The Global Monetary Phenomenon That Almost No One Is Seriously Discussing

I wish to present, in just a few charts, a remarkable monetary phenomenon that almost no one is discussing publicly.

 

As you can see below, the central banks of the world, largely those of the West led by the US and the UK, were net sellers of gold throughout the 1990's and through the turn of the century.  

 

As the Bankers to the world's reserve currency and sole global superpower, the Western central banks will make no major international policy decisions without the involvement of the Treasury, and especially the Federal Reserve and its constituent global banking machinery including the behemoth

Banks and the SWIFT system.

 

Gold purchases by central banks, at least those they were willing to publicly acknowledge, turned positive by 2010 at most.

 

The pundits did not expect this change to continue, as is shown in the 'forecast section' for 2012 and after in this first chart from RBC/Bloomberg below.

 

This chart shows most clearly perhaps how the Western central banks stepped up their gold selling attempting to control and then crush the price of gold, driving it down to a low of $250 in 1999-2001.

 

Interestingly enough this came to be known as Brown's Bottom.    England, under the leadership of Gordon Brown, then UK Chancellor of the Exchequer, very publicly sold 400 tonnes of its sovereign gold starting in late 1999 and 2001, reportedly to bail out some of the Banks who had gotten over their heads on short sale positions.

The largest net sales amount of gold reserves was in 2005, as the central banks attempted to dampen the price of gold which had risen from $250 to $450.   This selling was co-ordinated under the Washington Agreement, which was a so-called gentleman's agreement amongst some of the Western central banks, first created in 1999 and thereafter revised and extended in 2004. 

The banks included the ECB, Sweden, Switzerland, the UK.   Although it was not a signatory, the Federal Reserve was obviously involved.   In August 2009 this agreement amongst 19 central banks was extended for another five years. 

Spun positively by the financial media as 'good for gold,' this coordination of selling was designed to allow the Banks to coordinate their efforts, and not clumsily disrupt the markets as the Bank of England had done in 1999, allowing them to manage their sales and announcements for a smoother effect on price.  

As can be seen on the chart below, the central bank gold selling was unable to obtain traction, and the price of gold continued to rise as the Banks began to taper off their attempts to control the price through outright physical selling which seems to have had its last hurrah in 2007 as noted by Citigroup. 

"Official sales ran hot in 2007, offset by rapid de-hedging. Gold undoubtedly faced headwinds this year from resurgent central bank selling, which was clearly timed to cap the gold price. Our sense is that central banks have been forced to choose between global recession or sacrificing control of gold, and have chosen the perceived lesser of two evils. This reflationary dynamic also seems to be playing out in oil markets."

There are other non-bullion instruments which the central banks may employ to manage the price of gold which include strategic leasing, derivatives, and the use of proxies to influence markets in the manner in which certain financial entities have been recently exposed to be manipulating many other global prices and benchmarks, over periods of many years.   Yet there is still a great deal of denial over the central bank attempts to manage the price of gold relative to their currencies, despite an abundance of circumstantial, historical, and direct evidence.

 

This simple chart more vividly portrays how the forecasts of declining purchases of gold by central banks after 2011 were wrong-footed.

Since that time, central bank purchases have risen to 48 year highs.

One thing that we should bear in mind here is that the central bank numbers are based on 'official' numbers given to the World Gold Council.  

There is significant evidence that some of the central banks, notably China, are significantly understating their acquisition of gold as a matter of their own discretion.

 

Here is my own depiction below of the sea-change called 'The Turn' in global central bank purchases of gold.

This turn coincides with what I along with more important others have called the currency war,  most notably in a bestselling Chinese book published in 2007 by Song HongBing called Currency Wars (货币战争), and a book published in Nov. 2011 by Jim Rickards by the same name.

 This is different from the 'currency war' which the financial media likes to portray, as the devaluation of national currencies to obtain competitive advantage, is more of an artifact from the 1930's.   This new currency war involved a rethinking of the US as the global reserve currency, an unusual condition for a fiat currency which has been in place since at least 1971 when Nixon closed the gold window.  

