"speaking about gold price manipulation is a grave taboo."
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Wall Street Kisses Goldilocks Goodbye
Edmond J. Bugos
September 12, 2000
safehaven.com
The GoldenBar Report
Those who scorn inflation today will hail it tomorrow
as the last bastion of profitability...Ed Bugos
Rising Wedgies
Some market technicians, including myself,
view the rising wedge as a.....
...That Will Not Be Good
... that being said, there is indeed a few things happening
in the stock market that deserve special attention.....
... four American Utility icons are positioned
to take advantage of a growing global need
for alternate power infrastructures
less reliant on oil and gas.
... only one can truly benefit from an energy crisis.
... have spent significant resources
... positioning themselves to benefit from this, globally.
... to offer many oil dependent economies an alternative,
higher tech solution to their energy problems.
... have to denounce their Goldilocks allegiance!
... without a potential oil crisis,
there is no real potential for this Utilities play.
... inclined to wait out the highly probable second
bear leg in the rest of the market to unfold first.
That's right, second.
On the other hand, go.....
Rumors surfaced in Germany midweek
that Europe's biggest banking group,
Deutsche Bank AG, is in talks to acquire
the mighty JP Morgan.
Can anybody appreciate the politics
behind this supposed deal as much as I can?
I never saw it coming.
Anyway, by the end of the week,
Morgan's CFO, Peter Hancock handed in
his resignation to pursue longstanding
entrepreneurial interests.
In the end, this may turn out to be nothing
but a difference in opinion, at worst.
But if it were nothing, why would he
not put off his resignation until after
this whole thing was over, being sort of
a key person in a major acquisition and all?
Anyway you slice it; it still is a red flag.
Is the US investment business for sale?
This is the thought that had crossed my mind
when I first heard this merger talk on Wednesday,
before Mr. Hancock's resignation.
It is the thought that crossed my mind
when DLJ sold out to Credit Suisse Group recently.
The seed for that thought, however, actually occurred
immediately after the UBS acquisition of Paine Webber.
The reason is that I had just finished
The Politics of the Dollar,
where I had put forth that the US is now
vulnerable to political extortion on account
of potentially discontent foreign dollar owners.
In other words, the balance of political power
will shift to foreign dollar owners as long
as US politicians will want to keep them
from selling off the currency (to prevent inflation).
Let me explain.
... dragging along with it the Dollar/Euro exchange rate.
The big monetary problem facing the financial system
is the circulation of excess dollars.
Therefore, I suggest that it is in the US interest,
in order to forestall a dollar crisis at this point,
to convert foreign short-term deposits into long-term
foreign direct investment.
And I believe that it is in
Europe's dollar owner's interests
to find something useful to do
with all of their excess dollars.
So while the Europeans are busy buying
US banks from day traders at record highs,
American financial interests may be buying
failed Asian banks, cheaply.
This is nothing but an observation
at this point but it is interesting,
because in my second to last report,
Inflation versus Deflation,
I suggest that Japan is a net global creditor
and therefore most likely to survive
the currency debacle that is right around the corner.
Even worse, however, is that these headlines take away
from all the other garbage that the Europeans are buying.
I have observed, in previous research,
the relationship between the falling Euro
and the rising issuance of US Asset Backed Commercial Paper,
specifically finance company debt or consumer installment credit.
My conclusion was that the US financial sector
has been monetizing low quality debt in this last cycle.
This argument can also be found in the report
Inflation versus Deflation.
Interestingly, in an August 31 issue of
"Capital Issues2," entitled "Watch Reserves, not Rates",
the author points to a striking 0.88 correlation between
US commercial bank paper and the European Central Bank assets.....
"Operation Discredit GATA," is well under way!.....
... why are they trying so hard to deny it?
Perhaps because it is so difficult
to come up with a plausible argument
as to why it is in our best interest,
but possibly also because they have learnt
how effective outright denial of any wrongdoing can be,
especially in dealing with a public that has a vested interest
in their paper.
Where is the Motive, they ask?
... unlike manipulating interest rates or exchange rates
or oil prices or dairy prices or labor prices or what have you,
"speaking" about the manipulation in gold prices is a grave taboo.
And there is an excellent reason for that.
It is simply this:
... perceived that this kind of prosperity would not
be possible on a gold standard... because on a gold standard,
we have to accept some monetary discipline from time to time.
On a "paper" monetary system,
we can-will-and-have postponed the unkind "discipline,"
despite the fact that it comes at the expense of what
is referred to as the lender-of-last-resort model.
At some nearby point in the future
this will probably come at an enormous cost.
Conversely, on a theoretically proper gold standard,
the average entrepreneur can at least be reasonably confident
that he can keep any wealth that is conquered for longer than,
say a couple of decades.
... is my contention that ultimately this cost
will manifest in a loss of confidence and purchasing power
of the paper currency with the weakest fundamentals,
which have less to do with any deceptive productivity edge,
than they have to do with other more complex monetary issues,
such as the natural consequences of profligate dollar imperialism.
Nevertheless, by then we shall see where all of the false wealth
has been transferred to, and we may then possibly even lose faith
in the spin weaving banking system - dare I say it.
... the Federal Reserve System that was developed in 1908
may have to completely dismantle. That certainly explains
the taboo, don't you think?
The Irony of Power
The only real mistake that the Fed had ever made,
in terms of defending its power, was to allow
the monetary inflation to overcome the economy
and manifest in profuse quantities of low quality securities,
which are now owned by too many weak hands.
Here is the irony; these "hands" now have the power
to decide the Fed's destiny.
So yes, expect the "expert" nonsense to intensify,
as there are few markets other than gold,
where "they" may still exert an advantageous,
and more direct influence.
The next few years should prove very interesting to this argument.
Gold And Paper Have Become Mutually Exclusive
Everybody Has A Vested Interest in Something
The Prisoner's Dilemma
What is so bad about Fiat anyhow?
... concludes that the derivatives business
is completely unnecessary were there to be
less volatility in the free floating fiat exchange rate system
in the first place. He makes the case, and if he doesn't I do,
that this volatility is also unnecessary, and only exists
as a result of an unstable and misguided (politicized) monetary policy.
Thus, the enormous growth in the unnecessary derivatives business
(which I am sure Dr. Cross has a vested interest in) is a direct
consequence of this unnecessary exchange rate volatility.
... in this context, you bet that derivatives
are a necessary evolution.
That is not in question.
The question is what happens next?
Many economists have been trying to prove
the growing instability of this monetary system,
or systemic financial market risk,
and anyone that works for the gold industry
should be on the same bloody page.
It seems that the biggest obstacle
facing the gold business today,
is that investors have forgotten
what the value of gold really is.
Who can blame them?
After thirty years of spin,
the facts have obviously become twisted and distorted,
rendering the truth far, far away. End.
A proposition for my readers.....
Thus, if you are interested in this analysis,
please email me and note whether you would like
the report mailed to your address or simply emailed to you.
Sincerely,
Edmond J. Bugos
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