Imagine what it would be like psychologically, not to mention financially for America to go to war in the midst of a depression. This past Monday, when 90% of the volume on the NYSE involved shares trading lower, you could just sense that we were very, very close to a meltdown. But like so many times since the 1987 crash a White Knight (the Plunge Protection Team) came to the rescue presumably by intervention in the market by our policy makers. At least on two occasions over the past several days of trading the PPP was apparently aided by some false rumors in the geo-political arena.
I have been very critical of manipulation in the markets by our policy makers. But I have asked myself at times, If I were in a position of power, having inherited the mess created by those who held my position before me, what would I do? Congressman Ron Paul, who understands that our fiat money system is leading to financial ruin and an increasing departure from the individual freedoms our Founding Fathers laid out for us, told me and my son Scott when we visited him last year, that as much as he would like to see us go back on a gold standard, if he were in a position to make it happen, he would not do it immediately. Why? Because the economic dislocations caused by trillions of dollars of legal counterfeit currency "printed" by the FED and used to enrich Wall Street and the parasitic activities of Democratic and Republican administrations alike, are so great that any kind of "cold turkey" change back to an honest money system, desirable as that goal might be would result in horrific economic pain. What is needed, is step by step approach back toward a gold backed currency system or at least a currency system that subjects itself to the disciplined growth of the gold supply. Otherwise, as Greenspan himself recently pointed out, without that discipline, our monetary system has become ever less stable. Jim Sinclair has some interesting ideas about how that may be accomplished. In fact he sees a return, sometime next year where a gold certificate program will be instituted that would limit the amount of money that could be created out of thin air. But before that happens Jim believes the Fed will continue inflating the money supply in an effort to overcome increasing deflationary forces.
Whether you subscribe to the grand conspiracy theories of G. Edwin Griffin, in which a few of the western world's richest families consciously put into effect a plan to systemically destroy America and western values, and thereby gain dictatorial control, of America, I will leave that up to you. But if you follow the money that has sponsored the demolition of traditional values, it leads back to the same small group of global ruling elite that has funded major foundations and think tanks that have undermined traditional American values at one time taught in the Universities and churches. An overall moral decline and increasing emphasis on a planned economy rather than the virtues of the invisible hand of free markets has been the result, if not the goal of those same families who pushed the Federal Reserve down the throats of Americans. Again, we urge you to read "The Creature from Jekyll Island" by G. Edwin Griffin for background on this issue.
But who ever or whatever forces are being used to undermine America's traditional values, the fact remains that we are in quite a fix. The focus of our letter is on markets but can anyone doubt that the demolition of family values destroys the intellectual capital and work ethics and honesty of America which in turn results in a reduced standard of living? And, having lost our respect for the "invisible hand" of markets, policy makers have increasingly meddled in the economy creating greater and greater economic dislocations. The clandestine gold rigging policies carried out by our ESF is just one very important example of how distorting one key market leads to grand distortions in other markets like the dollar, U.S. equities, and U.S. debt all of which have encouraged an exaggeration of our balance of payments problems rather than allowing equilibrium to be reestablished.
What Would You do If you Were in Charge?
The point is, given the realities of the world we live in, we have to face on what is, not so much what should be. The should be is only for the future. We have to deal with what is reality now. For what ever their motives, the boys on CNBC have done a splendid job of keeping the American people uninformed about reality. Perhaps that is because our American "Holywood" culture would rather live in a fantasy world than the real world. But the following remarks over the past couple of weeks by some of Americas most financially astute people in America believe the time for continued disguise of reality is running out or in other words, mother nature can no longer be fooled.
· Greenspan recently said the American consumer may not be counted on too much longer to keep the American economy alive and well. (No kidding!) · Michael B. O'Higgins spoke of how he was positioning his client's money in cash and gold as he plans for another Great Depression. · Warren Buffet warned of a looming financial disaster related to derivatives that he believes increases rather than decreases systemic risk for our global economy. · William Poole, President of the St. Louis Federal Reserve in effect warned about the potential insolvency of the outrageously over leveraged Fannie Mae and Freddie Mac quasi-government mortgage lenders.
