An old pertinent post revisited:
Thu, 26 Feb 1998 04:44:49 -0700
Joe Flood (joeflood@mailexcite.com)
A new version of the Great Conspiracy Theory is doing the rounds (the place to find
these is on the Kitco Gold Discussion forum). Instead of the usual Arabs/US nexus,
this one hangs on the Gnomes of Zurich in the form of the Bank for International
Settlement (who are no doubt Masons or even Templars). The tale is long and dubious
but contains some points worthy of discussion
"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 last the trap is sprung, and his dreams of
riches turns 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. The BIS is the Central Bank's central bank. It was formed in 1930 to
handle the collection of German war
debt following WWI. 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. Never
once 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 WWII. Even though this
conference established the gold-backed US dollar as the only reserve currency,
the US did everything it could to
torpedo the BIS and give sole power to the US sponsored IMF. The war was not
over in 1944, but the combatants
still got together and defeated this US grab. In the final showdown, the Europeans
and Japan never completely
trusted the US.
As the years went by, the BIS suspicions were justified. The US 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, Pres.
Nixon took the dollar off the gold standard, and introduced the novel idea of
floating currencies. Meanwhile, the
US national debt began to increase each year, until it now stands at about $5.5
Trillion, an astronomic amount that
can never,ever be repaid. It was clear that the US 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 US had turned its back on gold, the BIS
was aggressively buying it. By 1990,
the BIS was by far the largest holder of gold, with more than 1 billion ounces.
This amounts to an outright corner
on gold.
The next thing I learned is that the BIS is 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 destoy the Soviet Union as a threat to world peace.
2 ) To destroy the US dollar as the world's 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 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 2 years ago in August 1995 when a rash of bad loans and insider
scandals brought the Japanese
to their knees. The BIS became alarmed, and advised the Japanese to lower their
loan rates to 1/2%. This created
an enormous gap between the low Japanes rate and the 6-1/2% US 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 in US 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 2 years,
in virtually unlimited volume. It
created a huge demand for US bonds, which in turn sustained a huge and unprecedented
bull market in stocks.
In 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 US 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. 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 a coup on June 24,1997, though it was only vaguely understood at the
time. The Japanese Prime Minister
Ryutaro Hashimoto told a luncheon meeting at Columbia University, "I hope the
US 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 desparate 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 bonds at new highs. Surely this is a speculator's dream come true-
well, isn't it? 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 lows. Do you imagine that the bonds will stay high or that the 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 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 all about yen-carry and
gold-carry. He was telling his
people that the game was over...
Another thought, the Japanese could acquire gold in a different way. They could
sell our bonds and buy the EMU,
the new European currency that the BIS is 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... "
Now I don't follow part of the logic here; I'm not sure why these arbitrages would
attract margin calls etc.
But I DO agree with Dan on one important thing - bond prices and commodity prices
are the key to what's going on. How is it that Japan can possibly support interest
rates of 0.5% which is below even the discount rate of future consumption? Surely
people would borrow infinite amounts, or arbitrage it until US/Japanese rates balanced.
Clearly the interest rate is being fixed, and the result is a squeeze on the supply
of local capital which presumably is what is keeping the Japanese market from expanding.
The net result also is a substitution of US BoP deficit by US bonds; so that Japan
is providing the money for the US to buy its goods. This HAS to be a deliberately
arranged game, and there HAS to be a massive vested interest to keep this game going.
Another strange coincidence is that during the Japanese PM's threat, the Oz PM just
happened to be in Washington, and two days later the Oz reserve bank announcement
was made which crashed the price of gold. Why announce it at all after the event?
Why destroy one of our biggest industries, apparently on purpose? It looks to me
like some huge favour was done - in exchange for what?
Maybe I'm reading too many Internet posts (I inadvertently subscribed to the Conspiracy
newsgroup the other day and received 250 posts per day till I stopped it).
Free web-based email, Forever, From anywhere!
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