Gold: the protector and creator of jobs

04/February/2009

Gold: the protector and creator of jobs


Hugo Salinas Price

"Some readers may ask themselves, “What has gold to do with protecting jobs? Gold hoarders are certainly not creating jobs, and hoarding more gold will not help at all.”

Gold has everything to do with the loss of jobs in the US, and gold has everything to do with recovering jobs for the US economy.

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With no loss of gold to restrain the US and force it to stop expanding credit, US imports surged and exports waned. The monetary difference was “paid” in dollars.

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There was no restraint to US credit expansion. It was a lovely time to be young and an American.

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The fiat dollar – unanchored to gold – was the greatest strategic gift that the US could have made to China. Now, they have a huge industrial base and the US has Oh, so little!
The damage is done. How to recover the industrial base of the US ? Not by slogans such as “ Buy American ”, nor by protectionism.

What is required is to recover economic balance between the nations of the world so that they all can balance their exports with their imports. This is not done by protectionism, a false remedy to joblessness.

The world needs to return to gold as the international means of payment. All imbalances must be paid, monthly, in gold. No fiat money “payment” allowed!

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The Gold Standard is the friend and protector of the worker and of the investor, as well as the basis for harmonious relations between the nations of the world.

And by the way, the current financial disaster in the US is directly attributable to Nixon's decision to “close the gold window”, because a monetary system based on gold is an obstacle to the criminal credit expansion perpetrated by the bankers. Gold based money puts shackles on bankers, forcing them to be careful. A fiat money system enables financial criminality – it's as effective in restraining criminality in finance as tying up a dog with a string of sausages."

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Newstopia explains the Reserve Bank



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Those that have been taking advantage of recently low gold and silver prices, trading their government fiat tokens for real actual money, leaving very little in "banks", are going to be well rewarded for doing the opposite of what governments, the mass media and the financial world are telling people to do.

The Gold Price to Move UP

The gold price could easily double this year.

Marc Faber thinks that if the US Treasury does not default on its debt, there will be serious price increases, that the Zimbawe school of economics is opperating in the US, and that features of a banana republic are not quite there in the US yet but doubts that the US will fail to arrive at a banana republic state.



Peter Schiff explains why these "stimulas" packages are putting gasoline on the fire.



Gold, silver and the related shares are the no brainer way to invest for the next few years. They will become the "go to" investment category.

Gold Price and Silver Price Explosions

The possible timing for gold price and silver price explosions may be around March 19 if not some other move somewhere in the financial markets.



More here on the World Economic Confidence Model


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The international monetary process
Hugo Salinas Price

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"Even so, gold remained a nuisance; the special nuisance for the U.S. was its established obligation to deliver gold in return for dollars tendered for payment by Central Banks: too many countries were turning in, for gold, the dollars which the U.S. was issuing in quantities larger than the world market wished to retain. U.S. gold reserves shrank from over 20 thousand tons at the end of WWII, to some 8 thousand.

On the other hand, the U.S. wanted to continue to issue more money to pay for its expenditures on war and social programs. The international monetary system was approaching a critical parameter, but any corrective measure was discarded.

Instead of reining in the excess, the U.S. discarded gold, the control which was critical to the system and which was signaling an imperative halt to excessive expenditure.

On August 15th, 1971, the world was left without an “International Monetary System”. What remained, and remains to this day, after the U.S. refused to redeem dollars for gold, is no longer a system. It cannot be a system, because the internal control which blocked the violation of critical parameters and insured operational stability has been removed.

We present an eloquent graph. It shows quite clearly that, as of 1971 and to date, the world no longer functions under an “international monetary system”, but within an international monetary explosion."
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[Good graph at the above link]


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It seems that the start of the loss of plane 'ol confidence in a big part of the world's financial system is underway from published accounts of the meeting at Davos. The world's current financial/banking system needs it to survive. It looks like a lot more loss is on the horizon. Fear can build up fast. It is a stronger emotion than greed. There is not a lot to have confidence in when major banks, brokerage houses, major vaults controled by entities in the financial system that are failing, governments that are supposedly regulating the financial system are in fact not, major accounting firms are not doing honest audits and the list could go on.

At some point there will be a race to the tried and true assets that can be 100% trusted, gold and silver. Then you will see the gold price and the silver price soar.

US Dollar Top

The US dollar sure looks like it made another and lower top since it has broken down through its short term uptrend line. This is a plus for the gold price and the silver price.



It probably made a double top. It could still make another head and shoulders top. Either way does not make much of a difference.



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A joke going around:

Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers..

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn’t that stimulating the economy of China?
A. Shut up.

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The latest US Treasury debt auction had to have an unknown entity, probably the Fed, step in near the end to buy up the balance that nobody wanted. The price of US Treasury debt has been going down lately. If it is non-US entities selling, they would get US dollars in return for the debt. Then they would sell the US dollars for their home "money", "currency", government fiat tokens.

