And Why There Will Be No Hyper-Inflation in America
By JC Collins
In Northern Alberta the leaves are already beginning to turn yellow as they begin their cyclical pattern of death and rebirth. The morning air is becoming cooler and the smells of autumn wrap themselves around me as I rise each morning for the hour long drive into the mines of Canada’s oil sands. Images of the long cold winter ahead creep into my mind with a sense of foreboding.
Leonardo Dicaprio was here last week doing research on what is most likely a work of protest against the oil sands. Mr. Dicaprio refers to it as the “tar sands”, the derogatory and politically incorrect name which is shunned by the industry and the region. Words are important in that they convey pre-loaded messages which are intended to extract a specific and desired response from the listener or observer. In this sense the word “tar” is dirty but the word “oil” is necessary.
Regardless, the world requires energy and energy is extracted from oil. With Goldman Sachs’ shale oil “quick grab” almost at its viable end, it is only a matter of time before large amounts of energy investment is poured back into the oil sands and the Keystone XL Pipeline becomes fully operational along its extended length. After all, Obama only held it off long enough for Goldman to push the limits of the shale oil revolution to support the international dollar just a while longer.
Perhaps its shale oil versus tar sands with oil sands coming out as the clear winner.
The world will continue to need oil long after the last internal combustion engine has been retired to the automobile collections of the rich. Many of the products we use today require oil for their production or composition, such as plastics. The world will not wake up one day and no longer require oil, nor could it. Simply put, the world economy must slowly transition away from oil – if it can and where it can.
The same goes for gold. No economic system can exist without the function of gold at its base structure. The Bretton Woods Agreement of 1944 allocated an extensive amount of the world’s gold to be held within the base structure of the Bretton Woods institutions. The idea was the gold would be entrusted to the western institutions in order to support the US dollar and the rest of the world would use these dollars to balance trade accounts.
An intensive look at the peripheral evidence strongly suggests that a massive amount of leverage was exerted on the world by the calculated strategy of World War Two for the purpose of consolidating the gold into the hands of the international bankers, which then created the so-called western institutions as the front for its operations.
From this gold consolidation came the global financial system which the world has operated on for the last 70 years. The only change over that time is in the early 1970’s when oil became a more visible component of the system than gold, but both functioned equally and separately underneath as the lifeblood of the system.
The geopolitical challenges and problems in the world today appear to be centered around resources such as oil and natural gas. The military conflicts surrounding these resources are clear to recognize if one is able to look past the constant flow of propaganda. It is obvious that powers in this world are willing to fight over the allocation of natural resources but what is also equally obvious is that these same powers find it unnecessary to fight over the movement and control of gold.
And that is a first in the history of the world.
It has never been fully explained why gold held in the western vaults has been shipping east over the last few years. Nor has the manipulation of the gold price by the exchanges in New York and London been addressed outside of cursory and ancillary news reports which offer very little in the way of investigative reporting or conclusions.
Those who purport that the BRICS countries are going to overthrow the western banking cabal are unable to explain why the western banks and governments would be willing participants in their own demise by making the gold available in the first place.
The movement of gold east, without a war to steal it, strongly implies a business arrangement of some sort, there has to be a seller and there has to be a buyer. In this situation both sides are very aware of what is happening and the movement of PM’s has been well planned to facilitate an overall macro and larger systemic objective.
Given that we have thoroughly covered the macro plan of the SDR Supra-Sovereign currency and have provided ample evidence by way of official publications and statements by global financial institutions, central banks, and governments supporting the larger SDR plan, it is clear that the systemic objective is a reduction of debt, along with a restructuring and consolidation of debt, to facilitate the implementation of a more global and balanced financial system.
Due to the need to keep vast segments of this implementation process secret to avoid panic and sudden unhealthy wealth shifts, an information void has been created which has been filled to overflow with conspiracy theories and wild speculation by PM propagators and currency rumor disseminators. Many of these are only following the logic intersect from which their interests cross paths with the external happenings of the larger macro multipolar world.
If gold was really going to skyrocket to $10,000.00 an ounce why in the world would anybody be selling. It’s the seller’s conundrum – you need to convince the buyer of why they need to purchase Now Now Now, but if it’s so hot and time sensitive than why would the seller be willingly to sell something so valuable.
My experience in this world has taught me that the most valuable things are seldom for sale.
