Autumn in many ways is the beginning of the new year. The new school year, the new crop year and this September the optimism reigns supreme. Nowhere is this more obviously exemplified than the cover of this week's Barron's whose cover displays a woman grinning from a swimming pool awash with hundred dollar bills. Under the headline "The New Rich" her smile is as assured as her grip on a fistful of dollars.

In a separate Barron's interview San Francisco Fed Chief Robert Parry allows that, "It's been an extraordinarily favorable period, one where the economy has performed in an outstanding way." As to inflation, Perry adds, "the Fed always ought to be concerned about inflation," but evinced no alarm about recent trends. Asked about oil, his answer was utterly complacent, "this is an event that clearly has an impact on the economy. But presumably, since energy prices and oil prices are volatile, there's no reason to expect that they are going to be permanently affecting the economy." In other words prosperity is permanent but oil prices aren't.

Certainly not affected are those creative types down at the Bureau of Labor Statistics who report that in August The Consumer Price Index was down .1% due to falling prices at the gasoline pump. This marks the first time US consumer prices have fallen in more than fourteen years. This may come as something of a surprise to the average consumer who actually has to transact in the real world and not in the make-believe world of government statistics.

The prospect of lower inflation should have been a banner day for the bond market. Instead it became a rout with the long bond dropping a full point. For the week the yield on the 30-year Treasury bond rose to 5.89% from 5.69% a week earlier. At some point the source of all this prosperity, Mr. Greenspan is going to be forced by the market to realize that saying you are tightening is not the same as doing it.

Commodity prices as represented by the Commodity Research Bureau (CRB) are making new annual highs. While for the week the CRB was down to 228.34 from 229.78 last week, it is well above last year's 200.10. Central Bankers and their proxies are discounting the rise in prices as a fluke and have for months been talking about the rise in crude oil prices as an aberration. This aberration has so far caused the approval ratings of British Prime Minister Tony Blair to fall to 6%.

The one commodity that has not showed any increase in price is gold. Is this a strange happenstance of nature? Or could it just be that the increase in the derivative book of the major bullion banks has allowed the deficit to be papered over? This has been the subject of much discussion. The bullion bankers and their proxies at the World Gold Council released a study by Jessica Cross that was supposed to lay this to rest. Instead it has been shown by Reg Howe that the author was ignorant of the difference between volume and open interest. This has been confirmed privately by the BIS (Bank for International Settlements) whose figures were used for the original report.

It's all about the Dollar. It should come as no surprise to anyone that the Dollar Index rose to new highs last week. For a country whose citizens recently achieved the dubious distinction of having a negative savings rate coupled with a trade deficit that is growing at a billion dollars a day this is quite an achievement.

One of the main arguments in its favor is the new fiscal responsibility of the federal government. The national debt clock in New York was unplugged and covered. However the federal debt is growing at a rate of $75 million per day. To check on the growing debt visit Ed Hall's site at www.brillig.com (Thank you, Susan R Berge).

The miracle rise in productivity that the media constantly cites as the reason for the great bull market is a fraud. The true reason is the incredible American credit machine. Increases in credit have reflated the world economy every time a crisis has occurred. There is no way that they can stop. The increase is now exponential. Dr. Kurt Richebacher has monitored and explained this for years as has Doug Noland whose Credit Bubble Dynamics (www.prudentbear.com) is must reading for anyone concerned with their own financial future.

Follow the Money. That is central to any expose. Where does the money lead? To the major multinational banks engaged in the gold leasing and derivative operation. In her book on Goldman Sachs, Lisa Endlich states, Leasing gold was a license to print money." Another quote succinctly sums up the hubris implicit in the large money center banks, "we're too big to fail."

There is nothing new about the attempts to discredit gold as the centerpiece of the monetary system.

The US Treasury as a Bear Operator was a heading in Anthony C. Sutton's 1977 book "The War on Gold." In it he described the Treasury gold sales of those years and wrote that "while the US government cannot openly declare itself a bear operator, the truth has been admitted off the record by a Treasury aide."

"You have to go through with the sale to show gold is demonitized. You have to put your money where your mouth is. The U.S. is selling gold to show that it doesn't hurt us, that it is good for us, even that we enjoy it"—US News and World Report, July 14, 1975.

Is it any surprise that the Treasury under Rubin and the Fed under Greenspan fought against any regulation of the over the counter derivative market? Derivatives have and continue to be the method with which to depress the physical gold market.

That the war on gold has been successful to date is not in question. Mine closures, bankruptcies, investor apathy and general scorn attest to that. All this is the mirror image of the cheerleading that prolongs the rise in equity markets and dollar denominated investments.

In a New Yorker article of July 17th, entitled Gold People, the subheading was Eccentric Losers of the New Economy. The author, James Collins was of the opinion was that "it seems that no matter what you bought in 1980 your investment would have increased in value by the year 2000." My reply to this article printed in the Letters column of the New Yorker (Aug 7, 2000) stated, "Last year, the prices of bedrock commodities of American agriculture such as wheat and soybeans broke twenty five year lows, a record that even gold has not yet attained. Does this mean that farmers are also "eccentric losers of the new economy," or is it possible that economic cycles are still valid and that commodities in general (and gold in particular) are at the same point that the Dow Jones was in 1980?"

The difference is that, at least in the United Sates, farmers are the happy recipients of seemingly unlimited Government largesse. This September over seven billion dollars starts to flow in aid. This makes over 20 billion in the last three years. And of course this does not include loan deficiency payments and other forms of aid.

Miners and their investors are not compensated by governments. In fact they are subject to stringent environmental regulations in addition to sophisticated efforts to depress the price of precious metals.

This has caused the price of gold mines shares to enter into a depression and those are the lucky ones. The rest have been driven to bankruptcy. What has caused the major mines to remain silent on the subject of price manipulation is a mystery.

I had a friend who espoused the theory that this was because they were miners and not gold people that they did not see gold as anything other than a product and could just as easily have been involved in zinc or copper. His generous view was especially unique as he had been a substantial investor in the gold sector and his net worth, once substantial, was now negative. He did not live to see the leaves of autumn.

Another "eccentric loser" sitting alone in his Lincoln Park high-rise staring out over the lake into the abyss when his heart failed. Un homme comme un autre. A man like another. But one whose humor and generosity in the face of adversity will long be remembered by those who knew him.

Looking at the placid waters of Lake Michigan on this sunny late summer Sunday I cannot help but wonder if the "New Rich" will display such character when the credit bubble crashes around them.

In memory of Blake Joyner.

Greg Pickup
September 23, 2000
gpickup@ix.netcom.com