It looks as if the
dollar could very easily decline another 15%
to 20%, which would take it back to 1995 when
the Clinton Administration with the help of
the Fed orchestrated a phony strong dollar
policy, which we are quite sure was
orchestrated by manipulating the price of
gold lower and of course by "talking
up" the economy by babbling fictitious
stories of the "productivity
miracle." Mr. Greenspan, who was nearly
run out of town in 1996 for speaking honestly
about his views that the market at 6000 was
"irrationally exuberant", quickly
thereafter "got with the program"
and became a key spokesperson for our
official propaganda machine. What a
contradiction to what our Founding Fathers
had in mind!
Mr. Greenspan, may
only be a puppet for the people who really
run America (read "The Creature from
Jekyll Island," by G. Edwin Griffin) but
he certainly deserves much of the
"credit" for the disaster that is
starting to unfold in the American and global
economies. Not only did Mr. Greenspan help
the Politicians in Washington (from both
parties) deceive the American public and
global investors that things were better in
America than they really were, but following
his "conversion" to the propaganda
campaign post 1996 he began to gun the money
supply like no other Federal Reserve Chairman
in history. So by assisting in the gold
manipulation, by printing of enormous amounts
of money and engaging in a pro-U.S. dollar
disinformation campaign, Mr. Greenspan became
a willing accomplice to the construction of
the bubble, which, as of this moment in time,
has only begun to contract.
The dollar is
undoubtedly the most important price in the
world because it is the world's reserve
currency without any serious competitors.
Because of its importance, the misbehavior of
our government in promoting a phony dollar
strength played a major role in sucking
trillions of dollars of capital into the U.S.
during the late 1990's, which in turn has led
to enormous economic dislocations around the
globe, not the least pernicious of which from
an American's viewpoint is the sudden
insolvency of American mining, manufacturing
and agriculture as a result of a fictitiously
strong dollar that led to unfairly
undervalued imports and the impossible task
of American companies exporting.
The "money
center" banking interests that are the
power behind the throne in America may have
enriched themselves enormously in the short
run. However, economic dislocations cannot be
promoted by the rich and powerful forever
without mother-nature finally saying "NO
MORE!" It would seem that with the
dollar now entering a secular bear market,
the phony strong dollar policy, which
benefited our banking industry at the expense
of our manufacturing sector, may have now met
its own threshold of lethality.
If the dollar's
strength was based upon the trashing of the
gold price (to make the dollar look better
than gold, the only currency superior to it
back in the 1990's), the dollar is now
unquestionably weaker than most all other
major currencies around the world and with
good reason. Returns on investment are still
way below where they need to be to justify
equity prices.
We would become less gloomy about the market
if we could envision decent earnings growth.
The trouble is, as even Mr. Greenspan
suggested, the consumer may now be about
tapped out. So with the U.S. economy so
dependent on consumer spending, that puts the
burden on the capital goods sector. But as
Stephen Roach said recently we have global
excesses of supply that are left over from
the excesses of the 1990's that continue to
suppress pricing power which puts the damper
on any real plans to increase Capital
spending. Add to that the fact that the
politicians and CEO's have already "shot
their wads" in pushing consumer durables
like housing and autos during the past two
years, which means there is not likely to be
the normal pent up demand for those big
ticket items that normally provide major
lifting power for the economy. No wonder
Warren Buffett is talking in apocalyptic
terms about the U.S. markets and Michel B.
O'Higgins was talking about another Great
Depression.
GOLD
The following email
from a mining engineer and former colleague
of mine
"Putting
terrorism and Iraq aside, which it would seem
are going to be dealt with in a material way
in the short term, that should also
subsequently take some of the pressure off of
energy prices, and in that scenario, I say
gold will be doing well to settle in the
$300-325 range.
. As for the
long-suffering shareholders of most gold
mining companies they can continue to hope.
The sad reality is that if there is another
spike in prices, many of them will
double-down and not fair any better than they
have in the past (save those, of course, that
decide to use the price spike as an
opportunity to take their chips off the
table.)