 

From the end of WWII the Bretton Woods Agreement had set up the US dollar reserve as a proxy for gold, redeemable at least by other central banks and their governments.  After the closing of the gold window the world was pushed into a scenario of central monetary authority it had not experienced in recorded history:  a single country, through a semi-public banking entity controlled the issuance of the world's global reserve currency unencumbered by a hard reference to some neutral external standard. 

 

This currency regime has been maintained by military and political power, informal agreements, treaties and trade sanctions, between 700 to 900 foreign bases of power and influence, and the indirect control of key global resources such as oil, the so-called petrodollar.

 

 

I certainly cannot predict where this will end, except to point to the example of past endeavours such as the London Gold Pool, and suggest that absent draconian government actions, market forces tend to overcome and overwhelm such efforts over time.  

 

As I have forecast for many years, at least from 1999, the natural objective of a global fiat currency regime is a unipolar, or quite possibly a multipartite global government that is more centrally directed oligarchy than sovereign democracies.  

 

The relationships of the various countries with the central authority in the evolving Eurozone are an approachable example on a small scale, a test run for the inverted totalitarianism, or neo-corporatism, of the bureaucrats and their corporate sponsors, to be a bit extrapolative.  Although I think that the TTP and TTIP are glaring signposts along the way.

 

One particular point of frustration has been how slow on the uptake so many economists and financial commentators have been in thinking through the various monetary schemes that they promote.  I doubt if they understood where they were leading that they would support them, even as their objectives are thought to be good. 

 

 

Analyzing Wall Street, Banks, and Big Money: A Checklist and an Example

 

"Journalism is one of the devices whereby industrial autocracy keeps its control over political democracy; it is the day-by-day, between-elections propaganda, whereby the minds of the people are kept in a state of acquiescence, so that when the crisis of an election comes, they go to the polls and cast their ballots for either one of the two candidates of their exploiters."

Upton Sinclair, The Brass Check

Rather than present someone else's analysis, here is a simple checklist for you to consider, and a few simple questions.

 

Run down the performance over the last ten years or so of the Too Big To Fail Banks and assess them for yourself.

 

Is further deregulation the answer?   Should we place even more power in the hands of the Banks themselves and then trust them to be good, or give that power to their own industry associations and instruments, including those attached to the revolving door? 

 

Is the Federal Reserve an unbiased and objective regulator fully transparent and answerable to the people before all others?

 

Does the libertarian idealism of assuming that people are all naturally good and rational, weighing long term benefits for all against personal short term gains, serve the public interest?  Is it realistic?   Is it always even real?

What results do we see from the last twenty years of overturning regulations that had stood in place since 1933?  

What sort of people do we elect?   What types of organizations are acquiring much more power, sometimes even tremendous control over healthcare, food, and the military, and with it the power of life and death?

The twenty traits assessed by the PCL-R score are:

• glib and superficial charm

• grandiose (exaggeratedly high) estimation of self

• need for constant stimulation

• pathological lying

• cunning and manipulativeness

• lack of remorse or guilt

• superficial emotional responsiveness

• callousness and lack of empathy

• parasitic lifestyle

• poor behavioral controls

• sexual promiscuity

• early behavior problems

• lack of realistic long-term goals

• impulsivity

• irresponsibility

• failure to accept responsibility for own actions

• many short-term marital relationships

• juvenile delinquency

• revocation of conditional release

• criminal versatility

Robert Hare: Psychopathy Checklist

 

  

Sovereignty?   Sovereignty is bad for business.  And so are democracy, local standards, and home rule.

"The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole."

Carroll Quigley, Tragedy and Hope

 

Jon Corzine, the Black Knight of Finance

“Crime, once exposed, has no refuge but in audacity.”

Tacitus

If there is a blatant, wanton theft of property for all to see, but no one is convicted or even indicted because of the lack of integrity in the justice system, is it still a crime?

Being a shameless narcissist means never having to say you are sorry, much less that you have failed so dishonorably that you deserve nothing more than public shaming, shunning, and oblivion.

Surprising though, how often this works in finance and politics.  And Jon has spent his time wallowing in both these wretched cesspits. 

