Replaying 1929?
From: July 29, 2001
| Replaying 1929? From: July 29, 2001 |
Ready to Crash the West? Re-monetizing Gold
It wasn't but two or three months ago that I remember the word of the Fed chairman himself, warning a group of bankers that it was time to look again at the quality of their assets because they were looking mighty suspect to him. Sure enough, human nature being heavier on greed than common sense, folks in the banking industry have managed not only to ignore the warning of the Fed Chairman, but the have continued to pile on the worthless paper.
Naturally, not being a complete dolt (you do after all read this column weekly, right?) you knew it was bound to happen some day but you maybe didn't figure it would happen this past week. But, sure enough, we've managed to have a pretty decent sized thrift go toes up with the federal bank regulators closing down Superior S&L of Chicago. The official FDIC announcement reads, in part...
All insured deposit accounts have been transferred to Superior Federal, FSB (New Superior), Hinsdale, Illinois ("assuming institution") a new FDIC insured Federal mutual savings bank. The OTS appointed the FDIC conservator of New Superior. All insured deposit accounts will be available as usual during regular business hours starting Monday July 30, 2001.
Principal and interest on insured accounts, through July 27, 2001, are fully insured by the FDIC, up to the insurance limit of $100,000. You will receive full payment for your insured account. Certain entitlements and different types of accounts may be insured for more than the $100,000 limit. IRA funds are insured separately from other types of accounts, up to a $100,000 limit.
If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of Superior Bank, FSB of Hinsdale, Illinois. This means that you may eventually recover some of your uninsured funds.
As we all know, the FDIC has enough money (for now) to step in and make the situation right. A hats off, and well done to them, but you have to wonder how many other banks are sitting on the brink of disaster. But we don't need to go there to get worried about the relative health of the nation's financial system. There's something much more worrisome on the horizon. It's the big picture stuff that makes the Superior S&L problem look like a grain of sand sitting beside Mount Shasta.
Regrettably, the Big Picture, that is coming into focus has driven me to start adding a few more Maple Leafs to our gold coin stash. In addition to a few "Maples" there's some Krugerands, which fortunately are politically correct (or at least OK) to own again. This week, I'll try to distill the problem into a few bite sized chucks so you can get your arms around it easily. Here's the short list:
Tipping-Point Revisited
In order to understand the importance of a tipping-point, it helps to buy into the idea that there are two kinds of events in the world. One type of event is what the think-tank guys
refer to as a diminishing event.
The way this works (pardon my quick artwork where I see I misspelled my own website's name) is that you have a set of conditions that used to exist, then a tipping-point event (Event A) happens and it unleashes some series of events that degrade over time down and where you end is with Event B.
An example of this kind of tipping-point might be a fire in a big hotel. The previous event was the existence of an operating hotel. The Event A would be our hypothetical big fire. The hotel is ruined. This sets off a diminishing chain of events. The big ones, people out of jobs, the TV coverage, all this stuff goes away over time. As the force vector of the event erodes, you get more and more routine items that are happening because of the fire. The old site is razed, the architects come up with new plans, and then 18-months later, the Event B happens...the new hotel is opened up.
Now the other kind of event is called a "growing" event. It's sometimes called a seed event. The way this works is sort of the opposite of the diminishing event.
As you scan through the news, most of the daily junk is not this type of event, but what the think-tank guys did (and still do, but without the model running) is they send web-bots out to scour the web and look for word association patterns and links that seem to indicate that a "growth" event of some kind if getting under way.
I suppose the consummate kind of growth event is something like where "Event A" is a beer hall putsche and the resulting "Effect B" is the many needlessly dead millions of World War II.
OK, there you have the two types of events - a diminishing event (most frequently occurring) and the "tipping-point" or complex growth event.
One other thing to keep in mind about complex growth events is that they tend to propagate through the larger world-system in much the same way that a virus spreads.
When you really come down to it, anyone who reads the news over a long enough period develops a sense of this tipping-point phenomena. I recall in my journalism career, there were several small events that led to larger events later, after some period of time. The trick as you read today's news is to try and sense whether an event is a diminishing one, or if it is a foreshadowing of a larger event.
I've been watching the news fairly carefully since the tipping-point event forecast from the think tank around July 15th. My belief, as I reported to you at the time, was that the ABM test, the so-called Son of Star Wars test, could be a tipping-point.
Interestingly, there've been some new developments about that test revealed in the past week. Most notable was the revelation that there was a radio beacon associated with the rocket.
