March 2009


GATA Board of Directors member Adrian Douglas, editor of the Market Force Analysis letter (http://www.marketforceanalysis.com/), has combined data from the U.S. Commodity Futures Trading Commission and the Office of the Comptroller of the Currency to show that the suppression of the prices of gold and silver in the last several years correlates exactly with the growing concentration of the short positions held by two U.S. banks, JPMorgan Chase and HSBC.
Short of the official admissions of the gold price suppression scheme collected and published by GATA over the years, Douglas’ report is probably the best proof yet, and certainly the most detailed. Douglas’ report is titled “Pirates of the COMEX” and you can find it in PDF format here:
http://www.gata.org/files/PIRATES-OF-THE-COMEX.pdf
Commodity Online

NEW DELHI: Gold to kill cancer cells! Yes, that is what is researchers have found out.

In a new development, researchers in the US have developed the first hollow gold nanospheres which can search out and kill cancer cells.

According to a report presented at American Chemical Society’s meeting, the researchers said the cancer-destroying nanospheres show particular promise as a minimally invasive future treatment for malignant melanoma, the most serious form of skin cancer.

Hollow gold nanospheres are equipped with a special peptide. That protein fragment draws the nanospheres directly to melanoma cells, while avoiding healthy skin cells. After collecting inside the cancer, the nanospheres heat up when exposed to near-infrared light, which penetrates deeply through the surface of the skin. In recent studies in mice, the hollow gold nanospheres did eight times more damage to skin tumors than the same nanospheres without the targeting peptides.

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It’s like putting a cancer cell in hot water and boiling it to death. The more heat the metal nanospheres generate, the better.

This form of cancer therapy is actually a variation of photothermal ablation, also known as photoablation therapy (PAT), a technique in which doctors use light to burn tumours. Since the technique can destroy healthy skin cells, doctors must carefully control the duration and intensity of treatment.

Researchers now know that PATs can be greatly enhanced by applying a light absorbing material, such as metal nanoparticles, to the tumor. Although researchers have developed various types of metal nanoparticles to help improve this technique, many materials show poor penetration into cancer cells and limited heat carrying-capacities. These particles include solid gold nanoparticles and nanorods that lack the desired combination of spherical shape and strong near-infrared light absorption for effective PAT.

Gold spheres with an optimal light absorption capacity in the near-infrared region, small size, and spherical shape are perfect for penetrating cancer cells and burning them up.

The shells are also much smaller than other nanoparticles previously designed for photoablation therapy. Another advantages is that gold is also safer and has fewer side effects in the body than other metal nanoparticles.

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The following is an excerpt from the much acclaimed Aden Sisters newsletter (Mary Anne and Pamela Aden)
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..THE CRISIS GOES ON AND ON

Very quickly, the initial Obama optimism essentially dissipated, primarily due to the worsening economy. Job losses are intensifying, the stimulus package isn’t what many thought it would be, the debt load is overwhelming and there doesn’t appear to be an end in sight.
The seriousness of this situation also seems to be sinking in more deeply. Increasingly, people are recognizing that this isn’t your typical recession. It’s global and massive, way bigger than anything ever seen before and it potentially involves the collapse of the banking and financial system.
Obama has been at the forefront repeatedly warning that, “we are facing an economic crisis of historic proportions… our nation will sink into a crisis that we may be unable to reverse… we risk falling into a deflationary spiral”, and so on.

FINANCIAL CRISES OF THE PAST

Most of us in this generation have never suffered through a financial crisis, but they are nothing new. We went back to review financial crises of the past and here’s what we found…
The past 800 years have involved a series of bubbles and busts, debt defaults, banking collapses, excessive speculation, panics, currency devaluations, recessions, deflations, inflation and of course normal times. And ever since the first stocks traded 400 years ago, the markets have had a long consistent history of booms and crashes.
Internationally, there have actually been 148 crises in the past 140 years. In more recent times, an interesting analysis looked at the aftermath of 14 severe banking busts, including the Great Depression, and others in various countries that have followed since then. Most important, the conclusions reinforce that the effects of this crisis could drag on for quite a long time.
So drastic measures had to be taken as every effort is made to soften the blow.

