With a record amount of fiscal and monetary stimulus, the big dollar lie has been given a temporary lease on life. The real marvel is that with so much stimulus, growth in the economy remains as tepid as it is.
With respect to the Kondratieff winter, I remain as convinced as ever with respect to its inevitability though I new believe we may see more inflation (defined as increases in prices) than I had previously thought. Indeed if the dollar continues to weaken, that is likely to result in even more rapidly rising prices until such a time as a cascading debt default scenario unfolds. But except for my belief now in moderately rising prices, I remain as convinced as ever in the inevitability of a deflationary depression caused by enormous amounts of debt that simply can no longer be serviced by our financial system. Indeed, the only remedy that our policy makers have in their bag of tricks is to print more money. Yet each printing results in an ever more pathological financial system. Until the system is overwhelmed by debt, the fantasy world of Kudlow and Cramer will remain the mainstay of CNBC and all those who have built their futures on paper money.
The Dollar is Key
The most important market in the world is the US dollar market because this is the world's reserve currency. More prices throughout the world are quoted in dollars than any other currency so when the day arrives that confidence is lost in our phony currency, it is difficult to see how our ever system of ever expanding bubbles can endure. Our currency is fundamentally a most unstable measure of value because this unit of measure is constantly changing. For example the supply money as defined by M-3 has grown by 6.27% over the past year so that the dollar, as a unit of measure, is not the same as it was one year ago. Imagine using a yardstick that increases in size by 6% or so each year, to measure distance!
So the dollar is a phony and unreliable measure of wealth and its creation at will out of thin air leads to much mal-investment and indebtedness that most certainly is leading us to an ultimate collapse of our monetary system. Mal investment leads to a far less than optimal application of scarce resources in our economy. And indebtedness, which is growing much, much faster than income will ultimately suck our economy into a deflationary black hole.
So noting is more important to keep and eye on than this constantly changing unit of measure that is the world's reserve currency. When the dollar goes, the bond market is likely to collapse, especially given the fact that a full 42% of our U.S. Treasuries are now owned by foreign creditors. And when bonds fall and interest rates begin to rise, that is likely to be the deflation trigger for the remaining equity bubble as well as the housing and debt bubbles overall. All these markets are linked together, but the demise of the dollar is key. In watching the dollar, we see last week it broke down a bit from its recent bear market rally. The dollar index closed at 96.00, which compares unfavorably to the 20-day moving average of 97.25, the 50-day moving average of 96.77 and the 200-day moving average of 98.85. The dollar also broke below its bear market rally uptrend. The key now is the around 92 where it hit a multi-year low this past June. If the dollar breaks through this point, the next phase of bubble deflation could be underway.
How Much is This Manipulation Costing Americans?
How Long can it go on?
The constant manipulation of the gold market by the same folks who established the Federal Reserve System and the fraudulent money our tyrant leaders have used to con us into believing all is well in America, is pictured in the Kitco chart below, which displays the 24-hour gold price. Those of you who have watched this chart over the past several years will recognize that the response these days to the kind of sudden slamming by the Gold Cartel that takes gold down by $5 to $10 is quite different now than it was during the "New paradigm days" of the Clinton years. In those days, gold would take weeks to recover a loss of a similar magnitude. Now, time after time, gold suddenly shoots right back up. It appears as though there are now ready buyers to acquire cheaper ounces, every time the manipulators feed more into the market where they can never again be retrieved for the American taxpayer.
How much of Americas gold is being trashed in an increasingly hopeless attempt to con people into thinking the dollar is better than gold? I don't know. How much time is this buying the ruling elite? I don't know that either. But we can expect the game to go on as long as the establishment can keep it going. Loss of all hope in my view, that the system could change from within was lost when GATA presented information of the gold conspiracy to the Republicans before Bush took office. So I take it as a given that the continuation of the gold manipulation scheme will continue until God in His infinite wisdom pulls the plug on these same evildoers. They treat common folks with the same contempt that a mafia counterfeiter treats his fellow man, except that the devastation of Americans is on a far larger scale than anything ever implemented by the Mafia.
As I watched the volatile move in the price of gold results of the Gold Cartel this past week, as partly pictured in the Kitco chart below, I wondered how much gold, which rightfully belongs to the American people, is being pumped into the world markets, just so the bankers, politicians and the likes of Kudlow and Kramer can continue to con common folks into believing the dollar is better than gold for a little while longer and thus retain their position of privilege a little while longer.
Gold is to the Federal Reserve, our bankers and our politicians what an honest cop is to a Mafia printing press. In fact, what the banking establishment and our politicians are doing to us, is worse not only because of the grand scale upon which this act of thievery is carried out, but also because it is leading to leading to the demolition of wealth creating activities in favor of a parasitic services sector. By printing money, the bankers and politicians are literally allocating resources away from sectors like manufacturing, mining, agriculture, research and development and other important wealth creating endeavors in favor of banking, law and other services. That is why financial services now comprise more than 30% of the S&P500 earnings, while mining, manufacturing and agriculture continue to decline. Given the ability of our bankers to print money at will, the best minds in America no longer seek to become scientists and engineers but bankers because that is where the really big bucks are. And so we are now outsourcing skilled job to places like India and Russia as well as China.
More Good News for Freedom Lovers - The Blanchard Suit will Proceed
In time, market forces will force the fantasy behavior engaged in these days by America to cease. In the mean time, those who philosophically believe in the quest for objective truth were treated to a surprisingly positive ruling by Federal District Judge, Helen G. Berrigan of the United Sates District Court of the Eastern District of Louisiana. She ruled that most of the gold manipulation charges brought to the court by Blanchard & Company, Inc. against Barrick Gold and J.P. Morgan Chase could go to the discovery phase. In other words, our side - as represented by Blanchard & Company, - those of us who have believed gold has been and continues to be manipulated, will be able to demand at least some of the secret information having to do with allegations of gold market manipulation should come into public view. If that happen, we think it could begin to wake Americans and the world up to the phony gold and phony dollar market that we have been conned into.
Supply and Demand favor gold bull market
A huge and growing battle is raging between the objective truth of God's laws as laid out in nature and the subjective truth of the landlords of the world who would have us believe endless amounts of money can be created and that some how, "abracadabra" it is wealth. These policymakers manipulate the price of gold so that the paper system can endure a while longer. But that this will end in tears with the Kondratieff winter deflationary debacle is not in doubt. Debt is in the process of growing like a cancer that at some point cannot help but snuff out the fiat currency lie.
When that day arrives, paper money will become worthless because of the inability of debtors to meet their obligations. That will lead to a loss of confidence in paper money. But even before that happens, as Frank Veneroso has pointed out, the supply and demand fundamentals for gold as a "commodity metal" support a gold price north of $600. When the melt down of our cancerous fiat money system emerges, the level to which the price of gold can rise in terms of a worthless paper currency will, unfortunately approach infinity. Most assuredly, we don't look forward to that day because of the strife and poverty that will accompany it. But those with gold should be in a much better position to survive than those without it.
The timing for this kind of infinite rise in gold is impossible to predict though we would, if we could, opt for an orderly rise similar to gold's bull market so far. We know markets never go up forever. We would therefore not be surprised if the price of gold were to get hit hard in the not too distant future, perhaps after scaling above $400. That however will not change the longer term outlook. We buy gold because it is real asset money. Not liability money. As such its value will survive when liability money defaults from bank to bank just like thousands of dominoes lined up next to each other. It is an insurance policy which tragically 99% of all Americans do not hold.
September 16, 2003
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks