The Unknown U.S. Gold Coin & How The Dollar Is Killing The Nation

March 21, 2010

WHAT PROPS UP THE DOLLAR

They say that what doesn't kill you makes you strong. Well it now appears that what makes you strong can also kill you. If you are wondering how that can be, then stop and think about what is REALLY propping up the dollar. Is it the fact that it constitutes most of the world's foreign reserves? No. Is it because it is backed by the full faith and credit of the U.S. Government? No.

The dollar is being propped up by two major factors. Firstly, it is the military supremacy of the USA which thus far has stopped a successful invasion of the nation whilst simultaneously setting up theatres of war and military bases in every corner of the globe. The second factor is the continued support of the dollar by China.

WHAT WILL TOPPLE THE DOLLAR

However, it is also these same two factors that will inevitably destroy the dollar and possibly the nation as well. The increasingly gargantuan military budgets have clearly outstripped both the current and future capacity of the nation to continue funding the beast of war. This will inevitably cause an internal economic and financial implosion. In particular virtually all war dividends arising from such wars are almost exclusively flowing to the arms manufacturers and their patrons. Such "imperial over-reach has been the Achilles Heel of many an empire in the past.

So too, is the patronage of the US dollar by the Chinese. Their strategy is nothing more than an instalment plan aimed at the stripping of US manufacturing capacity and know-how which will lead to a nation of retailers selling Chinese manufactured goods. But even that will one day stop as it is forced to either make its own goods or else watch its citizens as they are reduced to exchanging second hand goods.

So the mighty but misused dollar is the tool by which America is shooting itself in the foot and eventually in the head. Thus far a host of nations still cling to the dollar owing to historical reasons arising mainly from its role in securing the purchase of oil which is the lifeblood of most nations. The current predicament of the Euro and the lack of full convertibility of the Yuan are simply providing temporary respite in what is a fait accompli.

The more the nation prints and borrows its own dollars the greater will be the malinvestments in the name of progress and the greater will be the final reckoning. In the meantime the nation is slowly but surely being "killed" by its own dollar's capacity to pretend it has value.

THE UNKNOWN U.S. GOLD COIN

The Arabs once upon a time used to demand gold for the payment of oil royalties but time and easy wealth made them dollar addicts and susceptible to dollar contagion as U.S. Treasuries are hardly a worthwhile income earner or store of value. Few people would know that the original agreement between the Arabian American Oil Company (Aramco) and the Saudi Arabian Government called for payment in gold at the rate of 4 gold shillings per ton of crude or its dollar or sterling equivalent.

Ed Shaffer in his book, "The United States and the Control of World Oil", describes what followed:

"The company paid royalties and advances to the government in gold sovereigns until the outbreak of WWII, when, because of embargoes, gold became unavailable. During the war it made payments in dollars. A controversy then arose over how gold should be valued in terms of dollars and pounds, i.e. over the dollar-gold, pound-gold and dollar-pound exchange rates. The company argued that the relevant rates were those in New York and London while the Saudis claimed that the rates in Jidda should apply. At that time the par value of the English gold pound in London was $8.2397. In Jidda the English gold pound was selling at between $16 and $20 or approximately twice the London price. Translated into dollar-gold equivalents, the London price was equal to $35 per ounce while the Jidda price fluctuated around $70 per ounce."

In short Aramco at that time would have had to buy gold at $70 an ounce to meet its obligations. The US government came to ARAMCO'S assistance by allowing them to buy gold from the US Mint for $35 an ounce. Once again, the US government came to the assistance of corporate America at the expense of the public purse. The gold was duly minted into coins (discs) at the Philadelphia Mint in two sizes - one sovereign and four sovereign. The images above and below speak for themselves. If there is any doubt who the U.S. government is beholden to then I suggest you read Ed Shaffer's book if you can find a copy.

NO FAITH, NO CREDIT AND NO HOPE

If history repeats itself then the return to payment in gold should also not be discounted. For how long will the owners of valuable and scarce resources continue to accept the paper promises of the US? When will the world wake up to the fact that it is this acceptance of the paper dollar which enables the funding of US military adventurism? Who will honour the U.S. dollar? Will it be the unemployed? Will it be those on food stamps or those who have lost their homes? Will it be the owners of shut down factories or boarded shopping malls? Will it be politicians and their lobbyists? The answer is no one, because the nation will be broke thanks to the unsustainable policies of successive governments caused by the denial, suppression and manipulation of gold and silver. Worse still, the profligate policies of the government will reach a point where it is no longer able to even fund the protection of the USA itself.

THE INEVITABLE RETURN TO PRECIOUS METALS

The sooner the USA converts its paper dollar currency into GOLD AND SILVER MONEY, the sooner it can then devise a strategy for the gradual reversal of the nation's ills. Gold and silver obliges individuals, governments and societies as a whole, to live within their means. Clearly the US at all levels has exceeded the limits of prudent financial and economic practice and apart from some occasional movements upwards, the slope ahead remains slippery and deadly.

If it was good enough for the U.S. to mint gold coins for the Arabs 65 years ago, then gold and silver coins are also good enough for the citizens of the United States who voted for change they can believe in. It will always be far better to carry the weight of gold and silver in your pocket than the burden of debt on your back and the backs of your children and grandchildren.

Sydney Australia

A one-ounce gold nugget is rarer than a five-carat diamond.

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