GOLD SOARING ON UNCERTAINTY

These same factors have also been driving the gold market. It soared, briefly rising back above $1000, and within a couple of dollars of its all time, record high.
Gold is once again showing that it is the safe haven and it thrives in times of global turmoil, uncertainty, nervousness and fear. That’s what we’re seeing now and gold is certainly behaving in traditional fashion.
But this is just the beginning. Once inflation eventually kicks in, in reaction to all of this massive government spending, gold is going to soar, but this is going to take time.
It’s not going to happen from one day to the next, but that’s the underlying foundation pushing gold’s bull market higher, and it’s not going away any time soon. So stay with your gold. It’s your best, and probably only solid bet looking out to the years ahead.

Mar 20, 2009
Mary Anne & Pamela Aden

By David Parkinson
The Globe and Mail, Toronto
Friday, March 20, 2009

In 1897, at the height of a major U.S. recession and banking crisis, a gold discovery on the Klondike River in Yukon Territory triggered one of the biggest gold rushes ever seen. Now, more than a century later, history is — sort of — repeating itself.

No, the world’s downtrodden aren’t beating a frenzied path to a harsh, remote swath of the Canadian north this time around. But the 2009 recession and banking crisis has set off a rush to invest in gold and other precious metals at unprecedented levels — a move that has tightened the global supply/demand picture and helped push prices to record highs. And increasingly they are opting for the tangible comfort of physical gold — actual gold bars and coins that they can cling to in troubled times.

“When the banking crisis hit [last fall], we saw an avalanche of demand,” said James DiGeorgia, a Florida-based coin and precious metals dealer and editor of the Gold & Energy Advisor newsletter. “People are scared to death that all this debt [being taken on by governments] is going to debase the [U.S.] dollar and other currencies around the world.”

Data from the World Gold Council show that while demand for gold for industrial, dental and jewellery purposes fell 10 per cent in 2008, net purchases of physical gold for investment purposes jumped 64 per cent to 1,091 tonnes. In the fourth quarter — as the U.S. banking crisis reached new depths — net gold investment volumes surged 182 per cent from a year earlier. As a result of the boom in investment demand, overall gold demand rose 4 per cent last year, further widening the annual supply shortfall in the gold market.

“These dramatic retail investment inflows reflect the extreme uncertainty that surrounds the global economy and financial system,” the World Gold Council said. “In an environment where investors are more concerned about the loss of capital than they are about the return on capital, the absence of default risk or counterparty risk has been a key attraction for gold.”

Experts say the soaring price for gold — up 30 per cent since the end of October, at the same time the MSCI World stock index has lost almost 20 per cent — has created a bandwagon effect for investment in precious metals. But behind that have been some legitimate concerns — about global economic and financial market instability, and the possible inflationary ramifications of the rising government debts being incurred to rescue the world economy — that have sent investors to gold as a stable safe haven for their money, and a way to diversify their portfolios away from other more risky asset classes.

Yesterday, gold for April delivery surged $69.70 (U.S.) to settle at $958.80 an ounce on the New York Mercantile Exchange.

Gold-backed exchange-traded funds — an increasingly popular vehicle for gold exposure among retail investors — increased their net purchases of gold by 27 per cent in 2008. But the most startling demand growth came from direct purchases of gold bars and coins by retail investors, especially in Europe and North America, where holding physical gold has never been nearly as popular as it is in many Eastern cultures and developing economies.

Western net retail gold purchases totalled 133 tonnes last year — a sharp reversal from the moderate net sales of gold by Western retail investors in recent years. Meanwhile, gold hoarding among non-Western investors and gold coin purchases from government mints surged 60 per cent and 44 per cent, respectively, in the year.

“Especially in the industrialized countries, people are now buying precious metals for portfolio diversification,” said Barry Wainstein, vice-chairman and global head of foreign exchange and precious metals at Scotia Capital Inc., a long-time provider of precious metals products to Canadian investors.

Canadian banks have long offered retail clients exposure to gold through gold-backed certificates, whose value is based on the spot price of gold (minus administrative fees) and can be exchanged by their holders for either cash or physical gold. The advantage is that investors don’t need to worry about transport, storage, and insurance of physical precious metals.

Russell Browne, director of retail precious metals products at Scotia Capital, said volumes of RRSP-eligible gold-backed certificates have “more than doubled” in the past 18 months.

But in the past year many clients have been opting against certificates, in favour of the real thing. Some investors are even loading up on gold-industry-standard gold bars — 400-ounce blocks valued at about $400,000 at today’s prices.

“We now have retail investors buying multiple bars,” Mr. Browne said. (Scotia sells gold bars ranging from one ounce to the 400-ounce standard.)

The rising demand for bars has prompted Scotia’s precious metals arm, ScotiaMocatta, to ramp up its offerings of physical precious metals. In addition to its gold and silver products, ScotiaMocatta earlier this month introduced 1-ounce platinum and palladium bars for retail clients.

