By The Ister for the Saker Blog
The origin of modern banking can be found in the early days of the gold trade. In the Middle Ages, goldsmiths accepted deposits of gold in return for paper notes, which could be exchanged for the deposits at a later date. Because these paper notes were more convenient for commercial use than physical metal, they were usually not redeemed for gold right away. The goldsmiths noticed their customers’ deposits could be used in the meantime to generate interest and began surreptitiously lending out the savings of their depositors. Over time fractional reserve banking developed from this tendency of lending out money in excess of the actual reserves being held.
Goldsmith became banker, and from this early monetary system, banking families emerged. Prior to the existence of modern financial institutions, these houses were the entities which could be relied upon for large amounts of credit. A reputable surname gave confidence to depositors that their gold was in good hands, and from the intergenerational accumulation of wealth grew large pools of loanable capital. As nobles required weapons and pay for their armies, the conflicts of medieval Europe were fueled by families such as the Medici, Fuggers, and Welsers. Today, it is the Federal Reserve which finances America’s enormous military and conquests abroad.
To truly understand banking, the concept of free markets must be cast aside. Just as oil is a strategic resource for the real economy capitalist, gold and silver are strategic resources for the financial capitalist. Physical bullion is the basis from which all other lines of credit extend; we know this because the same central banks which publicly proclaim gold to be a barbarous relic still feel the need to maintain enormous hordes in their vaults.
As in oil markets, pricing is not influenced primarily by a large number of producers and buyers but by concentrated cartel dynamics. So while we witness yet another energy battle between OPEC and Russia unfold, it should be understood that similar dynamics are at play in the upper echelons of the monetary world as bankers seek to fix prices and control physical bullion flows in a manner which is beneficial to their interests.
A key difference from oil is that while the pump leads to the refinery and the refinery to the end-user, bankers do not generally like to part with their gold. Accordingly, markets have been designed so that prices are determined not by physical delivery but by the trading of unbacked or fractionally backed “claims” on the underlying metal: certificates, ETFs, and futures. We can be certain that there is not enough physical bullion to cover all these paper metal claims, just like the medieval goldsmith did not hold his deposits in full.
These paper markets set the price, although bars rarely leave the vault
Where is the vault? While Fort Knox claims the largest holdings, the price is set by the London Bullion Market Association and CME Group which together account for around 70% and 20% of global trading volume respectively. The London Bullion Market began in 1850, when N. M. Rothschild and Sons and several other banking families created a cartel to oversee the operations of the global gold market, including the establishment of the “London good delivery” list which created trading standards for size, dimensions, shape and fineness of bullion; today trading on London markets requires a high purity and being between 350-450 ounces.
This domination of the world’s gold market was not achieved through peaceful means: look into the forces behind the conquest of Transvaal’s gold mines, for it bears a direct parallel to America’s invasions of oil-rich nations today. Another similarity with oil markets is that military interventions have a habit of “liberating” the target nation of their gold: just ask Muammar Gaddafi.
The price of such a strategic resource could not be determined by an open market, thus alongside good delivery standards the “gold fix” was established in 1919 and was held in the offices of New Court until 2004, when its operations were passed on to a cartel of bullion banks such JP Morgan and HSBC. Ever since, these banks have been investigated and convicted countless times of manipulating and spoofing the prices.
How do we know that there isn’t enough gold to cover physical deliveries? Back in the 1970s the dollar was under a lot of pressure and Western banks maintained secret gentlemen’s agreements not to request delivery of bullion. In 1971 Dutch central bank chief Jelle Zjilstra ignored these formalities and planned to convert $600 million of the Dutch dollar reserves to gold, prompting Federal Reserve chair Paul Volcker to fly out to the Netherlands and warn him: “you’re rocking the boat.” Shortly after Zijlstra refused Volcker’s pressure and continued with the purchase, the US decoupled from the gold standard.
Abandonment of the gold standard risked a reduction in dollar demand, so Nixon enlisted Wall Street scion Gerry Parsky to negotiate with oil exporting Arab nations. After discussion, the Saudi state agreed to sell oil priced exclusively in dollars and to invest the proceeds of oil sales in America.
To those who say dismissively that the dollar is now backed by “nothing,” I say it is backed by oil and the threat of the US military.
Look at the somber fates of those that tried to ditch the dollar for gold or the Euro: Libya in a state of permanent civil war; starving Syrians picking through landfills in search of food only miles from occupied wheat fields.
So maintaining confidence in our reserve currency requires the undermining of confidence in gold, as its reemergence would unnecessarily democratize the international monetary order. Confidence is undermined first by price suppression, which is accomplished by the manipulation of precious metals futures markets. While it would be hugely wasteful for a private individual or consortium to manipulate such a market with their own money, that is where the unlimited fiat available at central bank trading desks come in: and we know central banks are secretly trading precious metals futures due to leaked documents from CME Group.
Leo Melamed, chairman of CME Group and the putative father of modern commodity futures markets noted in his book Escape to the Futures that CME’s Globex system was inspired by the original London gold fix:
Sandner, Kilcollin and I were in London with the chairman of the Rothschild Bank seeking his advice on how to bring the “gold fix” to Chicago. From the heated debate that followed one would have concluded that Kilcollin knew more about the subject than the legendary Rothschilds, the people who had founded the concept ages before.
What we can see from this is that strategic commodities such as gold and oil are far from a free market: recall my previous article The Empire is Losing the Energy War which described how the Saudi state functions as a price-suppression weapon against Russia’s oil exports. This global commodity suppression schema allows the importation of the planet’s finite resources at a fraction of the true cost in return for theoretically unlimited currency. Recall Fed governor Kevin Warsh’s comments in December of 2011 when gold hit an all time high that banks were:
“finding it tempting to pursue financial repression- suppressing market prices that they don’t like”
There are signs, however, that the thin pool of physical bullion which exists to maintain confidence in paper markets is drying up. In March of 2020, CME Group had to relax its own requirement of 100oz bars to allow 400oz London good delivery bars to be shipped from overseas and used for trade settlement. Some would say: if price suppression exists then why has the gold price gone up over the last few years?
The middle ground between setting the price to very low or very high levels, say, $100 or $10,000, is that the prices are set high enough to minimize outflows from vaults, while at the same time using futures to hammer down the prices at psychologically important levels and initiating margin calls on those who are long gold using leverage. Those who have watched gold for a long time can attest to the sudden and inexplicable drops which originate in the futures market and which occur every time the gold price appears *just* ready to break out.
It’s a very complicated charade for the bullion bank cartel. Allow the price per ounce to go too low and you risk running out of the gold necessary to facilitate markets. At the same time, if the price rises too high it attracts international attention and risks gold reemerging in monetary policy. Notice how as soon as the supply shortages became apparent in March 2020 the bankers were forced to reset gold from $1230 to over $2000 in order to stem the outflows of physical delivery.
Putin is intentionally exacerbating this drought of physical gold in Western banks by expanding the Russian central bank’s purchases of gold. For the past few years Russia has been the number one global purchaser of bullion, having spent over $40 billion to bring Moscow’s reserves to the highest level in history: a sum close to the annual military budget because it is a strategic asset.
Just last week, Russia’s gold reserves passed its dollar reserves for the first time reaching a sum of $583 billion, highlighted by the central bank as part of Putin’s de-dollarization agenda. Given that purchases have grown at roughly 15% per year we can predict that even if the price does not rise, the value of these holdings will be around $1 trillion in three years. Read the anxious commentary about these purchases in Bloomberg and Forbes, and remember the nervousness in the business press when Germany demanded its gold back in 2013, which would only exist if behind-the-scenes physical gold flows were disjointed and there was internal muttering in the financial world as to whether the demand could be fulfilled.
To any who doubt that this is an overt move, in the pre-WW2 monetary system the mass accumulation of gold was well understood among central bankers as an aggressive act intended to starve competitor states of their ability to create credit. For example, French and American hoarding resulted in hyperinflation for Germany and forced Britain’s pound sterling off the gold standard.
Russia’s acquisition of precious metal is a direct threat to the financial system. How funny that the system is so fraudulent that it is an act of aggression to simply demand in physical form what one has paid for in full on an open market; an act which the designers of the system cannot protest lest they reveal their own bankruptcy. Just as it did in the 1920s, the hoarding of gold in the East will eventually limit the West’s ability to extend credit, it is simply unfolding on a longer time frame.
