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What A Confidential 1974 Memo To Paul Volcker Reveals About America's True Views On Gold, Reserve Currency And "PetroGold"

Tyler Durden's picture




 

Just over four years ago, we highlighted a recently declassified top secret 1968 telegram to the Secretary of State from the American Embassy in Paris, in which the big picture thinking behind the creation of the IMF's Special Drawing Right (rolled out shortly thereafter in 1969), or SDRs, was laid out. In that memo it was revealed that despite what some may think, the fundamental driver behind the promotion of a supranational reserve paper currency had one goal in mind: allowing the US to "remain masters of gold."

Specifically, this is among the top secret paragraphs said on a cold night in March 1968:

If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.'s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years.

This then puts into question just what the true purpose of the IMF is. Because while its stated role of preserving the stability in developing, and increasingly more so, developed, countries is a noble one, what appears to have been the real motive behind the monetary fund's creation, was to promote and encourage the development of a substitute reserve currency, the SDR, and to ultimately use it as the de facto buffer and intermediary, for conversion of all the outstanding "barbarous relic" hard currency, namely gold, into the fiat of the future: the soon to be newly created SDR. All the while, and increasingly more so as more countries converted their gold into SDR, such remaining hard currency would be almost exclusively under the control of the United States.

Well, in the intervening 44 years, the SDR never managed to take off, the reason being that the dollar's reserve currency status was exponentially cemented courtesy of both the great moderation of the 1980s and the derivative explosion of the 1990s and post Glass Steagall repeal 2000s, when the world was literally flooded with roughly $1 quadrillion in USD-denominated derivatives, inextricably tying the fate of the world to that of the dollar.

However, back in 1974, shortly after Nixon ended the Bretton Woods system, and cemented the dollar's fate as a fiat currency, no longer convertible into gold, the future of the SDR was still bright, especially at a time when the US seemed set to suffer a very unpleasant date with inflationary reality following the 1973 oil crisis, leading to a potential loss of faith in the US dollar.

Which brings us to the topic of today's article: the international monetary system, reserve currency status, SDRs, and, of course, gold... again.

Below is a memo written in 1974 by Sidney Weintraub, Deputy Assistant Secretary of State for International Finance and Development, to Paul Volcker, when he was still just Under Secretary of the Treasury for Monetary Affairs and not yet head of the Federal Reserve. The source of the memo was found in the National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 1, Gold—8/15/71–2/9/72. No classification marking. A stamped notation on the note reads: "Noted by Mr. Volcker." Another notation, dated March 8, indicates that copies were sent to Bennett and Cross. It currently resides in declassified form in Document 61, Foreign Relations Of The United States, 1973–1976, Volume XXXI Foreign Economic Policy, and is found at the Office of the Historian website.

The memo is a continuation of the US thinking on the issue of the then brand new SDR, the fate of paper currencies, and the preservation of US control over reserve currency status. Most importantly, it addresses several approaches to dominating gold as well as the US' interest of banning gold from monetary system and capping the free market price, contrasted by the opposing demands of various European deficit countries (sound familiar?) on what the fate of gold should be at a time when the common European currency did not exist, and some European countries were willing to fund their deficits with gold: something the US naturally was not happy about.

While we urge readers to read the full memo on their own, here the two punchlines.

First, here is what the US' intentions vis-a-vis gold truly are when stripped away of all rhetoric:

U.S. objectives for world monetary system—a durable, stable system, with the SDR [ZH: or USD] as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR [ZH: or USD].

In other words: gold can not be allowed to dominated a "durable, stable system", and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.

We continue:

To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price and encourage the gradual disposition of monetary gold through sales in the private market. An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders, or by other agreement.... Any redefinition of the role of gold must be based on the principle stated above: that SDR must become the center of the system and that there can be no question of introducing a new form of gold– paper and gold–metal bimetallism, in which the SDR and gold would be in competition.

And there, in three sentences, you have all the deep thinking behind the IMF's SDR: simply to use it as a vehicle through which a select few can accumulate gold (namely those who can create fiat SDRs d novo), while handing out paper "profits" to the happy sellers.

And just in case it was not quite clear, here it is again, point blank:

Option 3: Complete short-term demonetization of gold through an IMF substitution facility. Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market. Profits from the gold sales could be distributed in part to the original holders of the gold, allowing them to realize at least part of the capital gains, while part of the profits could be utilized for other purposes, such as aid to LDCs. Advantages: This would achieve our goal of demonetization and relieve the problem of gold immobility, since the SDRs received in exchange could be used for settlement with no fear of foregoing capital gains. Disadvantages: This might be a more rapid demonetization than several countries would accept. There would be no benefit from the viewpoint of financing oil imports with gold sales to Arabs (although it is not necessarily incompatible with such an arrangement).

One wonders just who in the "private market" would be stupid enough to convert their invaluable paper money into worthless, barbaric relics?

And finally, was there the tiniest hint of a proposed alternative system to the PetroDollar. Namely, PetroGold?

