For The Times They Are A-Changin'

'Change is the law of life. And those who look only to the past or present are certain to miss the future.

A great change is at hand, and our task, our obligation, is to make that revolution, that change, peaceful and constructive for all. Those who do nothing are inviting shame as well as violence.

The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were and ask, why not?

History is a relentless master. It has no present, only the past rushing into the future. To try to hold fast is to be swept aside.'

John F. Kennedy


'Cynicism masquerades as wisdom, but it is the farthest thing from it. Because cynics don't learn anything.

Cynicism is a self-imposed blindness, a rejection of the world because we are afraid it will hurt us or disappoint us. Cynics always say no. But saying yes begins things.'

Stephen Colbert


'All successful revolutions are the kicking in of a rotten door.'

John Kenneth Galbraith


'This generation has a rendezvous with destiny.'

Franklin Delano Roosevelt

For good or ill, after a long period of abuse and a testing of the extremities of power and the people's willingness to accept them, the only inevitability is change.  Always.

History is not a given, it is not given to us. It is what we are, what we have been given, and what we make of it.

Currency Wars and 'The Big Reset'

"We now have arrived at the point where it is not the banks, but the countries themselves that are getting in serious financial trouble. The idea that we can ‘grow our way back’ out of debt is naive.

The current solution to ‘park’ debts on to the balance sheets of central banks is just an interim solution. A global debt restructuring will be needed, as economists Rogoff and Reinhart recently explained in their working paper for the IMF. This will include a new global reserve system to replace the current failing dollar system, probably before 2020."

Willem Middelkoop, The Big Reset Part I


"The wealth of another region excites their greed; and if it is weak, their lust for power as well. Nothing from the rising to the setting of the sun is enough for them.

Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola, circa 98 AD

It is remarkable how similar my conception of this is in parallel, and has been in this vein for quite a long time, as it seemed to be the inevitable path given the financial situation and its history as I saw it as far back as 2002.

As you know, my thought arose out of a study of 'crashes' I started in 1996, which branched out to a broader study of the role of finance and money.

I think we are still in the 'negotiating' phase of this currency war as I have called it, rather than 'Big Reset.'

I find Middelkoop to be fascinating.  I obviously do not agree with everything he says.  For example, I do not attribute the fall or Rome to the debasement of their currency, which I see as a symptom of the real problem of a more general debasement.

Rome fell because its productivity shifted from 'real things' and innovations in war and engineering to colonialism and the manipulation of power, a kind of financializaton.  It brought a rule by terror and the exporting of tyranny which hollowed the best of their society out from the inside. This cycle of corruption and excess brought an increasingly horrible and self-referential ruling class into power,  people privileged by birth and by ruthless dishonesty, until the empire collapsed from the edges into the very heart of it.

In a very real sense, Rome died of a terminal lack of honesty, virtue, and merit.  The financial and the ruling class become as one without respect to productivity.  And this is ironic because as the Empire declined, the lip service of their leaders to the old standards of 'Roman virtue' become ever louder and more mockingly false.  People will blame the mob, but Rome died from the top down.

Bear in mind that the American President that is next elected will be the leader of the dollar cartel going into this critical time. I would not assume that their interests will be fully aligned with those of the greater majority of the American people.

Given our experience in global trade deals for example, I suggest that there is a very good reason to hope that the political establishment is overturned, and to be wary of the status quo of politics and business as they are now.

The 'privileged class' in the West have become dangerously isolated, unsympathetic to the condition of the people, and brazenly self-serving in their rationalizations for a long series of horrendous policy decisions.

The more 'flexible' this new currency is, the more disastrous the inequality of the distribution of the pain will be.   Giving this government great latitude in creating a new money out of nothing is like giving gangster the keys to the Treasury.  I do not think that anything could be more clear that the more power they obtain, the greater and more frequent the abuses of it will be.

Now is no time to give unqualified trust to an imaginary theory of benign plutocrats ruling with the wisdom and nature of angels.  And this is why I am so adamantly opposed to the utopian notion of willful moneyprinting without fear of consequence or harm.

At odds with this theory of immutable solvency, history has shown, over and over again, that this is a license for looting by the select few for themselves and their friends.  And we already have one foot on the edge of that abyss.

Money is power, and in times of general corruption power must be, even more than in normal times, transparent, held to accounts, and restrained by a broader consensus.

And to say we do not have this now is an understatement.     That does not imply that we swing to the other extreme and allow these same plutocrats to impose austerity for the many, and even more comforts and privileges for themselves.

A return to 'hard money' itself is no panacea as I have noted before, because a system that is broken and self-serving can turn every good thing to ill purposes.   Their power serves only itself.  How can anything good come from a system ruled by ambitious, pathological liars in the service of sociopaths and serial criminals who have no decency, no moral reckoning, no fear of punishment, and no shame?

And if history serves, those who attempt to turn a crisis to their personal advantage will soon find themselves tied to the back of a tiger they cannot control.  But unfortunately their greed for money and power exceeds not only their wisdom but their common sense as well, and the truly Big Money will not listen, even until the end.