So why is a tiny stock like GameStop causing billionaire Leon Cooperman to cry on CNBC, and why is the SEC threatening small-time investors?
Simply, the financial markets are being revealed as a highly illiquid house of cards. Retail investors from Reddit began trolling short-sellers by rapidly buying small stocks and causing hedge funds to blow up from expensive margin calls. The losses are now estimated at around $70 billion, and as these small-time investors funnel their unemployment and stimulus checks into their aggressive trades they have fought wealthy investors in a more effective way than Occupy Wall Street ever did. They have now turned their eyes to the small and illiquid silver market…
Look at the fate of the Hunt brothers fortune: they were oil billionaires who tried to exercise their legal right to take physical delivery of a large volume of silver futures contracts and had CME pull the rug out from under them before it could be achieved. CME Group defeated the Hunt brothers by instituting Silver Rule 7 which limited the dollar amount of physical silver that an individual investor could buy. But how will that stop the hordes of young low net worth traders who are now telling one another to purchase physical bullion and intentionally strain the rigged silver market?
This arcane financial system is doomed to fail because it is based on ever-higher and more unstable abstractions of underlying wealth: CDOs squared and cubed, dark pool derivatives markets totaling trillions of dollars, and so on: all of which depends on the financial sector sucking as much money as possible out of a shrinking global economy through securitization. Now that people are demanding the underlying assets themselves, change is beginning.
What an interesting timeline: where Russia and unemployed youths have come to the same conclusion for how to defeat the banks.
The Ister is a researcher of financial markets and geopolitics. Author of The Ister: Escape America
The supply of Silver is no doubt tight, and regardless as to whether the Reddit traders manage to push up the price of Silver or not, eventually the U.S dollar will collapse under its own weight of money printing. This is not light years into the future, it’s happening now.
So with Russia and China hoarding big quantities of Gold and Silver, the bigger question lies, does the U.S have the 8000 tonnes of Gold it claims to have? There has been no audit since 1954.
There are doubts that it does, if true then the U.S as a power is in real trouble.
We will see a new monetary system backed by Gold and Silver, and if you, as a country do not have Gold reserves, you won’t be setting any rules at the monetary table.
So in short the big banks who are massively short the metals, and particularly the U.S, have most to lose from a rising metals price and a new monetary system backed by Gold.
I suspect that the west has been covertly buying and building up a secret gold and silver stash for quite some time now, as a defensive move against other countries doing the same thing. One day we might get a surprise announcement. But amazingly I have never seen any journalist anywhere (MSM or alternate) mention or discuss this ever! In my opinion a lot of alternate media journalists are likely covert mockingbird media agents anyway. I also feel that knowledge of this is being controlled so tightly that most journalists wherever they are directed to not even plant the thought seed into peoples’ minds. Time will tell.
Rob, I have read a few articles by Cynthia Chong. She is very good, particularly on the historical elements to all of this, eg: the City of London’s dominance for centuries. Regards.
please share links to some of her articles
thanks ahead of time
No there was an audit! Remember when Steve Mnuchin and Mitch McConnell went there and took a few black and white photographs as proof…
I suspect the gold has been stolen or is being siphoned off in weird swap agreements between western banks. Given that Germany demanded their gold back in 2013 and we sent them different bars than their original deposits, it is worth assuming we have way less than claimed
There is nothing in “Fort Knox” but emaciated mice and aged spiders. America is a totally bankrupt entity, presently existing through oil-price manipulation and having reserve status for its currency. It can’t and won’t last, there’s the ignomy of third world status looming in the not too distant future.
Boz From Oz
Good question. Does the US really have the gold it claims ? According to private analysts, bankers have been looting US gold, sending it outside America to safe, undisclosed locations. They are apparently expecting something. That Fort Knox holds tungsten instead of gold is old news.
As for Russia, it has been accumulating gold for years, not only buying bullion, but mining it’s own. Same goes for China. Both are waiting for the right time to introduce gold backed rubles and yuans. This explains US animosity towards both. Once gold backed currencies appear, what will happen to the US dollar ?
“To those who say dismissively that the dollar is now backed by “nothing,” I say it is backed by oil and the threat of the US military”. That is half true. Yes, the dollar is indeed backed by the US military, something I have been writing for years. What happened to Iraq and Libya when they discarded use of the dollar ? We all know what happened. However, to state that the US dollar is also backed by oil is absurd. Yes, Saudi Arabia and others are selling their oil in dollars, but only because they have to. Once gold backed currencies appear, what do you think is going to happen ? In the new situation even threats by the US military will not work. Even now some countries are using domestic currencies in bilateral trade, oil included.
The bigger problem today is that a significant amount of gold makes its way, and is refined in, switzerland.
And the evidence is mounting that what country’s delivers to the swiss, is then either payed for with cash or returned to its deliverer in a shiny diluted form of gold that looks like gold, tests like gold, trades like gold, but in fact, is far from a solid 24k’s worth of gold.
Not much is lost monetarily, but confidence in gvt is eroded as either they were participants like hillary or blind trusting gvt critters like billy.
“…does the U.S have the 8000 tonnes of Gold it claims to have? There has been no audit since 1954”.
Their eagerness to steal Libya’s gold reserves – and possibly those of Iraq and other countries too – suggests that the cupboard is bare.
Given that the paper market is so huge compared to physical, whatever gold is there has multiple claims on it.
“Re-hypothication”
“Does the U.S have the 8000 tonnes of Gold it claims to have?”
No idea, but it has first dibs ony still there originally belonging to those countries who were scammed into putting their gold their ‘for safety’. The Money Changers are running out of countries to loot for their locally held supplies (Libya, Ukraine, Iraq? …)
Gold Australia : the next shangri la? Three countries produce over 30% of the worlds gold and each over 300 tons. They are China and Russia and Australia. When the US dollar crashes and most of the world’s economies cannot cash their US bonds their economies will also default and gold will once again become the worlds monetry security.
Presently China and Russia trade in their own currencies and China is divesting itself of its US bonds. Considering the population to gold ratio the Australian economy will be one of the least effected and will become a favoured destination for those who have the money.
Australia has a problem. It is tied to the US defence yet its major trading partner is China. What is Australia’s biggest threat after the US$ crashes China or the US? China is not the Mongols it has no ambitions of empire yet it has commercial and social ambitions while the US spreads its form of ‘democracy’ with the sword. Further more the Chinese have excellent social programes and citizens better educated than the US.
Here is my short satirical video of the situation in Australia:
https://youtu.be/_uxJ8JYnwAQ
With government and central banking operations so opaque, one must assume the worst, e.g. the gold in Fort Knox has been looted. One must come to the same conclusion when regarding the level of corruption that exists. It would be possible to remove the gold by using fracking technology. If it is there to be stolen, its a good bet that is was.
Thanks, Ister, good analysis!
if you have the time, could you provide some background as to the economic/financial team in Russia and whether they are hopefully aligned with putin’s objectives.
I say hopefully because i’ve seen a fair amount of discussion about the “Atlanticists” and their own agenda which may be aligned more with Western interests rather than with Putin’s.
This becomes a rather larger question so maybe you could point me to a link or article which would be informative.
Kudrin seems to have been moved off to the side; I do have concerns about MinFin, Mineconom (sic), and the head of the Central Bank, the latter getting the most scrutiny and discussion as to whether she is with Putin.
Thanks in advance.
Has dilution by tungsten been introduced into the conversation yet?
Well the very rich want it all and won’t share.
My heart is bleeding for them.
Could they all be moving to Jasper parks in Alberta.
And then factor in Peak Oil, which is no longer a theory, but observed history. Thus, as EROEI (look it up) continues to approach the value of one at an accelerating rate, the AngloZionist Empire desperately attempts to construct a “United Federation of Plantations” within its spheres of influence where, for example, gold and silver are once again mined with human muscle and animal traction powered by naturally photosynthesized sugars (slave food). The Empire’s formula is obvious to those observing through the lens of Peak Oil mitigation: bomb and burn the weakest and most defenseless countries on Earth, force the survivors onto migration highways leading to developed nations where the high-energy consuming populations will be displaced and eventually replaced with a new supplicant, obedient, ignorant and, most importantly, low energy demanding workforce.