There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports... Although mobilization of gold for intra-EC settlement would help in the financing of imbalances among EC countries, it would not, of itself, provide resources for the financing of the anticipated deficit with the oil producers. For this purpose, it would be useful if the oil producers would invest some of their excess revenues in gold purchases from deficit EC countries at close to a market price. This would be an attractive proposal for European countries, and for the U.S., in that it would not involve future interest burdens and would avoid immediate problems arising from increased Arab ownership of European and American industry. (The Arabs could both sell the gold and use the proceeds for direct investment, so that the industry ownership problem would not be completely solved.) From the Arab point of view such an asset would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control

One wonders if the price of gold is "high enough" now for Arab purposes, and just where the Arabs are now in their thinking of converting oil into gold... or alternatively into a gold-backed renminbi. And if not now, soon, once the pent up inflation in the Fed's $4 trillion, and rising, balance sheet inevitably start to leak out?

The full Volcker memo can be found here.

h/t Koos Jansen

 

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Tue, 11/12/2013 - 06:58 | 4145290 HardAssets
HardAssets's picture

Fred Reed is my favorite writer on the Lew Rockwell site

 

I'm from a military family and served.

Unfortunately, there's far more 'rah, rah' going on than thinking regarding 'national defense'.

I cringe when I hear people call anyone in a uniform a 'hero' and when people thank uniformed folks for 'defending our freedom'.  The military/industrial/intel complex is the greatest threat to our freedom and to the survival of humanity today. They literally hold the power to kill all life on earth.

Gather the most honorable of men  . . . and put them under the authority of the most dishonorable . . . and the result will be awful.  The only remedy for this is for the honorable men to stop allowing themselves to be used this way, to stop being blind.

http://www.youtube.com/watch?v=Jc1ql4TfCZw

Tue, 11/12/2013 - 18:00 | 4147615 DaveyJones
DaveyJones's picture

thank you for your post. You too Akak. We need more folks like you brave enough to speak out and do the true fighting for our liberty and many others

Tue, 11/12/2013 - 13:17 | 4146382 RafterManFMJ
RafterManFMJ's picture

You know AKAK, the few times we were struck, the enemy got through with no problem. Odd, isn't it? So much money, so many ships, planes, etc.

Pearl Harbor

9-11

How many attacking forces did our vaunted trillion dollar military intercept and blow from the sky, sink at sea, etc. over our history? 

Zero.

Somewhere, there's a lesson in there.

Tue, 11/12/2013 - 00:19 | 4144874 thisandthat
thisandthat's picture

 

You should be grateful that others died for your right to write.

You're talking about the "collateral" civilians, right...? Doubt they give a fuck now what he says, specially if it's true (and FU, mr. internet thought pahlice).

Tue, 11/12/2013 - 01:48 | 4144998 Bay of Pigs
Bay of Pigs's picture

My Dad is 92 and fought in WWII and he says you're sadly mistaken. He doesn't believe anything he did protected your personal freedom and liberty looking at it from today. Many of those rights have been trampled on if you hadn't noticed.

Mon, 11/11/2013 - 23:57 | 4144817 dwayne elizando
dwayne elizando's picture

Butt-hurt, it's what's for dinner! Hahaha

Tue, 11/12/2013 - 00:07 | 4144838 Constitutional ...
Constitutional Republic's picture

A veteran? Of what? The RAMF most likely. Useless paper pusher.

Tue, 11/12/2013 - 00:18 | 4144869 dwayne elizando
dwayne elizando's picture

Sheep dog is regular here. If you truly have a problem with the current state of affairs in america, you should be arguing with someone other than a ZH regular. 99.9% here all have a distaste for how things are going.

Mon, 11/11/2013 - 23:56 | 4144812 SheepDog-One
SheepDog-One's picture

So because I call bullshit on the whole 'wealth' line of this article, and point out the military is looked at as dumb animals to be used as cannon fodder, that makes me a 'compliant Nazi' somehow? 

You're crazy.

Tue, 11/12/2013 - 00:04 | 4144831 Constitutional ...
Constitutional Republic's picture

You are such a brat. You define yourself, your words, as if you are something special. You are not special. You are ordinary, and quite clearly intellectually lazy.

Any mature person knows that war is a racket; knows that money is useful, not everything.

Ask Mommy for more cookies and milk. She has more patience for your sort than the mature world does.

Tue, 11/12/2013 - 00:52 | 4144941 Flakmeister
Flakmeister's picture

Your act is getting a little tired...

These nice people here at ZH have exhibited far more patience than you merit...

Tue, 11/12/2013 - 04:28 | 4145208 r00t61
r00t61's picture

"Constitutional Republic" is merely the banned user "newengland" posting under a different name.

http://www.zerohedge.com/users/newengland

Tue, 11/12/2013 - 10:44 | 4145779 Flakmeister
Flakmeister's picture

Getting banned here is real tough, I mean you gotta work that hate real hard...

