Why the U.S. Government Hates -and Fears- Gold

By Alan Walsh

The U.S. Government hates Gold because it serves as a clear, unambiguous, and constant sign of their fiscal irresponsibility.

U.S. currency used to be issued by the U.S. Government, and was backed by Gold. You could literally trade-in your dollars for Gold. Then, the Federal Reserve system was created, the dollar was disconnected from Gold, and the U.S. government stopped issuing currency. To really “seal the deal”, the government even outlawed individual ownership of Gold for awhile and forced citizens to sell it to them at a fixed price they set; then they raised the “official” price of Gold, devaluing every dollar citizens held by about 40%.

The Federal Reserve (also referred to as the U.S. central banking system, or central bank) is not a government agency; it’s a private bank, owned by other big banks, and run by people from those banks. When the U.S. Government wants additional money to spend, it buys it at face value ($100 for a $100 bill, for instance) from the Federal Reserve; which creates the currency. That’s why your dollars say “Federal Reserve Note” on them. In order to buy the currency, the U.S. government goes into debt  via Treasury Notes & Bills, etc. The government then spends that money.

Why did the U.S. government do this? So politicians could avoid accountability, buy votes, get reelected, increase their power, and transfer the effect of their spending to the future. This is how the federal government got to be the monster it is today. Under the old system, the government could only spend as much as it held in gold-backed dollars. If they wanted to spend more, they had to tax citizens. Citizens don’t like higher taxes, and get upset. Politicians lose jobs. Government was held accountable. The new Federal Reserve system removes this nasty inconvenience by letting the politicians just go buy currency from the Federal Reserve, creating new debt in the process; and government debt is a claim on the productivity of the nation – therefore it is your debt. Government doesn’t produce; it only consumes – your wealth. The income tax was created at the same time as the Federal Reserve system to pay for this debt.

As government buys more dollars from the Federal Reserve (and creates more debt in the process), it increases the number of dollars in circulation; thus creating inflation – plus damaging boom & bust cycles in the economy – plus interest expense on the debt. This is where Gold becomes very annoying to them. Gold, like any other commodity, adjusts in price with inflation and glaringly points it out. As the number of dollars in circulation goes up, the price of Gold rises.  People see their purchasing power in dollars go down, so they trade them for Gold; which holds its purchasing power in times of inflation and serves as alternative money. Government doesn’t want you to notice their little shell game, and they don’t want you to stop using and holding their inflationary dollars, so they hate Gold.

Our government, and other governments who play the same shell game, try to control the price of Gold and hold it artificially down through surreptitious trading activity in league with major financial firms. They try to send you false signals about their inflationary borrow & spend activity by artificially holding the cost of Gold down. If the price of Gold is low, everything must be okay, right? Wrong! Very, very wrong!

We’ve now reached a point where government borrowing and spending is so extreme that they can’t artificially hold Gold down to the price level they would like anymore.  Thus, Gold is trading near $1,700.00 per ounce. Many experts argue that if the government wasn’t surreptitiously intervening in the market to hold the price of Gold down, it would be trading for $3,000 or more.  Regardless, the rise in the price of Gold is a clear and unambiguous signal that government spending is out of control. The effect of this is to undermine peoples’ faith in the dollar and our government.  That makes it hard for government to keep up their shell game. Their borrowing & spending has also created a debt that the income tax can’t begin to cover – plus those nasty and growing interest obligations.

Sober people have also questioned how much of the Gold the government holds it actually owns anymore. They suspect that the government’s secret Gold sales to flood the market and hold the market price of Gold down have been so extensive that very little of the Gold they hold is actually owned by them anymore. Large Gold sales usually don’t involve physical transfer. An electronic record is created to note the new ownership. Therefore the government may be sitting on a large cache of Gold that “we the people” don’t own anymore. Perhaps this is partly why the price of Gold has risen despite government’s best efforts to hold it down. Maybe they’ve run out of Gold to sell. We can’t know for sure, because the government hides this activity behind a thick wall of secrecy. But bits and pieces of info leak out now and then, and they paint a dismal picture. Investigators have even uncovered documents created by central bankers for central bankers on how to execute market intervention between each other to hold the Gold price down.

