Wall of text, but definitely worth your 10mins to read….
—-—-—-—-—-—-—-—-—--
August 07, 2009
Europe’s central banks jointly announced a new sales agreement
to govern the gold they annually dump onto the market. They
announced a 20% lower quota – down to 400 tons per year – despite
the price of gold sitting only a couple of rallies away from a new,
nominal record.
The fact that these central banks are significantly reducing
their gold sales despite the high price of gold can only be
interpreted two ways. First, it could simply signify that these
central banks have much less gold to sell, and thus will be
steadily reducing their sales no matter how high the price of gold
goes.
The alternative interpretation would be that despite the
near-record price, Europe’s central banks expect the price of gold
to go much higher – and thus don’t want to give away their gold (as
was done by U.K. Prime Minister Gordon Brown).
In fact, both interpretations are correct. Even if we take the
reported gold reserves of these central banks seriously (despite
very good reasons to doubt those claims) Europe’s central banks
hold little more than 10,000 tons of gold, with about 40% of that
amount held by Germany, alone. At the previous ceiling of 500 tons
per year (or 5% of Europe’s total gold holdings) Europe’s central
banks would have squandered all their gold reserves in 20
years.
However, with Germany adamant that it won’t sell any of its
gold, in reality the previous agreement would have exhausted all of
Europe’s available gold – forever – in only about ten years. Even
reducing this quota to 400 tons per year only extends the ‘life’ of
this game for a couple more years.
This was one of the reasons why the United States was so
obsessed with getting the IMF to dump some of
its gold. Ultimately, the suppression of the gold market is aimed
at keeping the world’s “reserve currency” stable (i.e. the U.S.
dollar), and with it, all the other forms of worthless paper
currency floating around in the world. In fact, the 400 tons of
IMF gold that was finally approved for sale
is being included within the sales quota of Europe’s central banks
(despite the fact this gold is owned by ALL
of the world’s nations).
When the central banks of Europe originally created this sales
agreement (with gold trading at about 1/3 its current value), it
was intended as a sales ceiling. In other words, supposedly without
such an agreement, these central banks would have dumped even more
gold onto the market. However, the reality of this deal is that it
was always a sales quota – a target which the U.S. pressured Europe
to try to meet, to help fight the losing battle of suppressing the
price of gold.
For those new to the gold market, pushing down the price of gold
has been an important element in Western economic policy for
decades. Gold has always been the ultimate “barometer” of the
global economy, because in a free market, changes in inflation
would be almost instantly reflected in the gold price. Of course we
don’t have free markets – as evidenced by the Plunge Protection
Team, whose full-time job is to manipulate U.S. markets on a daily
basis.
The reason that gold-suppression is so important is because
lying about inflation is so important. Trillions of dollars per
year in government transfer payments (i.e. social programs) are
supposedly indexed to inflation, to continue to provide a level of
benefits in real dollars. In reality, by lying about inflation
governments can reduce the real value of those benefits, while the
general population remains oblivious to how they are being cheated
by their own governments.
Gold (and silver) manipulation can be empirically demonstrated
by simply looking at the huge (and grossly manipulative) “short”
positions (in the U.S.’s Comex futures market) which are many times
larger than the long or short positions of any other commodities,
in the history of the global economy. Naturally, the
blind/deaf/dumb U.S. regulator (the Commodities Futures Trading
Commission) is incapable of seeing any signs of manipulation.
However, we don’t need any confirmation by the CFTC to demonstrate gold manipulation since it has been
openly admitted by the world’s most prominent bankers. Officials at
the Bank for International Settlements (the world’s “bank” for
central banks) have openly acknowledged that “stabilizing” the
price of gold is an official policy of this institution. Since
“stabilizing” the price of gold never means pushing the price of
gold up, you don’t have to be an expert in linguistics to
understand what is really being said.
Sir Alan Greenspan was much less ambivalent. When asked how he
would respond to a global monetary crisis, his famous reply was,
“We stand ready to lease gold in ever-increasing amounts”.
“Leasing” gold is a central bank synonym for dumping gold onto the
market, since these bankers do not directly trade gold, but instead
have private bankers do this for them.
The only possible way that “leasing gold” can be considered a
response to a global monetary crisis is if the primary function of
these central bankers is merely to create an illusion of stability
in the global monetary system.
As I and many other gold-commentators have pointed out, the
entire world is now operating with a “fiat currency” system (i.e.
currencies backed by nothing) for the first time in human history.
Every time that individual countries have experimented in fiat
currencies, the results have been identical. Greedy bankers create
too much money, and much too much debt, and these economic “houses
of cards” financially implode in spectacular fashion.
Thus, the bankers themselves know that the current monetary
system is doomed, and their primary function is to create an
illusion of stability for as long as possible – before the
inevitable implosion of this system. Proof of the pending collapse
of this system is that aggregate debt levels have risen
exponentially (exactly what happened with all other currency
failures), to the point where some of the world’s biggest
dead-beats – notably the United States – are being forced to print
money simply to pay the interest on trillions of dollars of debt.
This is happening because the U.S. is no longer able to borrow
enough from other counties to pay this interest.
If we were to think of the U.S. as an individual, it is totally
obvious what happens to a person who is so heavily indebted that
they never pay off a penny of debt, and keep borrowing more and
more money just to pay their interest: they go bankrupt.
Thus, the losing battle to suppress the price of gold is
precisely parallel to the losing efforts of this same group of
corrupt bankers to keep their towering, teetering mountains of debt
stable. These “mountains” will collapse into rubble, and their
currencies will become worthless, as has been happening with fiat
currencies for 2,000 years, and (as always) the solution to this
collapse will be to re-institute a system of currencies backed by
gold and silver.
The fact that central banks are running out of gold to use as
“ammunition” to continue playing their game provides a finite
maximum length of time this system could survive (roughly a
decade). In reality, the game will be over long before those gold
reserves reach zero.
Regardless of U.S. pressure, one by one, Europe’s central banks
will simply refuse to dump any more of their own gold (following
Germany’s example). Indeed, Switzerland (who is one of Europe’s
largest gold-holders behind Germany) announced today it has no
plans to sell any more of its own gold.
Just as the manipulators could no longer meet the 500 tons per
year quota of the old agreement (total sales this year will likely
be below 400 tons), long before this new, five-year sales quota
expires total gold sales will fall well below the target quota.
With demand for gold continuing to rise, and an important
supply-source being reduced it becomes harder each day for the
anti-gold cabal to hold the price of gold below its current
equilibrium value (somewhere between $2000 and $5000 per ounce).
Thus the failure of gold-manipulation – and the resultant explosion
in the price of gold will be an important signal that collapse of
the global monetary system is imminent.
It goes without saying that the time to buy gold and silver is
now, while 99% of the world remains oblivious to the inevitable
collapse of the current monetary system. Buying a “store of value”
with a 5,000 year track-record behind it, using
soon-to-be-worthless paper is a bargain at any price.