Bodie,
Sorry about the delay, I wasn't ignoring your questions, I don't have much time to read and post on the Internet.
<<1. There are a lot of "big guys" out there who have basically done the equivalent of shorting gold.
2. If the price goes up they will loose big time.
3. To keep the price down, they flood the market with gold whenever the price approaches $300.
4. If certain countries and the general public can be convinced that gold will become worthless, then the "big guys" will never have to cover.>>
<<Questions
1. Are these assumptions correct?>>
Yes, basically. Gold will never go to zero in value as in shorting a company that has the potential to go broke, so they will have to cover but they would like to get gold down as far as they can for as long as they can before they buy back and replace the gold they sold.
In the meantime if gold doesn't go up, they get to use the money from selling short to invest in other things and leverage the money they have. (an imaginary example out of thin air would be like Goldman Sachs wanting to pump up their books so they could take the company public and make billions of dollars selling shares) If they "borrowed" the gold from the CB's at low interest rates (let's say at 2-3%), they can sell the gold they borrowed for the going rate and again use the money (which used to belong to the U.S. taxpayer) for investing. How could you not make money if you were borrowing millions of dollars for next to nothing?
Anyway, one of the reasons this is an unfair manipulation of the market (rather than just short selling which is legal)is you go see if you can get the same deal. The "big guys" are secretly (if it's all legal, I wonder why this has to be done behind closed doors and denied) making deals with your and my elected representatives to support their effort through monetary policy and our tax dollars to back them up. They also won't hesitate to go back and get rescued by "our" government if the markets turn upside down on them (LTCM fund for example). Did your elected representatives clear this with you and offer you the same opportunity?
The collusion with the government works because gold (or some other tangible asset) is the enemy of invented currency (fiat money = currency invented by decree or out of thin air). The last thing our elected manipulators want to see is the general public putting their money into gold (or some other tangible asset). This would take the money out of their sweaty palms and they wouldn't have the resources to bribe and intimidate us and other governments and bomb little countries of leaders who won't play along. If everybody started getting scared about having pieces of paper with pictures of ego-maniacs on them and began putting lots of money into real estate, you would quickly see legislation passed that would make real estate investment undesirable.
How can the government keep manufacturing money out of thin air and get us to buy worthless bonds to support their efforts if people start purchasing tangible things? Do you remember how angry our honorable leader was shortly after being elected and realizing that his government policy was going to be dictated to him by a bunch of "bond traders"?
Anyway, fiat money is great (keeps us from having to carry gold, chickens and chunks of land around with us) but the minute that the keepers and printers of the money start printing extra not based on true productivity then the system becomes false and heads toward ultimate collapse.
<<2. How long do you think the market can be flooded, thus keeping the price artificially low?>>
I have no idea. I'm amazed at how long they've been able to keep this shell game going. As long as the majority of people are charmed and entertained or the inevitable laws of physics don't intervene, I guess the illusion will continue.
<<3. With the T-bill interest rate rising, won't that give gold competition? Why buy gold, when you can get a higher return with T-bills.>>
Exactly. Be a good reason for raising the interest rate wouldn't it?
<<4. And my last question, what would be a possible alternative to gold (not silver), if for instance the "big guys" have the ability to flood the market (with gold) keeping the price down for say the next two years, while inflation increases at a rate similar to today's rate>>
You'll get as many answers to this as you will people you ask. The most important thing is to keep a large portion of your assets liquid and as debt free as possible so you can switch into various markets as it becomes clear where things are headed. Some cash, some gold/silver, some useful property, some securities in strong, well-run companies with relatively reasonable valuations - diversification and liquidity are important. |
