United States faces "a nation-breaking event that the Federal
Reserve is trying desperately to stop."
The United States is breaking
down economically, says a financial watchdog group, and is suffering
terribly under prolonged financial remedies, initiated by the
country's top banker Alan Greenspan, that have enriched the country's
elites while the middle and lower classes have been forced to
bear the brunt of the hardships.
Michael Bolser of the Gold Anti Trust Action
Committee (GATA) ominously warns: "We are looking at a situation
now that Bank of England President Sir Eddie George referred to
as an abyss… He wasn't talking about a temporary abyss,
he was talking about the permanent destruction of the value of
the United States dollar.”
Bolser added, “This is a nation-breaking
event that the Federal Reserve is trying desperately to stop.
And of course they have created the conditions to get us into
this jam. And it has taken them since 1987 when Alan Greenspan
was first appointed to do it. [Greenspan] has been on the wrong
path for that long. And he has refused to get off this path. His
answer to every single problem was to print more money. And here
we are at the end game of a one way box canyon, at the end of
which is a financial disaster."
To many pro-gold activists and libertarian economists,
this is a predictable consequence of the way America turned its
back on laissez-faire economic policies of the 1800’s and
embraced central bank financial manipulation and Big Government
interventionism in the 20th century. In the libertarian view,
“top down” Keynesian economics is “junk food”
Fed Chairman Alan Greenspan is concerned that
stimulus measures have been increasingly pushing on a string to
revive the overall economy. Although the Fed dropped its Funds
rate to 1% on June 25th, a 45 year low, America still has 25%
overcapacity and record trade deficits.
More and more debt is required to produce GDP
growth, now requiring five dollars of debt for each dollar of
growth. Ballooning government, personal, and corporate debt now
total about $34 trillion, or $119,000 per individual American.
Increasing carrying costs reduce consumer spending.
Fedspeak about deflation really pertains to bubble
valuations in the stock, bond, and real estate markets. Fed Governor
Ben. S. Bernanke declared last November that the Fed is prepared
to inflate without limit if necessary to prevent such deflation.
Home equity refinancings have helped sustain
consumer spending, which constitutes about 75% of GDP. If stock
and real estate values fall too far, a “negative wealth
effect” on spending might feed a recessionary downward spiral.
The Fed apparently forms an axis with banks and
Wall Street firms to stage periodic bond and stock market rallies
to prevent a rout and also to suppress gold as an inflation barometer.
On May 21, 2003, Greenspan testified before Congress
that the Fed is prepared to use its “Open Market Operations”
to buy bonds and suppress interest rates. These operations create
money, whose supply is growing by about 10% a year.
According Bill Murphy, Chairman of GATA, total
global gold short positions stand at about six times annual mine
and scrap supply, running about 2,500 tonnes a year. An annual
1,400 tonne demand deficit has to be filled to prevent price spikes.
Bill Murphy thinks the Fed may be arranging payments to foreign
banks at above market prices to disgorge more gold. As major gold
mining companies have unwound their hedges, big banks and Wall
Street firms have apparently stepped in to replace and augment
short derivatives positions.
The article Plunge Protection Team
by Brett Fromson, that appeared in the Feb 23, 1997 issue of The
Washington Post, described a Working Group on Financial Markets
(WGFM), created by the Reagan administration in early 1988 in
reaction to the 1987 crash.
Murphy and other experts believe that Wall Street
firms now use "PPTs" on a continuing basis to stage
strategic rallies in the stock market. The Fed provides liquidity
through a $40 billion repurchase agreement pool that can be augmented
by a $30 to $40 billion Exchange Stabilization Fund created in
the 1930s. The Fed lends these funds for 28 days and can roll
Despite bond, gold, and stock market interventions,
many wild cards threaten soft landings.
Foreigners own about 45% of US Treasuries. The
Fed may be forced to eventually hike rates to attract more capital.
Currently Japanese and Chinese central banks are buying US dollars
to arrest the dollar slide and maintain export competitiveness.
