In case you missed it, Ron Paul participated in a Fed forum at the CATO institute yesterday. I enjoy these types of gatherings. The speakers all were quite knowledgeable.
Most of the public is still unaware of that the gold price is currently suppressed by governments and central banks in collusion with bullion dealers. Even fewer realize that suppression of the price of gold has plenty of historical precedence. The following is the story of the London Gold Pool.
by Jake Towne, the Champion of the Constitution Originally published on Sunday, June 14, 2009 at http://www.nolanchart.com/article6535.html
“When gold speaks, all tongues are silent.” – Italian proverb
This article will briefly review the history and aftermath of the infamous London Gold Pool. For those unfamiliar with monetary history, let me quickly establish the events framing the London Gold Pool.
In 1933, the FED’s monetary inflation caused the Great Depression which was also America’s first bankruptcy. FDR plundered the American people’s gold and one month later outlawed the private possession of gold, an illegal act that existed until 1975. From 1933 onwards, America was on a “gold bullion standard.” A “gold bullion standard” exists when gold coins are not minted and owned by the people, but large international transactions with foreigners are handled in gold bar. However, the FED, America’s central bank, continued inflating the monetary supply which debases the currency and likewise increases the foreigner’s redemption of gold. (emblem)
Quote of the Day: “We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.” — Daniel Webster (1782-1852), US Senator Source: speech in the Senate, 1833
Since last September the Federal Reserve has made $9 trillion in transactions that are not reflected on its balance sheet. This compares to $2 trillion in transactions that is reflected on the Fed’s balance sheet.
Likewise, neither Congress nor the Inspector General knows anything about the profits or losses the Fed may have experienced from the $2 trillion that is reported on its balance sheet.
Add up the numbers — the Fed has done things in your name with $11 trillion. This is only a few trillion shy of the total annual gross domestic product of the United States. It’s also several times the total annual spending of the federal government.
Would it be an exaggeration to say that the Federal Reserve has become a shadow government, several times the size of the entity that’s supposed to be our real government? If we can judge by the resources involved then we would have to answer yes. The Federal Reserve seems to be disposing of more of your wealth than even your cancerous elected government does.
But apparently, neither you nor the people you elected is even allowed to know what the Fed is doing, let alone exert any control over it. This is a strong argument in favor of Congressman Ron Paul’s bill to audit the Fed — the Federal Reserve Transparency Act of 2009 (HR 1207).
There’s good news in this regard. HR 1207 now has 200-cosponsors, which is 46% of the entire House of Representatives.
Quote of the Day: “This is my long-run forecast in brief: The material conditions of life will continue to get better for most people, in most countries, most of the time, indefinitely. Within a century or two, all nations, and most of humanity, will be at or above today’s Western living standards. I also speculate, however, that many people will continue to think and say that the conditions of life are getting worse.” — Julian Simon
The 1970s were bad. We had high inflation plus bouts of high interest rates, high unemployment, and high oil prices punctuated by severe gasoline shortages. Major American companies struggled to survive, factories closed, and the industrial north became known as the Rust Belt.
Major intellectuals talked of limits to growth and a bleak future that might even include an ice age. It was common in those days to think that things could only get worse, but a man named Julian Simon thought otherwise…
If Ehrlich was right, and limits to growth were near at hand, then prices would rise as resources depleted. But Simon argued that our greatest resource is human ingenuity — the power of billions of human minds to constantly devise ways to do more with less.
Ehrlich bet that the price of five metals would be higher a decade later. Simon bet that they would be lower.
Simon won the bet. And so did humanity.
Things got much better after the 1970s, exactly for the reasons Simon proposed. Human minds figured out how to do more with less, but…
It’s important to note a stipulation of Simon’s bet with Ehrlich. The resources on which the bet was based had to be non-government controlled. The reason is simple…
* A few hundred politicians, or a few thousand bureaucrats, cannot possibly have sufficient knowledge to manage complex economics, solve complex problems, or match the brain power of billions of people operating in a free market.
* But politicians do have the power to distort the price signals that coordinate the free market, and that provide the incentives to accomplish more with less.
