Gold A Threat?

Is gold a threat? You bet, but not to you or I. Gold is a dire threat to the 'establishment' of any nation on earth, because every one of them is printing their 'monies' as fast as their presses can run, and this does include the euro, although their presses aren't on full speed as of yet. Gold has been true money for over two thousand years in all nations which have ever existed. Silver has the same properties too, and as a matter of fact, the first coins were made of silver, not gold. Gold is the scarcer though, except some say that currently there is more gold around than silver. I don't know, but it doesn't matter.

Since gold and silver are true money everywhere, and have always been considered so, it is logical that all nations on earth which have ever existed, eventually found gold and silver to be a threat to their very existence. Why? Because throughout history, all governments have proliferated, spent more than they took in, and eventually collapsed from fiscal irresponsibility. Before the collapse…they printed. They all thought they could create wealth by printing it. Silly? Of course, but politicians throughout history have been pretty stupid now, haven't they? Has there been a better way to maintain one's position as a Senator or Congressman than to bring home the bacon and pretend that one's constituents were all important? In reality, the main concern of a politician, is staying in office, regardless of level. This is why there are term limits in some places. To stop this nonsense.

Gold is also the enemy not only of governments but central banks as well, which can and do create 'money' out of thin air, which they then loan to customers (government) and collect interest. Neat trick, huh? Create something out of thin air, and then make a continuous profit from loaning it? That gold is an enemy of the "establishment" might be a better, more inclusive term. Most of us hate the "establishment," as it reeks of corruption, free lunches, bribes, and SFN. which means to me, "Something for nothing." "We've got to keep that damned gold price down, as it makes us look silly, and demeans our dollars," might be a quote from a central banker or politician. Understandably, because they are really threatened by gold's going up in their funny money. It is to the "establishment's" benefit to keep gold and silver's price as low as possible through any devious means at their disposal.

Governments used to own gold, and some still do, but it is doubtful that the U.S. government does any longer. Supposedly the Federal Reserve has gold, but I also think that is doubtful. Does the World Bank or some other nefarious outfit own any gold? The IMF? I don't know. They say they do.

Let's take the U.S. government, Treasury and Federal Reserve for examples of what's going on around the world. Obviously, the buck is going down far too fast for the comfort of everyone involved. Let us look at the insurance industry as well, because when those salesmen knock on your door and talk about "whole life" or "annuity" policies, surely at least the more sensible potential customers will realize that set incomes and savings plans in dollars are futile. At least we can hope a few of them will realize that, and say NO to a sales pitch. It is therefore in the insurance industry's interest to keep the dollar high and gold low. How can the dollar be propped up and gold kept down? There are several ways.

First, governments can sell their gold, flood the markets with it, or as they put it, "lease it," even though they might as well say "sell," because they will never see it again. That worked for a little while, and indeed did keep the price of gold below $300 per ounce, and silver which follows it at times, under $5 or $6. It placed millions of ounces of gold in private hands and out of government vaults. When prices began to rise, they'd just sell off some of their supply and drive it down again. When that ceased to work, and gold went over $300, the cries of anguish were heard all over the world. They were selling the one thing they had of value, and just to keep their funny money alive, they were selling the one thing they had which was tangible and of historic worth. Not a good idea Senator. So that generally stopped. In other words, after the horse had departed, the wise sages decided to shut the barn door. Ah! The intelligencia at work.

Then there are the futures traders, which still operate full blast. When one bets that the price of gold will be "X" dollars in December, they will buy a 'dec' contract and hope it will rise to that level. Or they may bet that it will go the other way. The spot price of gold is based on the futures contracts nearest the current date, less so much per day, etc. My supplier's web site (amark.com) is the best way to access the true spot price. If a whole bunch of futures traders bet the wrong way, and gold starts shooting up when they had bet that it would go down (shorted the market), they stand to lose their shirts. What to do? They get together and sell huge numbers of contracts, which floods the market with gold contracts and the prices go down, thereby covering their shorts. Simple? Sure. Is it legal? Doubtful. Will the exchanges stop that practice? Doubtful. The rules say that there must be sufficient gold and silver as well as other commodities before a futures contract can be let. Is there enough silver to cover the futures contracts at the COMEX, as an example? Hell no! Barely a third of the required amount, it appears. This does not thwart the traders however, so they go merely on their way.

Does this affect the prices of gold and silver when the traders bet the wrong way and cover their shorts? Yes. And now look at the poor government who watches its dollar wither like a flower in July with no water. Everyone knows there is a division of the government which props up the stock market when it should fall, and that is commonly called the 'plunge prevention team,' which uses dollars created out of nothing to buy stocks and keep prices up. They also do the same with dollars and gold, to keep one as high as possible and the other as low as possible. Does it work? To a degree, yes. Gold went from $718-$730, down as low as $560 I believe, and maybe lower for a brief stint. Silver from $14.80 to $9.70, and possibly even below that briefly. Both are on their way back up now, and the stock market sits at exactly the same place it was six years ago, and the DOW should be perhaps 3000. Gold and silver are no where near where they were six years ago. Try more than double.

Fixing markets and influencing them is one of the oldest tricks in the books. It is called "inside trading" in the stock market, and stopping that is like trying to keep the sun from rising. Anyone who has information not readily available to the public…say corporate employees by the thousands…can take advantage of this information and reap the rewards. Just don't do it too brazenly, or the SEC might slap your wrists, or make an example of you like they did to poor Martha. The question then is, can the price of gold and silver be kept under control forever? Can those who are harmed by gold and silver's rising prices in funny money, stop their rise…in funny money? The answer just has to be a sound, firm, resoundingly shouted, NO. Can they keep the prices of anything from going up in their funny money? Of course not, because as Stott's Law states, "The more of anything there is, the less they will be worth," and this includes dollars. The dollar flood continues and has to do so, because they have no other alternative.

They have to increase the supply of dollars, because they have no choice. They foolishly do the "earmarks," perpetual handouts, and never give a second thought to how much is collected in taxes. The debt of the U.S. government in unfunded promises and actual debts is over $40 TRILLION paper dollar funny money. Less that a twentieth of that comes in per year in income taxes, and 100% of that is used to merely pay part of the interest. (When "From Freedom to Fascism" is released July 28th in theatres, I have no idea what the public's reaction will be. Will people continue paying taxes? Go to the web site - freedomtofascism.com - for dates etc.) Do they have a choice? No, so the prices of EVERYTHING will continue to rise in funny money, and this includes gold and silver. There is no possible way to stop this eventual process, which will bring America to its knees, surrounded by trillions of worthless paper dollars.

CLOSED JULY 3-5. Have a grand Independence Day, and try to remember how great this nation was and still could be…without the D.C. Gang. Protect yourself.

June 29, 2006

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com