They don’t care about you. They care about their wealth, power and control. Always remember that. They are your owners. You are their property.
What A Confidential 1974 Memo To Paul Volcker Reveals About America’s True Views On Gold, Reserve Currency And “PetroGold”
Submitted by Tyler Durden on 11/11/2013 22:09 -0500
Just over four years ago, we highlighted a recently declassified top secret 1968 telegram to the Secretary of State from the American Embassy in Paris, in which the big picture thinking behind the creation of the IMF’s Special Drawing Right (rolled out shortly thereafter in 1969), or SDRs, was laid out. In that memo it was revealed that despite what some may think, the fundamental driver behind the promotion of a supranational reserve paper currency had one goal in mind: allowing the US to “remain masters of gold.”
Specifically, this is among the top secret paragraphs said on a cold night in March 1968:
If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.’s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years.
This then puts into question just what the true purpose of the IMF is. Because while its stated role of preserving the stability in developing, and increasingly more so, developed, countries is a noble one, what appears to have been the real motive behind the monetary fund’s creation, was to promote and encourage the development of a substitute reserve currency, the SDR, and to ultimately use it as the de facto buffer and intermediary, for conversion of all the outstanding “barbarous relic” hard currency, namely gold, into the fiat of the future: the soon to be newly created SDR. All the while, and increasingly more so as more countries converted their gold into SDR, such remaining hard currency would be almost exclusively under the control of the United States.
Well, in the intervening 44 years, the SDR never managed to take off, the reason being that the dollar’s reserve currency status was exponentially cemented courtesy of both the great moderation of the 1980s and the derivative explosion of the 1990s and post Glass Steagall repeal 2000s, when the world was literally flooded with roughly $1 quadrillion in USD-denominated derivatives, inextricably tying the fate of the world to that of the dollar.
However, back in 1974, shortly after Nixon ended the Bretton Woods system, and cemented the dollar’s fate as a fiat currency, no longer convertible into gold, the future of the SDR was still bright, especially at a time when the US seemed set to suffer a very unpleasant date with inflationary reality following the 1973 oil crisis, leading to a potential loss of faith in the US dollar.
Which brings us to the topic of today’s article: the international monetary system, reserve currency status, SDRs, and, of course, gold… again.
Below is a memo written in 1974 by Sidney Weintraub, Deputy Assistant Secretary of State for International Finance and Development, to Paul Volcker, when he was still just Under Secretary of the Treasury for Monetary Affairs and not yet head of the Federal Reserve. The source of the memo was found in the National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 1, Gold—8/15/71–2/9/72. No classification marking. A stamped notation on the note reads: “Noted by Mr. Volcker.” Another notation, dated March 8, indicates that copies were sent to Bennett and Cross. It currently resides in declassified form in Document 61, Foreign Relations Of The United States, 1973–1976, Volume XXXI Foreign Economic Policy, and is found at the Office of the Historian website.
The memo is a continuation of the US thinking on the issue of the then brand new SDR, the fate of paper currencies, and the preservation of US control over reserve currency status. Most importantly, it addresses several approaches to dominating gold as well as the US’ interest of banning gold from monetary system and capping the free market price, contrasted by the opposing demands of various European deficit countries (sound familiar?) on what the fate of gold should be at a time when the common European currency did not exist, and some European countries were willing to fund their deficits with gold: something the US naturally was not happy about.
While we urge readers to read the full memo on their own, here the two punchlines.
First, here is what the S intentions vis-a-vis gold truly are when stripped away of all rhetoric:
U.S. objectives for world monetary system—a durable, stable system, with the SDR [ZH: or USD] as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.… It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR [ZH: or USD].
In other words: gold can not be allowed to dominated a “durable, stable system”, and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.
We continue:
To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price and encourage the gradual disposition of monetary gold through sales in the private market. An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders, or by other agreement…. Any redefinition of the role of gold must be based on the principle stated above: that SDR must become the center of the system and that there can be no question of introducing a new form of gold– paper and gold–metal bimetallism, in which the SDR and gold would be in competition.
And there, in three sentences, you have all the deep thinking behind the IMF’s SDR: simply to use it as a vehicle through which a select few can accumulate gold (namely those who can create fiat SDRs d novo), while handing out paper “profits” to the happy sellers.