Simon won his bet because the free market is nothing less that the combined operation of billions of human minds coordinated by free floating prices. The bleak 70s turned into the prosperous 80s and 90s precisely because politicians and bureaucrats, both in the U.S., and around the world, stopped doing specific things to hamper the many-minds of the free market. Here in the U.S. …
Last month I described the collapse of the American banking system as “Off a Cliff with No Airbags.” Are we already in mid-air?
by Jake Towne, the Champion of the Constitution
Originally published on Thursday, May 21, 2009 at http://www.nolanchart.com/article6448.html
Today BankUnited FSB became the nation’s 34th bank to fail this year. Bank failures are nothing new, but this one will cost the FDIC $4.9 Billion per the FDIC press release issued Thursday, May 21. BankUnited had assets of $12.8 Billion and deposits of $8.6 Billion.
The takeover group is led by the infamous Carlyle and Blackstone investment groups. The take-away for the average Joe Public – is this:
The FDIC started 2008 with $53 Billion in its insurance fund, and this number is now less than $11 Billion. This translates to mean that less than a quarter of every $100 you have in a bank account is now FDIC “insured.”
It does not take a genius to predict that the FDIC insurance fund will be depleted this year, and a public bank closing (or “bank holiday” – as if it were some sort of twisted vacation) is likely this year. (Photo courtesy Luc Viator)
“What can I do to protect my family?” – Arthur Burns, Federal Reserve Chairman, 1978
by Jake Towne, the Champion of the Constitution Originally published Sunday, May 17, 2009 at http://www.nolanchart.com/article6430.html
The following is a message from Alan Greenspan’s “vaunted Federal Reserve” to the “Average Man.” (Hat-tip to LeMetropoleCafe.com for the lead.) (photo)
On January 17th, 1978, Federal Reserve Chairman Arthur Burns stated from the meeting transcript (emphasis mine):
“You know, the American public, in contrast to some or many of our politicians–perhaps most of them–is very deeply concerned about inflation. People all over the country have been asking themselves the question:
“The average man is also capable of judging neighborhoods. All he has to do is get into an automobile or walk and he can locate areas where the prospect of maintaining good conditions in the neighborhood or some improvement are pretty good over the next ten years or twenty years. People can do that. And they’re doing it in increasing numbers. It’s surprising to me. I hear it from college professors; I hear it from young people; I hear it from my own children.”
“What can I do to protect my family? What can I do to protect my children, my family, and myself against the ravages of inflation? And gradually the thought has evolved and is spreading rapidly that, on the negative side, putting money in the bank or a savings and loan account is no protection.
“What will he turn to? Well, there is farm real estate, a remarkable record there. But the average man doesn’t know how to buy farm real estate. He realizes that location can make an enormous difference. But there’s one thing the average man is capable of doing. If he doesn’t have a home, he can buy a home. If he already has a home, he can buy another.
“Buying bonds, Treasury bonds or corporate bonds, is no protection. Buying common stocks is no protection. It used to be a major protection but it no longer is.
“Then what is left? Well, gold or paintings. But the average man cannot invest in gold; he doesn’t know how. It’s not something he’s accustomed to. Likewise with paintings.
Jeff Cherry is Ron Paul’s 2010 Republican primary opponent. He represents precisely the kind Republican values that were just soundly defeated by Barack Obama. Cherry is a neo-conservative. He is a poster boy for all that is wrong with the Republican Party today. It turns out he’s also not quite the sharpest knife in the drawer when it comes to campaign strategy.
Cherry put up a web site attempting to trash Ron Paul, but one page on the site could easily be a page designed by the Paul campaign against Cherry. Perhaps the only exception would be that the design of the page is completely unpolished and unprofessional looking.
Here are a few of the things that Cherry thinks are horrible things that Ron Paul believes in, from http://www.doyouknowronpaul.com/
Wants to get rid of the Federal Reserve and return to the Gold Standard (see note below)
Wants to get rid of the Department of Education
Wants to get rid of the IRS
Voted against and does not support the Patriot Act.
Voted against the Foreign Intelligence Surveillance Act
Surely there are Ron Paul haters within the GOP that are smarter than this? Or probably not.
NOTE: Ron Paul does not advocate returning to the “Gold Standard”. He wants to permit competing currencies which can be backed by something tangible like gold, silver, or other commodities. These currencies could compete with the fiat dollars floating around. This is a gradual approach toward sound money and away from the fiat system we have now. This is not your great-grandparent’s version of the gold standard.