“In some cases, investors are more comfortable with owning physical precious metals than other financial instruments,” Mr. Wainstein said.

The growing desire to hold precious metals in their physical form may be another side effect of investor distrust in the crisis-riddled global banking sector. Newsletter editor Mr. DiGeorgia suggested investors in the United States have become increasingly nervous about gold-backed investment certificates and even gold storage services at their banks, for fear their assets may not be entirely safe in the case of a bank failure.

“I always tell people to take physical possession of their gold,” he said.

* * *

The Chinese Prime Minister’s body language while addressing a message to US requesting assurances for the safety of the country’s vast US$ holdings, is so “loud ‘n clear” it leaves no room for misunderstandings….

 

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A modern day gold rush is under way as people’s confidence in currency is fading fast while the price of gold rises, says Adrian Douglas, financial analyst and the director of the Gold Anti-Trust Action Committee.

RT: Mister Douglas, let’s get right down to it. What is the reason for the gold demand surge?

Adrian Douglas: The reason why gold demand is surging is for all the traditional reasons. It is that gold is a store of wealth and it has been a store of wealth for over 6,000 years of recorded history.

But gold is also a unique financial asset. When you buy gold bullion it has no counterparty risk. You don’t rely on any third party for your gold to store your wealth. Every other financial asset has what we call counterparty risk. And this is why investors are turning to gold, because they are starting to get worried about their bank deposits because they are scared the banks will not be solvent. They are starting to get worried about their stock portfolio because they are scared the companies they have invested in will not stay in business. And they are concerned about their bond portfolio because they are scared that governments will default on sovereign debt. So gold eliminates all of these counterparty risks and this issue is now driving investors towards gold.

RT: What about people that possibly do not have portfolios, they have a little bit of savings in a bank. Should those people take their money out of the bank and buy gold?

A.D.: Yes, they should. Gold and silver will go to astronomic numbers as fiat currencies are inflated to very little purchasing power.

The US government is announcing almost on a daily basis how many more trillions of dollars are being put into the system and this is money that is created out of nothing, it has no backing. It will eventually lead to hyperinflation and reduce the purchasing power of fiat currencies. So how could you protect yourself? By taking money out of the bank and buying gold from a broker.

You must own physical gold. There are a lot of gold substitutes out there which are paper promises for gold, and they won’t protect you. You need to have either allocated gold or gold in your hot sweaty hands that you own yourself.

RT: Tangibly holding it and having it in your home?

A.D.: Yes, in the interim while gold prices are going very high, people will be able to cash in their gold for fiat currency as and when they need it.

RT: You are the head of the Gold Anti-Trust Action Committee. And from what we heard the gold market was suppressed for over ten years. What does that mean? That there was suppression of the gold market in US for over a decade?

A.D.: In the first place in 1999 we recognized that there was a total mismatch between the demand for gold and its price performance. And we have met a lot of evidence over the years that was showing that the gold market has been suppressed. This suppression is an effort to maintain the value of the US dollar and also to keep interest rates low.

The whole mechanism for this has been described in a paper by Lawrence Summers, who was ex-Secretary of the Treasury, but when he was professor of the economics of Harvard University he wrote a paper called “The Gibson paradox and the gold standard”. In that research he explains how in a freely traded gold market the real interest rates and the gold price should move in inverse relationship to each other. In other words, if interest rates are low, the gold price should be high and vice versa.

What we’ve seen through the 90s and most of this decade is that we’ve had a low gold price and low interest rates. So, the conclusion we made was that the gold market is not freely traded and it has been suppressed.

RT: Lawrence Summers is part of President Obama’s cabinet.

A.D.: Yes, he is one of his economic advisers and so we can surmise that the suppression to gold price is ongoing and alive and well.

RT: You’ve referred to this as basically a Ponzi scheme.

A.D.: Yes, the Western central banks, with the ring leaders of federal reserves and governments, have instigated this scheme of suppressing the gold price. And this is what is at the core of the strong dollar policy. If you can suppress the gold price and not make it a free market then you can have low interest rates and a low gold price.

The low gold price essentially switches off the fire alarm in the financial system. What the purpose of the strong dollar was so that the US Government could issue lots of dollars without the alarm bells going off. The benefit for the US has been to live beyond their means. They managed to import goods from foreign countries and they have paid for them essentially with overvalued treasure debt. And they have even been so successful they have convinced other central banks that US treasury debt is a reserve asset. Now central banks around the world are sitting on trillions of dollars of treasury debt as a reserve asset which has a huge counterparty risk now of the American government – they will not repay it.

