If you wait by the river long enough, the bodies of your enemies will float by
Sun Tzu, The Art of War, Fifth century BC
Only fools and the ideologically impaired believe that today’s capital markets are free. In free markets, prices are determined by supply and demand. In capital markets, supply and demand considerations are subordinated to capitalism’s increasingly dysfunctional monetary menses, i.e. credit flows, emanating from central banks. Of all markets, today’s gold markets are the least free.
For almost three centuries, gold played a critical role in the bankers’ extraordinarily successful scheme to defraud society by substituting debt-based money in place of savings-based money, silver and gold, by introducing otherwise suspect paper money into circulation via the ubiquitous mechanism of credit so as to profitably skim societal productivity, entrepreneurial ingenuity and constantly increasing government expenditures via constantly compounding interest.
In the early 20th century, a negative trade balance beginning in the 1870s exacerbated by the overhead of an aging empire beset by nationalist insurgencies and the military costs of preparing for WWI, forced England to share the care and feeding of its golden goose, capitalism, with its former colony, the United States of America.
This was done in 1913 by the creation of a carbon copy of its central bank, the Bank of England, in the US with the enactment of the Federal Reserve Act. The reason given was that the establishment of a central bank in the US would prevent financial crises from occurring in the future as they had in the past.
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907.
Only two decades later, the Fed’s loose credit policies resulted in the speculative excesses of the 1920s, i.e. the ‘roaring twenties’, and the subsequent 1929 collapse of the New York Stock Exchange which plunged the US into the Great Depression of the 1930s – a crisis which made the financial panic of 1907 look like a mild case of neurasthenia.
This post was published at GoldSeek on 9 September 2014.