It Is A Race To The Bottom For Global Currencies And The Winner Will Be Gold

In 2010, any nation that has a weak currency has a very significant competitive advantage in global trade.  A weak currency means that the products and services produced by that nation will be less expensive for other nations.  Therefore other nations will buy more of those products and services.  When exports go up, employment goes up and more wealth flows into the country.  Alternatively, when the value of a national currency declines, exports do down, unemployment increases and less wealth flows into the country.  Therefore, dozens of exporting nations around the globe have become increasingly determined to keep their national currencies very weak in an attempt to maintain a competitive advantage in the global marketplace.  Essentially what we have is a race to the bottom among global currencies.  Whenever any nation wants to gain a little bit more of an edge in global trade they push the value of their currency down just a little bit more.  So who is the winner in all of this?  Well, that is easy.  Gold, silver and other precious metals will continue to be the winners as fiat currencies all over the globe continue to decline in value. 

Quite a few nations have been openly manipulating their national currencies for many years, but now currency issues are starting to make front page news.  Things are starting to get quite tense out there.  Major importing nations are starting to resent the fact that they have been burned by all of this currency manipulation and major exporting nations are absolutely determined not to lose the economic gains that they have achieved as a result of their currency manipulation.   

In recent months, nation after nation has been taking steps to weaken their national currencies.  Every time another currency gets devalued the hostility in the global marketplace just seems to grow.  In fact, Brazil’s finance minister recently was very honest about the fact that the nations of the world are now engaged in a very open “international currency war”….

“We’re in the midst of an international currency war, a general weakening of currency.”

So where does all of this end?

Well, to some the answer is to adopt a global currency.  But let us hope that never, ever happens because it would be the end of economic sovereignty for every nation on the face of the earth.

To others, the answer is for the nations that are being taken advantage of to stand up and to declare that they are not going to take it anymore.

Perhaps the most glaring example of one nation taking example of another is what China is doing to the United States.

In my recent article entitled “Currency War” I described the effect that currency manipulation by the Chinese government is having on trade between the U.S. and China….

For years, China has kept the value of their currency artificially low.  Even though China has made a few small moves toward a more free-floating currency policy, at this point China’s currency is still pretty much pegged to the U.S. dollar.  It is estimated that the Chinese government is keeping China’s currency at a value about 40 percent lower than what it should be.  This is essentially a de facto subsidy to China’s exporters.

By keeping their currency essentially pegged to the U.S. dollar at such a low value, China is able to flood the U.S. market with incredibly cheap goods and services.  But this has created an absolutely massive trade imbalance.  Today, the United States spends $3.90 on Chinese goods for every $1.00 that the Chinese spend on American goods.  Jobs and wealth are flowing out of the United States and into China at a pace that is almost unimaginable.

The Chinese know that if they let the value of their currency rise substantially it would have a devastating impact on their economy.  Chinese Premier Wen Jiabao was recently quoted in The Telegraph as saying the following about what would happen if the value of Chinese currency was to rise substantially….

“I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs.”

So instead American factories get to go bankrupt and millions of American workers get to lose their jobs.

Is that fair?

Meanwhile, other nations around the world are busy debasing their currencies.  For example, Japan recently made a 12 billion dollar move in world currency markets to debase the value of the yen.

Earlier this year, the Swiss National Bank experienced losses equivalent to about 15 billion dollars trying to stop the rapid rise of the Swiss franc.

It truly is a race to the bottom.

So who benefits?

Gold, silver and other precious metals of course.

Gold recently topped $1,300 an ounce. 

Silver has been absolutely soaring.

Exporting nations such as China and India have been gobbling up gold and other precious metals every time there is a little bit of a dip.  They are tired of piling up endless amounts of U.S. dollars and they are seeking to diversify into something more solid.

The trend toward gold and precious metals is so hot that one German firm that installs gold vending machines now has plans to introduce them into the United States later this year.

It seems like everyone wants gold right now.

Not that gold is any more valuable than it ever has been.

It is just that it is not going down in value like all of the fiat paper currencies around the world are.

This is not a good time to have faith in paper currencies – particularly the U.S. dollar.

