by Thomas Graham

IF YOU are a first-home buyer who does not like the idea of spending $500,000 for an undistinguished, two-bedroom house in a middle-ring suburb of Sydney, perhaps you should look further afield.

While Sydney real estate prices have dropped, they have not been ravaged by the economic crisis as they have in many European countries. And the price crash is attracting overseas investors.

The managing director of Marsh and Parsons real estate agency in London, Peter Rollings, said prices had fallen massively. "[They] are down between 20-35 per cent since August 2007 and, on top of that, sterling also weakened dramatically … last year. As a result, we saw large numbers of overseas buyers coming to London buying blue-chip property at knock-down prices."

France seemed to have escaped the real estate woes of Britain, but its luck has run out, with house prices tumbling.

Charles Gillooley, a director of an agency in the Dordogne region in south-western France, said the crash meant good deals for foreign investors.

"The reality of the economic crisis is sinking in to most French vendors, who have adjusted their prices downwards.

"One of our houses with beautiful views, a swimming pool and a large garden was on the market for €278,000 [$490,000] and has been reduced for €214,000 [$377,000]. That's a huge drop."

In recent years, French real estate in areas such as the Dordogne and the south has relied on the British buying second homes. But with economic uncertainty, prices have been reduced to attract buyers.

For the extravagant type wanting to buy big, there are properties such as the 176-bedroom Chateau de Nainville-les-Roches, 45 kilometres south of Paris. The 19th-century chateau on 40 hectares was sold for $6.1 million last November. Real estate agents in the area said that before the crash it could have fetched $20 million.

If France isn't your thing, then you may want to look at the olive groves of Italy. Calabria, in the south, offers cheaper property than in the more popular areas of Tuscany and Umbria, and a seaside villa can be bought for a fraction of the price of a similar property in the south of France. But if Europe doesn't appeal, there could soon be more property bargains closer to home.

Professor Steve Keen of the University of Western Sydney said he expected the Australian housing market to crash spectacularly. "We are going to see huge levels of unemployment, people will be forced to sell their houses and this will bring prices crashing down.

"I'm expecting a depression out of this economic crisis and house prices will simply not hold up when a depression is occurring."

By John Browne

This week, based on indicators of improving Chinese manufacturing activity, commodity and stock markets surged in the Pacific Rim. It appears that China's recession-fighting policies are being judged successful. The 41% rally in Chinese stocks in 2009 from the 2008 lows dwarfs the single-digit rallies in the US and Europe. With Western economies still sluggish, eyes are turning eastward for solutions to the global economic riddle. As such, recent hints at the direction of Chinese monetary policy should be closely regarded.

At the recent Group of 20 London meetings, China called for a new international monetary order with a gold link. This was followed by the sudden disclosure that China had used part of its huge gold output to boost its own reserves by some 600 metric tons, a 75% increase in total holdings since 2003. In his first 100

days in office, President Barack Obama's administration has injected nearly US$40 billion each day into US economy. Given the inflationary impact that such a torrent of new cash will spark, it is logical that the Chinese hedge its $1 trillion position with a more reliable store of value.

International money continues to flood towards the Chinese economic sphere, leaving the "old" industrial economies of America and Europe out in the cold. The cause is quite simple: the economies of America and China are mirror images of each other. The China-centric countries are producer-dominated and America is consumer-dominated. Over time, this dichotomy is producing massive shifts in global wealth.

For a century, American administrations have relied on the inflationary powers of paper money to finance consumer growth. The fact that the US dollar is the world's reserve currency enabled this scheme to persist for longer than would have been tolerated otherwise. The "stimulus and bailout agenda of George W Bush and Obama is the same practice on overdrive. While driving the country further into debt, it also ensures that it will be progressively less competitive in the global economy.

China, on the other hand, is the world's largest producer and one of the top three exporters, piling up vast current account surpluses, especially in US dollars. In order not to boost its currency to levels that would make its exports less competitive, China maintained its US dollar surpluses in dollars, investing the bulk, almost $1 trillion, of them in US Treasuries. This acted as "vendor financing" for its exports to America. The technique is similar to television commercials that promise "make no payments for four years", except in this case the deal is pushing 40 years.

