Oct 31

Tea Leaves & $2000 Gold

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Yes, some people are still forecasting $2000 gold by year’s end…
 

BOB and BARB Moriarty launched 321gold.com over 10 years ago, adding 321energy.com the better to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy as well as precious metals.
 
Previously a US Marine fighter pilot, and holding 14 international aviation records, Bob Moriarty here tells The Gold Report why he’s 100% certain that a market crash is looming… 
 
The Gold Report: Bob, in our last interview in February, we had currency devaluation in Argentina and Venezuela, interest rate hikes in Turkey and South America, and a cotton and federal bond-buying program. Just eight months later in October, we’ve got Ebola, ISIS and Russia annexing Crimea plus a rising US Dollar Index. We’ve also got pullbacks in gold, silver and pretty much all commodity prices. With all this news, what, in your view, should people really be focusing in on?
 
Bob Moriarty: There is a flock of black swans overhead, any one of which could be catastrophic. The fundamental problems with the world’s debt crisis and banking crisis have never been solved. The fundamental issues with the Euro have never been solved. The world is a lot closer to the edge of the cliff today than it was back in February.
 
About ISIS, I think I was six years old when my parents pointed out a hornet’s nest. They said, “Whatever you do, don’t swat the hornets’ nest.” Of course, being six years old, I took stick and went up there and swatted the hornets’ nest, which really pissed off the hornets. I learned my lesson.
 
We swatted the hornets’ nest when we invaded Iraq and Afghanistan. What we did is we empowered every religious fruitcake in the world. We said, “Okay, here’s your gun, go shoot somebody. We’ll plant flowers.” We are reaping what we sowed. What we need to do is leave them to their own devices and let them figure out what they want to do. It’s our presence in the Middle East that is creating a problem.
 
TGR: Will stepping back allow the Middle East to heal itself, or will there be continued civil wars that threaten the world?
 
Bob Moriarty: We are the catalyst in the Middle East. We have been the catalyst under the theory that we are the world’s policemen and that we’re better and smarter than everybody else and rich enough to afford to fight war after war. None of those beliefs are true. The idea that America is exceptional is hogwash. We’re not smarter. We’re not better. We’re certainly not effective policemen.
 
The Congress of the United States has been bought and paid for by special interest groups: part of it is Wall Street, part of it is the banks and part of it is Israel. We’re just trying to do things that we can’t do. What the US needs to do is mind its own business.
 
TGR: You’ve commented recently that you’re expecting a stock market crash soon. Can you elaborate on that?
 
Bob Moriarty: We have two giant elephants in the room fighting it out. One is the inflation elephant and one is the deflation elephant. The deflation elephant is the $710 trillion worth of derivatives, which is $100,000 per man, woman and child on earth. Those derivatives have to blow up and crash. That’s going to be deflationary.
 
At the same time, we’ve got the world awash in debt, more debt than we’ve ever had in history, and it’s been inflationary in terms of energy and the stock market. When the stock and bond markets implode, as we know they’re going to, we’re going to see some really scary things. We’ll go to quantitative easing infinity, and we’re going to see the price of gold go through the roof. It’s going to go to the moon when everything else crashes.
 
TGR: How are you looking at the crash – short term, before the end of this year? How imminent are we?
 
Bob Moriarty: Soon. But I’m in the market. Not in the general market, but I’m in resources. There’s a triangle of value created by a guy named John Exter: Exter’s Pyramid. It’s an inverted pyramid. At the top there are derivatives, and then there are miscellaneous assets going down: securitized debt and stocks, broad currency and physical notes. At the very bottom – the single most valuable asset at the end of time – is gold. When the derivatives, bonds, currencies and stock markets crash, the last man standing is going to be gold.
 
TGR: So the last man standing is the actual commodity, not the stocks?
 
Bob Moriarty: Not necessarily. The stocks represent fractional ownership of a real commodity. There are some really wonderful companies out there with wonderful assets that are selling for peanuts.
 
TGR: In one of your recent articles, “Black Swans and Brown Snakes“, you were tracking the US Dollar Index as it climbed 12 weeks in a row, and you discussed the influence of the Yen, the Euro, the British Pound. Can you explain the US Dollar Index and the impact it has on silver and gold?
 