Already the dollar has been slipping substantially and the Federal Reserve has not really even cranked up the next round of quantitative easing yet.

One of the easiest things to do when there are economic problems in a nation is to pump more paper money into the economy.  More paper money gives people something to spend, it spurs economic activity, it helps exports (as described above), and it helps put people back to work. 

Of course it also destroys the value of the currency, but we will get to that in a minute.

With millions upon millions of Americans out of work, and with millions of homes being foreclosed, and with poverty statistics soaring into uncharted territory, it is very tempting for our politicians in Washington to borrow even more paper money and to pump it into the economy in an attempt to get things going again.  But right now an election is coming up and the Tea Party has raised such a ruckus about government debt that there isn’t much appetite for more “stimulus packages” right now.

Of course the truth is that “stimulus packages” never solve any of our long-term problems anyway.  The reality is that they just give our economy a short-term “high” and make our long-term debt problems even worse.

Not that the U.S. government is not quietly up to some monkey business.  On Friday, federal regulators announced a 30 billion dollar bailout of the nation’s wholesale credit union system.

Another bailout?

Just what we need, eh?

But in general, the U.S. government is not doing a whole lot more reckless spending right now.

However, the Federal Reserve can inject more paper money into the economy without the help of Congress.  Under the guise of “quantitative easing”, the Federal Reserve makes up money out of thin air and pumps it into the economy by buying up U.S. Treasuries, mortgage-backed securities or anything else that they feel like buying.

So is this going to happen again any time soon?

There are all kinds of whispers on Wall Street that this is exactly what the Fed is going to do and that it is going to be massive.

And quantitative easing would probably stimulate the U.S. economy in the short-term.

However, it would also seriously damage the value of the U.S. dollar.

You see, the truth is that when more dollars are introduced into the system, the value of each existing dollar goes down.

It is called inflation, and it is a hidden tax on all of us. 

Think of it this way.  If you put five dollars away today and you anticipate that you will be able to buy two loaves of bread with it three years from now, you will be greatly disappointed if when that day arrives a loaf of bread now costs five dollars and you can only purchase one loaf.

When the purchasing power of the dollar declines, it is a tax on every single dollar in every single wallet and bank account in the United States.

Since 1913, the U.S. dollar has lost over 96 percent of its value.  Unfortunately, as ever increasing mountains of paper money continue to be required to keep our financial system solvent, the rate of decline of the value of the dollar is only going to increase in the years ahead.

So when you are watching the news and you hear that the Federal Reserve has announced some more “quantitative easing”, you might want to watch your wallet because you are about to be taxed.  Your dollars will still be there – they just won’t go as far as they used to.

But in the twisted global economic system that our politicians have created, if the U.S. does not devalue the dollar we will lose factories, jobs and wealth at an even faster pace. 

How sick is that?

So do not put your trust in the U.S. dollar.  In the end, it will fail.

So what do all of you think?  Feel free to leave a comment with your opinion (sane of otherwise) below….

BOMBSHELL – Whistle Blower Comes Forward With Solid Proof The Price Of Gold And Silver Is Being Manipulated By Major Financial Institutions

For a long time many of us have had very serious suspicions that the prices of gold and silver were being highly manipulated. But now, thanks to the mind blowing testimony of one very brave whistle blower, the blatant manipulation of the world gold and silver markets is being blown wide open.  What you are about to read below is absolutely staggering.  Once the American people learn how incredibly corrupt the world financial system is, it is going to change everything.  The government that we are all trusting to guard the integrity of the financial system is failing to do that job.  It turns out that the Commodities Futures Trading Commission has been sitting on solid evidence that the elite banking powers have been openly and blatantly manipulating the price of gold and silver.  Even though they were basically handed a “smoking gun”, they have done absolutely nothing with it.  But now the information has gone public and the CFTC is red-faced.

Back in November 2009, Andrew Maguire, a former Goldman Sachs silver trader in Goldman’s London office, contacted the CFTC’s Enforcement Division and reported the illegal manipulation of the silver market by traders at JPMorgan Chase.

Maguire told the CFTC how silver traders at JPMorgan Chase openly bragged about their exploits – including how they sent a signal to the market in advance so that other traders could make a profit during price suppression episodes.

