Inverse Lin-omena, the inverse of the Jeremy Lin phenomena where the unknown and previously discounted suddenly rise to prominence; here, the powerful and previously secure suddenly fall.
Today, central bankers, the mandarins of capitalism, are in disarray. Their attempts to contain capitalism’s current crisis increasingly resemble the tactics of a defeated army in retreat. Like Napoleon and Hitler’s respective "Moscow moments", the 21st century economic crisis has brought to an end the bankers’ spectacular 300 year run at the table of power and wealth.
The indebting of others as a means of accumulating wealth ends when the indebted can no longer pay what they owe. The arcane and esoteric scribblings of second generation University of Chicago trained economists cannot cover up this basic fact, i.e. that the indebted are broke; and soon, their creditors will be as well.
The bankers’ franchise of credit and debt built on a leveraged foundation of paper money fractionally backed by gold allowed the West to accumulate geopolitical power and wealth on a vast scale. That era is now over.
It ended when the gold convertibility of the US dollar was terminated in 1971 when the cost of maintaining a global military presence outstripped the ability of the US to pay in gold what it owed on paper.
It was as if someone removed a pin from the axle of international commerce when the US dollar was no longer convertible to gold. Previously, the US dollar was linked to gold, and other currencies were linked to the dollar. Everything was stable. It is no longer so. Once the pin connecting gold and paper money was removed, everything changed. The axle of international commerce began to vibrate and lately it’s been getting much worse. The fear is that the wheels are now about to come off. – Section 1, topic 3, How to Survive the Crisis and Prosper in the Process, Schoon, 2007
Today’s fragile state of the euro, a fiat currency created in a failed European attempt to compete with and/or replace an increasingly unstable US dollar, is but another indicator that the wheels are now about to come off.
After the US ended the gold convertibility of the US dollar in 1971, gold skyrocketed from $35 per ounce to $850 in 9 years, increasing almost 2,500% in value, dwarfing the later rise of the Dow (from 777 in 1983 to 11,722 in January 2000) a much smaller rise of 1,400% over almost twice the time (17 years instead of 9).
After gold’s spectacular ascent, central bankers decided the price of gold needed to be ‘managed’, as a rapidly rising price of gold signaled that something was fundamentally amiss with the bankers’ fiat paper money, a signal that central bankers did not want sent, a signal that bankers would work exceedingly hard to disguise for the next 40 years.
When stocks lose their value That’s a terrible thing When homes lose their value That’s a terrible thing But when money loses its value That’s the most terrible thing of all Introduction, How to Survive the Crisis and Prosper in the Process, Schoon, 2007
CENTRAL BANKERS MANAGE THE PRICE OF GOLD
In actuality, central bankers did not work ‘exceedingly hard’ to disguise the real market demand and price for gold. Instead, bankers disguised market demand not by hard work, but by smoke and mirrors, a contrivance common to confidence men everywhere and, today, to central bankers in particular.
To suppress the price of gold, central bankers covertly supplied markets with gold bullion belonging to the nations on whose behalf they ostensibly toiled, suppressing gold’s real price with excess supply. This artifice was discovered by Frank AJ Veneroso, an extraordinary financial analyst and consultant well known only in the rarefied circles of international finance.
According to Veneroso, since the early 1980s central bank gold sales and loans comprised a significant portion of all gold sold. In 1990, Veneroso estimates that 21.5% of gold sold that year came from central bank vaults; and by 2000, central bank gold sales had increased to over a 1/3 (34.6%) of all gold sold.
Frank Veneroso’s story of central bank manipulation of gold markets is found here.
With thousands of tons of central bank gold coming onto the market, it’s clear why the price of gold declined from 1980 until 2001. What is remarkable, however, is that in the face of such overwhelming supplies, the price of gold began to rise in 2001.
THE TURNING POINT
The turning point, however, actually occurred in 1999 and is marked by an event relatively unknown and almost tantamount to financial treason. About that event, I wrote in March 2009:
In 1999, it was rumored that investment bank Goldman Sachs had a 1,000 ton gold short position in the markets. Goldman Sachs was betting that the price of gold would continue to fall and they would be amply rewarded for their apparent "risk".
Because of central bank manipulation, the price of gold had moved inversely to the rise of stocks for almost 20 years and bankers were making easy money on the bet gold would continue its downward spiral.
However, much to the shock of Goldman Sachs and the central bankers, in 1999 gold stopped falling; and, because Goldman Sachs’ short position was so large, Goldman possibly could suffer catastrophic losses.
This is when England’s then Chancellor of the Exchequer, Gordon Brown, on May 8, 1999 announced England would sell over 50% of its gold reserves, 415 tons of the most precious metal on earth at the very bottom of the market.
The decision to sell England’s gold thereby saved Goldman Sachs and insured the political future of Gordon Brown. Goldman Sachs’ is still in business and Gordon Brown is now  the Prime Minister of England – proving that good things come to those who do the bidding of the powerful (whether either outcome was worth 415 tons of England’s gold is questionable).
Selling a nation’s gold to save the bankers’ parasitic system is now common practice as the banker’s system continues to collapse and gold continues to rise. Since Gordon Brown sold England’s gold, gold has risen from $275 dollars per ounce to its present price of over $900 despite the thousands of tons of central bank gold sold to prevent its inexorable movement higher. On 2/14/12 gold is $1,715]
CENTRAL BANK SALES AND LEASING OF GOLD HAS MADE GOLD AVAILABLE AT FAR BELOW MARKET RATES
To hide their burning house of cards, central bankers have sold thousands of tons of gold from national treasuries, mainly Switzerland, to keep the price of gold below what it would otherwise be. This is the true upside (for buyers) of the bankers’ gold suppression scheme.
While citizens cannot prevent central bankers from selling gold from their national vaults, today they are afforded the extraordinary opportunity to buy that very same gold on the open market at prices heavily discounted to their otherwise true market value.
My current estimate of today’s true market value of gold – without central bank intervention – is in excess of $10,000 dollars per ounce.
Many central banks, however, are today switching sides in the war on gold, preferring to keep their precious metals instead of selling them in an increasingly futile attempt to prevent the inevitable from happening – the collapse of the bankers’ now burning house of cards.
Today, the bankers’ fiat currencies are in a death spiral. It’s only a matter of time until the US dollar, the Japanese yen, the British pound and all paper currencies – including the Chinese yuan – come under the same pressure that now plagues the faltering euro.
Central bankers, however, will do everything in their considerable power to prevent their lucrative franchise of credit and debt based on paper money from collapsing; and, of late, they’ve discovered a new way to suppress gold and silver – the precious metal inventories of GLD and SLV, the precious metal ETFs used by investors to participate in the rising price of gold and silver.