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Exclusive Smoking Gun: The Fed On Gold Manipulation

Tyler Durden's picture




 

Zero Hedge has recently presented several declassified documents from the pre-1971 "Nixon Shock" days, that endorse the case for gold as a major historical factor in US monetary and foreign policy, as demonstrated by State Department and CIA disclosure. Gold's special status in policy and administrative decision-making was a direct factor in Nixon's choice to abolish the gold reserve at a time of an exploding budget deficit.

Yet what about the days after 1971, and specifically, how did that critical "behind the scenes" organization, the Federal Reserve, perceive and manipulate gold in the post Bretton-Woods world? Was gold, freed from its shackles to the dollar, once again merely a symbolic representation for money?

Zero Hedge presents the smoking gun that may provide responses to all the various open questions, courtesy of a declassified memorandum, written by none other than the then Fed Chairman, addressed to the president of the United States.

On June 3, 1975, Fed Chairman Arthur Burns, sent a "Memorandum For The President" to Gerald Ford, which among others CC:ed Secretary of State Henry Kissinger and future Fed Chairman Alan Greenspan, discussing gold, and specifically its fair value, a topic whose prominence, despite former president Nixon's actions, had only managed to grow in the four short years since the abandonment of the gold standard in 1971. In a nutshell Burns' entire argument revolves around the equivalency of gold and money, and furthermore points out that if the Fed does not control this core relationship, it would "easily frustrate our efforts to control world liquidity" but also "dangerously prejudge the shape of the future monetary system." Furthermore, the memo goes on to highlight the extensive level of gold price manipulation by central banks even after the gold standard has been formally abolished. The problem with accounting for gold at fair market value: the risk of massive liquidity creation, which in those long-gone days of 1975 "could result in the addition of up to $150 billion to the nominal value of countries' reserves." One only wonders what would happen today if gold was allowed to attain its fair price status. And the threat, according to Burns: "liquidity creation of such extraordinary magnitude would seriously endanger, perhaps even frustrate, out efforts and those of other prudent nations to get inflation under reasonable control." Aside from the gratuitous observation that even 34 years ago it was painfully obvious how "massive" liquidity could and would result in runaway inflation and the Fed actually cared about this potential danger, what highlights the hypocrisy of the Fed is that when it comes to drowning the world in excess pieces of paper, only the United States should have the right to do so. 

Another notable observation is that despite a muted antagonism between the Fed and the US Treasury persisting for decades, the fuse is and always has been short, and the conflict can promptly hit a crescendo, with the Fed ultimately always getting the upper hand. In the case of the Burns memo, the Fed's position was diametrically opposed to what the Treasury proposed was the proper approach. The result: full on assault by the Federal Reserve over the Treasury's credibility and even then, more than three decades ago, a veiled threat by the Fed involving escalating problems if the recommendation of the Treasury was picked over that of the Fed. "Severe criticism on the part of prominent and influential financiers would inevitably follow if the Treasury's present position prevailed." It is not surprising that the Fed's modus operandi has not changed one bit since 1975: it is our way or virtually assured destruction/embarrassment way.

Additionally, a curious tangent of the Burns memo is the fact that gold was explicitly used as an engine to enact political doctrine: "If the United States took a stand on the gold question that failed to satisfy the French in current international negotiations, would there be adverse economic or political consequences? I doubt it... If we do ever accede to French views on gold, we should at least use our bargaining leverage to achieve some major political advantage." And while gold as a policy mechanism was unable to satisfy its role this time, one wonders on how many subsequent occasions was global democracy trampled over in order to placate the US Federal Reserve:

"I have consulted Henry Kissinger as to whether there is some political quid pro quo we might want to extract from the French in exchange for acceding to some part or all of their desired position on gold. But Henry tells me there is none at this time."

At some point governments of advanced nations will say "enough" to the covert domination of their controlling bodies by the Federal Reserve, which through manipulation of its gold and money interests, effectively has control over not just the French, but every government which has a monetary basis to its respective economy and a relationship to the US "reserve" currency... Which means virtually every country in the world. The backlash, if and when it occurs, will be memorable.

Lastly, the memo presents a useful snapshot into the cloak-and-dagger, and highly nebulous world of CB negotiations and gold price manipulation:

"I have a secret understanding in writing with the Bundesbank that Germany will not buy gold, either from the market or from another government, at a price above the official price."

So to all conspiracy theorists claiming that gold is being manipulated on a daily basis by the Federal Reserve: when it occurs over and over, and is so well documented, it is no longer a theory, it is merely sad. And the fact that the US government goes to great lengths to hide the illicit dealings of the Federal Reserve, which through its monetary tentacles, has prima facie control over not just US policy but also over sovereign governments, is an unprecedented failure in the checks and balances system that the founding fathers had planned when they created the United States of America. Yet saddest is that the United States no longer pursues strategic goals that are in the best interest of the majority of its citizens, but merely manipulates other, less powerful nations into a servile existence that only provides gain to a very limited subset of the American financial oligarchy. It is time for the Fed's unprecedented control over affairs, both global and domestic, to end.

Full memo from Arthur Burns presented, compliments of Geoffrey Batt who collaborated in the creation of this post.

 

 

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Mon, 09/28/2009 - 09:16 | 81313 monmick
monmick's picture

Good work Tyler et al....

Mon, 09/28/2009 - 15:02 | 81658 Anonymous
Anonymous's picture

Alexander the Great, tutored by Aristotle, perhaps the richest and most powerful man in the world before the
age of 33, was interred in a gold sarcophagus and solid
gold casket filled with honey and transported by
a solid gold chariot to a solid gold mausoleum in
Memphis. It did not take long for various Ptolemy successors to steal the gold and move the body to Alexandria to put it on display under glass, with gold thefts every time it was moved or displayed.

Practically every war included the surreptitious
movement of gold from the vanquished to the conquerors,
providing stories of Chinese, Indian, Mesopotamian, Egyptian, Israel, Knights Templar, Arabic, Spanish, French, Revolutionary, Civil War, Philippines, Nazi, Korean, Vietnamese and Iraqi gold hoards accompanying inflation.

Since gold is ultimate money and power, is it any
surprise Mercantilist Bankers and Treasurers tried for
many thousands of years to get or control it?

China, the leading surplus nation, gold producer and fastest growing exporter, is only the latest in the
past 5000 yearsm bringing the cycle to conclusion.

Like the Chinese Olympics economic crash last Fall, the controlled Chinese economy may not survive the 6 October 60th Commemoration of Mao Communists coming to Power in 1949.

We currently think the biggest golden rain surprise of
all to johnny come lately gold bugs may be that gold goes down in deflations while scarce dollars go up.

Only if/when we see crisp new large bills in circulation with soaring interest rates might this change. Has anyone wondered why the Gold Eagle OZ has a $50 denomination and the official price of gold is still 42.22?

Would it be interesting and perhaps unexpected to see such severe deflation from the collapse of the debt empire that gold head south toward the Gold Eagle or Official Perice.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493

Mon, 09/28/2009 - 16:10 | 81728 Anonymous
Anonymous's picture

"We currently think the biggest golden rain surprise of
all to johnny come lately gold bugs may be that gold goes down in deflations while scarce dollars go up.

Only if/when we see crisp new large bills in circulation with soaring interest rates might this change. Has anyone wondered why the Gold Eagle OZ has a $50 denomination and the official price of gold is still 42.22?

Would it be interesting and perhaps unexpected to see such severe deflation from the collapse of the debt empire that gold head south toward the Gold Eagle or Official Perice."

Ridiculous. Severe deflation will be met with severe inflation. Gold at $50? Smoke another one.

Tue, 09/29/2009 - 09:55 | 82296 Anonymous
Anonymous's picture

The public has lost confidence in the banking elite and political class to defend their rights or to preserve their purchasing power.

They view fiat currency as an instrument whereby their labour is extracted from them. They endure this inflation and its drips'n'drabs while an economy expands and so long as it is a miniscule "tax". But when TPTB have repeatedly shown no respect for an individuals right to preserve his estate from swift, arbitrary, and large expropriations via fiscal and monetary policy, they refuse to hold that which erodes their wallet and lifestyle.

The fragility and instability of the financial system has led to leadership showing open contempt for its citizens. We are tolerated to the extent that we submit to their caprice, and to the extent that we quietly endure their predations. The dollar, the sovereign bonds, the equity markets all have broken the boundaries which should define their natures. They have been appropriated to further the ends of the state, and none demonstrate adherence to the underlying laws which SHOULD govern them. They have become a law unto themselves; and playthings of self-appointed wizards.

The capital markets have been prostituted to the whims of power and cannot be relied upon to fundamentally reflect the rational expectations of economic behaviour. The bond markets which should fail, or have interest offerings find their equilibrium through free exchange, do not. They have too become playthings. And the currency, most of all, cannot be held with any confidence. Men realize that moment to moment, the paper scrip can be universally devalued. It cannot be held overnight anymore than the superspeculative stock traders dare.

GOLD however is independent and (except at the margins) is beyond the reach of the idle predator class.

It will allow one to manage one's estate without the constant fear of state intervention and probable state seizure of the stored dead works of past years.

Mon, 09/28/2009 - 18:50 | 81871 Anonymous
Anonymous's picture

Money and Inflation 1930's

To provide an estimate of inflation we have given a guide to the value of $100 US Dollars for the first year in the decade to the equivalent in todays money

If you have $100 Converted from 1930 to 2005 it would be equivalent to $1204.42 today

In 1930 average new house cost $7,145.00 and by 1939 was $3,800.00
In 1930 the average income per year was $1,970.00 and by 1939 was $1,730.00
In 1930 a gallon of gas was 10 cents and by 1939 was 10 cents
In 1930 the average cost of new car was $640.00 and by 1939 was $700.00
A few more prices from the 30's and how much things cost
Firestone Tyre 1932 from $3.69
Single Vision Glasses 1938 $3.85
Complete Modern 10 piece bedroom Suite $79.85
Steak 1938 1LB 20 cents
New Emerson Bedroom Radio 1938 $9.95
Shaefer Pens 1933 from $3.35
Plymouth Roadking Car 1938 $685
Emmerson 5 tube bedroom radio $9.95
Howard Deluxe Quality silk lined hat $2.85

Chevrolet 1935 Master Deluxe
New Master De luxe Chevrolet with improved master blue flame engine, pressure steam oiling , cable brakes and shock proof steering $560

Example of a house for sale
1934 Stucco Bungalow Oakland
California 5 room stucco bungalow , breakfast room , separate garage, delightful location $3,750

