Here’s Jim Grant, who recently gave a talk to the Fed regarding his take on the harm the central bank is bestowing on the world economy.
April 4, 2012
There’s a popular theory among the world population that the U.S. launched wars in the middle east in order to control its oil reserves. On the surface, this seems entirely logical, but the truth of the matter may be much more sinister, and one should look a little deeper into the situation. It’s not the oil reserves the U.S. is after, although oil does play its part in this charade. The main concern of the U.S. in these wars is more likely the maintenance of its hegemony with U.S dollar as the world’s reserve currency.
The U.S. dollar became the de facto world reserve currency after World War II, when delegates from around the world met and together agreed to what became known as the Bretton Woods System. Under this system, the U.S. dollar would be linked to gold at $35/ounce. All other nations would tie their currencies not directly to gold, but indirectly through the U.S. dollar. This meant that those nations would hold dollars in their foreign reserves to support their local currencies. In order to obtain dollars, those countries had to either borrow them from the U.S. Federal Reserve or earn them with a trade surplus. The U.S. got a sweet deal here – perhaps justified due to the fact that after the war the U.S. was indeed the strongest, most productive nation on the planet, along with a huge stash of physical gold.
This system worked well for the world and especially for the U.S. during the prosperous years of the 1950’s and 60’s. But with the U.S. printing its own dollars to cover its increasing debts, including the vast expeditures on the Vietnam War, the world became concerned. Suspicious that the U.S. gold reserves would not cover the existing issue of paper dollars, countries began to trade in their reserve dollars for gold at the U.S. treasury using the pegged value of $35/ounce. The U.S. gold stash was steadily declining.
In order to prevent the total depletion of U.S. gold supplies, in 1971 the Nixon administration closed the gold window – nations were no longer allowed to exchange their reserve dollars for gold. It was the end of the Bretton Woods System, but not quite the end of the U.S. dollar hegemony in world reserve currency status.
One must then ask the obvious question: Why would a nation now hold a seemingly valueless paper dollar as a reserve currency, especially since its tie to gold has been cut?
The answer: The Petro Dollar.
After Nixon closed the gold exchange window, the dollar was a free floating fiat currency, competing with other currencies around the globe. Inflation started to escalate since there was no tie to gold anymore. In fact, in 1975 the average price of gold was $160 – more than 350% increase in just 4 years since abandoning the gold window. Additionally, OPEC nations had been using the dominant dollar as a preferred payment method for their oil exports, but now they were starting to lose money as the dollar lost its value. In 1973, OPEC launched an oil embargo, raised prices and started internal discussions on the logistics for trading oil for other currencies including gold. Steps had to be taken by the U.S. if it was to re-secure the dollar as the strong world reserve currency.
The first step was taken in 1974 when Secretary of State Henry Kissinger launched the U.S.-Saudi Arabian Joint Commission on Economic Cooperation. Kissinger used the term “petrodollar recycling” to refer to the overall plan, which was to allow Saudi Arabia to purchase U.S. assets and services with the dollars it was receiving for its oil sales. A beneficial result for the U.S. was that the Saudi Arabian central bank (SAMA) could now use its dollar proceeds to buy U.S. debt (Treasury bills, bonds, etc.).
But the most beneficial outcome for the U.S. was that Saudi Arabia, the most dominant member of OPEC, would agree to continue to accept only U.S. dollars in exchange for its oil sales and would convince the other members of the cartel to do the same. By 1975, all OPEC member nations restricted their oil trade to dollar transactions. To this day, as long as these key oil states play along, their leaders are showered in luxury and are quite secure in that they’re guaranteed the defense by the U.S. military and its industrial complex.
Meanwhile, countries around the globe must accumulate dollars in their own foreign reserves in order to import the most vital energy component – oil. Nations have to aquire those dollars the hard way – by borrowing from the U.S. Federal Reserve or earning them by trading resources, goods and services to other nations for dollars. But the U.S. enjoys the outrageous advantage of being able to print as much of the world’s reserve currency as it wants. Not only has it been able to use these dollars to purchase its own oil on the cheap, it has been able to continually out-do itself in annual deficit spending, now in the trillions of dollars, because it has had captive buyers for its debt.