But perhaps the courtiers and their servants will become duly concerned as they should be, because when it comes to it the plutocrats will throw them off the backs of their fleeing sleds as food for the pursuing wolves.  And above all they should know that this is the case with these empty shells of distorted humanity.

Reform, fair administration of justice, and transparency are the sine qua non.

It will be an interesting time, if history is any guide.

"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy."

Dean Baker


"Most of them became wealthy by being well connected and crooked. And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."

Charles Ferguson, Predator Nation


Tsar Nicholas II:   I know what will make them happy. They are children, and they need a Tsar! They need tradition. Not this!  They are the victims of agitators. A Duma would make them bewildered and discontented.  And don't tell me about London and Berlin. God save us from the mess they're in!

Count Witte:  I see. So they talk, pray, march, plead, petition and what do they get? Cossacks, prison, flogging, police, spies, and now, after today, they will be shot.  Is this God's will?  Are these His methods?  Make war on your own people?  How long do you think they're going to stand there and let you shoot them?  YOU ask ME who's responsible?  YOU ask?

Tsar Nicholas II:  The English have a parliament. Our British cousins gave their rights away. The Hapsburgs, and the Hoehenzollerns too. The Romanovs will not. What I was given, I will give my son.

Lawrence Wilkerson: Travails of Empire - Oil, Debt, Gold and the Imperial Dollar

"We are imperial, and we are in decline... People are losing confidence in the Empire."

This is the key theme of Larry Wilkerson's presentation.  He never really questions whether empire is good or bad, sustainable or not, and at what costs.  At least he does not so in the same manner as that great analyst of empire Chalmers Johnson.

It is important to understand what people who are in and near positions of power are thinking if you wish to understand what they are doing, and what they are likely to do.  What ought to be done is another matter.

Wilkerson is a Republican establishment insider who has served for many years in the military and the State Department. Here he is giving a 40 minute presentation to the Centre For International Governance in Canada in October, 2014.

I find his point of view of things interesting and revealing, even on those points where I may not agree with his perspective.  There also seem to be some internal inconsistencies in his line of thinking.

But what makes his perspective important is that it represents a mainstream view of many professional politicians and 'the Establishment' in America. Not the hard right of the Republican party, but much of what constitutes the recurring political establishment of the US.

As I have discussed here before, I do not particularly care so much if a trading indicator has a fundamental basis in reality, as long as enough people believe in and act on it. Then it is worth watching as self-fulfilling prophecy.  And the same can be said of political and economic memes.

At minute 48:00 Wilkerson gives a response to a question about the growing US debt and of the role of the petrodollar in the Empire, and the efforts by others to 'undermine it' by replacing it.  This is his 'greatest fear.'

He speaks about 'a principal advisor to the CIA Futures project' and the National Intelligence Council (NIC), whose views and veracity of claims are being examined closely by sophisticated assets.  He believes that both Beijing and Moscow are complicit in an attempt to weaken the dollar.

This includes the observation that "gold is being moved in sort of unique ways, concentrated in secret in unique ways, and capitals are slowly but surely divesting themselves of US Treasuries. So what you are seeing right now in the supposed strengthening of the dollar is a false impression."

The BRICS want to use oil to "force the US to lose its incredibly powerful role in owning the world's transactional reserve currency."   It gives the US a great deal of power of empire that it would not ordinarily have, since the ability to add debt without consequence enables the expenditures to sustain it.

Later, after listening to this again, the thought crossed my mind that this advisor might be a double agent using the paranoia of the military to achieve the ends of another.  Not for the BRICS, but for the Banks.  The greatest beneficiary of a strong dollar, which is a terrible burden to the real economy, is the financial sector.  This is why most countries seek to weaken or devalue their currencies to improve their domestic economies as a primary objective.  This is not so far-fetched as military efforts to provoke 'regime change' have too often been undertaken to support powerful commercial interests.

Here is just that particular excerpt of the Q&A and the question of increasing US debt.




I am not sure how much the policy makers and strategists agree with this theory about gold. But there is no doubt in my mind that they believe and are acting on the theory that oil, and the dollar control of oil, the so-called petrodollar, is the key to maintaining the empire.

Wilkerson reminds me very much of a political theoretician who I knew at Georgetown University. He talks about strategic necessities, the many occasions in which the US has used its imperial power covertly to overthrow or attempt to overthrow governments in Iran, Venezuela, Syria, and the Ukraine. He tends to ascribe all these actions to selflessness, and American service to the world in maintaining a balance of power where 'all we ask is a plot of ground to bury our dead.'

A typical observation is that the US did indeed overthrow the democratically elected government of Mossadegh in 1953 in Iran. But 'the British needed the money' from the Anglo-Iranian oil company in order to rebuild after WW II. Truman had rejected the notion, but Eisenhower the military veteran and Republic agreed to it.  Wilkerson says specifically that Ike was 'the last expert' to hold the office of the Presidency.

