Mega Chess
Hans Schicht
How is it possible with all the mess unfolding that the dollar, Wall Street and the US bond markets are still keeping up against all odds and gold and silver are not in orbit?
As I see it:
Some over-clever wizards bundled USA mortgages and marketed them overseas. Being bundled however cancels out any claim for redemption. Shrewdly the dirty mortgage laundry was off-loaded overseas, in the expectation that the swindle would go undetected and the packaged bundles would retain their trading value as financial instruments.
Bad luck for both sides! As the mortgage crisis in the US worsened, the overseas investors wanted to find out how much their packages were still worth. The swindle came out into the open and fell right back into the lap of the US mortgage market with a double whammy. The clever wizards caused the collapse not only of the US sub-prime mortgage market but also of the mortgage A markets. And worse, they caused the international trust in Wall Street Finance to collapse. The rest of the story you know.
We are now in a situation where no bank trusts the other, where inter-bank credit is drying up and dog eats dog, beginning with Morgan in its thirst for liquidity devouring and sucking Bear Stearns dry.
Selling US assets at home for liquidity is too dangerous. That could entail an immediate collapse of Wall Street and the US bond markets. Thus America is selling its investments in Asia and Europe, Wall Street is holding up and European and Asian stock markets are tumbling. Proceeds from overseas shares are changed back into dollars for repatriation, which helps to keep the dollar up.
From its side, the FED providing for the ever growing internal need for liquidity stepped up its long-bond monetization on the sly, buying back bonds in circulation against freshly printed phantom money and ever expanding credit facilities. Part of the bonds bought back the FED redistributes to the financial institutions in difficulties in exchange for dubious mortgage papers so as to help them to resurrect their underwater balance sheets. Scarcity of bonds keeps the bond prices up and thus interest rates down. Low interest rates means cheaper money for the pressured banks, lower outlays for the government to cover the interest due on the national debt and cheaper refinancing for the Munis.
A stronger dollar, a lower Yen and low interest rates help to unwind the remaining remnants of the carry trades.
All that might work in the beginning of a crisis, but a profound structural crisis as we are in is like a black hole, it starts accelerating, faster and faster, and once the “event horizon” has been reached everything just disappears into nothingness. It is like the old joke of the two conglomerates devouring one another: at the end there was nothing left! The only difference is that now we have a whole bunch of conglomerates at each other’s throat.
A giant black hole is presently taking shape on Wall Street and it is just a question of time that the present retreat of the foreign stock markets will be overtaken by a sudden internal collapse of Wall Street, may be helped along by some “pushing” done by an outside force!
Let me explain what I mean with pushing:
One does not attack one’s adversary when he is strong, only when he is weak. At the Fall of Communism and the ensuing mess the Americans moved in and stripped Russia bare under Yeltsin. The talk was about “the Rape of Russia”. Western finance implanted itself in the heart of Russia. Dollars flooded the country and the foreigners went for the Russian oil, gas and mineral treasures.
That all changed under Putin in 1995. After his election on his first visit outside Russia Putin went to Iraq. A visit that could not have been about anything else than oil. Putin knew what he wanted, playing the card of Russia’s energy wealth to restore Russian prestige.
There was a parallel movement to restore the rouble and kick the dollar out. To clean the house Russian foreign debts were defaulted on, renegotiated and the debts reduced to manageable proportions. The flimsy oil and gas and mining deals were redrawn.
The offensive ring of the newly installed American missiles around Russia and the enticements for the bordering states to join NATO was countered by Russia by keeping its finger on the throttle of the oil and gas pipelines and by throwing a spanner in the Western “pipe-dreams” in Asia.
What food means for the people, energy means for nations. It is all about energy now-a-days. Oil is the lynch-pin for the dollar and the dollar stands for the American Might. America’s staunch friend, the world’s great oil exporter, Saudi Arabia seems to have its oil exports linked to the dollar through a gold clause.
Could it be?
America raped Russia when it was helpless and down after the Fall of Communism. Putin is a judo champ and a chess player with lots of patience. Bit by bit he restored Russian prestige. Now Putin is waiting, waiting for the moment America will be on its knees in its self-inflicted financial mess and stuck in the quack mires of Iraq and Afghanistan. Then will Putin play his next card, his gold card. And he will cut the American Achilles heel by calling the bluff on the American gold hoard, thus on the dollar and thus on oil, the American lynch-pin.
The same as gold gives freedom to the individual and the lack of it brings slavery, the same counts for nations.
In June 2001 the Duma discussed in full the implications of an already sliding dollar. Not for nothing did Andre Bykow, Putin’s top economic advisor sit in on the GATA Whitehorse conference, where he listened to get the Kremlin’s views on the dollar and gold confirmed.
Comes Russia. Quietly Russia teams up with the cabal in the gold game, shorting at first along side the cabal, just waiting for the opportunity. Then, when America will be in dire straights and gasping for salvation, then Russia will enter the scene to play its gold card, beating the cabal at their own game, sending the dollar into oblivion and pulling the carpet out from under the American Financial empire.
Gold has never been a game for small investors and speculators. The London Gold Pool collapsed in 1971 a few years after General de Gaulle had decided to free France from dependence on the Dollar by acquiring gold on a large scale. The next great gold run-up December 1979/80 was ignited by the Iranian hostage crisis followed by the Russian invasion of Afghanistan, when the Americans blocked all Iranian accounts. But it was not only Iran, that took refuge in gold to escape asset confiscation. Many other countries in the region, fearing to get involved in an expanding boycott likewise went for gold.
It is not the man in the street, not even the Hedge Funds that move the gold. It are the Masters of the World, the Governments and the Central Banks that move the gold. And when they do, it is on a major scale. The paper game the cabal is presently playing could still go on for sometime. It needs a major event or a major force to change the situation.
The American Empire rests on two pillars: its financial might centred around the dollar and its military might centred around its nuclear arsenal. With its financial might gone, its control over the world’s energy will crumble, its bought influence overseas will fade and its military might will be starved of finance and energy. Will the Empire risk an early war to survive?
GATA is right on with gold, but the man on the street has no influence on developments once a greater power takes the initiative. We will just have to wait and see who will change the world and how the world is going to change and change it will.
Hans Schicht
July 31, 2008
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