Traders would recognize these signals and would make money shorting precious metals alongside JPMorgan Chase.  Maguire explained to the CFTC how there would routinely be market manipulations at the time of option expiries, during non-farm payroll data releases, during commodities exchange contract rollovers, as well as at other times if it was deemed necessary.

On February 3rd, Maguire gave the CFTC a two day warning of a market manipulation event by email to Eliud Ramirez, who is a senior investigator for the CFTC’s Enforcement Division.

Maguire warned Ramirez that the price of precious metals would be suppressed upon the release of non-farm payroll data on February 5th.  As the manipulation of the precious metals markets was unfolding on February 5th, Maguire sent additional emails to Ramirez explaining exactly what was going on.

And it wasn’t just that Maguire predicted that the price would be forced down.  It was the level of precision that he was able to communicate to the CFTC that was the most stunning.  He warned the CFTC that the price of silver was to be taken down regardless of what happened to the employment numbers and that the price of silver would end up below $15 per ounce. Over the next couple of days, the price of silver was indeed taken down from $16.17 per ounce down to a low of $14.62 per ounce.

Because of Maguire’s warning, the CFTC was able to watch a crime unfold, right in front of their eyes, in real time.

So what did the CFTC do about it?

Nothing.

Absolutely nothing.

Which is extremely alarming, because the size of this fraud absolutely dwarfs the Madoff or Enron scandals.  In fact, this fraud is so gigantic that it is not even worth comparing to any of the other major financial scandals of recent times.

But Maguire did not give up.  He sent several more emails to the CFTC detailing the open manipulation of the gold and silver markets.

The CFTC did not reply.

Finally he sent them a final email: “I have honored my commitment to assist you and keep any information we discuss private, however if you are going to ignore my information I will deem that commitment to have expired.”

The reply by the CFTC?

“I have received and reviewed your email communications. Thank you so very much for your observations.”

No action.

No acknowledgement that anything was wrong.

No recognition that a massive crime had been committed.

Fortunately, that was not the end of it.

On March 25th, the CFTC held a hearing on alleged manipulation in the gold market by the major banking powers.

Maguire wanted to testify during that hearing but he was not invited.

But William Murphy, chairman of Gold Anti-Trust Action (GATA), was invited to testify.  GATA has been compiling data on the manipulation of the gold and silver markets for quite a long time now.

Murphy was only given five minutes to deliver his testimony.  He raced through his presentation so that he could get as much information on the record as possible.

Very curiously, the live television broadcast of the CFTC hearing suffered a technical failure the minute before Murphy began his testimony. The technical failure was corrected the minute after Murphy was finished.

Coincidence?

Well, it turns out that there were are lot of coincidences surrounding this hearing.

But we’ll get to that in a minute.

When Murphy finished his statement, the panel asked him for some hard proof of market manipulation.  Murphy shocked the panel by revealing the name of Maguire and explaining how Maguire had informed the CFTC Enforcement Division of the market manipulation that was taking place by JPMorgan Chase.  The CFTC panel seemed stunned by the revelation and seemed reluctant to learn any further and asked nothing else about it.

Video of Murphy’s revelation to the panel is posted below….

In another “coincidence”, Maguire and his wife were subsequently injured and hospitalized when their car was struck by a hit-and-run driver in the London suburbs.

When a bystander who saw the “accident” tried to block the other driver from getting away, the other driver accelerated directly towards the witness, forcing him to leap out of the way to avoid being hit.  The hit-and-run driver’s car then hit two additional cars as he left the area.

But Maguire and his wife were fortunate.

In the past, other would-be whistle blowers that had evidence regarding the manipulation in the gold and silver markets died in “unusual accidents” before they were able to bring their evidence to light.

But there were even more “coincidences” surrounding this hearing.

A week before the hearing, the CFTC announced that they had had a fire in the room where its gold and silver records are held.

Isn’t that convenient?

In addition, after the hearing was over, Murphy was contacted by a number of major media outlets for interviews.

Within 24 hours, every single interview was cancelled.

Every single one.