RT: So we’ve been inflating the dollar like a balloon. Is this balloon going to pop?

A.D.: Yes, the suppression of the gold price is coming to an end. The gold prices have already risen from as low as $255 in 2001 to a high recently of $1000. This is a sign that the scheme is starting to lose traction because it depends on central banks being able to continue to put an extra supply of gold into the market to keep the price down. The central banks have been doing this for 15 years. Now, on our estimates, they have probably consumed 50% to 60% of their gold reserves. At the same time demand for gold by the general public is going up. Obviously the breaking point is coming where gold will skyrocket and it will go to numbers which will probably surprise even the most bullish people.

RT: In 2008 the Wall Street Journal published a warning of impending financial disaster due to the suppression of the price of gold. What was their response?

A.D.: What they say was ignored for 10 years has largely been ignored by the US press and of course by the government officials.

And we’ve got frustrated with that. We took out this full page ad in Wall St Journal, it cost us $264,000 and warning the general public that if this manipulation of gold price does not stopped, then there would be a significant catastrophe and disaster in the market. We got no response. The problem with the scheme is that it is in lots of people’s interest in the financial world and of course they need it to continue.

RT: Do you credit one Russian government official as the first anywhere in the world to acknowledge your claims of gold manipulation.

A.D.: This was Oleg Moshaiskov, deputy chairman of the Russian Central Bank who made a speech in 2004 to the London Bullion Market Association. In that speech he mentioned that a group of economists have got together (to form GATA) and came to the conclusion that the gold price is manipulated and that that suppression is allowing the US the exorbitant privilege of being able to spend a lot more than it should be allowed to spend.

RT: You say the entire financial crisis that the US and world is living through right now has come out through derivatives. What are derivatives?

A.D.: This is not understood by a lot of people and it is not mentioned in press very much.

Derivatives are essentially like an insurance contract. And you can take out an insurance contract against something happening, well, because the system is being rigged and many of the big money central banks and large insurance companies like AIG have known that the system was rigged they’ve been able to capitalize on it. So they have been able to sell trillions of dollars of derivative contracts to be able to get insurance premiums basically every month of these contracts. And be very wealthy out of that knowing that they would never have to pay out on the contract because the system was rigged. And this is where the problem has recently developed that the sub prime mortgage created defaults of the derivatives. That created a daisy chain effect through the system, but now these contracts are payable. So instantaneously black holes of trillions of dollars appeared on the balance sheets of many banks, and this is what is being referred to its toxic assets.

RT: So instead of these stimulus plans that keeps getting push from Washington, what would you suggest or needs to be done to save the US economy?

A.D.: First of all we need to outlaw the OTC derivatives. Second thing we need to do is to abolish the Federal Reserve and nationalize the banks.

The Federal Reserve is a private bank and the government has to pay them interest for creating money out of the thin air which the government could do on its own without having to pay any interest. The third thing we need to do is to back the currency with gold. And we need of course to reinstate discipline in landing and enforce the rules that keep the stock market honest and keep the banking system honest.

RT: Do you think that the Obama administration is going do any of the four things you have just mentioned?

A.D.: It would take a lot of courage to do the things which I’ve said. Because there are a lot of advisors who have vested interests so that those things are not done.

But the American people need to wake up and realize what is happening to their country. And I think if the American people make enough noise then perhaps President Obama might listen to the people instead of listening to some of his advisors who have another agenda.

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THAT ACCURSED PROPENSITY TO SAVE

by Antal E. Fekete,
Professor of Money and Banking
San Francisco School of Economics
March 9, 2009

“Thank Heaven for little Keynesian Nobel laureates… without them what would little Keynesian Treasury secretaries do?…”

At the long last we got the official explanation how we got into this mess. In his March 2, 2009, column in The New York Times under the banner title Revenge of the Glut Paul Krugman tells us, quoting the authority of the Chairman of the Fedreal Reserve Ben Bernanke, that it is all the fault of the Asians. They save damn too much. They test the endurance of unhappy Americans who bankrupt themselves in trying to work off all that darned excess saving fast enough before it can do more damage. Even though they do their level best, they could not keep up with the prodigious output of the Asians and “global savings glut” is the result. It was the cause of the U.S. current account deficits in the first place; now it is causing more mischief by creating turmoil in the financial markets and in the banking system. In this scenario, the good guys are the Americans. They are heroically trying to stave off disaster through their unselfish consumption. The bad guys are the Asians, tormenting their American victims in force-feeding them with overdoses of consumer goods all the way to the bankruptcy court.