That is not to say that PM’s are not excellent retainers of wealth, because they are, unlike anything else in fact. And that is the beauty of gold and silver, their purchasing power stays relatively the same. Your wealth will not bleed away through inflation. Using this logic in reverse, if gold did happen to go to $10,000.00 an ounce it would only happen in a hyper-inflation scenario and its purchasing power would remain the same. It’s a zero sum game. But better to hold PM’s than fiat currency.
This is the same reason why gold makes for a perfect base to the structure of any financial system. Its stability is time tested and true. If the macro financial world utilizes gold for its base structure, shouldn’t individuals also utilize the metal for their own micro financial structure? But don’t expect that its purchasing power will dramatically increase out of proportion to whatever fiat currency you decide to exchange it for.
Understanding why the movement of gold is being facilitated by all sides involved in the economic transition to a multilateral system entails going back to the year 1913. As detailed in Part One of the SDR’s and New Bretton Woods series, in 1913 China issued gold denominated bonds which it later defaulted on. These bonds act as a sovereign debt which must be honored by China in order for the Shanghai Gold Exchange to successfully offer foreign investors the ability to purchase yuan denominated bullion, which is set to begin on September 26th of this year.
These bonds today are worth over a trillion dollars and their importance in the upcoming economic transition should not be minimized or ignored. There is an excellent summary of the Chinese bond situation provided at the American Bond Holders Foundation, from which the following quote is provided:
From 1900 to 1940, the Chinese Government issued millions of dollars in sovereign debt – most notably, a large tranche of £25,000,000 issued at 5% in 1913 set to mature in 1960. This massive bond funded the modernization of China’s infrastructure and was widely acquired at the time by governments, banks, and investors across the globe. However, in 1938 China defaulted on its “binding engagement upon the Government of the Republic of China and its Successors,” leaving millions of global creditors unpaid. In accordance with the terms of the bond, successor government doctrine, and accounting standards, the United States can and should hold China accountable to its obligations.
The Chinese bonds in question are held throughout the world by treasuries, banks, companies, and over 20,000 private U.S. investors – many of which are active in seeking remuneration. Critically, the U.S. Treasury and Departments of Justice and State are understood to hold substantial portions of this Chinese sovereign debt. These holdings have not been fully cataloged nor has the U.S. Government moved to hold China accountable for its debt obligations.
The interesting component of this quote is that the US Treasury holds “substantial portions” of this Chinese sovereign debt. Let that fact sink in for a few moments as we continue.
Even FOX News has weighed in on the issue:
Many decades ago, China sold sovereign bonds worldwide to investors in many nations. They sold tens of thousands of these bonds on U.S. soil to American citizens on the recommendation of our government, indicating it was a solid investment.
Over the last sixty years, China has refused to pay to these bondholders either the principal or interest on these full faith and credit sovereign bonds.
In 1987, threatened with being kept out of the British financial markets, China acknowledged the debt it owed from the sale of these exact same bonds to British investors. As part of the Great Britain-PRC agreement on Hong Kong, the PRC agreed to pay its debt to British citizens who owned these same bonds. By paying the British bondholders, but no other bond owners worldwide, including U.S. bondholders, China “selectively defaulted” on these bonds.
And more perspective is given by Richard Parker over at JuneauEmpire:
The story begins nearly 100 years ago, in 1913, when the government of China began issuing bonds to foreign investors and governments for infrastructure work to modernize the country. As the country fell into civil war in 1927, paying these debts became increasingly difficult and the government fell into default. Even so, in April 1938, the Nationalist government of China began to issue U.S.-dollar denominated bonds to finance the war against Japan’s brutal invasion.
I’d like to focus in on this particular quote as it contains the substance of much of what we are about to discuss.
First, we know that the bonds were denominated in gold with bonds being issued in 20 pound and 100 pound varieties. A 20 pound bond was valued on the going price of 20 pounds of gold, and the 100 pound bond was obviously valued on the going price of 100 pounds of gold.
Secondly, we learn that China found it difficult to pay these debts when the country found itself embroiled in a civil war. It’s important to recognize the tactic of instigating a civil war as a tool of the international bankers. We are seeing the same methodology at work today in Ukraine, Iraq, Libya, Syria, etc…
Thirdly, it is stated that in 1938 China began issuing US dollar denominated bonds to help finance its war against the Japanese invasion of its territory. Not believing in coincidences, I find this factual information to be very informative of the covert machinations taking place during that era.
