At first blush, the politically easiest way to temporarily reduce the boiling domestic and international crisis of dollar debts is to greatly depreciate the gold value of the dollar. After all, it worked in the late l970s. But, today many structural and fundamental things are much different than the l970s. Today, unknowable vast amounts of dollars and dollar debts have been created by (computer) technological debtism. Today, more than ever, an international flight from a currency can accelerate into a panic collapse with computer speed. Because of many structural and fundamental changes involving dollars and dollar debts, a l970s depreciation of the gold value of the dollar will accelerate into a panic dollar collapse.
As someone who full time studied and traded that l970s gold bull market, I assure you that the l970s depreciation of the gold value of the dollar was totally controlled, and very precisely manipulated. Even the January 20th, l980 death of that gold bull market was very precisely manipulated. As a private participant in gold futures contracts, Merrill Lynch told me before the opening on January 20th, that I could sell gold futures; but, I could not buy gold futures contracts. That market manipulation by Merrill Lynch of a widespread futures customer base, had the predictable result of some gold contracts opening limit up and then closing limit down. Today, just like the mid l970s, no bankers explicitly proclaim that the gold rocket is leaving: "All aboard!"
The political insiders do not want any public freeloaders along for the criminal insider profits from a manipulated increase in the gold/dollar ratio. So, instead of listening for an explicit public announcement we have to observe behavior. A 'strong dollar' Secretary of the Treasury leaves; and, with a new Secretary of the Treasury we quickly get a de facto 'weak dollar' policy and dynamics that set the dollar/gold price on the move. Suddenly the war on gold has sparse but sporadic pro gold comments from surprising sources. IMHO, a mega, fundamental monetary policy change has happened. It was an involuntary change forced on the bankers by market and economic forces.
At a dollar/gold ratio of $3,000.00 per ounce there is a 'hidden' 90% devaluation and a 'hidden' 90% default of all dollar debts worldwide. The change of the Secretary of the Treasury, de facto ushered in a change from a 'strong dollar' policy to a new 'weak dollar' policy. Joining the currency "race to the bottom" should reduce our trade deficit and mitigate accelerating domestic unemployment and bankruptcies. However, the long term flaw of such a 'weak dollar' policy is that the strategy, in terms of debt relief, benefits only gold holders; bankers, governments, political insiders, and gold bugs. With the 'weak dollar' policy, there is no immediate debt devaluation for those who own no gold; corporations, state governments, local governments, and the obedient sheeple of the world. The gold havenots face debt defaults, bankruptcies, and collapse of purchasing power at best; and, job losses, homelessness, and starvation at worst. America economically becomes Argentina. The bitter fruits of technological debtism can not be avoided. Economics does have absolute laws on the increase of purchasing power with debt creation; and, on the decrease of purchasing power with debt liquidation. Cumulatively, purchasing power borrowed by debt creation always equals cumulative purchasing power destroyed by debt liquidation.
The new 'weak dollar' policy can only survive without crisis if presently constituted dollars can continue their debt/death/depreciation spiral without substantial domestic and foreign dollar debt repudiation and/or dollar redemptions and dollar currency exchanges reaching a crisis and panic stage. However, I expect that 'IF' of a dollar crisis and a panic out of the dollar to become an involuntary reality because the criminal price fixing 'strong dollar' policy was fatally maintained too many years. The 'gold cap' strong dollar policy has already economically and financially disemboweled America, the dollarization nations like Argentina, and much of the world. The most notable exception is China. The financial guts and intestines of America are already spilled on the ground by the combination of technological debtism and a long standing criminal gold cap market manipulated strong dollar. Thomas Hobbes prevailed in America and we now face a purchasing power abyss. The words "purchasing power abyss" will have much greater meaning and understanding to the reader five years from now.
