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If you wait by the river long
enough, the bodies of your enemies will float by
Sun Tzu, The Art of War, fifth century BC
When growth slows in capital markets, the bankers daisy-chain of credit
and debt breaks down; setting in motion defaulting debt which ends in
recession, deflation or, in extreme cases, a deflationary depression.
A deflationary depression is a fatal monetary phenomena where the velocity
of moneyÂcirculating credit and debtÂfalls so low capital markets are no
longer self-sustaining. This happens after the collapse of massive
speculative bubbles such as the collapse of the 1929 US stock market bubble
which resulted in the worldÂs first deflationary depression, the Great
Depression of the 1930s.
Throughout history, gold and silver have offered safety in times of
economic chaos. Today is no different. What is different is the response of
governments and bankers to the collapse of the current economic paradigmÂthe
bankers war on gold.
In the midst of the Great Depression, the US passed the 1934 Gold Reserve
Act which prohibited the ownership of gold by US citizens, forcing Americans
to keep their wealth invested instead in capitalismÂs paper assets.
The Gold Reserve Act outlawed most private possession of gold, forcing
individuals to sell it to the Treasury, after which it was stored in United
States Bullion Depository at Fort Knox and other locations. The act also
changed the nominal price of gold from $20.67 per troy ounce to $35. This
price change incentivized foreign investors to export their gold to the
United States, while simultaneously devaluing the U.S. dollar in an attempt
to spark inflation.
http://en.wikipedia.org/wiki/Gold_Reserve_Act...rical_narrative
The attempt to Âspark inflation in order to overcome a deflationary
depression is the 1930s version of todayÂs similarly futile Âinflation-targetingÂ.
The resultant rise in the consumer price index from 1934-1937 was only
nominal and, by 1938, powerful deflationary pressures had again re-exerted
themselves and the US and the world would remain mired in a moribund
deflationary depression for the remainder of the decade.
Although the devaluation of the US dollar against gold by the Gold Reserve
Act didnÂt Âspark the inflation bankers hoped would end the 1930s
depression, it would cause large amounts of gold to flow into the US Treasury
after 1934 as foreign sellers took advantage of the US TreasuryÂs offer of a
70% higher price for gold.
In 1944, this unprecedented flow of gold to the US allowed the US to make
the dollar fully convertible to gold, officially making the US dollar the
worldÂs reserve currency at Bretton-Woods. However, due to excessive
military spending, the US would overspend its entire hoard of gold by 1970,
forcing the US to suspend the gold backing of the US dollar in 1971.
When the US ended the gold convertibility of the US dollar, the US also
set in motion capitalismÂs end game; as the removal of the bankers golden
fetters (which previously tied money creation to gold reserves) now allowed
governments and banks the fatal freedom to print money and create credit without
limits.
http://www.financialsensearchive.com/fsu/editorials/bms/2006/0511.html
The final link between the dollar and gold was broken. The dollar became
nothing more than a fiat currency and the Fed was then free to continue
monetary expansion at will. The result... was a massive explosion of debt.
John Exter quoted in Gold Wars, Ferdinand Lips, Foundation for the
Advancement of Monetary Education, New York, 2001
It was the explosive growth of money and credit after 1971 that would set
in motion Ludwig von Mises Âcrack-up boomÂ. Excessive money printing and
credit creation would lead to a series of larger and larger speculative
bubbles which inevitably would culminate in monetary chaos.
The credit boom is built on the sands of banknotes and deposits. It
must collapseÂ
If the credit expansion is not stopped in time, the boom
turns into the crack-up boom; the flight into real values begins, and the
whole monetary system founders.
Ludwig von Mises, Human Action, 1949
GOLD AND DEFLATIONARY DEPRESSIONS
Although the ownership of gold by US citizens was outlawed in 1934, the
shares of Homestake Mining, the worldÂs largest gold mining company, acted
as a proxy for gold during the Great Depression giving investors the same
protection gold has given throughout history in times of monetary distress.
[Shares in] Homestake Mining.. rose from $65 per share in 1929 to more
than $300 per share in 1933 and then climbed to a $480 bid and $534 ask in
December of 1935Â
During the next six years after the 1929 stock market
crash, Homestake Mining paid out a total of $128 in cash dividends. Its
dividend in 1929 was $7 per share which then climbed to a staggering 1935
dividend of $56 per shareÂ
Homestake Mining earned a compound rate of
return of 35% per year from 1929 thru 1935, excluding dividends.[bold,
mine]
http://www.worststockmarketcrashes.com/fea...the-1929-crash/
Today, the world is on the verge of another, even greater deflationary
depression than the 1930s Great Depression. But governments and bankers have
pooled their considerable resources to hide that truth from the public in
order to protect their vast wealth and power achieved through their use of
paper money and leveraged debt.
Nonetheless, powerful deflationary forces unleashed by the collapse of
todayÂs even larger speculative bubblesÂthe 1990 Nikkei bubble, the 2000
dot.com bubble, the 2008 US real estate bubble and the serial global real
estate bubblesÂare again moving through global economies; and, just as in
the 1930s, the velocity of money is now so low capital markets are no longer
self-sustaining.
If todayÂs investors knew that gold provided not only safety but
explosive profits in times of economic chaos, the bankers paper markets
would have emptied long ago as the majority of investors would have bought
gold at the first sign the bankers house of cards could go up in flames.
But most investors didnÂt know and didnÂt buy; and, because of the
bankers ongoing war on gold, they still havenÂt.
This is the time of the vulture, for the vulture feeds neither upon the
pastures of the bull nor the stored up wealth of the bear. The vultures feeds
instead upon the blind ignorance and denial of the ostrich. The time of the
vulture is at hand.
DRSch target="_blank"oon,Time of the
Vulture, 3rd ed. 2012
In The
Price of Gold and the Art of War, Part I target="_blank"and Part
II, I explained how the bankers war on gold forced down the price
of gold between 1980 and 2000.Next, in The Price of Gold and the Art of
War, Part IV, I will explain goldÂs price rise after 2000, how the
bankers responded and how high the price of gold could go in the bankersÂ
end game.
In my current Dollars & Sense video on youtu target="_blank"be, The
Economy 2014/2015, I explain the economy in terms that can hopefully
be understood by most observers, target="_blank"see https://www.youtube.com/watch?v=YHQNYUd...eature=youtu.be
As we continue to move deeper into uncharted territory, I believe that
good times will succeed the bad times, that love will replace hate and that
peace and goodwill towards men and women will prevail.
Buy gold, buy silver, have faith.
Darryl Robert Schoon target="_blank"
www.drschoon.com target="_blank"
www.survivethecrisis.com
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