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Gold Crisis

By: Michael L. Wilson


-- Posted Tuesday, 8 April 2003 | Digg This ArticleDigg It!

The alleged manipulation of the International gold price is not a simple matter that the economist, the individual investor, or the hard working American citizen should take lightly. The average American remains rather naive when it comes to his or her savings and investing. Most believe that the dollars they work hard to earn today will be able to send little Johnny or Suzy to college tomorrow. For the last decade or so the American stock market has been a financial zenith for those who saw the signs and were willing to take the plunge. For the rest of us a savings account and a few bonds here and there did the trick. We were not interested in speculation, nor were we too keen or inspired with the fact that money could be made so quickly and seemingly so easily. We are the ones who put in 8,10, and 12-hour shifts. We are the ones that attend the universities. We are the ones where capital preservation weighs more heavily than abeyant speculation.

We are concerned with simply the security and preservation of our capital, so we would be able to send Suzy to college or save for that rainy day.

If you ask the average American what the difference is between money and currency they will stare at you with bewilderment and answer with a question "Aren’t they the same thing"? Allow me to explain what I believe could possibly be the nail in the coffin of the U.S. and the collective global economy if the average Joe’s and Jane’s, you and I, don’t start asking the important questions and getting some honest answers and soon.

As dollars begin to be dishoarded by those countries that use them as a hedge against their currencies, the U.S. economy suffers. No one hears in U.S. news that these countries have begun to dishoard their dollar reserves and invested elsewhere. These countries are becoming keenly aware of what is being done collusively to cook the books and report abysmal numbers here in is this country. The average Joe goes to work, pays his mortgage, and puts the rest into a savings account. Even though the long term worth of that savings account is rather questionable knowing that current intrest rates barely cover the rate of dollar depreciation. Today, having a savings account and not hedging it with something of intrinsic value, virtually guarantees the eventual depreciation of your purchasing power in a fiat world. Common sense is never putting all of your eggs in one basket, I fear many do. Please allow me to illustrate in the following paragraphs the current and ongoing "economic war" that is being staged behind the war on terrorism. This war is the war on gold and it’s followers. This is a war against the independant thinkers and those who have studied the histories and realize the consequences of irrationality. This is about what came before and what will eventually come after. This is the Unparalleled Standard.

The Unparalleled Standard

Carefully hidden, guillotined gold sheets, coins, plates, and ingots have been many times in history the difference between life and death, war and peace, poverty and prosperity. To the bride in Calcutta, gold is the pith of independence and security in the midst of an uncertain marriage, a financial, economic, or natural disaster. Handcrafted 22 Karat bangles, necklaces, or 10 tola bars minted in Zurich and sometimes illegally smuggled in from Dubai, are handed down from generation to generation remaining unchanged for millennia. To the diligent African farmer, pure gold beads and baubles allow him or her to save in something other than the local currency, which in many an African country, has a history of crumbling with each new political assemblage. The European has always relied many times only on gold. The English having a defacto gold standard beginning in 1717 and a full legal standard from 1821. The French and their franc, the Portuguese and their escudo, the Dutch and their guilder. All originally some of the most powerful and globally accepted gold coins now turned paper. Those who were able to put away gold and silver coins during the German hyper inflation following World War I, came out ahead and maintained not only their purchasing power but the preservation of their wealth.

In more modern times, it was the independent Japanese citizen who removed more than 64,000 ounces of gold from the world markets due to many unsuccessful attempts by the Japanese government to "re-inflate" it’s economy. Gold is financial independence in the hands of any and all that realize and understand that 6,000 years of immutable credibility cannot be refuted by any measure we would care to even consider.

The historical precedent teaches us that every civilization in history that terminated it’s gold or bimetallic system or standard (i.e. gold and silver backing), and allowed fiat money to become the basis of commerce, disintegrated over time just like the fibrous paper in circulation today. Usually only resuming the honest system after an economic catastrophe has occurred. Fiat "money" always depreciates into what it is essentially worth. Pesos, Dollars, Euros, and Yen might as well be sanitary toilettes, if they are only backed by the sheer human faith in the issuing government to remain honest.

