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What a humdinger last week was in a
money world that is chugging toward maximum velocity and turbulence. Readers
know (and may be sick of hearing) that I'm allergic to conspiracy theories,
but my allergy is not absolute or total and there are excellent reasons to
believe that the smack down of gold and silver was an orchestrated event. By
whom? So far, in the opaque realm of paper gold sales, we don't know, except
that it was a 500-ton dump that set off the larger skid, and it is even quite
possible, as one anonymous wag put it on James Sinclair's website, that the
buyer and seller were virtually the same entity -- meaning that the probable
naked short transaction only amounted to a mere bookkeeping jot when all was
said and done.
Anyway, the 500-ton all-at-once dump
could only be calculated to drive the price down. Any rational strategic sale
of so much gold would be parceled out in smaller amounts over time so as not
to drastically impair the sales revenue, as this sale did. And, by the way,
who even has the roughly $25 billion holdings in paper gold besides a major
government, a major central bank, or one of the Fed's Too Big To Fail
handmaidens (Goldman Sachs, JP Morgan, Morgan Stanley)? Or who could afford
to eat the $billion-plus loss on the smacked-down sales value? In other
words, the usual suspects.
I hate the term The Powers That Be, with
its odors of recycled paranoia and lumpen
extremism, but signs of collusion abounded last week. First, on Wednesday,
Goldman Sachs issued an advisory to short gold as the price flirted with
$1600/oz. Then on Thursday, The New York Times planted a front-page
story headlined: "Gold, Long a Secure
Investment, Loses Its Luster." The
story featured a quote by supreme market manipulator and world-class schmikler George Soros: "Gold was destroyed as a
safe haven, proved to be unsafe," Mr. Soros said in an interview last
week with The South China Morning Post of Hong Kong. "Because of the
disappointment, most people are reducing their holdings of gold."
Well, there you have it. Soros sez: Gold = shit. If you get some on your shoe, scrape it
off. All that set the stage for the Friday smack down. Notice how falling
gold and silver prices make the US dollar look good -- it takes fewer dollars
to buy more precious metal. The dollar must therefore be sound! And this is
in the interest of whom? Say, perhaps, a Federal Reserve busy systematically
melting away the value of dollars through so-called quantitative easing
(money "printing" or promiscuous credit creation) plus financial
repression (interest rate chicanery), and also a US government so deep
underwater on its debt obligations that Treasury Secretary Jack Lew shares
office space with the giant squid of the Aleutian Trench.
To complicate matters, the day of the
gold smash, rumors flew of a plan by the Cyprus government to sell off its
relatively small gold holdings to pay off its EU debt -- didn't happen -- but
the rumor had the effect of further queering the gold price some more by
implying that the EU would soon come calling on all the PIIGS nations to
settle up their vigs with yellow metal.
Thursday, interesting things happened in
another ring of the circus. The novelty investment called Bitcoin,
having developed a hockey-stick chart profile, shooting up from about $60 a
month ago to $260, got smacked smartly back down to $60. It had been
attracting a lot of attention as a shelter from international monetary
shenanigans -- and hypothetically as an eventual rival to funny-money central
bank currencies. Bitcoin is a web-based species of
virtual "money" invented by a shady character (or cohort of
characters) called Satoshi Nakamoto whose true
persona remains mysterious. Bitcoin's supposed
virtue is that it can't be confiscated by governments -- though experienced
programmers know any website can be hacked -- or otherwise meddled with,
making it a more reliable store of value than the traditional "safe
harbor" investments such as sovereign bonds and precious metals. Well,
okay, but it raises a couple of questions: 1) Does the world need an even
more abstract form of "money" than fiat currencies, CDOs, Fannie
Mae promissory notes, and JC Penny stock? I don't think so. If anything, the
world needs more tangible instruments to represent a store of value, a medium
of exchange, and an index of price. Bitcoin is
little more than a bundle of algorithms. Granted, math helps with the
management of money, but is math "money?" 2) what
happens if you can't get online to access your Bitcoin
"wallet?" Is Bitcoin, after all, just
another example of the techno-narcissism infecting contemporary culture?
That idea is just off the radar screens
of Bitcoin pimps such as Jon Matonis
of Forbes Magazine who said last week that "civilization won't
regress to the state of having no electricity." Really? You think so?
Just watch. Electric grids all over the world are aging and decrepit -- the
USA's in particular -- and the capital is not there to renovate them. And
perhaps you haven't noticed the gathering scarcity problem with fossil fuels.
You bet society could regress to, first, spotty electrical service and then
possibly no electricity at all in many places. But that is an extreme case
because in the meantime all it would take is a "denial of service"
incident to render Bitcoin useless -- and the
mysterious Mr or Ms Nakamoto him/her/itself induced a half-day time-out in Bitcoin last week, taking its Mt.Gox
trading platform off-line.
The week ahead in world money matters
looks bloody and gruesome. Japan is committing financial hara-kiri by central
bank desperation. In artificially suppressing the gold price, the American
Powers That Be (yccchhh....) give China, Russia and
other rivals the opportunity to buy gold cheaply, and to do so by dumping
some of their US Treasury holdings, weakening the dollar's international
exchange value -- which the gold smack down was supposed to enhance! China
and Russia have both been steadily accumulating their gold holdings in plain
sight, with the possible motive of backing currencies with more appeal in
international trade settlements than the dodgy US dollar.
The weeks ahead could be a bloodbath for
the four horsemen of monetary apocalypse: the dollar, the Japanese yen, the
Euro, and Great Britain's pound -- that is, the core of the so-called
advanced economies of the world. What a prankster history is!
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For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.
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