Mens Shirt $2.50 Ohio 1932
Ladies Wool Flannel Robes $3.95 Nebraska 1934
Ladies Winter Coats $16.00 Indiana 1937
Mens Quality Overcoats $15.00 Indiana 1937
Ladies Oxfords Shoes $2.44 Indiana 1937
Mens Slacks $3.98 Indiana 1937
Womens silk hose 49 cents Ohio 1933
Boys overcoat wool 8.69-11.98/each From $ New Jersey
Boys pants and breeches, corderoy From $1.98 New Jersey
Boys school suit, From $7.94 New Jersey
Girls hose (tights), woolen, From $25 cents per pair New Jersey
Men s shirt, Arrow, From $1.45 New Jersey
Men s sport coat, /each From $19.98 New Jersey
Women s dress shoes, From $3.45 New Jersey
Women s suit, 2 pieces, From $6.98 New Jersey
Mens Sox 10 cents ohio 1933
Ladies Sandals 98 cents Maryland 1939
Boys and Girls Underwear 49 cents Maryland 1935
Mens 2 Piece Suit Double breasted $19.75 New York 1935
Howard Deluxe Quality silk lined hat $2.85 New York 1935
Sheeplined Moccasins 79 cents Ohio 1935
Fancy Broadcloth Pajamas $1.89 Indiana 1937
Mens Lined Gloves 98 cents ohio 1935

How much electrical goods and appliances cost in the 30's

Electric Toaster $9.95 New York 1932
Electrolux gas Refrigerator $144.50 North Carolina 1939
Westinghouse Cleaner with attachment kit $39.95 North Carolina 1939
Westinghouse Wringer washing machine $59.95 North Carolina 1939
Tappan Gas Range $69.95 North Carolina 1939
Emmerson 5 tube bedroom radio $9.95 Ohio 1938
Philco Auto Radio $24.95 Ohio 1938
Electric Flat Iron $1.49 North Carolina 1935
Electric Movie Projector $3.95 North Carolina 1935
Kelvinator Washer Wringer Price $54.95
Tappan Gas Range With glass door which allows you to see your cooking , split oven and flexo speed baking $109.75

New GE Thrifty Six
Fridge Six Cubic Feet all steel cabinet stainless steel super freezer $149.75

Philco Radio
With built in Ariel Tuning system with ultra high fidelity and able to pick up stations from countries around the world and Police, Air, and shipping $188.00

How much food and groceries cost in the 30's

Shoulder of Ohio Spring lamb 17 cents per pound Ohio 1932
Sliced Baked Ham 39 cents per pound Ohio 1932
Dozen Eggs 18 Cents Ohio 1932
Coconut Macaroons 27 cents per pound Ohio 1932
Bananas 19 cents for 4 Pounds Ohio 1932
Peanut Butter 23 cents QT Ohio 1932
Bran Flakes 10 cents Maryland 1939
Jumbo Sliced Loaf of Bread 5 cents Maryland 1939
Spinach 5 cents a pound Maryland 1939
Clifton Toilet Tissue 9 cents for 2 rolls Ohio 1932
Camay Soap 6 cents bar Ohio 1932
Cod Liver Oil 44 cents pint Wisconsin 1933
Tooth paste 27 cents Wisconsin 1933
Lux Laundry Soap 22 cents Indiana 1935
Suntan Oil 25 cents Pennsylvania 1938
Talcum Powder 13 cents Maryland 1939
Noxzema Medicated Cream for Pimples 49 cents Texas 1935
Applesauce 20 cents for 3 cans New Jersey
Bacon, 38 cents per pound New Jersey
Bread, white, 8 cents per loaf New Jersey
Ham, 27 cents can New Jersey
Ketchup, 9 cents New Jersey
Lettuce, iceberg, 7 cents head New Jersey
Potatoes, 18 cents for 10 pounds New Jersey
Sugar, 49 cents for 10 pounds New Jersey
Soap, Lifebuoy, 17 cents for 3 bars New Jersey
Sugar $1.25 per 25LB Sack Ohio 1932
Pork and Beans 5 cents can Ohio 1932
Oranges 14 for 25 cents Ohio 1932
Chuck Roast 15 cents per pound Ohio 1932
White Potatoes 19 cents for 10LBs Ohio 1932
Heinz Beans 13 cents for 25oz can Ohio 1932
Spring Chickens 20 cents per pound Ohio 1932
Wieners 8 cents per pound Ohio 1932
Best Steak 22 cents per pound Ohio 1935
Pure lard 15 cents per pound Wisconsin 1935
Hot Cross Buns 16 Cents per dozen Texas 1939
Campbells Tomato Soup 4 cans for 25 cents Indiana 1937
Oranges 2 dozen 25 cents Indiana 1937
Kellogs Corn Flakes 3 Pkgs 25 cents Indiana 1937
Mixed Nuts 19 Cents per pound Indiana 1937
Pork Loin Roast 15 cents per pound Indiana 1937
Channel Cat Fish 28 cents per pound Missouri 1938
Fresh Peas 4 cents per pound Maryland 1939
Cabbage 3 cents per pound Maryland 1939
Sharp Wisconsin Cheese 23 cents per pound Maryland 1939

Mon, 09/28/2009 - 21:29 | 82025 Anonymous
Anonymous's picture

Theft via inflation????

Priceless

Mon, 09/28/2009 - 22:02 | 82053 Mr. Mandelbrot
Mr. Mandelbrot's picture

Wow!  Thanks for posting this! :)

Tue, 09/29/2009 - 01:27 | 82154 Anonymous
Anonymous's picture

Yeah, but a Laptop would have run a couple-three billion back then. Look how cheap they are now.

Tue, 09/29/2009 - 11:15 | 82386 Anonymous
Anonymous's picture

I agree with most of your numbers but back then gold was 25 dollars per ounce. Today it is 40 Times that. Mulitply everything by 50 and you will see why the middle class is being wiped out.

Mon, 09/28/2009 - 18:54 | 81874 Anonymous
Anonymous's picture

Well..... Even if it goes back to what you predict.. let's see what one could purchase with this gold back then...

Money and Inflation 1930's

To provide an estimate of inflation we have given a guide to the value of $100 US Dollars for the first year in the decade to the equivalent in todays money

If you have $100 Converted from 1930 to 2005 it would be equivalent to $1204.42 today

In 1930 average new house cost $7,145.00 and by 1939 was $3,800.00
In 1930 the average income per year was $1,970.00 and by 1939 was $1,730.00
In 1930 a gallon of gas was 10 cents and by 1939 was 10 cents
In 1930 the average cost of new car was $640.00 and by 1939 was $700.00
A few more prices from the 30's and how much things cost
Firestone Tyre 1932 from $3.69
Single Vision Glasses 1938 $3.85
Complete Modern 10 piece bedroom Suite $79.85
Steak 1938 1LB 20 cents
New Emerson Bedroom Radio 1938 $9.95
Shaefer Pens 1933 from $3.35
Plymouth Roadking Car 1938 $685
Emmerson 5 tube bedroom radio $9.95
Howard Deluxe Quality silk lined hat $2.85

Chevrolet 1935 Master Deluxe
New Master De luxe Chevrolet with improved master blue flame engine, pressure steam oiling , cable brakes and shock proof steering $560

Example of a house for sale
1934 Stucco Bungalow Oakland
California 5 room stucco bungalow , breakfast room , separate garage, delightful location $3,750

Mens Shirt $2.50 Ohio 1932
Ladies Wool Flannel Robes $3.95 Nebraska 1934
Ladies Winter Coats $16.00 Indiana 1937
Mens Quality Overcoats $15.00 Indiana 1937
Ladies Oxfords Shoes $2.44 Indiana 1937
Mens Slacks $3.98 Indiana 1937
Womens silk hose 49 cents Ohio 1933
Boys overcoat wool 8.69-11.98/each From $ New Jersey
Boys pants and breeches, corderoy From $1.98 New Jersey
Boys school suit, From $7.94 New Jersey
Girls hose (tights), woolen, From $25 cents per pair New Jersey
Men s shirt, Arrow, From $1.45 New Jersey
Men s sport coat, /each From $19.98 New Jersey
Women s dress shoes, From $3.45 New Jersey
Women s suit, 2 pieces, From $6.98 New Jersey
Mens Sox 10 cents ohio 1933
Ladies Sandals 98 cents Maryland 1939
Boys and Girls Underwear 49 cents Maryland 1935
Mens 2 Piece Suit Double breasted $19.75 New York 1935
Howard Deluxe Quality silk lined hat $2.85 New York 1935
Sheeplined Moccasins 79 cents Ohio 1935
Fancy Broadcloth Pajamas $1.89 Indiana 1937
Mens Lined Gloves 98 cents ohio 1935

How much electrical goods and appliances cost in the 30's

Electric Toaster $9.95 New York 1932
Electrolux gas Refrigerator $144.50 North Carolina 1939
Westinghouse Cleaner with attachment kit $39.95 North Carolina 1939
Westinghouse Wringer washing machine $59.95 North Carolina 1939
Tappan Gas Range $69.95 North Carolina 1939
Emmerson 5 tube bedroom radio $9.95 Ohio 1938
Philco Auto Radio $24.95 Ohio 1938
Electric Flat Iron $1.49 North Carolina 1935
Electric Movie Projector $3.95 North Carolina 1935
Kelvinator Washer Wringer Price $54.95
Tappan Gas Range With glass door which allows you to see your cooking , split oven and flexo speed baking $109.75

New GE Thrifty Six
Fridge Six Cubic Feet all steel cabinet stainless steel super freezer $149.75

Philco Radio
With built in Ariel Tuning system with ultra high fidelity and able to pick up stations from countries around the world and Police, Air, and shipping $188.00

How much food and groceries cost in the 30's

Shoulder of Ohio Spring lamb 17 cents per pound Ohio 1932
Sliced Baked Ham 39 cents per pound Ohio 1932
Dozen Eggs 18 Cents Ohio 1932
Coconut Macaroons 27 cents per pound Ohio 1932
Bananas 19 cents for 4 Pounds Ohio 1932
Peanut Butter 23 cents QT Ohio 1932
Bran Flakes 10 cents Maryland 1939
Jumbo Sliced Loaf of Bread 5 cents Maryland 1939
Spinach 5 cents a pound Maryland 1939
Clifton Toilet Tissue 9 cents for 2 rolls Ohio 1932
Camay Soap 6 cents bar Ohio 1932
Cod Liver Oil 44 cents pint Wisconsin 1933
Tooth paste 27 cents Wisconsin 1933
Lux Laundry Soap 22 cents Indiana 1935
Suntan Oil 25 cents Pennsylvania 1938
Talcum Powder 13 cents Maryland 1939
Noxzema Medicated Cream for Pimples 49 cents Texas 1935
Applesauce 20 cents for 3 cans New Jersey
Bacon, 38 cents per pound New Jersey
Bread, white, 8 cents per loaf New Jersey
Ham, 27 cents can New Jersey
Ketchup, 9 cents New Jersey
Lettuce, iceberg, 7 cents head New Jersey
Potatoes, 18 cents for 10 pounds New Jersey
Sugar, 49 cents for 10 pounds New Jersey
Soap, Lifebuoy, 17 cents for 3 bars New Jersey
Sugar $1.25 per 25LB Sack Ohio 1932
Pork and Beans 5 cents can Ohio 1932
Oranges 14 for 25 cents Ohio 1932
Chuck Roast 15 cents per pound Ohio 1932
White Potatoes 19 cents for 10LBs Ohio 1932
Heinz Beans 13 cents for 25oz can Ohio 1932
Spring Chickens 20 cents per pound Ohio 1932
Wieners 8 cents per pound Ohio 1932
Best Steak 22 cents per pound Ohio 1935
Pure lard 15 cents per pound Wisconsin 1935
Hot Cross Buns 16 Cents per dozen Texas 1939
Campbells Tomato Soup 4 cans for 25 cents Indiana 1937
Oranges 2 dozen 25 cents Indiana 1937
Kellogs Corn Flakes 3 Pkgs 25 cents Indiana 1937
Mixed Nuts 19 Cents per pound Indiana 1937
Pork Loin Roast 15 cents per pound Indiana 1937
Channel Cat Fish 28 cents per pound Missouri 1938
Fresh Peas 4 cents per pound Maryland 1939
Cabbage 3 cents per pound Maryland 1939
Sharp Wisconsin Cheese 23 cents per pound Maryland 1939

Mon, 09/28/2009 - 23:42 | 82131 The Deacon
The Deacon's picture

$1000 as the true, free floating price of gold?  Ha!  Priceless.

