Saturday, March 16, 2013

Former Treasury Official: America is Going to Crash Big Time

Editor's note: If you read my last post "The US Petrol Dollar Will End" you'll be certain to connect the dots mentally. I would suggest reading them both.

Usually it feels good to be right. But not when what you see coming is so unpleasant. I have thought for the last few years that:

  1. The gold price is manipulated down.
  2. The US stock market is manipulated up.
  3. This has continued longer already than I thought possible.
It would seem someone agrees. And not just any someone.

Dr. Paul Craig Roberts is a former Assistant Secretary of Treasury under the former Reagan administration. But Dr. Roberts isn't a partisan political economist like Paul Krugman. He has been a staunch critic of both W. Bush and Obama for destruction of American civil liberties in the war on terror.

Below is commentary from an interview with KWN followed by an excellent youtube interview I highly recommend.

From KWN:

Today a former Assistant Secretary of the US Treasury told King World News, “... the dollar is the vulnerable spot in the Fed’s policy management, and the popping of the bubble is likely to come from the dollar.”  Former Assistant of the US Treasury, Dr. Paul Craig Roberts, also warned King World News that a financial collapse is coming, and the Fed is desperately manipulating the gold price in an attempt to avoid the collapse.

Here is what Dr. Roberts had to say in this extraordinary and exclusive interview:  “A lot of people just can’t imagine that the government would fix the gold price.  And yet, in full view, the government fixes the bond price, and the banks fix the LIBOR rate.  So why is it people can’t comprehend that the government would fix the price of gold (laughter ensues)?”
“And you have to ask yourself, who would short gold in a rising gold market?  In the physical gold market the demand for gold rises consistently.  Investors would ride the rise in gold.  Do investors go in and short a bull market in stocks?  Not unless they want to get wiped out.  So why would they short a rising gold market unless the purpose is to stop the rise?

So it’s obvious that they are fixing the price of gold because we hear every day that there is more physical demand for people who actually want the metal....

“We hear reports that central banks are starting to acquire and accumulate gold using their dollars, and lightening their dollar load.

So if the demand for physical possession is strong, why would you short gold in the paper market, unless you are trying to hold down the rise of its price?  When the price of gold hit $1,900 a year or two ago it told the Fed that they can’t fix the price of bonds if the world perceives the dollar deteriorating at such a rapid rate in terms of the price of precious metals. 

If the dollar is deteriorating there (against gold), people also know that the value of assets denominated in dollars are also deteriorating.  So the Fed was worried that they would lose control of the bond price and interest rates because of the erosion in the dollar price of gold.  That is the origin of this policy.  The (heavy) shorting appeared then, and they broke up what was a very consistent and strong rise for over a decade. 

If you look at the chart you see there is a very sharp increase, and then it drops down a little bit and is kind of capped.  So it’s an obvious manipulation.”

Eric King:  “Dr. Roberts, as the former Assistant Secretary of the US Treasury, you brought up the dollar there, as you watch the massive creation of money, what are your thoughts on that?”

Dr. Roberts:  “You can’t retain a stable exchange value of your currency while you print it in enormous quantities.  So, at some point it has to shake the confidence of the rest of the world in the dollar as the reserve currency.

We already know about efforts to move away from the use of the dollar as the reserve currency.  We know the BRIC’s are making agreements to resolve their trade balances with one another in their own currencies.  That’s Russia, China, Brazil, South Africa, India.  It covers most of the geography of the world.

There are reports that Japan and China, despite their disputes over islands, are working to conduct their trade in their own currencies.  As the use of the dollar as the reserve currency for transactions or as a store of value declines, then the demand for dollars declines, so its exchange value in currency markets declines. 

The Federal Reserve can print all of the money it needs in order to support bond prices, but printing dollars doesn’t support the dollar price.  And the Fed has not the power to print foreign currencies with which to support the dollar price.  So the dollar is the vulnerable spot in the Fed’s policy management, and the popping of the bubble is likely to come from the dollar.”
 Part two of KWN interview here:

“I can point out three giant bubbles that threaten the remains of the American economy ... When these bubbles pop, the consequence is obvious:  The wipeout of the remaining wealth from bond and stock collapses, and a very strong domestic inflation from the rise in the import prices.”

“The United States is now an import dependent country.  It doesn’t produce its own manufactured products, clothes, shoes.  These import items dwarf the import of oil or energy.  So what is the potential for happening when these bubbles burst is widespread unemployment, and a rapid increase in inflation, before which the economic policy has no known solution. 

... It is frightening, and it shows the extent to which the economic policy of the United States is misused in support of four or five big banks that are ‘too big to fail’ ... We now have one bank, JP Morgan, which has derivative exposure equal to the (entire) world’s GDP....
“Unless these derivatives all net-out in some way, the bank (JP Morgan) has no way of covering its exposure ... When you have your top policymakers so utterly incompetent, well, then you are going to be in a huge mess ... So they’ve gone from one crisis to putting in place the foundation of a much bigger crisis.

There is no way for them to avoid it unless people think that dollars can be printed indefinitely without any effect on the value of the dollar.  But of course the demand for dollars is not growing in keeping with the supply.  So we have a potential massive crisis waiting to happen, but you can never predict what sets something like that off.”

Eric King:  “Why are you coming out and speaking like this?  It seems a very dangerous time and place in history to be so vocal.”

Dr. Roberts: “I don’t want everything to go to ruin.  What kind of social or political stability would you have if you have large numbers of people out of work and rising prices?  You are talking about massive problems.

Nothing and no one would be safe anywhere.  This type of situation is extremely dangerous.  The world has never seen it before.  There are no economic policy solutions.  You can’t deal with it by cutting spending because you already have high unemployment.

How are you (the Fed) going to contain the inflation?  Are you going to jack interest rates up and wreck what little is left of the economy?  The whole thing is a disaster waiting to happen.   And they (mainstream media and government officials) avoid it.  There is no talk about it.  It’s so obvious.  How can you not see it?  And yet they never mention it.  So I just feel compelled.  It’s my responsibility to mention it.”
 And if that's not enough to get your interest see the video below from Dec. 2012:

12:45 We’ve already gotten away with this longer than I thought they would.

16:52 The Fed buys S&P 500 Futures to support the stock market.

19:45 Hyperinflation happens not so much from printing but a massive change in the exchange rate against other currencies when confidence is lost. This is what happened in the Weimar Republic.

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