Japan, the BIS and GOLD...
Interesting post on the Kitco discussion forum:
gold-eagle.com:3128/cgi-bin/gn/get/forum.html?date=2001%3A04%3A15%3A07%3A00%3A00
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@ (goldcreature)
(Leland) Apr 15, 08:00
Houston, Texas
July 15, 1997
My Dear Sons:
This is about "The Sting". This is about the sting that will smash
the Great Bull Market. This is about the sting that will derail the
gravy train. The sting is already in place and its trigger has
already been pulled. The sting merely has to unfold. The public
suspects nothing.
A sting is a confidence game in which the victim is deliberately
set up to believe that he cannot lose, that he has a bird's nest
on the ground. Then at the last moment the trap is sprung, and
his dreams of riches turn to rags. This sting was made in Japan,
with a strong assist from Switzerland.
To get a better idea of the Swiss Connection, we have to look
at the Bank for International Settlements (BIS) in Basel. he BIS
is the Central Bank's central bank. It was formed in 1930 to
handle the collection of German war debt following World War I.
Its members are the central banks of the industrial world, such
as the Bank of England, the German Bundesbank, the Federal
Reserve Bank, the Bank of Japan, and so on. It is almost
certainly the most powerful financial institution in the world.
Never once in its long history has it ever had to ask for help
from any government.
A definite coolness exists between the BIS and the United
States. This goes back to the Bretton Woods Conference in
1944, held to set up the machinery for resuming world business
after World War II. Even though this conference established the
gold-backed U.S. dollar as the only reserve currency, the U.S.
did everything it could to torpedo the BIS and give sole power to
the American sponsored International Monetary Fund. The war
was not over in 1944, but the combatants still got together and
defeated this U.S. grab. In the final showdown, the Europeans
and Japan never completely trusted the U.S.
As the years went by, the BIS suspicions were justified. The
U.S. began to abuse its reserve currency role by simply printing
dollars. American companies began to buy control of
businesses all over the world. In 1971, President Nixon took the
dollar off the gold standard, and introduced the novel idea of
floating currencies. Meanwhile, the U.S. national debt began to
increase each year, until it now stands at about $5.5 Trillion, an
astronomic amount that can ever, ever be repaid. It was clear
that the U.S. was out of control.
Along about 1972, I began to spend a great deal of time and
effort in studying the BIS and its agenda. The first thing I found
was that although the U.S. had turned its back on gold, the BIS
were aggressively buying it. By 1990, the BIS were by far the
largest holder of gold, with more than one billion ounces. This
amounts to an outright corner on gold.
The next thing I learned is that the BIS are extremely
closemouthed. It keeps a low profile. Its favorite M/O is the
sneak attack. They have their own word for this – "coup". Their
ideal coup is one where the victim is taken by surprise, and
does not even know what hit him. The BIS tries to leave no
fingerprints. Thus their coups often become perfect crimes.
The third thing I learned was that the BIS had two ironclad
objectives. Both were so bold that they would take your breath
away:
1) To destroy the Soviet Union, as a threat to world peace.
2) To destroy the dollar as the worlds reserve currency.
We all know that the Soviet Union collapsed in 1989. This was
done by the BIS without firing a shot. They simply loaned large
sums of money to the Soviets, and then called the loans. Just a
routine castration! A simple foreclosure. This is how they got
the Russian gold.
The second goal, of bringing down the dollar as a reserve
currency, has not yet been reached, but I believe it soon will be.
This brings us to the present sting operation.
If you are going to derail the dollar and the Great Bull Market,
you better bring a pretty big checkbook. The new money
coming into the mutual funds is running about $20 billion a
month. Unless you can top that kind of buying pressure, you
don't have a chance. How in the world do you shoot down an
animal that big and that powerful? In my opinion, the BIS and its
Japanese partners have come up with an ingenious answer. It
is big enough to work. It goes like this:
The sting began two years ago, in August 1995, when a rash of
bad loans and insider scandals brought the Japanese banks to
their knees. The BIS became alarmed, and advised the
Japanese to lower their loan rates to ½%. This created an
enormous gap between the low Japanese rate and the 6-½%
U.S. rate. Into this gap poured speculators from Japan and
everywhere else. The speculators would borrow yen in huge
amounts. They would then sell the yen, and put the proceeds
into U.S. paper, thus making an enormous, guaranteed return.
