Royal Scot

Gold Pressure Is Near a Breaking Point

Brilliant. These are prophetic words.


On Nov 23 10:13 PM closed wrote:

> Most people sense that the financial crisis that has now been escalating
> for 15 months, and the "sudden'' collapse of the real economy, are
> only the beginning. These were just the first waves of the storm,
> but the really powerful tsunami wave is coming toward us. The catastrophe
> could still be avoided, but that would require responsible figures
> in governments and financial institutions to admit their mistakes
> and accept competent help.
>
> But here we have a problem: Those who now should be taking decisive
> measures to defend the common good are still not ready to face up
> to the origins of the crisis. The communiqué of the G-20 summit in
> Washington on Nov. 15 admitted that "risks in the financial markets
> were underestimated.'' The latest annual advisory of Germany's Council
> of Economic Advisors, the so-called Five Wise Men, speaks in nebulous
> terms of "a darkening of the entire economy'' as the main reason
> for the crisis. "The chain of failure includes many,'' declared German
> President Horst Köhler at a conference of top bankers in Frankfurt--and
> one can only agree with him.
>
> But Köhler's perhaps well-intentioned, but completely ineffective,
> appeal to the bankers who made ``a lot of money'' in recent years,
> to set up a ``Hardship Fund,'' is hardly a strategy to overcome the
> crisis, and the answer from those so addressed was just a tired smile.
> It is clear from all these statements, that the government, as well
> as the so-called experts, are still not willing or able to take the
> necessary steps to reorganize the financial system.
>
> - Derivatives: The Main Problem -
>
> In Europe, it is Italian Economy Minister Giulio Tremonti who, as
> a government representative, has had the courage to call a spade
> a spade, when he compared the financial crisis to a video game, in
> which every time you kill one monster, another pops up. And when
> you kill all of them, along comes the super-monster, which is derivatives
> outstanding.
>
> This is exactly where the body is buried! Now panic is setting in,
> as investors in November have been massively withdrawing their deposits
> from hedge funds and financial institutions, in turn, forcing these
> to sell whatever assets they can. This generates a double feedback-loop:
> Since the depression is coming to a head, asset prices are falling--most
> of them having been bought on credit in the first place--which further
> stresses the balance sheets of banks and hedge funds, which therefore
> curtail their lending even further. These various intensifying phases
> of "deleveraging'' of so-called structured paper are the main problem.
>
>
> The volume of derivative contracts outstanding was said to be, according
> to the Bank for International Settlements, $675 trillion at the end
> of 2007; the French magazine Marianne recently gave the figure as
> $1.4 quadrillion, but it could be much more. If an attempt is now
> made to honor what these bankers themselves call "toxic waste,''
> then, on the one hand, this leads to hyperinflation, since more and
> more liquidity is pumped in to try to back up the virtual values;
> but at the same time, it brings on deflation, since the collapse
> of the real economy leads to falling prices.
>
> This is the reason for the breathtaking speed of collapse of the
> real economy worldwide--the auto sector, the steel industry, petrochemicals,
> construction, shipping, etc., etc. And it is a global phenomenon:
> The U.S.A. is plunging into depression; China's American export market
> is collapsing; the Chinese economy is falling apart; China is no
> longer buying textile machinery in Germany; shipping is collapsing,
> since in the four or five weeks that it takes a ship to go from Europe
> to Asia, conditions have dramatically changed, so that the letters
> of credit are no longer accepted, etc., etc.: a downward spiral to...!
> Until an orderly bankruptcy reorganization is carried out.
>
> - The Roosevelt Solution -
>
> Fortunately, there is an historical precedent for how the problem
> can be solved: We need a new financial architecture, in the tradition
> of Franklin D. Roosevelt's Bretton Woods System: a New Bretton Woods.
> That was the idea that motivated French President Nicolas Sarkozy
> to propose the summit meeting of the G-20 countries, and this is
> the policy that is being proposed by Tremonti on a daily basis. This
> is what Lyndon LaRouche and I have proposed for a long time--since
> the beginning of the 1990s, to be precise. We must win the Berlin
> government over to supporting this policy.
>
> We need a real New Bretton Woods conference, at which a new financial
> system is decided upon, just as Roosevelt intended in 1944; that
> is, replacing colonialism with a new, just economic and financial
> order.
>
> Second, we need a worldwide New Deal, such as Roosevelt implemented
> in the U.S.A. during the 1930s, to end the Depression through state
> credit creation.
>
> Concretely, for Germany, this means that after (!) reorganization
> by means of a New Bretton Woods system, there must be an investment
> program of about EU200 billion for the creation of full, productive
> employment, as the BüSo has demanded for years. We need to build
> the Eurasian Land-Bridge as the centerpiece for reconstruction of
> the world economy.
>
> From a technical standpoint, such a reorganization is absolutely
> no problem. The problem lies elsewhere. For the last four decades,
> the economy and morality have been completely separated from one
> another, and a unrestrained dog-eat-dog society and personal profiteering
> have taken control. On the one side, you have totally unnecessary
> luxuries, such as the recent dedication of an artificially created
> luxury island in Dubai, which was apparently planned as a refuge
> for the super-rich before the outbreak of a world financial crisis;
> at the opening festivities, the fireworks alone cost $20 million
> and 1.7 tons of lobster was consumed; on the other side, billions
> of people are threatened with starvation and brutal poverty.
>
> Pope John Paul II, in his encyclical Centesimus annus (1991), called
> it an "abuse in the sight of God and humanity, if someone directs
> his capital against the people and their work,'' and this has happened,
> without a doubt, under the now-shattered system of globalization.
> We need a new paradigm, in which the economy and morality are brought
> into harmony, and man is placed at the center of politics and economics.
>
>
> Do you really want those who neither foresaw the crisis, nor are
> ready now to come to terms with its real origins, to be left to decide
> what should happen now?
>
> I propose that you help us, the BüSo, to carry out the necessary
> mobilization of the population, so that we can implement a New Bretton
> Woods System and a new New Deal!
>