 

How readily the failed, slippery eels of business and banking slide into politics and public influence, and how craven, political hacks find such welcoming showers of wealth from their business cronies after 'public service.'   It is corporatism, and a fellowship of disgrace, disorder, and dishonour.

 

Why I hear that even reformers, these days at least, are talking about change on one hand, while scooping in vast amounts of personal wealth through 'donations' from the all-corrupting status quo with the other.   They do not even have to wait until after office to begin collecting their rewards.

 

All the fashionable people of both parties, and most of the developed nations, are doing it, some less cleverly and quietly than others.   So who can judge, who will speak ill of other insiders and still remain one?   It is the credibility trap.

Jon Corzine Considers Launching Hedge Fund

By Julie Steinberg and Rob Copeland

April 19, 2015 7:05 p.m. ET

Jon S. Corzine, the embattled former MF Global Holdings Ltd. chief executive and ex-chairman of Goldman Sachs Group Inc., has discussed plans to start his own hedge fund in recent months, according to people familiar with the matter...

Read the entire article if you have a strong stomach for the self-delusion of the audacious oligarchy here.

The Will To Power in the Exceptional

"Christianity is called the religion of pity. Pity stands opposed to the powerful emotions which heighten our vitality; it has a depressing effect. We are deprived of strength when we feel pity...

What is good? All that heightens the feeling of power in a man, the will to power, power itself. What is bad? All that is born of weakness. What is happiness? The feeling that power is growing, that resistance is overcome."

Friedrich Nietzsche, The Antichrist

 

 'What is truth?' asked the cynical bureaucrat Pilate, and then turned and washed his hands of it.

 

 

 

"Cultures that do not recognize that human life and the natural world have a sacred dimension, an intrinsic value beyond monetary value, cannibalize themselves until they die. They ruthlessly exploit the natural world and the members of their society in the name of progress until exhaustion or collapse, blind to the fury of their own self-destruction...

The corporations, and those who run them, consume, pollute, oppress and kill. The little Eichmanns who manage them reside in a parallel universe of staggering wealth, luxury and splendid isolation that rivals that of the closed court of Versailles. The elite, sheltered and enriched, continue to prosper even as the rest of us and the natural world start to die. They are numb. They will drain the last drop of profit from us until there is nothing left. And our business schools and elite universities churn out tens of thousands of these deaf, dumb and blind systems managers who are endowed with sophisticated skills of management and the incapacity for common sense, compassion or remorse. These technocrats mistake the art of manipulation with knowledge."

Chris Hedges

 

“All life has inestimable value even the weakest and most vulnerable, the sick, the old, the unborn and the poor, are masterpieces of God’s creation, made in his own image, destined to live forever, and deserving of the utmost reverence and respect...

All too often, as we know from experience, people do not choose life, they do not accept the Gospel of Life but let themselves be led by ideologies and ways of thinking that block life, that do not respect life, because they are dictated by selfishness, self-interest, profit, power and pleasure, and not by love, by concern for the good of others...

As a result, the living God is replaced by fleeting human idols which offer the intoxication of a flash of freedom, but in the end bring new forms of slavery and death...

Francis I

 

I have long felt that the basis of our economic and political discussions are a distraction, and by design.   They force us to operate from some fundamental policy assumptions that prevent a discussion of our current state of affairs in a necessarily frank and fundamental manner.

El Greco, Fábula of Boy Lighting Candle With a Fool and an Ape

With regard to economics and political systems, a 'practical person' may decide on whichever form of government serves their own private interests best.  

 

The amoral person chooses what is expedient, and in this they are little different from the worst, because they will go along with whatever serves their own power and self-interest above all.  They will rationalize themselves into a hell on earth, or hereafter.

 

A 'moral being' must choose what is just, as defined by some higher principle of justice for all.  And that choice must be made because it is inherent in being human.

 

Just as love is the touchstone in religion, justice is the touchstone in public policy. 

 

Exceptionalism is no virtue, no mark of the chosen, but merely the sin of pride, wearing the silks of rationalization and self-delusion.  And this is at the root of every fallen angel, every lost soul, and every failing nation.