“Except for U.S. Treasuries, what can you hold? Gold?” – Leading Chinese central banker, February 2009
by Jake, the Champion of the Constitution Originally published May 5, 2009 at http://www.nolanchart.com/article6385.html
NEW YORK CITY, FEBRUARY 11, 2009 – Luo Ping, director-general at the China Banking Regulatory Commission, gave what may be a landmark quote in the years to come ahead. Besides chastising the United States for its “laissez-faire capitalism” – at which point I distinctly remember choking on my breakfast of delicious jiaozi (I was in Shanghai eating Chinese dumplings) since Ping obviously understands that corporate cronyism is NOT laissez-faire capitalism as fellow columnist Steven McDuffie recently reminds – in retrospect another part of his speech may prove to be the most prophetic. From Reuters:
“Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”
As I related in “China Nearly Doubles its Official Gold Reserves“, China revised its official gold holding from 600 tons in 2003 to 1,054 tons last month. However, the very fact that China reported no increase for 6 years and then suddenly doubled should prove one thing – the Chinese are abiding by the IMF Articles of Agreement only as it pleases them. For instance, the state-owned banks can hold as much gold as they wish without reporting, although this gold is de facto the Chinese government’s. Please understand that subtlety, not brazen statements like Bush’s sad “Mission Accomplished” ceremony or Obama’s 100 Days congratulation party, is the Chinese way.
Originally published Friday, April 24, 2009 at http://www.nolanchart.com/article6335.html
The People’s Republic of China announced a rise in its official holdings from 600 metric tons to 1,054 tons, making the country the world’s #5 holder of gold reserves. The 600 metric ton level had remained constant since 2003. While a rise of 454 tons sounds like a lot, at $900 USD per troy ounce, this is “only” $13 billion.
The United States has reported the largest reserves – over 8,100 tons, but GATA (the Gold Anti-Trust Committee) reports these holdings may not exist as they are strangely reported as “Deep Storage Gold.” Congressman Ron Paul’s bill, HR 1207, the Federal Reserve Transparency Act, will audit the Federal Reserve, including our gold supply. This week over 20 more co-sponsors joined, bringing the bill to 88 co-sponsors [Note: Now there are said to be 92 cosponsors]
July 24, 1998, was an epic day for the global financial system. Federal Reserve Chairman Alan Greenspan stood before Congress’s Banking and Financial Services and testified. This article and the next part will focus on these two testimony excerpts concerning derivative regulation and the gold market.
by Jake, the Champion of the Constitution
Originally published April 7, 2009 at http://www.nolanchart.com/article6266.html
WASHINGTON D.C. – July 24, 1998, was an epic day for the global financial system. Federal Reserve Chairman Alan Greenspan stood before Congress’s Banking and Financial Services and testified. This article and the next part will focus on these two excerpts from this testimony.
“In conclusion, the [Federal Reserve] Board continues to believe that, aside from safety and soundness regulation of derivatives dealers under the banking or securities laws, regulation of derivatives transactions that are privately negotiated by professionals is unnecessary.”
“Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.”
In his testimony, Greenspan recommended to Congress that regulation of Over-The-Counter (OTC) derivatives between private parties was not necessary. These derivatives are referred to as “dark derivatives” as they take place away from exchanges where the terms could be made public and the companies examined by the exchange for counterparty risk – the risk that a company would be insolvent or bankrupted by the time when the derivative comes due. For instance, the metal commodity markets like the NYMEX require a 100% cover of all deliverable contracts (leverage transactions still require a 90% cover per 17 CFR 31.8), and examine the solvency of both parties. The remainder of this article will delve into the consequences of this action.
Less than two months after Greenspan’s testimony, the failure of the hedge fund Long Term Capital Management nearly deflated the developing stock market bubble as it took $4.6 billion USD in derivative-based losses. The Federal Reserve leapt to the rescue, leading a cabal of investment banks to pony up $3.6 billion USD. Goldman Sach’s CEO Jon Corzine was forced out shortly afterwards by the future Secretary of the Treasury, Henry Paulson. Corzine would move on to become a US senator and is the current governor of New Jersey. Bear Stearns refused to cooperate and later became the first major casualty of the Panic of 2008.
Liberty Maven
The FDIC started 2008 with $53 Billion in its insurance fund, and this number is now less than $11 Billion. This translates to mean that 
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