High Tide for the Dollar: Revenge of the Sith

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Posted on 16th May 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse

I have certainly considered this scenario many times, of how the dollar regime might evolve,  and the one discussed below remains one possible outcome.

There is an intense international discussion going on about the future of the international currency system, and relations in general.  I have referred to this generally as the ‘currency wars’ for some time.

Most Americans have yet to notice this, due in no small part to the silence of the mainstream media.   If the US and the BRICs cannot engage in a rapprochement over the future of the international monetary system, and keep pushing a hard line for a US dollar hegemony, then of course the BRICs may pursue those discussions by other means.

One way to do this would be to revalue gold at let’s say $10,000 per ounce, and use it to partially back their own currency, or currencies.  Bill Holter does a good job of outlining that in the article excerpted below.  The details of how that one might play out is certainly open to much debate.

The counter to this is force, which the US has been employing much more aggressively and pre-emptively of late than it otherwise has done in the post-Cold War era.

I had assigned this somewhat unilateral devaluation of the Dollar to Gold outcome a low probability, thinking that the US and its allies, Britain, Japan, and parts of the EU, would continue supporting each other’s currencies and policies of foreign exchange valuations through non-transparent swaps and buying, in a managed devaluation amongst themselves of course. But I thought they would at least open the door to allowing the SDR to be reconstituted with a broader basket of currencies and metals not under NATO control.

The events of late in Ukraine make me wonder if the negotiations have not broken down because the hard liners in the Anglo-American cartel have prevailed over those who might favor accommodation and compromise. When the coup d’état occurred, with the US involvement becoming known, I had one of those ‘WTF’ moments many of us had when the US made a hard right turn and attacked Iraq, seemingly out of nowhere as a response to 911.   Wow, where did that come from?

Certainly it must be obvious that the neo-cons are back in force in Washington, although the neo-liberal economists in the Obama cabinet are certainly capable of carrying the financial side of that American Century outlook.

This is not to say that Russia and China are in the right, or are ‘good.’  They have positions and the Anglo-American financiers have positions.  One can certainly debate the relative merits, but for my own case I wish to try and understand what is happening, so that we may best adjust to it and understand what is happening and why.

And it would certainly be difficult to give high marks to the Anglo-American elites for taking care of those at home, and managing the domestic infrastructure and prosperity.  As we see so often throughout history, this appears to be the case of an oligarchy versus another oligarchy, as they grow restless within their domains.

Therefore I continue to believe that we will see change, rather than collapse.  Although if I were writing a book, or selling my site for clicks, the temptation for blaring headlines of doom might be stronger.   Things change, and periods of change always invoke dire predictions and phantoms of doom.

I am more concerned about a union amongst the oligarchs and the rise of a global governance that is anti-human, to be frank.   But even that is most likely an outlier I would like to think.  Of more real concern perhaps are the unsuspecting believers and the gullible who may be proudly riding the gospel of prosperity, and a fascination for the trappings but not the substance of devotion, into the maws of hell, with ‘Lord, Lord’ on their lips.  But that is another matter for a smaller audience, and a preoccupation for some of us here.

So grab something solid and hang on.  I don’t know enough to be able to predict how this will turn out, and  anyone who might be able to do so realizes that the fog of war is descending quickly.   Predictions and guesses are cheap, and will become even more plentiful as things progress.  But knowledge is the coin of the realm.

There could be rough waters ahead, mateys. But one can always hope that cooler and wiser and stronger heads will prevail.  This will play out slowly, until something happens, and then events may being to move rather quickly.  Pray for the best, and prepare for the worst.

“Next Tuesday, Vladimir Putin will meet with Chinese President Xi Jinping, I believe that the odds are quite high that an energy deal will be announced where Russia will supply China with oil and gas and that infrastructure (pipelines) will also be built to the express exclusion of the dollar. Please understand that this is not a deal where a few million barrels of oil are sent and then get settled for, no, this will be a very long term partnership which is why the infrastructure will be built.

