by Gayle Plato, M. Ed
( This entry is an ongoing exploration of the economic downturn we are facing)
Every other hour or so, some politician or activist is now shouting power grab. The regular guy like you and me is waking up; we are realizing that the monetary shift of power matters. While we get ready to mail in tea bag tags to Washington and complain about taxation without representation, it would be wise to reflect.
Writing about the AIG scandal afoot, I am literally reaching my knowledge limit as I read more and absorb the fiscal nightmare. To help explain, I first state that all you read is of a column by one person. I am speculating based on compiled information. Maybe we can go down the rabbit hole together.
Let’s jump into central banking shall we? World markets trade currency. The US dollar is a standard, and many fear it will be yanked. But the real issue is the currency that isn’t. Banks trade made up currencies- leveling notes of value- sort of like how we use checks that are intrinsically useless paper, representing money. Euro dollars are traded—this is not the Euro, nor is it a Dollar. It is a representation for calculated trade outside of the USA.
Eurodollars created by Russians using gold and other assets, and convertible currencies, deposited in British banks, created the concept of a euro-currency as a tradable item in the 1950s. To this day, London is the world center of currency trading. It’s where AIG made most of it’s mistakes, still coming to light. “Trading in Eurodollar futures is extensive, thus offering uniquely deep liquidity”. Prices are quite responsive to Fed policy, inflation, and other economic indicators. (http://en.wikipedia.org/wiki/Eurodollar)
Foreign countries trade in currencies all the time. Often, debt is not owed in their local currency. Iceland was trading debt denominated in foreign currency, and recently, the IMF had to bail out the entire country’s system. With that, the IMF placed policy restrictions on the political structure as it had Iceland in a forced hand. But up until the crisis, the people there could borrow cheaper a foreign currency and the exchange rate was favorable. Yet, in comes Gresham’s Law: “bad money drives out good.” It kills economies with currency losing value. This is a somewhat complicated truism that two or more currencies that trade are based on face-value. As value debases, one bad money will force out the money that is good- a currency that has an intrinsic value. Fiat currency is backed by faith in it and no gold or other precious metal. The US Dollar is fiat.
So in comes the IMF again as it is a global central banking structure. There are other central banks of all major European nations, Asia, and around the world. They trade currency, metals; they support each other and even loan out gold as a way to help keep good money in play. There are rules though. When any commodity like a precious metal is traded and interest rates paid, investment, or onward to retail purchase (think G. Gordon Liddy commercial on that gold stock purchase), there are rules of how much of the actual commodity is held or moved. There is a rule of 90% holding of say gold if you’re actually or even on paper futures, trading a commodity. It has to exist to be traded.
“The Commodities Futures Trading Commission (CFTC) has ignored or misinterpreted the purpose of the 90% cover rule for a very long time. This regulatory failure has allowed the current free-for-all “casino-like” atmosphere that now prevails at futures exchanges.” (http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default)
So what does this rabbit hole economics lesson have to do with anything? There is a dark event horizon of fake trades of precious metals, with large sums of gold moving about Europe. This movement is highly unusual as it was oddly timed. The other element of it all is that when more or less real gold changes hands, currencies fluctuate and bad money drives out good. Our fiat dollars will go down. Nevermind that we injected 1 Trillion dollars we must print, into the IMF. All we need do is look to other foreign entities who are begging the IMF to step in. If the peso, the yen, ruble, and US dollar all need a bail-out, then the global control will become a reality that we cannot stop.
