Six weeks ago, at the beginning of April, the whole world was on tenterhooks waiting for an imminent US attack on Iran. It was surely going to happen, the US had stationed most of their Navy in the Gulf and everyone from Vice President Cheney on down (or up, if you prefer) was making noises ever more reminiscent of what was coming our of their mouths in the days just before the US launched itself into Iraq in March 2003.
Russian intelligence even went so far as to put a date and time on the event. According to them, the US was going to attack at 6:00 AM on Friday, April 6.
Of course, the "powers that be" in the rest of the world had made it abundantly clear (much clearer than they did in the lead up to the March 2003 attack on Iraq) that they would view any military attack on Iran with the gravest of misgivings. This was and is true even in the case of the few remaining "allies" (foremost amongst which are Britain and Australia) in the US occupation of Iraq. The potential such an attack had, and most assuredly still has, to inflame the entire Middle East was pointed out repeatedly. So was the untenable position that US and "allied" forces in Iraq would be faced with. So was the complete illegitimacy in international law of any such US attack.
All this was blithely ignored, by the Bush Administration, by most of the mainstream US media, and, sadly, also by the Democrats still in the first throes of their Congressional majority. But the fact remains that the US has NOT attacked Iran, even though the forces necessary to do so are still being built up and the "alert" is still on all but a war footing.
In the time since the beginning of April, we have seen a Middle East peace move brokered by the Saudis which has now reached a worldwide standing with the meeting which took place last weekend in Egypt. We have seen peace feelers sent out by the Israeli government, where Prime Minister Ohmert "enjoys" an approval rating which makes President Bush (himself hovering below the 30 percent approval level) look like a paragon of popular political leadership. In recent days, there have even been some quickly squelched hints toward a diplomatic (instead of military) meeting between the Iranians and the Americans.
Consider the fact that almost all wars are, at root, designed as "distractions" to take the eye of the populace in the belligerant nation off domestic developments. This has certainly been true of every war in which the US has participated since WW I. The Gulf war of 1991, for example, certainly fits into this category. At the time, the US was mired in recession and government deficit spending was reaching a peak under President Bush I which has only been exceeded in US history by his son (and heir) Bush II.
For the "neocons" in the Bush Administration, the impetus towards Iran might be put down to mere belligerance and a need to try to reclaim their disastrous Iraqi adventure by upping the stakes. But to the US political and financial establishments, the impetus was - and is - far more fundamental than that. The US is literally losing control of the world. Its empire is crumbling around it. And with that, its global power to influence and shape events is on the wane. The US establishment wants to hold onto its power. To do that, it has first and foremost to hold onto the ability to get the rest of the world to "accept" - preferably by "persuasion" (read intimidation) but if necessary by force - the currency which it controls and can create literally at will. The foundation of the power of the US establishment is the global pre-eminence - as a reserve currency - of the US Dollar. This has been the foundation of every empire in history. The present US one is no different.
As you have no doubt noticed, the pressure on the US Dollar has "eased" over the past two weeks or so. So has the pressure on US interest rates brought to bear by the sub-prime mortgage meltdown. The fundamental economic aspects which produced this pressure have certainly not gone away, but their effect has lessened.
Would that have happened if the US HAD attacked Iran? We think not. But the US has NOT attacked Iran, not yet anyway. At the same time, the amount of money being funnelled into US debt instruments by foreigners has increased. At the same time, reliable reports have emerged that the European banks are selling much more Gold than they did over the same period last year. At the same time, the downward spiral of the US Dollar on the foreign exchange markets has been halted. And, of course, at the same time, the $US price of Gold has suddenly taken a header, as it did this week.
The rest of the world is doing EVERYTHING it can to dissuade the Bush Administration (and behind them the US political and economic establishments) from attacking Iran. A plan to bring peace to the entire Middle East has sprung up from nothing. The main trading partners of the US in Asia have met and decided to "pool" their reserves as a buffer against the possible re-occurrence of the Asia Crisis of a decade ago. European Central Banks, even though still constrained under the "Washington Agreement", have markedly upped their Gold sales.
There is no doubt that the US political and economic establishments too are well aware of the horrible dangers to themselves that they face if they attack Iran. There is the not so small matter of becoming an instant and global pariah. There is the greatly increased threat of market chaos up to and including the toppling of the "top dog" status of the US Dollar. In the Middle East itself, there is the very real danger of a catastrophic surrounding of US forces in Iraq. Any one of these developments could well be enough to finally topple the US from its "world's number one" pedestal. All of them combined are almost guaranteed to do it. And with that, of course, goes both the international and the DOMESTIC power of the US establishment. History is replete with precedents, the most recent of which happened in the USSR less than two decades ago.
For the last six weeks, the world has ridden the knife's edge. The US has not yet attacked Iran. The longer they refrain from doing so, the lower the chance that they will attack at all, and the greater the chance that at least a start can be made to address the disastrous consequences of Bush Administration foreign policy. That is what the rest of the world is counting on and working toward. And to that end, a little "distortion" in the financial markets, not least the precious metals markets, is counted as a VERY small price to pay.
And so it is. There is no absolute PROOF that the Gold sell-off this week was part of this effort, but all the signs point towards it. Let us fervently hope it succeeds. There are no guarantees, and we would still put an eventual US attack on Iran as being much more likely than it NOT happening at all. But the longer the US delays, the harder it gets and the more costly the delay becomes.
Gold (and its holders) have nothing to worry about anyway. Gold as money has outlived the collapse (violent or otherwise) of countless empires. One more won't make much difference. The one difference is that the building up of the US empire has distorted the global financial and monetary system to a FAR greater degree than any of its predecessors. That makes the "potential" for Gold that much greater than it has ever been before. Right now, it's worth the wait.
As we stated here two weeks ago, these are the numbers to watch out for:
Here is Gold in four major currencies in relation to its bull market high. As you can see, the 2006 high in Japanese Yen has been bettered this year. In fact, Gold's high in Japanese Yen came this past Monday (May 7) - just before the Gold sell off.
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