It is accepted by non-traditional historians that the international bankers funded all sides of World War Two, so it is not surprising that we see the Japanese invading China. As discussed in the post America’s Karma and World War Two Gold Theft, the international bankers used Japan and then America to steal Chinese gold and hoard it in the west to support the new financial agreements which were structured at Bretton Woods in 1944.
It is my contention that the gold which was stolen was the same gold which was used to support the original Chinese bond issuance in 1913. As China sunk deeper and deeper into the civil war which was orchestrated by outside influences it became more difficult to manage this debt, ending in the eventual invasion by the Japanese and theft of the gold.
China was unable and unwilling to honor this sovereign debt all these years because it was the international bankers who stole the gold and then demanded that the debt be paid.
The gold that has been moving east over the last few years is in fact moving back from the place whence it came.
The international banking interests, such as they are, recognize the need to implement a true global and balanced multilateral system from which further wealth transfers can be extracted. The time and labor of the human population can be better valuated and brought to market under a supra-sovereign exchange as opposed to a unipolar system. Or so the logic goes.
In order for such a system to work the old sovereign debts need to be cleared from the books and the true economic potential and metrics of each region need to be evaluated and adjusted before the multilateral is implemented.
The international launching of the Shanghai Gold Exchange is pertinent to what is about to happen for not only the holders of the Chinese bonds, but also the American sovereign debt held by China.
It is expected that once China reaches the agreed upon level of gold reserves then they will announce what those true reserve levels are along with how much US debt they retain. It will surprise many to learn at that time that China used a large portion of their US debt to pay back the sovereign debt of the bonds and increase their gold reserves at the same time.
This is the mechanism by which China will unload US debt without the risk of a devaluation of their investment. And at the same time the debt level of the US is reduced dramatically with further reductions coming by way of the Chinese bonds which are held by the Treasury. And no one will even know that it is happening until it is all done.
The dollar will not collapse as a large burden of the sovereign US debt will be adjusted downward and a more balanced approach can be taken on everything from IMF reform and G20 negotiations.
This year has seen some large and dramatic events take place, none of which have been covered by the mainstream media. The BRICS Development Bank and Reserve Contingency Arrangement were two of the biggest economic stories to happen since Bretton Woods in 1944, and now the yuan denominated Shanghai Gold Exchange, all in the same year.
Regional players in Asia and abroad will shortly peg their currencies to something other than the US dollar. It is likely we will see some portions of currencies fixed to the value of gold which will be set by the Shanghai Gold Exchange. The price discovery mechanism which is used to determine this value will be very telling of how specific currencies will be valuated.
As we have discussed in the posts Why the Vietnamese Dong Will Reset and The Dongs Revaluation is Imminent, there is a movement by Vietnam, and others, to support their currencies with gold reserves and peg the values to something other than the US dollar. The State Bank of Vietnam has been very vocal about supporting the dong with gold reserves and strengthening the currency by adjusting its exchange rate structure.
It is likely that the amount of gold going east is not just for China but also for other countries which hold US debt on reserve. The forthcoming reality of the Shanghai Gold Exchange is very telling of the larger transition which is in play.
Once balance has been achieved further action can be taken on the public and private debt front with the eventual restructuring of the International Monetary Fund and implementation of the supra-sovereign SDR reserve asset.
Its important to remember that the full transition to a multilateral system will not be complete until 2018. Between now and then we will watch as once familiar methodologies and institutions change and adjust to accommodate the larger macro objectives.
Calculations and analysis of the economic conditions will yield little success if they continue to be based on the old formulas. The fundamentals of Keynesian Economics or straight supply and demand will matter little in the emerging socialist world of redistribution and multiculturalism.
What we are experiencing and the era we are moving into are somewhat new on the surface. It’s only when we dig deep within the human condition itself that we discover the same logical fallacies and externalization which has plagued humanity from the first moment of waking consciousness.
Perhaps Leonardo Dicaprio and other famous personalities that wish to support moral causes would do well to support an alternative to the debt based money creation system which seems to haunt mankind through the ancient halls of past and present.
As my particular world moves into the fall season I anticipate continued change on both the micro and macro levels. Investment will increase in Canadian oil sands and the rise of the socialist super state will continue. New Years Eve will mark the one year anniversary of this site. Let us see what reality we live in at that time. I await the deadness of a dark cold winter. – JC