Liberty Maven

Gold is now in backwardation. I submit to you, Reader, the US Dollar is now officially a DEAD MAN WALKING.

by Jake, the Champion of the Constitution
Originally published December 6, 2008 at http://www.nolanchart.com/article5595.html

Dr. Antal Fekete published an article recently entitled “RED ALERT: GOLD BACKWARDATION!!!” “Backwardation” means that gold to be delivered today is now being priced higher than metal to be delivered later in the COMEX futures market in New York City.  Why does this occur?  It’s because buyers of future contracts do not believe that the metal will be available later.  With other commodities, like base metals or grain, backwardation is usually immediately arbitraged out with those holding excess physical supply.  The paper market in gold (and silver, which has been in backwardation for awhile) will eventually fail as new gold supply on the market is exhausted.  Central banks selling even more of their gold is probably suicide; the traders will eventually eat them alive.  Fekete says this foretells the eventual collapse of the dollar and other fiat currencies, and as an avid Austrian student of economics, I agree with him.

The origins of contango and backwardation are simple; futures trading really started in mankind’s first grain elevators. I recommend reading this article “The Last Contango in Washington” from Fekete in 2006 as well.  Decide for yourself if you agree with Fekete and I.  (And decide fast, for the last contango is already here!)  “Trader Dan” Norcini in his charts here says to cool my jets; the month-to-month 100-oz gold bar contracts are not quite yet in backwardation, just very, very close, but I still agree with Dr. Fekete.

Fekete wrote:

According to the December 3rd Comex delivery report, there are 11,759 notices to take delivery. This represents 1.1759 million ounces of gold, while the Comex-approved warehouses hold 2.9 million ounces. Thus 40% of the total amount will have to be delivered by December 31st.  Since not all the gold in the warehouses is available for delivery, Comex supply of gold falls far short of the demand at present rates. Futures markets in gold are breaking down. Paper gold is progressively being discredited…

Of course, it is too early to say whether gold has gone to permanent backwardation, or whether the condition will rectify itself (it probably will). Be that as it may, it does not matter. The fact that it has happened is the coup de grace for the regime of irredeemable currency. It will bleed to death, maybe rather slowly, even if no other hits, blows, or shocks are dealt to the system…

Gold going to permanent backwardation means that gold is no longer for sale at any price, whether it is quoted in dollars, yens, euros, or Swiss francs. The situation is exactly the same as it has been for years: gold is not for sale at any price quoted in Zimbabwe currency, however high the quote is. To put it differently, all offers to sell gold are being withdrawn, whether it concerns newly mined gold, scrap gold, bullion gold or coined gold. I dubbed this event that has cast its long shadow forward for many a year, the last contango in Washington ― contango being the name for the condition opposite to backwardation (namely, that of a positive basis), and Washington being the city where the Paper-mill of the Potomac, the Federal Reserve Board, is located. This is a tongue-in-cheek way of saying that the jig in Washington is up. The music has stopped on the players of musical chairs’. Those who have no gold in hand are out of luck. They won’t get it now through the regular channels. If they want it, they will have to go to the black market.

Fekete is forecasting the death of gold and silver markets at the COMEX (affectionately nicknamed the CRIMEX). As I wrote in “MY PROPHECY – The Federal Reserve Will End! A Money Matrix Addendum“, this is a fight that precious metal expert Jim Sinclair has been raising the rallying cry to the banners of free markets for quite some time. Just like the break-up of the gold standard in 1914, the crumbling of the gold-exchange standard* set by the Genoa Conference of 1922 in the late 1920s (British pound sterling) and the Great American Gold Theft by FDR in 1933, the fall of the London Gold Pool in 1968, and Nixon’s closing of the gold window in 1971, the fight to destroy the COMEX is a major battle in what Ferdinand Lips, ex-Rothschild banker, aptly called Gold Wars in his 2001 book before he died.

[ * FYI, understanding the difference between the gold standard and gold-exchange standard is critical to understanding the Great Depression.  Ben Bernanke and Lawrence Summers (newly named to the Obama team) either do not understand, or intentionally mislead others, in their writings.  In brief, the gold standard involved the use of gold and silver as currencies - you bought and sold all goods and services in terms of a certain weight of gold or silver, even if you used paper money that was a receipt for the metal.  The need for governments to slaughter their own armies (oh, and those of enemy governments) and finance WW1 ended the gold standard in 1914.  Started in 1922, the gold-exchange standard took two currencies - the British pound sterling (which previously WAS a pound of sterling silver) and the American dollar  - and pretended they were fully exchangeable for gold.  All other world currencies were then pegged and constantly revalued against these currencies.  However, the FED and Bank of England massively expanded their money supply (classic Austrian inflation) without buying gold and silver to back the currency during the 1920s.  They tried to pretend their currency was backed by metal, and when this fraud was revealed, it ended the gold-exchange standard.]