This is what is meant by realpolitik. It is all about organizing the world under a 'balance of power' that is favorable to the Empire and the corporations that have sprung up around it.

As someone with a long background and interest in strategy I am not completely unsympathetic to these lines of thinking. But like most broadly developed human beings and students of  history and philosophy one can see that the allure of such thinking, without recourse to questions of restraint and morality and the fig leaf of exceptionalist thinking, is a terrible trap, a Faustian bargain. It is the rationalization of every nascent tyranny. It is the precursor to the will to pure power for its own sake.

The challenges of empire now according to Wilkerson are:

1) Disequilibrium of wealth - 1/1000th of the US owns 50% of its total wealth. The current economic system implies long term stagnation (I would say stagflation. The situation in the US is 1929, and in France, 1789. All the gains are going to the top.
2) BRIC nations are rising and the Empire is in decline, largely because of US strategic miscalculations. The US is therefor pressing harder towards war in its desperation and desire to maintain the status quo. And it is dragging a lot of good and honest people into it with our NATO allies who are dependent on the US for their defense.
3)  There is a strong push towards regional government in the US that may intensify as global warming and economic developments present new challenges to specific areas.  For example, the water has left the Southwest, and it will not be coming back anytime soon.

This presentation ends about minute 40, and then it is open to questions which is also very interesting.

Lawrence Wilkerson, Distinguished Visiting Professor of Government and Public Policy at the College of William Mary, and former Chief of Staff to U.S. Secretary of State Colin Powell.

Related:  Chalmers Johnson:  Decline of Empire and the Signs of Decay

Gold Daily and Silver Weekly Charts - What Recovery - Peak Junk - Currency Wars

China shocked the world markets overnight by devaluing their currency by the most in two decades.

A devaluation of this sort is designed to improve the domestic economy by stimulating exports, lowering domestic costs of production relative to other sources, and to inhibit imports by raising their relative prices.

In other words, China clearly signaled that the US dollar, to which they were matching their own currency, is overvalued relative to the state of the global economy, and especially their own and their competitors in Asia.

China is 'the canary in the coal mine' for the global economy, a major source of labor and supply. Their own economy is sick because demand from overseas is down.

And why is demand lower? Because multinational corporations and the banking system have been financializing nearly everything to increase corporate profits and the wealth of a very few, pretty much at the expense of everyone else.

So if the people do not have the money to buy, and cannot keep increasing their private debt to service consumption because of the predatory lending rates and usurious fees in the system, guess what happens to aggregate demand? Duh.

This is not new. This is not unknown to economists. Thanks to Wall Street On Parade for reminding us of Franklin Roosevelt's campaign speech delivered at Oglethorpe University in 1932 during the depths of the Great Depression.

"Our basic trouble was not an insufficiency of capital. It was an insufficient distribution of buying power coupled with an over-sufficient speculation in production. While wages rose in many of our industries, they did not as a whole rise proportionately to the reward to capital, and at the same time the purchasing power of other great groups of our population was permitted to shrink.

We accumulated such a superabundance of capital that our great bankers were vying with each other, some of them employing questionable methods, in their efforts to lend this capital at home and abroad. I believe that we are at the threshold of a fundamental change in our popular economic thought, that in the future we are going to think less about the producer and more about the consumer.

Do what we may have to do to inject life into our ailing economic order, we cannot make it endure for long unless we can bring about a wiser, more equitable distribution of the national income.”

The central bankers have everyone focused on their interest rate antics while they have inflated their balance sheets obscenely, primarily for the benefit of the denizens of the FIRE sector who are acquiring productive assets and establishing monopolies with that paper.  The Fed is a key regulator of the banking system.  And they are failing badly.

You may disagree with the methods that FDR used during his 'New Deal' but I think his analysis of the problem was correct.  Andrew Jackson made similar observations in a different time and used different methods to address the issue.  They are outlined in his famous Farewell Address.

"But with overwhelming numbers and wealth on their side they are in constant danger of losing their fair influence in the Government, and with difficulty maintain their just rights against the incessant efforts daily made to encroach upon them.

The mischief springs from the power which the moneyed interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges which they have succeeded in obtaining in the different States, and which are employed altogether for their benefit; and unless you become more watchful in your States and check this spirit of monopoly and thirst for exclusive privileges you will in the end find that the most important powers of Government have been given or bartered away, and the control over your dearest interests has passed into the hands of these corporations."

The problem was not paper money per se, but the concentration of power and wealth which the abusive use of the paper monetary power had granted to a few powerful individuals and institutions.  No system is foolproof when a foolish people will allow the unscrupulous few to operate it in secrecy and without transparency, accountability and the rule of law.  And if anything is clear, the crony regulation by the Fed and other regulators of the Banking System, or lack thereof, is a failure and the source of much of our mischief.

And the primary reason we cannot acknowledge the facts of our own situation is that our political and financial class are caught in a credibility trap. They cannot speak the truth without compromising their own personal greed and will to power.