The defense establishment, trying to sell the need for the ABM system to the public, said at first that the test was 100% successful. Later, it was reported that there was no "physical confirmation" of the "kill", but that it was "confirmed electronically". You mean like a computer game? Uh huh.
More recently, within the past week, came the revelation that the warhead part of the rocket had this radio beacon in it so that the first stage of the intercept rocket would have some general idea where to head. The official reason for this beacon was that the Marshal Islands were to close to the rocket's firing point and this made the beacon necessary. No, of course none of the rockets that could conceivably be launched by America's enemies will have such neat little beacons in them, but then again, we expect that nuclear subs off our coasts notwithstanding, our enemies will be nice enough to bring their missiles to bear from a sufficient distance from our country that we'd have enough time to ready....aim (without a beacon)...fire!
Still, the missile test met the required criteria to be considered a possible tipping-point event. Certainly, the rapid signing of the China-Russian Friendship Pact made it seem like a fundamental change of sea state. With the first test complete, and with 20 more tests coming in the next five years, events are continuing to spiral. This weekend for example, the British paper the Guardian, reports the administration is looking at plans for a "Space Bomber" that could hit anywhere in the world in 30-minutes or less.
This possible tipping-point event, as shown in the diagram above, may actually force our enemies into aggressive acts in the "window of opportunity" that's open between now and the eventual deployment of the new American arms platforms.
Although a huge amount of ink and airtime will be spent promoting these systems, what's largely misunderstood is what I call "perspective distortion" of these events. On the one hand, the U.S. says these weapons are "strictly defensive" in nature and will allow the U.S. to "continue to preserve world peace". On the other hand, residents outside the U.S., and particularly those in countries which were one-time sworn enemies of the U.S. look at these new systems are purely offensive weapons designed to not just insure the U.S. always has huge "second strike" capability, but makes "first strike" a viable (meaning survivable) option.
I like to think of this the same way that I think of bulletproof vests. If you talk to any peace officer, they will tell you that the 12-pounds of Kevlar is purely defensive. But in most states, if a civilian puts on a bulletproof vest and then commits a crime, the vest almost magically changes its nature: it becomes an offensive weapon and its use carries with it criminal penalties. Good guys get to wear a vest and bad guys don't. The vest is really value neutral. The value is determined by the context of the viewer What Einstein studied in terms of relativity in physics obviously has its analogs in the study of news items! Relativity is everywhere, but the bias of the reader, or viewer, tends to blind us to everything but the prevalent view within our social group.
Is there Another tipping-point?
The second point this week is to consider another possible tipping-point. Sure, breaking the ABM Treaty could be a tipping-point, but is it THE tipping-point? The alternative tipping-point event in the past two weeks involves gold, and more specifically, the possible remonetizing of gold, that may be emerging as a trend. If it develops into a serious trend, that could easily take down the U.S. financial system and the rest of the world with it..
Regardless of what one thinks of Lyndon LaRouche, there is a very interesting piece on his "Executive Intelligence Review" site this week reporting that Russia has begun circulating a gold coin in the timeframe we're interested in. As the report by EIR's Rachel Douglas puts it:
The Bank of Russia (Central Bank) acted on July 10, making the gold chervonets legal tender. The coins were minted as prospective souvenirs in 1980, at the time of the Moscow Olympics in the Soviet Union, but the more interesting historical reference point is the 1920s coin, of which the modern chervonets is a replica. That currency was introduced at the initiative of Soviet Foreign Minister Chicherin in connection with the Soviet-German Rapallo agreements, acting at odds with the Versailles Treaty powers. That chervonets was used exclusively for foreign settlements.
Reference: http://www.larouchepub.com/other/2001/2828_chervonetz.html
If it strikes you as curious that the July 10 date comes so close to the think tank's tipping-point date, or the parallel with a 1920's series of events is odd, you're not alone. It also struck the think tank folks as curious. They went on to lay out some other interesting little bits and pieces about gold and silver, scoured out by their web-bots, that make a person wonder, "What's going on?"
- They point out that China signed a long-term gold supply contract with South Africa about 18-months ago. While China obviously has some need for gold in sophisticated electronics (some of which may be copied from us!), the size of the supply contract was sufficient that it could be a precursor to a partial monetizing of the Yuan. By the way, that report at the time caused one of the blips in gold over the $300 level.