 

I am not here making an appeal to the careless few based on either faith or reason.  Alas, I fear they are now beyond both morality and common sense, until a reckoning comes.

 

Rather, in this solemn season I am reminding the faithful and the many of a message they have probably heard, and forgotten, so often.  A man cannot serve two masters.  He will love the one, and hate the other.

 

The ultimate question is, 'whom do you serve?'  Choose as you will, but you will live with your choice, forever.  We do not choose all at once, but every day, and in all our actions, whether we are consciously aware of our choice or not.

Your carelessness and self-approval, your reputation and connections, your associations and positions, will be of no comfort and value to you then.  When exposed by the light your life of self-absorption and exceptional selfishness will be an ever stinging rebuke of burning regret and torment.  Not that you have betrayed and traded away so much that is good, but that you have done it for so little.

“A true opium of the people is a belief in nothingness after death - the huge solace of thinking that for our betrayals, greed, cowardice, and murders that we are not going to be judged.”

Czesław Miłosz

 

Taibbi: A Whistleblower's Horror Story

"Crush humanity out of shape once more, under similar hammers, and it will twist itself into the same tortured forms. Sow the same seed of rapacious license and oppression over again, and it will surely yield the same fruit according to its kind."

Charles Dickens, A Tale of Two Cities

"Flagrant evils cure themselves by being flagrant."

John Henry Newman

If a whistleblower reveals benign 'secrets' of government actions to a domestic reporter in the time honored tradition, they may be prosecuted as 'enemies of the state' under the abusive misuse of the Espionage Act.

 

It was Winston's contention that six week's after refusing to lie in his report to Moody's, Angelo Mozilo personally contacted Winston's supervisor and demanded his termination based on a personal website Winston maintained for his work as a motivational speaker and expert in leadership.

What I find particularly odious in the judgement is that not only will Winston NOT be able to obtain the reward from the jury verdict, which is a legal matter which I understand can be contended.  Although it seems that the appeals court took a fairly aggressive stance in this appeal, to the point of nullifying the jury not on the legal process but on their judgment about the evidence itself.  A copy of that first appeal is downloadable here.

 

The subsequent judgement against plaintiff to pay the costs filed by Bank of America seems excessive if not vindictive to say the least, given that the case itself was a 'close call' at worst.  And then there is the matter of his speaking to Frontline, and engaging in behavior in describing the ongoing frauds at Countrywide that were very embarrassing to Bank of America, and the DOJ itself.  It smells of vindictiveness.

I don't think it is this case alone that is so infuriating, but the context of Wall Street friendly judicial policy in the Obama Administration, and the hypocritical and harsh treatment of whistleblowers in general.   And Taibbi does a fairly good job of bringing these things forwards in his article linked below which I suggest that you read.

Deceit and theft by the privileged is excused and protected, while honesty and innocence are severely punished.    And the great mass of official journalists are silent, so we hear the news about this in a rock 'n roll magazine. 

 

Rolling Stone

A Whistleblower's Horror Story

By Matt Taibbi

18 February 2015

Two years ago this month, Winston was being celebrated in the news as a hero. He'd blown the whistle on Countrywide Financial, the bent mortgage lender that one could plausibly argue nearly blew up the global economy in the last decade with its reckless subprime lending practices.

He described Countrywide's crazy plan to give anyone who could breathe a mortgage in a memorable January, 2013 episode of Frontline called "The Untouchables," a show that caught the eyes of several influential politicians in Washington. The documentary inspired Senate hearings and even the crafting of new legislation to combat too-big-to-jail corruption in the financial world.

Winston was later featured in the New York Times as the man who "conquered Countrywide." David Dayen of Salon described Winston as "Wall Street's greatest enemy."

But today, Winston is tasting the sometimes-extreme downside of being a whistleblower in modern America.

He says he's spent over a million dollars fighting Countrywide (and the firm that acquired it, Bank of America) in court. At first, that fight proved a good gamble, as a jury granted him a multi-million-dollar award for retaliation and wrongful termination.

But after Winston won that case, an appellate judge not only wiped out that jury verdict, but allowed Bank of America to counterattack him with a vengeance.