Its all in how you frame it.  some might be as bold as to say the price of gold should be higher, but some are keeping it lower to mask the devaluation of the dollar through inflation.

Suppose the above is true re CB's keeping gold at bay (it is)  what would the price of gold be then, priced in Us fiat currency?  hmmmmm.

Mon, 09/28/2009 - 09:18 | 81315 Project Mayhem
Project Mayhem's picture

Fantastic!

Mon, 09/28/2009 - 10:01 | 81340 Project Mayhem
Project Mayhem's picture

 

today seems appropriate to shamelessly plug my magnum opus...

 

Gold and Systemic Crisis!

http://www.zerohedge.com/article/gold-and-systemic-crisis

 

Mon, 09/28/2009 - 16:05 | 81721 Gilgamesh
Gilgamesh's picture

I think someone was out just to prove this implied correlation wrong today.  This was an 'Everything Goes Up' day.  Dollar, equities, bonds, commodities (mostly).  Seems like something is missing though...  oh yes, volume.

 

That'll teach everyone not to go against the market just on a dollar rally?  Let me know when every last bear is shaken out of their hedges; it must be getting close.

Mon, 09/28/2009 - 09:26 | 81323 blackebitda
blackebitda's picture

game on

Mon, 09/28/2009 - 09:40 | 81327 JohnKing
JohnKing's picture

Why didn't Joe Hagan break this story?

Mon, 09/28/2009 - 10:19 | 81387 MsCreant
MsCreant's picture

Cause he gives anon blowjobs (known as Joe Blow) in Goldman Sacks urinals and calls it journalism?

joe_hagan@hotmail.com

Mon, 09/28/2009 - 09:30 | 81329 FLETCH
FLETCH's picture

STUNNING.... But not surprising

Mon, 09/28/2009 - 09:34 | 81333 Cheddar Bob
Cheddar Bob's picture

Thanks.

Mon, 09/28/2009 - 09:41 | 81337 Rusty_Shackleford
Rusty_Shackleford's picture

It is the key to understanding everything.

Keep up the great work.

 

I hear helicopters,.......Fed helicopters.

Mon, 09/28/2009 - 09:40 | 81338 Cheeky Bastard
Cheeky Bastard's picture

proof, the best method to separate oneself from morons .... * applause in the background *

Mon, 09/28/2009 - 09:41 | 81339 Gordon_Gekko
Gordon_Gekko's picture

Excellent work Tyler. The real conspiracy, as it is turning out, is that we have a free market in Gold (or anything else these days).

Mon, 09/28/2009 - 10:06 | 81368 Robb
Robb's picture

Well put. That summerrizes it all.

Tue, 09/29/2009 - 11:38 | 82429 Anonymous
Anonymous's picture

summerrize - ha, hello larry

Mon, 09/28/2009 - 19:01 | 81879 Anonymous
Anonymous's picture

exactly - a real tin foil hat conspiracy since Dec 23, 1913

Mon, 09/28/2009 - 09:46 | 81342 Anonymous
Anonymous's picture

So this is why we will never return to a gold standard and monetary stability!

Mon, 09/28/2009 - 09:48 | 81346 crzyhun
crzyhun's picture

Forgot to sign in.

So this is why we will NEVER have a gold standard again and a chance to return to monetary stability!

Sad day.

Mon, 09/28/2009 - 09:48 | 81347 Mazarin
Mazarin's picture

"saddest is that the United States no longer pursues strategic goals that are in the best interest of the majority of its citizens, but merely manipulates other, less powerful nations into a servile existence that only provides gain to a very limited subset of the American financial oligarchy. It is time for the Fed's unprecedented control over affairs, both global and domestic, to end."

Amen, if you are a Freedom loving American.


Mon, 09/28/2009 - 14:10 | 81608 Anonymous
Anonymous's picture

""saddest is that the United States no longer pursues strategic goals that are in the best interest of the majority of its citizens, but merely manipulates other, less powerful nations into a servile existence that only provides gain to a very limited subset of the American financial oligarchy. It is time for the Fed's unprecedented control over affairs, both global and domestic, to end."

Amen, if you are a Freedom loving American."

The Communist countries have been saying that about us for sixty years only the called it "Western Imperialism."

One could say, "Yeah but, would you rather live in their country or ours." Considering the exploitation the west has done in the east for almost 200 years, it's not surprising they are where they are. Nature balances things out. Before long we will be known as the "Yellow man's burden."

Mon, 09/28/2009 - 14:53 | 81647 Anonymous
Anonymous's picture

or in some cases, "yellow woman's burden"

that's seriously deep mate
been reading some lao tzu i see

Mon, 09/28/2009 - 15:31 | 81691 Anonymous
Anonymous's picture

Governing a great nation is like cooking a small fish - too much handling will spoil it.
Lao Tzu

Mon, 09/28/2009 - 17:56 | 81827 Anonymous
Anonymous's picture

CHAPTER XVII THE PURITY OF THE CURRENT. In the Age of Gold, the people were not conscious of their rulers; in the Age of Silver, they loved them, with songs; in the Age of Brass, they feared them; in the Age of Iron, they despised them. As the rulers lost confidence, so also did the people lose confidence in them.

CHAPTER XVIII THE DECAY OF MANNERS. When men abandoned the Way of the Tao, benevolence and justice became necessary. Then also was need of wisdom and cunning, and all fell into illusion. When harmony ceased to prevail in the six spheres it was needful to govern them by manifesting Sons. When the kingdoms and races became confused, loyal ministers had to appear

CHAPTER XIX RETURNING TO THE PURITY OF THE CURRENT. If we forgot our statesmanship and our wisdom, it would be an hundred times better for the people. If we forgot our benevolence and our justice, they would become again like sons, folk of good will. If we forget our machines and our business, there would be no knavery. These new methods despised the olden Way, inventing fine names to disguise their baneness. But simplicity in the doing of the will of every man would put an end to vain ambitions and desires.

Lao Tzu - translated by Aleister Crowley

Mon, 09/28/2009 - 09:53 | 81350 ShankyS
ShankyS's picture

Wonderful work. Sadly, I find it possible that this too will be glossed over (thus only further preserving the conspiracy theory) and status quo will march on. It will end one day in a heaping pile of shit, but what will it take to rip it from the tentacles of the vampire squid? (Shanky asks as we march on the road to fascism).

Mon, 09/28/2009 - 09:53 | 81352 Anonymous
Anonymous's picture

Why the F is the markets up today? in 30 minutes it made up for the losses of the entire last week basically.

Mon, 09/28/2009 - 11:57 | 81465 Anonymous
Anonymous's picture

Do you really have to ask this question, in a thread about government manipulation none the less?

Mon, 09/28/2009 - 12:24 | 81492 ivant
ivant's picture

everyone tells me its a jewish holiday again today. apparently there is some historical pattern that works most of the time where you sell on the friday of the holiday and boy on the monday. i dont know. but all i see is volume as light as a feather and a market absolutely ready to rally. then in addition you have the technical level that it bounced of (1040), which was to be expected. i was long during the asian session, but didnt think we would break 1055. went short at 1061. let's see how this one goes.

Mon, 09/28/2009 - 09:55 | 81353 lsbumblebee
lsbumblebee's picture

A tip of my tinfoil hat to you Tyler! Nice work.

Mon, 09/28/2009 - 09:56 | 81354 Anonymous
Anonymous's picture

beautiful.

I don't remember the "secret agreements in writing" part of any of my many econ classes.

huh.

Mon, 09/28/2009 - 09:58 | 81356 etrader
etrader's picture

UK switched a pile of Gold for EURO's.

Doesn't that say something about relevance Gold these days?

Mon, 09/28/2009 - 10:07 | 81370 Cheeky Bastard
Cheeky Bastard's picture

no; but it says something about blatant retardation of the UKs financial minister ...

Mon, 09/28/2009 - 10:15 | 81379 Project Mayhem
Project Mayhem's picture

Cheeky, discover any transfinite numbers lately?  ;)  I watched Pi the other day...

Mon, 09/28/2009 - 10:17 | 81382 Anonymous
Anonymous's picture

ask martin armstrong

Mon, 09/28/2009 - 10:21 | 81388 Cheeky Bastard
Cheeky Bastard's picture

LOL; no; i have chosen sanity instead :D. No, i was doing something in meta-logic and that kept me captivated for some time. I also watched Pi a week or so ago. Terrible movie; WTF was he searching for; a stock market equivalent of the Riemann hypothesis, distribution of random averages, deterministic equation of elements of a dynamic space.

Mon, 09/28/2009 - 10:38 | 81393 Anonymous
Anonymous's picture

2+2=5
-Winston

Mon, 09/28/2009 - 11:19 | 81421 Cheeky Bastard
Cheeky Bastard's picture

no, 11=2 ( mod 3 )

Mon, 09/28/2009 - 10:16 | 81380 Anonymous
Anonymous's picture

... currently prime minister ...

Mon, 09/28/2009 - 10:16 | 81381 Sqworl
Sqworl's picture

HAHAHAHA..SPOT ON.

Mon, 09/28/2009 - 11:05 | 81409 Anonymous
Anonymous's picture

Gordon Brown stole it from the British public to sell the the GS exec right after they shorted it into the ground.

Nice work if you can get it. Gordon did it with barely a whimper from the UK citizens.

Mon, 09/28/2009 - 11:07 | 81411 Anonymous
Anonymous's picture

Gordon Brown stole it from the British public to sell the the GS exec right after they shorted it into the ground.

Nice work if you can get it. Gordon did it with barely a whimper from the UK citizens.

Mon, 09/28/2009 - 11:15 | 81417 Anonymous
Anonymous's picture

Yeah - Browns Bottom has Two Cheeks

Mon, 09/28/2009 - 11:48 | 81453 Cheeky Bastard
Cheeky Bastard's picture

FU

Tue, 09/29/2009 - 09:58 | 82298 Anonymous
Anonymous's picture

You forgot the LOL. Way to miss the point, wanker.