Now here is the real carrot of the rabbit’s desire:
The European Central Bank sold over 35 tons of actual gold on the day that at almost the very same moment that Deutsche Bank was giving notice of its deliveries, the ECB happened to have “sold” 35.5 tons, or a total of 1,141,351 ounces of gold, on March 31, 2009:
“On Tuesday, March 31st, Deutsche Bank (DB) amazed everyone even more, by delivering a massive 850,000 ounces, or 8500 contracts worth of the yellow metal. By the close of business, even after this massive delivery, about 15,050 April contracts, or 1.5 million ounces, still remained to be delivered. Most of these, of course, are unlikely to be the obligations of Deutsche Bank. But, the fact that this particular bank turned out to be one of the biggest short sellers of gold, is a surprise.” (http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default)
All of this gold is traveling back and forth, with little concern for the rules of ownership and holding of any commodity trading. There is a great deal of shifting gold out there and with that, a high risk for currencies in Europe, Asia, Latin America, and even the United States to be compromised by ponzi scheme trades. This is the element of the power grab: the short, or long, but always loose trading of money and metals that keeps nations at the beckon call of international funds. Heavy short selling of metals with little look-see of the actual product can cause instability of global proportions.
There are long standing fears of gold scams, and one of the most noted is of legend. Some few worry that our extensive gold supply, the Fort Knox worry, is not really there. Maybe there is a short of all gold and then nothing is real. If fiat currencies backed with faith, what does a nation do as the dollar collapses? See the history in this country as the Long Depression of the 1870s, Black Friday, and the U.S. Grant administration fraught with gold fraud, the Frist/Gould Scandal (http://en.wikipedia.org/wiki/Black_Friday_(1869))
History does unfortunately repeat itself.
Europeans have faced this more recently that us. This issue of mysterious naked trades matters. This is the essence of any ponzi scheme. Remember too, Europe is deeper in the red than we are in terms of the mortgage crises- Spain, Ireland, and the United Kingdom. There is growing unrest as the trust in the systems fails.
Asia and specifically China, has had a long standing history of hoarding gold. Hong Kong is a huge player in international commodity trade of gold, and I wonder where the next grab of power will be? Could the gold movement underscore a bigger desire? Are we seeing a fiscal structure grab through the gold itself? Is this all about the desire for currency powers beyond the dollar and a new world currency?
Oligarchy gets bantered around in all of this, but the concept is as old as money. A small number of people hold the money and the power as an oligarch by definition is a family or tribe. Mexico is basically run by about 20 large families with drug trafficking being the new industry. Mexico is also fiscally ‘owned’ by foreign investment upwards of 80% of is gross product.
After the Soviet Union fell, the economic teams including a one Larry Summers, went in and helped create free enterprise markets. They also looked the other way as oligarchic structure- much of it still of Chechnya- created extremely wealthy Russian power brokers. Yeltsin was ousted and Putin’s regime came in. What does Russia have today beside fiscal troubles? A lot of raw materials to sell. What Russia does not have is good manufacturing ability. Step in China or other Asian markets with cheap manufacturing and endless labor. India and Pakistan also have huge capacity to produce and process raw materials. Mexico and Russia, even Iran all sell oil.
What we also see is a huge rise in Muslim extremism. Asia, Middle East, Chechnya, and now we hear Mexico is also brewing with terrorist organization. One thing is certain, all study of political power grabs and religious zealots goes deeper into someone’s pocket. What do they say? FOLLOW THE MONEY.
All of this big Economics lesson gets so convoluted—I basically understand it and I am getting lost in the caves of war game and shells. Tribal is feudal and the lording of people is the fiscal Costa Nostra, and all control is a small gold ol’ boys club.
We deny it and cover it all with false prophets and figureheads. The rich men run banks and insurance companies. The JP Morgan types have financed industry and the financing has become bigger than the industry. FIRE- Finance, Insurance and Real Estate, have become the world, and it is blazing up.
It is all small owning large-Oligarchy. Companies that dominated the country and the world are disappearing–like General Motors– once an industrial, product producing entity. Lately, GMAC financing mortgages and loans made more for the big heads than the cars ever profited. Now it is all a government-run free fall as we blame the middle men and hug all the unions. America used to be about cars, top quality products, and steam. Now everybody wants to make money off of money and that just cannot be sustained. Our manufacturing base has gotten smaller. We are all service entities and a growing bureaucracy. Bureaucracy cannot save us. If we do not get back to those basics- make and create-we lose the American Dream. We cannot all be Kings. The financial snake keeps eating its tail. Sooner or later the snake cannot eat one more bite and just dies from gorging itself.