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The ‘bad idea’ to attempt to resolve the national debt problem by minting a trillion-dollar platinum coin. Supporters say the US Treasury would be able to deposit said coin with the Federal Reserve to act as an asset, backing part of the outstanding debt.
As Jim notes, this is not an honest approach to discussing the root problem – which is based in the monetary system, itself.
Besides that, the idea is preposterous and just shows how crazy this system has become. Things don’t hold value because someone says they have value. A thing has value based on the public/market demand for that thing.
Prior to 1971, government spending was constrained by both interest rates and the fact that there was some semblance of a gold-backed currency via Bretton Woods. But today, we have neither constraint – the Fed’s zero percent interest rate policy combined with the current, purely fiat monetary system has created the unstoppable spending spree that has led us to these extreme levels of debt. If there is anything left at all as a bar against further spending, it is the debt ceiling. But even that is now being threatened with a proposal to remove it entirely.
The just announced appointment of Jacob Lew as Treasury Secretary. Jim is holding judgement in order to see if there will be any honest discussion regarding the real problems of the monetary system.
Do the statistics and reports generated by the government help anyone determine the real state of the economy? GDP, CPI and Unemployment reports “mean something, but they don’t mean what they say it means.”
A economic system based on fiat/paper money has never lasted in the past. Ever since 1971, when Nixon closed the gold window, the resources of the country have been used unwisely, investing in programs that destroy the country’s wealth. In order for real economic growth, this practice must be changed so that resources are invested in initiatives that build wealth.
The outcome of the presidential election will not alter the current course. Instead, the election is basically a contest to determine which group of ‘zombies‘ will get government sponsorship. A Romney win will ensure the military industrial complex stays in business, while an Obama victory will further the social/welfare state.
The government employing stimulus as a policy to help the economy is ridiculous. Again, it doesn’t help the overall economy generate wealth, it only serves those favored cronies with close ties to those in political office.
There’s been much discussion on the Fed’s newest monetary easing policy. The markets received their much anticipated stimulus and are reacting positively (for now). But as previous posts have indicated, the Fed’s stated objectives and motives are questionable at best. For a few steps further down the rabbit hole, here’s a must-see video from CrisisHQ.
“If you want to understand what’s happening in the Mideast, particularly in Libya, Syria and Iran, you must first understand the main driving force behind U.S. foreign policy. Contrary to mainstream media propaganda, it is not our desire to spread democracy or to prevent tyrannical despots from murdering their own citizens. The real agenda is to protect the Petrodollar system, because it is the only thing that is currently preventing the total collapse of our fiat currency.”
On this day, 41 years ago, Nixon shocked the world by removing gold convertibility for foreign holders of US dollars – it would be the end of the agreement made at Bretton Woods, where it was decided that the US dollar would be pegged to gold and all other currencies would be pegged to the US dollar. The message was so important that Nixon’s administration decided to preempt the most popular TV series, Bonanza, on Sunday evening prior to the markets opening on Monday.
What’s most aggravating is Nixon’s claim that he must save the dollar from the evil speculators trying to destroy the dollar – something we hear so much, even from modern day politicians. Never do these con men ever mention that there wouldn’t be anything to speculate on if those in charge of the monetary system were honest and abstained from their blatant money-printing, inflationary policies.
CNBC’s European Squawk Box had an interesting interview session with author and economist, Richard Duncan. Looking back over the last 40 prosperous years, ever since the last remaining link between the US dollar and gold was removed, the world has evolved into a form of financial creditism. Duncan notes that the central banks of the world have been able to provide easy credit and the world has greatly benefited. However, there comes a point where borrowers are unable to take on more debt. If the government does not step in and provide QE or some other kind of spending programs, there will be another Great Depression. Duncan even goes on to say that, in fact, a depression is unavoidable and inevitable, but it can be delayed if the government decides to benefit society further by spending on 21st century technologies in the nano science and medical fields, for example.
