"To borrow an invaluable metaphor from Alan Greenspan: if, under laissez-faire, the banking system and the principles controlling the availablity of funds act as a fuse that prevents a blowout on the economy - then the government, through the Fed, put a penny in the fuse box. The result was the explosion known as the crash of 1929.
(Nathaniel Branden - Common Fallacies about Capitalism)
"...under the Gold Standard, a free banking system stands as the protector of an economy's stability and balanced growth."
"The abandonment of the Gold Standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. ...The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets."
"In the absence of the Gold Standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. ...The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves."
All of these quotes, except the first one, come from Alan Greenspan. They are all contained in a short piece he wrote for Ayn Rand in 1966 titled: Gold And Economic Freedom. This is the same Alan Greenspan who has been running the Fed since August 1987, and who is now presiding over the biggest and fastest interest rate manipulation in the history of that institution.
What the world in general and the U.S. in particular has been witnessing with gradually increasing clarity over the past fourteen years is the acts of a man renouncing his mind by renouncing the ideas once scrupulously thought through and accepted as being TRUE. Every idea in the quotes from Mr Greenspan (and Mr Brandon) above IS true. It is not the ideas which have changed, it is the man who once held these ideas and has now renounced them. The reason he has done this is not important. The fact is that he HAS done it, and in the process, has stored up incalculable financial harm for most of the earth's population.
As shown by the Fed's action on April 18 - the fourth 0.5% rate cut in less than four months - Mr Greenspan is now shoved a whole fistful of "pennies into the fuse box" (see Mr Brandon's quote above). It failed in the 1920s, it will fail now. The true tragedy of the situation is that Mr Greenspan KNOWS this, but he is taking these actions anyway, because his course of action over the past 14 years has left him with no other choice.
Happily, the rest of us do not need to either renounce our minds or to rely on Mr Greenspan to "protect" our wealth. We can, and must, think for ourselves. If you find yourself tempted to rely on Mr Greenspan to do this job for you, consider his ideas then, and his actions now, and decide which YOU consider more viable.
With the Fed now having demonstrably PANICKED, it is past time to ACT (if you haven't already done so) to protect yourself from Mr Greenspan. Gold has improved this week - see the charts above. It continues to present very little in the way of downside risk. And more important by far, the worse the panic at the Fed gets, the more certain it is that Gold WILL preserve YOUR wealth.
The term "bubble" is a useful one in financial analysis, referring as it does to any market which has seen prices blown up to disproportionate levels. But, in this context, what is the opposite of a "bubble"? We don't know of a convenient word to use, but if one wants to describe the present $US Gold "price", that is what we are seeing. How about an "elbbub"? Kinda catchy - don't you think?
A "bubble" has nowhere to go but DOWN. An "elbbub" has nowhere to go but UP.
The chart of $US Gold is above. Here are the charts of Gold in the other currencies we cover.
Gold in Yen
Gold in Euros
Gold in D-Marks
Gold in Aussie Dollars
A little over a year ago, the Nasdaq was a "bubble". Now, the Dollar is a "bubble". ALL BUBBLES BURST.
(Gold This Week - March 30)
The latest bout of weakness on the U.S. Dollar has come in the immediate aftermath of the surprise rate cut of April 18. In the three days since that rate cut was sprung upon a delighted Wall Street, the $US Index has fallen by 2.14 points or 1.84%. A glance at the $US Index chart will show that the bull market which has defined the Dollar ever since 1995 is on its very last legs. A glance at the comparison between the $US Index and the Gold Chart should leave one in no doubt as to which is in the best position for future gains.
In the current issue of The Privateer (#422 - published on April 15), we analyse in depth the refusal of the European Central Bank (ECB) to go along with the Fed's rate cut regime. In light of the Fed's move on April 18 (three days AFTER the current Privateer was delivered), this analysis takes on even greater import. If the ECB doesn't cut - SOON - the pressure on the Dollar will become intolerable. And as that (downside) pressure on the Dollar increases, the UPSIDE pressure on Gold in $US terms will also increase. At some point, it will have to break.
The $US Gold price is a "product" (in reverse) of the great credit-creation boom of the 1990s. As THE alternative to the Dollar and all the paper investments based on the Dollar, Gold has been ruthlessly suppressed. The reason is achingly obvious. The U.S. has literally "financed" its boom of the past decade on massive new debt issuance. Any link between the Dollar and Gold would have made this impossible. Further, if the Gold price had not been suppressed, then Gold would have been a viable alternative for foreigners and Americans alike who saw the "writing on the wall". This could not be allowed to happen. It has not been allowed to happen.
(Gold This Week - April 12)
With the Fed now "in extremis", it is going to be harder and harder to continue to hold Gold down.
It is a tragedy too often seen when a human being renounces the things that he or she once held to be true, whatever the "reason" for such an act. The better the mind, the bigger the tragedy. But when a man whose actions affect the life and prosperity of every person in the world does it, the course of history is almost invariably changed. That is what is now building up. What replaces our current "system" will not inevitably be worse than what has gone before. But no matter what is to come, if you have wealth in the form of Gold, you have avoided - in Mr Greenspan's own words: "...The financial policy of the welfare state (which) requires that there be no way for the owners of wealth to protect themselves."
Protect yourself. Mr Greenspan will NOT do it for you.