Mon, 09/28/2009 - 10:01 | 81363 Anonymous
Anonymous's picture

Fascinating. This letter was written on June 5, 1975. Saigon fell on April 30, 1975. It's incredible that the French were such a great concern for the Fed during the back half of US involvement in Vietnam.

Also amazing is the Fed's concern about the significance of the IMF 3 years after the abondonment of the Bretton Woods Agreement. And even more fascinating is the World Bank coming out today warning about the dominance of the dollar as a reserve currency.

God, I love international political economy.

Mon, 09/28/2009 - 10:07 | 81372 Anonymous
Anonymous's picture

Could you please elaborate a little on the source of those documents in order to counter claims that those are "forgeries"?

Thanks from Germany

Mon, 09/28/2009 - 10:15 | 81375 DrPsycho
DrPsycho's picture

Heartfelt thanks for publishing this.

 

I sent copies to all at jsmineset.com, Jim Sinclair's site, including the link to this page.

 

Now he can tell all his people he has written proof of the manipulation all along.

Mon, 09/28/2009 - 10:15 | 81378 nopat
nopat's picture

Good piece of work, thanks for posting.  You've just fully motivated me to get off my ass and write something; a lightbulb went off in my head.

 

Marla, keep your eyes open around Thursday for something from me.

Mon, 09/28/2009 - 10:29 | 81390 blackebitda
blackebitda's picture

i think this made a bad morning for bernanke, barney frank, et all just. censor and spin control sirens on alert awaiting further instructions. cement trucks in the wings.  

Mon, 09/28/2009 - 10:36 | 81392 andrew123
andrew123's picture

Ok, nice job, but this is really and was written during a time period when people paid alot more attention to gold (Nixon closed the gold window in 1971, I believe), so it is not surprising that they were ery concerned.  It was a time period when the average person, at least internationally, really thought of gold as money, as opposed to another asset class.    I don't find this to be a smoking gun for current manipulation (although I am open to teh idea that it is occurring).

Mon, 09/28/2009 - 10:45 | 81400 MsCreant
MsCreant's picture

Hi Andrew,

I am curious, besides your take on the status of gold, do you think there is any reason that they would act differently now?

Mon, 09/28/2009 - 11:28 | 81427 andrew123
andrew123's picture

I have no idea what they are in fact doing, but I think that the price of gold is a lot less important now than it was in the 1970's.  Now it is just another asset class, and while some people might view the move in gold as inflationary, I think a huge move in the 1970's would have been catastrophic to investor and consumer sentiment, since it really did serve as money at the time.

Mon, 09/28/2009 - 13:54 | 81589 Narcolepzzzzzz
Narcolepzzzzzz's picture

If gold is 'just another asset class', it makes you wonder why Eddie George said the following in 1999 whilst Governor of the Bank of England:

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore, at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K."

Mon, 09/28/2009 - 20:11 | 81953 MsCreant
MsCreant's picture

Great avatar art.

Mon, 09/28/2009 - 20:34 | 81966 Assetman
Assetman's picture

... and great handle!

Mon, 09/28/2009 - 14:55 | 81648 Anonymous
Anonymous's picture

"Now it is just another asset class"

true, one that is the bedrock of central banks' balance sheets all over the world.

Mon, 09/28/2009 - 23:00 | 82104 TumblingDice
TumblingDice's picture

I have no idea what they are in fact doing, but I think that the price of gold is a lot less important now than it was in the 1970's.  Now it is just another asset class,

Promotion of that paradigm is exactly the goal of the Fed et al.

Mon, 09/28/2009 - 12:18 | 81487 Anonymous
Anonymous's picture

you are the paris hilton of monetary science...

i just deleted a page of refutation realizing
to whom i am speaking....possibly even to a fed-cai
hack afraid of resurgent gold which has never
diminished contrary to the foolish commentary
otherwise....

Mon, 09/28/2009 - 10:39 | 81395 naiverealist
naiverealist's picture

As the others have already stated, outstanding work.  You have managed to take a conspiracy "theory" out of the wing-nut sphere and give that shadowy world of international finance some clarity.

 

Now, along the lines of Rep. Grayson interrogating the AG for the Federal Reserve, we just need to know who "owns" the gold in Fort Knox, the Treasury (the people of the US) or the Federal Reserve (a private consortium of international banks).  I am hoping on the former, but betting on the latter.  Maybe this is why the Fed is buying all the garbage from the banks, so they can get paid back in gold and not fiat script (whoops, slipped into my conspiracist mode, sorry!)

Mon, 09/28/2009 - 11:36 | 81434 lsbumblebee
lsbumblebee's picture

What gold in Fort Knox? Has anyone actually seen it since 1954?

Mon, 09/28/2009 - 18:18 | 81821 TumblingDice
TumblingDice's picture

http://www.goldensextant.com/library.html

According to this report, written in part with the help of Chris Dodd and Ron Paul there are 264 million ounces of gold in Fort Knox.

The report also claims that the Treasury still owns the majority of this gold. Whether this is referring to a current tally or to a 1974 GOA audit is unclear. If they are referencing the 1974 information then it is a lot more likely that the information presented is based on truth. However, by 1982, the year this report was written, it would be hard to believe that a tally would reveal majority Treasury ownership of the gold in fort Knox.

As far as I know this is the last known official report on Fort Knox.

Thu, 10/01/2009 - 22:16 | 86054 Anonymous
Anonymous's picture

this is mouser98, noob to finance and economic under-
standing.

but, and i hope this turns out to be a really stupid
question,

264 million ounces at $1000 per ounce is only
$264 billion. Where is the other $26 trillion or so?
and if i am off on the total amount don't crucify me,
i don't have the m1,m2,m3 chart handy.

my point is that if we only have 264 million ounces in
gold reserves, and say $26 trillion in dollars, then
isn't each ounce really worth $100,000?

or am i completely clueless as to how this works.

Fri, 10/02/2009 - 12:52 | 86641 TumblingDice
TumblingDice's picture

Here's the kicker mouser, they're valuing the gold at the last official price, $42.22 per ounce, on both the Treasury an Fed balance sheets.

But as far as the relation between gold and the monetary bases, well that one has been null since 1971. No gold standard so there doesnt have to be any link between the m's an gold.

Mon, 09/28/2009 - 10:40 | 81396 Gubbmint Cheese
Gubbmint Cheese's picture

Faber doesn't see credit bubble in China - really? Are we talking about the same China?

http://www.marketwatch.com/story/dr-doom-sees-no-credit-bubble-in-china-...

 

Mon, 09/28/2009 - 10:45 | 81399 Anonymous
Anonymous's picture

outstanding sleuthing and thanks for posting....although it is not in the least bit surprising or new to those who understand the dictum, he who owns the gold makes the rules,
this finding is of utmost importance in advancing our understanding of the fed's universal permeation into all matters of government....

that the fed is participating if not dictating foreign and domestic policy is outrageous but something which i have been screaming at my butthole representatives all year....

the fed is indeed the 4th branch of government answerable to no one...

it is time to return the control of money to elected representatives and take it away from the vampire squid financial terrorists of wall street and from the rockefeller / rothschild axis of evil....

Mon, 09/28/2009 - 12:53 | 81525 chumbawamba
chumbawamba's picture

You might want to get yourselves some new representatives for your butthole.

I am Chumbawamba.

Mon, 09/28/2009 - 15:03 | 81660 Anonymous
Anonymous's picture

if U would like to come down and run for our orifice,
we would be tickled with glee to write Chumbawamba on our ballot.

Mon, 09/28/2009 - 16:51 | 81769 MsCreant
MsCreant's picture

I am MsCreant.

I vote Chumbawamba.

Mon, 09/28/2009 - 10:50 | 81402 B_Movie
B_Movie's picture

The Fed position ...Governments are free to do as they are told ...

Mon, 09/28/2009 - 10:51 | 81405 Daedal
Daedal's picture

...still waiting to read the counter-argument from Vitaliy.

Mon, 09/28/2009 - 10:51 | 81406 theGhostofXmasPast
theGhostofXmasPast's picture

@naiverealist according to the Fed, the Treasury has loaned the US gold supply to the Fed, whatever the hell that really means. And if some of GATA's speculations are true, then neither the Fed nor the Treasury owns the gold in Fort Knox. Roughly 50% of central bank gold has been loaned or swapped over the past 2 decades, so of the US roughly 8000 tons of gold, 4000 of it is probably loaned, swapped and thus SOLD into the market to keep the price down.

Mon, 09/28/2009 - 12:12 | 81479 naiverealist
naiverealist's picture

It just gets curiouser and curiouser. . . .

 

Warning bells started going off on the IMF's announcement of the planned sale of, what, 403 tons of gold.  My question is where did they get all that gold?  Whose gold are they selling?  Did Congress (and other nations) authorize money to the IMF, who then bought gold with it?  Or, did they just make an accounting ledger update from Fort Knox to their books?

 

I know, stupid questions, but I am not as knowledgeable on International finance as others on the board (which is great, as we all know). 

 

Kudos to Tyler for ferreting this information out. 

Mon, 09/28/2009 - 12:27 | 81496 Anonymous
Anonymous's picture

when the imf was formed member nations were require
to pony up a certain amount of gold....the usa
had the most gold and thus contributed the most
giving it veto control of the dispostion of the
gold....

so the imf at one time really had the gold at least
on paper....it's
not clear how much of their gold has been used
to suppress the gold price over the years
but this year was the
first year of which i am aware that congress has
ever authorized sale of gold....we hold 85% of
the votes....

it is also not clear how the gold was stored, etc...
for most of these years it has been moot point....

i believe that the imf sale was a way to launder
gold to cover large short positions but that is a
tale for another time...

Mon, 09/28/2009 - 20:27 | 81963 Cognitive Dissonance
Cognitive Dissonance's picture

My understanding is that while various countries "gave" gold to the IMF, the gold still resides in the various donor countries and under their control.

I personally believe that there is less than 10% of actual real physical gold on hand everywhere to back up all the claims and counter claims on Gold.

Once this understanding becomes wide spread, all hell will break loose. And precisely why the Fed (nor the US Gold depositories) will never be audited. Once the last card is turned over, the game is over. Thus they will never allow this to happen.

Never. 

Mon, 09/28/2009 - 22:00 | 82050 TumblingDice
TumblingDice's picture

IMF owns the gold to address any contigincies that might crop up in the financial landscape. The only way for it to return the gold is by a 85% vote, of which the US would HAVE to be part of, obviosuly, because it has more than 15% of the vote.

Mon, 09/28/2009 - 12:43 | 81510 Anonymous
Anonymous's picture

The IMF gold-garage-sale jawboning is just that. Every year they bleat out dire impending garage sales of gold, and nothing happens.

9/18/2009:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBBSWZUO70AQ

2/9/2008:
http://in.reuters.com/article/businessNews/idINIndia-31847320080209?sp=true

Even if they wanted to sell it, the gold in IMF holding belongs to the member nations.