Those were some rather heavy warnings coming from some of Americas "heavier lifters." So what happened once again when, for the 90th time since 1987, the markets began to look like the world was coming to and end? You got it! In stepped the Plunge Protection Team aided and abetted by one of its subsidiaries, the CIA who spread some good news, but false rumors about the capture of Bin Laden's sons and then about how the Iraqi generals were talking toe the CIA about surrendering. Bingo! The shorts ran for cover. The hedge funds sold gold and oil and all of a sudden you had the grandest reversal of America's fortunes in several months.
But again, the problem is the planting of this kind of disinformation and implementation of policies like trashing the gold price, only serves to impede the markets from carrying out their healthy function of maintaining equilibrium and stability. Make no mistake. Our government and its policy makers, having departed from free market economics have to keep telling bigger and bigger lies until the lies have become so outrageous that they can no longer be believed. Our policy makers are like Pinocchio. But, one by one, the effects on the U.S. dollar of increasingly unbalanced market positions can no longer be hidden by market intervention, because such intervention serves to worsen imbalances rather than allowing the markets to restore equilibrium. At some point, perhaps very soon, the dam will break. The outspoken comments by people like Greesnspan, Poole, Buffet and Michael B. O'Higgins, suggests we may now be very, very close to the dam breaking. Of course there have been other great minds, like Jim Rogers for example, who has been warning for quite some time of impending problems. But when those who are responsible themselves for orchestrating these imbalances start warning of doom, one can only suspect they see the ability to fool the public through market intervention is fast coming to an end. You would have to think that Mr. Greenspans and Mr. Poole for example may be posturing to avoid blame when the system breaks down, having said they gave us fair warning.
We hope we are somehow wrong about or gloomy outlook. But the intervention in markets, which were pushed more aggressively during the Clinton years and certainly on a more grand scale than by any other Administration, is the stuff of dictatorships. These policies can only end in tears because when the mechanism of supply and demand is not free to continuously bring about market equilibrium between supply and demand, problems arise which beget still more intervention which begets still more problems that beg for one more fix until a point is reached where economic freedom and thus freedom in every respect is lost!
But now, as America prepares for war and as we are entering what Ian Gordon describes as the Kondratieff winter, what is a politician to do? Imagine if the false stories of had not been planted this past week and the markets had not snapped back but begun a devastating total melt down as occurred in October 1987 before the Plunge Protection was Created. What would that do for the psychology of a country getting ready to fight a war that has virtually no global support? Still, as intervention after intervention has demonstrated in Japan, every time the government meddles, they prolong and deepen the problem by keeping the markets from functioning. By intervening, temporary relief is achieved for political ends, but each intervention prolongs rather than corrects past imbalances by obstructing the markets ability to work. Sadly, our policies are those of dictatorships not of a free people. A return to free market economics, starting with a free and honest monetary system would be so painful that even those who understand the merits of less government intervention think it is too painful to even consider. But one way or another the laws of nature will force a painful resolution. Our fear is that this President Bush will be thought of as our second Herbert Hoover of the last 100 years.
A MUST READ! "Read the Creature from Jekyll Island" By G. Edwin Griffin In our September and October issues we published a speech by G. Edward Griffin in which he provided substantial evidence that a group of rich and powerful elite, with a collectivist agenda are really in control America and its politics. We have had a considerable amount of positive feedback on those Mr. Griffin's speech and so it occurred to us, many of you may like to read his most famous work, that being his book called the Creature from Jekyll Island. This book explains how the Federal Reserve was created, by whom and what its real purpose was than and now, which is far different than the reasons for its creation as provided to you by the mainstream press. The existence of this rich and powerful group help understand why and how the gold market is manipulated. Thus I believe it is a very important work to help investors understand the incentives for various alleged market manipulations, the gold market being the one most often talked about in these pages. The Creature from Jekyll Island; A Second Look at the Federal Reserve, by G. Edward Griffin provides knowledge of how our banking system functions and how money is created out of nothing to make loans. I was blown away by the magnitude of the scam as it has evolved over the years. What a wild ride through history this is as the author reveals where money comes from, where it goes, and who makes it. The money magicians' secrets are unveiled, and you will get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Reads like a detective story - which it really is. But it's all true: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Your worldview will definitely change. This book is available on the Internet from The Reality Zone. The link is http://www.realityzone.com/creature.html.