Consider that The Path To Citizenship, Dreamers, Equality & Equity, Diversity & Inclusion, Critical Race Theory, etc. are all implementations of interlocking propaganda campaigns designed and executed to bring a Neo-Techno-Plantation into existence, efficiently stocked, and under the control of, let us call them, a “Plutocratic Oligarchic Transnational Elite Collective.” Study the American Slave Plantation System which was created and operated by the same Democratic Party that exists today. Recall the accounts of poverty, broken families, violence, killings, primitive living and working conditions, high-sugar diets, low life expectancy. And then consider that the next implementation will be a Techno-Plantation, as a critical amount of affordable (measured in EROEI) energy will remain to manufacture and service the sensors, networking, AI-centric computation resources, and a wide array of punishment, incarceration and execution devices needed to manage millions of plantation “workers” under the control of a handful of techno-Big House master owners/operators – The One Percent. Consider that the new slaves on the new plantation will be bringing themselves, voluntarily, with their families and friends, on ships that cross the oceans. Consider that the real purpose of the border walls will be to keep slaves CONTAINED within the United States plantations.
Will the Big Houses prevail? Or will these immigrant caravans wake up to the fact they are walking into a techno-open air work prison and death camp? Will those now inhabiting CONUS, whether new immigrant or old, escape their preprogrammed fate? Will they reject their captivity by removing the “convenience” of an Internet of Things? Will they crush their “cell phones” and “Alexa overseers” and remove all traces of electronic surveillance from their midst? Are Humans Smarter Than Yeast? (H.T. Richard Heinburg).
We shall see.
Precious metals will eventually prevail. It is unbelievable that fiat has lasted as long as it has. Unless the powers that be step in, Monday may be an interesting day.
A very important article, thank you!
For more detailed information on the history of this oldest of all frauds that is known today as fractional reserve banking, refer to the writings of one Henry Dunning MacLeoad, in his book “The History of Banking in all the leading Nations”. It simply lays down how goldsmiths in Britain kept issuing more deposit receipts for gold bullion than they actually held, thereby making more promises to deliver than they would ever be able to honor, if asked cumulatively at the same time by all their customers. Their excuse was that there was still the growing demand of the public for the deposit receipts/ certificates, that is “money”. However, from a moral point of view, the bankers have an obligation to point out this fact to their customers, which they do not and have never done.
The average Joe is not aware that his cash constitutes a promise that is potentially impossible to fulfil! People are to this day not aware that they are trading in the utility of exchangeability for any good or service for the potential partial loss of their traded value, only because this hardly ever happens except in bank runs etc..
By the way, this fraud is/was being committed in free-market as well as communist countries, as all modern money is fractional reserve money!
With digital “money” things are taken even farther: Now it is not only that we are potentially being stolen from as is the case with fractional reserve money, but our privacy is completely gone, and with it our freedom!
While I agree with many of the observations above, I disagree with the thesis. The author takes all of his evidence and twists it to fit his conclusion that Russia and the Reddit mob have formulated or stumbled on to a path which ends the modern Western imperial model.
Lost in all the evidence is the most glaring truth, which is stated early and is most relevant: the strength and viability of the dollar is backed by coercive power of the US military and that of US vassals. No amount of financial chicanery, clever or otherwise, is going to be enough to defeat the Imperial system. The empire can change its internal rules on a whim, and can reconcile the contradictions that arise from these changes with the threat of force.
I agree with the sentiment often voiced in these forums that the US military is drunk on its own propaganda and is far less capable than they think. That they are not a match for its two main strategic competitors, Russia and China; and would not be able to conventionally defeat regional powers like Iran or Venezuela. But this doesn’t mean that Russia would risk war because America fails-to-deliver physical gold at the futures maturity date. Neither does this mean that the apparatus of state power in America is degraded to the point where they couldn’t seize and outlaw alternatives to the dollar, be it btc or silver. There is precedent for this already.
It is the coercive power of America that keeps the dollar afloat; and the dollar will persist until that coercive power is degraded. It is in the interests of both Russia and China to extricate themselves from the dollar system, but not to hasten the dollar’s demise. Lest they have the misfortune of having rubble or yuan become a THE reserve currency and suffer the inevitable financialization that comes with that.
As far as your comment, “It is in the interests of both Russia and China to extricate themselves from the dollar system, but not to hasten the dollar’s demise” I disagree. China is much more bound to the dollar system than Russia, and Russia would benefit from a collapse of the dollar as it would spawn a global commodities bull market. That is the thesis of George Soros’s book A New Paradigm for Financial Markets
It was Moscow that offered to Beijing to simultaneously dump US debt in 2010, and Beijing that refused.
This was a great comment: “The empire can change its internal rules on a whim, and can reconcile the contradictions that arise from these changes with the threat of force”
This is solely my opinion, not based on anything other than what I think are the rational moves for the actors involved. But the Chinese involvement in the dollar system isn’t submission or miscalculation. I think it is the height of geopolitical judo.
First, I think the Chinese are acutely aware of how the dollar’s dominance inevitably lead to financialization and the hollowing out of American industrial capacity. Heck, they were on the other side of the trade. The US elites sent them all their physical capital and sold their own population down the river. Over the lifetime that began in the Carter administration to now, the fortunes of the Chinese and American masses have been diametrically opposed. I think the Chinese are purposely helping to maintain dollar “dominance” because it’s no such thing.
Second, I think the Chinese understand that dollar “dominance” is now largely an accounting gimmick. By productive capacity the Chinese economy has been far larger then the American one for the better part of a decade. Of course in dollar terms the US economy seems larger, after all the US literally prints dollars. American elites partook in a Faustian bargain from which they can’t extricate themselves. Even now that they fear China, they can’t re-industrialize their economy. They’d run the risk of overturning their own domestic power relation between Labor and Capital. The Chinese understand this “accounting gimmick” is at the heart of perceived American strength. While it keeps American elites fat (at the expense of their own people) it also keeps them beholden to China’s productive capacity and unable to redevelop their own.
Finally, an American politician of no historical renown once described Russia as a gas station with nuclear weapons. In 2021, the US can be described as dilapidated mall with Nukes. As much as the Chinese or the Russians may see a US collapse as the culmination of historical justice, I don’t think they want nuclear armed statelets fighting in North America. Not because they have sympathy for Americans; but because it would be dangerous for humanity. America is undergoing a state of national dementia; better to let them keep thinking they’re number one and looking at their stock portfolios. Like a dementia patient, you want to keep them calm as they “sundown”.
Unfortunately, despite the best efforts of the Chinese, I think the dollar will collapse. Americans think they are immune from repercussion and will put themselves in a situation where the military dominance which undergirds the dollar’s dominance will be exposed as fraud. It won’t be in military conflict with Russia or China, they won’t risk that. But they will send their Hollywood army, not only to a fight they can’t win, but likely to one they will lose.
And could you see generation Gamer going down to recruitment offices to defend the system they know so royally screwed last week?
To Dftbs
May I suggest a slight amendment to your “dilapidated mall with nukes” description of America? An alternative; “dying strip mall with nukes”? Rolls easier of the tongue, and even more down market than a your average decrepit Mall.
Good comments!
Philip, you’re correct, thank you. Cheers!
Agreed, especially with your “generation Gamer” comment. Even with the economy in the tank and few employment options out there, I think the younger generations are realizing that the nature of work has changed and they’re no longer interested in the so-called “security blanket” the military once provided, where benefits continue to be cut as well. And as far as all the flag waving patriotic bullshit that worked so well in the 20th century, I think that ship has largely sailed now as well. The young are more and more largely smart and cynical enough to see right through it. Good for them!
‘Unfortunately, despite the best efforts of the Chinese, I think the dollar will collapse.’
As is well discussed above, the value of the dollar, since it left the gold standard, is a confidence game.
But now, with unlimited QE, the Americans are essentially admitting, themselves, that the intrinsic value of the dollar is zero.
Sooner or later, and likely sooner, the markets will catch up to this admission.