To combat the global recession, China spent some $700 billion on a stimulus package, primarily focused on infrastructure. As such spending adds more value to the economy than government make-work programs, it now appears that China's stimulus package is having positive results.

Increased economic activity in China will benefit American companies with China-sourced sales. But the majority of the American economy remains oriented toward the American consumer, and his ever-increasing ability to take on debt. This is obviously not sustainable.

The outlook for America is for hyper-stagflation, or continued economic recession accompanied by rapidly rising prices. This calls into question the continued role of the US dollar as the world's reserve. Surplus nations, particularly China, are voicing their growing concern. They are exploring other, less volatile arrangements. They may be considering a return to the bulwark of monetary stability: gold.

Now the world's largest gold producer, China would benefit tremendously from a shift away from the US dollar and toward gold. She is clearly interested in world leadership, but would never dream of challenging the US militarily. However, in the 21st century, the weight of economics renders martial might largely irrelevant. Still, she can't afford to act irresponsibly.

There are a few considerations that should temper her ambitions. Even with the 600 metric ton increase over the past five years, China's gold holdings amount to only 1.6% of its total monetary reserves. Also, at 1,050 metric tons total, China's holdings are still dwarfed by the 8,132 metric tons held by the US.

Nevertheless, the Chinese call for a new, gold-linked reserve currency, combined with the near doubling of their own gold reserves, points to a major strategic trend that can be expected to spread to other surplus nations. The biggest winners, personal or governmental, will trade their dollars for gold before there's a rush for the door.

Private investors can ride the wave created by China's strategic shift by continuing to add to their gold positions.

The New York Fed is the most powerful financial institution you've never heard of. Look who's running it.

By Eliot Spitzer former New York Governor

The kerfuffle about current New York Federal Reserve Bank Chairman Stephen Friedman's purchase of some Goldman stock while the Fed was involved in reviewing major decisions about Goldman's future—well-covered by the Wall Street Journal here and here—raises a fundamental question about Wall Street's corruption. Just as the millions in AIG bonuses obscured the much more significant issue of the $70 billion-plus in conduit payments authorized by the N.Y. Fed to AIG's counterparties, the small issue of Friedman's stock purchase raises very serious issues about the competence and composition of the Federal Reserve of New York, which is the most powerful financial institution most Americans know nothing about.

A quasi-independent, public-private body, the New York Fed is the first among equals of the 12 regional Fed branches. Unlike the Washington Federal Reserve Board of Governors, or the other regional fed branches, the N.Y. Fed is active in the markets virtually every day, changing the critical interest rates that determine the liquidity of the markets and the profitability of banks. And, like the other regional branches, it has boundless power to examine, at will, the books of virtually any banking institution and require that wide-ranging actions be taken—from raising capital to stopping lending—to ensure the stability and soundness of the bank. Over the past year, the New York Fed has been responsible for committing trillions of dollars of taxpayer money to resuscitate the coffers of the banks it oversees.

Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for—but did not receive—harsh examination from the N.Y. Fed.

The composition of the New York Fed's board, which supervises the organization and current Chairman Friedman, is equally troubling. The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are "public" representatives.

So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman. Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner. These were the people who were supposedly representing our interests!

Of course, there have been the occasional nonfinance representatives from academia and labor. But they have been so outnumbered that their presence has done little to alter the direction of the board.

So is it any wonder that the N.Y. Fed has been complicit in the single greatest bailout of poorly managed banks in history? Any wonder that it has given—with virtually no strings attached—practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees? Any wonder that not a single CEO or senior executive of a major bank has been removed as a condition of hundreds of billions of direct cash and guarantees? Any wonder that, despite its fundamental responsibility to preserve the integrity of the banking system, it sat quietly on the sidelines as the leverage beneath the banks exploded and the capital underlying their investments shrank?

