Hi,
This post deals with Pirates who no longer operate on the high seas but have moved inland to financial markets where they are a TRILLION times more dangerous! The pirates still seek the same precious metals as heretofore but have found an easier way to plunder. The name OF THE GAME is GOLD DERIVATIVES.
A post on the Gold wars may give a more complete insight into how important Gold really is. The latest directive of Red China is a loosening of restrictions on gold buying by its citizens both in coins and jewelry. The reason seems to be that it will put more pressure on the American economy. Clever these Chinese!
Ludwig von Mises said "Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless." and he said that in the 1920s before gold had been removed as the standard of value.
Gold's history in this country goes back to the Constitution's section 8 "The Congress shall have power...to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures." Giving Congress that responsibility was probably not their wisest move if we judge the collective wisdom of that August body by their latest actions ignoring the voters on health care. And we have to assume their ignorance of Gold depravities.
However, in those days the CONGRESS believed it REPRESENTED THE PEOPLE so in 1792 they did exactly that. They fixed a rate of 0.5156 troy ounces of Gold to the dollar but in 1837 they reworked it and the dollar was redefined at one ounce of Gold for $20.67 dollars and it remained the fixed value for 96 years until 1933. The dollar at that time was devalued to $35. for a troy ounce of gold.
Now, here's where China's knowledge of our history with gold comes in handy. By the 1960's $35. an ounce for gold became difficult to sustain. Gold demand rose and US gold reserves fell because of trade deficits. John F. Kennedy's treasury undersecretary combated this situation by pooling the US and Europe's gold reserves to keep gold at $35. an ounce and formed the "London Gold Pool" with eight European countries.
However France's President Charles De Gaulle reneged and demanded the dollars that had been paid him for exports be replaced with gold under legal entitlement. So much for helping them out of a jam in World War 2. He caused an acute drain on gold and the pool folded but the demand for US gold did not abate. So a series of other measures were taken until 1981 when gold was abandoned by investors to have dollars.
China does not at present have much in-ground gold for mining. China's desire for Tibet and a railroad route to the high Himalayas presages a future of mining gold and other metals and minerals in that rich mountain territory. That's why the Dalai Lama can't get his land and his home back in Tibet!!
China's gold reserves are not presently as great as ours. We are at present in great debt to China. What happens when their citizens get GOLD FEVER as the government is gambling they will and China's reserves run low so she needs more gold for balance??????
You don't suppose Red China will demand we pay her in gold, do ya???? A cash demand no longer under legal entitlement but possible with a US President who bows to the Communist Chairman. Or is China hoping to burst the GOLD BUBBLE caused by DERIVATIVES that I explain later in this post? Would that big, really ancient country that feels it deserves to be the major world power do that to the good old USA?
IN A HEARTBEAT!!!!
Of course, the USA has not been above similar maneuvering. Richard Nixon, in the 1970's, faced with either eliminating trade deficits or valuing the dollar downwards against gold, did neither. He reneged on the international obligation of the US to redeem its dollar in gold just as FDR had repudiated the domestic obligation in the 1930's.
The last link between the dollar and gold was gone with Nixon's action and the world's currencies "floated" into 1974. Gold went from $35. to $195. an ounce. Recall that I told you in the last posts that Gold is now over $1100. an ounce.
In 1975 US citizens were allowed to buy gold again with no bargains at $195. an ounce. Large sales by the treasury and other central banks drove the price down to $103. with loss to the citizenry.
The imbalances were not resolved although gold auctions were tried to attempt to hold down the price. They were a failure because the demand for gold became overwhelming. Gold returned to $195. and by 1979 was $300. an ounce.
By this time Jimmy Carter, the Georgia Peanut King, was President and appointed Paul Volcker late in 1979 as Federal Finance Chairman. Gold went up to $400. by October. Volker went to a conference in Belgrade thereafter where the participating countries decided the global financial system was about to collapse. Volker returned and announced that instead of controlling interest rates, it would control money supply. Gold had soared to $850. by early 1980 after a great rush of gold buying.
Also early in 1980 US interest rates soared, the dollar stopped falling and began to rise. The gold buyers were coaxed back into dollars by the interest rates and the rising dollar and a major financial melt down was averted.
Unfortunately the prime rate reached 20% and stayed high until 1982 when gold after dropping to $296., took off and rose to $510 by 1993 then began falling to $410.
THE GOLDEN HORDE RIDES AGAIN (an allusion to the khanate (overlords) in Russia in the 13Th-15Th Century) from this point forward into the clever pirating of GOLD by the use of derivatives.
A DERIVATIVE is a contract between two parties based on and linked to an agreed and recognized asset's future price movements as security with the range of said contract limited only by the ingenuity of the traders. As long as derivative buying and selling is like the old HANDSHAKE agreements used to be, that is based on honor and honesty; it works.
