With Christmas just two days away (here in Australia) as this is being written, this is the penultimate Gold This Week for 2006. We'll put out a last one, probably a short one, next weekend.
As you can see from the chart above, right now Gold is up just over $US 100 (or about 19.4 percent) for the year to date. Not bad going at all, especially considering the frantic activities of what has been called the "PPT" (Plunge Protection Team) in the US over the latter half of the year, not to mentiuon the fact that this year was an election year in the US.
As we all know, the Democrats won the House and the Senate in November, although the recent stroke suffered by the Democratic Senator brings Democratic control of the Senate into question as we enter 2007. As is equally clear from the statements of the various "big wigs" of the Democratic party since the mid term elections, we cannot realistically hope for much in the way of change once the new Congress convenes next year.
And as the recent maunderings of President Bush and Vice President Cheney make equally clear, the chance of any form of "sanity" leaking into the Bush Administration is equally remote.
Amongst many other facts, the last issue of The Privateer for 2006 (Number 568 - published on December 24), points out that slowly but inexorably, the rest of the world is turning away from the US Dollar. To this point, this is being done with great caution and almost equally great trepidation, nobody wanting to invoke the "deluge" because of the gargantuan amount of US Dollar obligations held outside the US and also because of the simple fact that the US Dollar is still the major component in the "reserves" which form the foundation for the worlds many national financial systems.
Fed Chief Bernanke and Treasury Secretary Paulson have recently returned from China, both having eloquently demonstrated that they have learned nothing from the travails of US foreign and financial policy. Mr Bernanke took the opportunity in his speeches in China to lecture his hosts on the "benefits" of a market economy and "urge" them to free up their economy and their foreign exchange regulations alike. Whom does he think he is kidding? Rhetorical question. Mr Bernanke knew that his audience in China could and would see right through him. The speech, as all speeches given by US political potentates abroad, was not aimed at his immediate audience. It was aimed at the American people.
As the clock counts down on 2006, the situation in essence is simple. In the US, and Administration and a political establishment are in disarray. They are agreed on only one point. They want to retain POWER. What they cannot agree upon is how to do it, with their Iraq/Afghanistan position now clearly and completely untenable and their financial "clout" in the world diminishing almost as rapidly.
With the talk of a military "surge" in Iraq now the central topic of conversation in Washington DC, the end game is clearly coming close. It is becoming impossible for the US political establishment to hide the fact that the only means they have left to maintain their empire abroad and their position at home is naked military force. Economically, their means have long since been used up. The productive capacity of the US has been almost literally "burned out" in the pursuit of power and there is no domestic means left to replenish it.
A lost war would not mean a loss of political power for the US establishment. A loss of control of global finance via the loss of the premier status of the US Dollar WOULD. The US establishment knew this in the 1970s. That's why the pulled back and then pulled out of Vietnam. Will they do the same this time? Next year will tell the tale.
Even if they do, the fact is that when the US pulled out of Vietnam, the fiat floating currency era had only just started and the US was still the world's biggest global creditor. More than three decades later, they are the world's biggest global debtor and do NOT have the productive capacity to repay the debt. Should they tangle themselves even deeper in Iraq, Afghanistan, and elsewhere in the Middle East, they will end up without the means to even SERVICE it.
Gold as money and unbridled political power are at opposite ends of the political (and economic) spectrum. No nation has ever "ascended" to the status of empire without debauching its currency. And having done so, every nation which has reached that status has lost its empire and then suffered an internal political implosion.
All history teaches this lesson. When (if?) it is finally learned, the world will return to Gold as money. In the meantime, Gold is the ultimate protection against what circulates as "money". Really, the situation is as simple as that as we await the start of the new year.
Let us take this opportunity to wish you and yours all the compliments of the holiday season. Next week, we'll be wishing you a Happy New Year. Every year is a happy year for those who have taken the trouble and mustered the strength to look the REAL situation straight in the eye and accept it.