Our war posturing and our international military/economic threats and actions can politically threaten, intimidate, and punish those who defy us and the Brits. Did not bankers criminally steal the people's lawful bank deposits in Argentina and the IMF refuse the usual roll over of loans as a delayed severe retaliation for Argentina defying the Brits in the Malvinas? Was not Argentina set up for economic collapse by bankers selling Argentina on dollarization; and then, bankers covertly and criminally over-valuing the dollar by the price fixing of the gold cap? Do we not shake the fist of retaliation against North Korea because they have institutionalized the counterfeiting of United States dollars? Is not Afghanistan really about an oil pipeline? Is not the saber rattling against Iraq and Iran greatly about oil prices? Is not the increased mining unemployment and resulting increased starvation in Africa a consequence of our getting African gold at low prices due to the prolonged 'strong dollar' policy that included the price fixing and covert insider criminal profits from many Wall Street markets? Are we not attempting to solve a severe domestic debt crisis just like the ancient Roman Empire, by CONFISCATORY wars of conquest and the debasing of our currency? As a national policy, we are attempting to plunder and steal our way out of the purchasing power repayment of borrowed purchasing power. It did not work for Rome, and it will not work for us. The decline and fall of the Roman Empire was slow and prolonged. The current historical decline and fall of the American Empire is fast and quick due to technological debtism creating more dollars and more dollar debts at lightening (computer) speed.
IMHO the medium and long term price of gold in presently constituted dollars is not nearly as important as the medium and long term future purchasing power of fungible and physical gold and silver (assets) in one's direct physical possession. That purchasing power of fungible, divisible, easily recognized, and physical precious metals safely in one's physical possession will increase dramatically. The crisis of debt defaults and debt repudiations will soon divide the purchasing power of the nations, local governments, corporations, and individuals of the world into two groups: Those who safely have physical gold; and, the gold have-nots. If you like purchasing power, as opposed to hunger and homelessness; have fungible, divisible, liquid physical gold and silver safely in the possession of your hands.
The single most important thing that we need to understand is the primary absolute law of economics: "CUMULATIVE PURCHASING POWER GAINED BY DEBT CREATION IS ALWAYS EQUALED BY CUMULATIVE PURCHASING POWER LOST BY DEBT LIQUIDATION". This is Atocha's absolute Supreme Law of Purchasing Power. Another way to state the same absolute Law is: "TOTAL ECONOMIC EXPANSION GAINED BY DEBT CREATION IS ALWAYS EQUALED BY TOTAL ECONOMIC CONTRACTION CAUSED BY DEBT LIQUIDATION." Because of technological debtism, especially computerized dollars and computerized dollar debts, we face an economic contraction and purchasing power abyss unprecedented in the history of debt. Will you be holding physical gold and silver during the implosion of debt liquidation and during the aftermath of the purchasing power abyss?
The general collapse of individual and collective purchasing power due to the coming debt liquidation by repudiation/default (the presently constituted dollar is also debt) will leapfrog the purchasing power of fungible, physical, asset gold and silver. The 'leapfrog' in the purchasing power of physical precious metals may well happen overnight and with the closing of derivitive markets like the futures markets. Prior to the leapfrog, presently constituted dollars may become very, very valuable for paying debts in order to save ownership of assets like one's home and cars.
As goldbugs with fungible physicals, our joy over our windfall gold and silver 'leapfrog' profits in purchasing power must be tempered with great sadness and care giving for our neighbors who are the non-gold owning sheeple who loose their jobs, businesses, paper wealth, homes, cars and pensions. Love for our neighbors in distress must exceed our greed for profits, in both words and deeds. For we now embark on the prolonged human suffering and misery of a dark ages economic depression much more severe and much more prolonged than the 'great depression' of the l930s.
We are structurally set up for a great currency whipsaw of asset confiscation and the transfer of wealth by existing debt repudiation, default, and foreclosure; and, by currency manipulation/change. Both the price deflationists and the monetary inflationists will likely have their chance to both crow, and eat crow.
The purchasing power of physical gold in one's possession can not be defaulted or repudiated; and if prudent, it need not be stolen by individuals or government. What else can meet those requirements during a mega worldwide debt repudiation/default and resulting collapse of collective purchasing power? That is essentially all that we need to know about the coming price/purchasing power of gold. If one's primary focus has been to secure themselves and their loved ones from the coming worldwide debt repudiation/default, and the resulting prolonged and severe dark ages economic depression; then, the yearly time table of events unfolding is relatively unimportant except for short term trading profits in presently constituted dollars. And of course, one wants to get out of debt including presently constituted dollars, before debts are repudiated or defaulted or result in the transfer of ownership by repossession. But, one should do that in advance.