I do not mean to suggest that any of these board members intentionally discharged their duties with the specific goal of benefitting themselves. Rather, what we have seen is disastrous groupthink, a way of looking at the world from the perspective of Wall Street and Wall Street alone. That failure has brought the world economy to the edge of unraveling. And some of Geithner's early missteps betrayed an inability to get beyond this tunnel vision, such as the idea that the banks need to be first in line to be paid and to be paid in full. We can only hope that Geithner, who, to his credit, did try to raise some of the regulatory issues that mattered while he was at the Fed, is no longer in the mental prison of Lower Manhattan and will have more success now that he has a board of one—President Obama.

Perhaps it is time to calculate what these board members have been paid by their banks in salary and bonuses over the years and seek to have them return it to the public as small compensation for their failed oversight of the N.Y. Fed. And more fundamentally, perhaps it is time to take a hard look at the governing structure and supposed independence of this institution that actually controls the use of our tax dollars and, heaven help us, the fate of our economy.

Eliot Spitzer is the former governor of the state of New York

As the integrity of the US banking system is compromised, private citizens should consider becoming their own central banks. The days of irredeemable paper fiat currencies may be approaching its end, and there is a reason why the central banks hold gold - it is their default insurance.

Do not be fooled, the gold reserves of central banks are their actual Money. Debt-based paper dollars, yen, pounds are all just ridiculous currencies, sad shadowy mirrors of their former selves, which is gold and silver coin. Gold's manipulated volatility cannot mask its >16% annualized returns versus the USD over the past 8 years. Remember - in actuality, it is the depreciation of the world's fiat currencies we are seeing, not the appreciation of gold itself which is itself both money and a currency.

by James Turk

This week Bill Murphy and Chris Powell, co-founders of the Gold Anti-Trust Action Committee (www.gata.org), will be in London, England. Their trip is part of GATA’s ongoing effort to raise awareness of the gold cartel and its surreptitious intervention in the gold market.

Bill and Chris will meet with the British media to explain GATA’s findings. They will also attend an important fund raising event being held in support of GATA’s work. Their trip is another important step by GATA aimed at creating a free market in gold, one which is unfettered by government intervention.

Governments want a low gold price to make national currencies look good. Gold is recognizable the world over as the ‘canary in the coalmine’ when it comes to money. A rising gold price blurts the unpleasant truth that a national currency is being poorly managed and that its purchasing power is being inflated.

This reality is made clear by former Federal Reserve chairman Paul Volcker. Commenting in his memoirs about the soaring gold price in the years immediately following the end of the gold standard in 1971, he notes: “Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.” It was a mistake because a rising gold price undermines the thin reed upon which all fiat currency rests – confidence. But it was a mistake only from the perspective of a central banker, which is of course at odds with anyone who believes in free markets.

The US government has learned from experience and taken Volcker’s advice. Given the US dollar’s role as the world’s reserve currency, the US government has the most to lose if the market chooses gold over fiat currency and erodes the government’s stranglehold on the monopolistic privilege that it has awarded to itself of creating ‘money’.

So the US government intervenes in the gold market to make the dollar look worthy of being the world’s reserve currency when of course it is not equal to the demands of that esteemed role. The US government does this by trying to keep the gold price low, but this aim is an impossible task. In the end, gold always wins, i.e., its price inevitably climbs higher as fiat currency is debased, which is a reality understood and recognized by government policymakers. So recognizing the futility of capping the gold price, they instead compromise by letting the gold price rise somewhat, say, 15% per annum. In fact, against the dollar, gold is actually up 16.3% p.a. on average for the last eight years. In battlefield terms, the US government is conducting a managed retreat for fiat currency in an attempt to control gold’s advance.

Though it has let the gold price rise, gold has risen by less than it would in a free market because the purchasing power of the dollar continues to be inflated and also because gold remains so undervalued notwithstanding its annual appreciation this decade. These gains started from gold’s historic low valuation in 1999. Gold may not be as good a value as it was in 1999, but it nevertheless remains extremely undervalued.