Mon, 09/28/2009 - 12:49 | 81516 Anonymous
Anonymous's picture

Who'd of thunk those "CASH 4 YOUR GOLD" commercials would have been so successful? :)

"Gold is money and nothing else." JP Morgan

Mon, 09/28/2009 - 13:06 | 81538 Anonymous
Anonymous's picture

The IMF gold-garage-sale jawboning is just that. Every year they bleat out dire impending garage sales of gold, and nothing happens.

9/18/2009:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBBSWZUO70AQ

2/9/2008:
http://in.reuters.com/article/businessNews/idINIndia-31847320080209?sp=true

Even if they wanted to sell it, the gold in IMF holding belongs to the member nations.

Mon, 09/28/2009 - 10:52 | 81407 Anonymous
Anonymous's picture

You are just figuring this out? It has been a known fact for, I don't know, 38 years now...

Mon, 09/28/2009 - 11:04 | 81408 Steak
Steak's picture

The CIA assassinated democratically elected leaders, the FBI spied on US citizens, the govt has performed heinous medical experiments on citizens, we've committed war crimes against (some) innocent folk the likes of which we executed Japanese for back when.

In the context of the crimes perpetrated by this country, fixing the price of gold is hardly the most egregious.  Citizens if broadly made aware of gold price fixing would be upset but unable to distinguish that from the myriad other ways the govt screws folk.

The real key is WHO has this information.  A million US citizens reading this post, meh...one well placed chinese banker, and the lid comes off.

Uncovering secret presidential memos like this one is quality journalism the likes of which the teevee refuses to provide.  I hope things like this can help this country's financiers figure this game out and help us stop our kleptocracy.

Mon, 09/28/2009 - 11:12 | 81413 Daedal
Daedal's picture

"In the context of the crimes perpetrated by this country, fixing the price of gold is hardly the most egregious."

But consider the scope of the problem and potential harm as a result. Look toward what happens to a country whose monetary system collapses -- famine, civil unrest, crime, and even war are common outcomes. Nazi party gained popularity after a prosperous Germany printed money to pay its WW1 debts...'fixing' the price of Gold is merely a means toward perpetuating a fiat monetary system that is headed toward collapse.

Mon, 09/28/2009 - 11:12 | 81416 Tipo anónimo
Tipo anónimo's picture

Thanks.

Forget gold manipulation, currency, et al.

 

It just is one more brick in the wall of proof that government is a necessary evil, one that should be kept caged, as was planned for by the founders of the US.

Mon, 09/28/2009 - 11:21 | 81424 Anonymous
Anonymous's picture

um, there is nothing interesting in this 1975 document. The Fed and Tres are simply discussing strategies on how to best keep inflation at check, and how to maintain competitive advantage in the world economy/political landscape.

You people seriously need to relax. What, you would rather the fed and tres not discuss anything or strategize at all?

Nothing in this article suggests any conspiracy, unless you have the ZeroHedge Goldbug lenses on, in which case I also suggest you build a bunker and buy food and ammo (which has more common sense behind it than gold conspiracy)

Mon, 09/28/2009 - 12:25 | 81493 Assetman
Assetman's picture

This was my intial impression as well.  Sure, it may villify the Goldbug crowd, but so what?  It's been suspects for decades now...

Thinking through this though, this finding by TD may be more than meets the eye.  If the coaxing of gold valuation by the Fed carried over from the days of Arthur Burns to our current Uncle Ben, I think the global markets would like to know about it.

In other words, here is one more reason why Audit the Fed should gain more traction.  If it's not a conspiracy theory, as your comment purports, the audit will prove the Fed it-- and the lunatic fringe of the Goldbug collective will be silenced.  But if an audit reveals something more ominous... well, who knows what will happen?

I'm getting the sense that between the Fed and Treasury, something will be created to roadblock Audit the Fed.  Whether it's something sneaked in to waterdown the intital intent (via Barney Frank) or something more dramatic (like intitiating a market collapse), it appears to me that the Fed keeping its opacity and unilateral powers is of primary importance.

Mon, 09/28/2009 - 13:21 | 81556 Anonymous
Anonymous's picture

I guess the fundamental question is given the degree of power of the FED and its integral dealings with our treasury department and their effect on the well being of all citizenry, what argument is there against auditing the fed? That it costs too much money relative to what it's likely to uncover? That the bogey man is going to get us?

It seems that transparency and representative democracy must be bedfellows if the later stands any chance of surviving. And, inherently, no cost is high enough to preclude the public from the truth.

So we can't implement economic policy as cheaply if everyone knows what we're doing... maybe... but, who's to say we should be participating in (manipulating) the market anyway? We obviously don't have a grasp on certain issues that are capable of growing over time and manifesting themselves so large we cannot fix them... It's time to admit what we don't know and let that guide our policy as well.

Mon, 09/28/2009 - 14:39 | 81635 Assetman
Assetman's picture

I don't disagree with any of that... but the "bogey man" is precicely what the Fed and others in the oligopoly are likely to scare us with as an alternative to Fed transparency.

And they'll likely do whatever it takes.

Mon, 09/28/2009 - 16:59 | 81780 MsCreant
MsCreant's picture

I asked this elsewhere and got little response. I'll try it here.

What happens, in reality, if the fed is found to have participated in criminal activity?

Don't gloss this shit. Really get your brain cells around this.

I don't think anyone will know what to do. I think it all grinds to a f@cking halt. Justice and court systems incapacitated. Govt. shut down.

Are we responsible for the debt anymore if it can be proved that the United States is a victim of fraud?

I'd love to see the thought experiment unfold with more (wall)street wise minds on it than my own.

 

 

Mon, 09/28/2009 - 17:39 | 81811 Assetman
Assetman's picture

You pose a very good and very relevant question.  In all honesty, I think when we seek the desire of auditing the Fed, a repsonse of "you can't handle the truth" may well apply.

To answer your question, it's likely that an international criminal court would be the most likely venue, as it is very likely criminal activity would be cross border in nature.

And unfortunately, I would expect taxpayers would still be responsible for paying the debts its so burdened-- even if they are the unwitting victims for fraudulent activity.  I'm not sure most of us would want to point weapons of mass detruction and threaten on our international neighbors with war when we know that we are the ones untilmately responsible for our own demise.

As for what goes on inside this country, the Fed as we know it would be dissolved and our elected leaders would be under very intense pressure to radically overhaul our financial and regulatory (and perhaps political) systems.  I'd give anarchy a 20% chance of happening, only led by martial law at 79%.

It's something I don't even want to think about, but boy, I guess it is a possiblity, isn't it?

 

Mon, 09/28/2009 - 18:00 | 81832 Anonymous
Anonymous's picture

can we reserve the 1% for aliens landing on the white house lawn?

Mon, 09/28/2009 - 20:37 | 81968 Assetman
Assetman's picture

... you know me better than I know myself.

Creepy.

Mon, 09/28/2009 - 20:33 | 81965 Cognitive Dissonance
Cognitive Dissonance's picture

Plenty of international and domestic legal precedent to repudiate debt that was incured without the citizens knowledge or if the proceeds were not used for the benefit of the public.

Mon, 09/28/2009 - 22:09 | 82058 TumblingDice
TumblingDice's picture

It is extremely unlikely that various creditor parties will agree on or even engage in negotiation of the distinction of legitimate debt and the type of debt you are talking about. It is a nearly impossible task.

Mon, 09/28/2009 - 19:24 | 81911 Sancho Panza
Sancho Panza's picture

I suspect individuals would be outed rather than the institution of the Fed itself.  

Mon, 09/28/2009 - 20:44 | 81972 Assetman
Assetman's picture

Perhaps.  Definitely agree on individuals getting the brunt of the damage.

Although I think there will be intense pressure to alter the Fed Reserve Act to impose total transparency-- and quite possibly-- change the ownership structure of the Fed itself.

The issue of who does the Federal Reserve (member banks vs. American people) ultimately serve will need to be debated and approved. 

Mon, 09/28/2009 - 20:38 | 81969 Cognitive Dissonance
Cognitive Dissonance's picture

There are so many variables that this thought experiment would need parameters. It depends on what is found and the extent of the damage done. Who knew what and for how long.

It appears to me that the question involves more than the Fed. I suspect there is more than the Fed involved in the Fed's mess.

The one variable most important is would the comatose American people shut off American Idol long enough to give two shits. Don't automatically assume they would. Americans were 100 to 1 against the bailout in September 2008 and yet when the elections were held 2 months later, nearly every incumbent was returned to office.

So much for a pissed off American people.

Mon, 09/28/2009 - 21:04 | 81994 Hephasteus
Hephasteus's picture

It wouldn't matter. Congress has the power to issue money. If they wanted to they could replace the dollar with a currency ala greenbacks and the silver backed currency proposed by Kennedy. This entire financial crisis could be over in 3 days if we did that.

Currency is nothing more than a promise. If the american people promise something it's not only as good as the fed's promises but better because the fed has to back it's promises up with so much intimidation and cruelty anyway.

Mon, 09/28/2009 - 22:10 | 82060 MsCreant
MsCreant's picture

Did not see your post or Miles before I posted my opus down there.

Mon, 09/28/2009 - 22:23 | 82074 Miles Kendig
Miles Kendig's picture

 

Opus 9, in C.

You are working with some good ingredients.

Mon, 09/28/2009 - 21:07 | 81996 Miles Kendig
Miles Kendig's picture

 

MsCreant.

From my limited perspective the issue revolves around the concept of what are the national & international standards for what I call the concept of lawful exclusion from judicial review.  Essentially, the fed does to the national government here in the US what the US government does to everyone else.

  This will be one of the turning points upon which the next great changes in social structure will be based.  After all, the simple fact of the matter is that it is far more difficult to hide n snow the general populace and the greater the awareness, the greater the revulsion at the juxtaposition between perceived social structure and the actual mechanics for some.

Great questions!

Mon, 09/28/2009 - 22:08 | 82057 MsCreant
MsCreant's picture

Thanks for your thoughts. 1% for alien landing is kinda low. Need more tin foil.

In all seriousness, I think it is a thought experiment that we need to face head on. As I lurk here (well, I guess I've posted a whole lot today) I am collecting a whole lot of these that I think need to be put through a "thought experiment."

I think my parameters above were too broad, but we have to start somewhere. How about this:

1.     

The Fed has no assets at all except toxic waste on their books worth only pennies on the dollar. Maybe even it is proved the fed has been deliberately setting itself up to be the fall vehicle, engineered to go down in flames after taking on the debt. The real movers and shakers were to walk away from the mess and set up the same shop over at the IMF or some such.

2.     

The Fed has been printing so much, no one knows how much $ is out there. The M1, M2, M3, reports are pure fiction, evidence is found that much more printing/fiating has been going on than stated. I never hear this one discussed but in my gut I feel it is true. With all the other stuff they pull, why wouldn’t they do this? What would prevent it?

3.     

Other countries have found out and they have started to do the same. See #2.

4.     

There is only 1 oz. real gold for every 10 oz. on paper. Part of mad Fed plan.

5.     

Every so-called first world country is insolvent.

6.     