Tue, 11/12/2013 - 01:40 | 4145034 logically possible
logically possible's picture

sheepdog, don't waste your time, he is another brainwashed yes man servant to the politicians.

Mon, 11/11/2013 - 23:35 | 4144757 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

so let's see. suppress prices in paper market, buy up physical, steal real wealth from the entire human race, then oppress entire human race. standard day for a central banker. maybe start a war or two to make sure those pesky a-rabs keep trading their oil for central bank funny money.

Mon, 11/11/2013 - 23:36 | 4144758 Toxicosis
Toxicosis's picture

Don't tell that dickhead Denninger any of this.  He'll have none of it, since it isn't true, cause conspiracies aren't real. 

Mon, 11/11/2013 - 23:48 | 4144792 worldofdebt
worldofdebt's picture

Ah, Toxicosis, here are some Denninger Stock Picks on video that you'll love -- quite Hilarious actually... Really terrible picks. Funny Video Link Below:

https://www.youtube.com/watch?v=XqWIS0O2gIk

Tue, 11/12/2013 - 00:01 | 4144826 akak
akak's picture

 

Don't tell that dickhead Denninger any of this.  He'll have none of it, since it isn't true, cause conspiracies aren't real.

For insulting Herr ForumFuhrer, I BAN YOU!!!

Tue, 11/12/2013 - 04:20 | 4145200 Svendblaaskaeg
Svendblaaskaeg's picture

"..For insulting Herr ForumFuhrer, I BAN YOU!!!"

Thwow him to the floor ..

 

Mon, 11/11/2013 - 23:37 | 4144765 zjxn06
zjxn06's picture

Waitress, I'll have the tall stack today please.

Mon, 11/11/2013 - 23:42 | 4144776 ghengis86
ghengis86's picture

L O fucking L!

These cum-dumpster lying sacks of shit know the importance of the barbaric relic more than you or I would like to think they do; there's a reason they're richer than you and manipulation, obfuscation, inflation, deflation and careful propaganda creation of all things golden are their tools. Fuck faces from the current Mr. Yellen on down have been and always will be duplicitous cunts. Always enriching their masters; always expanding their control.

Let's see how much longer this paper fiat game lasts until the MOAB (Mother of All Bubbles) goes up in flames. $85 billion worth of gasoline a month on top of all that paper is surely to burn for quite some time.

Gold, bitchez?

Gold.

BITCHEZ!!!

Mon, 11/11/2013 - 23:49 | 4144791 SheepDog-One
SheepDog-One's picture

Actually, I'm convinced these days Bernank is just telling the truth and that gold IS pretty much meaningless big blocks stacked up in basements, big deal.

Mon, 11/11/2013 - 23:56 | 4144810 ghengis86
ghengis86's picture

Until its not.

But the charade has continued longer than anyone really expected, so who knows. It does get tiresome waiting for the Big Bang. Just wish I could stay sober long enough to accept that it already occurred as a slow burn into debt serfdom and full on 1984 police state.

Tue, 11/12/2013 - 04:24 | 4145202 CHX
CHX's picture

So are 1s with a bunch of added zeros on the FEDs central server in the basement (next to the porbably shrinking stash of gold ingots), where you add zeros as you please. See any difference?

Tue, 11/12/2013 - 01:31 | 4145010 sablya
sablya's picture

You so had it: manipulation, obfuscation, inflation, deflation and careful propaganda creation

manipulation, obfuscation, inflation, deflation and careful propaganda propagation.  

 That would have been sheer poetry. :)

Mon, 11/11/2013 - 23:42 | 4144777 hmmmstrange
hmmmstrange's picture

40 years of oil for paper, surely we can make it 41.

Tue, 11/12/2013 - 00:53 | 4144945 Flakmeister
Flakmeister's picture

It would be nice to make it to 60... but I don;t think that will happen...

Mon, 11/11/2013 - 23:47 | 4144785 Son of Captain Nemo
Son of Captain Nemo's picture

Best laid plans of bankers and politicians...

 

Mon, 11/11/2013 - 23:47 | 4144786 dwayne elizando
dwayne elizando's picture

Question. How in the hell would SDR's stop inflation?

Mon, 11/11/2013 - 23:59 | 4144819 Constitutional ...
Constitutional Republic's picture

SDR ensures the game goes on: inflation, deflation; the world owned by the central banks, monarchies, vatican, while the lovely little political pets admire their leaders, and send better men to die in war. Those men who would die for their family, country, the comrade stood next to them rather than seek money, plaudits, a useless life like 'sheep dog'.

Tue, 11/12/2013 - 06:09 | 4145273 CultiVader
CultiVader's picture

quit giving yourself greenies troll

Tue, 11/12/2013 - 01:56 | 4145049 Crawdaddy
Crawdaddy's picture

Answer: SDRs will not stop inflation or otherwise change the monetary dynamic of the world (for the good at least.)

SDRs are the wet dream of every globalist alive today. SDRs represent the abilty to control every govt on the planet. It is a key step in the plan for their beloved NWO.