For example, until the end of the 19th century, approximately 40% of the world’s money supply consisted of gold, and the remaining 60% was national currency. As governments began to usurp the money issuing privilege and intentionally diminish gold’s role, fiat currency’s role expanded by the mid-20th century to approximately 90%. The inflationary policies of the 1960s, particularly in the US, further eroded gold’s role to 2% by the time the last remnants of the gold standard were abandoned in 1971. Gold’s importance rebounded in the 1970s, which caused Volcker to lament the so-called mistakes of policymakers. Its percentage rose to nearly 10% by 1980. But gold’s percent of the world money supply thereafter declined, reaching about 1% in 1999. Today it still remains below 2%.

From this analysis it is reasonable to conclude that gold should comprise at least 10% of the world’s money supply. Because it is nowhere near that level, gold is undervalued.

So given the ongoing dollar debasement being pursued by US policymakers, keeping gold from exploding upward to a true free-market price is the first thing they gain from their interventions in the gold market. The other thing they gain is time. The time they gain enables them to keep their fiat scheme afloat so they can benefit from it, delaying until some future administration the scheme's inevitable collapse.

So how does the US government manage the gold price? They recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank to do it, by executing trades to pursue the US government’s aims. These banks are the gold cartel. I don't believe that there are any other members of the cartel, with the possible exception of Citibank as a junior member. The cartel acts with the implicit backing of the US government to absorb all losses that may be taken by the cartel members as they manage the gold price and further, to provide whatever physical metal is required to execute the cartel's trading strategy. How did the gold cartel come about?

There was an abrupt change in government policy circa 1990. It was introduced by then Federal Reserve chairman Alan Greenspan in order to bail out the banks back then, which like now were insolvent. Taxpayers were already on the hook for hundreds of billions to bail out the collapsed ‘savings & loan’ industry, so adding to this tax burden was untenable. He therefore came up with an alternative.

Greenspan saw the free market as a golden goose with essentially unlimited deep pockets, and more to the point, that these pockets could be picked by the US government using its tremendous weight, namely, its financial resources for timed interventions in the free market combined with its propaganda power by using the media. In short, it was easier to bail out the insolvent banks back then by gouging ill-gained profits from the free markets instead of raising taxes.

Banks generated these profits by the Federal Reserve’s steepening of the yield curve, which kept long-term interest rates relatively high while lowering short-term rates. To earn this wide spread, banks leveraged themselves to borrow short-term and use the proceeds to buy long-term paper. This mismatch of assets and liabilities became known as the carry-trade.

The Japanese yen was a particular favorite to borrow. The Japanese stock market had crashed in 1990, and the Bank of Japan was pursuing a zero interest rate policy to try reviving the Japanese economy. A US bank could borrow Japanese yen for 0.2% and buy US T-notes yielding more than 8%, pocketing the spread, which did wonders for bank profits and rebuilding their capital base.

Gold also became a favorite vehicle to borrow because of its low interest rate. This gold came from central bank coffers, but they refused to disclose how much gold they were lending, making the gold market opaque and ripe for intervention by central bankers making decisions behind closed doors. The amount lent by central banks has been reliably estimated in various analyses published by GATA to be 12,000 to 15,000 tonnes, nearly one-half of central banks total holdings and 4-to-6 times annual new mine production of 2500 tonnes. The banks clearly jumped feet first into the gold carry-trade.

The carry-trade was a gift to the banks from the Federal Reserve, and all was well provided the yen and gold did not rise against the dollar because this mismatch of dollar assets and yen or gold liabilities was not hedged. Alas, both gold and the yen began to strengthen, which if allowed to rise high enough would force marked-to-market losses on those carry-trade positions in the banks. It was a major problem because the losses of the banks could be considerable, given the magnitude of the carry-trade.