My intent was to explain that China has imported 1,000′s of tons of gold over the last several years and that they (even though their system is very highly leveraged just as ours) have prepared themselves for what is coming.  ‘What is coming’ is that China will have just as many massive defaults as the U.S. will …but with a “small difference.” I believe that China will mark gold up to an arbitrary number of let’s say $10,000 per ounce which will do a number of things. First, this will make China’s holdings worth much much more which can and will be used as collateral to steady their debt markets. This collateral will serve to re liquefy the banks AND back their currency should they wish to (I believe they do).

Another added ‘benefit’ is that this will expose the fact that the West no longer has any gold. The dollar will go into a spiral because not just ‘one lunatic’ like Saddam Hussein is proposing to no longer use dollars. No, we are talking about 2 major oil producers and our largest trading partner who may just be the largest economy in the world having eclipsed us. Another little tidbit is that these 3 taken together were for years the absolute arch enemy of the U.S. and now they are forming a unified triad where Russia and Iran can say, ‘Hey, you told us not to use dollars anymore, we’re just doing what you’ve told us to do.’  Talk about forming ‘policy’ without looking 5 seconds into the future, our sanctions would be the definition of this.”

Bill Holter, They Don’t Need Us, We Need Them

Read the entire article here.

6 Comments
  1. Yojimbo says:

    He muses well, and writes beautifully, but his perspective is from someone who financially is safe from the crashing economy, like the lighthouse in the picture above.

    The rest of us peons are in the churning waves in the picture, and his musing, while somewhat comforting, will do us no good when the storm hits with full force.

    16th May 2014 at 9:38 am

  2. Yojimbo says:

    From a commenter on Zerohedge:

    Remember: This is all being done by design. It’s not so much that obama is “messing” up and making mistakes in all these geo-political challenges with Russia and China.

    It’s by design to look that way. obama is just an empty suit puppet being controlled by the global elite.

    They want America to go down and this is the way they are trying to achieve it. obama and the rest of the scum he surrounds himself with as well as a large majority of our elected and non-elected beaurocrats are more than happy to play along as they achieve great wealth, power, and status among the global elite. But they’re all just puppets too and they’re greed and treason won’t get them far.

    This is all part of their Cloward and Piven strategy to overhwelm America with debt and chaos until the entire system collapses under the weight of it all.

    They don’t care how it occurs and have launched a multi-faceted attack against us from many directions with obamacare, QE, wars, Agenda 21, deindustrialization of our manufacuring, insane environmental regulations, Common Core, crony Fascism, etc. etc.

    All being used against us to destroy our society, freedom, and rights under the Constitution and Bill of Rights which they despise and wish to replace with a Marxist/Fasicst/Authoritarian regime or Oligarchy.

    They’ve done very well so far, haven’t the little mother fuckers???

    I’m skeptical we can ever turn this all around unless or until a collapse does actually occur and we (the good guys) battle it out with them either by civil war or military take-over of the government to replace them, kill them, or throw them all in jail, and then re-establish civilian government with the original Constitution and Bill of Rights.

    Until then I think all we can do is watch this shit-show continue, keep trying to wake more people up, and prepare our asses off by stacking phyzz, supplies, guns, ammo, food, water, etc.

    Just get ready for it. Because once they finally achieve destroying the dollar and replacing it as the world reserve currency, America is going to plunge into some seriously deep shit for a very long time. And we need people who are physically and mentally prepared to head into this and lead the rest who will be completely caught off guard.

    This treasonous government is building an army around us of those who are fully dependent on them and once they collapse everything they know those people will run to them begging for anything to survive. That’s the ultimate trap being set for America so that they can deal us the final blow of a full authoritarian regime.

    We have to be ready to fight that at all costs, folks. No joke. This is very fucking serious.

    16th May 2014 at 11:42 am

  3. MarsPleaseAttack says:

    @Yojimbo,

    But hasn’t it ALWAYS been thus? The only way to break the chain is to opt-out of nation-states, of “civilization”, and live in small tribes. Sadly, since we are WAY beyond carrying capacity, that will require about a 99% die out. Even then, you have to hope the psychopaths that create hierarchy are reduced to such a small number that they cannot create and master the same social relations that doomed our society. Seems unlikely….

