Why Gold?

From about 1815 to 1915, all the major currencies like Pound, Franc, Dollar, Mark etc was gold backed. This meant their exchange rates were also linked to gold. One Dollar would be defined as say, 1/30th of an ounce of gold. Pound was say, 1/6th of an ounce of gold. Therefore the exchange rate between USD and Pound would be $1 = 0.2 Pounds.

This was simple mathematics and it made sense. If you had $30, you can take it to a Bank and demand 1 ounce of Gold. The banks were obliged to keep gold reserves. They were fully solvent.

First world war changed this. Urgency for financing the war gave way to partial gold back-up. Governments started printing currency notes without gold back up.

Thus, currencies became partially gold based. They became non-convertible (to gold) nationally. But internationally, gold back-up continued. All transactions between international banks, exports etc were backed by gold.

Even this partial gold base prevented countries from printing paper money. How?

Lets say one country prints paper money to boost their domestic money supply. What will happen?

As money supply increases, prices will rise. It would be much cheaper to buy imported goods than to produce. Import would mean outflow of gold. As gold reserves are limited, they will be forced to keep this in check and look for efficiency in production or reduction in money supply.

Simple, isn't it?

If the world had kept gold standard, the economic growth as we see today would not have happened. But the growth would have been more natural and organic.

Fractional reserve banking system was the steroid. It lead to credit creation. $1 million in printed currency based on $10000 gold reserve would become $10 million in credit. This credit would drive the economy. So, $10,000 became $10 Million.

Worldwide, especially in the western world, all the governments are used to this opium of fiat currency. They are addicted to it. The parasite took over the host and became the host itself. Gold gave way to paper.

What is finance? It is just a way to facilitate the meeting between capital and the generation of goods and services, which we call economy. But, now finance is the king. Real capital and real economy - for which we introduced finance - is forgotten. In the U.S, all the growth in the last 25 years has been in finance. Clever guys created instruments called derivatives which could be based on the price of anything from pepper to oil or the thickness of your backyard grass. The turnover of these derivatives were higher than the turnover of actual commodity or instrument they supposedly represent.

It is a bit like self-fulfilling betting results. I will explain.

Imagine you are a part of a vast digital network of gamblers, numbering in the millions. You are betting your substantial portfolio on the results of a general election happening in your country. There are two candidates - X & Y. You see that in the betting market, X has more odds, meaning the betting market expects Y to win. Even though ideologically you are with X, you want to win and hence you bet on Y. Now that you are committed, you will make sure that not only you, but all your friends and relatives vote for Y on the voting day. The betting market now influenced your real life.

We forget why the betting market was skewed to Y in the first place. It is because big money got there before you did and made it look like a win situation for their man Y. You were part of the crowd lead by these pied pipers.

This is what happened in the case of oil last year. Large business houses were betting on it, driving the real price up. It happens to commodities, your food, real estate, anything and everything. Warren Buffet calls these derivatives "financial weapons of mass destruction".

Niall Ferguson, the famous economic historian, wrote an article in Vanity Fair in 2008:

"We have witnessed the death of a planet. Call it Planet Finance. Two years ago, in 2006, the measured economic output of the entire world was worth around $48.6 trillion. The total market capitalization of the world’s stock markets was $50.6 trillion, 4 percent larger. The total value of domestic and international bonds was $67.9 trillion, 40 percent larger. Planet Finance was beginning to dwarf Planet Earth"

The facilitator became larger than the deal. Parasite became bigger than the host.

Let us come back to gold. Do you know that there is a big gap between the supply and demand of gold? The total world wide demand for gold is about 4000 tonnes per annum. The supply is only about 2500 tonnes. But then, why aren't we seeing the price rise in gold that it actually deserves? Who is filling this gap? Who is keeping it down artificially? What is their purpose? How do they do it?

I know the who part. It is western central banks and the U.S Federal Reserve.

Why? Beacuse this is very vital to their strong dollar policy. The low price of gold has a sort of a calming effect in the economy. To maintain the illusion that that the paper you are holding is valuable. Not to cause a flight towards the precious metal. Which would be disastrous and destructive now.

How? I actually do not know. May be they are selling it from their reserves. Deceit has its own ways. You will get more answers when Ron Paul's bill to audit the Fed passes in the Senate.

For 6000 years, mankind held gold as valuable. All these years what we have managed to dig out is about the size of a 20m cube - about 140,000 tonnes.

Here is how I see it. This may be crazy - may be there is no scientific basis. But this is how my mind works. I am just a common man. Prove me wrong if you can.

If this were the original and only money, this should represent that $48.6 trillion that Niall Ferguson was talking about. I mean what the world is truly worth. Any growth would be offset by additional mining of gold.

Now I do my math. You will not find this anywhere. It is my original thought.

I will round things up. $48.6 trillion to $50 Trillion.

$50 Trillion divided by 140,000 tonnes should give me intricate value of gold per tonne. $50*1000*1000*10,00000 divided by 140,000*1000*1000. Then you multiply the result by 31.1034768 to convert it to $ value per ounce.

This works out to be about $11,108 per ounce of gold. This is the real intrinsic value. The current value is about $900.

Add the frenzy on top and on a speculative day, it could go to $20,000 per ounce!! People are mad, they are crazy. You can't predict what will happen once hell breaks loose. There simply aren't any financial or economic models available.

As the D-day approaches, you will see a sudden plunge in the value of gold. I bet my dear life that this will happen. That is only a red herring. Big money is trying to make you sell so that they can buy it at low value. Don't be disheartened. Keep buying. It should pay off.

Therefore, I am with 6000 year history. Not with a piece of paper invented about a couple of hundred years back. I want to make sure I am holding the real asset at the time of reckoning. My minimum point of argument would be not to look like an idiot at the crucial time. I don't want to get caught swimming naked when the tide turns low.

What about you?

The end game is on

Cybersecurity Act of 2009, if passed in the U.S Senate, will be the beginning of the end of free speech. This bill gives the President virtually complete authority to do anything with the internet.

The similarities are unmistakeable.

Amidst 9/11, they passed an Act which gave them power to arrest and jail a person indefinitely without trial.

The TARP program was announced with a veiled threat of an impending market collapse. Billions went into executive paychecks and bonuses. Trillions of dollars went to Wall Street extortionists.

Now the U.S government is creating a situation of terror to pass this bill. They are screaming of cyber attacks on all government agency websites which could affect national security. You will see some dramas if this bill doesn't pass. Some of the "crucial" websites would be under "attack" in 9/11 mode!

The real stories are always ignored in CNN, Foxtel,CNBC etc. Only a few of us ignore mainstream media and seek the truth from internet. Now they are taking it over.

Both work for the same masters. Bush and Obama. Latter is the made up face of imperialism.

What are you doing - you Americans? Watching TV 6 hours a day and eating burgers while your freedom is being snatched away from you?

Shame on you.