So the gold cartel was created to manage the gold price, and all went well at first, given the help it received from the Bank of England in 1999 to sell one-half of its gold holdings. Gold was driven to historic lows, as noted above, but this low gold price created its own problem. Gold became so unbelievably cheap that value hunters around the world recognized the exceptional opportunity it offered, and demand for physical gold began to climb. As demand rose, another more intractable and unforeseen problem arose for the gold cartel.

The gold borrowed from the central banks had been melted down and turned into coins, small bars and monetary jewelry that were acquired by countless individuals around the world. This gold was now in ‘strong hands’, and these gold owners would only part with it at a much higher price. Therefore, where would the gold come from to repay the central banks?

While yen is a fiat currency and can be created out of thin air by the Bank of Japan, gold in contrast is a tangible asset. How could the banks repay all the gold they borrowed without causing the gold price to soar, further worsening the marked-to-market losses on their remaining positions?

In short, the banks were in a predicament. The Federal Reserve’s policies were debasing the dollar, and the ‘canary in the coalmine’ was warning of the loss of purchasing power. So Greenspan's policy of using interventions in the market to bail-out banks morphed yet again.

The gold borrowed from central banks would not be repaid because obtaining the physical gold to repay these loans would cause the gold price to soar. So beginning this decade, the gold cartel would conduct the government’s managed retreat, allowing the gold price to move generally higher in the hope that, basically, people wouldn’t notice. Given its ‘canary in a coalmine’ function, a rising gold price creates demand for gold, and a rapidly rising gold price would worsen the marked-to-market losses of the gold cartel.

So the objective is to allow the gold price to rise around 15% p.a., while at the same time enable the cartel members to intervene in the gold market with implicit government backing in order to earn profits to offset the growing losses on its gold liabilities. Its trading strategy to accomplish this task is clear. The gold cartel reverse engineers the black-box trend-following trading models.

Just look at the losses taken by some of the major commodity trading managers on their gold trading over the last decade. It is hundreds of millions of dollars of client money lost, and gained for the gold cartel to help offset their losses from the gold carry-trade. All to make the dollar look good by keeping the gold price lower than it should be and would be if it were allowed to trade in a market unfettered by government intervention.

There are only two outcomes as I see it. Either the gold cartel will fail in the end, or the US government will have destroyed what remains of the free market in America. I hope it is the former, but the continuing flow of events from Washington, D.C. and the actions of policymakers suggest it could be the latter.

By Rob Kirby

Most widely accepted and reported accounts of our current global financial difficulties place its beginnings in the August 2007 timeframe, when sub-prime [mortgage] credit markets “seized up”.

The precarious state of our financial system was echoed some time before August 2007, when none other than Dallas Fed President, Richard Fisher, espoused [in a rare moment of clarity and candor] back on April 16, 2007,

“I have spoken in previous speeches of our “faith-based currency,” a term I use only slightly tongue in cheek. The dollar—like the euro, the yen, the British pound and other currencies—is what economists call a fiat currency. It is backed only by the federal government’s power to raise the revenues needed to meet its obligations and by the rectitude of the U.S. central bank. If the market were to lose faith in either assumption, the dollar would be debased.”

Fisher’s [then] words elicit connotations of “a sales job” – to make believers out of skeptics. After all, instilling faith in skeptics “IS” fundamentally what any religion is all about anyway, ehhh?

Why We Should All Be Skeptical

Generally speaking, Central Bankers are paid to lie. We know this because former Federal Reserve Vice Chairman, Alan Blinder, “slipped” back in the 1990’s when, on national television, he uttered the words,

"The last duty of a central banker is to tell the public the truth."

When one stops and connects the thoughts of these two esteemed Federal Reserve officers one can easily arrive at the conclusion that lies [or omissions of truth, if you prefer] are in all likelihood, tied to “keeping the faith”.

Recent changes in accounting procedures of FASB [Financial Accounting Standards Board] at the behest of the assemblage of Central Bankers at the latest G–20 meeting in London will serve to obfuscate the true financial condition of financial institutions. As Trace Mayer recently articulated, FASB Changes Perpetuate Fair Value Lying;

THE SPINELESS GELATINOUS FASB

Financial companies [read: the privately owned Federal Reserve] have used their agents, U.S. lawmakers, to pressure the FASB to relax fair-value accounting rules. Yahoo! Finance reports,

“The changes will allow the assets to be valued at what they would go for in an “orderly” sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month.”


