The Fed’s Attempt To “Scare People Away” From Gold And Silver

When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the U.S. dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was in danger. Who could believe the dollar’s exchange rate in relation to other currencies, when the dollar was collapsing in value in relation to Gold and Silver.

The Federal Reserve realized that its massive purchase of bonds in order to keep their prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of U.S. dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the U.S. dollar, thus ending in the fall of the dollar’s foreign exchange value and collapse in US bond and stock prices.

Intelligent people could see that the U.S. government could not afford the long and numerous wars engineered by the the neoconservatives, or the loss of tax base and consumer income from off-shoring millions of U.S. middle class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for Gold and Silver.

Central banks are slower to act. Saudi Arabia and the oil emirates are dependent on U.S. protection and do not want to anger their protector. Japan is a puppet state that is careful in its relationship with its master. China wanted to hold on to the American consumer market for as long as that market existed. Actually, the exit from the dollar was launched by individuals.

When Gold topped $1,900, Washington put out the story that Gold was a Bubble. The presstitute media fell in line with Washington’s propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011.

The Federal Reserve used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Federal Reserve was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3, 2013, drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27.

The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, that hedge funds and other large investors were going to unload their gold positions and that clients should get out. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the U.S. Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion Prices took a big hit, and bullishness departed from the Gold and Silver Markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.

For now it seems that the Fed has succeeded in creating wariness among Americans about the virtues of Gold and Silver, and thus the Federal Reserve has extended the time that it can print money to keep the house of cards standing. This time could be short or it could last a couple of years.

However, for the Russians and Chinese, whose central banks have more dollars than they want, and for the 1.3 billion Indians in India, the low dollar price for gold that the Federal Reserve has engineered is an opportunity. They can purchase gold at $350-$400 an ounce less than two years ago.

The Federal Reserve’s attack on Gold and Silver Bullion is an act of desperation that, when widely recognized, will doom its policy.

As I have explained previously, the orchestrated move against Gold and Silver is to protect the exchange value of the U.S. dollar. If bullion were not a threat, the government would not be attacking it.

The Federal Reserve is creating $1 trillion new dollars per year, but the world is moving away from the use of the dollar for international payments and as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices, and a rising interest rate and collapsing bond, stock and real estate markets.

The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money, and ,to keep interest rates low and debt prices high to support the banks’ balance sheets.

When the Federal Reserve can no longer print due to dollar decline, U.S. bank deposits and pensions could be grabbed in order to finance the federal budget deficit for a couple of more years. Anything to stave off the final catastrophe.

The manipulation of the Gold and Silver Bullion market is illegal, but as government is doing it the law will not be enforced.

Via its obvious and concerted attack on Gold and Silver, the U.S. government could not give any better warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt.

Those who believe in government and those who believe in deregulation will be proved equally wrong. The United States of America is past its zenith. As I predicted early in the 21st century, in 20 years the U.S. will be a third world country. We are halfway there.