As the government shell game grows, people start paying attention, and realizing how they’re being hosed by the government’s inflationary, destructive borrow and spend policy. If more Americans understood how our monetary policy works, and what government’s doing to them, they’d be screaming. Government does everything it can to keep us in ignorance.

Faith in the U.S. Dollar has been so severely undermined that other nations, who are not so naive in these matters, are seriously talking about abandoning the dollar as the “world currency”, a beneficial status which the U.S. has enjoyed since the end of World War II. If that happens, investment coming into the U.S. will decline and government will find it increasingly difficult to sell or roll-over their debt; China being our largest current creditor. Then the U.S. will hit a “fiscal cliff” that makes the current one look like a ride in the park.

The U.S. national debt is now over $16 Trillion dollars; over $52,000 per person, and approx. 125% of gross domestic product (gross domestic product being our productivity as a nation – your productivity – the productivity our government taxes you on) – a new record by far. The current government’s policies alone added $8 Trillion to that debt in the last four years. Then there’s the interest on all that debt. Budget projections indicate that the national debt could hit $20 Trillion in the next couple years if we keep going the way we are. Other nations are starting to look at the U.S. like Greece; a bankrupt financial disaster. We’re mortgaging our nation to entities like China, who are not exactly our friends. The current administration’s indebted the nation to a greater extent than any other, but they’re not the only perpetrators. This has been going for decades since the new system was created. It’s not a Democrat or Republican problem – it’s a national tragedy.

Gold at $1,700 an ounce sends this signal clearly – which government fears and hates.

The government wants you to hold their inflationary dollars. The Federal Reserve does too; and bad-mouths Gold. The finance houses who surreptitiously work with the government to control the price of Gold tell you that Gold is an unproductive asset, and you should hold dollars instead; while they quietly buy it for their own accounts. They’re all propagandizing you to keep their shell game going. I remember one time a couple of years ago when one of the major financial houses (JP Morgan I believe) was publicly telling it’s clients to sell Gold, while privately buying it for their own account.

The national tragedy goes even deeper. The Federal Reserve holds secret meetings where it shares inside information with the finance houses who help it; information that they use to make millions and billions on the markets from you unknowing investors. If you think the equity & debt markets are free and open, think again. It’s all manipulated.

Let’s talk about one of the many ways in which your government shafts you with this shell game – Social Security. You are required to make tax payments into Social Security. These payments are made with post-income tax dollars (you’re first income-taxed on the income you pay the social security tax with). The government spends the social security revenues (money) and replaces them in the social security trust fund with government debt instruments; thus, the government spends your social security contributions as it sees fit, and replaces them with new government debt. Of course, government debt is a claim on the productivity of the country – your productivity – and therefore represents a new debt you as citizens take on. This is important to note, because government spends your social security contributions, and creates a new debt owed by you as a citizen (another tax) for payment of benefits to you. Then, when you receive your benefits, up to 85% of them are subject to income tax depending on your filing status and how much income from other sources you have coming in.

To recap, the government first taxes the income you pay social security taxes with (income tax), then taxes you for social security (social security tax), then spends the money and replaces it with new debt (a new claim on your productivity, or tax), and then taxes you on your benefits (income tax). That’s three taxes on the money you put into social security, plus the social security tax itself. Of course, the government must pay interest on the new debt they created (another claim on your productivity, or tax), so really you pay five taxes; and your contributions are spent now for anything the government wants. Most citizens think the government is taking their money and putting it into a social security trust fund (savings account) to pay your benefits. Nope! That money’s gone. They spent it and replaced it with debt – debt that you owe as citizens.

The government says that your benefits money is safe because it’s invested in instruments guaranteed by the U.S. government. What they really mean is that your benefit claims are backed by their ability to tax you; or create new debt that you owe as a citizen; and that’s the only way those benefits are going to be paid. They just keep spending the tax money as it comes in, and pass the buck for social security obligations to future generations. Neat trick huh?

Additionally, “people retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.”  The government absorbed all the money you put in, plus the employer contributions, and you won’t even get back what you alone put in; let alone all the interest you could have earned on that money over the years. This is what your government has done for you. Isn’t it great? What a deal!

Your wealth, purchasing power, and financial stability are being undermined every day by the government’s borrow & spend shell game, the underhanded dealings of the Federal Reserve and it’s finance house cronies, and very likely the sale of our nation’s Gold reserves (your Gold reserves) to manipulate the markets and fool you. Even your most basic “protections” are being undermined by government subterfuge. Gold serves as a clear warning, and an alternative.