You see folks, the real reason behind the lies of the bankers and their owned, puppet politicians through ACCOUNTING CHICANERY is, yet-again, to “keep the faith” in a dying, irredeemable fiat currency regime that has long past its due date.

This same mob would like us all to believe that they are doing their level-best to “unfreeze credit markets” and get the banks lending again.


If this were truly so, we must ask why the Obama Administration last week chose to villain-ize hedge funds and make spurious claims that they “stood” with ‘reasonable banks’ and the Chrysler employees.

The reality, folks, is that this issue has been severely [and purposely, perhaps?] mischaracterized:

You see, the hedge funds that were cast in the role of “villains” in this case just happened to be the most senior, secured debt holders of Chrysler.

When one contemplates what debt is, as an asset class [as opposed to common equity] and why an investor chooses secured / unsecured debt over equity, one must consider where each of these assets stands in a receivership. Secured debt or fixed income, by virtue of its FIXED coupon, limits the upside return of investor in favor of SECURITY – that of being first in line for repayment of principal should a company fail. Investors in equity [common stock] of a company have consciously and willfully chosen more risk and the prospect of greater, unbridled returns, but assume that risk at the expense of knowing – in the case of receivership – they stand BEHIND the secured lenders of said company. A recap of President Obama's remarks,


He [Obama] lauded the company's management and the United Automobile Workers, for making concessions. He even praised J.P. Morgan and other financial firms that "agreed to reduce their debt to less than one-third of its face value to help free Chrysler from its crushing obligations" and German automaker, Daimler, for agreeing to give up its stake.


Then he slammed unnamed hedge funds that rejected the government’s settlement offer in hopes of getting a taxpayer-funded bailout. "They were hoping that everybody else would make sacrifices, and they would have to make none," he said. "Some demanded twice the return that other lenders were getting."


Then, with pointed anger, the president added:


I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices.

President Obama’s proposed solution to the Chrysler crisis would see secured debt holders recoup the same amount [percentage] of their investments as unsecured debt holders and equity holders.

Because secured debt holders would not agree to this proposal, the Obama Administration has forced Chrysler into bankruptcy, where they hope to use the power of the courts to “stuff” secured debt holders with their prescribed outcome.

If the Obama Administration is successful in enforcing this solution on the secured debt holders of Chrysler, this might constitute a “wooden stake through the heart” of global debt markets – effectively shuttering them forever.

Remember folks, President Obama is being counseled in this regard by an esteemed list of current, as well as former, Central Bankers. Should this action end up irreparably shuttering the debt markets forever, it would run contrary to the stated goals of Fed and Treasury officials that they are doing their level best to “unfreeze” credit markets and get banks lending again, wouldn’t it?

But then again, if Alan Blinder was telling the truth when he said that “the last duty of a Central Banker is to tell the public the truth”, should any of us really be surprised?

Got physical gold yet?

By James West

The irony of the emergence of a Swine Flu pandemic amidst an economic contraction brought on by glutinous gorging on credit and real estate in the United Casinos of America is surely not lost on barbed minds. The insistence by the World Health Organization that it be termed the far less ominous sounding H1N1 is evidence of our collective predisposition to avoid calling a spade a spade if it has negative implications. That predisposition will be viewed by posterity, should there be any, as a terminal flaw in the human character of our era.

The manifestation of a Swine Flu pandemic in the midst of a global economic meltdown does not bode well for the ‘recovery’, which, depending on who you listen to, is either well under way or years away. Our insistence on ignoring the simple solutions to both problems may yet herald the biggest historic instance of mass delusion and subsequent extinction of our kind.

Close the airports, and unwind the global entanglement of trade temporarily pending a recalibration of its mechanisms, and enjoy the inevitable return to mental and physical health, albeit amidst diminished financial circumstances.