Dh-mtl, I’m less optimistic about markets catching up to reality. Markets are social constructs, they are the result of societal forces not natural realities. What the central banks did with their last round of covid motivated qe is essentially to defrock the proverbial emperor. But unlike in the fable, there was no comeuppance. Rather, American society doubled down on its fictions.
When those legalistic market mechanisms are challenged, the rules are changed by those in power. We see this in the aforementioned qe; we see this in the sanctions regime; and ordinary Americans experience it everyday, although they often sleep walk past the injustice. The GME fiasco is delightful because it’s hard for them to sleepwalk past that drama.
I don’t think the “market” will ever catch up to the reality on its own. Buy gold, buy silver, good luck taking delivery. It’ll be credited to your account at the clearinghouse warehouse. Buy btc, or some other crypto. If it isn’t outlawed, at the end of the day if it is paper crypto, you find yourself in the same dollar pit. Good luck finding a way to invest in Yuan or Rubble. Chinese stock listed in American exchanges are ADR, not actual equity ownership.
The dollar system is less a system of economic activity and more system of political and physical coercion. In the end what will bring down the dollar isn’t devaluation or a bubble bursting in the market. In the end it will collapse to an exogenous shock. Something that demonstrates imperial power as fraud. The pandemic has certainly gone a long way towards this, but the imperial system responded with increased internal violence and surveillance. The people are no match for it. The catalyst will be external.
But the Chinese involvement in the dollar system isn’t submission or miscalculation. I think it is the height of geopolitical judo.
I think there is a very simple explanation for that. The Chinese know that for the rest of the world the dollar is still king, they still can’t get enough of it, so they (the rest of the world) will be happy to sell them whatever they have for sale (mines, agricultural land, civil infrastructure) as long as they are paid in USD instead of yuans. That is the mean reason i think they want to keep a highly valued USD, because it is good for their business and so they will as long as it is for their convenience.
@gatobert
I agree it is geopolitical judo on China’s part. The evidence is, of course, China’s considerable holdings of US debt. China has enormous leverage to pull the trigger on the Global USD. However, the global status quo is working quite well for China, overall: domestic and foreign agendas (BRI) are both advancing at a rapid pace. Meanwhile, China can take the time to perfect the digital yuan and ensure a seamless global transition from USD to 21st century currency, that is, without causing a tremendous GFC in the process.
Of course. China is the one holding the aces in this global poker game and they’ll throw them all at once on the table at the moment of their choice. So someone should be kind enough to go tell the news to the delusional gangs in Washington & Wall Street/
With quantum computing its difficult to see how the world could return to the gold standard.
However lets assume Im wrong, and we entertain the idea that whilst its true that dedollarization is ongoing, that Russia & China will be able to influence the gold price.
I hate being critical of anything that Putin (&/or the RF) is doing, but I think this author’s claim is wildly optimistic and I hasten to remind readers that one of the (several) ways the Empire brought the former USSR to bankruptcy was it had stockpiled gold and the US & UK merely sold down the price of gold, leaving the USSR holding an almost worthless asset
Here’s why I make that point:
Firstly. Gold Reserves (by country) https://tradingeconomics.com/country-list/gold-reserves
Secondly, the BoE holds the gold reserves of at least 30 other countries:
• “Our gold vaults hold around 400,000 bars of gold, worth over £200 billion. That makes the Bank of England the 2nd largest keeper of gold in the world (the NY Federal Reserve tops the list).”
https://www.bankofengland.co.uk/knowledgebank/how-much-gold-is-kept-in-the-bank-of-england
• Gold hidden in secret vaults beneath the Bank of England worth $248bn (21 April 2016)
“A fifth of the world’s gold is hidden under London, worth an estimated £172 billion ($248 billion).
The vaults under the Bank of England on Threadneedle Street are said to hold 5,134 tonnes of gold.
This makes up the majority of the 6,256 tonnes kept safe beneath London’s streets …”
https://www.independent.co.uk/news/business/news/gold-price-bars-hidden-secret-vaults-beneath-bank-england-worth-248bn-a6994276.html
Thirdly, the United States Geological Survey (USGS) reports that in the US about 18,000 tonnes of gold remain undiscovered, w/ another 15,000 tonnes having already been identified but not mined. By far, Nevada reigns as the gold capital of the country.
It would be interesting to see comparative data for other prominent goldmining nations: S Africa, Russia & Australia
… and
Lastly, under the Hindutva nationalism of PM Modi, India is increasingly falling into the US orbit. If India positions itself against Eurasian integration under Russia & China’s lead of the EAEU and BRI respectively, Indian households have the largest private gold holdings in the world, standing at an estimated 24,000 metric tons. That figure surpasses the combined official gold reserves of the US, Germany, Italy, France, China & Russia. (as at Oct 11, 2017)
So I really cant see how Russia (&/or China) could influence the gold price. I suspect Central Bank Digital Currencies (CBDC’s) will be the way forward for the advanced economies
Regards
“Secondly, the BoE holds the gold reserves of at least 30 other countries…”
And, judging by its recent theft of Venezuela’s gold, intends to keep them all.
Hi Insanity is statistical
You post the tradeingeconomics link as a source for gold reserves by country.
With all due respect, this site has zero credibility just on this estimate of China’s 1948 ton holding alone.
This estimate is farcically low. Annually China produces 500 tons domestically…so the 1948 ton figure could be reached in less than 4 years just on this production alone. They have also imported thousands of tons in the last 20 years. Many non-politicized estimates put their likely holdings at an absolute bare minimum of 30,000 tons.
Given that the all-time total globally mined gold tonnage is somewhere in the region of 200,000 tons I would be gob-smacked if China didn’t stock at least this 30,000-ton minimum. Even 30,000 tons would only be a very modest 15% of this total, especially for an export economy the size of China’s.
Apologies, but 1948 tons at 0.9% is totally absurd as an estimate. This figure alone means the entire site is hugely suspect
Cheers
Col
Did I just see a tender for 8000 tons of gold plated lead ingots? If a visual compliance check is all that is needed and the physical fake gold itself never moves (a small amount of the real McCoy readily available) who would be the wiser?
Another hall of mirrors.
(unfortunately this may mean war)
Excellent summary. Wittingly or not, the Gamestop and Reddit episode has exposed the Western (primarily US) financial system for what it truly is – a house of cards built on so many layers of fraud, few can really comprehend it.
Its simply game over.
I’m planning on buying a couple of ounces of silver from Perth mint to join the fun. Bitcoin is still the best vote against the dollar.
I dabbled a couple of years ago. They take a hefty commission between their sell and buy prices.
So it has to be a larger than average wave to get your own net profit out of the deal etc.
But the online system works well and they store etc.
Another good article by the Ister, but a quibble. In the past we have seen empires collapse financially (Spain), but resource depletion (oil), discussed in your previous article, is generally more important. The USSR collapsed two years after its peak oil, the 2008 crisis was two years after oil hit 200 USD/barrel (and three years after the real peak oil in 2005).
The peak produced (but not consumed) oil was in 2018. In 2020 the elites went in a different direction this time, effectively putting billions of people under house arrest, collapsing the economy themselves, and starting a multi-generational long term depopulation program. The end game is serfdom and a sparsely populated West.
IMHO, the current system is so sophisticated, and their hold onto the media so total, that only resource shocks can unravel it. Obviously, we got to it eventually, but only after 12 years of a zombie economy, and 107 years of financial corruption, punctuated with huge wars to hold down those who wanted nothing to do with private central banking.
The Spanish Empire and the Soviet one, collapsed financially but not because of missmanagement, otherwise how could both had become empires, but becuase of systematic looting.
Spanish galeons coming back for America full of gold mined there, were systematically robbed by the English pirates granted patente de corso by Her Royal Majesty…. It was all this gold who then went to plant the roots of the current City of London and thus the foundations of the current British financial empire…
Then it was coordianted with harassing by war, started by the Britons, and completed by the US allying already born native Americans generations in their wish for independence to manage their own wealthy resources ( which lasted quite few, as they started to suffer immediately under the new hegemon…)
The story of the USSR we all know quite well by other sources different from US ones, as the Soviet economy was quite flourishing even at the mid 80s. There was no sign of collapse. o
Of course, no country/Empire can resist the general looting without restraint and systematic dismantling of industry and foundations of state institutions…
With respect the 2008 crisis, as happened with all the previous ones at least dating from the 80s, have been provoked by financial trading, concretely the last ones, as that in 2008, by high frequency trading,.