One would think someone would cry “Foul!” Well, someone did. The first nation to step away from this rigged system was Iraq. In November of the year 2000, Saddam Hussein declared that Iraq would no longer accept the dollar for trade in the Oil for Food program. Instead, the oil would be priced in and exchanged for Euros. Many said this would be a bad investment for Iraq at the time, but the move was actually beneficial because the dollar declined 17% against the Euro until the U.S. attacked and accomplished its mission in May of 2003. Of course, now that the country was “stabilized” the Iraqi oil trade was repriced in the dollar market again and things went back to “normal” for a while.
The system would be challenged a second time, this time by Libya. In February of 2009, Muammar Gaddafi was elected the chairman of the African Union and would continue the effort to create the United States of Africa, which among other things, would include a unified currency, a dinar based on gold. Gaddafi went so far as to suggest that the African nations’ oil trade would be switched from the dollar to this new gold currency. Here’s a segment from Russia Today:
Furthermore, it’s quite interesting to note that prior to the Libyan Revolution in February of 2011, Libya didn’t have a central bank linked with its western counterparts. It’s strange that before the “rebels” even had concluded battle, before they had even established a new government, they created a central bank.
And now the petro dollar has a third challenger – Iran.
The western powers are terribly concerned with Iran’s pursuit of nuclear technology. Mahmoud Ahmadinejad has publicly stated his intent to “destroy Israel” and of course this is not something to be taken lightly. Additionally, one must wonder why Iran would even need nuclear power when they’re sitting on one of the world’s largest oil and natural gas deposits.
However, attention should be given to recent events. Early in 2008, Iran launched a new commodity exchange known as the Iranian Oil Bourse. The intent was to allow for Iranian oil to be priced and traded with multiple currencies. As the system was ramped up, initially the exchange limited its trade to secondary petroleum products, with crude oil to be added “when the system was ready.” Iran recently announced it would be ready on March 20, 2012. This was a declaration of war on the petro dollar!
The U.S. along with the EU then implemented a defense. Just prior to the expansion of the Iranian exchange, on March 17, the EU carried out orders to expand sanctions against Iran by removing Iranian banks from the international bank-wire transfer system known as SWIFT. Furthermore, any banks caught doing business with Iran would be sanctioned as well. It seems Iran’s entire international commerce engine has been halted and its oil industry crushed.
Japan, China, India and Turkey are among the countries who’ve been dependent on Iranian oil to some degree. Various discussions have been taking place between Iran and its trading partners on the possibility to enlist trade for other commodities such as gold or grain. Unless someone caves in here, another war – perhaps a big one – seems to be on the horizon.
This article was researched and published by JonK.
Update: September 15, 2012: Must see video from CrisisHQ.
“If you want to understand what’s happening in the Mideast, particularly in Libya, Syria and Iran, you must first understand the main driving force behind U.S. foreign policy. Contrary to mainstream media propaganda, it is not our desire to spread democracy or to prevent tyrannical despots from murdering their own citizens. The real agenda is to protect the Petrodollar system, because it is the only thing that is currently preventing the total collapse of our fiat currency.”
Here’s a video from Alt Investors with a discussion on the petro dollar:
Source material from books (available at Amazon) on the petro dollar:
A Century of War: Anglo-American Oil Politics and the New World Order – 2004, F. William Engdahl
The Hidden Hand of American Hegemony: Petrodollar Recycling & International Markets – 1999, David E. Spiro
- Confessions of an Economic Hit Man – 2004, John Perkins
Here are links to further reading on OPEC’s petro dollar recycling:
In the 1970’s, the Hunt brothers tried to ‘corner’ the market in silver. They realized that the market was extremely small and if they could start taking delivery of enough physical metal tied to futures contracts, it would cause a physical shortage and the price would shoot up. So, with the help of financial backing from Sheik Khalid bin Mahfouz of Saudi Arabia and his discrete offshore company in Bermuda, International Metals Investment Company, they embarked on a strategy to gain control of and profit from their silver scheme.