Is that a coincidence too?

It appears that some very powerful people do not want this information to get out.

It also shows how corrupt the mainstream media has become.

This is a story that is so much bigger than the Madoff scandal or the Enron scandal that it is not even funny.

And yet the mainstream media is avoiding it like the plague.

But there were additional bombshells that came out during the hearing as well.

During the hearing it was revealed that the gold manipulators have accumulated a huge short position in gold and that these huge short positions are “naked”, which means that these positions are not hedged.

These massive short positions have put some of the largest financial institutions in the world in an extremely vulnerable position.

In addition, it has now come out that most “gold” that is traded is not backed by the actual metal itself.  For years, most people have assumed that the London Bullion Market Association (LBMA), the world’s largest gold market, had actual gold to back up the massive “gold deposits” at the major LBMA banks.

But that is not the case.

People are now realizing that there is very little actual gold in the LBMA system.

When people think they are buying “gold”, they are actually just buying pieces of paper that say they own gold.

In fact, during the CFTC hearings, Jeffrey Christian of CPM Group confirmed that the LBMA banks actually have approximately a hundred times more gold deposits than actual gold bullion.

Uh oh.

So what happens if everyone decides that they want actual physical delivery of their gold?

It would be such a mess that it is painful even to think about it.

The truth is that right now most of the trading activities on the London exchange are just paper for paper.

But people get into gold because they want to be in a real commodity.

In fact, there are thousands of clients around the globe who think they own huge deposits of gold bullion, and are being charged large storage fees on that imaginary bullion, but what they really own are a bunch of pieces of paper.

If there comes a time when everyone starts asking for their gold it is going to create a squeeze of unimaginable proportions.

Maguire explains this situation this way: “for 100 customers who show up there is only one guy who is going to get his gold or silver and there’s 99 who will be disappointed, so without any new money coming into the market, just asking for that gold and silver will create a default.”

The truth is that it is absolutely impossible for the LBMA to ever deliver all the gold and silver owed to the owners of contracts.

Yes, it is a gigantic mess.

But this type of things is not entirely unprecedented.  For example, Morgan Stanley paid out several million dollars back in 2007 to settle claims that it had charged 22,000 clients storage fees on silver bullion that did not exist.

But the scale of the fraud going on now is absolutely mind blowing.  The following video contains footage from the hearing related to these issues….

So what is the bottom line?

The bottom line is that the precious metals markets are cesspools of fraud and manipulation.

The markets have been suppressed by the major financial institutions for years, and this has created the potential for a “squeeze” in the precious metals markets that could send the prices of gold and silver into the stratosphere.

You see, the reality is that there would be no gold left in the entire world if all the Gold ETFs (Exchange Traded Funds) asked for physical delivery.

Are you starting to get the picture?

In fact, Maguire claims that the naked short selling scam by the major financial institutions is well into the trillions of dollars, making it by far the biggest financial fraud in history.

Maguire calls what has been going on “financial terrorism”, and he accuses the financial institutions involved in this fraud of “treason” for putting national security at risk.

And national security is at risk.

Because if the true extent of this fraud comes out, it could collapse the entire financial system.

If you have never heard an interview with Andrew Maguire, we encourage you to listen to the audio interview posted below.  It will really open your eyes to what is going on in the precious metals markets….

The Century’s Biggest Fraud Revealed

This is one of the biggest financial stories of the decade.  Because it is complex, most Americans will not understand it.  But the fraud and manipulation in the gold and silver markets has the potential to cause a massive economic collapse even without all of the other factors talked about on this blog.

Some very powerful people have been doing some really, really bad things.  Once people understand the truth, they will never look at the financial markets the same way again.  Already, faith in the major financial institutions of this country has been shaken by revelations about what has been going on over at Goldman Sachs.  The American people have no more appetite for any more financial scandals or for any more Wall Street bailouts.  But if the fraud and manipulation taking place in the precious metal markets ever gets totally exposed it will change the U.S. financial system forever.

Please get this information out to as many people as you can.  There are a number of very powerful people who are not going to be pleased that sites like this are attempting to get the truth about this massive scandal out.

Safecastle

The Economic Collapse