This came to be known as the "Yen – Carry Trade". This yen –
carry trade has been going on for over two years, in virtually
unlimited volume. It created a huge demand for U.S. bonds,
which in turn sustained a huge and unprecedented bull market
in stocks.
In a similar fashion, the Japanese and others found that they
could do the same thing with gold and this came to be known as
the "Gold – Carry Trade". The speculators could borrow gold at
about 1%, sell the gold, and then invest the proceeds in U.S.
paper, with a huge guaranteed return. How delightful! How
delicious! But how lethal!
I say lethal because this yen – carry, gold – carry Ponzi scheme
has created a "potential short squeeze of colossal magnitude".
(Michael Belkin, "Strategic Investments", May 14, 1997) Sooner
or later, these fantastic leveraged schemes must be unwound.
The gold and the yen which were borrowed and sold short will
have to be bought back; and the bonds that were bought with
borrowed money will have to be sold. The totals involved are
probably well over a trillion dollars, or far beyond the mutual
funds yearly take. Anything could trigger the debacle. As long
as gold keeps going down or the yen keeps going down, no
problem. As long as bonds keep going up, no problem. But
once gold starts to rise, or the yen starts to rise; or once bonds
start to fall, these huge positions would be unwound. There
would be a run for the exits, and the panic would feed on itself.
Margin calls would ruin the leveraged speculator in short order.
There would be no way to stop the carnage. All it will take is a
coup to start the waterfall.
We had the coup on June 24, 1997, though it was only vaguely
understood at that time. The Japanese Prime Minister, Ryutaro
Hashimoto, told a luncheon meeting at Columbia University, "I
hope the U.S. will engage in efforts and in cooperation maintain
exchange stability so we will not succumb to the temptation to
sell off Treasury bills and switch our funds to gold".
In a matter of minutes, the NYSE collapsed, and the Dow-Jones
closed down 192 points in a mini-panic. The victim's saw the
trap for the first time! Then the media and Wall Street fell all
over each other trying to control the damage, saying Hashimoto
was misquoted, etc., etc. The various exchanges staged a
desperate anti-gold raid, and soon had gold down to 12-year
lows. The Street breathed a sigh of relief and returned to its
summertime siesta.
But the damage was done. Now look at the mess that confronts
the big-time gamblers. We now have gold at new lows and the
bonds at new highs. Surely, this is a speculator's dream come
true – well, isn't it? No, this is The Sting. The yen – carry and
the gold – carry is still in place, and they still have to be
unwound. The temptation Hashimoto mentioned now becomes
unbearable. The Japanese cannot resist the chance to sell the
bonds near their highs, or the chance to buy gold near its low.
Do you imagine that the bonds will stay high or that gold will
stay low? No way! The unwinding begins to feed on itself, and
the 5000 mutual funds and all their friends will be unable to do a
single thing about it. That's what you mean by The Sting.
I have no idea whether Mr. Hashimoto was acting on his own,
or whether his words were part of a larger plan. I know one
thing, though. This guy is no innocent babe in the woods.
Before he became the Prime Minister, he was Japan's Finance
Minister. He knew the ropes. He knew the big wheels at BIS.
He knew all about yen – carry and gold – carry. He was telling
his people that the game was over. Remember that these are
the friendly little folks who gave us Pearl Harbor and the
kamikaze! For just a fleeting second there, when Hashimoto
spoke, the thought flashed across my mind that the Japs had
just won World War II.
Another thought – the Japs could acquire gold in a different
way. They could sell our bonds and buy the EMU, the new
European currency that the BIS are sponsoring to replace the
dollar. The EMU is expected to be a package combination of
gold and paper.
So there you have the anatomy of the greatest sting in history. It
is real. It is in place. It cannot be stopped. It can only feed on
itself and get more and more desperate as the shorts are
squeezed to death. And best of all for the BIS, the fingerprints
on it are not Swiss – they are Japanese. Call this the "Karate
Chop".
Think about this, and call me with your reactions. There is more
to this story. Stay tuned.
Much love, Dad"
* * * * * * **
Mr. Johnston's letter was written last July. I don't want to be
redundant but this is the reason I have been telling you in the
past that we are in the transition from intangible financial assets
to tangible real assets.
Dennis Birch's RESOURCE STOCK DIGEST |