As they continued taking delivery of their futures contracts, their silver inventory increased and silver prices began surging. The managers of the COMEX were so concerned, they enlisted the help of regulators to stop the brothers’ attempt to control the silver market. The CME and CFTC ended up changing the rules to limit the number of contracts any one individual or institution could hold, thus having the immediate result of halting silver’s price surge. It’s interesting to note that today, regulators are not taking the same steps to halt the same kind of manipulation on the short side of the silver market.
In an effort to keep that false front of openness and transparency, someone at the Fed had the bright idea to align with technology and start a twitter account. But with all the tweets bashing the Fed and its policies, maybe it wasn’t such a good idea? Maybe it won’t be long before the Fed terminates this Twitter account. Here’s some streaming tweets:
Take an honest, introspective look at why you believe in recycling. Everyone, it seems, (including me) has always believed that recycling makes good common sense – both economically and environmentally. But Penn & Teller give a convincing argument here that maybe it’s all just over-blown hype.
At 10AM on Wednesday, February 29, 2012 gold and silver were hit with massive paper selling on the COMEX. Gold was hit for about $100 (5.5%) and silver was taken down $3.75 (10%). But the stock market was flat, untouched.
The sell-off in the precious metals was supposedly triggered by Chairman Ben Bernanke’s testimony before the congressional financial committee. Main-stream media reported that many precious metals investors had been buying the metal in expectation of more easy money coming from the Fed soon, but the chairman’s comments on the economy were not quite as dovish. While Bernanke’s remarks did not specifically mention any monetary easing coming any time soon, nothing was said about the $700+ billion of easy money the ECB was providing to European banks.
According to Jim Sinclair, this was a cover-up by the Fed chairman and the precious metals were manipulated to the downside on purpose. Because if the expectation of no more liquidity from the Fed was really the cause of the collapse of precious metal prices, then the stock market should have been hit just as hard, which it was not! Furthermore, this $700+ billion for European banks was QE! The ECB got those funds from two places: “It’s been coming in from the IMF and from swaps done by the US Federal Reserve.” Here’s Jim Sinclair’s audio interview at King World News.
Indeed, here are three articles making the case that the sell-off was initiated by a seller who wasn’t at all interested in profit, but was motivated by taking the market down:
- A Single Seller Drove Gold Down as Bernanke Testified
- Central Banks Smashed Gold
- Gold Fall Creates a Fantastic Opportunity for Potential Buyers
Ironically (or not), the precious metals were hit during this exchange between Ron Paul and Ben Bernanke, where Paul held up a silver ounce coin and asked the chairman why people aren’t given the option of using gold and silver as a “competing currency” with the US dollar.
James Koutoulas, a lawer representing clients of MF Global who lost an estimated $1.2 billion, reveals the ugly truth behind what caused MF Global to declare bankruptcy.
- MF Global moved investment funds to the United Kingdom, where there is no limit to the leverage that can be used in rehypothecating client assets.
- MF Global then invested those funds in European debt futures, leveraged perhaps 40-times, believing the troubled nations like Greece would eventually be bailed out. (Note that higher leverage means tighter margins.)
- Then, with the extreme volativity in the latter part of 2011 when there were weeks of rumors coming out of the media hinting of both defaults and bail-outs, the investment went sour as margin calls forced MF Global to pony up more cash. They had no other option but to go into their segregated client accounts and allegedly steal cash to cover the margin calls.
Three SWIFT transfers of $5 trillion each have supposedly been executed – initiated from the Federal Reserve Bank of New York, to JP Morgan Chase, to HSBC/London, and finally to the Royal Bank of Scotland. Executives at HSBC and RBS have verified the receipts of the transfers, but the money isn’t in any accounts and the purpose of the transfers is unclear.
According to Lord James of Blackheath, there are three possibilities:
- There may have been a massive piece of money-laundering committed by a major Government who should know better.
