The BlogBusinessfederal reserveSaudi Arabia

If You Don't Believe We're Already Back on a Gold Standard, Think Again

Surprisingly, a few days later Warren Buffett made the same observation. He said "the Fed is the greatest hedge fund in history." For Warren, this is great. He is on the receiving end of the biggest transfer of wealth in history from workers and savers to borrowers and speculators.
Open Image Modal
By 

Host of Keiser Report on RT

Host of Keiser Report on RT
|
This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.

In 1971, the U.S. 'closed the gold window' starting an era of global fiat money reference-pricing that has been unprecedented in history. Never before had the world operated on the basis of no country anywhere having a currency tied to something with intrinsic value like gold.

We did have the 'petrodollar' -- a U.S. dollar exchange rate based on the deal struck between Saudi Arabia and America -- for the U.S. to buy their oil and for the Saudis to buy U.S. dollars and bonds in return -- that started a multi-decade period of oil companies (with the U.S. military machine in their pocket) bullying the world into buying U.S. dollars or getting cut off from oil and dollar supplies. But now it's over.

This is important because the petrodollar has been the overriding motivation explaining why the U.S. is involved in multiple wars in various oil dependent economies and their satellites. U.S. wars have supported the petrodollar first and foremost and this lulled many into believing that Gold no longer played a role, but recent events prove these assumptions wrong.

Goodbye petrodollar, hello gold.

Leading up to the news that the Federal Reserve would not 'taper' their bond buying (i.e, QE) program we saw a precipitous drop in the price of gold. Since I know (like others including Peter Schiff, Bill Fleckenstein, and even James Rickards who stated as much on my show Keiser Report) that the Fed cannot 'taper' at any point going forward without throwing their entire Ponzi scheme into the ditch (causing every major bank in the world to instantly collapse) it was interesting to see the price of Gold trade down before the non-taper news -- unless you know the Fed, working alongside bankers on Wall St. and the City of London -- are actively managing the price of gold (along with stocks, bonds and currencies).

The Fed (who is implicated in every recent major market rigging scandal covering Forex, energy markets and credit default swaps) knew that it would make an announcement that would cause a buying panic in gold (that they were going to debase the currency some more) -- so the Fed had to go into the market and drive the price of Gold down ahead of the announcement or risk seeing gold pop to new all-time highs of $2,000 or more.

Conspiracy Theory?

I commented a few weeks ago that to understand the Fed you have to understand that it, along with JP Morgan and the other TBTF banks, are one giant hedge fund. And this is a huge negative for supporters of free markets who believe prices should be determined by the market -- not the Fed. Surprisingly, a few days later Warren Buffett made the same observation. He said "the Fed is the greatest hedge fund in history." For Warren, this is great. He is on the receiving end of the biggest transfer of wealth in history from workers and savers to borrowers and speculators. But for those not on the Fed's list of recipients of hundreds of billions worth of interest-free loans that never have to be paid back the fact that the Fed is a giant hedge fund is devastating. It's no coincidence that the day after the 'no tapering' (what equates to more 'food stamps for bankers' aka QE) it was announced the government is thinking about cutting actual food stamps for the non-recipients of the Fed's free money who can now expect a real 'taper' in the form of a cutback.

The huge price drop in gold before the taper announcement is the 'smoking gun' proof the Fed does exactly what Warren Buffett says they do: operate like an enormous hedge fund; making free loans to 'friends,' manipulating markets with impunity, disrupting price discovery with high powered algo trading fraud and pressuring governments to submit to various extortion schemes like Hank Paulson's TARP of 2008.

In effect, if you know what to look for, the world is on a gold standard now. The price of gold -- in terms of its role as the currency of last resort -- is telling you that the Fed Ponzi is running at full tilt and about to bust and that the ravages of having such a destructive mechanism at the heart of the economy are now unraveling.

Gold is telling you something. Are you listening?

Because even with all that hedge fund fraud effort at the Fed to keep the price of gold down, the trend of the price of gold is still up and at some point the ability to keep it down will fail and then, as Warren Buffett also said, 'Only when the tide goes out do you discover who's been swimming naked."

