By Giordano Bruno

Neithercorp Press - 11/18/2009

For decades, gold and silver investors have been warning the masses about the catastrophic weaknesses inherent in fiat currencies; currencies backed by nothing but empty promises and printed out of thin air ad nauseam by Central Banks. Precious metals, they said, were the only safe form of currency because they were finite, and could not be duplicated, meaning they could not be inflated to worthlessness. Until recently, these warnings have gone almost completely ignored by the general public.

Critics of gold (often proponents of Central Banks) contended that gold was an unrealistic and outdated foundation for an economy because its limited supply restricted liquidity, and kept a country from being able to “spend effectively.”

Well, America is closing in on the year 2010, and most of us have now had an opportunity to see that “free money” actually has a price. As I write this the dollar is hurtling down against numerous other currencies due to the private Federal Reserve’s decision to keep interest rates artificially near zero, as well as their decision to pump trillions of dollars of liquidity into foreign and domestic banks. Bloomberg estimates that nearly $24 Trillion has been pumped into the financial system by the Fed:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM

What critics of precious metals didn’t seem to grasp was that gold’s limited supply was actually a saving grace, not a weakness. Gold has been used as currency for over 6000 years, and the U.S. Dollar was backed by gold right up until 1971 when Richard Nixon severed the Greenback completely from any tangible resource, though the Dollar to gold ratio had been waning since the establishment of the private Federal Reserve in 1913. America’s greatest industrial and financial accomplishments were made during the gold standard era, so to claim that a gold standard hinders economic progress is simply absurd. Even former Fed Chairman Alan Greenspan once vehemently defended the use of a gold standard:

“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. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
Alan Greenspan, 1967

http://www.usagold.com/gildedopinion/greenspan.html

Another argument I have often heard is that gold’s value is an “illusion,” and only worth anything because people “believe it to be valuable.” This is a highly naive position. First, gold’s value is rooted in its scarcity as a malleable and storable resource that cannot be reproduced, making it highly adaptable as a form of currency. Paper money on the other hand, is entirely an illusion. It has no scarcity, no inherent value, and can be reproduced to infinity. Its worth is based entirely on faith. Whenever I hear critics attack gold, I have to laugh at the irony. Every downfall gold is accused of having are actually the same sort of downfalls ever present in the fiat paper money those same critics hold in their pockets. Yet they go on attacking gold; a tangible, real asset.

As long as free markets or any trade on a large scale exists in the world, there will always be a need for currency, and precious metals (or currencies backed by them) are the only concrete and stable financial units in existence.

Investors in PM’s have also been pleading with the public for years to look deeper into the COMEX markets and the obvious attempts by a minority of bankers to hold the value of gold and silver down. The Commodity and Futures Trading Commission (CFTC) is supposed to regulate and oversee any abuses in the COMEX, however, their investigations appear largely for show, and they have even been known to attack those groups who suggest manipulation as “delusional conspiracy theorists”. However, the evidence for market manipulation by globalist banks is evident and available to anyone willing to take the time to look it up for themselves. Let’s examine it now…..

Why Manipulate Gold And Silver Down?

Many people can’t seem to fathom why Globalists and Central Banks (especially in the West) would want to keep the value of PM’s down. The answer is very simple. Globalists believe in a philosophy of “centralization”, meaning, they believe that control over the finances, the politics, and the people of the world should be delegated to a small group of individuals with a “superior” grasp of governance. They believe that first economic, then political sovereignty of all countries should be dismantled and one world rule established.

“The powers of financial capitalism had (a) far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank…sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.”
Carroll Quigley, member of Council on Foreign Relations (CFR), mentor to Bill Clinton, quote from “Tragedy and Hope”, 1966

“[There must be] some dilution of sovereignty, to the immediate disadvantage of those nations which now possess the preponderance of power … the establishment of a common money, might be vested in a body created by and responsible to the principal trading and investing people. This would deprive our government of exclusive control over a national money.”
John Foster Dulles, CFR founder, former Secretary of State, 1939

To help in this task, the Central Banks of the world turned to a fiat money system. Completely fiat systems allow central banks tremendous leeway to either build up or break down a country’s economy. By restricting or increasing the flow of money through a system by any amount they chose, they could create deflationary panic, inflationary collapse, they could create bubbles in credit based systems as the Federal Reserve did to the housing market. Essentially, under a fiat currency, the lives of millions are in the hands of only a select few men. If the dollar were backed by a tangible asset such as gold or silver, their ability to determine the flow of currency would be greatly diminished, and this level of financial control would not be possible.