Last summer, the bank vindictively put a lien on Winston's house (one he'd bought, ironically, with a Countrywide mortgage). The bank eventually beat him for nearly $98,000 in court costs.

That single transaction means a good guy in the crisis drama, Winston, had by the end of 2014 paid a larger individual penalty than virtually every wrongdoer connected with the financial collapse of 2008.

When Winston protested his preposterous punishment on the grounds that a trillion-dollar company recouping legal fees from an unemployed whistleblower was unreasonable and unnecessary, a California Superior Court judge denied his argument — get this — on the grounds that Winston failed to prove a disparity in resources between himself and Bank of America!

This is from the court's ruling:

Plaintiff argues that the disparity in the resources between the individual plaintiff and the defendant Bank of America make it unfair to place the cost of the premium on plaintiff. Plaintiff offered no evidence in support of this argument; it is rejected...

Read the entire story in Rolling Stone here.

Sarah Lacy and the Darker Side of Über Corporatism

This is a stunning video, with some serious implications. I urge you to watch it. It involves abusing corporate power to smear and intimidate critics.

It was a bit humorous to watch the talking heads discomfort with some of the implications and statements.  The West coast anchors tend to be more business focused and laid back than their New York based cousins who are more deeply into the Wall Street culture.

I am not familiar with Sarah Lacy's work as a journalist and editor, but as a debater she is on point and brilliant.

I am not completely unfamiliar with the attempted use of power to suppress people's views. Outside of professional circles it is petulant and childish, given to snarky emails, snide backstabbing, and cliquish exclusion. You know, the kinds of things one often finds within University departments, corporate bureaucracies, and the blogosphere. lol.

But too often where serious power and money is involved it is real, it is a threat, and it cannot be tolerated if there is to be any aspiration to a free and open society. And we are fools if we allow such power to grow and its abuse to be tolerated, for the misguided fears for our security, much less some short term easy money.

Why The Democrats Got Their Clocks Cleaned

The Democrats failed to make the most of a great moment in history because there was no Democrat brave enough, independent enough, to energize their party around the mandate for reform given to them overwhelmingly by the people in 2008.

Remember when everyone thought that the Republican party was dead, completely and utterly repudiated in 2008?  And how they have risen from the dead!

Obama was a pawn of the moneyed interests before he even took office.  He didn't sell out;  he was a well engineered product with a well targeted brand, selected and groomed for it.  

Less a politician than a thoroughly modern manager, Obama's primary objectives are to please his shareholders, whomever those may be.   And they were certainly not the people who voted for him.   He is not any kind of progressive or reformer once one scratches the surface.

That became clear in his first 100 days with his appointments.  And in his defense, the Democrats on the whole have been throwing their constituents under the bus for the sake of Wall Street money since 1992.  So Obama was not so much a betrayer as a fake, a member of the Wall Street wing of the Democratic party.  He is always fumbling, and making excuses, but at the end of the day, he did as he was told. 

The Democratic leadership has tried to bridge a gap between representing the people and fattening their wallets, and have ended up pleasing few.  They won't become the party of the moneyed interests because they cannot sell out more deeply than their counterparts.  And as for their traditional constituency in the working class, the only rejoinder is, 'the other guys are worse.'  And the other guys say the same thing to their base about them.  And no one is getting served, except the one percent.

I think that the 'other guys' are going to be worse, and people are just going to have to see how bad things can get, again, before they can get any better. 

From an FDR 1936 campaign speech in Madison Square Garden:

"For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master."

Naomi Klein on Global Neoliberalism

Yellen's Trickle Down Dilemma

Why is the economy so sluggish?

Even if real wages are stagnant, and consumers are tapped, the Banks have been saved and stand ready to loan from an abundance of freshly created money (that they can obtain for almost nothing).

Why won't consumers make a leap of faith and borrow more, betting their last assets on an indifferent Congress and an elusive recovery?  

 

It's heads we win and tails you lose for the bailout Banks. 

 

And from a Banker's perspective it probably makes sense.