Bob Moriarty: First of all, when people talk about the US Dollar Index, they think it has something to do with the Dollar and it does not. It is made up of the Euro, the Yen, the Mexican Peso, the British Pound and some other currencies. When the Euro goes down, the Dollar Index goes up. When the Yen goes down, the Dollar Index goes up. The Dollar, as measured by the Dollar Index, got way too expensive. It was up 12 weeks in a row. On Oct. 3, it was up 1.33% in one day, and that’s a blow-off top. It’s very obvious in hindsight. I took a look at the charts for silver and gold – if you took a mirror to the Dollar Index, you saw the charts for silver and gold inversely. When people talk about gold going down and silver going down, that’s not true. The Euro went down. The Yen went down. The Pound went down and the value of gold and silver didn’t change. It only changed in reference to the US Dollar. In every currency except the Dollar, gold and silver haven’t changed in value at all since July.
 
The US Dollar Index got irrationally exuberant, and it’s due for a crash. When it crashes, it’s going to take the stock market with it and perhaps the bond market. If you see QE increase, head for your bunker.
 
TGR: Should I conclude that gold and silver will escalate?
 
Bob Moriarty: Yes. There was an enormous flow of money from China, Japan, England, Europe in general into the stock and bond markets. What happened from July was the equivalent of the water flowing out before a tsunami hits. It’s not the water coming in that signals a tsunami, it’s the water going out. Nobody paid attention because everybody was looking at it in terms of silver or gold or platinum or oil, and they were not looking at the big picture. You’ve got to look at the big picture. A financial crash is coming. I’m not going to beat around the bush. I’m not saying there’s a 99% chance. There’s a 100% chance.
 
TGR: Why does it have to crash? Why can’t it just correct?
 
Bob Moriarty: Because the world’s financial system is in such disequilibrium that it can’t gradually go down. It has to crash. The term for it in physics is called entropy. When you spin a top, at first it is very smooth and regular. As it slows down, it becomes more and more unstable and eventually it simply crashes. The financial system is doing the same thing. It’s becoming more and more unstable every day.
 
TGR: You spoke at the Cambridge House International 2014 Silver Summit Oct. 23-24. Bo Polny also spoke. He predicts that gold will be the greatest trade in history. He’s calling for $2000 per ounce gold before the end of this year. We’re moving into the third seven-year cycle of a 21-year bull cycle. Do you agree with him?
 
Bob Moriarty: I’ve seen several interviews with Bo. The only problem with his cycles theory is you can’t logically or factually see his argument. Now if you look at my comments about silver, gold and the stock market, factually we know the US Dollar Index went up 12 weeks in a row. That’s not an opinion; that’s a fact. I’m using both facts and logic to make a point.
 
When a person walks in and says, okay, my tea leaves say that gold is going to be $2000 by the end of the year, you are forced to either believe or disbelieve him based on voodoo. I don’t predict price; I don’t know anybody who can. If Bo actually can, he’s going to be very popular and very rich.
 
TGR: Many people have predicted a significant crash for a number of years. How do you even begin to time this thing? A lot of people who have been speculating on this have lost money.
 
Bob Moriarty: That’s a really good point. People have been betting against the Yen for years. That’s been one of the most expensive things you can bet against. Likewise, people have been betting on gold and silver and they’ve lost a lot of money. I haven’t made the money that I wish I’d made over the last three years, but I’ve taken a fairly conservative approach and I don’t think I’m in bad shape.
 
TGR: Describe your conservative approach.
 
Bob Moriarty: The way to make money in any market is to buy when things are cheap and sell when they’re dear. It’s as simple as that. Markets go up and markets go down. There is no magic to anything.
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Oct 23

An End to QE? A Good Man in Congress?

Gold Price Comments Off on An End to QE? A Good Man in Congress?
God knows what Ron Paul was ever doing in US politics…
 

OVER the weekend, we were down in Nashville at the Stansberry Conference Series event, along with Ron Paul, Porter Stansberry, Jim Rickards and others, writes Bill Bonner in his Diary of a Rogue Economist.
 
The question on the table: What’s ahead for the US?
 
Ron Paul took up the question from a geopolitical angle. He told the crowd that the military-security industry had Congress in its pocket.
 
As a result, we can expect more borrowing, more spending and more pointless and futile wars. They may be bad for the country and its citizens, says Paul, but they are good for the people who make fighter jets and combat fatigues.
 
“We’ve been at war in the Middle East for decades,” he said…
“We supported Osama bin Laden against the Soviets in Afghanistan…and the result of that was the creation of al-Qaeda.
 
