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Today at the
closing bell I saw that Kitco and CNBC both agreed on the price of gold...
almost. CNBC had it at $876 and Kitco had it at $871.60. But the bigger
difference was that CNBC had the red arrow next to gold saying it was down
$20 while Kitco shows that it is UP $19.60. So which is it? Is gold up or
down?
I suppose the answer is that "it depends". It depends on what you
compare it to. Everything is relative.
Perhaps the red arrow on CNBC was a simple mistake. But it was up on the
screen the whole time I was watching.
How about the Dow Jones Industrial Average? Well, next week they are going to
remove the ailing insurance company AIG which has been dragging down the DJIA
and in it's place they are putting the more buoyant KFT (Kraft Foods Inc.).
How about inflation? The CPI is the CONSUMER Price Index. That is the
barometer for what you and I pay. And when the price of gas or milk was
running the CPI up, they simply stopped counting those prices. Instead they
count flat screen TV's which are going down in price. If the price of steaks
are going up, they make the "assumption" that people will just eat
cheaper ground beef and they show the price of "meat" is falling.
How about the money supply? The M3 was the broadest calculation of money. M0
is all the physical currency in circulation. M1 is M0 plus the money in
demand deposits like checking accounts. M2 is M1 plus time deposits like
CD's. And M3 is M2 plus everything else that is "liquid" including
large liquid assets, institutional money market funds, short term repurchase
agreements and so on.
M3 was the broadest measure of money in the system commonly used by
economists and published by the Federal Reserve. And when liquidity is
pumped, it generally lands in the system somewhere in the form of an M3
category and takes a while to filter down to M2 and M1.
But in March, 2006, the Fed stopped publishing M3 data. Wikipedia says,
"They explained that M3 did not convey any additional information about
economic activity compared to M2, and thus, had not been used in determining
monetary policy for years. Therefore, the costs to collect M3 data outweighed
the benefits the data provided."
How about our nation's gold? No one is allowed to go in and count it. When
Congressmen visited Fort Knox they were only allowed to look at the pile that
had been placed in front of them (behind the security bars). When one of them
asked to look behind the pile to see how much more was back there they were
told they could not.
When our national gold is lent out for various purposes it is replaced with
an IOU. That IOU says that the gold will be returned some day. On the books,
that IOU is counted the same as a bar of gold. There are not two separate
columns. So we have no way of knowing how much of our nation's gold is real
and how much is "paper". And the problem with paper gold is that
when there is a shortage of real gold, those paper IOU's get settled in
Federal Reserve Notes, or dollars.
So what is reality? Where is truth?
It is out there. It is right behind the facade. And the facade is wearing
thinner by the day. You see, in reality there are real consequences for
actions. There are inevitabilities. You can fool all of the sheeple some of
the time and some of the sheeple all of the time, but you cannot fool all of
the sheeple all of the time.
Our markets may be manipulated, but they are manipulated within the structure
of a free market, where the world is allowed to participate. So while they
can fool the world for a while into thinking that it is safe to jump back into
financial securities, they can't do that forever. Sooner or later the
consequences of the past will blast into the present and reality will be
overwhelming. That almost happened this week.
This week we went into full meltdown. But Wall Street was so hungry for some
good news that even the mention of Uncle Sam coming to the rescue made the
Dow soar.
Today, the chairman of the Senate banking committee, Democrat Chris Dodd,
said the United States could be "days away from a complete meltdown of
our financial system" and Congress is working quickly to prevent that.
Today Jim Sinclair listed out the implications of the current action under
consideration by our elected officials:
Dear Friends,
1. Today's reported potential infinite bailout of all and any portends, if
adopted, is the largest increase in dollars outstanding since the Jurassic
Age.
2. It closely models actions undertaken regarding the production of
currency liquidity seen in the "Weimar Republic."
3. It is reported now that more than 1000 hedge funds are on the rocks. This
has the potential for a significant financial impact.
4. The only way to hide the numbers from the statistics produced by the
suspected actions of the Fed is to value the indebtedness purchased at 100%,
claiming a wash transaction.
5. The only conclusion is that when the smoke clears and the advertised
actions have been adopted, nothing more dollar negative than this has ever
occurred due to the potential expansion of T bills and therefore dollar
supply explosion.
6. Gold is the only currency with no liability attached to it which, as you
have seen recently, will be selected as the currency of the people.
Respectfully
yours,
Jim Sinclair
I think I agree.
FOFOA
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