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The title refers to Aesop's tale about the wolf that has lost his tail
in a trap. As he felt uncomfortable being so different from others in the
pack, he tried to persuade his fellow wolves that they, too, should get rid
of this cumbersome and useless appendage. He declared that "the tail of
a real wolf is a barbarous relic". Read on to find out how an
experienced wise old wolf answered him.
Like all of Aesop's tales, this one also has a modern message. When
Uncle Sam in 1971 defaulted on his
gold obligations, he did not want people to call a spade a spade. He wanted
them to call the American default,
more elegantly, the 'demonetization of gold'. He was trying to persuade
others to demonetize gold, too, by discarding it as a "barbarous
relic". Yet he was disingenuous enough to keep the remnants of his
gold while pushing others to sell theirs. He urged them to auction off that cumbersome and useless appendage
and put the proceeds into US Treasury paper. "Cut off your tail to save
my face!"
The late Mr. Ferdinand Lips asked me to write an introduction to his
book "Gold Wars". I was delighted and the outcome is reproduced
below. In my dedicated copy Mr. Lips wrote the following kind words:
Dear Antal,
Your introduction, the intellectual input and professional insight you
gave me for writing this book are the 'crown jewels' of Gold Wars.
With warm thanks and best wishes,
Ferdinand
April 3, 2002.
My introduction to "Gold Wars" follows.
A "gold war" is an attempt by the government upon the
constitutional rights of the individual. Why do governments resort to gold
wars? Sometimes they want to wage shooting wars without raising taxes; at
other times they want to indulge in "social engineering" through redistribution
of income. But in every instance there is a common thread: governments have,
correctly, identified gold as the only antidote in the hands of the
individual against their effors to build the Tower of Babel of irredeemable debt.
This book is much more than a chronicle of gold wars. It is also an
account of the historical failure of "Esperanto money". Over a
hundred years ago a Polish physician by the name Ludovik
Lazarus Zamenhof (1859-1917) created a synthetic
language in the hope of removing the curse of Babel from mankind. According to the Bible
man had become so conceited as to challenge God by proposing to build a tower
that was to reach to High Heaven. God's punishment for the temerity was to
confuse the tongues of nations. The tower could never be completed for
failure of communication due to the confusion of different languages. Zamenhof called his artificial language
"Esperanto", meaning "the hopeful". The hope was in vain,
as the experiment attracted imitators, and other synthetic languages, e.g.,
"Ido", sprang up. The confusion of
tongues, and the curse of Babel,
has remained.
Calling irredeemable currency "Esperanto money" is apt. The
Biblical story may be interpreted allegorically as an admonition not to
challenge God by attempting to build a tower of irredeemable debt that is to
reach to High Heaven. The admonition fell upon deaf ears and, now, God's
wrath is upon us. Currencies of nations have been confused. The tower can
never be completed for lack of compatibility among various means of payment.
The hope of Esperanto money to remove the curse is in vain. Other synthetic
currencies spring up such as the SDR (special drawing right), the Euro, and
so on. The confusion of currencies, and the curse of Babel, remains.
Ownership of gold is not about lust: it is about liberty of the
individual. The gold standard is not a "game": it is the embodiment
of the timeless principle: pacta sunt servanda (promises are
made to be kept). Official hatred of gold bordering on the neurotic appears
less irrational if we contemplate that gold, and gold alone, is capable of
exposing the ever-present bad faith behind the irredeemable promises made by
the powers that be.
The Americans who defaulted
on their international gold obligations in 1971 have put great pressure on
other countries that they follow suit and denounce gold. This brings to mind
the fable of Aesop about the wolf that lost his tail in a trap. As he felt
uncomfortable being so different from the others in the pack, he tried to
persuade his fellow wolves that they, too, should get rid of this cumbersome
and useless relic. But a wise old wolf pointed out to him that his proposal
would have had greater merit if it had been made before his fatal encounter
with the trap.