There is much ingenuity, sweat, and capital that go into the production of this essential element. Wall Street financial advisors have foolishly claimed gold to be a "barbaric relic" from the past that has no future as a monetary store of value. Analysts have been widely known to sway investors away from gold and into paper assets paying them bigger commissions. Usually they claim that the latter classes of investments are at an all time low and they can only go up. People these days will say anything to get paid. Current ratios show that the U.S. stock market is no where near the bottom, yet investors continually pour in hoping for that rebound. Gold is a commodity that has been in a 20-year depression. It is an element that is essential to many facets of modern life and in many areas irreplaceable. Gold is currently facing an increasing supply/demand shortfall and is being artificially suppressed by entities that trade in more paper than Charmin. Based on these factors alone it would not be too far fetched to conclude that gold is heading toward an explosion in its market price if and when the derivative situation is halted.

Gold and silver have been the ONLY universal forms of money that are accepted anywhere and without qualm, from Finland to Sudan, São Paulo to Moscow, the yellow gleam of gold is deeply imbedded into the human psyche. It is the governments that seem to have the averted taste toward gold. Gold forces governments to be honest, accountable, and reciprocal. Gold limits their ability to just print and spend, forever bludgeoning themselves into debt behind the facade of "expanding" credit for its citizens. Congressman Ron Paul himself stated that "monetary inflation is a hidden tax levied more on the poor and those on fixed incomes than the wealthy, the bankers, or the corporations". Even the peon knows that the more you have of anything the less it will be worth.

Gold can be melted, dissolved in highly corrosive mixtures of acids, buried, eaten and bowelled out, recovered from ocean depths, and still has value. One well known 18th dynasty Egyptian pharaoh, was buried in a solid gold coffin weighing 225 lbs., the value of the gold alone is $1,296,000 based on a market price of $360. The same gold buried today will be here 100, 1 000, 10 000, 100 000 years from now and will still be valuable. History has proven this fact. One cannot say the same for the 1924 deutsche mark, the 1920 dollar, or the 1995 peso.

The history behind and of, the Great German inflation, the cancellation of the U.S. gold backing, or the Great Mexican Depression has been ingrained into the psyches of those who lived through it and forever recorded into the histories. History will continually recapitulate itself because people do not learn from past mistakes. The people remember but learning seems to be the challenge of the politicians and governments.

Gold has a history that spans across the entire scope of human existence. The first metal known, forged, and implemented by mankind was gold, not copper. Cherished by thousands of cultures as a gift from the heavens, a transportable means of wealth, and most importantly an accurate barometer by which everything else is measured. Gold is the oldest word in the English language still in continuous use today. The most referred to element in the bible. The most sought after commodity throughout history after food, shelter, and land was gold. If it were not for gold’s existence, the daily items that we take for granted could not have been conceived.

It is with this sunny yellow metal that we are able to have computers, and dependable circuitry for electronic equipment. It is gold’s superb reflectivity of infrared rays that allow us to have UV protected sunglasses, hand held lasers for surgical procedures, or solar energy panels that provide environmentally friendly electricity. It is due to gold’s unchallenged malleability, ductility, and electrical conductivity that we are able to have microchips that get smaller and faster year by year. The same aforementioned properties make nanotechnology a viable possibility. Non-heat dependent catalytic converters, controlled radiation dispersal through cancer-fighting implants, safety airbags, effective heat dissipation of aircraft engine alloys, food-freshness sensors, digital data storage, satellites and telecommunications equipment, high temperature laboratory thermometers, permanent and semi-permanent dental partials. The windows of office buildings are coated with a microscopically thin layer of gold that reflects 92% of infrared heat, cutting energy costs by 40%. Defrost systems for car windows, Ayurvedic medicine, surgical implants, chemical catalysts, and chances are that your stereo equipment has gold plated contacts allowing for the free flow of electrons providing the best sound quality. The stuff even protects Air-Force One, which is equipped with goldplated reflectors. These reflectors confuse an incoming missile's heat-seeking signal, making it difficult for a missile's guidance systems to focus on their target.