    16th May 2014 at 11:50 am

  4. Tommy says:

    @yojimbo, I agree. He’s got that ‘storm in a teacup’ tone – and while I get the clarity that’s afforded when the ‘doom’ is parked for a moment, its still there. That’s my preoccupation…the endgame, whatever it is, is gonna be bad for me, but the journey down alone is sure to be a gauntlet. I am curious about what would happen, or how it would play out, if China said 10k/oz and the fed said no, its 2k….that would be an interesting day.

    16th May 2014 at 11:52 am

  5. AWD says:

    “all part of their Cloward and Piven strategy to overwhelm America with debt and chaos until the entire system collapses under the weight of it all.”

    MlYzZ.jpg

    Sith lord or anti-christ?

    4487770115_1e7213aa28.jpg

    16th May 2014 at 11:56 am

  6. Administrator says:

    Gold Daily and Silver Weekly Charts – How Long Can the Gold Pool Hold Gold and Silver Down

    “The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.

    The central banks coordinated concerted methods of gold sales to balance spikes in the market price of gold as determined by the London morning gold fixing while buying gold on price weaknesses. The United States provided 50% of the required gold supply for sale. The price controls were successful for six years until the system became no longer workable. The pegged price of gold was too low and runs on gold, the British pound, and the US dollar occurred and France decided to withdraw from the pool. The London Gold Pool collapsed in March 1968.

    The London Gold Pool controls were followed with an effort to suppress the gold price with a two-tier system of official exchange and open market transactions, but this gold window collapsed in 1971 with the Nixon Shock, and resulted in the onset of the gold bull market which saw the price of gold appreciate rapidly to US$850 in 1980.”

    Wikipedia, The London Gold Pool

    The first chart this evening is a chart that compares the year to date performance of the SP 500, the NDX, the Russell 2000, and gold. I will let you figure out which one is outperforming.

    If you have not noticed, gold and silver have been ‘pegged’ just below 1300 and 20 respectively. Someone asked me ‘why these particular levels’ the other day. I would hope the reason why they are capping the metals in the first place would be fairly self explanatory by now.

    Who are ‘they?’ Some of the Western central banks have obviously formed a ‘gold pool’ through which they are attempting to manage the relationships of a number of currencies, including the natural money of gold and silver.

    The Western banks are running a bit of a con game with the Dollar, and it has already passed its prime. You really cannot based global economics on a piece of paper that one country creates at will for its own domestic and foreign policy conveniences. Not unless you are willing to sacrifice your own autonomy. Its a similar thing to the reason why the euro must eventually fail, because it is a single currency across a non-cohesive political union.

    I think it is a matter of practicality. The Fed and its crony central banks are clearly in a bit of a panic, and they are attempting to hold the line in the metals, while they try and manage the unfolding set of crises which they have created, and which are hardly resolved.

    They would like to strike a lower level, but as we have seen that is a bit problematic, because the vaults of the West were being emptied fairly steadily, and the miners will be having even more trouble staying in business at lower prices. And there remains a stubborn demand for the metals from the peoples of the Mideast and Asia, despite the efforts of the neo-liberals to bring them to heel.

    I cannot predict exactly when this current cartel will fail, as the London Gold Pool fell when France withdrew for example. It is hard to predict an exogenous decision or shock. But there are no lack of guesses. Guessing is not a practical investment strategy, but it works in selling advice.

    It is clear that China and Russia and parts of the Mideast are not on board with the Pool, and India is struggling against its own people. The US is flexing its muscles, but that sort of thing tends to become untenably expensive, even for those who own a printing press, but do not own the printing press.

    Perhaps we may see some better hints of it through the fog of deception as the time approaches. But it seems likely that when the new gold pool starts to crumble, the price levels may move with a bit of a bang.

    Have a pleasant weekend.

    JESSE

    16th May 2014 at 4:56 pm

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