“Pick oil” and all that narrative is just a cover to avoid the peoples becoming aware that they live in a casino like economy and that all their hard work and savings of decades can be wipied out in a milisecond operation by bots, and the owners of these bots, who are reaping the earnings…
That way, a smartie emburses the fruit of decades of hard work by millions of people in a milisecond,without sweating the least..
That this can happend has been allowed by our governments who are systematically bribed by the owners of the funds.
The Gamestop event is going to change nothing.
Whenever tokens representing valuable commodities replace the commodities themselves it’s important to remember that the tokens are only replacing one of the functions of currency – that of means of exchange. The function of being a universal equivalent in which all value can be measured must still be fulfilled by a commodity that has a real value (i.e. contains socially necessary labour), something that banknotes or electronic signals hardly possess. For this reason, any tokens that are used as currency must be backed up by a commodity of real value, i.e. they must ultimately represent the actual value of commodities in circulation in the economy.
In the modern world banknotes and electronic transfers clearly aren’t convertible into metallic money, e.g. gold. Going into a high street bank and demanding the equivalent in gold of a ten pound note is not likely to get you very far. Instead the currency is guaranteed by the government and backed up by the strength of a nation’s economy. Today, banknotes fulfil the function of money as a means of exchange, while the strength of the nation’s economy as a whole provides the value against which goods and services can be measured and traded.
So where does Bitcoin fit into all this? Clearly Gold is money and bitcoin is a commodity not money or even a promissory note. It is a means of exchange and speculation but it is not backed up by a government and a national economy. Bitcoins do not have an economic anchor and so their value is entirely driven by speculation and subject to the whims of investors. Such an empty currency really cannot be considered a currency at all as it is entirely crippled by contradictions and notoriously unstable and open to criminal manipulation.
But the punters seem to have faith in this new monetary gizmo. The jury’s still out and we’ll see in the fullness of time who is right and who is wrong. Given that gold has been around for 5000 years I know where I would put my money (assuming I had any). But if you want to bet the farm on this novelty, good luck.
(If this is too off-topic and better suited at the MFC, feel free to delete this one.)
It’s no secret for many of us that the US dollar, like any other fiat currency under the sun, has lost its purchasing power over the years. But how many people in the US proper are aware of this?
It has been claimed that the Susan B. Anthony dollar, Sacagawea dollar and Presidential dollars have failed to replace the $1 bill in the US because the US public has long preferred the latter over the former. Given that as of 2020 a dollar today buys what 28¢ used to in 1979, I often wonder: how much more inflation will they tolerate before they bite the bullet?
Other countries’ coinage ecosystems are such that, within the past century, the following radical modifications have been made:
1. the elimination of small coin denominations (e.g. the 1- and 2-centime pieces in Switzerland),
2. introduction of larger coin denominations to replace lower banknote denominations (e.g. Canada’s $1 and $2 ‘loonie’ and ‘toonie’), and/or
3. redesign of existing circulating denominations, be it color, shape or size (e.g. Sweden shrinking its coins down in 2016).
At least one of these measures is taken in response to the declining purchasing power of a currency and likewise its coin denominations.
The USA in this case remains an outlier, having done neither. The sizes and colors of the penny, nickel, dime and quarter remain unchanged compared to their counterparts from within the past century, even before WWI (although their metal compositions may be different). Pennies in particular are still minted at nearly 2¢ apiece. Not every single vending machine still in operation in the USA accepts dollar coins, let alone dispenses them as change (ironically they were the reason the SBA was introduced in the first place). Some kids’ educational materials often gloss over the dollar coin, or at least the existence thereof. A typical play money set likewise is likely to not contain any plastic facsimile dollar coins (sometimes half-dollars are omitted as well). And this is decades after 1979.
It has been argued that the failure to replace the $1 bill with a coin reflects a deep-seated refusal to admit that the problem of inflation exists. Without knowledge of inflation, people become complacent enough to not question the sustainability of the current system even as they struggle with it. I can only assume at this point that the failure of the dollar coin in the USA is thanks to the general public’s ignorance about inflation.
Then again, I suppose that’s American exceptionalism for you.
Excellent article, well researched and with facts and names I was not aware of.
I’ve been watching the U.$. dollar and ‘its peg to oil’ for a long time now; probably since about 2003, all the while wondering when the house of cards will blow away with the wind. For some reason, and I rub my hands with glee at the prospect, I foresee Russia all of a sudden, and without much fan-fare, announcing to the world that they are in fact the largest holder of bullion on the planet, and that everyone else is lying; (as Putin parades German auditors through 14-15 thousand tons of gold bullion). It just seems funny, and as far as ‘sticking it to NATO’ a far more effective weapon than any nuclear bomb.
Watch this space. Comments welcome, flaming okay, but coherent responses preferred.
So in the end what really matters is real economy. Not that fake virtual economy making money with money and living in fantasies. What a wake up for Woke Up folks, LOL.
Thank you Ister. Now i know more about background of Nixon’s Shock (August 1971). But were their other factors behind the scenes than just Nederland? I guess Vietnam War and Americans loosing real economy markets against rising Japanese, Korean and German production played certain roles too. Suddenly in late 1960s American products disappeared from European markets. No one wanted to buy an American car.
Yes, Vietnam war and the collapse of the London Gold Pool thanks to De Gaulle. There were several CIA assassination attempts on his life and then they deposed him in a colour revolution in 1968.
Any time there has been a significant fall in the stock market gold and silver have fallen. Will they crush the stock market to end the rebellion of the little people?
there is no need for any hand wringing or head scratching, on where humanity is headed in financial or economical terms.It has all been already well planned , to be rolled out according to the time table set by players who fix everything for humanity,…
.. all you have to do is go to their official website and it is all there., W.E.F, W.B, B.I.S, DAVOS, I.M.F,etc, the plan is not to use gold nor silver not even the black gold but DIGITAL currency, which they can and will generate, if you have other ideas just look what is happening in syria and north korea where they have their own financial not controlled by the I.M.F, even russia,iran and china have central banks, team players of the W.B & I.M.F…..
it is a game and it is coming to the street where you live…just get used to it, we have survived much worse things since we crawled out from the cave.
https://www.youtube.com/watch?v=SH6CbZ6_mhI
I’d like to focus much more the shape of real economy of main powers. It it’s true as Chinese researching group have suggested that during Obama era just around 27% of U.S GDP was real economy that share now some 6 years later is less than 25%. China has around 20-30% bigger GDP-PPP than USA and with real economy the gap is much wider, likely twice as big as that of U.S.
Then we have to compare intellectual capacity of U.S to China. During last few years China has passed U.S also with new patents and new satellites sent to space. On educational level China, with exception of higher level older age scientists, China is superior. When education results in China are becoming better, the results in Europe and USA are becoming worse compared to 1970s are latest studies suggesting. It seems to be that since 1980s USA and UK have given up of good education for its population. So the idea of nation taking care of its own people has generation ago abandoned. This process has started in other European nations. This people are not “their own people”. For elite they are just white trash.
Then we must remember how according the data of EU, BRICS controlled 50% to 65% of 20 and 57 most critical strategic resources while EU hardly more than 3-4% and U.S and Canada less than 10%. China and Russia do have better cards in hand and even the Joker for Empire, US Military, while i’m not so sure, is hardly no longer the game changer. Not in world of several nuclear weapon nations. And not when following the golden idea of Patton – winning war with minimal own losses – is pure fantasy.
It seems to be that Empire’s last hope is Russian snow flake younger generation who still foolishly think that America is “defending the freedom and democracy”. Let’s see how lucky they are in these last years of empire.