And just in case it was not quite clear, here it is again, point blank:
Option 3: Complete short-term demonetization of gold through an IMF substitution facility. Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market. Profits from the gold sales could be distributed in part to the original holders of the gold, allowing them to realize at least part of the capital gains, while part of the profits could be utilized for other purposes, such as aid to LDCs. Advantages: This would achieve our goal of demonetization and relieve the problem of gold immobility, since the SDRs received in exchange could be used for settlement with no fear of foregoing capital gains. Disadvantages: This might be a more rapid demonetization than several countries would accept. There would be no benefit from the viewpoint of financing oil imports with gold sales to Arabs (although it is not necessarily incompatible with such an arrangement).
One wonders just who in the “private market” would be stupid enough to convert their invaluable paper money into worthless, barbaric relics?
And finally, was there the tiniest hint of a proposed alternative system to the PetroDollar. Namely, PetroGold?
There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports… Although mobilization of gold for intra-EC settlement would help in the financing of imbalances among EC countries, it would not, of itself, provide resources for the financing of the anticipated deficit with the oil producers. For this purpose, it would be useful if the oil producers would invest some of their excess revenues in gold purchases from deficit EC countries at close to a market price. This would be an attractive proposal for European countries, and for the U.S., in that it would not involve future interest burdens and would avoid immediate problems arising from increased Arab ownership of European and American industry. (The Arabs could both sell the gold and use the proceeds for direct investment, so that the industry ownership problem would not be completely solved.) From the Arab point of view such an asset would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control.
One wonders if the price of gold is “high enough” now for Arab purposes, and just where the Arabs are now in their thinking of converting oil into gold… or alternatively into a gold-backed renminbi. And if not now, soon, once the pent up inflation in the Fed’s $4 trillion, and rising, balance sheet inevitably start to leak out?
The full Volcker memo can be found here.
h/t Koos Jansen
Are We There Yet Daddy?
Gold and silver largely chopped sideways today with a slight downward bias, but nothing of real consequence.
There was a small amount of movement of gold out of the Scotia Mocatta warehouse on Friday. The report is shown below.
The way to play the precious metals market is to not take leveraged or timed (option) positions. Why is this?
Because the markets are being price manipulated, like the currency markets, LIBOR, base metals, and quite a few others it seems.
So what do we not do? We do not try to time the market, since the guys who are pushing prices around have the advantage of ‘seeing our hands’ given their market positioning and access to non-public information.
This means we are trading for the intermediate to long term. Daily price antics cannot affect us because we are not leveraged, and we are not holding things like options which have expirations.
I wanted to clarify this, because lately I have been getting some questions that make me think that some are trying to time this market, and pile into leveraged positions to maximize their outsized gains. That is not likely to work. The worst thing that can happen to a new trader is to hit a jackpot like that, because they will break themselves trying to regain the feeling of being fortune’s child by playing long shots.
Convergence is a more likely way to play markets. That means that even though some things can get out of bounds and stay there for longer than we might think, eventually the fundamentals will come to bear and the markets will converge back to probability again.
In the case of gold, claims per ounce at these prices are at historic highs. The last two times this happened, we saw a major intermediate trend change within six months. Can it be nine months? Sure, why not? With regulators turning a blind eye and the Fed essentially handing the banks and trading desks $80 billion per month by buying their assets at non-market prices, things can go on for quite some time.
But eventually the fundamentals of supply, demand, and value will apply, and sometimes with a vengeance. We saw this in the financial crisis of 2008, wherein the mispricing of risk in Collateralized Debt Obligations blew up, and the housing bubble collapsed.
Sometimes that is what happens when trend becomes overextended. You can break yourself trying for the maximum profit and bragging rights, and miss the big move when it comes from sheer exhaustion.
So I think that is where we are with the precious metals, and with gold in particular. There are no sure things, but this one seems to be unfolding in a fairly classic manner. Try not to pig out and get sidelined before the time comes. As Bernard Baruch once said, better to lose the first ten percent of a major bull move than to try and get in early.
Now, you may not think we are going to see another leg up in precious metals. And you could be right. So what do you do? You sit out and wait for a clear breakout and confirmation. For those more aggressively inclined you take light positions with cool money and no leverage. And then sit and wait to be right.