That’s why the U.S. government hates -and fears- Gold.

Be informed.

Learn More About the U.S. Government Monetary Policy:

http://walshal.wordpress.com/2009/04/11/monetary-policy-a-primer/

Other Suggested Reading:

America Has Become a Pinata

http://walshal.wordpress.com/2012/12/28/america-has-become-a-pinata/

Germany Tip-Toes Toward a Euro Exit

Germany Tip-Toes Toward a Euro Exit

Dan Amoss The stock market will not remain in its current tranquil state. Investors will soon be roused from their blissful trance. This trance traces its origins back to the mass self-delusion that central banks can revitalize multi-trillion-dollar economies, simply by prodding investors into stocks and other “risk assets.” Investing is not that simple. The comparison between bond yields and stock yields — two completely different investments — has become absurd. Bonds are contracts involving a fixed stream of cash flows and a predetermined maturity date. Stocks are claims on highly uncertain streams of future free cash flows that often stretch out for decades. Many risks can enter the picture and alter the trajectory of free cash flow — and investors’ expectations of them. Risks tend to appear out of the blue and smack investors out of their blissful trance — a trance created by central banks that have shifted far too much attention on the returns of stocks versus bonds… Here is just one negative catalyst growing closer as the weeks and months pass: Germany could exit from the euro and return to the deutsche mark. While a German exit would offer long-awaited clarity about the future of Europe, it would also spark a mad scramble to adjust to a new reality. A German exit would trash the euro’s value against the currency that’s steadily becoming the reserve of choice: gold. Only weak economies with bankrupt governments would be left standing behind the euro. The European Central Bank (ECB) would be free to monetize as much Italian and Spanish debt as it wished (i.e., print euros to buy the government bonds of Italy and Spain). The economists calling for a weaker currency to restore prosperity to the PIIGS countries would get to see their prescription play out in a real-world laboratory. Results would show that currency debasement does not create stronger, more competitive economies. Countries left in the euro would see collapsing living standards: import prices would rise and capital investment would fall amid a chaotic currency regime. ECB president Mario Draghi famously deemed the euro “irreversible”; he would do whatever is necessary to preserve it. But what Draghi sees as necessary will eventually be seen as intolerable in creditor countries like Germany. Once Draghi starts monetizing Spanish debt, Germany and other wealthy countries will view the euro’s costs as greater than its benefits. The German central bank — the Bundesbank — still exists. The Bundesbank could convert its liabilities from euros to deutsche marks at a predetermined exchange rate and take a one-time write- down on assets related to claims on PIIGS central banks. It would certainly be costly, but the alternative is worse: perpetually financing eurozone states unwilling to restructure public benefit programs unaffordable for their economies. Having seen the example of Greece, the Spanish public suspects that austerity will only make things worse. Spain will come to believe that its salvation lies in the printing press — in the ability to inflate away its heavy debt burden. After promising markets that the ECB would buy Spanish debt, Mario Draghi now has no choice but to fire up the euro printing press. Most other debt holders will flee the chaos unfolding in Spain. They’ll refuse to hold Spanish bonds at yields too low to compensate for default risk. The ECB, once it establishes a fake, above-market price for Spanish bonds, will ultimately find itself the only holder of those bonds. This is what happens when central planners impose prices far from what private investors consider fair value (in this case, pushing Spanish debt yields to below 4%, versus a much higher market-based yield). Once the German taxpayers see that the ECB will become the majority holder of Spanish debt, they will insist that German politicians plan an exit from the euro.

Still Think Gold and Other Financial Markets Aren’t Manipulated? – Read Their Ad!

The Bank for International Settlements Bares It’s “Dirty Little Secret”.

Thanks to;

CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. -and- Researcher R.N.

The powers-that-be do their best to hide their manipulations of the financial markets, but every now and then the truth leaks out.

A researcher found a 24-page brochure prepared by the Bank for International Settlements to introduce itself to prospective members at a seminar at BIS headquarters in Basle, Switzerland, in June 2008.  The brochure includes an advertisement for the gold market-rigging services provided by the BIS to its 50 or so member central banks.  Page 17 of the brochure touts “Our Products,” including “Gold & Forex Services — Interventions.“

Can they make it any clearer?

