’t we recognize this back in the year 2003?”

As I see it, this is one of those rare times in an investor’s life when he can buy an undervalued asset at a bargain price. This is a time when you can buy real money with fiat paper. At this time you can buy real money, gold, with “junk” fiat paper which is created “out of thin air” by the Federal Reserve.

Read the entire article here...