They may not accumulate depreciating dollars forever.
The rapidly growing unregulated derivatives market
now totals an estimated $127 trillion, 13 times the U.S. economy.
Billionaire investor Warren Buffet publicly denounced unregulated
derivatives as "Weapons of Mass Financial Destruction"
after his difficulties in unwinding the positions of an acquired
company. .Almost every year derivatives are involved in a major
blow up, such as Enron in 2001 or the 98% wipe out of the $200
million Japanese Eifuku hedge fund in seven trading days in Jan
Wall Street firms promote derivatives because
they remain extremely profitable. America's largest banks hold
perhaps a third of all derivatives. They can use unregulated credit
derivatives to circumvent conventional reserve and margin requirements
and expand lending activities. JP Morgan Chase is exposed to over
$25 trillion and is leveraged at over six times its equity. Greenspan
himself has lobbied to keep the derivatives market unregulated
and beyond the scrutiny of the Financial Accounting Standards
If the above is not alarming enough, surely the
amazing fact that the privately-controlled Federal Reserve has
never been audited should set off the alarm bells, particularly
in this era of monetary corruption. The reader may interpret this
any way he or she wishes but who was it who said that anything
that can happen will happen?
The Federal Reserve has been highly questionable*
from its founding in 1913, put over on the gullible, trusting
American people by willful bankers and politicians, all of whom
profited beyond the riches of Croesus. One who believes that the
controllers are conducting the business of the Fed honestly and
are not improperly -and illegally- enriching themselves is suffering
All of this raises troubling, paradoxical questions,
not to mention the possibility that another terrorist strike could
be used to not only destabilize America’s financial system,
but also as a scapegoat for a financial breakdown that might happen
Bill Fox is VP/Investment Strategist, America
First Trust Financial Services. Bill welcomes phone calls and
responses to this article. His address is VP, America First Trust
Financial Services, Registered Rep, Sammons Securities Co., LLC
P.O. Box 820669, Vancouver, WA 98682, telephone: 360-882-5369,
toll free: 866-945-5369 (866-WILL FOX), email: firstname.lastname@example.org.
Securities offered through Sammons Securities Co LLC, member NASD
* Although I did not use the word "conspiracy"
in the original long version of this article, it was suggested
for the short version by an AFP editor. The word "conspiracy"
is accurate when broadly constructed relative to the concept of
government espoused by Thomas Jefferson (profiled in my "Inspiration"
article). Congressman Ron Paul's article "Paper
Money and Tyranny," explains how the creation of a central
bank in peacetime was vigorously opposed by many of America's
Founding Fathers. The original Constitution did not authorize
a national bank that could create money. The decentralized banking
system of the 1800s was arguably more stable than the centralized
system of the 20th century under the Fed. Our central bank was
a logical outgrowth of the radical centrism promoted by the Abraham
Lincoln administration discussed towards the end of my "Other
the Score" article and brilliantly summarized in the
Donald Livingston article "The
Litmus Test For American Conservatism." An unaudited,
privately owned central banking cartel with an unlimited capacity
to create money out of nothing is a necessary prerequisite for
privileged elites to have the financial leverage to create and
control a global interventionist, deficit-spending, pork barrel,
welfare-warfare state. Such states tend to ultimately overextend
and corrupt themselves much like the Roman Empire. This is one
reason why many central banks may be viewed as incompatible with
self-constrained, principled republicanism. Even Fed Chairman
Alan Greenspan once admitted to the "shabby secrets"
of the "welfare statists" who require a central bank
in his famous essay "Gold
and Economic Freedom." Also, I provide background on
the men who engaged in subterfuge to create the Federal Reserve
Act in 1913 towards the end of the long version of my "Amidst
Bullish Hoopla" article in the "Morphogenesis
of the Fed Axis" section. I think that the general tendency
of Americans to disbelieve in financial "conspiracies"
may change if the U.S. ever goes the way of Argentina and half
the population slips below the poverty line.
(total article length, excluding title, bio, and footnote: 1,069