Switzerland was the only country to point out that the American demand
to shed the 'obsolete' gold reserves would have been less disingenuous if it
had been made before the the gold dollar was
dishonored in 1971. This tale, however, did not
have a happy ending. Switzerland
had to be humiliated for being so impertinent as to run a currency superior
to the dollar.
Mr. Lips has written a wonderful book for the discriminating reader,
who may want to understand better the challenge to God's authority involved in the construction of the Tower of Babel of irredeemable debt. (End of
Introduction to Gold Wars.)
The Fifth and Last Session of Gold Standard
University Live
It is scheduled to take place in Canberra,
Australia,
November 11-14, 2008. I invite readers of my column to come as this may be
the last opportunity that I can offer to run a seminar of this type. As you
may know, Mr. Eric Sprott of Sprott
Asset Management, Inc., has withdrawn his sponsorship of Gold Standard
University, saying that in his opinion the "results do not justify the
expenditure". Fortunately we had Australian sponsors to finance and
organize this last session.
Session Five will be a Primer on the Gold Basis, as the most important
trading tool ever. (Basis is the name for the difference between the nearby
futures price and the cash price of gold.) I have championed the case for the
gold and silver basis for many a year. I have also challenged investment
advisors to recognize it and include basis-trading in their repertory. They
have shied away, declining to take up my challenge. I can understand the
reasons for their hesitation. To put it charitably, they prefer the endless
regurgitation of COT reports and other tools of supply-demand analysis to
breaking new grounds, because of
their keen sense of lack of competence concerning the basis. Of course, I am
not saying that there are no competent people who trade the gold and silver
basis. To be sure, there are a few but, naturally,
they keep their cards close to their chest. They will never spill the beans.
Nothing is farther from them than the idea of sharing information. You will
never hear them discussing the basis in public.
The latest severe correction in the dollar price of gold and
devastation in the price of silver illustrates my point. The only rational
explanation for this extraordinary decline in the midst of an extraordinary
monetary crisis is the disconnect between
the price of paper gold and the price of real gold. Of course, we have
known all along that the government considers it as its sacred duty to
manipulate the gold price by hook or crook. The best way of going about it at
this juncture is to engineer a disconnect between paper gold and real gold in
the hope that the fall of paper gold will demoralize the market with the
result that real gold will be dislodged even from firm hands. The delivery
mechanism of gold futures contracts, and that of other forms of paper gold
such as ETF's, is made subject to manipulation on
purpose. However, they may manipulate the price of paper gold to their
heart's content; it is not and never will be in their power to manipulate the
gold basis. Properly interpreted, variation in the basis instantaneously
reveals the fact and extent of paper gold manipulation. I dedicate the last
Session of Gold Standard University Live to the task of showing how to arrive
at this proper interpretation of the basis, and how to turn manipulation to
your advantage by making the basis a trading tool.
You must understand that the gold market, as it is presently
constituted, is a gambling casino where the tail wags the dog. The casino
owner is a secret agent of the U.S. Treasury. Shills abound. Bluffing and
false-carding is rampant, and the bluff is hardly ever called. The reason for
this is the widespread assumption that the managers of the irredeemable
dollar have near supernatural power. They don't, of course, but they have
succeeded in eliminating the last vestiges of transparency on the gold holdings
of the US Treasury, and they obscure the purpose for which it is held. They
pretend that the purpose of Treasury gold is to keep
the demand for real gold in check; in reality, without gold in the Treasury
the U.S.
could not keep garrisons in every part of the world even against the wishes
of the local population, nor could it fight several wars at once in several
distant theaters. There would be no local suppliers
selling them ordnance.
Managers of the irredeemable dollar can double-count and triple-count
Treasury gold with impunity in order to fool outsiders, in order to keep the
demand for real gold in check and to shift all such demand to paper gold. In
the meantime, all we have is the telltale mark of the basis -- if you know
how to read it.
But the hour-glass for the endgame is filled with gold dust, not
with sand. When the last peck of gold is gone, prestidigitation is up.
That will be the most dramatic event in the entire history of money, an event
that I have, tongue in cheek, called "The Last Contango
in Washington".
