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Further to my post of 6 May on the book Sutton, A.C., The war on gold,
1977, '76 Press, California, USA, below are some extracts from
the book I've made for my personal reference:
Page 59: It is this disciplinary function of gold that is irksome to
politicians and managed-economy bureaucrats and academicians. Politicians are
always eager to buy votes with promises of perpetual prosperity, and
bureaucrats are happy to go along to expand their own empire building.
Page 60: Of course, a market clearing price for gold (assuming a 100 percent
cover for all present paper debts), might suggest a price of $800 to $1,000
an ounce. This would be a pleasant windfall for those with the foresight to
own gold, but it would mean psychological devastation for those who have
built their careers on the philosophy of helping everyone to live at the
expense of everyone else. The latter need to conduct and anti-gold crusade
for their own self-preservation.
Page 111: Defeat turned to disaster between November 1967 and March 1968, as
the U.S.
lost a staggering $3.2 billion from its gold stocks. By this time other
European central banks followed the French example and told the United States
that further defense of the dollar would require
U.S. gold; none of theirs would be available. The end came on March 14, 1968,
the day the Gold Pool lost 400 tons of gold to private buyers. The loss of 20
percent of the U.S.
gold stocks within five months finally galvanized the Treasury into action.
At the request of the Federal Reserve Bank and the U.S. Treasury, President
Lyndon Johnson asked the Bank of England to close the Gold Pool operation.
Page 122: Certainly, a paper system will not last in open competition with
gold and silver coins. It is recognition of Gresham's Law that forces the U.S. Treasury
to be vehemently against the issue of any gold coins, even and innocuous gold
bicentennial memorial coin. While at the same time the Treasury must keep a
damper on the price of gold in the market place.
Page 143: The remaining question is not whether the debt structure will
collapse, but when. What do we mean by “collapse”? H.A. Merklein defines collapse as a “combination of
unemployment and inflation so rampant that the market ceases to function
effectively.” (“Can the U.S. economy collapse?”
World Oil, December 1975.) Merklein suggests that,
given a 50-percent inflation rate, “public confidence in government
issued fiat money tends to break down ... and barter begins to replace the
money economy.” According to Merklein's
calculations, with a ten-percent unemployment rate, collapse could begin at
30-percent inflation - a figure exceeded by the United
Kingdom, Argentina,
and Italy
in 1975. Even granted the existence of many unknowns, Merklein's
evidence does suggest the early 1980s as Doomsday for the United States.
Page 151: It was, in effect, a declaration of bankruptcy. When President
Nixon closed the gold window he did not, as he said, demonetize gold. On the
contrary, he demonetized the dollar! Regardless of his words, his actions
emphasized the premium value of gold over fiat dollars. The propaganda war on
gold by the U.S.
since 1971 has been designed to prevent this single fact from penetrating the
consciousness of the American public. When the real significance of the
demonetization of the dollar is fully grasped by Americans, the result will
be monetary panic, probably followed by the collapse of the debt pyramid.
Page 153: Then, on December 31, 1974, the United
States removed the official ban on gold ownership by U.S.
citizens. At the same time it began a massive internal propaganda campaign,
with the help of an unquestioning media, against gold holding.
Page 157: The current battle – one the U.S. Treasury must win or go
down in disgrace – is to prevent significant numbers of American
investors from acting on the paper-gold equation. At all costs the American
citizen has to be persuaded that paper dollars are at least equal to, if not
better than, gold.
Page 159: The Treasury, the Federal Reserve System, and the Congress are
under the illusion that they can decree what is money. They cannot. They can
legislate legal tender, but that is not necessarily the same thing. Money is
what people and countries will accept in exchange for goods and services.
This may, or may not, be paper dollars. Historically, as we have seen, money
has been gold, silver, copper, and even iron. These currencies have led to
stable monetary systems. Money has also been leather, mulberry leaves, and
rice paper; today it is wood pulp and ink and the present debt system.
Historically, the latter have been the unstable systems. Why? Because at some
point holders of these latter moneys look for something of intrinsic value as
a store of wealth, and the find none.
Page 172: In early 1975 only about ten percent of South Africa's gold output was
used to mint the Krugerrand, the one-ounce coin
that is held mostly by individuals, not central banks, as a hedge against
inflation. By the end of 1975, 25 percent of the South African gold
production entered the Krugerrand presses. As a
result, significantly less gold reached the world bullion market. Test
marketing promotion of the Krugerrand in Philadelphia, Houston,
and Los Angeles
had “staggering” and “incredible” results, according
to coin dealers. A major New York
advertising agency, Doyle, Dane, and Bernback, was
hired by the Krugerrand distributor, Intergold, to promote gold coins directly to the America
public, which previously had been exposed soley to
the bear-market tactics of the U.S. Government. The response was truly
“staggering.” By the end of 1975, Krugerrand
sales were running at the rate of 5,000,000 coins annually – an amount
equal almost exactly to the total proposed IMG annual sale for 1976.
Page 180: The Treasury plan obviously is to maximize uncertainty in the
market to depress price, and it cannot maximize uncertainty by regular sales.
It can do so only by random sporadic actions at critical market turns, for
example in deflationary periods accompanied by maximum propaganda.
Page 200: The legalization of gold in the United States in 1975 was
probably not a withdrawal from coercion but an interim effort to make the
propaganda war on gold more credible. History suggests that gold will once
again be made illegal in the United
States and subject to arbitrary seizure by
a police-state apparatus. Looking back over monetary history, we see that
gold has always been prominent as a protector of individual sovereignty.
Private gold ownership is inconsistent with the aims of dictatorship; a war
on gold is a necessary concomitant to centralized political power. Wars and
fiat currencies have always gone hand in hand.
Page 203: As we look into the future (in competition with the professional
prognosticators), the domestic war on gold looks like this: there will be an
increasing realization by the public that the ratio between paper-debt and
gold in inexorably shifting in favor of gold. That
public confidence is the all-important requirement to keep a paper-debt money
system afloat . . . and this confidence is eroding. Surges in
confidence-erosion will account for short-run increases in the price of gold,
while for intermittent periods the government will regain some public
confidence; when this occurs, gold will settle back to its approximate
long-run ratio to paper-debt units. At some point, however, there is a
distinct probability of panic – if debt holders see the debt pyramid
collapsing or even anticipate its collapse. Particularly this will be true if
there is general realization that paper assets are actually someone else's
debt and are inherently worthless. However, it is important to note a
distinction between “realization” and “action.”
Investors may “know” the pyramid is illiquid and in danger of
collapse; they may not “act” on this knowledge. The herd instinct
suggests that only a few will bale out in time; the majority will act in
panic, too late.
Bron Suchecki
Goldchat.blogspot.com
Bron Suchecki has worked in the precious metals
markets since 1994, when he joined the Perth
Mint as an Administration Officer in their Sydney retail outlet. In 1998 he moved to Perth to work in the
then fledgling Depository division. He has held a number of roles since then
in the treasury, risk and governance areas of the Mint.
All posts are Bron's personal opinion and not
endorsed by the Perth
Mint in any way.
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