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A NEW GOLD DOLLAR REALIGNMENT: THE ONLY WAY OUT

This is a theory, which addresses a counterintuitive relationship that a rise in gold may reflect: 
a)      Bring the U S dollar into some kind of parity with other Sovereign currencies, thus halting it’s dive toward oblivion. 
b)      Leads to an economic recovery lead by the U S, thus, saving the global financial infrastructure.
 
The driving force behind this financial slight of hand will be the US agreeing to a basket of currencies being used as a world trade exchange medium, instead of just the US dollar. This will save the US dollar from crashing. These negotiations are going on now behind closed doors around the world. 
 
The negotiations will:
 
  1. Determine which currencies will be in the basket.
  2. Set the relative percentage of each currency.
  3. Outline a timetable for the integration of the new world exchange currency.
  4. Create a mechanism to forgive the US’s excessive printing of debt in exchange for allowing the selected Sovereign countries to join their currency’s with the US dollar as a new world exchange medium. As an aside: The new currency will be called the Mumbo Jumbo. At the point of conversion the dollar will be worth approximately 60% less than the day before. Meaning everything you buy will cost 50% more than it did yesterday, thus the secrecy.
  5. The selected countries will in effect convert their US bonds and treasury holdings into their local currency. This will allow them the liquidity of currency necessary to bring them into some kind of percentage liquidity relationship with the large US dollar float.
 
Let’s look at the last point first and then go to a little US history from the last financial slight of hand, al’a the late 1970’s.
 
The US dollar is traded world wide as exchange for all commodities, oil being the largest. In doing this, the amount of dollars in world circulation has expanded out of necessity, in an expanding world economy, where international trade dominates all economic activity. This isn’t a bad thing unless the US goes on a printing spree to the tune of 4 trillion dollars and off balances all relationships with the underlying commodities, which it is supposed to represent. As this scenario plays out the dollar can only go lower and eventually the momentum of downward devaluation begins to feed on itself. Gold is now signaling that we are beginning this second phase on dollar deprecation.
 
The problem is: How do other countries now use their currencies for international trade when there are so many US dollars relative to the amount of their local currencies in circulation? Even the Euro doesn’t come close to having enough actual currency in circulation to support international world trade. The Chinese Renminbi, the Canadian Looie, the Australian Dollar, the Saudi Riyal and the Brazil Real, if added up together would not even come close to providing the liquidity necessary for world trade. These countries, the natural resources rich countries, hold US debt that they have exchanged for their commodities. But they do not have the local currency to make a market in international trade, they must use dollars.
 
So, right now they are secretly negotiating with the US government to wrap their US bonds and treasury holding into credits denominated in their local currency to bring their currencies up, into a liquidity relationship with the US dollar. The US dollar will drop to say 60% over time and the Euro, the Renminbi and the other currencies in the basket will, over time take their position alongside the US dollar.
 
Meanwhile gold will, for no apparent reason go through the roof, say to $2500/ oz. Why?   Because these vary same Sovereign countries are as uncertain of the outcome as you and I are. That’s why the meetings are secrete.
 
The History
 
If you think this is crazy please spend some time looking at the now declassified documents exchanged between the US, the IMF and the BIS during the last financial slight of hand. This occurred in the late 60’s and through the 70’s and lead to gold rising to its last all-time high in 1980. Oh, and by the way, causing inflation to go north of 15% and a double dip recession, officially called two recessions. Is this financial slight of hand process beginning to sound familiar? 
 
Remember, way back in the ancient monetary past when the US dollar was tied to gold. This was to prevent bank financiers from printing too much money. What a quaint concept. We actually held a certain percentage of gold, at Fort Knox, against the money we printed. But problems occurred; we had to finance a very expensive and unpopular war, called the Vietnam War. This war happened during the beginning of the international trade expansion and we started printing more money, in excess of the gold in reserves we were supposed to hold. Gold prices were set at $32/ oz., and there was no incentive to mine gold, a problem if you are supposed to hold a fixed percentage of gold in relationship to the currency you print. So, instead of letting gold float and set its own price we just printed a lot of extra money. Eventually, our trading partners realized this, and there was a run on the bank, we call it the US Treasury. Then, the Bretton Woods system collapsed in 1973. Guess what? We didn’t have enough gold to cover our international trade obligations, as more and more governments requested gold instead of dollars or bonds or treasuries to cover the balance of payments. They wanted gold. Things got a little dicey. Our friends, through demand payments in gold were forcing us to disengage from our unpopular war against communism. Thus, the first modern international money crisis was born.
 
How did we weasel out of this very difficult position? Kind of like the position we are in now? We cheated our trading partners by conning them off the gold standard, through allowing them to print as much money as they wanted too, just like us. In exchange they forgave us our debts, a new international money parity (or should that be party), was established and you and I suffered through 1979, 1980, 1981 and 1982, not a pleasant time, if you actually had to make money at a real job outside the financial community. I’ve now been through both and the 79-82 period was scary: massive unemployment, souring interest rates and out of control inflation.
 
But we of short memories, are doomed to repeat these capital cycles every generation or so, so financial family empires can thrive and flourish. It’s like the King and Queen, God bless them. We need these very smart big-brained sociopathes to run our collective lives for us.
 
Back to the future.
 
We now find our selves with a very similar problem. What can we do? We can’t become Zimbabwe because the Chinese and everyone else holding US bonds, treasuries and dollars would truly be screwed. We need a logic 101, creative new financial path, thus a basket of currencies for international trade in exchange for debt forgiveness. Good-by dollar supremacy. It’s ok, maybe someone will help police the world and we can lower our military budget too. Hay, how about the Chinese?
 
Oh, by the way, if this doesn’t work out to well here is what you will get instead of a very funky solution: Presidential Executive Order 6102 of 1933:
 
“I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order. Etc, etc.”
 
Not to digress, the first four points above, are therefore a logical outcome of this predicament and must be occurring somewhere between some very smart people who have a lot to lose and a lot more to gain. This isn’t about you and me; it’s about power and how to steal our collective incomes. So, hang on and buy gold now, while you can, but be sure to sell the news. Remember always buy the rumor and sell the news, this is how us little folks make a few bucks, as nothing lasts forever. 
 
And that is the point of this article. Gold is going up but it will come back down just as fast or faster, after the financial dust settles and gold as a psychological hedge against financial disaster, settles back down to $450/oz. Look at gold prices around 1980 through 1985, I’d say we have two more years at most, of golden bliss and then look out, it will be back in the doldrums for gold but the ride will be exhilarating.