What is really curious is why in the Earth The Netherlands central bank got with its own, and that tiny country was not destroyed and its population submitted to chaos and starvation like the Syrians and Lybians…not even suffered a coup…
Wondering whether this could have to do with the fact that the Netherlands´monarchy is the founder of the Bilderberg Group…and are really part of “The Familiy”…
On the other hand, I am surprised that you, being an expert in financial markets, missed the real story behind the alleged “plebeyian” take over of Wall Street…
What seems to really have happened is that previously to the coordianted effrot by WallStreetbets forum, a WS mogul, one Coehn fomermerly owning an online business on luxury items for pets, joined the forum and happened to encourage ( and highly likely explain how to do .) them to do this collective purchasing…
Some huge hedge funds happened to own at the moment of the collective “proletarian” action, a respectable protfolio at Gamestop, thus collecting quantious earnings. The hedge funds are Citadel and Blackrock, being Citadel the one who then rescued almost bankrupted Melvin Capital, and Balckrock the one transanational hedge fund owning main assets in at least Europe and who received a huge transfer of menoy vfrom Trump just before the pandemic and whose personel have come to “occupy” main economic positions in the Biden administration….
In my view, what we are witnessing here is a fight amongst WS sharks ro reduce the number of participants so as to concetrate remaining wealth in fewer hands.
The “plebeyians” happened to be just instrumental, the rpoof that they resulted stopped at certain point and probably will lose their tiny assets.
Once the wealth is grabbed, more strict regulations will be placed as alibu out of this event, to avoid that the wealth is agsin redistributed.
Following the monopolization of money and assets, a harsh social credit system will be placed to control the increasingly aware and furious masses..
This outcome could well be the goal of the whole pandemic operation, so called Great Reset, in the verge of the obvious weakness of the petro-dollar fiat system and the surge of other superpowers.
Facing the increasing inability to go over there stealing what of value other nations have, the US regime have just probably decided to plunder its own population, some WS sharks included, so as to keep alive, while still is possible, what keeps enforcing its power to steal around the world, the US military….
‘Russia’s gold reserves passed its dollar reserves for the first time reaching a sum of $583 billion’
Those are total reserves, including Dollars, Euros, and Yuan. Gold is ~ $120B.
Here is some important financial history of gold by the late Willard Cantelon:
“And in underground vaults five stories below Wall Street reside more than a hundred thousand gold bars worth well over a billion dollars. But though this gold is on American soil, it is not ours. It bears the stamps of the central banks of any one of seventy foreign countries. But in spite of the physical guard placed on the gold at Fort Knox and in the sub-basements of the New York banks, America’s gold steadily drained away. If the gold could speak, it might impart quite a story of the miles it had traveled from country to country and from one hand to another. dt the height of her power, Britain took muchof the gold from the Spanish. The Spanish took it from the colonies that they invaded. At the close of World War I, when the leaders of the Western world met in the beautiful Hall of Mirrors to sign the Treaty of Versailles, Germany was compelled to deliver up all the gold she possessed in the Reich Bank of the nation. It would not be long, however, before much of America’s gold would move back again to Germany and to western Europe. In 1934, when legislation was passed prohibiting the American public from owning gold currency, the door was left wide open to the foreign holders of American dollars to claim gold in exchange for their paper. But even before this international stage was set, Representative Louis T.McFadden (R-Pa.), Chairman of the Committee on Banking and Currency, made statements on June 10 of 1932 which indicated America’s gold was already moving backto Europe. His statements were recorded in the Congressional Record and pages 140-174 in H. S. Kenan’s book entitled The Federal Reserve Bank. Representative McFadden speaks of those on the other side of the water
with a strong banking “fence getting the currency of the Federal Reserve Banks-exchanging that currency for
gold and transmitting the gold to the foreign confederates.”
McFadden named the dates on which America’s gold was shipped to Germany:
On April 27, 1932, $750 thousand in gold was sent to Germany. One week later another $300 thousand in gold was shipped to Germany the same way. In the middle of May of that year, $12 million in gold was shipped to Germany… . Almost every week there was a shipment of gold to Germany-these shipments are not made for profit.
Representative McFadden referred also to the comments of Senator Elihu Root:
Long before we wake up from our dreams of prosperity through an inflated currency, our gold which could
have kept us from catastrophe will have vanished, and no rate of interest will tempt it to return. In his report to Congress, Louis McFadden asked the question, Why should our depositors and our government be
forced to flnance the munition factories of Germanv and Soviet Russia?
Representative McFadden continued,
Gold was taken from the entrusting American people and was sent to Europe. In the last several months
$1,300,000,000 in gold has been sent to Europe every dollar of that gold once belonged to the people of United States and was unlawfully taken from them. As I weighed the words of Louis McFadden and other
Iawmakers, I also witnessed the fantastic scene of America’s vanishing gold. The record was unbelievable:
1949 – $24,500,000,000
1958 – $21 ,593,000,000
1959 – $20,478,483,000
1960- $19,420,997,000
196l – $ 17,667,587,000
1962-$15,997 ,647,000
1965 – $ 13,733,000,000
On and on the gold drain went, unabated. Then came the crisis in the spring of 1968. We were living in Europe at that particular time. On March 14, hysterical crowds of people crowded, screamed, and scrambled their ways to the windows of the banks of England, and to the bank windows of the sub-basements of Paris to exchange their paper for gold. On one single day, the crude and the cultured, the peer and the peasant, carried off 200 tons of the precious metal. They stored it in secret places of their homes and
deposited it in various banks in strongboxes labeled with fictitious names. On that day Senator Everett Dirksen in conversation with Secretary of the Treasury Fowler, William McChesney Martin, and a dozen other senators said,
We have reached the bottom of the barrel.
It seemed like only yesterday when I spoke on monetary matters when America had $26 billion in gold in her treasuries. By June 30 of 1971, it had been reduced to $10.5 billion.
Inflation
Why did the people of Europe and Britain crowd hysterically into their banks on March 14,1968,to exchange $240 million in paper for 200 tons of gold? They could not eat their gold for food. They could not wear it for clothes. It was too heavy to carry on the streets as a legal tender or medium of exchange. Why did they prefer to have the precious metal in place of their paper money? The answer was extremely clear. They were afraid that their paper would be canceled with the stroke of a legislative pen. It would be as worthless as the German marks of 1923 when it took a wheelbarrow load to buy a simple sandwich or hot dog. The average man knew his paper money was becoming of less and less value. Americans could recall 1937 when $30 a month would put food on the table for a family of four. By 1947, the same food would cost $43. By 1957, it would cost $72. Then $100, and inflation continued unchecked.The British, too, looked at their paper with its diminishing value. The record was indeed far from encouraging. The monetary facts offered little hope for the survival of their paper. In 1930, the official value of the pound was $4.86. In 1952, $2.82; in 1967, $2.40. In May of 1973 on the streets of Tokyo, I stared with incredulity at the spectre of inflation in Japan. Ground beef
that was selling in October for $1.40 per pound was now $2.87; orange juice was over $3.00 per glass; steak, $ 16.00 per pound. In less than a year the price of real estate had doubled, and wool had tripled. Hashimoto, Secretary General of the ruling Liberal Democratic Party tried in vain to reason with the flnancial giants of his country. He concluded that those in a position to affect the inflation were too strong and beyond control.”
The future if one really wants to go there is one of an implantable microchip where you will be alloted your ration food and otherwise and for this privilege you will need to obey a demigod or this Valiant Thor as Paul Hellyer claimed in his docu https://paulhellyerweb.com/
Cantelon sums it up this way and note this was written early 1970’s:
“I had seen wars bring debts and rationing. I had seen certain natural circumstances contribute to the establishment of the International Monetary Fund and the World Bank. I had witnessed the computer age transform our world into IBM cards where men were filed as digits rather than people. I had viewed the skylines of the world’s leading cities, where bank buildings rose heavenward like giant cathedrals
Unbelievable, I said, as I studied these superstructures dominating the horizons of the world. Unbelievable that some of these great banking houses will be devoid of vaults. They will have no need of such, for in place of money will be only computers which carry a man’s number and determine his allowance in a world-wide ration system. Even while I thought on these truths, I was moved with the knowledge that banking houses were perfecting thenon-toxic ink with which a number could be implanted for life on man’s flesh.
The world system will be praised and promoted by brilliant men. With eloquence and apparent logic they will
persuade men that this is the path to peace and security. {Social Credit ie China?????!!!!} The world leader will rise to power with flattery and gain complete control of the military and monetary powers of all nations.”
The prophet John tells how this world leader who will have power over “all kindreds and tongues and nations”
(Rev. l3:7) will cause that as many as will not worship shall be killed. (Rev. 13:15).