Now, it looks like the US dollar market and the US Treasury debt market are both winds at the back of the gold price and the silver price.

The Silver Price

The silver price is chomping at the bit to take off:




An equal spacing tool on the 2 year chart is suggesting it, too.



How high will silver be by the end of March?

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Both silver and gold should be itching to take off since it is business as usual at the PTB's (Powers That Be) White House. There is no change. The spending plans are bigger than ever; read debt increases at the US Treasury and garbage assets on the books of The Fed bigger than ever. They just replaced one puppet with another puppet to quiet down the citizen units; to buy some more time.



Bait for the Two-Legged Rat

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"this week, I stopped in at a local sandwich shop and, to occupy myself with something other than looking out the window, took hold of a regional real estate guide that, as part of its editorial features, includes a table showing all of the lenders who do business in the area - 16 in all.

Among other information, the lenders' table displayed whether or not the various lending institutions offer "Mortgages to Buyers with Less Than 20% Down?"... and whether they "Offer Mortgages with Credit Scores Under 600?"

Even today, after all the news and global angst, 9 out of 16 still advertise that they offer loans to individuals with credit scores below 600, and four of them actively promote the fact that they'll go down to 580 - which is roughly the credit rating of an escaped felon on the run for credit card fraud. But such a loan, each of the listing institutions further qualifies, is available "Only w/FHA."

And 12 out of 16 will still give you a loan with less than 20% down... in fact, "w/FHA," the solid majority will still provide a loan with less than 5% down, and one touted the availability of a 103% loan."
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It could get so bad that the US Treasury and/or The Fed break. After all, the world is now questioning the "full faith and credit" BS/crap of the US government.

"The Insolvency of the Fed

Daily Article by Philipp Bagus and Markus H. Schiml | Posted on 2/5/2009 12:00:00 AM

Since August 15, 1971 the US dollar has been an irredeemable paper currency. Every irredeemable paper currency in history has failed. Yet, the experiment of the US dollar and the rest of the fiat paper world continues.

During the current crisis, however, financial systems all over the world are increasingly struggling, and the end of the experiment seems closer. In fact, the Federal Reserve System has used up much of its "ammunition" for monetary interventions in an attempt to keep the experiment going, lowering its target interest rate almost to zero. Other central banks are also quickly approaching the "zero limit" for interest rates." ....

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The US Treasury needs to borrow about 2-2.5 trillion this year.

The US governments budget deficit will be about 1 trillion this year.

FOMC Committee member Janet Yellen said that the idea that more borrowing from the Fed by the US Treasury will lead to higher inflation and higher interest rates is "ludicrous". Same 'ol black is white stuff.

The new president has attempted to appoint 4 tax dodgers to high office.

What has changed?

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The AMEX's gold bug index, the HUI is suggesting that the silver price wants to take off, too.

Gold, Silver, Money, "Money", Debt and the US Dollar - II

Ron Paul [whose economics is Austrian] on Federal Reserve, banking and economy [therefor on gold and silver use as money]:



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"It is well enough that the people of the nation do not understand our banking and our monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry ford


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G. Edward Griffin on the Federal Reserve System



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Bill Buckler at The Privateer:

.... "The US Dollar is still the world's RESERVE currency. The US is the only nation in the world which can buy valuable goods and services anywhere WITHOUT having first to buy the currency of the nation from which it is buying. The US Dollar is an INTERNATIONAL trading currency as well as being a RESERVE currency. Finally, there is the simple fact that the rest of the world holds predominantly US Dollars as the "reserves" which form the foundation of their own monetary system. Without these "reserves", they haven't got a system.

It is, of course, a fact that the US Dollar is rapidly losing its reserve currency status. The planned debt issuance of the US Treasury over this calendar year - estimates range from $US 2.5 to well over $US 3 TRILLION - are not supportable. The rest of the world doesn't have that kind of money to lend. If the Obama Administration carries forward its "stimulus" (and other) policies, the stark prospect of a simple "monetisation" of the debt - by means of literal US Federal Reserve purchases of it - is a certainty. The status of the US Dollar, as an international trading and reserve currency, will not survive that. The end result is that the US Dollar will plummet, if not against all other global currencies then certainly against the one form of MONEY which is no-one else's liability - Gold." ....

Gold, Silver, Money, "Money", Debt and the US Dollar

Gold and silver are money. There is no liability or debt attached to them. Now a days the word "money" has been perverted all the way to referring to something that is directly attached to debt.

This is worth nailing down once and for all:

Paul Grignon's 47-minute animated presentation of "Money as Debt" tells in very simple and effective graphic terms what money is and how it is being created.

Money As Debt (1 of 5)



The other 4 parts are at the links to the right at:
Money As Debt (1 of 5)

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The Inevitable Collapse of the Dollar:
Peter Schiff and Steven Roach interviewed.