When the price of gold finally skyrockets, the State, of course, will most likely crack down, blame, and seek to suppress the gold “speculators.” However, it is important to note that actually what will occur is NOT the price of gold skyrocketing. The grams of gold one holds in their pocket before and after this event will not change at all.  Same with the dollars you own. What is actually occurring is the PLUMMET in the value of exchange of the dollar and other fiat currencies for goods and services .

For those who do not understand what I mean by this, take a look at the chart of oil priced in dollars and gold from this James Turk article from 2005 or the below source list.  Bottom line is that even though it was delayed for a decade by market manipulation, gold, the canary in the coal mine of the world economy, will finally start sounding for all to hear.

Gold and silver, the natural and free currencies of mankind, will win the Gold War against the fiat currencies of corrupt governments. Historically speaking, supporters of gold are undefeated. Gold has always won each battle against the users of fiat, although pesky governments, wars, and lies have had the upper hand from time to time.  No fiat currency has survived from the 19th century through the 20th century, and no fiat from the 20th will survive the  beginning years of the 21st.  The latest attempt by the American corporatocracy over the past 100 years has been the most determined ever. They have tried to blank the memory of gold from all of us, in a fit of mass brainwashing. [Of course, by writing this, part of the reason is to prove that they missed one.] Truly, it is always darkest before the dawn. Even if fiat currencies manages to survive through 2009, through 2015, even (as unbelievable as it seems to me, but I have learned to never underestimate the FED) through the next decade, the seeds of victory for gold have been planted and will crush or slowly suffocate fiat.

Of course, after the worship of fiat is brought to a nasty, brutal end, governments will scramble to control gold itself, whether its FED Gold Certificates, theft of private gold, or some other nonsense.   For a brief moment, the world will rest on a tipping point. If it falls on the side of freedom, this will be a time to rejoice. If it falls on the side of the corporatocracy, the setback will only be temporary, but I believe it will herald a period of warring states. If you thought the Iraq and Afghanistan Wars are horrible, you will be shocked at what comes next.  However, no matter.  It may take a few more generations, but honest money will one day win out.

For the past 300 years or so, defenders of liberty in Western society have fought to win the separation between church and state, which still remains an American ideal based on the inherent human liberty & privilege protected by the First Amendment.

The next struggle has been well underway, some would even say from the dawn of the American republic (ie Hamilton) to separate the state from meddling in economics, trade, and business. This lack of separation has always been there, but the truth of our command economy was finally revealed to even the most clueless American this fall.

It is your author’s hope that separation between the economy and the state will one day be as widespread and commonplace as the separation between church and state (which could certainly be improved too!) Will rallying cries of “Gold is money!” and shouts for the honest, sound currencies of gold and silver once more be heard in our country?

That reminds me of one last quote:

“Gold Is Money, and Nothing Else.“

- JP Morgan, testifying under oath to Congress before the Pujo Commission, 1913

My fellow Americans, enjoy your weekend, but I do believe the time remaining to own gold and silver is running out.

Jake, the Champion of the Constitution           [Reach the Author Here!]

www.CampaignForLiberty.com (photo2)

“Your self-liberation will leave this behind!
Beyond slings and arrows that rain on our minds!
You’ll make it better!
Shake it off!
It never mattered anyway!

If we don’t make it alive,
Well it’s a hell of a good day to die!
All our light that shines strong,
Only lasts for so long!”

- The Offspring from “Half-Truism”

If you need a laugh now, please try:

SPOOF: New Element Discovered in America!
Published: December 5, 2008
The heaviest element ever was discovered yesterday by Franklin Delano Mussolini Laboratories of Washington, DC. Read all about it!

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The Money Matrix Series

America, Were Michael Phelps’ Eight Olympic Gold Medals Worth Winning?
Published: August 24, 2008
Michael Phelps and other American athletes are bringing back loads of Gold, Silver, and Bronze Medals from the Beijing Olympics. A young libertarian economist asks if it was worth it.