 

Henry Giroux On the Rise of Neoliberalism As a Political Ideology

"There is a lack of critical assessment of the past. But you have to understand that the current ruling elite is actually the old ruling elite. So they are incapable of a self-critical approach to the past."

Ryszard Kapuscinski

Mammon in the City of London, 1889

Are they incapable, or merely unwilling?  That is the credibility trap, the inability to address the key problems because the ruling elite must risk or even undermine their own undeserved power to do so.

I think this interview below highlights the false dichotomy between communism and free market capitalism that was created in the 1980's largely by Thatcher's and Reagan's handlers.   The dichotomy was more properly between communist government and democracy, of the primacy of the individual over the primacy of the organization and the state as embodied in fascism and the real world implementations of  communism in Russia and China.

But we never think of it that way any more, if at all.  It is one of the greatest public relation coups in history.  One form of organizational oppression by the Russian nomenklatura was replaced by the oppression by the oligarchs and their Corporations, in the name of freedom.

Free market capitalism, under the banner of the efficient markets hypothesis, has taken the place of democratic ideals as the primary good as embodied in the original framing of the Declaration of Independence and the US Constitution. 

It is no accident that the individual and their concerns have become subordinated to the corporate welfare and the profits of the upper one percent.  We even see this in religion with the 'gospel of prosperity.'   In their delusion they make friends of the mammon of unrighteousness, so that after they may be received into their everlasting habitations.

The market as the highest good has stood on the shoulders of the 'greed is good' philosophy promulgated by the pied pipers of the me generation, and has turned the Western democracies on their heads, as a series of political leaders have capitulated to this false idol of money as the measure of all things, and all virtue. 

Policy is now crafted to maximize profits as an end to itself without regard to the overall impact on freedom and the public good.   It measures 'costs' in the most narrow and biased of terms, and allocated wealth based on the subversion of good sense to false economy theories.

Greed is a portion of the will to power.   And that madness serves none but itself.

This is a brief excerpt. You may read the entire interview here.

Henry Giroux on the Rise of Neoliberalism
19 October 2014
By Michael Nevradakis, Truthout

"...We're talking about an ideology marked by the selling off of public goods to private interests; the attack on social provisions; the rise of the corporate state organized around privatization, free trade, and deregulation; the celebration of self interests over social needs; the celebration of profit-making as the essence of democracy coupled with the utterly reductionist notion that consumption is the only applicable form of citizenship.

But even more than that, it upholds the notion that the market serves as a model for structuring all social relations: not just the economy, but the governing of all of social life...

That's a key issue. I mean, this is a particular political and economic and social project that not only consolidates class power in the hands of the one percent, but operates off the assumption that economics can divorce itself from social costs, that it doesn't have to deal with matters of ethical and social responsibility, that these things get in the way.

And I think the consequences of these policies across the globe have caused massive suffering, misery, and the spread of a massive inequalities in wealth, power, and income. Moreover, increasingly, we are witnessing a number of people who are committing suicide because they have lost their pensions, jobs and dignity.

We see the attack on the welfare state; we see the privatization of public services, the dismantling of the connection between private issues and public problems, the selling off of state functions, deregulations, an unchecked emphasis on self-interest, the refusal to tax the rich, and really the redistribution of wealth from the middle and working classes to the ruling class, the elite class, what the Occupy movement called the one percent. It really has created a very bleak emotional and economic landscape for the 99 percent of the population throughout the world."

 

Performance of a Number of Global Stock Exchanges Year-To-Date

Except for a few Asian countries, and special situations not pictured perhaps, it looks like a global slump from here.

There are still a select few unbroken housing bubbles out there that may find some adjustment in a future capital crisis.  Canada and Australia come to mind, among others.

Despite the billions of taxpayer funds poured into them, some if not quite a few of the troubled multinational Banks are still in trouble, and a few may be teetering.

Does anyone who is well informed not recognize that the policy errors of the Central Banks and their political cronies have failed to foster a sustainable recovery after five long years of enormous bank subsidies and public misery?

And the fruits of this selfish foolishness may likely be another crisis that is even more decisive?

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.


Related:  The One Percent's Plots To Overthrow Democracy