Since 1960 I have been following the gold price. And since 1973 I have been charting gold. Charts are great to identify a ground swell and might work for free markets where multiple buyers and sellers are involved. But that is not the case with gold. I track gold not with the eye of a chartist, but with an eye on the financial and political macro happenings, events which I always painstakingly add to the charts.

Gold is part of the great power game. The bulk of gold is held in a few hands only. To understand gold one has to come to grips with what is going on in the world's power centers: New York, Europe, Japan and recently China. Before the second world war London, Paris, Rome, Vienna and Shanghai were the gold fortresses. But after the war's bloodletting gold's center of gravity has shifted to New York. Although in the last 30 years Europe managed to re-established important gold reserves and London became the world's gold trading center, the control rests in New York.

And when I talk of New York I am not talking about the USA or Washington. I am talking about the East Coast Financial Brotherhood which traces its roots in the rail roads, oil, real estate, the industrial revolution, the banks and commodities. The Brothers hate the limelight. They have encapsulated themselves and are hiding in multitudes of trusts, foundations, or whatever legal cloaks. They and their "staff", which includes the cream of executives in business, in finance and politicians, are in control of the US financial infra-structure: the banks, insurance companies, investment funds, hedge funds, brokerage houses, credit rating companies, commodity markets, industries, the media, universities and the FED included. The latter having the principal banks and all the "national" banks as its shareholders. Consequently, the FED will thus serve the interests of the banking brotherhood first, and the interest of the American people second. Furthermore on an international level, New York indirectly controls the IMF, the World Bank, the IFC and affiliated organizations. Washington might be the capital of the USA in name, but New York is the capital of the world. And that includes Washington. Their Tri-Lateral Commission and their Council of Foreign Relations constitute the government within.

To evaluate New York's power one should well take note of its prime objectives:

1. To make the dollar, in whatever context from cash to long term credit, the only viable international currency for reserve, finance, trading and investment purposes, not tolerating any rivals like gold, silver, the pound sterling, the mark, the yen or the ecu.
   
   
2. To flood the entire world with dollars and to use every opportunity to push dollars out into the world's currency markets.
   
   
3. To make the whole world and the citizens at home permanently indebted to and credit dependent on New York.
   
   

• Congress was easily brought to promote ever growing budget and external payment deficits to provide all the dollars the world could take and to conjure fiat money out of thin air in collusion with the Treasury and the FED.
  
  
• The banks were given free reign to balloon the credit supply in the grandest con-game ever: creating "negative money" by monetizing the national debt.
  
  

Inflation was exported and prosperity imported on the sore back of the rest of the world. However, such a situation can only last as long as the dollar keeps flowing outward.

• To foster foreign lending, the IMF, the World Bank and the IFC were founded at the Bretton Woods conference convened by the "Brotherhood."
  
  
• Establishing, executing and policing New York's strategy was left to the brokerage houses, the commodity markets, the hedge funds and credit rating companies.
  
  

Armies have been replaced by money, and generals by money managers. When rivals get too powerful, "measures" are taken. When the Bank of America tried to establish its own financial empire on the West Coast, the carpet was pulled out from under it. And likewise it was done to the Japanese, the South Koreans and others. Now an attack on the euro must be in the cards. How and when this attack will begin is still a secret however.

The latest weapons in New York's arsenal are the hedge funds. In the Asian camp stands Japan holding its trump card of its huge holdings of US government debt paper - which it might suddenly dump on the markets. Europe on the other side of the Atlantic is rallying to the euro, the youngest rival to financial power and the latest challenge to New York.

New York, contrary to public opinion (promoted by its own media!) is far from hating gold. New York knows that the dollar will not be eternal, and that one day (set by them they think!) gold will make a great come-back. And when it does come roaring back, they want to have lots of it!

Their policy is to acquire gold

• as anonymously as possible,
  
  
• as cheaply as possible by means of relentless short selling and by belittling gold on every occasion,
  
  
• and as much as possible by looking for it where it is most available: by persuading central banks to lease bullion to (their) hedge funds (never to return it!),
  
  
• to get the principal gold mining industries to hedge their game,
  
  
• and to give shoestring financing to small mining and exploration companies - only to acquire them later for pittance, when they cannot service the burgeoning debt.
  
  

About 25-years ago Engelhard brought Harry Oppenheimer, world's top gold mogul, into the New York club. This resulted in several South African mining houses attaining ADR status in Wall Street. If my grapevine is reliable, the Oppenheimers and entourage have since that time acquired substantial interests in one of the world's mayor banking groups -- and must by now have become solid partners of the New York "Brotherhood."