Another interesting part of this segment that should be noted is where the panel brings up the comparison of the present situation with the past, where central banking policy was to raise interest rates rather abruptly in order to curb reckless borrowing. “When you throw money into the system ….. the good guys out there won’t borrow and spend because they’re too cautious. It’s the bad guys who come in and borrow and spend. … There’s lots of bad guys around, we can see them all over the place – we know they’re there!“ Touché.
Which presidential candidate would you be most be confident would NOT lie to you? Here’s Ron Paul on CNBC taking up the philosophical arguments no other candidates are discussing, including one hell of a debate on gold and the debasement of the dollar with Morgan Stanley’s Stephen Roach.
There’s a popular theory among the world population that the U.S. launched wars in the middle east in order to control its oil reserves. On the surface, this seems entirely logical, but the truth of the matter may be much more sinister, and one should look a little deeper into the situation. It’s not the oil reserves the U.S. is after, although oil does play its part in this charade. The main concern of the U.S. in these wars is more likely the maintenance of its hegemony with U.S dollar as the world’s reserve currency.
The U.S. dollar became the de facto world reserve currency after World War II, when delegates from around the world met and together agreed to what became known as the Bretton Woods System. Under this system, the U.S. dollar would be linked to gold at $35/ounce. All other nations would tie their currencies not directly to gold, but indirectly through the U.S. dollar. This meant that those nations would hold dollars in their foreign reserves to support their local currencies. In order to obtain dollars, those countries had to either borrow them from the U.S. Federal Reserve or earn them with a trade surplus. The U.S. got a sweet deal here – perhaps justified due to the fact that after the war the U.S. was indeed the strongest, most productive nation on the planet, along with a huge stash of physical gold.
This system worked well for the world and especially for the U.S. during the prosperous years of the 1950′s and 60′s. But with the U.S. printing its own dollars to cover its increasing debts, including the vast expeditures on the Vietnam War, the world became concerned. Suspicious that the U.S. gold reserves would not cover the existing issue of paper dollars, countries began to trade in their reserve dollars for gold at the U.S. treasury using the pegged value of $35/ounce. The U.S. gold stash was steadily declining.
In order to prevent the total depletion of U.S. gold supplies, in 1971 the Nixon administration closed the gold window – nations were no longer allowed to exchange their reserve dollars for gold. It was the end of the Bretton Woods System, but not quite the end of the U.S. dollar hegemony in world reserve currency status.
One must then ask the obvious question: Why would a nation now hold a seemingly valueless paper dollar as a reserve currency, especially since its tie to gold has been cut?
The answer: The Petro Dollar.
After Nixon closed the gold exchange window, the dollar was a free floating fiat currency, competing with other currencies around the globe. Inflation started to escalate since there was no tie to gold anymore. In fact, in 1975 the average price of gold was $160 – more than 350% increase in just 4 years since abandoning the gold window. Additionally, OPEC nations had been using the dominant dollar as a preferred payment method for their oil exports, but now they were starting to lose money as the dollar lost its value. In 1973, OPEC launched an oil embargo, raised prices and started internal discussions on the logistics for trading oil for other currencies including gold. Steps had to be taken by the U.S. if it was to re-secure the dollar as the strong world reserve currency.
The first step was taken in 1974 when Secretary of State Henry Kissinger launched the U.S.-Saudi Arabian Joint Commission on Economic Cooperation. Kissinger used the term “petrodollar recycling” to refer to the overall plan, which was to allow Saudi Arabia to purchase U.S. assets and services with the dollars it was receiving for its oil sales. A beneficial result for the U.S. was that the Saudi Arabian central bank (SAMA) could now use its dollar proceeds to buy U.S. debt (Treasury bills, bonds, etc.).
But the most beneficial outcome for the U.S. was that Saudi Arabia, the most dominant member of OPEC, would agree to continue to accept only U.S. dollars in exchange for its oil sales and would convince the other members of the cartel to do the same. By 1975, all OPEC member nations restricted their oil trade to dollar transactions. To this day, as long as these key oil states play along, their leaders are showered in luxury and are quite secure in that they’re guaranteed the defense by the U.S. military and its industrial complex.
