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Wednesday, September 10, 2014

The Price Of Gold And The Art Of War Part I

Gold bullion recovered from tunnels dug in the Philippines as part of Operation Golden Lily

 The Price Of Gold And The Art Of War Part I

Sep 09, 2014 - 05:41 PM GMT

If you wait by the river long enough, the bodies of your enemies will float by  Sun Tzu, The Art of War, Fifth century BC

Only fools and the ideologically impaired believe that today's capital markets are free. In free markets, prices are determined by supply and demand. In capital markets, supply and demand considerations are subordinated to capitalism's increasingly dysfunctional monetary menses, i.e. credit flows, emanating from central banks. Of all markets, today's gold markets are the least free.

For almost three centuries, gold played a critical role in the bankers' extraordinarily successful scheme to defraud society by substituting debt-based money in place of savings-based money, silver and gold, by introducing otherwise suspect paper money into circulation via the ubiquitous mechanism of credit so as to profitably skim societal productivity, entrepreneurial ingenuity and constantly increasing government expenditures via constantly compounding interest.

In the early 20th century, a negative trade balance beginning in the 1870s exacerbated by the overhead of an aging empire beset by nationalist insurgencies and the military costs of preparing for WWI, forced England to share the care and feeding of its golden goose, capitalism, with its former colony, the United States of America.

This was done in 1913 by the creation of a carbon copy of its central bank, the Bank of England, in the US with the enactment of the Federal Reserve Act. The reason given was that the establishment of a central bank in the US would prevent financial crises from occurring in the future as they had in the past.

The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907.

Only two decades later, the Fed's loose credit policies resulted in the speculative excesses of the 1920s, i.e. the 'roaring twenties', and the subsequent 1929 collapse of the New York Stock Exchange which plunged the US into the Great Depression of the 1930s—a crisis which made the financial panic of 1907 look like a mild case of neurasthenia.

But after the greatest crisis in the history of capitalism—a crisis the Federal Reserve Act was allegedly designed to prevent—there was no debate to revoke the charter of the Federal Reserve. This is because the reason for the Fed's existence, i.e. to prevent future financial crises, was a smokescreen to hide a far more insidious agenda.


The purpose of central banks such as the Federal Reserve is not to prevent financial crises or to ensure price stability or even today's mandate of the moment, to promote full employment. These are canards raised by central bank/Fed toadies in their craven defense of the bankers' long-running and immensely profitable predatory ponzi-scheme.

The purpose of the Federal Reserve and all central banks is and has always been to benefit bankers by indebting nations, allowing bankers and the favored few to live off the constantly compounding interest of said indebting ad infinitum. In this, the Federal Reserve has succeeded beyond all previous measures of success.


The Fed's care and feeding of England's golden goose, i.e. capitalism, almost resulted in the complete collapse of capital markets in the 1930s. However, extending the franchise of central banking to America would do far worse. America's military spending after WWII would cost central bankers the gold required to pass off their paper banknotes as money.

In 1949, the US possessed 21,775 tons of gold which backed the US dollar, stabilized capital markets and constrained the ability of governments to print excessive amounts of paper money. But, after 1949, unprecedented levels of US overseas military spending and the costly overseas expansion of US multinational corporations drained the US Treasury of so much gold the US could no longer redeem the flood of US dollars circulating overseas.

In August 1971, at the urging of Paul Volker, then Under-Secretary of the Treasury, President Nixon ended the convertibility of the dollar to gold; and for the first time in history gold was no longer money.

Although gold and silver are not by nature money, money is by nature gold and silver

                Karl Marx, Das Kapital - Volume 1, Chapter 2

Because all paper currencies were pegged to the US dollar and the US dollar was convertible to gold, all currencies lost their connection to gold when the ties between gold and the dollar were cut. As a consequence, on August 15, 1971, all currencies in the world became fiat.

Paul Volker took full responsibility for triggering capitalism's end game. In a 2013 interview, Volker explained his role in that consequential act with more than a modicum of pride: I certainly was a major proponent of suspending gold convertibility, in fact the principal planner.