Panic seen? That's easy - take a look at this chart of the Dow. Any other stock market in the world shows a similar formation, they vary only in the magnitude of the fall suffered.
The Dow fell by 1370 points this week, its biggest weekly points fall ever. The Dow fell 14.26% this week, its second biggest weekly percentage fall ever, beaten only by a 15.5% weekly fall in the summer of 1933. Consider also the fact that the Dow had never closed above the 1370 point level (the amount if this week's fall) until the end of October 1985
The loss of life on September 11 is a tragic and inescapable fact. There is no way to "value" a life, and no way to "total" the value of the lives lost. The loss of property, and the cost of rebuilding, can be valued, and the value is probably in the several tens of $US Billions.
But look at the "collateral damage" that has been done to the world's financial markets - and SYSTEM - since September 11, and the destructon of property represented by the terrorist attacks pales into utter insignificance. The loss of capital value on world stock markets has been in the TRILLIONS. In the U.S. alone, the AVERAGE loss by diversified stock mutual funds so far this year is now calculated at 25.7%. A large portion of that loss has been suffered in the few days since September 11, especially for those funds who focus on "blue chip" stocks.
Now, add to that the knee-jerk Central Bank interest rate lowerings of September 17. Add to that the FANTASTIC amount (nearly $US 320 Billion) of new "bank reserves" that the Fed has injected into the U.S. banking system since September 12. Add to that the huge repatriation of capital held overseas by Japan, and the fact that the Bank of Japan has had to try to offset the effect by buying U.S. Dollars. Add to that the fact that despite this buying, the Yen is inexorably RISING against the Dollar, further endangering the life blood which is Japanese exports.
A headline in an Australian newspaper states that Mr Greenspan would have us believe that U.S. economic fundamentals "remain strong". This statement goes far beyond the "untrue" or the "disingenuous", it borders on the farcical. If U.S. and world markets are indeed "MARKETS", they discount the expected future performance of the largest economic entities in their respective nations into present prices. Look at them.
Are the actions of the Fed reflecting their future expectation of a "strong" Dollar when they massively increase bank reserves in the obvious expectation of a coming flood of redemptions of Dollar-denominated debt instruments of all descriptions? Is "price stability", the supposed key mandate of the Fed, served by such a GARGANTUAN burst of pure, unadulterated monetary inflation? Is the defense and furtherance of "Freedom", the "American Way", our "free markets", or for that matter "civilization" itself served by a level of interference with the operation of markets never before approached in modern history?
Clearly not. The minor "panic" is being illustrated by the huge dive in global stock markets this week. The major PANIC is being illustrated by the actions of financial regulators around the world, and ESPECIALLY in the U.S.. As we have stated before, the great tragedy of the present situation is that the people of the U.S. and the world are being exhorted to stand up and defend freedom, liberty, civilization, and free markets while their "leaders" throw away every principle which preserves, protects, and defends those concepts.
In a free and civilized society, it is the right to LIFE that must be defended. If the right to life exists, then the right to liberty must also exist. A human being cannot exist as a human being unless his or her ability to take actions and bear responsibility for the result of those actions also exists. That being so, the right to property must also exist. The material wealth which results from any action must belong - COMPLETELY - to the human being which took the action.
Life, liberty, and property are indivisible. Curtail the right to one and you curtail the right to ALL! The not (YET) seen panic which is swirling around every financial REGULATORY agency in the U.S. at present is a fear that the American people are about to find out just how far the GOVERNMENT of the U.S. has diverged from the principles which gave birth to their nation and which they are now being asked to defend.
To quote a statement which appears elsewhere on this website - "If you think you can divorce ideas from economics, or principles from investment portfolios, we suggest that you ...think again. You might change your mind.
There is an apocryphal story which has appeared in several places on the net about a commodities trader who was on one of the lower floors of the World Trade Center on the morning of September 11 when the planes hit. Apparently, after the impact, this trader went back to his desk and attempted to place an order for physical Gold. He could not get through and the order was not placed. Thankfully, the trader had time to get out of the building and survived.
Gold, the "barbarous relic", the "commodity", the one financial "asset" which no longer had any place in the global financial system, the "mere metal", the "NON MONEY" - is poised at the brink of the $US 300 level.
In a very short trading session on the morning of Friday, September 14, spot future Gold spiked up to $US 300 - the "market" was immediately shut down - for "technical reasons". This week, Gold futures have seen the regular duration of their trading sessions cut in half. On top of that, only market orders are being accepted - there are no limit orders allowed.
This is, supposedly, because of the physical damage which has occurred on the Gold trading floors in New York. But as the latest issue of The Privateer pointed out, just as there are U.S. stock exchanges outside New York, there are commodity exchanges outside New York too. It is no longer enough to "regulate" the $US price of Gold. Now, the mechanism by which paper claims to Gold are traded must be altered out of all normal alignment.
Why? The answer should be obvious. To do everything humanly possible to prevent a stampede into Gold and out of $US-denominated investment "assets". So far, the stampede out has not been prevented. But the stampede in - TO GOLD - has.
Or has it? Abundant evidence from right around the world shows that the demand for PHYSICAL Gold (coins, bars, etc) has SKYROCKETED over the past week. The large and growing danger for financial regulators is that the longer they suppress "paper Gold" as traded on the futures markets, the higher the likelihood for a "two-tiered" Gold price - one for paper claims to Gold - the other for PHYSICAL Gold itself.
Why are people who are merely fearful about the situation beginning to turn to Gold? Partly because they want to diversify OUT of "paper, partly because they have begun to notice that Gold has held up VASTLY better than almost all forms of investment paper, and partly because they have a vague recollection of Gold being a "good investment" in times of grave financial and political strife.
Why are people who DO understand the situation buying more Gold. BECAUSE THEY UNDERSTAND THE SITUATION. They know that the last bastion of the hope that the U.S. bull market was NOT over - the Dow - has crumbled. They know that the Fed has thrown all monetary caution to the winds. They know that capital preservation is paramount. They know that Gold is the only available financial asset which is not someone else's liability.
Please take the time to examine carefully ALL the Gold charts we present this week. The technical picture is clear. The fundamental picture is even clearer. Gold is on the verge.