This fact led to banker manipulation of the precious metals. Gold and silver COMPETE with fiat currencies. They offer an alternative to the currencies controlled by central bankers, and thus had to be removed from the picture. By manipulating the value of PM’s down, globalists could convince the general public that such commodities were “too unstable,” or “too ineffective and unpredictable”. Most American’s would shrug off gold as a novelty, good only for jewelry making and circuit-boards, instead of thinking of it as actual “money.”

Many so called financial experts make the mistake of assuming that banks manipulate markets out of a greed for profit, but in reality, finance, especially on an international level, is about political and social control. Precious metals offer a way towards monetary independence, thus, globalists will always endeavor to control PM markets.

How Are Precious Metal Markets Manipulated?

There are two primary methods to manipulating PM markets. Both require that an individual or group have incredible amounts of capitalization (central bankers print their own capitalization from thin air whenever they please). The first method involves a sometimes confusing investment strategy called “Shorting.” The second involves the issuance of gold and silver “bonds”. Let’s examine both methods…

Shorting or Short Selling: Shorting is a legal investment strategy that can be used by those with large amounts of capitalization to take advantage of and control the value of an entire market. Essentially, it is a “bet” placed by the investor which says the price of a commodity (or security) will go down.

Say an investor wants to “short” 10 oz of silver at $20 an oz, for instance. That investor borrows 10 oz from a broker or a third party. The investor then sells the borrowed silver on the market for $200, hoping that the value of silver will go down before he has to return what he borrowed to the third party.

Now, say the value of silver goes down to $10 oz after the shorting investor sells. When he pays back the third party, he only has to spend $100 to buy back the 10 oz of silver he originally borrowed. He has just made a profit of $100. This chart and video can explain further:

Traditionally, short selling is an important component of the stock market, allowing investors to “cover” other investments should a drop in the market occur. However, large banks have taken the process a step further into what is called “naked short selling”. Naked short selling occurs when a bank short sells an asset that it doesn’t really own. When a bank like JPMorgan Chase naked short sells a massive amount of silver they don’t actually own, this gives the illusion that the supply of silver on the market is actually much higher than it is. This in turn forces the overall value of silver down, as the fake supply outweighs the perceived demand. It also creates a guiding force in market psychology. When an incredibly large volume of short selling appears in a market, it sometimes convinces other investors that the market is about to fall, and they also sell, creating a cascade which lowers the value of the entire market. The market, in effect, fulfills its own prophecy. In fact JPMorgan pulled this exact scam back in 2008 causing the silver market to lose half of its value:

http://news.silverseek.com/TedButler/1238441075.php

http://www.occ.gov/deriv/deriv.htm

This would seem like an obvious crime in terms of gold or silver, because eventually the person who bought fake PM’s from the bank would expect delivery. When the bank didn’t deliver, they would be caught, right? Not quite…

The problem is that on the COMEX, most gold and silver is traded in paper bonds and derivatives. These bonds are supposed to represent a certain amount of silver or gold, and often they only exist as numbers on a computer screen. This is where the second method of market manipulation comes in.

PM Bonds and Derivatives: The sad fact is, most gold and silver transactions on the market today rarely involve any real assets changing hands. It is all done with paper bonds and computer trading. This gives banks like JP Morgan an incredibly easy avenue to manipulate prices. All they have to do is create bonds out of thin air, just like Central Banks create money out of thin air. Those bonds are then treated by other investors as real silver or gold. This gives the market the illusion that there is more gold and silver than actually exists, driving down the price. As long as big banks keep just enough gold and silver on hand in case some people want the real thing, no one would be the wiser. This is very similar to the legalized fraud of “fractional reserve banking” which allows entities like the private Federal Reserve to exist in the first place.

This smoke-and-mirrors act is based on an assumption: the assumption that a majority of investors will not trade in their paper bonds for real gold and silver. But what would happen if they did…?