- There are continuing reports that the "big money" players in the U.S. are starting to accumulate precious metals. One of the think tank's web-bots found this on the Compass Financial website:
Reason B: Starting in mid-1997, Warren Buffet’s Berkshire Hathaway began acquiring silver bullion. The company was open about its purchases. As of mid-2000 at least, they still held the bullion. Reason S: Paul and George Soros then took large positions in Apex Silver Mines. They took these positions both through Soros Fund Management and personally as well. Reason G: guess who now owns 12% of Pan American Silver Corporation. None other than Bill Gates. And if that is not enough, we will add Reason W: the private sector investment department of the World Bank (International Finance Corporation) now owns 5% of Pan American Silver Corp.
Another bot reported that Mr. Gates had acquired a couple of adjoining mines.
- More recently, the web-bots found a July 26 edition of MINERS NEWS that has the scintillating headline "Bill Gates investing in silver mine." but the article itself was in a secure area, so we don't know if this is the same mines as referenced by Compass Financial's site, or if this is something new related to the reported adjacent purchases.
- There has also been promotion of a bi-metallic Dinar for use in the Arab speaking countries. In fact, if you haven't read up on the Islamic view of banking, you can get a sense of it by reading any of the numerous papers on the web about how their banks work. The most significant feature of Islamic law and Islamic banking is to understand that in their view, if a single transaction is profitable, it is usurious. The Islamic code requires any profit come from two transactions. Anything less equal usury! You can read more about this at http://www.millennium-money.com/islamic_bank.htm but the key thing to remember is that there is active and growing discussion of an Islamic gold and silver backed currency.
Scenario Building
With this data on the table, is it possible to construct a viable scenario that would cause a melt down? Admittedly, the data is scanty, but sure, a scenario is just a grown up "What If?". The facts on the table, though sketchy, suggest some possible evolutions of future events. It might, for example, go something like this:
A pending catastrophic crash of the U.S. dollar seems a mighty far-fetched thing if you project past trends into the future. Indeed, there is little evidence in any straight line (linear) projections that indicate such a possible scenario is imminent. But suppose, for a moment, that we have entered a non-linear world. If this was the case, projecting anything based on past events would be meaningless, because the outcome of the future will be so far off the present trend as to make analysis almost pointless.
You quickly get into the quantum world of whole systems, rather than the present model followed by most; what's called Western Reductionist thought. That's where everything can be reduced to subordinate parts. But such a world stops existing once communications improves to a certain point. Just as the EPR Paradox became possible, as did non-local effects, the quantum world can "jump" in unfamiliar ways.
Lynching of bankers hasn't happened in the U.S. previously, but it was a fact of post-revolution Russia from about 1917 through 1927. A failing U.S. currency is a fairly rare event in U.S. history, but if you read a bit, you'll see the term "Not worth a Continental" related to a currency crisis in Revolutionary times. More recently, as Paul Johnson writes in his "A History of the American People" (pg. 558) about the monetary issues that plagued the U.S., following the Civil War:
"The Republican government went back to the gold standard in 1879. Farmers and other debtor groups formed the Greenback Movement for a paper currency. Gold continued to go up until 1896, and prices fell. The farmers were badly hit and crucified by interest payments. The pressure on them was increased by the Panic of 1873. They then turned to silver (as opposed to gold) as their panacea. But thee was great muddle and confusion arising from the inadequacy of technical knowledge, and misapprehension about the way in which Gresham's Law - 'bad money drives good money out of circulation' - actually worked. A further confusing factor was the discovery and rapid exploitation of more mines, both gold and silver, at this time. With a free market in bullion, the total amount of specie available, and the relative supplies of gold or silver, had unpredictable effects on the financial markets.93"
Granted, the occurrence of a huge upset to our currency has only happened twice before in the country, but there's no sound reason I can think of why re-monetizing gold could not have an upsetting impact on U.S. markets.
With little more than the past several weeks of research to go on, I decided this week to put seven more ounces of gold into our secret stash. No, it's not on the boat, do you think I'm nuts?
The process is pretty simple. I just called the folks at Kitco (see www.kitco.com), reserved seven more Maple Leafs, giving a bank card to lock the price, and then sent off a bank draft for the balance owed. The coins will be shipped to a specified address (insured to the hilt, of course) and that will be that.
I used to think the odds of gold being re-monetized were about zilch. But now, with pressures continuing to build in the financial system, I'm reminds of the think tank's explanation of how complex systems break. They don't slowly bend out of shape, they can break in a violent release of energy.
To illustrate the mechanism, they use the 
example of a clock. In the first instance, the clock is operating
normally, and two pegs are placed such that as more and more energy is applied to the clock, there is no where for the additional energy to go.
Normally, of course, without the pegs, the additional energy would simply build up and the pendulum would swing further and further from the center.
At some point, as additional energy is applied to the complex system, something has to give. Here, you've got only three choices.