Free Market Manipulation

It seems that even in this age of BA’s, MA’s, and Ph.D’s the general populace still does not seem understand much about such an integral part that gold plays in world commerce. Why has the U.S. dollar has lost 95% of its purchasing power since 1930? Most do not even know what a "Dollar" actually is, as defined by the US constitution, which dictates that "No State shall make anything but gold and silver coin a tender of payment of debts". Unfortunately, the Founders of this nation wrote "states" rather than "federal government," and the consequence of that unforeseen error has allowed our federal government to produce ever more worthless "money." Look at history for the legacy that fiat money has left for modernity to learn from. Rome, Germany, and more recently Argentina and Japan, what is next? Brazil is teetering, and the US is well on its way if the only thing the geniuses in office can do is fill American heads with propaganda and talks of war. The IMF can only do so much to stave off economic disasters, and even they are handing out more monopoly money.

You must know and understand the history of your money, you should know that the bills that you carry in your wallet are not money, but a currency. A currency is different from money in that a currency is simply a certificate of deposit or a ticket of redemption for a fungible tangible asset ie. gold or silver. In 1933 President Roosevelt, under a national declared state of emergency, confiscated under penalty of a $10,000 fine and imprisonment, gold coins and bars and made it illegal for Americans to own gold. A right that would not be reinstated for another 40 years. The confiscation, melting and the raising of the official gold price allowed congress to inflate the US economy and expand government. The severe consequence of that one action paved the way for the drastic year after year downward fluctuation of the dollar. Which has caused many of the economic and social problems that we are faced with today.

The history and the uses of this most precious metal is fascinating, but the recent tribulations in its market price are little more than a complete shame.

Gold has been degraded to the status of a simple commodity by the U.S. government. The U.S. government, in collusion European banks manipulate its price downward to keep vast amounts of capital out of the metals and into their currencies. This would not be such a big deal if the currencies could be redeemed for gold. The vast majority of Americans do not realize what this means for them or their families. American investors like helpless sheep are encouraged to buy while the insiders are selling. If the stock market is indeed rigged like the gold market, the effects will be devastating. The average American will loose their nest eggs that the fast talking brokers have promised them.

The reason for manipulation? According to the GATA (Gold Anti-Trust Action Committee) Suppressing the price of gold has made it a cheap source of capitol for New York bullion banks, which borrow it for as little as 1 percent of its value per annum. Gold is borrowed from the central banks and sold, the proceeds are invested in the financial markets in securities that have much greater rates of return. As long as the price of gold remains low in this "carry trade" it is a financial bonanza for the few at the expense of the many, including the gold producing countries of the world, most of which are poor. If the price of gold were allowed to rise, the effective interest rate on gold loans would become prohibitive. Suppressing the price of gold gives a false impression of the U.S. dollar’s strength as an international reserve asset and a false reading of inflation in the Unites States. In short too much gold is being consumed at too cheap a price. Massive amounts of derivatives are being used to suppress the gold price. If this situation is not corrected soon, there will be a gold derivative credit and default crisis of epic proportions that will threaten the solvency of the largest international banks and the world standing of the dollar. The longer the gold price is artificially held down, the bigger the eventual banking crises will be.

References

Browne, Harry. Author. 1974. You Can Profit from a Monetary Crisis. Macmillan

Coombs, Charles. Author. 1981. Gold & Other Precious Metals. New York: Morrow.

Eichengreen and Flandreau. Editors. 1997. The Gold Standard in Theory and History: Second Edition.

Gold Anti-Trust Action Committee. Inc. Murphy, Powell, Straud, and Feather. Gold Anti-Trust Action Committee Inc. 7 Louisa Road Manchester, Conn. 06043-7541 USA

Stott, Don. Author. 2001. Consequences: Many Times Unintended

World Gold Council, The. www.gold.org

 

Michael L. Wilson - mwils19@lsu.edu

Sophomore at Louisiana State University

 

The reader hereby has my permission to copy, print, modify or freely redistribute all or any portion of this article free of charge or permission for educational purposes. However, please email me to inform me how you have modified and/ or changed the information contained here. I am unhinged and widely open to comments, criticisms, or concerns. Please feel free to contact me with any or all questions concerning this article.


-- Posted Tuesday, 8 April 2003 | Digg This Article




 



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