Want To Stop Market Manipulation? Demand Physical Delivery Now!

The banker scheme to hold down PM’s hangs by a very thin thread. If a large percentage of investors were to get rid of their paper bonds and trade them in for real commodities, banks would eventually be forced to admit they do not have nearly enough silver or gold to cover the bonds they issued. The entire lie would be exposed and the value of physical metals would skyrocket, while the value of paper bonds would plummet to zero.

Some investors may ask, “Why would I want to do that? I could lose all the value of my fake bonds. Why not just let the illusion go on?”

What these investors don’t realize is that naked short selling and the issuance of false bonds cannot go on forever. In fact, short selling by the large banks has begun to fail already.

Due to inflationary printing by the Federal Reserve, and a projected U.S. deficit of $9 trillion, foreign central banks in countries like China and India have begun to snap up tons of gold at a time as a hedge against a U.S. Dollar collapse, which is immanent. This massive gold buying spree has offset the once unchallenged short selling of Western banks, causing the price to leap regardless of manipulation. The IMF recently tried to dump 400 tons of gold onto the market in an attempt to drive prices back down from their record setting highs. Instead, India immediately bought 200 tons from the IMF outright, and the price of gold rocketed even higher:

http://online.wsj.com/article/SB125722876971624729.html

Remember, if someone short sells an asset, and the value of the asset goes up, the short seller has just lost money. If this continues, and prices keep going up despite the short seller’s actions, eventually the short sellers will be forced to buy just to cover their bad investments or risk losing everything. This will create what investors call a “short squeeze”. Imagine banks like JPMorgan rushing to buy tons of silver in an attempt to cover all the fake bonds they issued. The market would explode.

Investors in paper bonds will start demanding physical delivery of their silver and gold, especially in the face of a collapsing dollar, and again, banks will not be able to deliver the goods to everyone because they never had them to begin with. Central Bankers are hoping that by the time this occurs, the dollar will be in a shambles and a PM resurgence will be too late to save the day. After all, the reason they were keeping PM values down was so the Dollar would have no competition.

Once the dollar is destroyed, they can introduce Special Drawing Rights (SDR’s), which are semi-based in gold, as the new world reserve currency. The head of the IMF has openly stated that this is their intention:

http://www.reuters.com/article/ousivMolt/idUSTRE5AG0I720091117

However, if some investors take the market into their own hands and demand physical delivery now, they will be able to collect their gold and silver before the wave of crisis hits and before the paper bond market disintegrates, which will happen eventually anyway. The goal here is to be a part of the FIRST group of investors to collect their physical gold and silver, not the last group, which will receive nothing.

Time Is Running Out

The dollar loses substantial ground weekly, gold continues to hit new highs, and silver is on the edge of bursting forward. China and other BRIC nations have made it perfectly clear that they want the dollar replaced as the world reserve currency, and so has the IMF. When this happens, all faith in the dollar will be lost, and countries still holding Treasury Bonds will rush to dump them. Because of America’s historic level of debt, the dumping of T-bonds will result in the insolvency of the Treasury. No amount of printing will save it, because no country will accept U.S. dollars as payment. The dollar will be worthless and hyperinflation will commence. Only those people holding gold and silver will be able to operate financially on any level. They will be the only people able to maintain their wealth, because by their very nature PM’s increase in value as fiat currencies collapse. Only those holding gold and silver (or another country’s currency) will be able to get products made outside the U.S., and only those holding PM’s will be able to maintain an economy independent of the one now in disarray.

Critics have been attacking precious metals markets relentlessly, and yet, they continue to climb. Some financial analysts have openly admitted bewilderment, claiming that the epic rise on gold makes “no sense.” This is because they don’t understand the fundamentals of economics, and they never did. Fiat currencies always collapse. Always. The dollar is no different. Mainstream analysts simply cannot fathom that a dollar collapse is occurring, and this is why their predictions on PM’s and the economy in general are always wrong. The rise of gold makes perfect sense when one realizes and accepts the reality that the dollar is soon to end. It is time to prepare for this event, and precious metals are one of the best methods for doing so.

Posted on Thursday, November 19th, 2009 at 12:54 pm in the category:All Posts. Comment RSS 2.0 feed. Comment it , or trackback this post.