Fiat World: Uprising and Downfalling

James West

By James West
February 11, 2011

Certain characteristics of crumbling empires are historically recurring, and pattern recognition practitioners are thus informed and so forewarned. Their discourse is labeled contrarian, hysterical, strident or radical, depending on the source of criticism, who seldom survive the subsequent reality to be told “I told you so”. Thats not the point anyway.

Napoleon in Russia, Rommel in North Africa, the Japanese at Pearl Harbour. The Romans, the Incas, Vikings, Mongols – all representative of empires whose downfall was precluded by geographic overextension of the armed forces, one of the aforementioned ubiquitous characteristics of regimes whose days are irrevocably numbered. And then currencies: the German Mark, the Italian Lira, the Zimbabwean dollar – diluted and inflated to astronomic excess – another sign of a civilization on the brink of decline, and perhaps, collapse.

Literature assures us that a nation who refuses to learn from the mistakes of previous generations is bound to repeat them. That legacy is now before us.

The surest symptom of a country who has lost the ability to objectively and correctly assess its position in the global pecking order and thus act appropriately is when they begin to abandon allies because the allegiance is no longer convenient.

Does this sound like anyone we know?

In the news from Egypt, an American-originated declaration of Mubarek’s impending resignation and departure is resoundingly refuted by that embattled leader. The United States Federal Reserve announces it will buy “back” $97 billion in debt, according to MarketWatch, who goes on to state the Fed has bought “$397 billion in U.S. debt since August”. The world’s most powerful nation in the 20th century has in the 21st passed its prime and is suffering horribly from dementia. Its like watching a faded starlet in Hollywood try to strut down Rodeo Drive, a laughingstock to passers by, but she convinces herself that she’s still ‘got it’.

How does the central bank of a nation $14 trillion in debt keep coming up with money to buy its own money? Is it not supremely revealing of the extreme depths of delusion to which this so-called bank and its governors have now descended? The fraud inherent in this perpetual shell game is obvious to all except the hucksters moving the shells around and the dupes naively trying to follow the pea shell in the hopes of winning a prize. The audience knows there is nothing under any of the shells.

The concentrated ownership of mainstream financial media among six major U.S. corporations is evident in the perpetual fact-warping that now passes for news. Any measly percentile of fabricated statistic is seized upon as rosy evidence of a return to robust economic health, while the plethora of legitimate indications to the contrary are completely ignored.

The defacto collapse of American influence over the Middle East is ominous for Israel, gathering frigates and aircraft carriers of the U.K./American allied forces notwithstanding. If the solution in Egypt is to be democratic and moderate, it will be under the impetus of the Egyptian people forthwith, and no American proxy will be legitimized. Bu continuing to meddle in the politics of the region, the United States galvanizes new enemies among those formerly who only harboured a distaste.

Authoritarianism has come to an end in Egypt for the time being. The outcome of what looks like will be free and fair elections will determine who is in charge of the very large and entrenched system of violent domestic control. Mubarek might be gone, but the secret police apparatus is intact, and will pass in one form or another to the next government. Should fundamental Islam prevail, the might just be a step into darkness, as opposed to towards light.

Russia has an authoritarian regime and no democracy. The wall came down but state control is now back in force, stronger than ever, as evidenced by that nation’s propensity for violence towards journalists and dissenters.

And what is the difference between the clashes with students in Beijing in Tiananmen Square and the protests in Tahrir Square in Cairo? The main one is that whereas in Cairo, the army sided with the people, in Beijing the army is fanatically aligned with the leadership.

Gold Doesn’t Care
The fact that gold’s price performance in the last 40 days or so digresses thoroughly from its normal course during times of mid-east instability amid severe monetary and price inflation is pure evidence that either the price of gold is directly manipulated by banks, or that the coordinated campaign of disinformation by the Big 6 media division of the U.S. Treasury has finally become so fine tuned as to hypnotize recipients of its message. In either case, $2 billion in redemptions of Gold ETF GLD makes one wonder what has changed fundamentally to justify such a sell-off in a month where global instability and inflation are robust?

Or have those with a vested interest in the appearance of a stable dollar realized that they could use the billions of dollars in quantitative easing to directly influence demand for and thereby price of gold by incrementally building large holdings in gold ETF’s and then dumping them in compressed timelines to help generate severe price swings?

How very ingenuous to use the strength of gold’s demand and price metrics to undermine those very same dynamics! Buy up ETF shares with dollars fabricated out of thin air, then dump the built-up position in a single month to drive superficial dollar demand and coincident gold aversion. Whoever dreamed that up should get the congressional medal of honour and go straight to jail

These short term machinations aren’t relevant in the long run however, and only provide buying opportunities for those building a store of value in precious metals. Pundits speculate on an impending day of default for the U.S. dollar, when to sovereign bond holders, that day has come and gone, and the big players are tip-toeing to the exits accumulating gold as they go. When we finally shine the light on them an acknowledge the default has already occurred, the gold and silver price explosion to the upside beyond $2,000 will begin in earnest.

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James West

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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