The pegs can break. This won't happen in our example though because we've built our pegs out of super-strong titanium steel. (Think of these as the financial system brakes within individual countries.)
The clock could break, but we've got darned well built clocks. This could well be the individual country's self interest. Very strong and ready to become overnight protectionist should it be needed.
What's left? The pendulum - the derivatives system. And when that goes, the pegs become meaningless and the clock stops working.
Oh well. On to the charts. [Charts deleted as they are not current]
Readers? RIGHT!
A fellow named Craig wrote in already (Sunday night) in response to the article this week. While munching on a shrimp Caesar salad, a dram of Margarita ala Cuervo, Elaine suggested I post his thoughtful note and reply. So here goes:
Hi George,In your latest posting, you pose under "Scenario Building", that the troops will be paid with gold and that private gold ownership is then made illegal. Two questions: 1. If the troops are paid with gold and then spend it, are both the troops and the goods sellers immediately arrested? 2. If the troops are paid in gold and no sellers will accept it because it is illegal to own, isn't that likely to upset the troops as much as paying in fiat currency (which no one will accept either)? My understanding of events when fiat currencies go bust is that either a new "improved" fiat currency takes its' place or the metals do (or I suppose barter makes a comeback).Still working at getting rich and I really enjoy your site,Mark *****
Honestly, Mark, I don't know how the government will work out this little inconsistency of payment. It could be the fiat is paid them for day-to-day things, and the gold held in "trust", like we can "trust" government, right? Or, there might be something like the Federal Reserve's old "Silver Certificates" issued. This way, not only do the people you want to have power get it, but you also get them to spread the new and improved (specie backed) fiat currency. As soon as enough time lapses, you simply pull the plug on convertibility, like Nixon did.
I don't know if this will work out smoothly or neatly, but I'll tell you what. For a 20 ounces of gold per day, I would be pleased to sell the whole cast of Urban Survival contributors into servitude. If things get to where the scenario puts us, they would all thank me. As the think tank guys remind me, an ounce of gold used to get a person five hectares of land and the cattle to graze on it. In present fiat terms, this would be about US$200,000. Yeah, $4-million a day is a good day rate. Four guys, think tank guy, Ehor, Howard...me...yeah that works. Yup.
Now given those payments, even a 30-day consulting assignment could make us all at least comfortable. Remember that when the world is going down in flames wealth becomes relativistic. I figure not only would Ehor Mazurok & I make out like bandits, but Howard Hill would pay off his new estate in less than a day and we'd have enough left over to send friends of this site, like Jim Kunstler, a case of Dom in a Carerra and three girls to open it for him. We'd also be able to hire enough staff to figure out where to put the three girls and Jim in the Carerra.
OK, no more Cuervo...
On a vastly more serious note, a reader named AL brought our attention to an article up on WorldNetDaily.com tonight titled "Viruses as Global Population Control?". Extract from a new book being published August 1???
Q: What do you mean when you say "the techtronic era" is here?
A: That is in regard to the most advanced methods of killing populations. First coercing them, enslaving them, as well as killing them. That is essentially what the book "Death in the Air" deals with. Brzezinski made the quote famous – the term techtronic – that was in his book. We draw on that somewhat but actually go in way beyond that in dealing with the military think-tanks of United States and NATO and begin to look at how what is called "non-lethal" warfare is conducted.
What we have been talking about is in fact non-lethal warfare. Where you don't kill populations like in a bomb or a gunshot but you make them sick. You then make them dependent on pharmaceuticals which are actually a military-pharmaceutical complex run by the same players – the global elite – and then ultimately these populations become enslaved to the pharmaceuticals and economically debilitated along with their nation states.
Sound like one hellavah book, huh? Drop by www.worldnetdaily.com for more...
And one more letter???
George,
Just read your latest and have a question on 'Federal Reserve's old "Silver
Certificates."'
If these are the 1960's certificates, I thought they were issued by the
Kennedy Treasury Dept against the wishes of the Federal Reserve?
This is one of the three possible reasons for his murder as he was "fighting
the Fed", which we all know is a no-no. Of course, he was actually taking a
step back to constitutional government, but I don't have to tell you that.
Keep up the good work,
Dave
Gosh, I had forgotten about this...anyone know for sure? I remember the Silver Certificate, but don't recall which agency actually wrote the paper. I must be coming down with CRS.....I've seen this bandied about the net off and on for a while...???
Write when you get rich..
All contents (c) 1998-2001 by George A. Ure, MBA, except authors as linked or noted
"Rechargeable Money" and "Traceable Tender" (c) 2001, George A. Ure