Tue, 11/12/2013 - 03:36 | 4145172 dwayne elizando
dwayne elizando's picture

So they're saying the IMF controlling the price of currencies against eachother will stop inflation? Dafuq?

Tue, 11/12/2013 - 00:00 | 4144823 gafgroocK
gafgroocK's picture

 

 

Boys, I'm too tired getting fucked from all directions without permission, is what he said above, good or bad if you own gold?

Tue, 11/12/2013 - 00:12 | 4144842 Constitutional ...
Constitutional Republic's picture

:-) funny.

Good for gold, btw. Meh. It is what it is. Central banks aim to hold 10% in physical gold. China and India and Russia are catching up. O'bomba should have listened more closely to Volcker. 

The young career politicians are crass and ignorant. So are their peers.  Same as ever was.

Tue, 11/12/2013 - 00:16 | 4144862 A Lunatic
A Lunatic's picture

Stick  a fork in me and dump me out at Fukushima already.......

Tue, 11/12/2013 - 00:23 | 4144880 hadriansnightmare
hadriansnightmare's picture

"demonetization of gold" ?  How do you demonetize something that isn't money?  I'm so confused.....  I didn't know you could demonetize a "tradition"

 

 

 

Tue, 11/12/2013 - 00:26 | 4144885 Dre4dwolf
Dre4dwolf's picture

Human sacrifice was a tradition in many cultures.

We demonize that.

 

I hope.

Tue, 11/12/2013 - 01:25 | 4144999 sablya
sablya's picture

Gold has a natural fitness for being money.  We know you love it.  ;-)

Tue, 11/12/2013 - 00:30 | 4144884 Sizzurp
Sizzurp's picture

It looks like Weintraub's plan was to sell, or demonetize as he put it, US and European gold.  The Arabs would be the obvious buyers to settle trade imbalances.  Interesting that they thought this was a better plan than giving them USDs so we would avoid what he called "interest burdens".  I guess that didn't pan out, or maybe it did and now we have no gold, and enormous interest burdens to boot.  Maybe that's why Saudi seems to be making all the rules in the middle east.  He who has the gold....... you know the rest.

If our gold has all been sold, and we also have all this debt, we are going to have a big problem.  How's that for the understatement of the century?

Tue, 11/12/2013 - 00:54 | 4144948 Flakmeister
Flakmeister's picture

All that gold basically pays for a few years of oil imports....

Just some perspective, that's all...

Tue, 11/12/2013 - 23:45 | 4148711 layman_please
layman_please's picture

i think you are on to something! only way i can interpret this memo, is that they knew gold will have to become worthless, because if not, US would default due to the trade deficit. 

'To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price and encourage the gradual disposition of monetary gold through sales in the private market.'

which means, even if they valued gold, it will still become barbarous relict in the framework of modern economics. such an attitude is basically an open statement that they sold fort knox gold long ago. for if gold had some value in their minds, they would have bought it themselves, instead of saturating the private market.

it has been almost 30-40 years before some fringe group(though not so fringe central banks in the east) has started to notice value of gold again.

Tue, 11/12/2013 - 01:01 | 4144957 Paracelsus
Paracelsus's picture

The French sent a cruiser in the early '70's to convert their stash of paper to Gold.They were exercising their rights under the Bretton-Woods currency convention.There was such a pile of Greenbacks out there that no way that the Ft. Knox reserves could soak them up with physical metal.This is the anatomy of a bank run (a Central Bank run on assets).The US effectively defaulted and went off the quasi-gold standard in use up to that time.Nixon closed the gold window and currencies have been floating (read that "manipulated") ever since.

The day that a gold backed Yuan appears will be the day we declare war on China.

Also,Henry Kissinger's bloody fingerprints are all over this era of our history. 

Tue, 11/12/2013 - 01:23 | 4144992 sablya
sablya's picture

Hey, any refs on Kissinger re gold?  Those guys have ba;;s, unbelievable.  

Tue, 11/12/2013 - 01:37 | 4145023 Tinky
Tinky's picture

Not gold related, but here is a choice Kissinger quote:

 

The report’s damning conclusions continued: Had the U.S. not encouraged the Kurds to go along with the Shah and renew hostilities with Iraq, “the Kurds might have reached an accommodation with [Iraq’s] central government, thus gaining at least a measure of autonomy while avoiding further bloodshed. Instead the Kurds fought on, sustaining thousands of casualties and 200,000 refugees.”

One of the officials who testified before the committee in secret session was Henry Kissinger. When questioned by an appalled congressman about the U.S.’s decision to abandon the Kurds to their bloody fate, Kissinger chided the committee, “One should not confuse undercover action with social work.”

 

Tue, 11/12/2013 - 02:09 | 4145063 Diogenes
Diogenes's picture

I heard the Vietcong were making millions of US $$$$ in south  Vietnam from black market trade in stolen American goods, selling drugs to GIs et cetera.