Ex-Im Bank Offering Revolving Credit Line to Small Business Exporters

More small business exporters throughout the United States will have access to revolving credit, thanks to a new product unveiled by the Export-Import Bank of the United States.Through Global Credit Express, small business exporters may be eligible for a revolving line of credit, up to $500,000 for six to 12 months. During the program’s pilot phase, an initial $100 million in financing will be made available through a select number of lenders nationwide.

Following the pilot, the bank will evaluate the results of this direct loan program and determine whether to increase the available amount. The product is designed to finance the business of exporting rather than specific export transactions.Small business exporters interested in applying for financing through GCE can contact the bank by calling (800) 565-3946 and selecting option 2.

Debt Derivatives and Gold will Explode Shortly

Courtesy of: CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.

Debt derivatives and gold will explode shortly, von Greyerz tells King World News

Fund manager Egon von Greyerz, interviewed by King World News today, expects debt derivatives to start exploding across Europe and the United States soon, and gold to end its consolidation phase and to start moving up again as soon as next week. An excerpt from the interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/17_Greyerz_-_Gold_to_Begin_a_Major_Advance_Starting_Next_Week.html

U.S. trade deficit surges to $50.2 billion in May

updated 7/12/2011 8:51:24 AM ET 2011-07-12T12:51:24

Courtesy of msnbc.com

 

WASHINGTON — The U.S. trade gap widened much more than expected in May as a jump in oil prices helped push imports to the second highest level on record and exports fell slightly from April’s record high, a U.S. government report showed on Tuesday.

The trade deficit totaled $50.2 billion, the highest since October 2008, and well above the consensus estimate of $44.0 billion from Wall Street analysts surveyed before the report.

Imports rose 2.6 percent to $225.1 billion, the highest since the record of $231.6 billion set in July 2008 just before the global financial crisis took a huge toll on global trade.

The increase reflected record imports of capital goods and food, feeds and beverages in a sign of resurgent U.S. demand, but a jump in oil prices to $108.70 per barrel — the highest since August 2008 — also accounted for a large part of the gain.

The oil price jump helped push the U.S. petroleum trade deficit to the highest since October 2008. Imports from the Organization of the Petroleum Exporting Countries were also the highest since October 2008.

The wider-than-expected trade gap will likely prompt analysts to scale back their estimates of second-quarter economic growth, as imports captured more of stronger U.S. demand.

Link to Full Article

Fed Data Cruncher Finds No New Normal Unemployment With Nationwide Figures

By Vivien Lou Chen -Jul 10, 2011 4:01 PM PT

Courtesy, Bloomberg

Mary Daly holds up two charts containing 33 bars that all point down. They show eight industries getting hit equally hard after the 18-month recession ended in June 2009, suggesting that much of the past two years’ high unemployment is broad-based and should dissipate as the economy improves.

Daly is among researchers throughout the Federal Reserve system — from San Francisco to Philadelphia and the board in Washington — who are scouring data, examining models and gleaning anecdotes to determine why the jobless rate has remained stuck around 9 percent or more since April 2009. Most are reaching the conclusion that any long-term, structural shifts in the labor market aren’t significant enough to keep the U.S. from returning to a pre-crisis unemployment level of 5 percent to 6 percent by about 2016.

“If we were mis-measuring the natural rate of unemployment, I would expect to see rapid wage growth in some sectors offset by wage declines in others,” said Daly, 48, who heads the Federal Reserve Bank of San Francisco’s applied microeconomic research department. “I don’t see that. I see pretty uniform patterns across all sectors.”

This means Chairman Ben S. Bernanke and his colleagues should be able to bring down unemployment by continuing to keep interest rates near zero, eventually stimulating demand and encouraging businesses to start hiring again, said Sung Won Sohn, former chief economist at Wells Fargo & Co. and now an economics professor at California State University-Channel Islands. The risk is they will leave record stimulus in place too long, sparking a rising price spiral.

‘Flood of Liquidity’

“The research going on in the Federal Reserve is very important and critical in charting the future course of monetary policy, given the historically high jobless rate,” Sohn said. If the cause is primarily structural, then the Fed “will have simply created more future inflation because of a flood of liquidity it has created.”