Read that very carefully because this next part describes LEGAL??? pirating.
The birth of the DERIVATIVE MARKET IN GOLD followed and it makes HEDGE FUNDS look like milk and cookies. This a real WHISKY GAMBLE.
All this maneuvering openly over gold was becoming a problem so it was decided to go underground to fight for gold. And thus GOLD DERIVATIVES were born (ie: a security whose value derives from the value of something else) and developed in the currency, and spread into the equity as well as gold markets.
They provided leverage for more aggressive trading (WHERE THE PIRATES HANG OUT) and a method to expand the amount of money in circulation without expanding the "money supply". Inflation slowed. More lovely ORIGAMI PAPER traded ON PAPER.
As a consequence another the more frightening DERIVATIVE GOLD STRATEGY was named FORWARD SELLING by Gold Mining Companies. By 1990 gold companies world-wide but mainly in Australia were selling many years worth of PROJECTED GOLD PRODUCTION. Paper promises for gold to be mined.
This Gold Mine paper allowed the Bullion dealer to sell gold immediately by borrowing from the world's central bank, who had a GOLD hoard. He paid a SPOT GOLD LEASE RATE (an extremely low rate of interest based on the SPOT PRICE OF GOLD) and provided the GOLD or (paper again)a CLAIM to Gold to the buyer and invested that money. The difference of the SPOT and FORWARD determined the FORWARD PRICE for gold. The forward price is the interest rate minus the lease rate paid for the gold. So far, so good BUT..........
The figure for the sale of GOLD OPTIONS (DERIVATIVES) reached in 2009 was 30,000 tonnes (according to Market Skeptics on the net "More about the OTC Gold Derivative Market")--that is more than the WORLD'S TOTAL OFFICIAL GOLD RESERVES. . . in retail that's called understocked and oversold and often considered FRAUD.....Ouch!!!!!!!!! If a run on the metal stuff begins -POP -POP - POP and we all go DOWN - DOWN -DOWN.
Start digging GOLD in the mines boys!!!!!! Time's a wasting!! This bubble is set to burst all over the gold mining grounds. The PIRATES OF FINANCE found in the hedge (funds) recently have also been hauling gold. Get a move on before we have a real catastrophe because China is waiting patiently for our bubble to burst.
Cheers, Connie
This post deals with Pirates who no longer operate on the high seas but have moved inland to financial markets where they are a TRILLION times more dangerous! The pirates still seek the same precious metals as heretofore but have found an easier way to plunder. The name OF THE GAME is GOLD DERIVATIVES.
A post on the Gold wars may give a more complete insight into how important Gold really is. The latest directive of Red China is a loosening of restrictions on gold buying by its citizens both in coins and jewelry. The reason seems to be that it will put more pressure on the American economy. Clever these Chinese!
Ludwig von Mises said "Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless." and he said that in the 1920s before gold had been removed as the standard of value.
Gold's history in this country goes back to the Constitution's section 8 "The Congress shall have power...to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures." Giving Congress that responsibility was probably not their wisest move if we judge the collective wisdom of that August body by their latest actions ignoring the voters on health care. And we have to assume their ignorance of Gold depravities.
However, in those days the CONGRESS believed it REPRESENTED THE PEOPLE so in 1792 they did exactly that. They fixed a rate of 0.5156 troy ounces of Gold to the dollar but in 1837 they reworked it and the dollar was redefined at one ounce of Gold for $20.67 dollars and it remained the fixed value for 96 years until 1933. The dollar at that time was devalued to $35. for a troy ounce of gold.
Now, here's where China's knowledge of our history with gold comes in handy. By the 1960's $35. an ounce for gold became difficult to sustain. Gold demand rose and US gold reserves fell because of trade deficits. John F. Kennedy's treasury undersecretary combated this situation by pooling the US and Europe's gold reserves to keep gold at $35. an ounce and formed the "London Gold Pool" with eight European countries.
However France's President Charles De Gaulle reneged and demanded the dollars that had been paid him for exports be replaced with gold under legal entitlement. So much for helping them out of a jam in World War 2. He caused an acute drain on gold and the pool folded but the demand for US gold did not abate. So a series of other measures were taken until 1981 when gold was abandoned by investors to have dollars.
China does not at present have much in-ground gold for mining. China's desire for Tibet and a railroad route to the high Himalayas presages a future of mining gold and other metals and minerals in that rich mountain territory. That's why the Dalai Lama can't get his land and his home back in Tibet!!
China's gold reserves are not presently as great as ours. We are at present in great debt to China. What happens when their citizens get GOLD FEVER as the government is gambling they will and China's reserves run low so she needs more gold for balance??????