“Then we supported Saddam Hussein against Iran. Saddam and bin Laden hated each other. But after 9/11 we attacked Saddam, using a bunch of lies to justify it. We sent over military equipment worth hundreds of billions of Dollars. This equipment is now in the hands of ISIS – another enemy we created…and a far more dangerous one.”
Ron Paul is such a pure-hearted soul. What was a man like him doing in Congress?
 
It must have been some sort of electoral accident. Good men rarely run for public office. And when they do, it is even rarer for them to win.
 
Poor Ron is retired from Congress now. And he spends his time trying to “get the word out.” He thinks that if people only realized what was happening they would vote for more responsible leaders and more sensible policies.
 
Alas, that’s not the way it works. The further the country goes in the wrong direction, the more people there are who have a financial interest in staying on the same road.
 
We visited Ron in his office on Capitol Hill. He held a breakfast meeting with a small group of congressmen, trying to convince them to vote his way; we don’t remember what was at issue.
 
It was an uphill battle. Only a few members of Congress attended. And those few worried that their districts would lose money…or that the labor unions wouldn’t like it if they voted no…or that they might not get a plum committee assignment if they bucked their own party leadership. Ron was alone.
 
Politics favors blowhards, hustlers and shallow opportunists, we concluded. Which makes us wonder how Ron Paul ever got elected to Congress in the first place.
 
But not only did he get elected…once in Washington, he never sold out. Neither to the right nor the left. He opposed zombies, malingerers and bullies wherever he found them.
 
Which brings us to the subject of our own presentation to the Nashville crowd. We were following the (QE) money. “St. Louis Fed president James Bullard let the cat out of the bag last week,” we explained.
 
As Bullard told Bloomberg TV last week:
“I also think that inflation expectations are dropping in the US. And that is something that a central bank cannot abide. We have to make sure that inflation and inflation expectations remain near our target.
 
“And for that reason I think a reasonable response of the Fed in this situation would be to invoke the clause on the taper that said that the taper was data dependent. And we could go on pause on the taper at this juncture and wait until we see how the data shakes out into December.
 
“So…continue with QE at a very low level as we have it right now. And then assess our options going forward.”
We didn’t think it would happen so fast. We thought the central bank would wait. We expected a little more hypocrisy…a bit more posturing…a little more phony resistance…a few denials…
 
…the Fed should have played it cool…coy…elusive…hard to pin down, making investors really sweat before coming to the rescue.
 
We knew where the Fed would end up…but we didn’t know it would go there so quickly and easily!
 
Bullard is admitting to a staggering act of vanity and hypocrisy. In the land of free minds and free markets, apparently only the Fed knows what prices equities should fetch.
 
Henceforth, it will approve all price movements on Wall Street.
 
To bring you fully into the picture, dear reader, the US central bank has the economy, and the markets, hooked on cheap credit and printing-press money. It has been supplying both on a grand scale for the last five years.
 
But it had promised to stay away from the playground, beginning this month. Now that the economy is recovering, goes the storyline, the Fed will back away from its emergency measures and allow things to return to normal.
 
QE ends this month. Higher interest rates are expected next year.
 
No bubble has ever been created that didn’t have a pin looking for it. And nobody likes it when the two meet up. Last week, it looked as though the Fed’s bubble and Mr. Market’s pin were coming closer. Then quick action by Bullard helped push them apart on Friday.
 
QE began in November 2008. And zero interest rates began a month later. This has perverted prices for stocks, bonds, houses…and just about every other asset price on the planet. Stocks are worth more than twice what they were at the bottom of the crisis. The average house is worth $60,000 more.
 
Now QE is ending. And that means a lot less money gushing into financial markets.
Instead of increasing at a 40% rate as it did in 2012, what Richard Duncan calls “excess liquidity” – the difference between what the Fed pumps out via QE and what the government absorbs via borrowing – will go up only 6% this year.
 
Next year, there will be even less.
 
With less new money coming from the Fed…and still no real recovery…something’s gotta give. No matter what Fed officials say. And since stocks periodically go down anyway, this seems like as good a time as any.
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Oct 01

Gold Prices Killed by Not-So "Super" Dollar

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Gold prices have been hammered by the rising US Dollar. What might October hold…?
 

DOLLAR UP, gold down, writes Adrian Ash at BullionVault.
 
That’s pretty much the lesson for precious metals investors looking at any long-term rise in the US Dollar since exchange rates began floating in 1973.
 
