"If it (the debt limit) had not been increased, it would have put we in the Treasury in the position where we would have had to make a choice between defaulting (on debt payments) or ...using shaky, I might even say potentially fraudulent, accounting devices to paper over a lack of action by Congress
"I'm very pleased we didn't reach that point, because ...I do not think we in the Treasury should put ourselves in the position of where we could be accused ...of following the horrendous accounting policies and practices that have come to the surface in private companies in recent months. We will set the standard for integrity in accounting practices and policies."
This is a direct quote from U.S. Treasury Secretary Paul O'Neill. IT REALLY IS! We have not pulled this off one of the satirical sites on the net like "The Onion" or "SatireWire dot com". Have you finished reading it? Is it a nice day where you are? Why not take a short walk around the block to pick your jaw up off the floor, and then read it again.
It is fairly difficult to know where to start with this one. The first thing that jumps off the page for us when we read these quotes is that Mr O'Neill is overdue to have his belt and shoelaces removed and to be placed gently but firmly in a padded cell.
But perhaps that is somewhat harsh. Perhaps all that happened is that, in the excitement of the moment, Mr O'Neill did not think out the implications of the words he was so recklessly uttering. If so, that would not be in any way unusual for a member of the Bush Administration, most of whose mouths have been disconnected from their brains for some time now.
Let's look at just one of the many implications. Let's say it was the day before WorldCom was going to have to come clean with their somewhat embarassing accounting mistakes. The board of directors was in a frantic meeting trying to figure out a way to come up with some more capital. Suddenly, the CEO jumps to his feet! "I've got it, boys! Let's vote ourselves another $US 450 Billion in capital!". "BRILLIANT - shouts the board in unison - "that'll fix everything!
Isn't that what the House just did for the Treasury?
What WorldCom (and the other dastardly private sector miscreants) actually did was simply to call a deficit a surplus. Isn't that what the Treasury did every year between 1997 and 2001? If Mr O'Neill is right, and the Treasury ..."set the standard for integrity in accounting practices and policies", then why shouldn't WorldCom and all the rest follow such practices? Unfortunately, corporations, even great big corporations, don't have the means to "vote" an increase of capital into existence. Only governments have that.
But they only have it for as long as the poor downtrodden governed have the capacity to suspend their critical faculties. And Mr O'Neill's latest outburst is going to test that capacity like it's never been tested before.
In light of THIS, such pecadillos as forcing the Gold price down almost $US 10.00 in the last 10-15 minutes of Comex trading on June 28 fade into utter insignificance. So does gabbling on about any kind of "Dollar Policy" - strong, weak, or "just right" - while the U.S. currency slides off the radar screens. After all, everyone should know by now that Gold doesn't matter and the world will NEVER run out of Dollars. Not as long as the U.S. government can grant themselves permission to borrow as much as they want to.
And they want to - here's a parting shot from Mr O'Neill. "The whole idea of a debt ceiling is an anachronism. We'd be better off without it." And by his own "lights", he's right. After all, how can the Treasury ..."set the standard for integrity in accounting practices and policies" when they keep running up against limits to the amount they can give themselves permission to borrow? Just make the permission unlimited and they can make accounting an anachronism too. Why bother, when it doesn't matter how much they owe?
It doesn't matter to them, but it may matter to the rest of us. If the evidence coming from U.S. stock markets and from the U.S. Dollar is to be heeded, it DOES matter to the rest of us. If the blatantly and transparently desperate efforts to knock down the Gold price on June 28 are any evidence, it matters a LOT to the rest of us. Is there an escape from Mr O'Neill's burst of lunacy? Sure, other major currencies, like the Euro which almost reached parity with the Dollar on June 28. Is there an escape from the Global lunacy of thinking that one can create wealth on paper by a government vote? Sure - GOLD!
If you still harboured any doubt or haziness about Gold's place in the economic and financial scheme of things, the events of this past week, and in particular these AWESOME quotes from Mr O'Neill should have banished them forever. Mr O'Neill is far from the first official in the long and sordid history of money based on government edict to speak while having his mouth disconnected from his brain. There have not been many in history, however, who have exposed the entire scheme as blatantly as he has just managed to do. That takes REAL talent - perverse as it may be.
There has only EVER been ONE ultimate escape from the insanity of fiat money and out of control credit creation, and that is physical Gold. It is a measure of the desperation of the present situation, and of the venality of those in charge of the current global financial system, that this ATTACK on Gold was mounted.
The machinations are becoming to gross and too clumsy. They are becoming so easy to see that it is getting very hard to not see them. We can see the results all around us. World stock markets are crumbling. World economies are crumbling. The world's RESERVE CURRENCY is crumbling. Now, one of the most powerful financial men in the world has laid the entire con game out in the open for everyone to see.
We are too young to have been watching the markets closely when the London Gold Pool fell apart in the late 1960s - but fall apart it did. We certainly remember vividly the attempts by the Treasury and the IMF to "cap" the Gold price in the late 1970s. That fell apart too. Now we are watching the same thing again, for the same reasons, but with a tenacity and a ferocity which the previous two major attempts to "fix" Gold did not approach. This one will fall apart too.
It's just a matter of time, and of how far people are prepared to go in refusing to see what is right in front of their eyes. Stay tuned, Mr O'Neill has just upped the ante to a place where it has NEVER been before.
PS: The debt ceiling is not yet law and will not be law until President Bush signs the bill. The White House has assured the Treasury that the bill will be signed before Monday, July 1.
PPS: We have more to say about Mr O'Neill, and about the amazing events of the past week, in the latest issue of The Privateer (#453 - published on June 30).