Although Krugman does not say it, the implication is all too clear: there is one especially pernicious form of saving, namely, saving in the form of gold. Keynesians, through half a century of hard work, ably assisted by their Friedmanite comrades, have developed a highly efficient system to embezzle, unobserved, superfluous savings in an antiseptic way. Their sophisticated contra-saving devices through currency debasement anesthetize those bastard savers so that they can be pilfered and plundered without touching a raw nerve. It is a clean job, causing a minimum of commotion.

Unfortunately, these methods do not work on those who do their vicious anti-social saving in the form of gold. These guys will have to be taken care of by other means, such as threats of central bank gold sales, bubble-bursting and price-busting techniques in the paper gold markets, and other similar tactics. If everything else fails, the guillotine could be reactivated as an instrument of monetary policy, last used in this way during the French Revolution. At that time, if you were found in possession of undocumented gold, your head would be chopped off in summary justice.

* * *

It is very doubtful that in the long and checkered history of science there is another episode comparable to this deliberate misuse and abuse of knowledge for the exploitation of those who do not have the full complement of it. What makes it particularly odious is that Keynesian obscurantism and anti-scientific propaganda is put in the service of a hidden agenda: to cover up the mismanagement of the economy through Keynesian precepts, the sabotaging of human cooperation under the system of division of labor, and the destruction of capital through the corruption of the monetary system.

The monetary system was developed to serve and protect society as a whole: savers as well as consumers. After all, at some point during our lives we are (or ought to be) savers, so that later, in our harvest years, we could be consumers. If it does not work in the opposite order, Mother Nature is to be blamed. Saving always and everywhere had to precede consumption. Saving has always been primary and consumption secondary, like it or not.

But Keynesians have overthrown Mother Nature. They say that it is possible to have consumption without prior saving. Having corrupted our monetary system and having destroyed society’s capital, Keynesians have rendered people unable to fend for themselves. They treat them as they would treat livestock in the feedlot. In exchange for fattening them (in preparation for the slaughterhouse) livestock is being relieved from the need to gather feed in the summer for winter consumption. Keynesians, self-styled directors of the national economy, reserve the job of the feedlot operator to themselves. They declare savings and capital obsolete. Synthetic credit manufactured at the central bank in the service of collectivism is used as a substitute.

It would be well if Keynesians took to heart the astute observation of Glenn Prickett, Senior V.P. at Conservation International, that “Mother Nature doesn’t do bailouts.”

* * *

Apparently it has never occurred to Krugman that the present disaster is not due to his imaginary savings glut but, rather, to the imperfections of the monetary system. Why can’t we have a monetary system that allows people to save to their hearts’ content? Why do we have to have one that sets up the Treasury and the Federal Reserve as partners in the crime of check-kiting? Maybe the idea of delegating unlimited power to these agencies was not such a good idea after all. Maybe the U.S. Constitution imposed a wise limitation on the power of government in refusing to sanction irredeemable currency. Maybe no one should have the privilege to issue liabilities without assuming countervailing responsibilities. Maybe our corrupt monetary system carries the seeds of self-destruction in allowing structures like the quadrillion-dollar strong derivatives tower to get conceived and grow beyond all limits until it topples on the people of Babel. Why is questioning the efficacy of our monetary system taboo anyway? All these questions are side-stepped by Krugman as he trots out that old Keynesian war-horse, the theory of oversaving.

* * *

There is just one disturbing element in Krugman’s centrally planned economy. It is the golden thorn in the Keynesian flesh. It is gold, the barbarous relic. Man’s greedy little palm is itching to touch the stuff. Visual contact in museums, churches and art galleries will not suffice. Keynesians have a job here that has been cut out for them: they have to ‘educate’ people that wanting gold is like wanting the moon. They can’t have that; at any rate, green cheese is just as good, and the government has an efficient green cheese factory, the central bank, that can manufacture it in unlimited quantities. Those who like gold had better learn to like green cheese.

By the way, this is vintage Keynes. It is in the Bible: the moon, the green cheese factory and all, entitled The General Theory, written by the Prophet in 1936. Go look it up, and see it for yourself. It shows Keynes’ cynicism and his infinite contempt for the intelligence of others.

We are anxiously waiting to see how the pupils of the Prophet will deal with this piece of unfinished business: to cure man of auri sacra fames, “the accursed hunger for gold” (Virgil, Aeneid, III. 57.)