Also on HuffPost:

11 Lies About The Fed
Myth: The Fed actually prints money.(01 of11)
Open Image Modal
People commonly say that the Fed itself prints money. It's true that the Fed is in charge of the money supply. But technically, the Treasury Department prints money on the Fed's behalf. Asking the Treasury Department to print cash isn't even necessary for the Fed to buy securities. (credit:AP)
Myth: The Federal Reserve is spending money wastefully.(02 of11)
Open Image Modal
Both CNN anchor Erin Burnett and Republican vice presidential nominee Paul Ryan have compared the Federal Reserve's quantitative easing to government spending. But the Federal Reserve actually has created new money by expanding its balance sheet. The Fed earned a $77.4 billion profit last year, most of which it gave to the U.S. government. (credit:Getty)
Myth: The Fed is causing hyperinflation.(03 of11)
Open Image Modal
Someconservativeshave claimed that the Federal Reserve is causing hyperinflation. But inflation is actually at historically low levels, and there is no sign that is going to change. Core prices have risen just 1.4 percent over the past year, according to the Labor Department -- below the Federal Reserve's target of 2 percent. (credit:AP)
Myth: The amount of cash available has grown tremendously.(04 of11)
Open Image Modal
Some Federal Reserve critics claim that the Fed has devalued the U.S. dollar through a massive expansion of the amount of currency in circulation. But not only is inflation low; currency growth also has not really changed since the Fed started its stimulus measures, as noted by Business Insider's Joe Weisenthal. (credit:AP)
Myth: The gold standard would make prices more stable.(05 of11)
Open Image Modal
Rep. Ron Paul (R-Tex.) has claimed that bringing back the gold standard would make prices more stable. But prices actually were much less stable under the gold standard than they are today, as The Atlantic's Matthew O'Brien and Business Insider's Joe Weisenthal have noted. (credit:Getty Images)
Myth: The Fed is causing food and gas prices to rise.(06 of11)
Open Image Modal
CNN anchor Erin Burnett claimed in September that the Federal Reserve's stimulus measures have caused food and gas prices to rise. But many economists believe global supply and demand issues are influencing these prices, not Fed policy. And there actually is no correlation between the Fed's stimulus measures and commodity prices, according to some economists Paul Krugman and Dean Baker. (credit:Getty)
Myth: Quantitative easing has not helped job growth.(07 of11)
Open Image Modal
Some Federal Reserve critics claim that the Fed's stimulus measures have destroyed jobs. But the Fed's quantitative easing measures actually have saved or created more than 2 million jobs, according to the Fed's economists. In addition, JPMorgan Chase chief economist Michael Feroli told Bloomberg last month that QE3 will provide at least a small benefit to the economy. (credit:AP)
Myth: Tying the U.S. dollar to commodities would solve everything.(08 of11)
Open Image Modal
Rep. Paul Ryan (R-Wis.) has proposed tying the value of the U.S. dollar to a basket of commodities, in an aim to promote price stability. But this actually would cause prices to be much less stable and hurt the U.S. economy overall, as The Atlantic's Matthew O'Brien has noted. (credit:AP)
Myth: Ending the Fed would make the financial system more stable.(09 of11)
Open Image Modal
Rep. Ron Paul (R-Tex.) claims that ending the Federal Reserve and returning to the gold standard would make the U.S. financial system more stable. But the U.S. economy actually experienced longer and more frequent financial crises and recessions during the 19th century, when the U.S. was using the gold standard and did not have the Fed. (credit:AP)
Myth: The Fed can't do anything else to help job growth.(10 of11)
Open Image Modal
Manycommentators have claimed that there simply aren't any tools left in the Fed's toolkit to be able to help job growth. But some economistshave noted that the Fed could target a higher inflation rate to stimulate job growth. The Fed, however, has ruled this option out -- for now. (credit:AP)
Myth: The Fed can't easily unwind all of this stimulus.(11 of11)
Open Image Modal
Some commentatorshave claimed that the Fed can't safely unwind its quantitative easing measures. But the Fed's program involves buying some of the most heavily traded and owned securities in the world, Treasury and government-backed mortgage bonds. The Fed will likely have little problem finding buyers for these securities, all of which will eventually expire even if the Fed does nothing. But economists have noted that once the Fed decides it's time to unwind the stimulus, the economy will have improved to such an extent that this won't be an issue. (credit:AP)

Support HuffPost

At HuffPost, we believe that everyone needs high-quality journalism, but we understand that not everyone can afford to pay for expensive news subscriptions. That is why we are committed to providing deeply reported, carefully fact-checked news that is freely accessible to everyone.

Whether you come to HuffPost for updates on the 2024 presidential race, hard-hitting investigations into critical issues facing our country today, or trending stories that make you laugh, we appreciate you. The truth is, news costs money to produce, and we are proud that we have never put our stories behind an expensive paywall.

Would you join us to help keep our stories free for all? Your will go a long way.

Support HuffPost
Suggest a correction
|
Submit a tip