Ah, but the question included a time frame, 2003. What is my guess for gold's high during 2003 in presently constituted dollars? Will the 'IF' of a debt crisis/dollar panic happen during 2003, or after 2003? I don't pretend to know! But, I will GUESS. My guess is that the 'IF', the world-wide tsunami debt repudiation/default (including the panic flight from the presently constituted dollar as debt), will happen during 2003. My GUESS is that presently constituted dollars will be worthless by the end of 2003. My speculation is that some presently constituted dollars will be exchanged for a new "gold standard" currency that is not pure circulating physical gold and silver. That guess of a tsunami debt liquidation and flight from the dollar during 2003 binds me to the following conclusion and answer to your question: "The 2003 high in presently constituted dollars for physical gold will be essentially infinity. The presently constituted paper dollar bills will be reduced to their intrinsic value as paper heating fuel and paper cooking fuel due to world-wide debt liquidation by repudiation/default including the repudiation/default and panic flight from the presently constituted debt dollar."
Any 'Gold Standard' is the same old, same old, criminal monetary sheering and slaughtering of the next generations of sheeple, all over again. Any 'gold standard' empowers bankers with the authority to become criminal 'paper hangers' (criminology term for those who write and pass worthless checks) and faux computer alchemists. The value of any 'gold standard' currency becomes relative to the criminal abuse of absolute power by bankers to stretch and shrink an elastic currency for their own political and financial gains. Power corrupts and the temptations of the powers of monetary creationism by fiat bankers inherent in an elastic currency always result in the total criminal corruption of the bankers and a worthless elastic currency. To eliminate the criminal abuse of the currency creation powers of bankers, a currency must solely be circulating physical gold/silver/copper. Physical gold and silver as currency are absolute because they can not be created by bankers. As Roy Jastram documented over centuries, there is an historical constant in the purchasing power of physical gold. As Franz Pick documented over centuries, there is an historical constant of depreciation and worthlessness for elastic paper currencies.
The creationism of elastic currencies inherently resides with self-serving men and women who are their own authority. Have no doubt, any 'gold standard' currency is an elastic currency. The creationism of circulating physical gold and silver currencies resides solely with God. Physical gold and silver as circulating currency is absolute (non-elastic in Federal Reserve terminology). Paper/computer debts circulating as an elastic currency are relative to the criminality of bankers and politicians. When it comes to currency: "In God we trust, in bankers we bust."
In short, I guess that the debt/dollar crisis will implode/explode this year. I also guess that some holders of presently constituted dollars will be able to convert some of them into a new sucker "gold standard" debt currency during a limited time period for exchange. After the official exchange time period expires, presently constituted paper dollars will be essentially worthless except for their fuel value. And, presently constituted computer dollars will be absolutely worthless.
My guess, in terms of timing and 2003, is greatly political. By the 'IF' of a debt liquidation induced panic, or a dollar exit panic happening during this presidential term, the Republicans are assured that they are in power for the restructuring of America, including the restructuring of the presently constituted dollar, the restructuring of the taxation system, and the restructuring of every aspect of American life, wealth, and freedom. And the domestic and international political scapegoats for the inevitable purchasing power collapse from decades of domestic and foreign, private and corporate, and local and federal government, exponential dollar debt explosion are abundant: Oil, the Euro, gold hoarders, criminal accounting, criminal corporate CEOs, Sir Greenspan, drug dealers, Wall Street conflicts of interest, computer hackers, and terrorists.
I also guess that 2003 is the year of the 'IF' of a debt liquidation panic; or, a dollar exit panic, in part because of the fundamental political change from a covert and criminal market manipulated strong dollar policy to a covert and criminal market manipulated weak dollar policy. That alone, signals to me that the end of the presently constituted dollar is near. Also, there is more speed and risk of loss of control during the deliberate sinking of the 'strong dollar' ship; than in the long slow building of a 'strong dollar' ship. Rats tend to scurry and get off a sinking ship with great haste. And international currency traders, like rats, seek the highest total return and they are quick to depart a sinking currency. And now the political insiders get to ride the gold and silver profits from a manipulated bull market.
My guesses on timing for 2003 are not investment advice. In fact, precise timing; or, even year to year timing does not matter to me as I do not trade in and out of physicals. Also, I only sell a precious metal stock when I perceive that another precious metal stock is a better investment. I am a long time successful investor who has invested almost entirely in physical precious metals, precious metals futures contracts, and precious metal stocks; since the legalization of the private ownership of gold bullion coins in the United States. I no longer invest in futures contracts. I have BS and MS degrees in criminology, combined with an investigative, entrepreneurial background. This criminological essay is an exercise of my freedom of speech for educational thought provoking purposes. It is not intended as investment advice.
Copyright 2003, Frank Smith
January 6, 2003