John Lyke, publisher of The Lyke Report, a personal and financial privacy newsletter, recently quoted Lawrence Patterson's Criminal Politics newsletter. Here Patterson comments on gold prices and our bankrupt country.
The Bankruptcy Court for nations is held by the Central Banks of the major nations (its always been that way). The U.S. ran out of credit last fall, and bankruptcy negotiations began immediately.
If the bankruptcy court is underway to settle the debts of the United States, it should be no surprise that conditions must be conductive for an agreement on terms of continuing business as usual!
To obtain a final agreement for the reorganization of the debtors affairs - (1) a currency crisis would logically be avoided at all costs. And (2) a run-away gold price would have to be avoided as well at all costs. When you think about it, this is just common sense. To arrange for these conditions, the dumping of the dollar had to be suspended by our major creditors, and the purchase of gold by the general public would have to be avoided at all costs, because the dollar's value would fall faster with gold rising.
Since Senator Jesse Helms (bless his memory) successfully lobbied for the legalization of gold ownerships for American citizens, there is a substantial risk of a run-away gold price in the U.S. Therefore, the Central Banks had to agree on a method of solidly capping the gold price to avoid a serious deterioration in the value of their paper $ reserves.
In expectation of these problems, there was a gold capping agreement set in 1999 for five years. While the above facts may have been kept absolutely secret, the gold capping agreement was released to the public in this magazine and in the London Financial Times and other European papers in 1999. The agreement to cap the gold price was dated September 30, 1999, and expired in September of 2004.
Negotiations for another five-year agreement began in January of '04 and the 15 Central Banks participating, including Germany, France, Italy, the UK, the Austrian and other banks, settled on the next five-year agreement to allow only 450 tons for each country per year to be sold. Keep in mind that the price has risen from $252 an ounce to over $400 an ounce since mid-1999 through December of '03 and that's not too bad! In January, '04, the German Central Bank changed its limits requesting to sell 600 tons of gold each year for the next five years. The purpose was to help stimulate the weak German economy with the proceeds.
In view of the rising gold price since 2001 and the bankruptcy of the United States, it became imperative to increase the amount of selling during the next five-year agreement.
Since no formal announcements have been made in the Euro press since January '04, no one can be sure what the final five-year agreement has been. However, the judgment is that a substantial additional sales volume has been agreed upon to prevent the price from running away on the upside.
Nervousness of American investors over the weakness in the dollar and the exploding trade debts and current account deficits and related commentary thereto, have forced the Central Banks I am convinced to set a much higher figure of sales. Probably a thousand tons a year over the five-year contract for each member country signing the pact.
Unfortunately, there is no way of knowing how many countries have been willing to sign up. However, the Wall Street Journal has taken a stand on this as of 8-17-05.
According to the WSJ, during the first year of the second Gold Sales Agreement, a total of 494 metric tons per country has been sold by the middle of August, for the year ending September 30. They point out that since only 494 metric tons have been sold, that leaves only six more tons to sell, per country, over the six weeks between mid August and October 1, which would lead they claim to higher gold prices.
Whether the WSJ article is correct or not is simply unknown, but the bankruptcy proceeding would take precedence over any other factors including accuracy or truthfulness of reporting.
At some point in time, the Central Banks will realize that it is fruitless to dump any additional gold at all into the market, and whatever the allotments are a thousand tons per country or 500 tons per country they will stop selling any gold! This decision to stop selling will be reached because they will realize that they are unable to control the upward march of the gold price, and that they are losing asset value by dumping the gold (nothing could be more simple).
All of this, of course, cannot be admitted in any news release and cannot be found in any official publication as a confirmation. However, the fact remains that this same situation has been met by the Central Banks in the 1970s, when it was realized that legalizing the ownership of gold for American citizens was the final death knell to their trying to depress the gold price.
They gave up any dumping of gold shortly after January of 1975, allowing the price to move swiftly upward and then increasing in speed until the peak of about $850 was reached in early January, 1980.
Considering the price run-up between 2000 and early 2004, one should be patient enough to wait out 2005 or longer for the next move up through $500 and $600 an ounce and onward from there to unknown heights.
The only "lever" left that the Central Banks have in their bankruptcy negotiations, is to demand that the U.S. government past rules and regulations and declare gold bullion illegal. Just when they will throw in the towel, and demand this of the United States is unknown, but the day will come, just as it did in 1933 and in 1975.
I know this from my years of working with Dr. Franz Pick and his many seminars and seminar tapes that I still possess and occasionally listen to for a reconfirming advice as well as the writings of Col. E.C. Harwood, whose newsletters I still possess from the 60s and 70s.
The magnificent tide of paper money created since the death of both of these leaders in the mid-1980s could only be called a paper tsunami." It would be amounting to a "tsunami" from the United States alone every 12 months. Our debts are so gargantuan that they can hardly be imagined. Currently at the rate of $9 trillion by the end of this year. (Each trillion is a thousand billion) These debts are now held by the Central Banks and do not include any non-Central Bank debt (debt of the United States Treasury held by private owners).
Therefore, those who are so impatient that they cannot wait a few more months are foolish indeed, and can go ahead and trust the paper assets that they own, and will be grievously sorry in due course.
I sternly warn my clients and subscribers to get their affairs in order! No one knows when the bell will toll and the bankruptcy negotiations will come to the conclusion: that U.S. privately held gold must be confiscated and delivered to the Central Banks, repeating the actions of FDR in 1933. Acquire legally-protected gold in the form of antique collectibles that are, of course, gold bullion in the form of antique coins with a value far in excess of the bullion.
The premium will survive the call-in, and be added to the new revalued price. Thinking otherwise is complete stupidity. There is no reason why these mementoes of American history would not maintain their rarity, and their premium just because the official price of gold was raised. To believe otherwise violates common sense.
In addition, you should have some bartering ability, and I suggest only silver dollars for this purpose. The price of silver can be manipulated far easier than gold, (witness the bankruptcy of the Hunt brothers). But you should have silver dollars to allow you to purchase a years groceries, for example, in the event of a worst case scenario if complete chaos should reign.
Remember that you have dollar-denominated insurance policies, annuities, Social Security checks, arriving in U.S. dollars (unadjusted for inflation) as well as dollar-denominated real estate.
Those who hold U.S. Treasury Bonds will end up in worse shape than anyone else, in the long run, due to inflationary losses, plus the losses in the value of the currency the Bonds are denominated in (double loss).
If you wish to risk storing gold in Switzerland, you go right ahead, but you will face a nasty surprise when the Swiss Central Bank betrays you identity under an agreement with the Treasury Department (this is known as Force Majeure).
Editor's Note: The Lyke Report, P.O. Box 290, Glenview, IL 60025, 1 year, 12 issues, $89, is a digest of financial news reports and privacy updates. Visit the web site at www.lykepublications.com for a Special Subscription Offer and sample issue.. Lawrence Patterson is publisher of Criminal Politics, P.O. Box 37812, Cincinnati, OH 45222.