And this is daunting to us because FDR was a bit of an outlier, an odd combination of personal advantage and profound physical suffering, in a time that gave rise to terrible demagogues in the US and other countries.  And 'Old Hickory' was hardened by service, sorrow, and conscience to duty first.  How many like these do we see today?

The implications of this are an intensification of the currency war as the financial powers continue their stranglehold over the governments and the economic systems, inflating money but keeping the most of it for themselves, so that wages and income for the great mass of the public remains slack and a broad sustainable recovery is not thereby driven.  Say's Law, which decrees that increased production creates its own demand through necessarily increased wages, is as great a canard as the efficient markets hypothesis.

So, the central banks will continue to game the system by adding money, leveraging a broad tax on everyone who holds their currency, by using a number of means to devalue their currencies.  And creating a few winners and many losers by running the confidence game, large and in charge, of being wise and perfectly objective administrators, and not cronies and viceroys for the moneyed interests. As James Montier pointed out in his essay here:

"Lest you think I am being unduly harsh on the world’s poor central bankers, let me turn to the wider idolatry of interest rates that seems to characterise the world in which we live. There seems to be a perception that central bankers are gods, or at the very least minor deities in some twisted economic pantheon. Coupled with this deification of central bankers is a faith that interest rates are a panacea.

Whatever the problem, interest rates can solve it. Inflation too high, simply raise interest rates. Economy too weak, then lower interest rates. A bubble bursts, then slash interest rates, etc., etc. John Kenneth Galbraith poetically described this belief as “…our most prestigious form of fraud, our most elegant escape from reality… The difficulty is that this highly plausible, wholly agreeable process exists only in well-established economic belief and not in real life.”

In response the economists are poking their noses even more deeply into these otherworldly models, and ignoring the carnage which their cockeyed world views have helped to cause.  Not because they are at fault, but because they distract many charged with observing these things from the widespread plunder which they enable, and they provide a cover for the inefficacy of official policy.

The US Dollar did not soar as measured by the DX index, but instead was flat as shown below.  As I noted, it is outdated and is now primarily the inverse of the Euro.  I would imagine the dollar and gold and other alternative safe havens got legs when priced in Chinese Yuan.

I tend to agree with Pater Tenebrarum that Gold Stocks Are At An Interesting Juncture.  But my posture for now is tinged with a serious concern about the equity markets overall.  I just cannot seem to get off my focus on bullion sans intermédiation of a producer or leverage.  Of course at some point when the bull revives this will be a sub-optimal approach.  But for now I am content to sit in a more defensible position.

Stay tuned, because the action is just beginning.

Have a pleasant evening.

Comex Registered 'Deliverable' Gold Bullion Stores - Money Is All About Power To Some

"The conventional wisdom seems to be that the problems of the euro zone are, as economist Martin Feldstein once put it, 'the inevitable consequence of imposing a single currency on a very heterogeneous group of countries.'

What this commentary gets wrong, however, is that single currencies are never the product of debates about optimal economic solutions. Instead, currencies like the U.S. dollar itself are the result of political battles, where motivated actors try to centralize power.

This has most often occurred 'through iron and blood,' as Otto van Bismarck, the unifier of Germany put it, as a result of catastrophic wars. Smaller geographic units were brought together to build the modern nation state, with a unified fiscal system, a common national language that was often imposed by force, a unified legal system, and, a single currency. Put differently, war makes the state, and the state makes the currency....

European leaders weren’t stupid or self indulgent when they decided to move ahead with the euro, without fiscal union or strong Europe-level democracy. They just cared more about politics and international security than economics. They wanted to build a Europe that had transcended the divisions of the Cold War, and bind together Germany, which was reunited and much more powerful, with the rest of Europe."

Kathleen McNamara, This is what economists don’t understand about the euro crisis – or the U.S. dollar

Why is it that 'great people' always seem compelled to build their dreams of empire on the backs and broken bodies of innocents.  As always, it is for the greater good, and there will be collateral damage.

I do think some of the things that McNamara says is just a rationale for a certain philosophy of government.  The historical example of the US is almost embarrassing, revisionist, especially when she discusses the civil war, and how aimless the US had been until the creation of the Federal Reserve in 1913.

But it serves the hypothesis that the ends of pursuing 'order' justify the means including the overthrow of freedom, and that this is the lesson from history.  It certainly is a lesson, but I am not sure it is the one that she intends.

Money is indeed a medium of exchange, and a store of value. And it can also be a means of power, if it is abused and distorted to serve selfish ends.   We certainly have seen enough of that sort of thing in the first fifteen years of this century, with bailouts, and selective justice, and the abuse of regulation and monetary policy to favor a few over the many.

According to this line of thought, those who foresaw the pitfalls of the euro wanted nevertheless proceed in order to foster a unified political system which they felt would be more orderly, controlled by a collection of technocrats.

There is a similar school of thought with regard to a single world currency like the US dollar for example, that is to be controlled centrally by a cadre of technocrats that will be able to bring order, if not freedom, to everyone.   And somehow these benevolent technocrats always turn out to be merely human.  And then with time something less, much less.

After all, we must have order.  And in establishing that order, there must be collateral damage. Like Greece.