The entire banking system is insolvent (follows from #5). The FDIC is beyond insolvent. The logistics of unwinding a “too big to fail” has tentacles so far inside the system that 600,000 lawsuits are triggered overnight when the FDIC tries to take it down. They simply do not have enough time or personnel to get the job done. The ones that have been done so far are relatively easy to apply force to get the public “showcase” result desired. And even in these cases, embedded in the larger backdrop of this particular global economy, they are still insolvent the second they start interfacing with the larger system again. Don't you know in your gut this one is true? Even if you could clean up a bank, it gets sick again when you put it online.

7.     

I have not discussed the derivatives directly. How about the Feds bad assets are deeply backed by dark pools of evil.

8. The Fed is making money off of drugs and hookers. Needed one that sounded to far out there, but sadly it does not.

9.     

Everything we have been told about how everything works is a lie (I have been personally unwinding this one for maybe 4 years or so, I just keep finding more). Okay, this one is too vague, certainly not a news headline.

This is a smathering of some things I am worried are true.

Wake up the next morning and there it is in the headlines. Tee Hee, go for broke, all of it is true.

Tue, 09/29/2009 - 07:36 | 82241 SWRichmond
SWRichmond's picture

One thing I consider a given: this government has a contingency plan for a currency crisis, and that plan does not include respecting civil rights.

1.  Likely the Fed has become just another over leveraged hedge fund.  Revealing that status would cause a currency crisis; the response to that crisis would be some sort of governmental power grab.  I am not certain how the American public would respond to a refusal to audit the Fed.  Most likely IMO is that 1207 passes, bogs down in the senate, then foot dragging ensues about how to proceed.

2.  Nothing would prevent #2.  They lie their assess off about everything else, why not this?  When you've caught the government lying as often as most of us have, it's hard to believe anything they say.

3.  I think coordinated currency devaluations have begun, and that they're being done deliberately.

4.  Others have suggested a much higher ratio than that.

5. & 6.  By any objective measure, true.  This has important political implications.  The government has already demonstrated its willingness to lie, obfuscate (Fed testimony), change rules (FASB 157), cheat and steal (TARP) in order to maintain the status quo.  We are on notice that we cannot expect fair treatment (justice) going forward.  In other words, the U.S. political system has overtly declared that it does not serve us, but rather, views us as subjects and not citizens.

7.  The derivatives market, which IMO is composed of nothing more than highly leveraged (yet empty) performance promises, is where the bodies are buried.  See "ACA Capital".

8.  Not enough money to be made here compared to what's needed.

9.  When you have been deeply immersed in a bubble of lies for your entire life, it takes a long time to peel back the layers. 

Tue, 09/29/2009 - 14:03 | 82601 MsCreant
MsCreant's picture

Don't have as much time today as I wish I did. You and I agree on so much, I will cut to the chase and leave you a short message.

I saw that you were kind of PooPooing Peak oil as science fiction (I think I saw that). With all these things you agree with me on, why in the world do you trust that human ingenuity will just "work it all out" regarding the energy issue? I think there a good chance we won't, or if we do, it will be a hell of a bumpy trip. I think it is reasonable to run that thought experiment, and prepare a bit there too.

Thanks for the point by point above. Thanks everyone for all your inputs. Very validating for me to see other minds going there.

And if we audit the Fed, yeah, it will lead to other sins we may have never even guessed (as creative as these readers can be!).

Mon, 09/28/2009 - 22:15 | 82064 TumblingDice
TumblingDice's picture

It depends on the criminal activity. The smaller the crime the more likely it is that individuals take the fall as the poster above pointed out.

If the crime has something to do with extensive hidden monetization and other such things. Something that can't just be glossed over since there would be too many big victims on the international scale, then I believe we'll see a total default. Entropy suggests that the vacuum will be filled. Ho it fills and with what is anyone's guess, but the size of potential vacuum is so large that the process will most likely be violent.

Mon, 09/28/2009 - 22:27 | 82076 Miles Kendig
Miles Kendig's picture

 

but the size of potential vacuum is so large that the process will most likely be violent.

Especially if the monster either cannot be corralled, or those that created the monster are consumed by it as it consumes itself.

Tue, 09/29/2009 - 02:36 | 82186 Slewburger
Slewburger's picture

I've thought the same thing to myself... We may never get there...

After all it could pose a 'national security risk' to completly audit the fed.

We may lose faith in certain financial institutions....

And God forbid people (Chinese) lose faith in the funny money or the markets and stop investing here. We are already seeing them attempt to divest.

If an audit really goes through its unlikely enough people will be interested to hold those accountable. I can see the powers that be causing some epic misdirection and finger pointing.

That being said I would love to see the real plunderers punished..... perhaps with some sweet irony....

I'd like to buy some land and they can share crop on it, or they can work on a chain gang with Sheriff Grayson on horseback.

 

Mon, 09/28/2009 - 12:37 | 81502 Anonymous
Anonymous's picture

this article is profoundly interesting for two
reasons: 1. it puts to lie the assinine statements
that the fed and treasury have not suppressed the
price of gold and that gold is a barbaric relic....
2. it exposes the tentacles of the fed into foreign
policy

and as a bonus it shows the inter-relationships
between the fed, cia, and state departments...

that you could miss this signficance of these points
is evidence of a lightweight intellect....

the memo, especially taken with other memos
from gata and zh, is further evidence of the
extensive involvment of the government in the
manipulation of the gold price....

such keen interest by these parties is an a forte
pronouncement of the dictum, he who owns the
gold makes the rules....

and why should the fed be making policy and
controlling the world as clearly burns fears would
be lost if the price of gold were not suppressed....

you need to seriously go back to your cia-fed
cube and find another argument for defending your
imperialist agenda....

Mon, 09/28/2009 - 11:22 | 81425 Anonymous
Anonymous's picture

Bravo, sir, bravo!

Mon, 09/28/2009 - 11:38 | 81437 steve from virginia
steve from virginia's picture

Far more interesting is the Chinese government encouraging private citizens to buy gold. How ... deflationary!

As for the Fed/Treasury manipulating gold prices; how could they not!? Since gold is priced in currency and currencies are either gold backed or not, manipulation is integral to the process.

The only diff, is that fiat currencies price gold as a commodity.

As for the vague and diffuse notion (hope) for a hard currency (or a gold backed currency) forget it! Rather a fiat- fiat currency is more likely such as that bastard stepchild, the IMF Special Drawing Rights. Gold is useless as a currency. It's too deflationary; it's pretty, people like to make art out of it and take it out of circulation. Better to have a Picasso- based currency.

Mon, 09/28/2009 - 11:53 | 81458 Anonymous
Anonymous's picture

Income taxes don't work too well in China.

Who is buying lots of gold? China. Where do merchants get their gold? The government. (huge mark-up)

When the gold bubble collapses do you think the government will be sitting on piles of gold?

If their currency collapses will China outlaw gold ownership?

It's clear that this is a no lose situation, right? So why can't people see it here?

Mon, 09/28/2009 - 12:50 | 81520 Anonymous
Anonymous's picture

you're a quack and a cia-fed fucktard sent to
dissmeninate your moronic totalitarian ideas....
owning gold is not deflationary
although hoarding might be and therin lies the
beauty of gold....

you seem to miss the point entirely or rather seem
interested in obfuscating it...the point is that
through various actions the fed and treasury
have sought and continue to manipulate the price
of gold through actions on gold - not through
monetary operations....you and a fellow traveller
on this thread are the paris hiltons of monetary
science....your comments are ridiculous in the
extreme....

but you are correct that fed monetary policy has
also contributed to manipulate the price of gold
just as it has for every other good and service
in the economy - an exertion of central totalitarian
economic planning....

gold is without peer as money and in no way
is deflationary and certainly not any more so than
your toilet paper fiat which you love...

better to have your face on the next fiat currency
with which we can wipe our asses.....

a return to hard money would be a boon for the
economic fortunes of our nation and a massive
setback to the totalitarian cia-fed control of
this country and the world....and to whom do
the cia-fed report? why the rockefeller / rothschild
cabal....

this memo was a smoking gun of extraordinary
dimensions...for those who object to an
unelected and unaccountable branch of government
making foreign policy and monetary policy it is
wholly repugnant....

but i know the cia-fed despises representative
government...the people are little and to be
corralled like sheep....

Mon, 09/28/2009 - 23:26 | 82109 steve from virginia
steve from virginia's picture

Sorry, I'm not CIA (I did have a summer job there a long time ago in their cartographic department).  It was terribly boring.

owning gold is not deflationary
although hoarding might be and therein lies the
beauty of gold....

Excuse me while I laff out loud!

Going back to gold is impossible. There simply isn't enough to go around and that gold in hand ... mostly lies outside the US. The US would have to buy its gold.

What would the US buy it with? ???

China is buying IMF gold. Why? It's hard to say, but their current stimulus plan - which is also their future stimulus plan - is highly inflationary. China isn't like the US; China has savings and the US doesn't. What the US has is deleveraging. This is not deflationary or cash savings as it is a bookkeeping artifact, only. It's virtual savings. China has cash in hand which can be turned out. When this happens all at once it is highly inflationary.

Chinese savings is in cash yuan(renmimbi). Add more and more stimulus mounting up and a pile of savings waiting to flood (a constrained) consumer marketplace and the possibility of hyperinflation becomes real. It only takes some velocity. Added stimulus amplifies the possibility. The Chinese banks are flooding the country with loans; the usual sinks are becoming saturated. Swapping gold for cash might be a way to dampen the urge to take cash out of savings and hurl it into a spending - and hyper-inflating - bonfire.

I don't know details about the gold sales other than what is available on Caijing, which is a reliable outlet for news in China; that and Michael Pettis.

People hold onto gold for dear life. Cash fiat money is toilet paper. Gold is ... beauty ... and it is always worth something. Swapping gold for paper would keep Chinese savings secure. I tend to give the Chinese more credit for cleverness than I do the US Fed which only knows how to print. The Chinese had paper money five hundred years before the US was founded.

All of Bernanke's printing is exporting - through the dollar/yuan peg - US inflation to China. If China drops the peg, there will be a currency crisis. Why? Because the yuan is overvalued, not undervalued as so many suggest. The outcome is a de facto or administrative devaluation of the Yuan. A consequence is the Chinese oil bill would explode, amplified by the need to buy (increasingly valuable) dollars with the cheapening yuan to pay for crude. This is why the Chinese are wailing about the rock/hard place they are in and want a new reserve currency besides the dollar. Right now Bernanke is screwing the Chinese and there is nothing they can do about it. They have to buy dollars; the Chinese buy dollars to maintain the peg but the lack of yuan liquidity - particularly overseas - adds a 'scarcity value' to yuan. Yuan can only be spent in China and there is nothing available either in China or anywhere else for sale in yuan that cannot be bought in dollars! The Chinese citizens would dump yuan if they could (ever) get their hands on dollars. This happens already where the yuan and dollar are freely traded; Hong Kong.

How do I come to this conclusion? Because almost every economist on planet Earth is bearish on the dollar vis a vis the yuan. We all know that turns out. How often are the economists wrong?