And now in late 2014, says former chief economist at Swiss bank UBS, George Magnus “It looks as though the third US Dollar uptrend of the post-Bretton Woods era may be underway.” Just so long as you also ignore his warning against “extrapolating” short-term noise into long-term forecasts…
Gold price vs. US Dollar Index, 1973 to 2014, daily data
Might Magnus be right? For gold prices, as the chart shows, it’s less the absolute level than the Dollar’s direction of travel that counts. Starting from all-time lows in spring 2011, today’s greenback hardly matches the “Super Dollar” of the early 1980s. Yet the background rhymes…
  • Commodities glut after a long bull market? Check…
  • Disinflation in consumer prices? Check…
  • Weak competitor economies in Europe? Check…
  • Over-borrowed emerging markets? Check…
  • Strong US monetary policy, raising rates on the Dollar? Well, no. Not by a long way.
Even with the Federal Reserve still sticking however to its “considerable” delay for raising rates from zero, the third-quarter of 2014 proved ugly for Dollar investors holding non-US assets.
 
Gold for US investors marked the end of Q3 by hitting new 2014 lows, losing 5.8% on the London PM Fix for the month of September alone. Silver fell to the lowest Dollar price since May 2010…down more than 12% from the end of August.
 
Yet gold priced in Euros, in contrast, remains near the top of its 12-month range. Even in the British Pound…flattered by Tuesday’s GDP revisions…gold has held 3% higher from New Year.
 
Gold’s recent drop, in other words, is entirely relative. And this split between Dollar and non-Dollar gold prices might widen in October.
 
First there is the European Central Bank’s meeting concluding Thursday. Mario Draghi and his team have long hinted at some kind of QE-style money printing. The latest inflation print of just 0.3% per year across the 18-nation union will loom large.
 
Then, in the last week of October, the US Federal Reserve will face the opposite problem. It is set to taper the last $15 billion of its monthly QE printing. That leaves rising inflation, and strong GDP, begging for an end to the “extended time” promised for zero US interest rates. 
 
Before then, we’ve got US jobs data Friday (with an early look in ADP’s private-sector estimate mid-week). Then, mid-month, the European Court of Justice will hear a legal challenge to the Eurozone central bank’s Outright Monetary Transactions (OMT)…the 2012 plan which finally stemmed the single currency’s debt crisis. 
 
Mario Draghi hasn’t actually fired any OMT money at weak-economy bonds yet. But if the Court decides the plan is illegal (insomniacs will enjoy reading the arguments here. Or better still here) it could spark fresh panic…out of Greek, Spanish and other debt-heavy markets…pulling the Euro lower again. 
 
Analysts are of course aligned with the Euro bears betting against the currency in the forex market. Barclays Bank today cut its 12-month forecast for EUR/USD from $1.25 to $1.10 – a move which, if matched by the Dollar’s other major crosses, would take the trade-weighted index to a decade high of 90 or so. Gold prices in 2004 were trading below $400 per ounce. So a blunt analysis, never mind the momentum in gold futures and options betting, says a fall in the Euro must push bullion prices lower again as the US Dollar surges. After all, it worked like clockwork in the other direction.
 
Gold up, Dollar down” was so solid between 2002 and 2008, it became a no-brainer trade for no-brain hedge funds. The US currency fell 30% against its major trading peers on the forex market. Gold meantime rose 160% in Dollar terms. But this relationship broke down during the financial crisis. Because gold kept rising…and rising…while the Dollar whipped higher.
 
What are the odds today? Playing the averages, and reviewing the last 40 years (daily data, 12-month change), gold has been twice as likely to rise when the US currency is weakening on the forex market than when the Dollar Index is getting stronger. And when gold drops hard…down 10% or more from 12 months before…the Dollar has been rising 91% of the time.
 
No-brain traders are betting this rule-of-thumb will hold firm as 2014 ends, and gold will keep falling in Dollar terms as the US currency gains versus the Euro, Yen, Pound and the rest. 
 
But watch out. Because since 1974, gold and the Dollar have also moved in the same direction some 30% of the time. And when gold rises as the Dollar also goes up (21% of the last 40 years), its gains have been markedly better on average than when the Dollar is falling. 
 
Yes, really. When gold has risen against a background of Dollar strength, gold priced in Dollars has gained 24% year-on-year on average. It’s averaged 18% gains when the Dollar’s been falling. 
 
