Tonight there was a program on CNBC [ I know, I knnow, always suspect] about Japan and all its financial problems. What the commenator was saying certainly applies with equal force, if not more so, to the US financial system. One of the facts that came out in the discussion was that the BOJ is spending billions upon billions of dollars to support the dollar, or to suppress the yen's rise. Now figure that the BOJ in the last couple of years has probably spent more than the entire capitalization of the PMs trying to support the dollar, and I think you can see how desperate the holders of US $s are to keep the trash levitating. How strange that an official of the Russian government would tell the citizens of the Russian Republic not to dump dollars. Somebody is really worried about something, and it transcends any differences in the international community about Iraq and how that mess ought to be resolved. [Personally, I think Bush should declare victory and withdraw our soldiers and bring them home. Napoleon lost in Egypt when he invaded, he just didn't tell the folks back home. And no one really cared. Did bring back the Rosetta Stone, however.]
None of this makes any sense unless you look at the world financial system at this moment in time. As I have said many times on this board, and all-out effort has been made and is being made to destroy every statistical indicator and measure of the true condition of the economy and more importantly the financial system. We're talking about survival, survival of a financial system that has long since passed into decadence. There is nothing novel about nations and their agencies screwing with that most important of all indicators, AU. As I said earlier, if the BOJ is willing to "WASTE" sums of money equivalent to the entire capitalization worldwide of the PMs, rest assured a bit of manipulation here and there can be expected. But I think we can see with what is happening in Japan with the man in the street, who shuns banks and buys physical Au, regardless of what the experts say, that the "authorities" will be powerless to change the course of events. These are truly scary times.
Afghanistan was supposed to solve all or enough of the dollar's woes by providing us with a plentiful supply of cheap oil on a par with Saudi Arabia's. Oil, for the umpteenth time, is what gives currency to the dollar. In the summer of 2001, the U.S. made known to those concerned its intentions to invade Afghanistan. Most likely 9/11 was a state-sponsored action, most likely by Pakistan who considers Afgahnistan its own territority, as a pre-emptive strike in anticipation of that invasion. Far from being a failure of intelligence, everything went according to script. U.S.A.F. planes didn't take off for nearly an hour and a half to intercept even though all four airliners were being tracked by the FAA and law requires them as a matter of course to be up in the event of a high-jacking, no word from the president required. The pre-emptive strike succeeded in galvanizing US public opinion, as was meant, to approve war on Afghanistan and to accept the Patriot Act; our government was uncannily ready with both invasion plan and legislation to oblige us. Too bad, though, the oil proved to be neither as plentiful nor as a cheap -- it is full of sulphur, which means it means it needs more refining, which means it is no longer cheap. Too late, too, to save Enron, who would have been a major beneficiary of Unocal's pipeline, from extinction.
The G7 has been supporting the dollar as the oil-contract settlement currency, low these many years, through the controlled burn of CB gold sales. It took time to design and build support for an alternative. Even after the euro was up and running, it has taken time for the float to grow big enough to receive a massive dumping of extraneous dollars. Now, we are the only ones supporting the Washington Accord and all that is needed to change things in a hurry is for the BIS/ECB to use unneeded dollars to bypass the gold-convertibility markets and buy physical in quantity. Actually, all they have to do is enter the market in a small way and LBMA will go the way of Enron.
The difference between the actions of official and unofficial Japan is probably a legacy of post-WWII occupation. Maybe the BOJ is signalling two different things, serving two different purposes with its yen policy. That would be a good thing, because without gold, a dead yen be a dead Japan.
America and Europe: Will European Monetary Union Fracture the Alliance? By the Right Honorable Michael Portillo
Wednesday, May 27, 1998 5:30 p.m. Wohlstetter Conference Center Twelfth Floor, AEI
European elites are embracing federalism and European integration as the primary means to ensure post-cold war security on the Continent. Michael Portillo argues that this is the wrong route. European integration is being designed in such a way that it sharply reduces democratic control, stirs up nationalism, and endangers the transatlantic link. Only a renewed and revitalized atlanticism will, in Mr. Portillo's view, guarantee European security. Mr. Portillo was secretary of state for defense in Britain from 1995 to 1997.
Introduction: Jeane Kirkpatrick, AEI Speaker: Michael Portillo Comment: Richard Perle, AEI >>