And again I recalled the fantastic passage of scripture that I had repeated so many times before,
He causeth all small and great, rich and poor, free and bond, to receive a mark in their right hand or in their
foreheads: and that no man might buy or sell save he that had the mark-or the number.
(Rev. 13:16-17)
Romanov likes truth and well here one has it!
There is good money and bad money. Rich keep the good and give the bad money for the others. History of money is mostly if not almost totally counterfeiting.
A very interesting historical account of the commodities market & gold manipulation.
The current short squeeze in silver couldn’t have come at a worse time: banks are overleveraged in the midst of an economic depression and global pandemic.
Next week will be eventful…Btw, silver is not just a precious metal, it has lots of industrial uses.
I LOVE reading your articles Mr. Ister, thanks for being here.
Contrary to popular belief, the US does not have a fiat currency created by fiat or edict of the US Treasury.
The US has a privatized currency, the federal reserve note created ex nihilo by the member banks of the Federal Reserve as debt. Every time any person or corporation takes out a loan from a bank, the money is created out of thin air as a data entry on the bank’s computer. If there were no debts there would be no money in circulation.
Since the creation of the privately owned Federal Reserve in 1913 the US dollar has lost 99% of its purchasing power. This is due to the weighted average compounding of interest on all money created as debt that increases exponentially. Currently the US Treasury owes $29 trillion to private entities on which it has to pay around $750 billion on yearly interest payments. And where does this money come from ? It comes from the creation of even more money as debt by private banks.
As the principal of loans are paid off, the banks are legally required delete the money back out of existence. However, the banks get to keep the interest on the money they created out of nothing. Thus even more money must be created as debt in order to pay this interest. The rate of inflation is roughly equal to the weighted average annual interest rate.
“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
Abraham Lincoln
And then he was assassinated.
Dffb states:
“Lost in all the evidence is the most glaring truth, which is stated early and is most relevant: the strength and viability of the dollar is backed by coercive power of the US military and that of US vassals. No amount of financial chicanery, clever or otherwise, is going to be enough to defeat the Imperial system.”
We agree with your current state of US Imperialism.
HOWEVER, if you study HOW/WHY ALL imperialism comes and goes, there are ALWAYS signals and events that precedes the death of these Megaliths.
Invariably, these Empires are challenged by growing powers that keep chipping away at that armor. This has happened over & over again from ancient to modern times.
Look at what happened to the Spanish Empire, the Dutch Republic, and later the British Empire. Competition eventually destroyed them.
If China and Russia can maintain their slow walk away from US$$/Military by trading more & more with friendlier nations……………eventually, competition wins out, making it inevitable that US Supremacy shall whither and die.
Curiously – folks who specialize in this field find that for each SUCCEEDING Imperial Power, their term of power grows shorter and shorter. That is historical fact.
Actually Canada holds most of the western countries gold bars.
This may be true although reportedly, Canada has no gold reserves at all (of its own gold). Canada is the worlds 5 most productive producer of gold. As of 2016, Canada had sold most of her gold to China and even let a Chinese company take over a Canadian gold mine. Just lately though the Inuit protested another Chinese mine in Canada and Trudeau stopped the aquisition. The official reason given for liquidating the gold stock was that gold is better sold and reinvested in a wider variety of better performing instruments.
Marx makes a profound statement in Capital III: “Usury centralises money wealth.” “It does not alter the mode of production, but attaches itself to it as a parasite and makes it miserable. It sucks its blood, kills its nerve, and compels reproduction to proceed under even more disheartening conditions. … usurer’s capital does not confront the labourer as industrial capital,” but “impove-rishes this mode of production, paralyses the productive forces instead of developing them.”
The Quran (2:275) is very specific on usury / interest:
Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.
By the way Judaism has forbidden usury….but they have interpreted these laws as only to apply to lending between Jews, which is false.
Any person with a basic knowledge of the fundamentals of the economic monetary (banking) system can tell you that you cannot build a free and fair society when any of these two points are taking place:
1) the creation of money out of thin air by a group of people
2) the lending of this created money on interest and indebting of people and nations.
The concept of lending on interest….actually making money without any effort just by having money is wrong…..It makes the rich richer and the poor poorer. This is the nature of this system.
When a family loses a home to a bank, which is not even “their home” because they do not own it, this is not a fair business, this is not trade, the bank takes little to no risk. Not only the bank is to blame for this practice but also the home owners are to blame for entering into such a contract.
Such a system is the opposite of charity, it is the opposite of sharing the burden, it is the opposite of entering or starting a fair business where the person who is rich and has money will share in the risk of the poor person starting off a business. But on top of all that, banks create money out of thin air and then expect you to pay interest on the money they created and gave to you.
The creation of money in its current form FOLLOWED the system of lending on interest…..it is a natural consequence of lending on interest.
In the past money was not being printed out of thin air….it was actually first real money in the form of crops, silver, gold etc….but it was being lent on interest. Once the money lenders realized this lucrative business practice, they started printing money that they did not have out of thin air
So, where does that put all them covid stimulus checks that are being handed out? I don’t know about anyoune else, but I’m very excited about receiving my $600 + $1400.- should they ever give it to me.
I surmise I better spend it before anybody figures out it all isn’t worth a thing….
Cause and effect. Nixon’s move to de-peg the dollar from gold was the inevitable effect.
As surely as the sun rises in the morning and sets in the evening, ho-hum.
If the Rothschild et all figured out that gold (and other precious metals) had to be “fixed” due to the inevitable imbalance (is this even a surprise?) between physical quantities and issued currency notes, they surely would have figured the next upgrade required to print fiat money with impunity (it doesn’t take a genius). It’s the holy grail that bankers and megalomaniac dream of. A goal worth pursuing but would require decades of work and planning …
To cut the story short, raise up America to hegemon status and use it to print infinite money.
That’s where the Federal Reserve comes in.
The truth is, the modern dollar was never backed by oil – anyone who says it is, puts the cart before the horse. The dollar is backed by pure perception. A perception that the United States of America is the center of the world. Major economies like Japan and China are “forced” to purchase US treasury notes to balance their trades because of this perception. The fundamental basic is mind boggling stupid because it costs the USA almost zero to maintain or pay them back due to the infinite money effect, why would they even agree to this idiocy? It’s all imaginary numbers.
With tightly intertwined economies, it becomes 100x easier for America to dictate terms as de-coupling will be painful to the unprepared. So, for example, if America tells China/Japan to only purchase oil in US dollars – they will most likely comply to avoid any sort of painful de-coupling. Getting back to oil, the KSA et all won’t be able to sell anything if enough customers demand a different payment method. However, they will be forced to accommodate to customer’s demand if given little reason to hold out.
The dollar will see its inevitable demise as perception evaporates day by day, re-pegged to something else. What would that be Mr. Holmes?
In conclusion, the rats would either have to defend the dollar or abandon it for a new currency where they have the same amount of control and ability to print infinite money. The latter is harder (but likely not impossible) in a multi-polar society, while the former is an uphill task because they’ve already screwed the pooch (it’s dying in ICU). Whatever their next schemes, being in control of the money supply isn’t the same as being able to print infinite money.
Domestically the privatized US dollar is the only legal tender within the US economy, and is also backed by the US taxpayers, who must pay their taxes exclusively in US dollars. The federal income tax was introduced in 1913 at the same time that the Federal Reserve Bank was created by Act of Congress. This was not a coincidence.
Internationally, the US dollar is backed by the International Monetary Fund and the World Bank, and the computerized SWIFT money transfer system, but when a country decides to abandon the US dollar entirely for international trade, the US military is called into action to bomb said countries back to the stone age, notably Iraq and Libya.
Ista and fellow Cafeistas
Great article!…it was inspirational to me to endeavour to explore some of these points further and to try to do so with a distinctly southern hemisphere if somewhat agricultural perspective…
Title…A PONZI SCHEME MASSKERADING AS A COUNTRY?
Yes indeed, the list of “Wall Street Fears” is as long as it is daunting…I will list some random thoughts that spring to mind. In essence, I see the whole US financial debacle as resembling a hyperactive cat chasing its own tail as it plummets over a large cliff.
