The Econo-Matrix

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Published : April 25th, 2005
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Category : Editorials

In the financial world we live in, nothing is as it seems anymore - except for one thing:

We are all operating under the same illusion.

Well, most of us, anyway. Let me explain what I mean.

One of the cornerstones of what we call "reality" is that it is, by and large, the same for everyone. While we all have different mental perceptions and interpretations of the things we see, hear, feel, taste, and touch around us, on a strictly sensory level the vast majority of us agree on what kind of world we live in.

The same thing should be true of what we will call "economic reality." In a sane world, we all should be operating on the same economic and financial signals as everyone else.

The trouble is that we don't.

The ultimate kind of signal in any economy, whether it's local regional, national, or global, is price. The price of whatever it is we want to either buy, rent, or sell.

I am not arguing that all prices should be the same. That would be idiotic, of course. What I am saying is that the way in which we as humans determine the price of anything should be reliable. It should be determined based on a rock-solid, commonly shared, universally acceptable, and unalterable unit of account.

And that unit of account should be physically and conceptually inseparable from the very thing we use as payment for whatever it is we buy or sell.

Without that absolute unity, even identity, between the three aspects of money (medium of exchange, unit of account, and store of value) in every respect in the very thing we use as money there can be no reliable price-discovery mechanism.

"The market" is absolutely helpless when it comes to discovering the price of anything if there is no mechanism that makes the hidden costs of manipulation immediately (or at least mediately) noticeable.

When you give the power of determining the value of what we regard as money to mortal humans, mere individuals whose judgment will invariably be clouded by their own agenda, their own desires, their own ideas of what is right and wrong, correct and incorrect, then you create a financial world that resembles far more one of those computerized "programs" humans were fed in the movie called "The Matrix" than actual market reality.

When mere humans have the power to:

- determine the amount of currency-creation and of the cost of borrowing that currency at will;

- decree that certain institutions (banks) are allowed to literally loan currency into existence while being able to demand actual, tangible collateral from their borrowers as security;

- when the right to operate the "ultimate lender" - the "creator" of currency is farmed out to a private corporation with private shareholders;

- when these private shareholders of such corporation(s) are then recruited to perform the jobs of the elected officials who are supposed to oversee the actions of their own kind,

the you have created a financial "matrix" of such epic, such diabolical proportions that no normal human being - or even group, organization, or nation of human beings, can be expected to figure out what the real price of anything actually is.

It's like living in another movie called "Dark City" where a group of "administrators" nightly changes every individual's and family's apartment, address, furnishings, associations, etc. while people sleep. When they wake up, they live in new surroundings, with new people, having new jobs working for mew businesses, which keeps them so on edge and so confused and disoriented that they can never quite figure out what's wrong with their world.

That is what is happening to us, to real human beings, when we participate in what we are taught to regard as the "free market."

As long as central planners determine the nature, the amount, the value, and the design of the currency we all are required to earn, spend, and save, we do not live in economic reality. We are like little kids living in "Neverland" - and you know what happens to little kids over there.

They quite literally get shafted.

There is an easy, very visual way to get an idea how out of whack the world is that these central planners have created for us (or the world that we have allowed them to create for us), and that is to look at a chart of just about any economic parameter showing how it behaved before and after the world's reserve currency was decoupled from real money - gold.

Look at the difference in the several charts between the periods before 1971 and after 1971:

To create this chart I simply picked randomly from about twenty different time series stored in my "workspace" on "". I'll bet you get a very similar result if you pick other series.

If the various lines are seen as symbolizing the heartbeat of the US (and therefore the world) economy, you can see that this "patient" is suffering a heart attack. (Better get out of that hospital, quick!)

What you are looking at is a picture-book example of unmanageable, formerly un-imaginable imbalances being created - imbalances which will soon kill this patient dead.

What our leaders did to the world economy by taking all currencies off gold is akin to taking a passenger jetliner off the "autopilot" (i.e., a gold-referenced currency system) and letting a twelve-year old, adrenaline-crazed video game junkie take control of the cockpit!

How anyone with half a brain wave, looking at this chart, can still believe that our money-masters have "everything under control" and will surely prevent a "hard landing" if only we let them do their jobs in peace, is utterly beyond me.

But yet, such people exist. Not only that, they are in the majority.

They are mainstream investors clutching their 401Ks.

They are the baby-boomers who are patiently hoping that this half-crazed twelve-year old in the cockpit will "fix social security" in time for their retirement.

They are the currency and stock day-traders who are convinced that riding these insane market-waves up and down will bring them lasting peace, prosperity and security.

They are the school teachers and college professors who educate our young.

They are the politicians we elect into public office - and the ones who elect them.

They are your banker, your cab driver, your boss, and your coworkers and friends.

They consider the "hoarding" of gold to be a mild form of insanity.

They will even consider having an RFID chip implanted under their skin for future payment and identification purposes. After all, it's so that "terrorists" can no longer fly big machines into buildings, unannounced, right?

Yet, while "they" believe that "all will be fine" and that paper-money is the way to go (after all, they can buy what they need, right?), a powerful, up-and-coming, global economic force with over one billion inhabitants, with a communist government and a freer market than ours, with a two-thousand year history of imperial atrocities that gave birth of the likes of Mao Tze-Dong, i sdoing its won thing.

This blooming power is telling its own citizens to "hoard gold!"

This power has been methodically liberating its formerly repressed gold market.

This power has had its unofficial agents buy up gold wherever it could be found during the "terrible nineties."

This power is most likely who's buying the gold being divested by European central banks in their attempt to ensure a smooth transition away from the dollar-reserve system.

This power is now creating the newly licensed profession of "gold analyst."

This power is putting out trial balloons launched by non-officials, who talk about pegging its currency to gold instead of the dollar (just "temporarily" of course).

Maybe, just maybe, "they" - whoever they are - should "take the red pill" and take a good, hard, painful but healing look at reality? Maybe they should think again, when it comes to gold?

Get gold!

By : Alex Wallenwein

The Euro vs Dollar Monitor

Alex Wallenwein is the editor and publisher of the financial newsletter, The Euro vs. Dollar Currency War Monitor.


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