As for a gold conspiracy; the last 'big' one was when Bank of England tried to peg gold to pounds- sterling beginning in the mid- 1920's. Montague Norman and his central bank buddies both in the US and UK (Morgan, Dawes,Thyssen, Brown Brothers- Harriman) tried all the usual tricks to maintain the peg, even at the cost of deflating the US stock market bubble in 1929 (rise in Fed funds rate over the preceding year). When England finally went off gold in 1931, the world's banking system crashed; pounds were proxy for gold and were instantly worth- less. Banks were caught holding billions in sterling and raced out of it in desperation to other currencies or gold. The resulting rise in short rates in the US re- ignited the deflation after a recovery in hand. The loss of reserves caused thousands of US banks to fail. People who had gold specie (the US $10 and $20 coins were gold coins) hoarded it as they were conscious of losing it. Eventually, Roosevelt confiscated private gold (forcibly swapped specie for paper money) then devalued the dollar which was backed by gold only. Specie was outlawed. This and new liquidity ended the banking crisis in 1934. Prior to this effort, banks were permanently closing -state bank holidays - all over the US, leaving some states with no functioning banks at all.

Larry Summers made his pre- Harvard reputation devising schemes to undercut the market price of gold. In the early 80's, gold price adjusted for inflation was much higher than it is today. Gold was a hedge against inflation and selling 'virtual' gold in the futures market drove prices down. Where is Larry Summers today? Same place as inflation, in an inner circle of some sort.

Summers, Obama ... I don't know who to feel sorry for in this relationship ...

Gold has been a currency for thousands of years and has failed as a currency every time. Gold is easily counterfeit as specie and useless as a reserve - the bank(s) that hold it can leverage off of it just as easily as can be done with fiat, but with large and increasing management or surplus expense. The more of a thing one has, the more it costs to manage that thing; at some level the cost of management is greater than the value of the thing itself. This is why central banks and Treasuries got rid of metal reserves, they cost too much to manage.

All it costs to create reserves in a fiat system is a dude with an earring and tattoos lurking at a beat- up Navy surplus desk in a cubby hole next to the loading dock of the Federal Reserve building;

"Hey boss, how many dollars do we need, again?," pushes button on laptop, '$300,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000, ... '

The reason the US maintained a gold reserve status for the dollar vis. Bretton Woods is because the US had all the world's gold at the time and there were relatively few dollars in circulation ; dollars held a scarcity premium, the gold reserve was redundant and all US trading partners at the time accepted cash as cash and did not need to redeem for gold. Only after the US started importing massive quantities of crude oil beginning in the 1960's (peak oil in the US was 1970) did large amounts of US cash flow into world- wide circulation. The dollar scarcity premium disappeared Ironically, the dollar gained a greater reserve status as the gold peg evaporated; dollars could be found anywhere in the world where gold was scarce.. France simply ended the charade by demanding gold in 1970 forcing the hand of Nixon in August of the following year.

The Fed and Treasury can use more than one scheme to ruin gold speculators.

Gold is no panacea, it is another finance instrument; an industrial commodity ... just like the dollar or the euro or zinc or corn. Corn is more useful; our crisis is not a financial crisis, it cannot be solved by changing the form of the currency. Ours is an energy crisis that has been building for a long time. Over-consumption of oil has shifted the market balance between buyers and sellers/producers. Peak oil in the world energy markets took place in 1998. Look @ EIA monthly prices and see for yourself. Oil is the new gold.

The world's economy has been suffering the increase in oil/energy prices of 600% since that time. The cost to the physical economy (rather than the finance/credit economy) has been the reallocation of purchasing power toward energy and away from manpower/wages. The consequence has been the loss of business for companies and the loss of purchasing power for consumers. The gambit to substitute debt for purchasing power ended in failure last year. Shifting to gold will not give the unemployed - or the 'substitute Americans' laboring for $3 a day in China - any additional purchasing power. The consequence is the accelerating unwind in the physical economy.

The peak oil dynamic is why the world's central banks are desperate to form another asset price bubble, in any asset category. Bubble prices in finance are a hedge against rising energy prices. The world's finance community acknowledges peak oil by its actions while the world's political leadership denies it.

If you buy gold personally, that is as good a choice as any. You are not a 'fucktard' for doing so. Keep in mind, the 'conspiracies' driving gold prices down make it a decent bargain for speculators, but the process makes risk asymmetrical. The same conspiracies can support gold prices artificially high. Remember, there are NO HEDGES (Zero Hedge) against deflation. All assets decline in value against currency in deflation; which is always and everywhere a monetary phenomenon. Some assets decline moreso than others. Food production and tools are better hedges than gold as was the case during the Great Depression. Gold can be stolen or confiscated. Who would steal or confiscate a hammer?

If dollars- as- currency are rising in value against assets, why gold? At some point in a decline, you have to sell it ... for what? A can of beans?

Mon, 09/28/2009 - 23:56 | 82139 Mr. Mandelbrot
Mr. Mandelbrot's picture

"Going back to gold is impossible. There simply isn't enough to go around"

Murray Rothbard and I disagree.  Any quantity of gold in an economy (to reasonable degrees of course) would be ideal.   Simple supply and demand takes care of price.  The last century or so of the world gold standard before the Great Depression was slightly deflationary (meaning smaller bits of gold would buy the same basket of goods over the period) because the population (hence the demand for money) was growing faster than the supply of money (gold).  Please man up and concede the point.


Tue, 09/29/2009 - 03:09 | 82199 steve from virginia
steve from virginia's picture

 

Any quantity of gold in an economy (to reasonable degrees of course) would be ideal.

Ideal for what? What's a reasonable degree?

At the point where gold - or anything else - is an exchange marker, there is no difference between it or any other thing. A stick with notches cut into it is just as good as gold. (A UK tally stick, which corresponded to the longest period of pre- modern English financial stability, btw.)

Good as gold. Good as oil! BETTER as oil!

The idea of monetary discipline (Rothbard) is distinct from owning a particular object. Neither idea nor item indicates a value judgement. The utility of an object lies in what can be done with it, also you may wish to trade it for something. The 'value' of the object lies in the trade rather than the utility - otherwise the trade would not take place. Value is indifferent to some arbitrary concept or fetish attached to the object, it can only be determined by trade.

If you have peanut butter to trade and everyone far or near hates peanut butter, yours is worthless. It is the value of the trade - what the peanut butter will buy - that makes peanut butter valuable. If no one wants it: if an object cannot be bartered for anything, it has no value at all.

You have to eat the peanut butter all by yourself.

Granted, gold has some value to some relative to other 'things', but so do Picassos. Circumstances matter. A jeweler will have no use for gold if there is no market for jewelry.

The currency of the present and immediate future is crude oil. Gold is a 19th century anachronism. As a currency, it is worthless. How would a government get from fiat to a gold standard? Any gold would be hoarded by the rich, who would buy it all with the (depreciating fiat currency that they now have) and keep it for themselves. There would be no gold in circulation. People would use the fiat as it would be in circulation- this is Gresham's Law and still applies. The law put an end to specie and gold reserves; in the marketplace gold failed on its own terms. The value of currency increases because there is enough of it to facilitate trade. Gold did not trade since few bartered it for anything other than gold!

Out of circulation gold may as well not exist at all. During the Depression, people had few possessions but hoarded gold, they lost their possessions to called loans or to circumstance. They would not part with the gold so the gold was worthless, practically speaking. Once the desperate traded (bartered) their gold for some good - then ate the good - they were paupers. This is true today, where Zimbabweans barter .001 oz of gold for a loaf of bread. The advantage in this trade lies with the bread owners, not the gold owners.

The misinterpretation of Rothbard has a thing standing in for an idea. Discipline, like character, cannot be bought in a store, even with gold.

Thus ever with speculators. Carpenters, plumbers, farmers and mechanics survived the Depression. My grandfathers both kept good jobs during the Depression, gold was useless to them except for their gold retirement watches.

I'll say it again, the current problem with the world's economy isn't financial; it is energy. Energy is money, if you will. (It is bad money because using energy destroys its exchange utility most of the time.) The world runs on energy, not on money, credit (same thing) or gold. Currently, the dollar is a proxy for energy - traded in the oil market every day - the dollar has value; what it's worth in crude oil. As crude oil vanishes (regardless of cash - or energy - inputs) the value of the dollar, what it buys, increases along with the value of the energy it buys.

It's not what the oil buys in the dollar market that matters, it is what the oil buys elsewhere in the physical economy. Every day it buys more; the oil becomes more valuable, its consumption worth less and less. Ditto its proxy, the buck.

Your deflationary scenario omits the increase per- capita in net energy consumption of the population beginning in the 18th century. All previous deflationary episodes have taken place against this increase, which represents an increase in productive wealth. That is, the trade in question barters some currency for increased fossil fuel production. The economic bias has been toward inflation (growth), in other words.

The world has changed. There is an ongoing net decline in available energy and production derived from that energy. This changes the bias from inflationary to deflationary - financial (credit) claims against production arbitrage against money claims against the energy that enables the production. The financial claims are against future production that will never take place because the energy to allow the production will cease to exist. Oil is now the 'hard currency'.

Whether it is peanut butter or dollars, the energy proxy becomes more and more expensive. What you desire - monetary discipline - is happening right under your nose. As it accelerates (Mexico's Cantarell field will be net depleted next year. Saudi Arabia and Russia are in terminal decline and net exports will 'fall off the table' within five years) you will see what damage a truly hard currency will do - how an unreasonable lack of quantity in the economy is far from ideal.

If you look at the wreckage of the economy (and employment over the past ten years) you can see what the hard currency of energy has already done. So, I'll 'man up' and restate;

"Going back to oil is as impossible as back going to gold. There simply isn't enough to go around!"

 

Wed, 09/30/2009 - 08:10 | 83523 Anonymous
Anonymous's picture

Where you say: Going back to oil is as impossible as back going to gold. There simply isn't enough to go around!

ultarnerd There is still a problem and they may be eventually be forced to use gold as well as bartering etc.We have to have some form of money we can carry and if everything paper loses peoples trust it could become similar to Zimbabwe here too.
I did notice that people there were being taken advantage of just look at the amount of gold they wanted for a loaf of bread.Mind you the gold might not be that pure but panned gold out of streams etc tends to be quite pure.
If people have a taste of extreme inflation it may become impossible to people to accept another unbacked dollar if all it really is is just another dollar with its name changed.Without some form of money civilization will come to a halt and we cannot trade oil unless you do not mind carrying around 45 gallon drums of the stuff but yes it could have made a good from of money if not for that.
I did read that Germany did use land to back some of its money so I suppose just about anything can be used to back a dollar even oil stored in barrels on a reserve.Problem then gets back to paper and if you have a currency crisis and even the stock market itself is caught again selling paper gold etc that cannot be backed then it may become hard to get anyone to trust anything in the US that's paper its just that its especially true of anything unbacked
Look up the 1980s where silver went to about 50.00 per ounce and note that this happened when the Hunts went to get their silver that forced those on the stock market that sold silver they did not have to go and buy the silver at any extreme price to fill those contracts.There was a lot of naked short selling, were you sell what you do not have hopping to buy it back when the price drops to make a profit and its worse with silver now then ever.Its a great way to keep prices on gold down by flooding the market with cheaper gold or silver but it only works by being sure that most will just resell the contracts to another rather than taking actual delivery of the actual weight of metals.
What I have read is that the government is turning a blind eye to it now more than ever and or even encouraging it.Many people with retirement savings plans that include this form of paper gold or silver may very easily end up losing big time.
I do like c-gold.com and goldmoney is not to bad as long as they are not US located.The few that were have been taken out for assorted reasons and I still wonder if there are hidden reasons beyond the ones given.Just looks to fishy why only the US ones doing this got in trouble.Other websites comment the same thing so I am not alone.
There may well be an extreme dislike of any form of competing currency.I even wonder sometimes now if the US may have sold all its gold so that a gold backed dollar might be very difficult but wow what a disaster that could lead to especially if foreigners start to refuse US dollars and you need it to trade.
And add to that the environmentalists have prevented a lot of mining etc and the US is in an even worse mess.Read that with tungsten its severe and is needed for strategic reasons.That means a real mess if you get into any wars.