I do not know how this will unfold exactly. But I do know one thing. All the pundits and master traders don’t know any more than that either. But they will be glad to sell you their opinions, and hope that you do the natural human thing and remember the three times they were right, and forget about the six times that they were wrong. Most people certainly tend to keep score that way.
There are ways to get nearly perfect records in trading. But most of them are not available to the average, honest person.
Jesse
“Because the owners, the owners of this country don’t want that. I’m talking about the real owners now, the BIG owners! The Wealthy… the REAL owners! The big wealthy business interests that control things and make all the important decisions.
Forget the politicians. They are irrelevant. The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice! You have OWNERS! They OWN YOU. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought, and paid for the Senate, the Congress, the state houses, the city halls, they got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls.
They spend billions of dollars every year lobbying, lobbying, to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want:
They don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. Thats against their interests.
Thats right. They don’t want people who are smart enough to sit around a kitchen table and think about how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago. They don’t want that!
You know what they want? They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork. And just dumb enough to passively accept all these increasingly shitty jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and vanishing pension that disappears the minute you go to collect it, and now they’re coming for your Social Security money. They want your retirement money. They want it back so they can give it to their criminal friends on Wall Street, and you know something? They’ll get it. They’ll get it all from you sooner or later cause they own this fucking place! It’s a big club, and you ain’t in it! You, and I, are not in the big club.
By the way, it’s the same big club they use to beat you over the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table has tilted folks. The game is rigged and nobody seems to notice. Nobody seems to care! Good honest hard-working people; white collar, blue collar it doesn’t matter what color shirt you have on. Good honest hard-working people continue, these are people of modest means, continue to elect these rich cock suckers who don’t give a fuck about you….they don’t give a fuck about you… they don’t give a FUCK about you.
They don’t care about you at all… at all… AT ALL. And nobody seems to notice. Nobody seems to care. Thats what the owners count on. The fact that Americans will probably remain willfully ignorant of the big red, white and blue dick thats being jammed up their assholes everyday, because the owners of this country know the truth.
It’s called the American Dream,because you have to be asleep to believe it.”
George Carlin
And the money printing just keeps on going, allowing the criminals in Washington to continue their socialist and welfare state agenda. They just keep stuffing the banksters accounts with billions every single day. None of the printed money creates jobs, helps ordinary people, or improves the economy in any way; it just makes the banksters and Wall Street fucks richer and richer. It’s killing the average American, actually, as inflation eats away what little income they get. The peasants and serfs are going to revolt on of these days, maybe. But then they’re so far in debt, they’ll never get off their asses will they?
Former Fed Quantitative Easer Confesses, Apologizes: “I Can Only Say: I’m Sorry, America”
Submitted by Tyler Durden on 11/12/2013 – 06:24
“I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing…. We were working feverishly to preserve the impression that the Fed knew what it was doing… The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time…. Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets. As for the rest of America, good luck….. The implication is that the Fed is dutifully compensating for the rest of Washington’s dysfunction. But the Fed is at the center of that dysfunction. Case in point: It has allowed QE to become Wall Street’s new “too big to fail” policy.”
Ob ama said “sorry” too.
They can stuff their sorrys in a sack, mister. Which is all I hear when behavior stays the same and the sorry is thrown out as an explanation.
People, or corporations, that are sorry, change the behavior. They don’t double down on it.
No room in my life for a worthless platitude used as an excuse. This insider is still rich, and still enriching the beast, just pointing his fingers elsewhere with blame, while believing he shares none of it now (“private bank” fuck you asshole, your entire bonus has been paid by my childrens’ tax dollars, and standard of living).
Stuff your sorrys in a sack mister.
Then shove them up your rich, insider, connected, benefiting/ed ass.
I wonder what the owners are going to do when dollars become all but worthless. Bubbles Bernanke is devaluing the dollar daily, and all the .01% are holding dollars. Their hubbris will be their end (and ours).
Can you spot the similarities?
[img[/img]
[img[/img]
To me, the best deal available to everyone today is being able to trade this worthless fiat currency
called dollars for some real money, like gold or silver. Have to wonder how much longer this option
will be available to us “average citizens”. If you snooze you loose!