Former US assistant treasury secretary Paul Craig Roberts has pointed his finger at the US Federal Reserve as a culprit behind the grand orchestration to smash gold prices to defend the exchange value of the dollar. He gave an interview on April 12 to King World News as follows:
“This is an orchestration (the smash in gold). It’s been going on now from the beginning of April. Brokerage houses told their individual clients the word was out that hedge funds and institutional investors were going to be dumping gold and that they should get out in advance.
“Then, a couple of days ago, Goldman Sachs announced there would be further departures from gold. So what they are trying to do is scare the individual investor out of bullion. Clearly there is something desperate going on.
“I have assumed from the beginning that it is the Fed’s concern over the dollar, because the dollar is being printed in huge quantities at the same time that other countries are abandoning the use of the dollar as international payment.
“The exchange value of the dollar is being threatened, and if it collapses the Fed loses control over interest rates. Then the bond market blows up, the stock market blows up, and the banks that are “too big to fail”, fail. So it’s an act of desperation because they’ve got to establish in people’s minds that the dollar is the only safe place, the only safe haven – not gold, not silver and not other currencies.
“And to help protect this policy they have convinced or pressured the Japanese to inflate their own currency. The Japanese are now going to print money like the Fed. They are lobbying the European Central Bank to print more. So I see this as a dollar protection policy.”
If this is the case, then gold is poised for a rebound. Its price could skyrocket in the event of dollar collapse. Richard Russell, known as the godfather of newsletter writers, also gave an interesting interview to King World News on April 23, saying that we are witnessing the greatest and most momentous changes in world economic history. With a heavy debt load and the Fed’s willingness to print away the US dollar, the dollar will soon lose its world reserve status. The dollar crash will come sooner rather than later.
“It is my opinion that within the next year or possibly two years, the dollar will lose its reserve currency status, and the US bond market will crash, taking the stock market with it,” Russell said.
“The US debt is now roughly 90 per cent of our gross national product. This ratio is widely considered to be dangerous. The Treasuries are now in a massive bubble while offering almost no yields. All bonds are in a bubble. Even the yield on some junk bonds is down to around 6 per cent. To sum up, bonds are in a gigantic bubble that I expect will burst this year or, at the farthest, next year.”
Given Roberts’ and Russell’s views, we can surmise that the Fed’s orchestration to suppress the gold price is an attempt to buy time. At issue is the derivatives market, now with a nominal value of $1,000 trillion. The global banks are heavily exposed to the derivatives market. The Fed’s money printing is in fact designed to inject liquidity into the global banks to keep them afloat from the exposure to financial derivatives. Any tiny losses would wipe out their capital base, turning them into zombie banks, though many of them are already zombie banks. The Fed is now manipulating the bond market and also the interest rate at zero per cent. There is no free market. Gold prices have also been manipulated to buy time for the dollar. If the dollar were to fall, interest rates would rise. That would crash the bond market followed by the stock market.
But perhaps the financial system is design to fail so that a single world currency can be introduced. The Fed’s buying time for the dollar could be part of a scheme that would launch the single world currency when the timing is ripe. The International Monetary Fund’s Special Drawing Rights (SDR) could be the single currency as the G-20 laid the groundwork for this unit in 2009.
On April 2, Jim Sinclair, another gold bug investor, told King World News that the current financial system is designed to fail, ahead of the introduction of the single world currency.
The Chinese, the Indians, the Russians and others would never agree to this single currency because the West would continue to dictate the international architecture of the global financial system. The crisis in the Korean Peninsula could be part of the geopolitical dialectic to accelerate this process to a single world currency – with the dollar wobbling in the backdrop.