Such simplistic yet idealistic pontificating sounds feasible superficially, but we’ve devised and installed such a pervasive metaphysical infrastructure of mis-information, that its only on our death beds that we catch a brief glimpse of the reality behind our fabulous global amusement park.

Economists, (the academic variety, I mean – not the “one who acts economically” of archaic definition) are the copywriters for the tanned and coifed anchormen who translate economic data from mathematical complexity into street form.

“Stocks Rise on Renewed Optimism.”

“Gold Down as U.S. dollar rallies.”

“Green Shoots of Economic Growth Seen”.

Its as if the real driving forces of economic fluctuation are too menacing to identify plainly. Instead they must broadcast in the language of kindergarten students.

More realistic headlines are conceivable.

“Swine Flu Pandemic Caused by Too Many Pigs”

“Stocks and Gold’s Daily Price Fluctuation Irrelevant to Bigger Picture”

“Economy Won’t Recover Until Transparency Across Derivatives, Commodities and Credit Implemented”.

Its not so hard.

The Swine Flu outbreak is being compared in the press to the Spanish Influenza outbreak of 1918-19. That outbreak was caused by “an unusually virulent and deadly Influenza A virus strain of subtype H1N1”, according to Wikipedia.

The Swine Flu outbreak of 2009 has been described as a virus “that was produced by reassortment from one strain of human influenza virus, one strain of avian influenza virus, and two separate strains of swine influenza virus.

The Spanish Flu outbreak was not Swine Flu. At least, that’s what the Center for Disease Control in Atlanta says. The question is, then “why are they being labeled identically?” The same question could be asked of currency and gold. Gold is money, and currency is merely paper printed with a value that fluctuates according to its perceived value. Gold takes gargantuan effort to produce from mines, which explains its cost and value, whereas paper money is fabricated with a minute fraction of the effort.

Why, then, is paper currency accorded the same utility as gold?

Historically, paper money evolved from the fact that you stored your gold with a banker, and he issued you pieces of paper acknowledging the fact that there was gold that you owned stored in the banker’s vault. That evolved into governments issuing currency backed by gold in the government’s vault. Through various manifestations the Gold Standard determined the value of the world’s currencies, until Richard Nixon terminated the relationship with the end of the Bretton Woods Agreement, that governed the last albeit bastardized version of the original gold standard.

The motivation for the United States Government in adopting a floating currency backed by nothing but the willingness of a counterparty to accept its face value is obvious enough. Gold takes enormous effort to produce, and is limited in quantity.

Confidence is manufactured comparatively easily, and is limitless under the right conditions. The inherent value of gold undermined the confidence game required to perpetuate the U.S. dollar into the global reserve currency, and so it evolved that it was against the government’s interest to have a global Gold Standard, and very much within its interest to have a global U.S. dollar standard, which is what we have now.

Unfortunately, the same inability of humanity to temper its responsible stewardship of currencies throughout history has once again manifested itself in the virulent fabrication of U.S. dollars, facilitated by the media. No currency has lasted more than a hundred years in history, and it appears that the inflation of the U.S. dollar supply should soon enough lead to a Weimar-esque price hyper-inflation, where the price of a loaf of bread doubled every 15 seconds that will spell its doom.

Unfortunately, or fortunately, depending on your position in the food chain, the information distribution apparatus that has been hijacked by the richest of the rich and the power hungry mob in three piece suits is now so powerful, that even in the face of irrefutable tangible plain-as-the-nose-on-your-face evidence to the contrary, the U.S. dollar continues to appear strong, and gold performs weakly.

For those of you entranced by the information apparatus so described, here are a few basic facts that should help you prepare for the worst.

Gold is money (So is silver). Currency, especially the U.S. dollar, is not.
There is no recovery underway, and won’t be for at least another 2 years, if even then.
Swine Flu, despite its emerging ‘preferred’ name H1N1, is still Swine Flu.

DISCLOSURE: The author owns some gold and some U.S. dollars but no pigs.