- A major American department has an agency which has gone rogue on and has created a structure out of which it is seeking to get at least €50 billion.
- This is an extraordinarily elaborate fraud, which has not been carried out, but
which has been prepared to provide a threat to one or more Governments if they do not make a pay-off.
Read the entire transcript here.
Fox has fired Judge Napolitano after this rant. His intimations were a little too close to the truth. No, the main-stream media, controlled by the established powers, cannot have a loose cannon like this, can they?
But in a beautifully articulated monologue in his final episode, Napolitano sums up America’s root problems and encourages the people to fight for their freedoms against the tyranny of government!
That’s what the ‘powers that be’ are saying as increasing numbers of people are seeing the truth behind the wickedness of our central banking system!
“It is well that the people of the nation do not understand our banking and monetary system. For if they did, I believe there would be a revolution before tomorrow morning.”
– Henry Ford
Are you an American investor? Do you actually own the shares of stock in your portfolio? Maybe it would be a good idea to go check those stock certificates stowed away in your safe. What’s that? You don’t have any of your stock certificates? Oh that’s right… your stock broker handles those for you. Ok, ask your broker to tell you the designated owner’s name that appears on those stock certificates. As Jack told his wife in The Shining, “You’ve got a big surprise coming to you! … Go check it out!”
Unfortunately, due to modernization and ‘efficiency’ measures, stock certificates have become obsolete – they no longer exist in physical form. They’re electronic nowadays. Still, you’ll find that neither you nor your broker has been designated as the stock owner on those electronic share entries. It’s likely that the actual owner is a member firm of the Federal Reserve System – Cede & Company. Only in America… right?
This ‘technical’ evolution of stock share management has definitely made trading stocks more convenient as investors can easily trade in and out of their positions in mere seconds. However, what has been unnoticed by the majority is that having these shares centrally owned and managed makes it easier for market manipulators to gain enough shorts to control market movements. The way a short position is supposed to work is that a prospective investor wanting to short-sell a stock must first find someone who currently owns that stock and is willing to lend them his/her shares. With the centralized ownership/management system, that is easily accommodated.
And as if that wasn’t enough to worry about, investors are increasingly becoming concerned about the integrity and honesty of western banking and investment houses. MF Global, for example, has recently cost its clients an estimated $1.5 billion, which they’ve brazenly exclaimed has simply “vanished.” MF Global was caught red-handed – they dipped into their customer base’s funds to cover losses they made in their own proprietary trading activities. Imagine waking up one morning and logging into your investment account only to find that your trading positions and cash holdings had all but disappeared!
But there’s a way investors can protect themselves against such fraudulent activity and also ensure true ownership of the shares in their stock portfolio. In the first edition of our Protect Your Assets series we offer a step by step guide for doing exactly that.
That’s not all, though. There’s another way investors can protect themselves and diversify their stock portfolios at the same time. Perhaps it’s time to look into opening up a foreign brokerage account. In fact, major advantages come to those having an international investment account, such as:
- Access to investment vehicles not available within American borders.
- Cash diversification among several currencies within the same account.
- Ability to trade directly in other global markets
- Cash is generally safer when stored in strict investment brokerages rather than banks, such as Bank of America, which have expanded their services into the investment arena.
But exactly what should an investor look for when researching potential oversees investment firms? In this Protect Your Assets edition, we also cover that, as well as chart a pre-screened list of some of the better foreign brokers, comparing various fees and services.
It’s all in our Protect Your Assets – Stocks edition, where we focus on what an investor can do to protect his/her stock portfolio from being stolen by corrupt financial institutions engaging in fraudulent activity, confiscated by over-zealous government legislation, or gradual erosion by ever increasing localized taxes.
The first part of the report gives step by step instructions on how to ensure stock shares are registered in the name of the investor and how to make the necessary changes if that is not the case. The second part outlines the importance and advantages of having an overseas brokerage account, what to look for in a prospective broker and a pre-screened comparison of several international investment firms worthy of any serious investor’s attention.
Protect Your Assets – Stocks ……………………..
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