Of course, investors tend to buy gold and the Dollar together when crisis hits. Not only, but not always either. You could cite any number of crises where gold failed to rise with the Dollar, and pitch them against the gold price surge of Soviet Russia invading Afghanistan in 1979, the 2008 Lehmans crash, or the 2010 Eurozone meltdown.
 
Never mind if those events sound at all familiar here in late 2014. Ignore the fact that a rising Dollar…plus rising gold…adds up to 30% more fun for non-US investors trying to defend their money against crisis. Financial markets have avoided seeing any trouble ahead all year. So far. As an investment banker puts it to the Financial Times today…applauding this year’s surge in global mergers and acquisitions…”I have never seen a market more resilient than it is today, in terms of absorbing geopolitical and financial risk.”
 
Such complacency is the reason gold investing exists, whatever the outlook for the Dollar (and “Everything seems to be Dollar positive,” says another forex strategist…also tempting fate).
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Sep 03

Gold & Financial War

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James Rickards lays out how Russia vs. the West could hit your investments…
 

DURING the Cold War, the United States had enough nuclear missiles to destroy Russia and its economy and Russia had enough missiles to do the same to the United States, writes investment manager and author James Rickards in Addison Wiggins’ Daily Reckoning.
 
Neither adversary used those missiles and the leaders were quite careful to avoid escalations that might lead in that direction. Proxy wars were fought in places like Vietnam, the Congo and Afghanistan, but direct confrontation between the United States and Russia was never allowed to come to a head.
 
The reason was that no matter how devastating a nuclear “first strike” might be, the country under attack would have enough surviving missiles to launch a massive “second strike” that would destroy the attacker. This is what was meant by “mutual assured destruction” or the balance of terror. Neither side could win and both sides would be destroyed, therefore they went to great lengths to avoid confrontation and escalation in the first place.
 
In financial warfare between the United States and Russia, a similar balance of terror exists. It is true that the United States has powerful financial weapons it can use against Russia. The United States can freeze the assets of Russian leaders and oligarchs that can be found both in United States banks and foreign banks that do business in Dollars. The United States can deny Russian access to the Dollar payments system and work with allies to deny Russian access to the SWIFT system in Belgium that processes payments in all currencies, not just Dollars. Many of these tactics have, in fact, been used against Iran and Syria in the financial war that has been going on in the Middle East and Persian Gulf since 2012.
 
But, Russia is not without financial weapons of its own. Russians could refuse to pay Dollar-denominated debts to United States and multilateral lenders. Russia could dump the billions of Dollars of United States Treasury notes they own thus driving up United States interest rates and hurting the United States stock and bond markets.
 
Most ominously, Russia could unleash its hackers, among the best in the world, to crash United States stock exchanges. On August 22, 2013 the NASDAQ stock market crashed for half a trading day and no credible explanation has yet been offered for the crash. Hacking by Syrian, Iranian or Russian cyber warriors cannot be ruled out. This may have been a warning to the United States about enemy capabilities.
 
In short, the United States has no interest in intervening in Ukraine militarily and even its economic response will be muted because of new fears of mutual assured financial destruction emanating from Russia and elsewhere. Putin has thought all of this through and has taken Crimea as his prize.
 
Merely because financial warfare between the United States and Russia will not be allowed to go too far, does not mean that the situation in Ukraine will not impact markets. Stock markets dislike uncertainty of any kind and Russia’s intentions with regard to the rest of the Ukraine outside of Crimea certainly add to uncertainty.
 
Russia’s victory in Crimea may embolden China to assert territorial claims to certain islands in the South China Sea, which will increase tensions with Japan, Korea, Taiwan and the United States.
 
There is always the possibility of a financial attack being launched by mistake or miscalculation, which could cause events to spin out of control in unintended ways.
 
Investors may not be able to change this dangerous state of the world, but they are not helpless when it comes to preserving wealth. A modest allocation of investable assets to physical gold will help to preserve wealth in the face of financial war or unexpected catastrophic outcomes.
 
Gold is not digital, cannot be wiped out by hackers, and is immune to crashing stock markets and bank failures. Russia has increased its gold reserves 70% in the past five years. China has increased its gold reserves over 200% in the same time period. Do they know something you don’t?
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Apr 23

More War Needed

Gold Price Comments Off on More War Needed
America’s last 2 adventures were so successful, we should go into Ukraine…
 

COMING off such successes in Iraq and Afghanistan, writes Bill Bonner in his Diary of a Rogue Economist, it makes sense that the US should send troops to Ukraine, no?
 