Until mid-1997 all went as New York had planned. Dollar expansion continued to increase - except for a few hick-ups, like the demise of Bretton Woods, the collapse of Pound Sterling, Watergate, the oil crisis, and the Teheran hostage crisis. During each one of these crises, it was gold, the dollar's mirror, which offered short-term opportunities. Until today New York has always managed to regain control of the situation. It is imperative to note New York in its zest for absolute power does not tolerate competition with ITS dollar!

During the second half of 1997, their push-credit debauchery in Asia got out of hand. Far from being a localized Asian economic crisis, it showed the first cracks in the Western monetary house of cards. Ironically, it is Western finance which is today in crisis. And so is New York, its master. To complicate matters, the unforeseen happened: a Russian default, a sudden rise of the Japanese yen, and the LTCM hedge fund detonated right in the heart of capitalism. The dollar and the stock market were severely shaken, but managed to (temporarily) recuperate.

As long as the dollar was widely accepted by the world, New York's empire expanded. However, last summer the dollar demand peaked - subsequently the dollar flow reversed forever.

The US trade and investment balances have both turned decisively negative. This results in a sharply increased offer of dollars on the international markets. Consequently, there is a growing reluctance to accept further inflows of dollars! Billions of dollars have been obliterated in Asian losses. Billions have been, and are still being repatriated to the US to help support a "safer" Wall Street. Many foreigners have liquidated, but even more are still dumping dollar assets in order to survive. And on top of all that, the euro is destined to replace a substantial slice of many foreign dollar reserves. Dollar instability is Developing, which only will correct itself with a dollar at a considerably lower value level.

As the dollar devalues, the whole Western financial system will go down the tubes. It is only a question of time when the next crisis will hit. When it does, gold's value will surge. Perhaps not immediately, but definitely it will happen. Although nothing happened to gold when the 1979 Teheran hostage crisis erupted, gold went through the roof when the Russians invaded Afghanistan. Today, like then, we should watch for potential crises to base our "golden" decisions. Undeniably, an abundance of crises are on the horizon! And in times of upheaval, even New York will lose control of events, markets and gold.

Global credit creation has reached unbelievable proportions. Financial power has smothered all economic and social rationality. The never-never-pay-back credit explosion has created a potential global inflation of threatening proportions. When the asset balloon bursts, and the basic livelihood of millions will be threatened, then the only way out for governments and banks will be to resort to hyper-credit and explosive money creation to forestall economic collapse and social unrest. Then stocks, bonds, fiat currencies will shrivel away, and inflation will explode with a vengeance in our daily necessities, commodities and hard assets.

A great upheaval looms! But the approaching financial debacle is only part of still a greater scenario. The Asian crisis, the fall of world stock markets, the collapse of the derivative markets, the turning tide of the dollar, the resurgence of social and political tension with conflicts all over the world, and the rush to globalization, and the explosive growth of the Internet, should all be viewed in this context.

Our planet has suddenly become a full house -- and mankind, like rocks under Pressure, has entered the process of re-crystallization from a structure of national entities into a fully integrated global society. Governments are losing control over events, over their territories, borders, citizens, business, income and currencies. National sovereignty is at stake. Small is powerful again! Small is everything big is not: adaptable, elastic, controllable, efficient. New trends and structures are rapidly developing -- and old ones becoming obsolete.

Private global law is bound to replace the present utter confusion of multiple national laws applied internationally. Non-governmental organizations or NGOs, people, business and professions are starting to cluster directly on the world wide web, bypassing all what is national. Independent private digital global currencies based on precious metals will make their entry soon. The whole hotchpotch of national currencies and credit finance has become unworkable, outdated and is near collapse. Its demise is going to adversely affect governments, banks, bonds, share and commodity markets - New York included.

We are on the threshold of a totally new age, the "Age of the Humapan". A world fully integrated. Not just a cozy global village of national interests.

It will not be a smooth and short metamorphosis into the Humapan society. The next few decades point toward upheaval, inflation, unrest and radicalism and in such scenario gold is bound to shine. The transition might take a life-time. The Establishment will do its utmost to keep its grip on power. There is a great danger that digitorial Compustates might subjugate mankind into ant societies. Only our zest for freedom backed by a free world wide web, privacy from data-banks and the only real global currency, gold, will decide otherwise.

December 1998
Lake Chapala, Mexico
Hans Schicht