The basis will give you an early warning signal. That is what Darryl Robert Schoon, who will also be lecturing and available for
questioning at Session Five, calls "the silver canary singing in the
gold mine". Come to Canberra
and hear Darryl as he explains the riddle.
Remember, basis is the specialty of Gold Standard University. No one
else is willing to go public with research results concerning the basis.
Prices, price ratios, volume and open interest statistics, COT reports can be,
and probably are, manipulated and falsified in order to mislead market
participants and scare them away from real gold. They can have paper gold as
much as they want, provided that they are willing to settle in cash. They are
offered a posh spot in fools' paradise. But no matter how all these signals
are manipulated or falsified, the basis is a pristine market signal that
never lies. It can be neither manipulated nor falsified because it shows the divergence between paper gold
and real gold. It is a seizmographic signal that
picks up rumblings in the bowels of the earth half way around the globe,
foretelling the coming of earthquake. The basis will tell you well in advance
when all the offers to sell real gold or silver are about to be withdrawn in
all the markets of the world. Once that happens, infinite demand will
confront zero supply. Don't say it can't happen here. It has happened locally
in France in 1796, in Germany in 1923, in China in
1947, to mention but three episodes. This time it will happen globally.
I shall tell you all about it in Canberra.
Just send us an e-mail indicating that you are interested in attending. We
shall answer you promptly telling you how to register. Attendance is limited;
first come, first served.
Don't let yourself be talked into mutilating yourself in order to save
the face of the government!
See you in Canberra!
Antal E. Fekete
Professor, Intermountain Institute of
Science and Applied Mathematics, Missoula,
MT 59806,
U.S.A.
Gold Standard
University
aefekete@hotmail.com
Professor Antal E. Fekete was born and educated in Hungary. He
immigrated to Canada
in 1956. In
addition to teaching in Canada,
he worked in the Washington
DC office of Congressman W. E. Dannemeyer for five years on monetary and fiscal reform
till 1990. He taught as visiting
professor of economics at the Francisco
Marroquin University in Guatemala
City in 1996. Since 2001 he has been consulting
professor at Sapientia
University, Cluj-Napoca, Romania.
In 1996 Professor Fekete won the first prize in the International Currency
Essay contest sponsored by Bank Lips Ltd. of Switzerland. He also runs the Gold Standard University.
DISCLAIMER AND CONFLICTS
DISCLAIMER
AND CONFLICTS
THE PUBLICATION OF THIS LETTER IS FOR YOUR INFORMATION AND AMUSEMENT ONLY.
THE AUTHOR IS NOT SOLICITING ANY ACTION BASED UPON IT, NOR IS HE SUGGESTING
THAT IT REPRESENTS, UNDER ANY CIRCUMSTANCES, A RECOMMENDATION TO BUY OR SELL
ANY SECURITY. THE CONTENT OF THIS LETTER IS DERIVED FROM INFORMATION AND
SOURCES BELIEVED TO BE RELIABLE, BUT THE AUTHOR MAKES NO REPRESENTATION THAT
IT IS COMPLETE OR ERROR-FREE, AND IT SHOULD NOT BE RELIED UPON AS SUCH. IT IS
TO BE TAKEN AS THE AUTHORS OPINION AS SHAPED BY HIS EXPERIENCE, RATHER THAN A
STATEMENT OF FACTS. THE AUTHOR MAY HAVE INVESTMENT POSITIONS, LONG OR SHORT,
IN ANY SECURITIES MENTIONED, WHICH MAY BE CHANGED AT ANY TIME FOR ANY REASON.
Information contained herein is obtained from
sources believed to be reliable, but its accuracy cannot be guaranteed. It is
not intended to constitute individual investment advice and is not designed
to meet your personal financial situation. The opinions expressed herein are
those of the author and are
subject to change without notice. The information herein may become outdated
and there is no obligation to update any such information. The author, 24hGold, entities in which they have an
interest, family and associates may from time to time have positions in the
securities or commodities discussed. No part of this publication can be
reproduced without the written consent of the author.
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