What's that, you say! How can Gold hitting a five-year high on the London AM fix ($US 327.25) on May 31 be a "small symptom"? Isn't the whole "Gold world" agog, exulting over their gains on Gold and Gold stocks one minute and then breaking out into a cold sweat over whether it can all keep going the next? Why, Gold is even being talked about on CNNfn, for pity's sake!
All true, and yet it IS a comparatively small symptom. If there are degrees of "angst" amongst the U.S. financial "powers that be", right now the increasing Gold price is, if not the least of their worries, then definitely not amongst their major concerns.
What ARE their major concerns? Well, lets take a look at some of them.
The early June issue of The Privateer (published on June 2) focusses on an astonishing event. While President Bush was in Europe, his Joint Chiefs of Staff (JCS) let it be known publicly that they would NOT fight a war against Iraq this year. The reason given was that the U.S. armed forces are simply not ready for it.
With this announcement, the U.S. military is attempting to pre-empt U.S. policy making, and in so doing putting in grave jeopardy the VITAL principle of the supremacy of the CIVIL over the MILITARY in U.S. government. To date (June 1), we have heard NOTHING from Mr Bush, the U.S. COMMANDER IN CHIEF, in response to this bombshell by his JCS.
Then there is the U.S. government's debt position, with the Treasury having hit its debt ceiling and being forced to resort to "other measures" to fund the U.S. government and to avoid default on more than $US 6 TRILLION of Treasury debt. The latest on this front is that a provision to increase the ceiling from its present $US 5.95 TRILLION to the Treasury's preferred $US 6.7 TRILLION has been steamrolled through the House tacked on to an "anti-terrorism" bill. It still awaits ratification in the Senate.
But Ron Paul of Texas has uncovered a dirty "secret" in the form of a "Supplementary Apppropriations" bill (HR 4775) now before the House. There is a provision (among all the other pork) in this bill which would make it possible in future for the Congress to raise the debt limit "in conference" - that is - away from public scrutiny.
This, or something like it, had to happen eventually. It is the usual sleazy trick, but it doesn't really matter much anymore to anyone who understands the situation. The U.S. government, despite all its protestations to the contrary (remember the talk about paying off ALL Treasury debt by the year 2009-10-11-???. Astonishingly, many people took it seriously. This bill, if (when) it passes, will be the final proof, if any more is needed, that the debt will NEVER be paid off. It will fool no-one, except those who refuse to see.
On another front, President Bush's chief economic advisor, Mr Lawrence Lindsey, strode forth on Thursday, May 30 to assure his breathless listeners that the Bush Administration's "strong Dollar policy" was still intact. Pity the Dollar isn't. Mr Lindsay went on to say that so far, the Dollar had retraced only THREE PERCENT of its post 1995 gains. We don't know what "basket (case) of currencies" Mr Linsdey is utilising to come up with this assertion, but we don't think he is including any of the ones that most people watch (the Euro and the Yen, for example).
And finally, just to show that the Bush Administration is not alone in their steadfast adherence to a "strong Dollar policy", the Bank Of Japan was sighted in the forex markets twice on Friday, May 31. They were actively and openly selling Yen and buying Dollars to prop up the once mighty US BUCK.
Now, take all of the above and couple it with a rising tide of economic statistics giving the lie to what is still being called a U.S. economic "recovery", and you can see that the U.S. Administration and the U.S. financial powers that be are embattled on ALL fronts. No sooner do they slap a patch on one hole in the dam than a bigger leak breaks out somewhere else. The rising $US Gold price is certainly one of these leaks, but it is not - YET - the biggest or most important one.
To distill the situation down to its essence, what is at grave risk now is the facade of U.S. financial impregnability built up over most of the past decade. What is smoking at the edges is the impression that no matter WHAT happened economically or financially, the U.S. would land on its feet smelling like roses. It has been more than a decade since Japan turned turtle, and ever since, the world has ridden out a continuous series of economic and financial crises. The U.S. has given the appearance of riding unscathed through them all. In fact, as each crisis succeeded the previous one, the perception of the U.S. as being "strengthened" by them increased.
That took a knock when the Nasdaq crashed in 2000. It took a bigger knock when the entire U.S. stock market turned turtle in the wake of 9/11. It is taking a still bigger knock now as the U.S. Administration loses control of its military, as U.S. debt resumes its upward spiral, and as the Dollar crumbles before the eyes of the world.
And, of course, in the midst of all this, the $US Gold price is going UP. HOW COULD IT DO ANYTHING ELSE?? We are well aware that God is reputed to be omnipotent. Men are not, not even the men (and women) who run the U.S. political and financial system. It is unravelling before their eyes, and they are demonstrating a growing inability to do anything except slow down the descent into what is starting to resemble an abyss. Sooner or later, the wheels ALWAYS fall off any attempt to have one's cake and eat it too. Right now in the U.S., they are wobbling as badly as they have at any time over the past century.
Yes, the Gold price rise is a small symptom - but it is a KEY symptom. For many years, the financial powers that be have concentrated on keeping the Gold price DOWN as a pre-requisite for allowing the prices of all paper financial assets to go UP. Now, all of them, including the U.S. Dollar itself, are going DOWN, no matter the efforts being expended to stop their falls. In this climate, Gold can't do anything but rise.
Please remember, Gold has only just made it to the BOTTOM of its previous (1993-96) bull market. It has only just exceeded the highest London Gold fix made during its long sojourn below the $US 300 level which began in November 1997. In (you should pardon the expression) short, it is just getting started.