Sunday, October 12, 2008

A Message to CNBC

I don't usually like to simply repost stuff, but this one is just so on the money. It also sounds very similar to some of my recent posts. This is FreeGold by dictum! What I would suggest to Steve is that this same outcome can be reached through free market means by simply monetizing gold. But what the hell, if they will accept this plan, I won't complain:

The Golden Bailout Plan
(in answer to CNBC’s request for a plan)
By Steve Hickel - Posted on USAGold forum (Steve's writings from 1999-2000 can be found in this post.)

CNBC has asked business leaders, CEO’s to come forward with their plan to bailout the economy. They claimed that few were taking the challenge. Well here is a simple plan that may be crazy enough to just work.


Before any bailout plan can be implemented, it is a must that all financial skeletons be brought out into the light. If all the skeletons see the light of day, then transparency will reign. Confession is good for the soul and apparently ultimately financial markets. The problem is some financial entities hold secrets too powerful for the confession called the Public. Despite that, all time bombs need to be made known. Until that happens, we will not rise above the current financial debacle.

The most important confession of the day needs to be from the folks who are holding back the price of gold. They need to inform JQP (John Q. Public) how they have worked in conjunction with the Federal Reserve, the Treasury department, the Plunge Protection Team, and all the other cohorts involved in suppressing the price of gold to keep it from reaching its natural level. We just need a few insiders in the above “conspiracy” to come forward on the QT (quiet) and confess. They will feel better, I assure them.

Why is this particular confession important?

Primarily because the Dow to Gold ratio has seen a ratio of 2:1 or better in the last 100 years at least twice. We are currently in a third such correction of this ratio. In fact, we are well on the downward leg of this correction that promises – based on past performance – to be swift and brutal. As the Dow appears to be headed towards 7,000 (or lower), that would mean that gold will either raise to meet the DOW at $7,000 or the DOW will lower to meet gold at 860.

The author believes that most of us would prefer the DOW to not fall so low. Logic dictates that gold rise to the level of the DOW (and the sooner the better). Some have predicted that the DOW to Gold ratio will actual surpass historical corrections and go to a .25 to 1 ratio. That would mean that if gold holds its own currently, that the Dow will go to 200.

Ridiculous as this sounds, the confession of the gold suppressors needs to come as soon as possible. Once they have confessed to suppressing the price of gold, then those involved can reverse their position on the long side and keep the DOW from dropping further.

Once the skeletons expose themselves through contrition of those involved, it will be time for action.


In order to prevent the DOW from reaching 1000 (or less), the financial powers (that got us into this mess in the first place and who confessed and now feel much better) need to make an immediate adjust in the price of gold. What about the matter of free markets that would normally perform this function?

Well we know that such matters of free markets no longer matter in the current crisis. Besides, someone confessed to Gold not having been privy to a real free market anyway. So, stop kidding around. Raise the price of gold to a level that allows the US and Europe and the rest of G-11 countries to pay off their imbalances with gold and retain half their gold in the process. What level would gold have to “be risen” to in order to accomplish the above?

That is a tough question because we don’t even know if the US or Europe has the gold we think they do. So perhaps we should have a public inventory of the gold (since the above confession will have made the holders of gold feel better in the knowledge that all skeletons are in the public realm). Once we take an inventory of gold held (and owned) by the US and Europe and the remainder of the G-11 countries, we will then need a true accounting of all the debt that needs to be “paid off.” The author believes that these steps (inventory and an accounting of debt) should be done in parallel. Don’t wait to do one until the other is completed. Keeping the DOW from falling further is imperative.

As a point of discussion, let’s say that we limit our discussion to the US Debt levels (both on the books and any that might be confessed above to not be on the books – until now). Let’s just say that $20 Trillion is the actual number of US debt obligations. We will know more once the GAO or some independent organization let’s us know our real debt levels and the counters of US gold let us know the actual amount of Gold held free and clear in US depositories.

For argument sake (based on public domain information), lets assume that the amount of gold held by the US (free and clear) is 8,000 tons of gold. Eight thousand tons of gold equates to 8,000 X 32,000 troy ounces (there are 12 troy ounces in 1 troy ton). This adds up to 256,000,000 ounces. Current market value of gold (based on COMEX, the US-based futures market – which some folks believe is one of the culprits involved in the prices suppression scheme of gold – but this will already have been confessed so no worries) is $860. For some unknown or forgotten reason, US gold appears to be priced at $42.22 per ounce. So much the better for reasons explained below.

In order to determined what value gold needs to “be risen” to in order to pay off $20 Trillion in debt and still have one-half of US gold free and clear, we simply need to divide $20 Trillion by 256,000,000 ounces and double the value (keeping half – remember?). The author’s calculator suggest that amount to be $XX per ounce ($XX per ounce doubled). Or, if you prefer, divide $20 Trillion by one-half of 256,000,000 or 128,000,000 ounces. In any case, the answer is 20 trillion divided by 128 million = one hundred fifty-six thousand two hundred fifty or $156,000 per ounce.

We need to factor in the current value of the audited US gold at $42.22. Subtracting $42.22 from $156,000 gives us the amount that the gold needs “to be risen to” in order to pay of the assumed $20 Trillion in US debt and to keep half of US gold in the process. That amount is $156,182.78. To put this in perspective, gold needs to rise from $860 (current value last Friday) to $156,128.78 – that is a 181.54 increase in the current price of gold. If someone disagrees with the above math, please speak up now.
As far fetched as this plan would seem and to account for any variances that may arise due to European confessions and audits and accounting of debts and other countries such as China and Russia factoring their thoughts, it will actually keep the DOW from falling to 1,000 and will put the US and Europe and other countries on much more solid financials. DEBT Free!

If some financial institutions failed to confess that they may have been naked short gold as this process unfolds (and failed to go long), they may find having to buy gold at $156,128.78 per ounce daunting. In fact, it would most likely bankrupt them and their 3rd generation offspring. But that was what the process of confession was to accomplish – show us where all the skeletons are so we can deal with them prior to “having gold rise” to $156,128.78 per ounce.

Some may take exception here and state that this is the same as inflation rising by a factor of 181 times. They may also claim that it is the same as going on the gold standard. The author respectfully disagrees. He thinks that this a one-time adjustment. Raise the price of gold, pay off the debts, then figure out a better way to do things going forward.

In case the confessors believe that gold should be kept from the hands of the masses by attempting to confiscate gold or make it illegal for common man to own, the author believes they are missing the point. The points is to raise the price of gold one time very quickly to $156,128.78. Pay the debts public and private and come out the other end with a better system that those smarter than the author would know how to do.

The author is not sure why CNBC has not had any business leaders come forward to suggest the plan of Confession and Action but no one has heard of another better plan other than create more debt to pay off other debt. It is time to act NOW.

1 comment:

FOFOA said...

Chris Powell of GATA liked Steve's piece:

Chris Powell ( 13October2008; 19:46)
The golden bailout plan
9:42p ET Monday, October 13, 2008

Dear Friend of GATA and Gold:

Steve Hickel writes in his essay posted tonight at Gold-Eagle, “The Golden Bailout Plan,” that central banks should stop fighting gold and let it rise far enough that they can eliminate their otherwise unpayable debts by selling half their remaining gold reserves. This is a bit similar to the suggestion made in 2006 by the Scottish economist Peter Millar, who wrote in a scholarly paper that central banks would need to let gold rise into the thousands of dollars per ounce in order to avert a catastrophic debt deflation (

Who knows? In a year or two or three you might be able to liquidate your home mortgage just by pawning your watch or wedding ring.

You can find Hickel’s essay at Gold-Eagle here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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