The U.S. has recovered only 1.8 million of the more than 8.7 million jobs lost since January 2008, according to Labor Department figures, as companies such as Campbell Soup Co. (CPB) and Lockheed Martin Corp. (LMT) still shed workers. A report Friday showed the unemployment rate rose to 9.2 percent in June, the highest this year, from 9.1 percent in May.

When asked during a June 22 press conference if there’s a “structural issue” with unemployment, Bernanke said Fed officials “expect to see healthier job-creation numbers” and “payroll numbers improving relatively soon.” The U.S. is “still some years away from full employment in the sense of 5.5 percent, say,” he added.

Link to Full Article

Global growth: American exceptionalism

American exceptionalism

Jul 1st 2011, 17:41 by R.A. | WASHINGTON; Courtesy, The Economist

AMERICA’S economic prospects seem to be improving, but it’s very nearly alone in that respect. The latest data from purchasing managers’ indexes around the world provide a snapshot of a global slowdown. While American manufacturing activity grew at a faster pace in June relative to May, most countries saw slowdowns and a few dipped back into contractionary territory. (See this useful interactive at Real Time Economics for an easy comparison.)

Slowing growth in China has grabbed attention, given recent headlines about debt loads and unrest there. China’s PMI dipped from 52 to 50.9, barely in expansionary territory, in June. That’s not entirely a bad thing, however. Chinese inflation has been running uncomfortably high, and the government has been working to slow the economy’s growth. The story is the same in India, where activity also slowed, and in Brazil, where production actually fell in June.

As the chart at right indicates, the Indian and Brazilian economies have been running especially hot. (You can see an interactive chart of the factors that make-up the index here.) Depending on the pace of the slowdown over the next few months, there are sure to be worries about hard landings. Emerging market governments have little choice but to combat destabilising inflation.

The good news for the rich world is that slowing emerging market growth will keep commodity prices. That, in turn, will dampen inflationary pressures and free central banks to respond more appropriately to domestic economic conditions. In Europe, those conditions are weak and getting weaker. Manufacturing activity for the euro zone decelerated sharply in June. The big core economies, Germany and France, weren’t spared. But matters are worse around the periphery.

Link to Full Article

Obama’s Economists: ‘Stimulus’ Has Cost $278,000 per Job

12:07 PM, Jul 3, 2011 • By JEFFREY H. ANDERSON

When the Obama administration releases a report on the Friday before a long weekend, it’s clearly not trying to draw attention to the report’s contents. Sure enough, the “Seventh Quarterly Report” on the economic impact of the “stimulus,” released on Friday, July 1, provides further evidence that President Obama’s economic “stimulus” did very little, if anything, to stimulate the economy, and a whole lot to stimulate the debt.

The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.   

In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead. 

Furthermore, the council reports that, as of two quarters ago, the “stimulus” had added or saved just under 2.7 million jobs — or 288,000 more than it has now.  In other words, over the past six months, the economy would have added or saved more jobs without the “stimulus” than it has with it. In comparison to how things would otherwise have been, the “stimulus” has been working in reverse over the past six months, causing the economy to shed jobs.

Link to Full Article

Exits abound on Obama’s economic bench

By Stacy Kaper and Catherine Hollander

National Journal

updated 7/5/2011 12:13:27 PM ET 2011-07-05T16:13:27

 

If Timothy Geithner steps down as Treasury secretary, it would spotlight an increasingly apparent liability for the Obama administration as it searches for a way out of the economic crisis — the weakness of its bench on economic and financial services policy, where a number of crucial vacancies loom at a fragile time for the financial system.

While the administration’s economic attention has been consumed by the struggle to strike a budget-cutting deal that would lift the debt limit before the economy is further rattled by the threat of a default, critics have been complaining that there is little attention or manpower devoted to other pressing issues. Having to take time and energy away from limited resources to focus on replacing a Treasury secretary would only add to those problems, analysts said Friday.

“It makes matters worse,” said William Longbrake, an executive in residence at the University of Maryland and the former vice chairman of Washington Mutual. “What about the rest of the economics team? There doesn’t seem to be a whole lot there to actually help the president formulate good sound economic policies as well as good sound political strategy. Everywhere I look, the people who have been guiding the president’s economic policy are all either departed or shortly will depart.”

Link to Full Article