Have we forgotten the long line of thought that money and the banking system are utilities, that were put in place under state charter and regulated to provide for their function within a greater, productive economy in order to serve the public good?  And not as a tool of power and oppression by a privileged few?

Is this not the message one receives in reading of the law, and the long history of thought from the founders to the New Deal, with the usual digressions and abuses of monopoly power that will use a variety of means, including finances?  And not as an instrument primarily of state power and control over the people.

The central hypothesis of Professor McNamara seems to be that money, like most other things, is primariily an instrument of power, and that the deployment of the euro is an exercise in the centralization of power over a heterogeneous collection of nations and economies, and a means to bring Germany to its natural place at the head of a United Europe.

I am not saying that this view of public finances, banking and money as instruments of power is the intention or perspective of all economists.  Such a view of monetary theory exists as a willful distortion and abuse of economics, fostered by hubris and the will to power.

"What is good? All that enhances the feeling of power, the will to power, and the power itself in man. What is bad? All that proceeds from weakness. What is happiness? The feeling that power is increasing--that resistance has been overcome. Not contentment, but more power; not peace at any price, but war; not virtue, but competence."

Friedrich Nietzsche

It is a perspective that is shared by some of the powerful and the privileged.  It is just not normally associated with popular or democratic governments.   Just as other public utilities like the police are not intended as a force used to terrorize the people and quell any dissent, or the judiciary exists to permit and facilitate the abuses of a privileged few, while serving as an instrument of oppression over the general populace.  Such things can and do occur.  But these are aberrations, and not the norm, except in a society that has lost its conscience and moral moorings.

It is ironic that McNamara is a Professor of Government and Foreign Service at Georgetown, Carroll Quigley's old university.  I am not familiar with her body of work, and so admit I may be construing what she has written about the European Monetary Union, or was even being satirical.  But what she says calls to mind the writings of another Georgetown professor Carroll Quigley who, as you may recall, was Bill Clinton's mentor, and sponsor for his Rhodes Scholarship.

"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. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences."

Carroll Quigley, Tragedy and Hope, 1966

As old as Babylon— or Babel.

The amount of gold deliverable at these prices at the Comex seems to be a bit thin by historical standards. 

Currency Wars, Gold Pools, and Comex Potential Claims Per Deliverable Ounce

Based on some interactions with newer patrons of Le Café, I thought it might be a good time to restate the general lay of the land in the gold market.   The occasion for this is the latest measure of what might be called leverage in the futures market, what it is, and what it may or may not mean and why.

Clearly the paper markets, involving associated trades in ETFs, mining company stocks, derivatives, and so forth are much broader than the futures market alone.  But the futures market is what one might call the locus of execution for our drama.

The potential claims number for gold at the NY Comex is calculated by Nick Laird at Sharelynx.com by taking the amount of gold bullion marked as 'registered' for delivery at current prices by the number of contracts open on the futures market at 100 ounces of gold per contract.

Yes there is more gold that the 373,000 ounces currently marked for delivery in all the warehouses.  But that gold is merely there in storage by its owners, so counting it towards delivery, without the prior consent of the owner, is a bit presumptuous to say the least.  One might safely assume that market rules apply, and more gold will become deliverable at higher prices.

With a potential 111 claims per ounce of gold marked 'registered' for delivery at these prices, one might expect to see quite a move higher in prices to reach a market clearing price, and perhaps even a significant short squeeze.

But we probably will not see any such short squeeze, and maybe not even a breakout from this price range, unless something unusual happens outside of the New York and London markets.

The Comex, aka The Bucket Shop on the Hudson, does not set prices in the usual supply and demand dynamics.  And London and New York are playing a tag team with any number of markets these days, from forex to LIBOR to bonds.

Gold could break out in a big way.  It would not take all that much for a large hedge fund, or even a well-heeled world class individual, to turn about three thousand of those contracts in for delivery AND take the gold bullion out of the warehouses, moving them to Asia and pocketing a substantial profit on the gain.  

This assault on an unsustainable price peg is how Soros and associates in Zurich took the Bank of England for over a billion in their selling of the pound against an unrealistic price  point. 

Why doesn't anything like this happen?  

Is it because people do not have the money to do it?  In times of billion dollar art auctions and $500M homes being built on spec?   Don't make us laugh.

Is it because people do not want gold bullion?    The Shanghai Gold Exchange is routinely moving  physical thirty to forty tonnes per week out of its warehouses.   Thirty tonnes is about 965,000 troy ounces, about three times the total deliverable at the Comex now in total.

No, it will probably not happen because the big money has been warned off the Banks' turf, and their game is to keep the wash and rinse price cycles running to provide a steady profit as long as they can.   

As long as price is the 'only component' in the market dynamics, with demand and supply artificially dampened by a 'no withdrawals' house rules,  the liar's pokers carney games based on very loosely regulated price action can continue.  