* * *

Krugman ends his piece on an alarmist note. The savings glut is still out there, ready to gobble us all up. In fact, it is bigger than ever, now that suddenly impoverished consumers have rediscovered the virtues of thrift; now that the worldwide boom which provided an outlet for all those excess savings has turned into a worldwide bust.

One way to look at the international situation right now, Krugman says, is that we’re suffering from the “global paradox of thrift”. Around the world savings exceed the amount that businesses are willing to invest. And the result is a global slump that leaves everyone worse off. The implication seems to be that we need a savior. We need someone to save us from ourselves and our own destructive saving habits. The government is our savior. It can tax savings up to 100 percent.

* * *

It is hard to imagine a worse way of standing facts upon their head. The exact opposite is true what Krugman has the cheek to suggest. The falling interest-rate regimen inspired by Keynes has destroyed capital across the board. The only way to replace or to replenish it is through saving. Krugman adds insult to injury when he suggests that there is too much saving in the world, where in fact there is too little, and that this glut is the reason why businessmen have stopped investing. So it falls upon the government to take up the slack and start spending ourselves into prosperity. Krugman’s is a recipe for the ruination of what is left of the world economy. The trouble is that he and his cohorts at the Treasury and the Federal Reserve have all the means of coercion at their disposal to finish off the job. They control the monetary system, they control taxation, they control the White House. They also control the guillotine that is being dusted off just in case it may be needed again as an instrument of monetary policy.

* * *

There you have it: Krugman’s theory of the savings glut, and my theory of wholesale capital destruction in the world as a result of serial halving of the rate of interest by Keynesian monetary policy. I am ready to submit my thesis to a public debate that it was Keynesian measures that started capital destruction I warned about already eight years ago. If they had any decency, Keynesians should admit that they were wrong and let others come in with the new Obama administration and repair the damage. After all, Keynesians have amassed unprecedented power in Washington with their savings glut fable once before. There is absolutely no reason why they should be given a second chance to try their half-baked theory of oversaving on innocent people. But the idea of giving up power has never crossed their mind. They just won’t, even if blood is flowing on the streets of Detroit and Los Angeles. That’s the nature of the so-called Keynesian revolution. It is not a branch of economic science; it is a branch of Leninism, a blend of collectivist ideology reinforced with unmatched expertise on conspiracy, street fighting and barricades.

* * *

In a nutshell, here is my theory of wholesale destruction of capital as a result of Keynesian monetary policy of serial halving of the rate of interest. The regime of falling interest rates is lethal to businesses, whether financial or producing. It makes businessmen lethargic: they understand that the falling interest-rate environment makes their investments go sour. It clandestinely wipes out capital through increasing the liquidation value of debt on past borrowings. Lower rates are not helping business as Keynesian propaganda suggests, because the issue is not the cost of future borrowing. The issue is the historic cost of past borrowings that has rendered existing investments unprofitable.

Chartered accountants and bank examiners ignore the erosion of capital due to falling interest rates, most likely with the connivance of governments if not on direct order from them. So there is no advance warning, and the destruction of capital presents a surprise fait accompli. When it hits, it is already too late to do anything about it.

The wholesale destruction of capital is a social disaster of the first magnitude, in many ways worse than the destruction of physical capital due to war, precisely because wartime damage is expected and preparations are made to cushion it. Capital accumulation is the result of decades or even centuries of arduous saving by hundreds of millions of individuals that, nevertheless, can be frittered away in a matter of a few years. To rebuild the capital base of society will take a concentrated effort to save for decades to come. This great task of reconstruction is certainly not being helped, rather, it is being sabotaged by the vicious Keynesian agitation about a mythical savings glut.

* * *

Gold offers the only ray of hope in an otherwise thoroughly gloomy picture. Gold represents that hard core of capital that cannot be destroyed by the credit collapse. Gold is the only asset that survives any consolidation of balance sheets. Other bank assets tend to be canceled out upon the nationalization of banks. At any rate, they are subject to counter-party performance that becomes questionable in a credit collapse. Gold has no counter-party liability.

If our civilization is to survive, it will have to make a head start in rebuilding capital, the sooner the better. It cannot start capital accumulation from scratch. It must enlist gold in the reconstruction effort. One ounce of gold will go farther than all the make-belief credits created out of the thin air by all the defunct central banks of the world.

This is the triumph of gold: it can be bad-mouthed all the Keynesians want. But gold and those who control it will have the last laugh.

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