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Nothing like having real gold and silver money in your grubby little hands rather than that fantasy stuff in general use at the moment.

Interest Rates Rise With Gold

A refresher from the past on rising interest rates, historical charts included:
Saturday, June 10, 2006
Interest Rates Rise With Gold

An important editorial, Default Option, by Greg Hunter from Jim Sincliar's site. He tells it like it is. It's understandable:


Default Option
Posted: Feb 01 2009 By: Greg Hunter Post Edited: February 1, 2009 at 11:31 pm

Filed under: General Editorial

Dear CIGAs,

I have been hearing about how we as in “We the people…” have to fix the banks so they can lend money again. Many options have been discussed and it looks like the President is strongly leaning toward a “Bad Bank” type of rescue where toxic securities will be dumped into a newly created institution. It’s a magical place where bad debt bets will disappear like tears in the rain, of course, with taxpayer help. This has never been done before on a scale this large, so no one really knows exactly what the consequences will be or if it will even work. NYU economics professor Nouriel Roubini predicts that the losses for the banking system could be 3.6 trillion and is “effectively insolvent.” Just about a year ago Roubini said the bank losses would be 2 trillion bucks. Fact is, no one knows for sure how much this may end up costing because the toxic securities (OTC derivatives) are very, very difficult to price. In many cases they could be worthless or worth a lot less then they can ever get on the open market. In a year from now the number could be 7 trillion in bank losses, who knows! The toxic asset picture is a moving target but, one thing is for sure, it will be many trillions in losses by the time it is finally cleared up.

My question is if the banking system is “insolvent” and it’s unknown how much this will cost then why is the “default option” not in play here? Famed investor Jim Rogers says the insolvent banks should be “allowed to fail.” Then the assets would go from the incompetent to the competent. There are hundreds of small and medium sized banks that did not invest in toxic securities and are financially sound. In short, the incompetent banks would be liquidated and competent banks would take over the assets that are left behind. Instead, the pundits of Wall Street are basically telling America,” You make us (the banks) whole first and then we will lend you your money back!” That is simply outrageous because we are rewarding the incompetent!!!!!!!

Remember, incompetent and foolhardy bankers are the cause of this “credit crisis” in the U.S. and the rest of the world. Letting those banks take the hit for their ill advised, reckless investments biased on greed will do many things. Here are just a few. Letting the reckless banks fail will limit taxpayer exposure and preserve our capital and our credit rating as a country. Bank failure will wash bad debt out of the system once and for all and protect the dollar from free fall. Finally, I think in the end it will be cheaper and more effective than what has and will be done in the future to “fix” the credit crisis.

In default, the incompetent banks, the bond holders and the share holders will get completely wiped out. Yes, there will be plenty of pain to go around but that is coming anyway. All the capital injections and bailouts and “Bad Banks” just put off judgment day and make things worse for the country. The idea that somehow we as a nation do not have to pay for our financial sins is a farce. The only people that should be protected with taxpayer money (even though it will cost trillions) are the depositors. Without depositors you do not have a banking system. Depositors are savers and that is what is needed for capital formation. We do not need anymore debt formation. Warren Buffet wasn’t able to get 10 percent interest for loaning billions to Goldman Sachs or GE because he had a good credit score. He got preferential treatment because he had capital (yes… cold hard cash) to invest. The way I see it, the less time we drag this problem out, the faster we can truly put it behind us. Right now the “default option” is voluntary, but if we get this wrong and do not really fix this problem, then default may be forced on a lot more people than just the incompetent bankers.


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"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, 'Account overdrawn.' - Ayn Rand, author of Atlas Shrugged, Capitalism: The Unknown Ideal, Fountainhead (basis for a once popular movie).


When the powers that be are totally out of control, like now, it's time to be into basics. Physical posession of gold and silver amongst the most basic of the basics.

The HUI Gold and Silver Stock index Is Looking Good

The Amex's HUI index of gold and silver companies looks like it is chomping at the bit to head higher.

(Open in new tab for a larger view)


From its final October low, it has made 4 more **higher** lows.
Plus, Thursday was an outside reversal day. Bullish.
It is hitting its head on about the 310 level currently for the fourth time.
Break out to the upside next week?

How the equal spacing tool looks on the HUI:


There is resistance right now at the 310 level. Later on it will be at the 360 level.

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The new "manager" of the US economy has installed nothing but more of the good 'ol boyz for the management team, meaning the boyz got themselves another good little puppet like the last puppet (has the new puppet demonstrated the ability to run so much as a hot dog stand, or even a lemonade stand?), meaning it will be more of the same, more debt piling up, probably at a faster rate than before. More huge legislation authorizing even bigger spending (requiring huge debt creation to get the US dollars created to spend), without it being read by those who vote for it. More of the same is getting ugly.



Gold and silver in the hand is going to be critical for some people.