It is not all that dissimilar to a poker game in which there are unlimited raises, the rule of table stakes does not apply, and one does not have to show their cards, and can only be called if the house allows it. Those with the biggest wallets can keep selling paper gold as long as they wish at whatever price they wish, and never have to even show their cards, and cannot effectively be called unless they permit it. 

I know this example is a bit rough, but not all that much.   It almost looks like a scam, rigged in favor of the deepest pocketed players, doesn't it?   And what if they get additional information about the hands of the other players and the size of their wallets.  Well, now you know why I consider those smaller players who keep coming back to the action in that casino to be a bit out of touch.

So the bullion banks and their friends can keep cranking out steady profits while holding bullion prices within a range that is a comfort to the nervous money printers in the Federal Reserve.  This keeps the government happy, the regulators off their backs so to speak, and the wash and rinse cycles rolling.

The reason why this sort of imbalance could get sorted out in the currency markets but not in commodities is illustrated by the relative experiences of George Soros and the Hunt Brothers.

Lucky for Soros that the forex markets are so broad and deep that no single group of cronies can control the exchange rules in the 'cash markets' to suit their plays.  Yes some central banks can make it quite risky, even painful, but the solution is not so neat as what happened in with the Hunt Brothers and silver.  There the exchange the US regulators just changed the rules of the game and that was that.

If one were to do something about a price imbalance in a commodities market, as opposed to an unregulated global market, you would tend to wish to do it off exchange by slowly accumulating a large portion of the available global supply, as quietly as possible.  This only works obviously with a commodity that has inherently has a relatively stable supply.

The spoiler in the gold paper game might then be expected to be  those 'outside' the range of the gold pool.  They are those who do not do their business primarily in the betting parlors of New York and London.

If one cannot secure a sizable portion of supply via paper on the exchange where the cronies make the rules, one just cuts out the middlemen and buys it directly, and it works as long as they do it off exchange and have an unimpeachable line of credit.   And then one would keep stacking their physical metal while enjoying what they think are very attractive prices.

Some analysts think that they know 'what China wants.'   Who is China?   Have the Chinese had a meeting and hammered out a single, unified policy plan?  How about the Americans, and the Russians? Or are there various competing domestic factions in every country?   And even more significantly perhaps, are there special interest groups, a self-defining elite, without preferences except for themselves?  As you can see this is a complex scenario with many variables.  

And in compressing the complexity of the scenario, we lose information and applicability, always, and sometimes intentionally.  Simple sells, and is successful depending on your sales objective.  Nothing was simpler and more powerful than the efficient markets hypothesis with perfectly rational actors.   It led to an otherworldly market ideology that caused one of the greatest financial crises in history.

This is not the first time we have seen such a de facto pooling arrangement.  There was the London Gold Pool, which sought to 'stabilize the gold price' at $35 dollars from 1961 until it collapsed in 1968.   That mispricing caused a 'run' on the gold in the US, and  led to the Nixon shock in 1971,  the closing of the gold window,  and the eventual rise in the price of gold to $850 in 1980.

Or we could point to the long bear market in gold, which reached its trough with the sale of England's gold in Brown's Bottom around $250 between 1999-and 2002,  This was resolved with the so-called Washington Agreement, which provided a plan for more measured selling and leasing of Western central bank gold to control the price of bullion largely amongst the Europeans.

Their intention was to have had this agreement continue until 2009, but alas, the rising economies of Asia and the BRICS were not sharing their vision of the future.  And so the purchasing of central bank gold reserves turned positive for the first time in over twenty years around 2006-7, ahead of the collapse of the US housing and credit bubble. 

As you may recall, gold subsequently rose to around $1900 in a fairly short period of time, and has now fallen back to the current price range in dollars of $1180-1230. 

And where are we now?

The BRICS are still buying.   There is quite a bit of secrecy and jawboning surrounding the actual levels of bullion available and unencumbered in the Western central banks.  The IMF, a ringmaster for the States if you will, has offered (threatened) to sell the same gold on about ten occasions. 

Not all the Western banks are holding to plan.  Some are even taking the unusual steps of repatriating their gold from the Anglo-American vaults where it has been since the Second World War.  They fear that if things go off the rails, and there is a reckoning of ownership claims, possession will once again be nine-tenths of the law.

 

It will be interesting to see where the market forces take us eventually, if they are allowed to do so.  I do not assume necessarily that they will.     

However the fact remains that the existing 'Bretton Woods II' de facto reserve currency arrangement for global trade, based on a fiat US dollar, which was unilaterally put in place by the US in 1971 on the closing of the gold window, has reached its point of unsustainability.

I do not believe that there has ever been a purely fiat global currency of this magnitude before in recorded history.  So we should not be too surprised if the situation seems to evolve rather slowly,

There is already a great deal of posturing by cross national special interest groups, with 'negotiation' on multiple levels from financial to diplomatic.  We may even expect the abusive use of the military to push certain proposals forward rather forcefully.

Bureaucrats can become quite draconian when their schemes for personal power go awry.  And in my own monetary thinking a purely fiat currency for international trade ultimately implies the development, or imposition, of a global government controlled by the monetary authority, whatever they may choose to call themselves.  The imposition of fiat valuation relies on control, which means power, and often plenty of it.