They deposited the dollars in the Bank of France in exchange for gold

They sent the gold to Communist China to pay for the weapons and supplies they used against South Vietnam.

This is where the French banks got the piles of dollars, and why they wanted to exchange them for American gold.

I don't know if this is true or not but it would be interesting to track France's gold reserves compared to imports from the US and see if the gold stayed in France or not.

Tue, 11/12/2013 - 02:12 | 4145068 trader1
trader1's picture

we're already at "war" with china.  nsa director keith alexander said so. 

Tue, 11/12/2013 - 07:26 | 4145316 HardAssets
HardAssets's picture

"The day that a gold backed Yuan appears will be the day we declare war on China."

That could very well be a nuclear war that costs millions of lives. Of course, morons like mr. upside-down flag will be cheering those following orders to push the launch buttons and calling them 'heroes'.

Tue, 11/12/2013 - 01:04 | 4144964 RaceToTheBottom
RaceToTheBottom's picture

ZH, I appreciate this article.  More and more information is getting out there.  There are less and less excuses for remaining in the dark......

Tue, 11/12/2013 - 01:30 | 4145008 MilwaukeeMark
MilwaukeeMark's picture

And so now we have the central dots needed to connect the whole shitty system.

The move towards singler payer (because of the eventual planned failure of Obamacare), the push for more people on government programs, domestic drones, monitoring of our emails, the TSA to frisk people and their baggage as they try to exit, massive stockpiling of bullets, a corrupted IRS, the attempts to ban semi-automatic (they like to call them assault) rifles, diluting our military by pushing out career (constitutional supporting) soldiers, demonizing the Tea party .. all part of the end game to control an unhappy populace once their music runs out. The facist state is nearly in place.

95% of the populace is blissfully unaware. Many still sport Obama stickers.

Tue, 11/12/2013 - 02:13 | 4145070 Diogenes
Diogenes's picture

What do you mean nearly? The last brick is in the wall, the last piece of the puzzle is in place. What you are experiencing now is the golden age of the fascist system. From here it only gets worse.

Tue, 11/12/2013 - 08:04 | 4145371 MilwaukeeMark
MilwaukeeMark's picture

Your brick analogy made me think of the ghetto walls Himmler built in Warsaw, brick by brick, to hold people in to starve them and hold them until they could ship them in cattle cars to death camps. This time the bricks are threats by TSA, IRS, NSA and Obama's mandated regulations. The end will be the same.

The evil actors of history may change, but their methods are surprisingly similar (and thus highly predictable)

Tue, 11/12/2013 - 11:23 | 4145931 therevolutionwas
therevolutionwas's picture

It's clear to me now why Doug Casey and others moved out.

Tue, 11/12/2013 - 07:37 | 4145331 HardAssets
HardAssets's picture

Welcome to the 4th Reich.

I used to wonder how the Germans & Austrians could allow Hitler to take power and destroy their nation and many lives. I used to wonder how the Jews in those countries could stay there after the Nazis took control in 1933.

I happens because it is a slow, step by step process. People don't imagine how horrible the situation will eventually become. All the writings on the wall.

Tue, 11/12/2013 - 23:15 | 4148605 layman_please
layman_please's picture

like hitler who was not even german, us president ... oh never-mind 

Tue, 11/12/2013 - 11:05 | 4145854 therevolutionwas
therevolutionwas's picture

A person speaks up and the sheeple crown him with a hat of tinfoil.  They don't want to listen, the propaganda worked on them.  They say, " Obama has failed.....but, hey, Hillary is looking good....should have ran her for Prez last time.....           On it goes.

 

edit:  ....or, God forbid, they will go with a neo-con ex general type.

Tue, 11/12/2013 - 01:32 | 4145009 MilwaukeeMark
MilwaukeeMark's picture

above post

Tue, 11/12/2013 - 01:36 | 4145012 MikeMcGspot
MikeMcGspot's picture

Gold is a religion.

The secret is….. There is no secret.

The whole fucking idea is stupid.

Gold. some super metallic element idea that transfers some super human properties to you just because you have it?

The whole fucking idea is stupid, unless you can perpetuate it within the world of believers.

I’m free from your spell of lies.

There is no special super chemical or other special quality of the thing such as an element like gold which is better than others such as Iron.

 Gold is a lie as some sort of savior, Gold is a religion, bow down to the one you serve.

My favorite metal gods for now are tungsten with a bit of carbide, silver and copper, Iron I love Iron to death as a human being.MikeMcGspot

 

Tue, 11/12/2013 - 01:41 | 4145033 Tinky
Tinky's picture

The sophistication of your analysis almost matches that of your screen name.

Tue, 11/12/2013 - 16:21 | 4147239 Tall Tom
Tall Tom's picture

You are too funny. Thanks for the laughter.

 

Just because you do not value Gold does not mean that 7 Billion other inhabitants of the World do not value it. In fact many offer Cash Bids for that 170,000 Metric Tons daily.