When we first read this in the Washington Post, we thought it might be a late April Fools’ Day joke. Then we discovered the writer was sincere about it. Apparently James Jeffrey is a fool all year round:
“The best way to send Putin a tough message and possibly deflect a Russian campaign against more vulnerable NATO states is to back up our commitment to the sanctity of NATO territory with ground troops, the only military deployment that can make such commitments unequivocal. 
 
“To its credit, the administration has dispatched fighter aircraft to Poland and the Baltic states to reinforce NATO fighter patrols and exercises. But these deployments, like ships temporarily in the Black Sea, have inherent weaknesses as political signals. They cannot hold terrain – the ultimate arbiter of any military calculus – and can be easily withdrawn if trouble brews. 
 
“Troops, even limited in number, send a much more powerful message. More difficult to rapidly withdraw once deployed, they can make the point that the United States is serious about defending NATO’s eastern borders.”
And why not?
 
The US has a global empire, supported by an unprecedented mountain of debt. All bubbles need to find their pins. And all empires need to blow themselves up. What Jeffrey is proposing is to speed up the process with more reckless troop deployments.
 
We’re with him all the way. Push ol’ Humpty Dumpty off the wall and get it over with…so the US can go back to being a decent, normal country without phony “red alerts”…”see something, say something” snitches…and a trillion-Dollar “security” budget that reduces our safety.
 
But we doubt it will be that easy. Empires do not go gently into that good night. Instead, they rail…rant…and rave against the dying of the light.
 
They also make one awful mess of things. Empires depend on military force for their survival. And to meet their budget goals.
 
Typically, they steal things. In the Punic Wars, for example, the Romans filled an alarming budget gap by conquering the city of Tarentum. They then stole all that was portable…and sold its citizens into slavery.
 
Problem solved…for a while.
 
The US is unique in the annals of imperial history. It always imagines it will reap a rich reward – at least in status, if not in money – from its conquests. It never does.
  • President Wilson believed he would be hailed as a great international statesman. Instead, Europeans laughed at him and his 14 Points. (“Even God himself only needed 10,” quipped French prime minister Georges Clemenceau.)
  • President Johnson imagined a big “thank you” from the Vietnamese. Instead, he got a “no thanks” from Americans.
  • And President George W. Bush imagined the oil riches of Iraq flowing back to the homeland…only to end up with the most costly and unrewarding war in US history.
It is only because the US is so rich that it has been able to afford this kind of malarkey. But that is coming to an end. For much of the last 30 years, the imperial war machine has been financed mainly on credit – aided and abetted by a credit-crazed central bank.
 
How long this can go on is anyone’s guess. Probably no longer than the Fed’s credit bubble can continue to inflate.
 
In the meantime, the defense contractors, the military lobbyists, and the other zombies in the security industry will continue to push for more meddling – in Syria…Ukraine…heck, wherever…
 
The bubble must find its pin somewhere!
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Mar 03

Ultimate Money

Gold Price Comments Off on Ultimate Money
And awfully useful when empires collapse…
 

NO ONE has asked us, says Bill Bonner in his Diary of a Rogue Economist.
 
But we keep giving our reply anyway.
 
“Are we in a new bull market in gold” was the question. Our answer: We don’t know.
 
But our reply suggested it didn’t make any difference. Gold has survived hundreds of paper currencies and hundreds of empires. Although the Dollar may have gained ground last year, gold will survive it, too.
 
Colleague Braden Copeland thinks gold stocks may have entered an explosive bull market. He notes that not only are prices rising, more important, so is trading volume.
 
“There’s no fever like gold fever,” says old-timer Richard Russell. And when gold fever takes hold…the results can be spectacular.”
 
But here at the Diary we are not speculators. We are observers. And what we observe is that gold is real money…ultimate money…the kind of money people turn to when the other kinds seem unreliable.
 
It is also what great empires tend to accumulate. Like trophy wives, gold goes to winners.
  • In the 16th century, Spain collected the world’s gold;
  • In the 17th century, the Netherlands was where the gold coins rolled;
  • In the 18th century, France was the world’s richest nation;
  • In the 19th century, Britain brought home the world’s gold;
  • And in the 20th century, the US was number one – with the largest gold hoard on the planet.
So, who are the biggest buyers of gold today? The Chinese. They are preparing to take their place on the world’s largest stage.
 