 

The future composition of any world government is a very open question.  There is very obviously an Anglo-American faction for 'the New American Century.'  But there are also Pan-Asian, Pan-Pacific, sub-Saharan, Eurasian and Pan-European elements as well.  Although it is most likely a bit of a reach, one has to wonder if this odd construction of the European Monetary Union is not some sort of a testbed for the future cooperation of regional oligarchies. 

 

I am not saying that there is 'A Plan' but there are certainly plans that some groups are clearly pushing towards their own objectives and agendas, and have been doing so for some time.   Professor Carroll Quigley, Bill Clinton's mentor at Georgetown, has been instructive on this subject.

We are in exciting times with history being made it seems.  There are a number of possible outcomes, which quite frankly no one can accurately forecast at this point.  There are too many degrees of freedom, so they literally cannot.   But they can throw up theories and strawmen of what may happen, and charge you to read about it.  It is an honest source of income, rather like writing racing forms or novellas, or the weather report in the 1950's.  And it is fun to talk about while we watch things develop.

But make no mistake, when some of these fellows overreach with their claims of certainty, if they really knew what will happen they would  not be telling it to you.  They would be playing with their own money in the casino, for all they were worth.   Or running funds that increased their leverage for their theories, while providing a steady management income.  This is a longer term play after all, and so speculative leverage is a short term risk to be managed.  Banks like to catch the players indisposed.

And then, alas, there are those who play for pay, who promulgate their ideas for the special interests, spreading disinformation.  Or just make the most dramatic sort of stuff up, selling a kind of financial pornography.

This landscape is what I, and several others some more notable certainly, have called The Currency Wars.  

Russia Adds One Million Ounces to Gold Reserves In March - Update on the Currency War

"There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny."

Franklin D. Roosevelt, 1936

In the tripolar world of Europe, US, and East Asia, Russia may play a pivotal role in a fourth sphere of influence.

Europe and the US are pressing heavily on its western borders, trying to limit Russia to Western Asia.

Thus I have said that if the push for one world corporatist government under the dollar banner falters, Russia may play a pivotal role in the composition of influences and the struggle for power that will follow.

At least for now, that struggle will be played out in currencies and economics of production. Control of production and the cost of labor involved is a high priority for the multinationals. What is of a lower priority is consumption, and the settlement of consumption through an equitable international currency arrangement.

The frenzy of the US elites to pass the 'trade deals' with Asia and Europe is indicative of their concerns that the progress of their plans is reaching a critical impasse. These deals will fortify the corporatist control over North America, a prerequisite before intensifying their plans for Europe and Asia. I suspect that, when push comes to shove, Asia will be little more than Japan, Australia, and a few other client states. China will almost certainly choose its own say more fitting to its domestic situation which may become more precarious.

 

Gold is of obvious strategic importance in this struggle since it is a means of settling international payments that does not as easily fall into the financial controls of one faction or another, as is the case with a fiat currency which is, at the end of the day, an instrument of highly discretionary power.

The discussions of these topics on US media is interesting to watch.   I fully expect for the propaganda to reach ever more ridiculous levels, and for any domestic dissent to be crushed before it can gain any momentum. 

 

The differences between the Wall St. Democrats and the Corporatist Republicans will continue to become increasingly cosmetic and more factional and social than substantial, in the manner of two competing gangs seeking their own enrichment rather than elected representatives of a diverse population.  Big money is steadily disenfranchising the electorate, and the credibility trap chokes off meaningful reform.  

 

Greece may in turn become more pivotal in this struggle between the West and Europe. The difference in treatment between the people of Greece and the government of the Ukraine should be more obvious to the Western observer. The lesson is certainly not lost on the rest of the world. The US-Europe may court you, but once they entwine their fingers through your hands, you are theirs to dispose of as they please.

That is a failing of the winner's curse. They start overreaching in their belief that they will simply move from victory to victory, no matter how clumsy and brutal their tactics may become.

Notes on the Currency War - 'Old as Babylon and Evil as Hell'

Below is an excerpt from a much longer article which you can read in its entirety here.

It is an interpretation told from a certain perspective, but overall does a fairly decent job of laying out the general boundaries for the currency war that has been brewing in the background since 1971 with the collapse of Bretton Woods.

It is more visible to us now because it started manifesting more overtly in the 1990's and since then has slowly been gaining momentum.

If an analyst does not understand this, is not aware of it even if they do not agree with this particular interpretation, then they have a poor grasp of the major trends that are driving so much financial and political activity in the world today.

And fortunately or unfortunately, gold and silver are deeply involved as the traditional supra-national world currencies.

To put the entire thing in a nutshell, in 1971 the US arbitrarily ended the Bretton Woods Agreement by closing the 'gold window,' and placed the world on an entirely fiat reserve currency which the US controlled. Since the US is making monetary policy to suit its own domestic agenda, and increasingly so over the past twenty years, the stresses that this creates in the world have become unacceptable to many other countries, some of which are in a position to push back against this.