 

The problem lies in the fact is that the vast majority of owners of that 170,000 Metric Tons are not selling it...FOR ANY PRICE. Thus Gold is really very scarce in the Marketplace.

 

The United States Government supposedly owns only a paltry 8,000 Metric Tons out of that 170,000 Metric Tons. And they are the Government that supposedly owns the most??? (Germany is second. China is Third...) That should tell you that most Gold is Privately Owned... Nobody is selling.

 

You can value "Limited Edition" Serial Numbered Government issued prints of Dead Presidents and Statesmen if you like.

 

The problem is that those Art Prints are really "Unlimited Editions". And when there is an abundance of supply when demand fails then good luck trading them for something of value. That day is approaching fast.

 

There are 7 Billion People eager to take my Gold and my Silver in trade for scarce resources. In fact I have no problem finding them.

 

But when the 7 Billion figure out that there are just too many Trillions of those Art Prints floating around and people are no  longer willing to take them in trade for scarce Goods and Services you will be wishing that you had some Gold.

 

There is just a lot of Iron around. It is far too abundant for it to serve as money. You can like Iron. Hell Iron has served me well. I like Iron. It is not a bad metal. It is just not useful as Money.

 

So knock yourself out. It is a free country...well...supposedly.

Tue, 11/12/2013 - 01:37 | 4145027 Schmuck Raker
Schmuck Raker's picture

Huge!

Thanks ZH. I wouldn't have a clue if it were not for YOU!

Tue, 11/12/2013 - 01:43 | 4145032 devo
devo's picture

They'll make SDRs the global reserve currency when this US experiment fails. The only thing left to bailout the US are citizens from productive countries.

Tue, 11/12/2013 - 04:17 | 4145199 Urban Redneck
Urban Redneck's picture

The US citizens aren't going to get a bailout, they are going to be paying REPARATIONS for 40 years of their government's inflation trade.

Tue, 11/12/2013 - 01:44 | 4145035 Peter Pan
Peter Pan's picture

Good has no chance of becoming the basis of the world's monetary system and fiat has no chance of being a store of value.

This Mexican stand off will continue until the system collapses. What follows s anybody's guess.

Tue, 11/12/2013 - 02:20 | 4145076 q99x2
q99x2's picture

Savages should not control money.

Tue, 11/12/2013 - 02:22 | 4145078 The Heart
The Heart's picture

The invasion and takeover by the evil foreign communist mercenary  troops is happening NOW!

Gotta be the greatest slow take down and conquering of a country ever.

With a presidink like the soterobama thing, who needs enemies?

Grid EX II and Martial Law Using Foreign Mercenaries:

http://thecommonsenseshow.com/2013/11/11/grid-ex-ii-and-martial-law-usin...

http://www.youtube.com/watch?v=2J1FrWbTDRQ#t=618

 

Tue, 11/12/2013 - 03:19 | 4145158 MikeMcGspot
MikeMcGspot's picture

As I see it the math of this, it wont work based on the people I know in civilian life and the military and LEO; particulary elected law in our counties such as Sherrifs , State National Guards, universities and such.  

Should some foreign force be brought to bear here , they may be all hot to trot trading bullets as they get dosed  down with untracable nano bots and virus to alter DNA/RNA replicaitons in their systems bringing an end to them and their progeny.

Our systems of war are evolving to this perspective, as time goes on bullets will become less and less relevant.

 

 

 

Tue, 11/12/2013 - 08:31 | 4145427 shovelhead
shovelhead's picture

You will repel all invaders with your Iron Thor hammer.

I am comforted.

Tue, 11/12/2013 - 03:21 | 4145159 Bloodstock
Bloodstock's picture

With the 2nd Amendment still basically intact there will be one hell of a resistance. The truth shall prevail!

Tue, 11/12/2013 - 03:05 | 4145136 AUD
AUD's picture

I don't think the idea that the powers that be have been angling to have their dud cheques trade money good in perpetuity is any revelation.

Tue, 11/12/2013 - 03:11 | 4145146 alfbell
alfbell's picture

 

 

There's no prediction as to what TPTB will come up with once the USD crisis hits. Have to diversify to have any chance of coming out of this alive. I believe the best way to prepare is to invest in... #1 a place with water and alternative energy and room for crops and greenhouses (and put some rental properties on it for income); #2 increase and add onto your skill set (skills that will be needed, marketable and tradeable in any economic scenario); #3 physical gold.

I would think that if one had 20% of their net worth or investment portfolio in physical gold it would replace their overall net worth when the currency collapsed. Gold would just need to go up 5X in value (in relation to the USD) to make you whole again. Altho this is trying to place a value on gold with the USD, a fiat currency that will vanish into the wind one day.