Meanwhile, countries around the globe must accumulate dollars in their own foreign reserves in order to import the most vital energy component – oil. Nations have to aquire those dollars the hard way – by borrowing from the U.S. Federal Reserve or earning them by trading resources, goods and services to other nations for dollars. But the U.S. enjoys the outrageous advantage of being able to print as much of the world’s reserve currency as it wants. Not only has it been able to use these dollars to purchase its own oil on the cheap, it has been able to continually out-do itself in annual deficit spending, now in the trillions of dollars, because it has had captive buyers for its debt.
One would think someone would cry “Foul!” Well, someone did. The first nation to step away from this rigged system was Iraq. In November of the year 2000, Saddam Hussein declared that Iraq would no longer accept the dollar for trade in the Oil for Food program. Instead, the oil would be priced in and exchanged for Euros. Many said this would be a bad investment for Iraq at the time, but the move was actually beneficial because the dollar declined 17% against the Euro until the U.S. attacked and accomplished its mission in May of 2003. Of course, now that the country was “stabilized” the Iraqi oil trade was repriced in the dollar market again and things went back to “normal” for a while.
The system would be challenged a second time, this time by Libya. In February of 2009, Muammar Gaddafi was elected the chairman of the African Union and would continue the effort to create the United States of Africa, which among other things, would include a unified currency, a dinar based on gold. Gaddafi went so far as to suggest that the African nations’ oil trade would be switched from the dollar to this new gold currency. Here’s a segment from Russia Today:
Furthermore, it’s quite interesting to note that prior to the Libyan Revolution in February of 2011, Libya didn’t have a central bank linked with its western counterparts. It’s strange that before the “rebels” even had concluded battle, before they had even established a new government, they created a central bank.
And now the petro dollar has a third challenger - Iran.
However, attention should be given to recent events. Early in 2008, Iran launched a new commodity exchange known as the Iranian Oil Bourse. The intent was to allow for Iranian oil to be priced and traded with multiple currencies. As the system was ramped up, initially the exchange limited its trade to secondary petroleum products, with crude oil to be added “when the system was ready.” Iran recently announced it would be ready on March 20, 2012. This was a declaration of war on the petro dollar!
The U.S. along with the EU then implemented a defense. Just prior to the expansion of the Iranian exchange, on March 17, the EU carried out orders to expand sanctions against Iran by removing Iranian banks from the international bank-wire transfer system known as SWIFT. Furthermore, any banks caught doing business with Iran would be sanctioned as well. It seems Iran’s entire international commerce engine has been halted and its oil industry crushed.
Japan, China, India and Turkey are among the countries who’ve been dependent on Iranian oil to some degree. Various discussions have been taking place between Iran and its trading partners on the possibility to enlist trade for other commodities such as gold or grain. Unless someone caves in here, another war – perhaps a big one – seems to be on the horizon.
This article was researched and published by JonK.
Update: September 15, 2012: Must see video from CrisisHQ.
“If you want to understand what’s happening in the Mideast, particularly in Libya, Syria and Iran, you must first understand the main driving force behind U.S. foreign policy. Contrary to mainstream media propaganda, it is not our desire to spread democracy or to prevent tyrannical despots from murdering their own citizens. The real agenda is to protect the Petrodollar system, because it is the only thing that is currently preventing the total collapse of our fiat currency.”
Here’s a video from Alt Investors with a discussion on the petro dollar:
Part 1
Part 2
Source material from books (available at Amazon) on the petro dollar:
The changes have been subtle and even span generations, which accounts for few people even noticing. Yet, looking back over the history of the US currency, one immediately sees that the citizens have been fleeced!