And here is the big point I have read about a deal where gold for oil was worked out and it worked by keeping the price of gold lower in US dollars so that they could just get the amount of gold they wanted for a barrel of oil.As it turned out than a small amount of the sellers only wanted gold.But the thing was even while they were in the minority they were still a large enough of a part of the market to dramatically effect oil prices.Think about what would happen if suddenly there was 10% less oil on the market as the demand would drive the price up far more than just the 10%.
The articles appear to have been a few years old so the situation might have changed significantly since then and there is the question of it it was actually true at all.

The US may be in a very serious mess if its also true that they have sold and or leased out most of their gold and its far worse with silver.
They might not have enough gold to use it for a gold backed dollar but yet they may have no choice and it will be put up in price significantly.One estimate assuming the US still had its gold was 50,000 an ounce.
This could all happen if the Arabs insists on gold for oil and refuse US dollars if a currency crisis dose happen.
What will the government do then?

Its ironic if what I read is true that the US became the reserve currency because they were the last to go off the gold standard and now they may have secretly sold it all.

Me I got all my extra money in silver and just a bit of gold.

Wed, 09/30/2009 - 23:07 | 84710 Mr. Mandelbrot
Mr. Mandelbrot's picture

 

Sometimes, before we attempt to understand how money works, it is instructive to understand what money is.  To be a good "money," a thing has to meet a few basic requirements, and the better a thing meets these requirements, the better the money is.

 

A good money:

 

1.  Is extremely liquid at all times

2.  Is fungible and divisible (unit of account)

3.  Has a very high value to mass ratio

4.  Contains preservability

5.  Has verifiability

6.  Is relatively scarce 

7.  Serves as a store of value

8.  Is relatively unencumbered by controls/manipulations

 

Current examples of excellent monies include gold, silver, high proof alcohol, cocaine, heroin, methamphetamine, oil (and derivatives such as gasoline, kerosene, etc.), federal reserve notes, euros, etc., etc.

 

There are and have always been many competing monies.  You're correct that circumstances do matter.  In most places at most times, peanut butter is not a good money.  In a Mad Max scenario, its trade value would be a completely different matter.  My personal experience and research has led me to the conclusion that if there is to be one ultimate money, gold is that one ultimate form of payment and store of value that will be most readily accepted by the greatest percentage of people in the most circumstances, especially given the rumblings in the world economy and financial markets these days.  Gold's track record as a store of value over centuries is unassailable.  Many experts expect fiat currencies' function as a "store of value" to decline considerably over the coming months and years, which will make them inferior monies.  The behavior of market participants will react accordingly, which is why I've been turning my dollars into gold and silver.

 

Of course governments would not (and probably could not) go directly from a fiat to gold standard.  There would probably be a lack of a standard in between as chaos would certainly reign for a time.  The history of money shows that governments never chose precious metals as the money for their people--the people chose precious metals as the money for their governments.

 

As a result of the financial (money) crisis, there has been a marked acceleration in a global shift in consciousness as to what money is and how it really works.  You've just become a part of it.

 

We should all want our economy to operate with a sound money, and any thing that can be  created out of thin air by the trillions in just a matter of weeks does not meet  the qualifications of a sound money.

Mon, 09/28/2009 - 11:40 | 81439 Anonymous
Anonymous's picture

you hit it on the head with "...it is no longer a theory, it is merely sad."

Mon, 09/28/2009 - 11:41 | 81442 Stuart
Stuart's picture

Shove that up your pie hole John Nadler!

Mon, 09/28/2009 - 23:58 | 82141 Mr. Mandelbrot
Mr. Mandelbrot's picture

I hate that disinformationist bastard!!!!!

Mon, 09/28/2009 - 11:44 | 81446 Anonymous
Anonymous's picture

Meanwhile gold is trading around 995/oz. Oh well, so much for "$2000/oz by September".

http://www.dailymarkets.com/contributor/2008/11/27/citigroup-says-gold-l...

Oh hum...... Gold.

Mon, 09/28/2009 - 11:54 | 81461 Cognitive Dissonance
Cognitive Dissonance's picture

It will be interesting to see which newspapers, TV networks and economic pundits talk about this, don't talk about this or attempt to debunk this piece of evidence.

Watching what happens on this subject will tell you who are the mouth pieces for the vested interests of the powers that be.

Mon, 09/28/2009 - 18:39 | 81860 Anonymous
Anonymous's picture

This will never get a single mention by mainstream press.

Even bloggers like Shedlock won't acknowledge it because they have been dead wrong about the manipulation.

Mon, 09/28/2009 - 20:13 | 81954 MsCreant
MsCreant's picture

It has been posted at Mish's and Denninger's and no one commented.

Mon, 09/28/2009 - 20:58 | 81988 Miles Kendig
Miles Kendig's picture

We can often discover more by how someone responds, or fails to respond to stimuli as much as where the response does occur. Amazing when it is so clear, eh?

Tue, 09/29/2009 - 01:32 | 82157 MsCreant
MsCreant's picture

I like much of what Denninger has to say. He quarantines discussion on topics, he is a bit of a heavy and an enforcer regarding it. I probably posted it, and my guess is folks were scared to address it because it was off topic and, tremble, about gold.

At Mish's I think I don't have credibility there because I am a female and I am not a trader. I do not mean Mish himself, he has been a sweetie, and a gentleman, always. I do not have thin skin, but some of the female posters have been chased off by certain characters. I know this for a fact because I have had contact with the women in other venues. So both locations have different things going on. And I could have read things wrong about why there was no response.

Tue, 09/29/2009 - 01:51 | 82166 Miles Kendig
Miles Kendig's picture

 

You have great instincts.  Trust them!

I fully agree that many of our public spaces as they are now constituted can be rough sledding for many.  I cannot but help observing some of the intragender commentary with a certain amount of wonderment tho.  I suppose the old saying that the older some get, the closer to seventh grade they get applies.

BTW, I appreciated your kind response to my video suggestion over the weekend.  To answer your question the name is comes from a movie of all things.  Hopscotch, with Walter Matthau and Glenda Jackson.  Does a bit more with what I bring to the table so to speak being a nontrader and lifelong public servant. The joke usually is on me.

All The Best

Tue, 09/29/2009 - 02:44 | 82189 MsCreant
Tue, 09/29/2009 - 02:59 | 82197 Miles Kendig
Miles Kendig's picture

[:-)

Happens to us all.  Thanx for the stand up.

Mon, 09/28/2009 - 11:59 | 81467 Anonymous
Anonymous's picture

Support HR 1207 to Audit the Fed.

Once the light is shined on that institution.. we can END it.

Mon, 09/28/2009 - 12:06 | 81472 The Eradicator
The Eradicator's picture

TD, will you stop embarassing the mainstream financial media by breaking stories such as this one. If you keep this up, they will need a government bailout.

Mon, 09/28/2009 - 12:09 | 81476 chumbawamba
chumbawamba's picture

Oh SNAP.

I am Chumbawamba.

Mon, 09/28/2009 - 12:15 | 81480 George the baby...
George the baby crusher's picture

Mr. TD and Geoffrey Batt have just given all us gold tinfoil hat people freedom.  I'm already thinking about reducing my paranoia medication.  But I'm still paranoid about systemic failure, peak oil, global warming, poleshift, polarshift, Bilderberg and my neighbours.  Second thoughts, I'm gonna take me a double dose tonight.

 

"Just because I'm paranoid, doesn't mean I'm not being followed" Homer simpson

 

 

 

Mon, 09/28/2009 - 13:54 | 81590 trx
trx's picture

Yes, and paranoid people can have real enemies as well !

Mon, 09/28/2009 - 12:14 | 81482 Slewburger
Slewburger's picture

The first rule of Project Mayhem is you do not ask questions.

Mon, 09/28/2009 - 12:23 | 81491 chumbawamba
chumbawamba's picture

So, are people finally starting to get it?  The reason rackets like the Federal Reserve abhor gold is because gold is mon ey and they cannot control its issue.  This is about control.  The Federal Reserve owns you.  The Federal Reserve is Satan.  Therefore, anyone who relies on the dollar is in the thrall of Satan.

The final battle is nigh.  Those who hold gold will be the victors.

Gold. Guns. Garden.

I am Chumbawamba.

Mon, 09/28/2009 - 18:15 | 81841 Anonymous
Anonymous's picture

ever notice that most of the presidents on the FRN's are the ones who were most antagonistic to a central bank?

Jackson
Jefferson
Lincoln

then there's good ol Bennie Frank: “The refusal of King George III to allow the Colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators, was probably the prime cause of the Revolution.”

coincidence or sick joke by ol' J.P.?

Mon, 09/28/2009 - 20:55 | 81984 Miles Kendig
Miles Kendig's picture

hehe.

I am sure JP loved giving up more than 70% of his baby and never forgot it. 

 

Tue, 09/29/2009 - 18:22 | 82943 Hephasteus
Hephasteus's picture

I used to think it was wanted posters. LOL

Or reminders that ya these people fought us but look you're using OUR money.

Kind of a dig?

Tue, 09/29/2009 - 00:00 | 82143 Mr. Mandelbrot
Mr. Mandelbrot's picture

Check.

Check.

and Check.

Chumbawamba, I'm good to go!

Mon, 09/28/2009 - 12:29 | 81499 philmink
philmink's picture

 

Great work Tyler.  Awsome.

 

Phil

Mon, 09/28/2009 - 12:37 | 81504 genieous
genieous's picture

"All the perplexities, confusion and distress in America arise, not from defects in the Constitution  or confederation, not from want of honor or virtue, so much as from downright ignorance of nature of coin, credit and circulation." John Adams, 2nd President of the United States

Can any CB even spell honor or virtue - could they define them or display and example of them in their conduct?

 

Mon, 09/28/2009 - 12:43 | 81511 waterdog
waterdog's picture

Any bets on what they will find when they grow a nut sack and audit GLD.

Mon, 09/28/2009 - 13:39 | 81577 chumbawamba
chumbawamba's picture

Paper?

I am Chumbawamba.

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