Tue, 11/12/2013 - 03:22 | 4145157 trader1
trader1's picture

 

 

 

... on the monetary question – we need money to circulate commodities, no question about it. But the problem with money is that it can be appropriated by private persons. It becomes a form of personal power and then a fetish desire. People mobilise their lives around searching for this money even when nobody knows [w]hat it is. So we’ve got to change the monetary system - either tax away any surpluses people are beginning to get or come up with a monetary system which dissolves and cannot be stored, like air miles.  [David Harvey, 2013; source]

Tue, 11/12/2013 - 10:49 | 4145792 therevolutionwas
therevolutionwas's picture

Read some Mises and Rothbard.

Tue, 11/12/2013 - 11:33 | 4145965 trader1
trader1's picture

i have...and? 

 

Tue, 11/12/2013 - 03:30 | 4145168 janus
janus's picture

epic post, TD.

one that will no doubt be hyperlinked for years to come.

and the final analysis?  capital, my good man! (real capital)

Tue, 11/12/2013 - 03:39 | 4145174 silverstud
silverstud's picture

We will overcome... kill the beast

Tue, 11/12/2013 - 03:58 | 4145185 Kina
Kina's picture

Problem for USA.... all Asia considers gold as money...and Russia...and the middle east....and Africa and South America......so The Bernanke all the scum sucking corporate criminals can stamp their feet, manipulate gold as much as they like....half the planet see it as the assest of assets...and will they swap it for some other form of USD such SDR???

 

 

They wanted to own and control all the gold in the world... but what happened....the dickheads ended up selling it all away to keep prices down and to bail out corrupt bullion banks....and now have SFA gold....and are left selling paper on the COMEX making out thats the price of real gold....when everybody with half a brain will hold their gold tight and never sell or fall for the corruption. They have forced all the gold into strong hands by making it cheap.

 

Now if they had let gold rise and rise...it would have been very liquid.

Tue, 11/12/2013 - 04:01 | 4145190 Kina
Kina's picture

I can bet at the end of the day when chaos hits currencies and the USD is bouncing around all over the place and over the cliff.....the USA will come out and say they have such and such bullshit tons of Gold and are backing their currency with it.

Tue, 11/12/2013 - 05:01 | 4145224 JPMorgan
JPMorgan's picture

Last time I checked the western vaults were being rapidly emptied and transferred over to the eastern hemisphere.

The master of gold will be China WHEN they decide they have enough and officially declare their holdings and back the Yuan.

On that day the US becomes the worlds No. 2 so called superpower.  

Tue, 11/12/2013 - 18:39 | 4147757 Flakmeister
Flakmeister's picture

Why would the Chinese do something as retarded as back the Yuan with gold??? To what benefit? Certainly not theirs...

Tue, 11/12/2013 - 05:05 | 4145226 KTV Escort
KTV Escort's picture

Any thoughts on Hudes' claim our checks to the IRS go directly to the UK (40%) and the Vatican (60%) while Afghan drug $ and QE supports the US gov? Spare me the ad hom attacks, I'd just like to know if anyone else is making these claims.

Tue, 11/12/2013 - 06:25 | 4145283 fijisailor
fijisailor's picture

Yes.  Hude's a quack

Tue, 11/12/2013 - 09:04 | 4145483 Mongoose
Mongoose's picture

Huh?

Anyway, interesting handle. Did you earn it?

Tue, 11/12/2013 - 11:06 | 4145867 bunnyswanson
bunnyswanson's picture

Karen Hudes is worth listening to. 

https://www.youtube.com/watch?v=58ayjFKRQ2A

 

 

http://www.independent.co.uk/news/world/europe/pope-francis-corruption-f...

Pope Francis calls out corruption

Tue, 11/12/2013 - 05:48 | 4145244 Quinvarius
Quinvarius's picture

The plans of mice and men.  Remember how well demonitizing gold and silver worked out for the Romans?  I am sure they were firing off high-faluting memos as well.  They had big plans for everyone too.  All we did was ruin the country and hand off the gold and economic batons to China.  Well played, sirs---NOT.  Reminds me of this David Bowie song.

http://www.youtube.com/watch?v=OX1jLh2Gw-w

Tue, 11/12/2013 - 05:44 | 4145252 falak pema
falak pema's picture

This thread spells out the defeat of Jacques Rueff's role in France and the rise of the neo-Keynesian (Tobin) cum Friedmanian alliance to marginalise gold; all the while keeping king dollar firmly in place.

The objective was KING DOLLAR preeminence; the means were decoupling with gold, using SDR as surrogate and then moving on to PETRODOLLAR ONCE THE OPEC became tool of Pax Americana in the handshake of Saud and Nixon organized by Dear Henry post 1973 six days war.

A page of oil cum monetary policy all having as nexus Saud and Ghawar oil bonanza was born and rules today.

Poor old Rueff he was left to write his bitter soliloquy about the demise of western monetary fiat world; like a forgotten druid of a past age.

Now its payback for Mr Rueff!!

Tue, 11/12/2013 - 05:59 | 4145257 Quinvarius
Quinvarius's picture

They never planned for any mistakes.  The problem with pure fiat is that it cannot survive a crisis.  Pure fiat can work in a perfect world.  But this world is not perfect.  Once you blow up there is no "there" there.  Gold will always win by default.  Every single time, you can count on corruption and crime to end even the most perfectly conceived fiat.  Even the Romans with their almost total economic hedgemony could not pull off token money.  The USD has competition from two other Romes, both with more financially sound money.