Recently, we were asked to update our book Empire of Debt, written with Addison Wiggin. Most observers, we pointed out, have concentrated their attention on the growing pile of US public debt, scheduled to reach 200% of GDP by 2020.
 
We preferred to focus on the empire itself. Debt has its lifecycle. So do empires. Both expand. Then both…without exception…contract.
 
An empire funded by debt is an especially ungainly, grotesque thing. It lurches from one disaster to another – going deeper and deeper into debt each time.
 
The Vietnam War pushed President Nixon – in what became known as the “Nixon Shock” – to end the Dollar’s convertibility to gold. Recent wars in Iraq and Afghanistan have further weakened the empire’s finances…with costs approaching $5 trillion.
 
But it is not the debt that kills empires. Debt is just a razor conveniently left on the side of the tub.
 
In the meantime, Mr.Market can do whatever he pleases. And it may please him to push the price of gold stocks considerably higher.
 
We will see…
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Nov 06

More Blood, No Treasure in Iraq

Gold Price Comments Off on More Blood, No Treasure in Iraq
Post-liberation Iraq is getting worse, not better, as US miliary aid piles up…
 

OCTOBER was Iraq’s deadliest month since April, 2008, writes former Texas Congressman and US presidential candidate Ron Paul.
 
In those five and a half years, not only has there been no improvement in Iraq’s security situation, but things have gotten much worse. More than 1,000 people were killed in Iraq last month, the vast majority of them civilians. Another 1,600 were wounded, as car bombs, shootings, and other attacks continue to maim and murder. 
 
As post-“liberation” Iraq spirals steadily downward, Prime Minister Nuri al-Maliki was in Washington last week to plead for more assistance from the United States to help restore order to a society demolished by the 2003 US invasion. Al-Qaeda has made significant recent gains, Maliki told President Obama at their meeting last Friday, and Iraq needs more US military aid to combat its growing influence. 
 
Obama pledged to work together with Iraq to address al-Qaeda’s growing presence, but what was not said was that before the US attack there was no al-Qaeda in Iraq. The appearance of al-Qaeda in Iraq coincided with the US attack. They claimed we had to fight terror in Iraq, but the US invasion resulted in the creation of terrorist networks where before there were none. What a disaster.
 
Maliki also told President Obama last week that the war in next-door Syria was spilling over into Iraq, with the anti-Assad fighters setting off bombs and destabilizing the country. Already more than 5,000 people have been killed throughout Iraq this year, and cross-border attacks from Syrian rebels into Iraq are increasing those numbers. Again, what was not said was that the US government had supported these anti-Assad fighters both in secret and in the open for the past two years.
 
Earlier in the week a group of Senators – all of whom had supported the 2003 US invasion of Iraq – sent a strongly-worded letter to Obama complaining that Maliki was far too close to the Iranian government next door. What was not said was that this new closeness between the Iraqi and Iranian governments developed under the US-installed government after the US invasion of Iraq. 
 
Surely there is plenty of blame that can be placed on Maliki and the various no-doubt corrupt politicians running Iraq these days. But how was it they came to power? Were we not promised by those promoting the war that it would create a beach-head of democracy in the Middle East and a pro-American government?
 
According to former Treasury Secretary Paul O’Neill, in early 2001 as the new Bush administration was discussing an attack on Iraq, then-Defense Secretary Donald Rumsfeld said, “Imagine what the region would look like without Saddam and with a regime that’s allied with US interests. It would change everything in the region and beyond it. It would demonstrate what US policy is all about.”
 
We see all these years later now how ridiculous this idea was. 
 
I have long advocated the idea that since we just marched in, we should just march out. That goes for US troops and also for US efforts to remake Iraq, Afghanistan, Libya, and everywhere the neocon wars of “liberation” have produced nothing but chaos, destruction, and more US enemies overseas. We can best improve the situation by just leaving them alone.
 
The interventionists have unfortunately neither learned their lesson from the Iraq debacle nor have they changed their tune. They are still agitating for regime change in Syria, even as they blame the Iraqi government for the destabilization that spills over. They are still agitating for a US attack on Iran, with Members of Congress introducing legislation recently that would actually authorize US force against Iran. 
 
It looks like a very slow learning curve for our bipartisan leaders in Washington. It’s time for a change.
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