The Money Matrix – Prelude (PART 1/15)
Published: August 1, 2008
Prelude and Source List to a Series on Global Monetary Policy of Control and Explaining Big Government’s Finances

The Money Matrix – What is a Dollar Bill Worth? (PART 2/15)
Published: August 2, 2008
“Living so free is a tragedy when you can’t see what you need to see!” – Powerman 5000 ‘Free’

The Money Matrix – What Makes Money Money? (PART 3/15)
Published: August 3, 2008
A quick history of money per Rothbard followed by the properties of money per Ron Paul

The Money Matrix – If You Don’t Know Who the Sucker Is, Then It’s You! (PART 4/15)
Published: August 7, 2008
The Money Matrix series rolls on by asking ‘What are the Types of Money?’ and ‘What is the “Best” Currency and Why?’

The Money Matrix Explores Seigniorage – Do not give in to evil, but proceed ever more boldly against it. (PART 5/15)
Published: August 24, 2008
The Money Matrix explores Seigniorage as Legalized Silent Plunder with an introduction into medieval and modern banking.

The Money Matrix – How the FED Works (PART 6/15)
Published: November 17, 2008
A step-by-step explanation of how the Federal Reserve, America’s Central Bank, can manipulate monetary policy.

A Money Matrix Addendum: Citigroup and GATA Call for an End to the Suppression of the Gold Market
Published: September 22, 2008
The Suppression of the Gold Market Goes Mainstream, Thanks to Citigroup. And a few interesting back-of-envelope calculations about where the price of gold could go.

Save Ron Paul’s Voice – A Money Matrix Addendum
Published: September 28, 2008
Learn how by reading. Article is intended as a poke-in-the-eye for members of the Ron Paul Revolution who complain about the bailouts and the financial, banking, and housing crises and do not realize that they may in fact be hypocrites.

MY PROPHECY – The Federal Reserve Will End! A Money Matrix Addendum
Published: October 29, 2008
Many of the Prophecies of Ferdinand Lips from 2005 are becoming true. “Right now [the FED] is creating the biggest housing bubble in history. This may lead to economic collapse. I expect that a revolution will one day take place against the Fed. It must be abolished. After all, its founders were not that intelligent but rather stupid men. Or they were devils. It is a tragedy. Not only that: It is the biggest tragedy in world history, even worse than wars. Yes, worse than wars. It made most people poor. It damaged America. It caused wars and then helped to finance them.”

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Gold and Silver Investigation Source List

A Quick History of Gold

GO GATA! The premise of the Gold Anti-Trust Action Committee that the world gold market is artificially suppressed by central banks in order to make their currencies look stronger.

www.GoldMoney.com – GoldMoney is an international gold and silver warehouse with insured vaults in London and Zurich.  Ability to hold and pay interest on four major fiat currencies, issue payments in goldgrams, etc. Think of them as an alternative way to diversify where and how  your physical metal is stored, but I urge you to be wary and thoroughly investigate this and ANY method where someone else holds your metal for you before investing.  The best is always physical possession  (or pay for storage at a Brinks depository) although you should always be creative with your storage locations

The World Gold Council – A wealth of information on central bank holding, gold derivatives, supply and demand statistics and more.  Free login required.

Rothbard, Murray N. “What has the Government Done with Our Money?” (1990) A 50-page document that describes Austrian economics.  Rothbard has written a host of other great sources as well, like the 1994 work “The Case Against the Fed.”

www.jsmineset.com Expert Jim Sinclair shares his thoughts on gold investing, financial markets, and trading.  For free!

www.DollarCollapse.com This site’s main use is as a newsfeed for dollar, gold, and housing market current events.  They explain their dollar collapse theory here, which I partly agree with.

www.SilverSeek.com I particularly enjoy reading the columns of Theodore Butler and Jason Hommel

www.GoldSeek.com The sister site of SilverSeek.  The Mogambu Guru’s (aka Richard Daughty) column has tunnel vision but hilarious and educational..

www.professorfekete.com A seriously pro-gold scholar.

www.lemetropolecafe.com Offers timely gold market advice and a daily “Midas” column.  Try the 2-week free trial.

Paul, Ron. “Pillars of Prosperity.” (2008) A 400+ page compilation of Dr. Paul’s writings. After reading these, one realizes that Dr. Paul did very little recent work in putting together his best-selling “The Revolution” as most of this book was written 20+ years ago.

Millar, Peter. “The Relevance and Importance of Gold in the World Monetary System.” (2006). Self-explanatory title. Understanding Graph 2 on page 3 is key.

Greenspan, Alan. “Gold and Economic Freedom.” (1966) Interesting work from the Maestro prior to his conversion to inflationary Keynesian theory.