Welcome to the New Dark Age

Monday, 28 July 2014

Hugo Salinas Price

The Powers That Be in the US and its allies seem to be committed to keeping the price of gold below $1320US/oz.

Is the US control of the price of gold bad for China? It would appear that since China is purchasing large amounts of gold, keeping the price from rising is in the interest of the Chinese.

Is the US control of the price of gold bad for Russia? It would appear that Russia has no urgent reason to see a higher price of gold.

Is control of the price of gold considered as a damaging policy by the Rest of the World? The Rest of the World does not seem to be particularly upset by the control of the price of gold.

Who is upset that the price of gold is so clearly kept down below $1320US/oz? Answer: the gold miners of the world and those who own gold as financial protection, as well as those who have long positions in the futures markets. All of these actors are limited in number, as contrasted with a world population of some 7.5 billion humans.

So it is evident that in reality there are relatively few parties – individuals and corporations - who care about the price of gold. For the vast majority of people in The West, the price of gold is of no concern whatsoever. Wealthy Chinese are buying gold, but they know better than to say anything about it, let alone complain about the low price.

Gold has been banished from everyday use, and can only be hoarded unproductively. Gold is going into hiding, as Professor Antal E. Fekete has pointed out. (See www.professorfekete.com)

This is not the first time gold has gone into hiding; gold went into hiding in the days of the collapse of the Roman Empire of the West. It is going into hiding again, in the present slow-motion financial collapse of the world.

The price of gold will enter a rising trend, no matter how violent the official interventions to control its price, because at the present low prices it will be impossible for the gold market to satisfy demand for gold from a largely silent minority of mankind that wants to own gold. When this happens, we can expect the criminalization of gold ownership, at least in some quarters of the world.

At some point, impossible to predict, the demand for physical gold will only be satisfied at increasingly higher prices.

Gold today has really only one enemy: the Federal Reserve of the US.

At about $1307US/oz, one US Dollar is worth 0.0238 grams of gold. That is to say, a little more than two-hundredths of a gram: 2.38/100 of a gram. At 0.02 gram per Dollar, the price of gold would be $1,555US/oz. (31.103 gr per ounce/0.02 = $1,555.15US/oz)

The Federal Reserve – and the US Establishment – are naturally worried that as the dollar becomes worth less gold, there may be a loss of confidence in the dollar in the world’s financial markets. That is a horrifying prospect for the Federal Reserve and the US Government, as the American Empire rests on two pillars, each of which supports the other: the Military and the Dollar.

If the Dollar loses prestige in the world and declines in value against other currencies, the Military loses force. If the Military loses force, the Dollar loses acceptance. If they go, the American Empire is over.

Russia and China are ambivalent about the Dollar. The health of their economies – such as they are – depends on a Dollar which maintains its value. So they are not going to challenge the Dollar by fiddling with the price of gold.

On the other hand, the American Empire is not behaving towards them in a friendly manner. For that reason, they will not be collaborating actively to suppress the price of gold.

Russia will not demand gold for its oil and gas; Russia does not wish to upset the apple-cart. China will not push for a higher price of gold, because it owns over $4 trillion in Bonds denominated in both Dollars and Euros (with minor amounts in other currencies.) China wants to use those Bonds to buy up resources all over the world, and has no interest in destroying their value.

So Russia and China are just going to sit back and watch the gold markets do their work, which will be inexorable.

Will Russia and China collaborate to establish a new Gold Standard for the world? Highly unlikely. The structure of their economies is built upon banking systems which carry out fractional banking and which are loaded to the gills with maturity imbalances: short massive amounts of deposits and long massive amounts of long-term loans. They will not change this system until it suffers a total collapse, and then they will strive to resurrect the same flawed system, because that is all they know how to do.

Russia and China are attempting to set up a rival to the IMF. To the IMF mess will be added the BRICS mess, with all the same wasteful “development loans”. I repeat: that is all they know how to do.

Gold and silver will never lose the powerful attraction which they hold for humans.

However, the use of gold and silver in a productive, free society based on property rights, and in its financial system, is a body of theory which is unknown to today’s rulers. The necessary knowledge was put aside to deal with the exigencies of WW I, which started just 100 years ago, and was never put to work again when that war was over.

At this point, it is as impossible to recover that knowledge and the spirit what went with it, as it is impossible to recover the spirit which created the Parthenon and the other marvels of antiquity.

“You are lost and gone forever,
Oh my darling, Clementine!”

I bid you welcome to The New Dark Age.