"To tell you
the truth, I find it remarkable, but not
surprising, after several years of reading
about conspiracies, the evils of hedging,
etc., nobody ascribes any of the industry's
problems nor the investment communities
disaffection with it to the scams or the
perception that the game is rigged in the
venture equity markets. Recall this has been
the case long before the dot com bubble burst
or the more recent Wall St.
controversies"
Well I think my
ex-colleague is still definitely among the
brainwashed majority in the financial
community who have a deep seated hatred for
gold and who also displays a rather normal
negative sentiment during the early stages of
a bull market. With regard to the prevailing
sentiment toward gold, I think Richard
Russell has once again hit the nail squarely
on the head in his Friday March 7, 2003
commentary.
"Opinion --
Here as the Dow is within 410 points of its
October low, the implications are momentous.
A violation of the Dow's bear market low of
7286.87 could easily trigger a waterfall or
even a crash. The main European markets are
down across the board today. The losses in
Europe have been huge.
"These moves
have come at a critical time. They've come at
a time when Bush is on an all-out campaign to
try to convince the UN "partners"
that he is on the right path, and that they
should not block his way with a veto. The
last thing Bush needs now is a plunging stock
market and a surging gold price. I believe
that today "someone" (the
government?) has gone all-out to hold the
stock market up and to knock the price of
gold down.
"One concept
that subscribers should understand. Once the
primary trend of a time such as gold or the
stock market is established, the more
activity or manipulation against the primary
trend, the stronger the primary trend
becomes.. The people who buy stocks on these
counter-primary trend advances are buying
stocks against the primary trend. Ultimately,
they'll be forced to sell these same stocks
at lower prices. But during the counter-trend
rallies, stocks are moving from stronger
hands to weaker hands.
Every time gold
dips, every time some central bank or some
manipulator dumps gold, the metal moves out
of weaker hands and into stronger hands.
Finally, gold establishes a rock-bottom base.
The weak hands have either been knocked out
of the market -- or sold out or scared out.
"Once that
happens, gold will be ready to move higher
and ultimately into its second phase. The
second phase is the phase where the public
finally becomes interested in the item.
We think it is
interesting and most likely revealing, that
gold made its biggest move upward immediately
upon the resignation of former Treasury
Secretary O'Neil. Never while we were without
a Treasury Secretary did we see any
significant down days like that displayed
above, which had become common during the
strong dollar manipulation days of the Rubin
and Summer's regime. But immediately upon the
new Treasury secretary taking office, we have
begun to see this kind of quick and sudden
down plunges in the New York market. Then as
was always so common from 1995 onward, the
gold markets rise throughout the global
markets, only to be trashed once again in the
New York markets. Now that a new
"fox" (Treasury Secretary) is in
charge of the chicken coup (The Exchange
Stabilization Fund), the old pattern has once
again commenced.
But we remain quite
certain that the times have changed. The
ability fool the global market participants
about the dollar by trashing gold can no
longer work. And as we discuss every week,
the deflationary depression that we are
beginning to face is to reveal that emperor
Greenspan indeed is wiring no cloths. Having
their fill of dollars, foreigners are very
happy that our short sighted politicians and
Fed chiefs are willing to hand them gold at
bargain basement prices. They want out of the
dollar. The only question is when will the
slow trickle out of the dollar and into gold
and other currencies turn into an avalanche.
The basic fundamenal
supply and demand gold numbers run something
like this. 4,000 tons of annual demand. 2,500
tons of supply from mines and recycling.
1,500+ tons from dishording form central
banks. The 64 trillion dollar question is,
"how long can this grand deceit by our
policy makers go on?
How much gold do the
western central banks have that they can use
to keep 
fabricating
their lies about fiat money? It looks like
perhaps ½ of the 34,000 or 35,000 tones the
banks claim they have, have actually been
leased out, never to be returned again to the
central banks. No doubt the western central
banks will "forgive" the repayment
of gold and accept paper instead. But what
will that do to America's financial viability
when its Central Bank is built upon the quick
sand of liability money (fiat money) rather
than asset money (gold). It is a very foolish
and shortsighted policy that our ruling elite
have propagated, and one I am unfortunately
confident will led to national financial
ruin.
March 11, 2003
J Taylor, Editor of
J Taylor's Gold & Technology Stocks