You don't suppose Red China will demand we pay her in gold, do ya???? A cash demand no longer under legal entitlement but possible with a US President who bows to the Communist Chairman. Or is China hoping to burst the GOLD BUBBLE caused by DERIVATIVES that I explain later in this post? Would that big, really ancient country that feels it deserves to be the major world power do that to the good old USA?
IN A HEARTBEAT!!!!
Of course, the USA has not been above similar maneuvering. Richard Nixon, in the 1970's, faced with either eliminating trade deficits or valuing the dollar downwards against gold, did neither. He reneged on the international obligation of the US to redeem its dollar in gold just as FDR had repudiated the domestic obligation in the 1930's.
The last link between the dollar and gold was gone with Nixon's action and the world's currencies "floated" into 1974. Gold went from $35. to $195. an ounce. Recall that I told you in the last posts that Gold is now over $1100. an ounce.
In 1975 US citizens were allowed to buy gold again with no bargains at $195. an ounce. Large sales by the treasury and other central banks drove the price down to $103. with loss to the citizenry.
The imbalances were not resolved although gold auctions were tried to attempt to hold down the price. They were a failure because the demand for gold became overwhelming. Gold returned to $195. and by 1979 was $300. an ounce.
By this time Jimmy Carter, the Georgia Peanut King, was President and appointed Paul Volcker late in 1979 as Federal Finance Chairman. Gold went up to $400. by October. Volker went to a conference in Belgrade thereafter where the participating countries decided the global financial system was about to collapse. Volker returned and announced that instead of controlling interest rates, it would control money supply. Gold had soared to $850. by early 1980 after a great rush of gold buying.
Also early in 1980 US interest rates soared, the dollar stopped falling and began to rise. The gold buyers were coaxed back into dollars by the interest rates and the rising dollar and a major financial melt down was averted.
Unfortunately the prime rate reached 20% and stayed high until 1982 when gold after dropping to $296., took off and rose to $510 by 1993 then began falling to $410.
THE GOLDEN HORDE RIDES AGAIN (an allusion to the khanate (overlords) in Russia in the 13Th-15Th Century) from this point forward into the clever pirating of GOLD by the use of derivatives.
A DERIVATIVE is a contract between two parties based on and linked to an agreed and recognized asset's future price movements as security with the range of said contract limited only by the ingenuity of the traders. As long as derivative buying and selling is like the old HANDSHAKE agreements used to be, that is based on honor and honesty; it works.
Read that very carefully because this next part describes LEGAL??? pirating.
The birth of the DERIVATIVE MARKET IN GOLD followed and it makes HEDGE FUNDS look like milk and cookies. This a real WHISKY GAMBLE.
All this maneuvering openly over gold was becoming a problem so it was decided to go underground to fight for gold. And thus GOLD DERIVATIVES were born (ie: a security whose value derives from the value of something else) and developed in the currency, and spread into the equity as well as gold markets.
They provided leverage for more aggressive trading (WHERE THE PIRATES HANG OUT) and a method to expand the amount of money in circulation without expanding the "money supply". Inflation slowed. More lovely ORIGAMI PAPER traded ON PAPER.
As a consequence another the more frightening DERIVATIVE GOLD STRATEGY was named FORWARD SELLING by Gold Mining Companies. By 1990 gold companies world-wide but mainly in Australia were selling many years worth of PROJECTED GOLD PRODUCTION. Paper promises for gold to be mined.
This Gold Mine paper allowed the Bullion dealer to sell gold immediately by borrowing from the world's central bank, who had a GOLD hoard. He paid a SPOT GOLD LEASE RATE (an extremely low rate of interest based on the SPOT PRICE OF GOLD) and provided the GOLD or (paper again)a CLAIM to Gold to the buyer and invested that money. The difference of the SPOT and FORWARD determined the FORWARD PRICE for gold. The forward price is the interest rate minus the lease rate paid for the gold. So far, so good BUT..........
The figure for the sale of GOLD OPTIONS (DERIVATIVES) reached in 2009 was 30,000 tonnes (according to Market Skeptics on the net "More about the OTC Gold Derivative Market")--that is more than the WORLD'S TOTAL OFFICIAL GOLD RESERVES. . . in retail that's called understocked and oversold and often considered FRAUD.....Ouch!!!!!!!!! If a run on the metal stuff begins -POP -POP - POP and we all go DOWN - DOWN -DOWN.
Start digging GOLD in the mines boys!!!!!! Time's a wasting!! This bubble is set to burst all over the gold mining grounds. The PIRATES OF FINANCE found in the hedge (funds) recently have also been hauling gold. Get a move on before we have a real catastrophe because China is waiting patiently for our bubble to burst.
Cheers, Connie
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