In 1929, all newly issued US currency was standardized in size and general appearance. For example, the $10 bill would now always be printed with Alexander Hamilton’s portrait. At this time, it’s interesting to note that bills were issued in different series
All these issues had the same general appearance, but differed primarily in their obligation to the bearer of the bill.
For example, here is a Federal Reserve Note from 1928. (Click on images for better clarity.) The obligation is stated as “REDEEMABLE IN GOLD ON DEMAND AT THE UNITED STATES TREASURY, OR IN GOLD OR LAWFUL MONEY AT ANY FEDERAL RESERVE BANK”
Similarly, here is a Gold Certificate from 1928. This is not a note, but rather a certificate representing a specific amount of gold on deposit at the Treasury. Starting at the top of the bill and ending at the bottom, the whole concept is written as ”THIS CERTIFIES THAT THERE HAVE BEEN DEPOSITED IN THE TREASURY OF THE UNITED STATES OF AMERICA TEN DOLLARS IN GOLD COIN PAYABLE TO THE BEARER ON DEMAND”
But in 1933, Franklin D. Roosevelt took America off the Gold Standard, thus citizens were no longer able to redeem their bills for gold coin. Gold Certificates were not printed anymore. Furthermore, the words ”IN GOLD” were removed from the obligation statement of the Federal Reserve Note, leaving the redemption option to “LAWFUL MONEY” as can be seen in this 1934 note:
The US Constitution doesn’t contain the words LAWFUL MONEY. But Article 1, Section 10 prohibits states from making “any Thing but gold and silver Coin a Tender in Payment of Debts;“ While gold was withheld from the public at this time, silver was still accessible and Silver Certificates were still redeemable for silver coin.
The Treasury, therefore, had to keep silver in their vaults in order to keep the promise of redemption. But the value of silver was increasing and people were trading in their certificates for the real metal. The Treasury’s silver was drying up. As the certificates were redeemed, they were destroyed as no new silver was put in the vault to maintain proper backing.
Finally, in 1964 the Treasury halted silver redemption. All that was left then, was the Federal Reserve Note, which was now being printed with a completely relaxed obligation.
There is no longer any promise to redeem anything on demand of the bearer. Only a statement is made that this fiat paper note is “LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.” Even though there is nothing but more paper backing this bill, citizens yearn for more of this stuff as if it’s worth something more than the empty promises of the issuing government.
They might have spruced it up a bit recently, but as the saying goes, it’s like putting lipstick on a pig…. it’s still a pig!
Some very serious questions are arising regarding whether or not Fort Knox still has all the gold that is supposed to be stored in its vaults. Below is presented some information on the subject by various sources. Updates will be posted as information becomes available.
June 6, 2012
James Rickards, author of Currency Wars, believes the U.S. has all the gold it says it does (8,133 tonnes) and explains that the reason why an audit is being denied and downplayed is simply part of their strategy to keep gold’s true importance from being divulged. Furthermore, with all the rehypothecation of gold through swaps and leasing arrangements, they want to “avoid all of the awkward legal title questions that would arise once the physical existence issue was settled.” Read the article at US News.
October 6, 2011
By broadcasting the documentary below, the History Channel has not only raised public awareness, but has illuminated the fact that the precious metals markets are rigged and have been for a very long time!!! (Also see America’s Book of Secrets – Fort Knox on Hulu for even more insights.)
At the end of the program, there’s an interesting side-note regarding the 1900 children’s story, “The Wizard of Oz.” The video below presents an extremely strong case that the story is actually about gold & silver. Dorothy loses her house and teams up with the scarecrow and the tin-man (a farmer and industrialist) along with a timid lion (W.J. Bryan), trying to maintain enough courage to follow the yellow brick road (the gold standard), battling against evil (banking) forces. Once they finally reach Oz (oz = ounce), they find that the system is being maintained by a corrupt politician manipulating the people through trickery and deceit. In the original book, written by L. Frank Baum the ruby slippers were actually silver!! And silver is what brought Dorothy back home – back from a nightmare.
An excellent education begins with this feature on The Secret of Oz…
