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Oct 2, 2009

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IMF beats gold-auction drum
By Antal E Fekete

The IMF should have been scrapped and its gold returned to the original subscribers in full when corrupt politicians, following advice from corrupt economists, abandoned the regime of fixed foreign exchange rates in 1971. But the IMF was left in place, and it stood there as a bombed-out air-raid shelter. It continued to be used as a bully-pulpit from which the gospel of monetary rectitude is still being preached - making it the laughing stock of the world.

This is not to say that this clown of the US Treasury has not done enormous damage to the economies of Soviet-occupied countries as they were regaining independence after the crumbling of the Berlin wall. The IMF has earned eternal shame as the chief agent

"to make the world safe for fiat money". If it did not succeed in its mission, it was not for lack of trying.

One of the first things the IMF did as an agent of the US Treasury, after the inglorious collapse of the Soviet Union in 1990, was to force countries formerly under Soviet occupation to dispose of their gold reserve in exchange for IMF membership. Fancy the enormity of this crime. Even under the harshest of Soviet military occupation these unfortunate countries were allowed to keep their gold reserve, and with it some faint promise of a better future.

Then came freedom, American style, for which these countries have been yearning for half a century. Lo and behold, the first thing they have to give up is their gold reserve - in the defense of the dollar system that had gone bankrupt 20 years earlier! The IMF will never be able to live down what amounts to the monetary rape of Eastern Europe and its "captive nations". The IMF was the shepherd dog, shepherding these people under American auspices from one slave labor camp into another.

The miserable 65 years of history of the slave-driver IMF must be compared with the superb history of five millennia of gold as money and indestructible agent of freedom. The world's understanding of gold and its role in human history is very imperfect indeed, to say the least. People are in the habit of watching the gold price and trying to interpret its zigzagging as you would try to decipher messages from an oracle or the predictions of a false prophet. They keep talking about gold being "weak" or "strong". But when it comes to the Rock of Gibraltar, all talk about strength or weakness is entirely out of place. The only question is whether the boat of paper money, and its voyageurs, can survive the shipwreck when their boat is smashed against the Rock.

The outstanding fact about gold is that during the past half-a-century mines have disgorged an amount equal to all the gold previously produced during the course of history. And all this gold has disappeared without a trace. It has been devoured by an insatiable private demand - a stark reminder that politicians after two world wars have failed miserably to re-establish the financial and social order and security of the nineteenth century that the world had hoped for, in order to be able to function properly.

Yet the gold that has disappeared in private hoards, the fruits of half-a-century mining effort, an amount matching in size what the world has produced since the dawn of civilization, is not lost completely. It has just gone into temporary hiding. It does not like the floating foreign exchange rate system. It abhors the swinging rate of interest. It hates the style of banking adopted after bank reserves were insulated from any influence of the saving public. It does not like the conspiracy of the banks and the government against the public good.

Vanishing gold - measured by its vanishing basis - shows the greatest vote of no-confidence ever registered in all history, as far as confidence in the political and monetary leadership of the world is concerned. The gold will re-emerge triumphantly when the global regime of irredeemable paper money bites the dust - as it most certainly will in this century, probably during the next decade.

When that happens, the paper tower of Babel will come crashing down. All paper fortunes will be wiped out. The world will stand denuded of its capital. It will be unable to pay wages to the workers, to say nothing about paying pensions to the retired segment of the population. We shall witness the greatest change of guards ever. Bankers will deny their profession and will, like John Law of Lauriston fleeing from Paris, put on female garments and leave town under the cover of the night. [3] Only those with gold in hand will be able to provide capital to re-boot the productive apparatus of society and to rebuild the financial system necessary to support it.

Those who seek refuge in gold today have no reason to be ashamed, in spite of the scorn heaped upon them by the media and academia. Rather, they should be proud. They have an historic mission to accomplish - to save our civilization from total extinction. They are the inhabitants of Noah's Ark. They carry the seed corn, and they are the custodians of the gene bank, with which they will have to start from scratch when the water recedes. Let the Nervous Nellies sell their gold into weaknesses in trying to turn a paper profit. Those strong in faith know that they are part of the select few, taking a voyage in the Mayflower to the Promised Land.

And herein you find the historic significance of the IMF gold sales. It is good news, very good news for those with a proper appreciation of history as it unfolds before our very eyes. Permanent gold backwardation as a threat to society has been temporarily removed. "The Last Contango" in Washington has been postponed. There is a little more time to prepare for Armageddon.

Those who want to vote on how the world should be rebuilt and governed, those who believe in peace, progress, and prosperity under the gold standard after the coming collapse of the paper system, can still secure their ballot in the form of a gold coin. Just ignore the gold price. Gold is still cheap, thanks to the supply of oxen at the Fed and the IMF. And, lest injustice be done, also thanks to the supply of oxen at the US Treasury.

Ignore the gold price, yes, but keep your eyes peeled for the gold basis. It is your only reliable guiding star in these treacherous financial waters. It will tell you in advance when gold will cease to be offered for sale at any price, whether quoted in Zimbabwe dollars, or in US dollars, Swiss francs, euros, ameros, or in whatever monetary cocktail the "experts" may come up with in the future.

The last gold coin ever sold in exchange for paper will go to someone who is fully conversant with the concept of the gold basis. Is it going to be you?

Notes
1. Alan Greenspan, The History of Money (2002).
2. Antal E Fekete, "The Supply of Oxen at the Federal Reserve," January 20, 2005, see www.professorfekete.com.
3. John Law (1671-1729) was a Scottish economist who believed that national wealth depended on trade. He was responsible for the Mississippi Bubble and a chaotic economic collapse in France.

Antal E Fekete has since 2001 been consulting professor at Sapientia University, Cluj-Napoca, Romania. In 1996, Professor Fekete won the first prize in the International Currency Essay contest sponsored by Bank Lips Ltd of Switzerland. Professionally produced DVD recording of Professor Fekete address before the Economic Club of San Francisco on November 4, 2008, entitled "The Revisionist History of the Great Depression: Can It Happen Again?" plus an interview with Professor Fekete is available from www.amazon.com and from www.economicclubsf.com at US$14.95 each.

(Copyright 2009 Antal E Fekete).

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