#1 Whilst the US Govt deludes itself that annual inflation is 1.4% for the twelve months ended December 2020, it uses all manner of mathematical chicanery to comes up with this is an absurdly inaccurate fairy tale. John Williams calculates real inflation at around 9% and the Chapwood index… https://chapwoodindex.com/… estimates it at around 10%…what’s more, it has been in this realm since 2010! This poses an enormous problem for savers and pension schemes to survive.
#2 The US also had a huge debt/GDP ratio levels at the end of WW2. Da FED addressed that problem with what they called yield curve control…i.e. putting a cap on interest rates by aggressively buying treasury bonds and immediately driving the rates back down again. In doing this they can actually inflate away some of their existing debt. But the corollary is that in doing so they create a huge problem with real [inflation adjusted] interest rates.
#3 Foreigners currently hold in the region of $27 trillion $US denominated financial assets and bank deposits in these overweight US dollars. This is a large exposure [indeed this figure is more than US GDP] but the 10-year interest rate is only 1 -1.1% so this creates a problem. Great for the US who want to inflate away debt [read technically default on debt] but not quite so flash for whoever has bought this debt.
#4 So in essence what has the FED been up to…that’s right, they have institutionalized sharply negative [real] interest rates. And the unsolvable problem of what in essence is a giant sovereign Ponzi scheme exposes itself…how do you taper a Ponzi scheme…slight problem! At the same time, they cannot allow base interest rates to rise because almost all debt including Govt debt simply wouldn’t be serviceable.
#5 Ergo… problems for overseas holders of US$s! They need a certain amount simply to facilitate trade deals, although wisely some countries are finding other ways to trade partly because they know the intrinsic value of the US$ is rapidly evaporating, but also because Warshington was foolish enough to weaponize their Reserve currency [surprise surprise…want don’t they try to weaponise]. The combined effect is rapid erosion of the US$ reserve currency status and usage. = huge looming problems for the US maintaining its hegemonic behaviour. The extraordinary 70-year privilege of their foreign escapades being effectively bankrolled by their overwhelming Reserve currency status is now going up in smoke. So too the farcical situation where the US’s ‘enemies’ unwittingly actually financed attacks on themselves whenever they purchased this debt.
#6 So how do these countries then dump all of these dollars onto the world market without creating huge turmoil themselves. When they convert them to their own currencies this doesn’t solve the massive real interest rate problem either, because their currencies are fiat too just as their CB and interbank rates are also near zero.
#7 So what else can they do with these dollars since bond market returns are effectively farcical and the world equity markets is a huge and dangerous ticking time bomb. What other avenues does this leave them then to reinvest in…let’s see real estate, cryptos, and PMs are the obvious ones?
#8 Ergo… if too many of these redirected dollars go into gold and silver this then further threatens the US$ value which then in theory erodes US debt… BUT, in turn, this would then drive the costs of US imports up so much it would cripple the economy anyway!
#9 The enormous fibber that da FED spins that they seriously seek to normalize their balance sheet…bollocks…you cannot taper a Ponzi scheme and if they even attempt to, it would kill the economy almost overnight.
#10 And the other great fib that da FED intended to normalize interest rates and help retirees who try to live off savings…total bollocks to that too. Even if rates went up to 7% [completely unfeasible anyway] the retiree would still have real interest rates of negative 2-3% anyway [ 9 – 10% true inflation minus 7% = negative 2 or 3%]
#11 So, da FED is currently buying around $80 billion [that’s spelled with a B] treasuries every month, yep good old QE, it hasn’t gone away…indeed it is actually pretty close to $1 trillion [with a T] per year. Add in another large dose of $40 billion monthly in mortgage-backed security purchases [which is how they manipulate mortgage rates down] and QE comes to a mind-numbing $120 billion per month… or almost $1.5 trillion annualized. Hmmm…so much for the noble but incoherent intention of tapering then. At the moment they seem to be focusing on the short end treasuries…bills with maturities of 12 months or less…and notes with maturities of 5 years and less. Word on the street though is that they will shortly be looking at the long end stuff as well… 5-7 and even 20-30 year maturities… by all accounts, the sky is the limit!
#12 So it is now looking like da FED will limit hikes in 10-year treasuries by indicating they will be in the market buying. If this threat doesn’t work, they might even use the old post WW2 strategy where they officially capped rates. If this was done at around 1.5% and nominal inflation was 3.5% then the indicated rate is minus 2%. Who on earth would want to lock in this sort of negative return?
#13 = Huuuuge problem for global institutional portfolios since 10-year treasuries are an integral cornerstone to them = huge problem, and more than likely terminal, for the entire global financial system.
#14 When real yields are locked in, this pushes up gold/silver prices…as the old saying goes… runaway gold prices are the US$s enemy. Great for inflating away debt but HTF do you run a ravenous country like this with some $2.6 trillion imports [17% of the global trade].
= bigger deficits
= more debt
= bigger interest bills
= yet more rampant debt because of massive trade deficits
= technical insolvency
= bankruptcy and monumental debt default
There is no solution to this problem and no way out for da FED because they have emptied their magazine of all live rounds. There will never be any solution for the US simply because the FED CB model is completely dysfunctional. It’s as simple as that.
Regards and many thanks to The Ista et al
Col
Digging up gold and then burying it again in bank faults is an exercise in futility, since its industrial uses are few and far between. As far as banking goes, it is an atavistic anachronism that is five hundred years out of date. Fractional reserve banking originated with gold merchants, who offered safe storage of people’s gold, who then printed up gold certificates that could be used for trading goods without the need for cumbersome transport of bullion from one place to another. The cunning gold merchants then discovered that they could print up more gold certificates than they had gold in their vaults. That was the birth of fractional reserve banking. The fiction of gold backing currencies has been used to convince a gullible public that printed money has real value tied to the price of gold, but there never was enough gold to fulfill this function. It was just a confidence trick. Of course, gold has value as a commodity that in many ways is an indicator of the rate of inflation of any given currency over time.
Wall Street is only symptomatic of the Anglo-American dominated Ponzi Scheme, which masquerades as the Western financial system.
Back in the Fall of 2019, Wall Street was in major panic mode as the speculative bubble that underlies the entire US financial market was ready to implode again (ala 2008), until the Federal Reserve swooped in to prop up the market with massive infusions of liquidity.
Now, the Wall Street bubble has grown ever more ginormous and promises to be even more cataclysmic in its impact when it finally blows–imploding the economies of America and its closest crime partners, especially the Anglo nations like Canada, United Kingdom, Australia, and New Zealand.
Picture a black hole in outer space collapsing in on itself, when you think of the Anglo-American economies.
The Saker talks about the world being decoupled into a Zone A (the Anglosphere, West, and vassals who seek to maintain their unipolar rule over the world) vs. Zone B (Eurasia who advance a multipolar vision of the world).
This bifurcation has an economic and political dimension, which Michael Hudson’s article touches upon here:
“But this multipolar world is split between, let’s say, finance capitalism and everybody else, because the West, the developed west, wants financial capitalism, doesn’t understand that it’s sowing the seeds of its own demise. Just elaborate on this a little bit – the West and financial capitalism versus growth economies that create real value.
Michael Hudson Well, that’s exactly what’s happening. Countries are beginning to say no to the US demands that they neoliberalize their economies and follow the Washington consensus. So you’re going to have China, Russia and the Shanghai Cooperation Organization nations essentially going their own way, de-dollarizing and creating their own economy on non-neoliberal lines, as opposed to the United States. In United States, there’s going to be a lot of people losing their status. And when people lose their status and they’re impoverished, that’s the breeding ground for fascism.”
Multipolarity and Financial Capitalism
https://michael-hudson.com/2021/01/multipolarity-and-financial-capitalism/
Paul Volcker wasn’t chair of the Federal Reserve in 1971. He was under secretary of Treasury at the time. Carter appointed him to the Fed post in August, 1979.
Paul Volcker raised the interbank lending rate to 20% in March 1980 and crashed the US industrial economy. The unemployment rate went to over 10%
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
– Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
Woodrow Wilson Quote. … President Wilson later came to regret signing the bill: “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit.”
This is what happens when you put academics in power. They have no experience, and they learn by their mistakes too late. The deep state put Wilson in office, because Taft, being a practical man, would have never done this.