This tension between the dollar and the rest of the world is either going to end in an acceptable and workable compromise, or will result in a split of the world into regions of power and financial influence, most likely three or four. This will be accompanied by conflict on all the usual levels: diplomatic, economic, and military. We are seeing this today.

Compromise is being thwarted by a neo-conservative, militaristic and nationalistic group in the States, with clients in other countries, that view an American hegemony as the natural and highly desirable outcome of the end of the Cold War.  However, this is a patriotic cover story for what is essentially a bid for more money and power for a privileged few who have no patriotism and little decency, who serve only themselves and their patrons.  To quote Edward Abbey, their motives are 'old as Babylon and evil as hell.'

Signorelli, Sermons and Deeds of the Antichrist

Whether you agree with this or not does not matter so much, because it is painfully obvious to those thought leaders in countries like the BRICs that this is the situation.   And they are acting on this, and the US is reacting in response. But from reading the literature of the neoliberal economists and neoconservative politicians, it seems hard to come to any other conclusion based on facts and specific actions which have been taken by the US, the UK, Canada, Germany and Japan.

 

In some ways the situation in Europe, with Germany and a few northern countries driving the ECB and its monetary policy, is a microcosm of the type of tyranny of monetary policy which is held globally by the US Dollar.  This does not even have to be purposeful, but is the natural outcome of a fiat currency held as the major exchange mechanism over a region without political and fiscal unity.  It is inevitable by its very construction, and manifests in other economic problems such as those described in Triffin's Dilemma.  

 

So why do some people keep promoting these types of unsustainable mechanisms?  As always, money and power.  Controlling the reserve currency enables a form of financial neo-colonialism in securing and controlling the payments and politics of the indebted nations.  We are seeing a fine example of this now in Greece, but the US set the pattern for this, particularly in South America, long ago.

And the money masters rationalize this, as Polyani noted, "by indulging in prejudice and sentimentalism. The improvidence of the poor is a law of nature, for servile, sordid, and ignoble work would otherwise not be done.  Also what would become of the fatherland unless we could rely on the poor? 'For what is it but distress and poverty which can prevail upon the lower classes of the people to encounter all the horrors which await them on the tempestuous ocean or on the field of battle?'"

 

The role of the many is to suffer, labor, and die for the select few, however they may choose to define themselves, and assert and maintain their dominance.   This is nothing new, but again, a theory 'old as Babylon and evil as hell.'  Exceptionalism is the very rationale for evil, and pride,  the father of sin.

 

I do not think it is too much to say that we are experiencing a type of 'world war.' This seems to be the settling of differences and adjustments that tends to follow major economics shifts, as we had seen in the first half of the 20th century.  The gilded age, the great financial bubble, interspersed by almost twenty years of horrific carnage.  And the sociopathic few, those black holes of the human spirit, are unleashing the madness once again.

 

"The Fed effectively acts as the world’s central bank, but sets monetary policy only in its own interest. Under the pressure and the orders of financial oligopolies, it fixes interest rates and prints money to suit itself, sending economies across the globe into tailspins...

These policies aren’t enacted with the express goal of kicking the global South in the stomach, but this outcome is a necessary and predictable result of the domination of the global financial order by a sole country whose interest is to keep its hegemonic status. Other measures are taken precisely toward this end. This latest round of financial warfare has to be seen in the context of financial imperialism in general. Countries struggling for sovereignty are also being hit by sanctions, speculative currency attacks, commodity price manipulation, biased evaluations from US ratings agencies, massive fines on some banks for what the US has deemed inappropriate practices, and the prohibition of certain banks from participating in the international banking system...

Not only does the dollar enable the US empire, but also protecting the dollar’s status is a major reason for US imperial wars. American financial and military strength is based upon the fact that the dollar is the world’s reserve and international trade currency, creating a global demand for dollars which allows the US to print as many greenbacks as it likes. It then pumps them into the overbloated finance capital system and uses them to fund its criminal wars...

Without this international demand for dollars, the dollar would “correct,” and US hegemony would eventually, inevitably, come to an end. Therefore the US pressures and attacks countries that attempt to free themselves from the dollar’s yoke, not only because they’re guilty of lèse-majesté, but in order to force the world to maintain the status of the dollar and thus preserve US domination...

Although it has so far been unsuccessful, the idea of rebalancing the world monetary system is extremely threatening to the US, and goes a long way toward explaining recent US wars and warmongering, which may otherwise seem irrational...

The dollar is rallying less because of any supposed US recovery than because of higher global demand for dollars due to investors’ risk aversion, in the wake of the Fed pulling the plug on QE. Parenthetically, the US economy is definitely not recovering..."

Michèle Brand and Rémy Herrera, Dollar Imperialism 2015

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power as well.

Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola

Not exceptional, except in its delusions. It is a story of an otherwise decent people made capable of doing monstrous things, drunk on rhetoric and power, led on by the madness of the few and their visions of empire.   It is a story old as Babylon, and evil as hell.