Tue, 11/12/2013 - 07:46 | 4145351 Tabarnaque
Tabarnaque's picture

So much for Trader Dan who refuses to acknowledge the manipulation of the price of gold!

After reading this text, anyone denying the price manipulation of gold by the power that be is either a blind ignorant or a deceiver working for the power that be.

Tue, 11/12/2013 - 08:53 | 4145461 pndr4495
pndr4495's picture

That " derivatives " hot potato still has yet to land securely at someone's doorstep.  It is spoken of in hushed tones in the boardrooms and bathrooms methinks.  When somebody in this lofty bank community " has to eat that error " -as anyone from a trading floor understands that phrase- there will be ample blame being thrown around , but for the accountability and responsibility for the woes birthed from all that " GREAT " trading there will next to nothing.  A lot of comments here admit that we will be in uncharted waters.  Hubris has killed many talented individuals.

Tue, 11/12/2013 - 09:18 | 4145517 world_debt_slave
world_debt_slave's picture

Watch the CFTC video when the witness Jeff ? defined the meaning of "physical" gold.

Without proper definitions set out from the beginning, we are kept blind by the "manipulated" words spoken.

Tue, 11/12/2013 - 10:05 | 4145636 withglee
withglee's picture

If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency.

This should make people leery of the gold bugs. There will always be some segment of the marketplace that will work to be the "masters of the gold" and thereby have the rest of the marketplace by the short hairs. It is just a form of capitalism where there is only one valid unit of capital.

 

Tue, 11/12/2013 - 10:12 | 4145666 therevolutionwas
therevolutionwas's picture

Government is the problem, not gold.

Tue, 11/12/2013 - 10:40 | 4145759 withglee
withglee's picture

Correct. Government is the problem. But gold is obviously not the solution!

Tue, 11/12/2013 - 11:20 | 4145921 therevolutionwas
therevolutionwas's picture

We shall see.  I'm betting on it..and silver.

Tue, 11/12/2013 - 12:23 | 4146157 withglee
withglee's picture

I am too. I am favoring silver (junk coins 1964 and earlier) because when it all falls down, it should be the easiest thing to exchange in simple barter to buy things like groceries. I have an innate feeling for what something like a silver quarter is worth. When I was in high school I could buy a gallon of gas with one. For summer jobs I was paid 48 of them to work a day. My parents could buy two full carts of groceries for 100 of them.

But the only reason I stock up on silver is because I have zero confidence in my fellow man to adopt the proper management of the medium of exchange.

Tue, 11/12/2013 - 17:25 | 4147488 Tall Tom
Tall Tom's picture

Yeah...You write that Gold is not the solution. Am I to understand that you believe that Silver, somehow, is the solution?

 

I share with you that same lack of confidence, in many, to manage a medium of exchange.

 

(All I need do is watch how they manage their current medium of exchange which is the US Dollar. Far too many are carrying loads of debt and are treading water. An Intwerest Rate move to the upside will send many into insolvency as they will not be able to make payments on outstanding loans. People whom work for the Government are no different in that regard. If they cannot manage their money then just how can one expect them to handle the Taxpayer's money?)

 

So I am not understanding that when you write that Gold is not a solution. Do you think that there might not be a solution? Or, if you think that there is a solution, then what do you propose?

Tue, 11/12/2013 - 13:46 | 4145970 Flakmeister
Flakmeister's picture

Actually, insatiably greedy sociopaths are the problem....

Tue, 11/12/2013 - 18:11 | 4147641 RMolineaux
RMolineaux's picture

I remember very well as a graduate student watching intently the drama of the demise of the international gold standard during the period 1968-73.   What is being overlooked today is the prime motivation for the US in its support of the SDR.  The wish to be "king of gold" as documented in this article derived from the fact that the US was rapidly losing its official gold stock through trade imbalances.  Kennedy was the last president to attempt to maintain a balanced trade account.  Johnson effectively demolished the effort with his fiscal imbalances, Vietman war and incipient inflation.  There was also the fear that more nations would demand settlement of their trade surpluses in physical gold, as France was doing.  There were hints that the Arab nations would threaten gold retaliation for US support of Israel in the 1967 and 1973 wars.  The idea of remaining "king of gold," while publically denigrating it persists today, as evidenced by the invasion of Libya to destroy the gold dinar.  What ever happened to Libya's gold anyway?

Tue, 11/12/2013 - 22:51 | 4148532 HardAssets
HardAssets's picture

BoNeSxxx:  "Say what you want about these globalist cental banker psychotic fuckshites...

One thing you have to admire is their patience.."

What they have is psychopath personalities and the ability to print unlimited sums of ''money' out of thin air.

Do NOT follow this link or you will be banned from the site!