Monday, April 27, 2009

The Judgment of Value

The central banks, the printers of money, the governments, the treasuries, the powers that be have no say in the value of a dollar. That judgment of value is reserved for the recipient of those freshly printed dollars.

Even those of us that hold dollars, that hoard them in our mattresses or bank accounts, have no say in the value of those dollars. The people that we offer those dollars to have the power to judge their worth, and to decide how much time, labor or real goods they are willing to part with for a piece of paper.

Think about the fact that Ben Bernanke said that he can control the value of the dollar with the printing press (or today's electronic equivalent). Can he? Does he have that control? So far he seems to be printing with reckless abandon yet we, the people, still receive those dollars and judge them to be worth the same as before. Have you insisted on a raise at work? Have you told your boss that you will not come back to work unless you receive more dollars for each hour of your valuable time? Of course not.

So by what mechanism will the recipients of dollars finally tell Ben that he cannot have as much "stuff" for his magic paper? Ben truly does not have control of this. Everyone EXCEPT Ben does.

The problem is that most of us don't have a choice. The only thing we have to part with in exchange for paper dollars is our time. And at that, we are living right at the margin. In other words, we trade time today for what we need tomorrow. And paper dollars are the medium of this exchange. So we don't have the luxury or the power to pass judgment.

Those that DO have the luxury and power of passing judgment on the value of the dollar are the people that have great surpluses of wealth and real goods. Those that control the industries of the world and those that control the stockpiles of real wealth and the stuff we all want and need.

The mechanism by which they pass this judgment is an enormously complex and recondite concept. Our government tells us this concept is called "inflation" (or "deflation"). They tell us that these people of great control either "inflate" prices or "deflate" them. But in reality, these people are simply trying to balance the goods they can receive in the future against what they are willing to part with in the present. To do this, they weigh what they have in stock against what they need and want. And they pay close attention to the cost of those other things as well as the availability and time horizon for acquiring them.

Of these people of great surplus, there are actually two groups. One group controls the distribution of wants, and the other the distribution of needs. In the simplest terms, think about the people to whom you offer your paper dollars. There is your grocer who exchanges food for your dollars in the latter group, and there is the electronics dealer who exchanges televisions and iPods in the former. Together, these two groups bid for your dollars with the amount of goods they offer in exchange. And in this way, they judge the value of the dollar. The central banker has no say in the matter.

The wants and needs groups can be differentiated by saying that wants are subjective and needs are objective. In other words, EVERYONE has certain needs, but WANTS are subjective to the individual and to current circumstances. Needs require very little marketing. They do not have to convince you that you need something like food. But wants require a great deal of marketing. Those people that control the "wants stockpile" must convince you that THEIR want is actually a need, especially during hard times.

So it follows that one group has greater control of the judgment of a dollar's value than the other. One group will always have people lining up to offer their dollars for judgment, while the other group must actually line up FOR your dollars. Do you see the difference?

When it comes to needs, people are in a long line with money in outstretched hands waiting for that money to be judged. When it comes to wants, SUPPLIERS are in a long line with "wants" in outstretched hands waiting for their WANTS to be judged by you and your dollars. So in a way, they no longer have control of the judgment of the value of currency. They have LOST that power during hard economic times.

Ben Bernanke says he is worried about "deflation", or his definition of deflation which is these suppliers LOWERING their prices. So in order to fight against this, he is attempting to double and triple the amount of currency in circulation. The idea being that with more dollars out there, these suppliers won't want to part with their goods for the same amount as before. They will want more.

The problem is that Ben (and the deflationists) are looking at the suppliers that NO LONGER HAVE CONTROL OF THE JUDGMENT! Ben is reacting to the actions of people who are only reacting to the bad economy. These people are not lowering their prices because they judged the dollar to be more valuable. They are at the mercy of collapsing bubbles and a bad economy. So Ben is printing in vain based on his theory and his objective.

But on the other hand, there is a sinister undercurrent to this situation. That group of suppliers that still DOES have control of the judgment of the value of dollars is still out there. It has not lowered its prices and it is watching these developments. It is watching Ben's frantic and reckless printing and it is wondering, "as I part with these life necessities in exchange for your dollars, will I be able to later recoup a commensurate amount of stuff?"

This group is watching this very closely. It is weighing its own stockpile of "needs" against what IT wants and needs, and it is paying close attention to cost, availability and time horizon for acquiring stuff.

This group is being completely ignored by Ben Bernanke and the other deflationists. But the fact of the matter is that this relatively small group of people is like the Supreme Court of Judgment for the value of the dollar. Once this group decides that the dollar will no longer work as a medium to transfer to them a commensurate amount of stuff with what they are parting with in the present, watch out!

This group which is being ignored is a little jumpy right now. They know they are being ignored and they know what is going on. They know that they are sitting on stuff that everyone needs, including themselves. And they are paying close attention to the size of their stockpiles. They are worried about the resupply lines. They are worried about getting "caught with their pants down". They are worried about waking up one day and finding themselves with empty shelves and a bag full of worthless paper.

So far they have not acted on this worry. They are still playing along. But make no mistake, they alone have the judgment power that makes ALL the difference. Be nice to them, because THEY will ultimately judge the value of your dollars. And if this makes you nervous, then why not exchange a few of your dollars for something they will judge well once they have sent the dollar to the stockade? Then, when empty shelves are everywhere, you will still have something they will want in exchange for what little they have left, hidden in the back.

Sunday, April 26, 2009


Gold is not a commodity. The CBs have used every weapon to keep it's price low . Understand me, Gold is now, today, a devalued currency being used in world trade!

How much further can they take this? The world private stockpiles that could be sold have been. The CBs are heavy into their own stuff now and are over their heads if they had to make good on all the private deals ( read my other posts ) . The economic game is ending! Watch closely as the world currencies and markets fall one by one. Watch in absolute wonder as the demand for oil plunges and it's price goes thru the roof. Yes, oil stocks will crash with the markets. And gold? You will never know it's price. It will stop all trading as it slices thru $10,000+.

Who am I? As I will not be around for long so I am nobody. But, follow with me as all of this takes place in your time.

Hear me now, what the wealthy and powerful know: "real value does not have to always be stated or converted throughout time. It need only be priced once during the experience of life, that will be much more than enough!" Worldwide the oil business is still conducted in dollars. But, an interesting side show is now taking place that will change the way we think about gold and oil!

I offer this, do not use the solid reasons for owning physical gold, as a purpose to trade it. Your profits from such trade, will, on the last day, in the heat of fire, burn as paper does! Sir, the world is going to change, and the rules of engagement will also change. Gold will be repriced, once! It will be enough for your time of life.

In this day, as not in the past, the loss of paper value as a concept will destroy the very foundation of wealth that this economic system is built on. This drama has started and is well underway!

In the world today there are only three assets, gold, oil and currencies. The paper currencies, so long admired and accepted are now in a war of self destruction. They will consume each other in an end battle of "I'm the last man standing but have lost all use as a unit of value".

Ever wonder why the US treasury has not sold gold, it would have the opposite effect! The oil that since the early 70s, held together the world monetary system is now causing it to slide apart! We are not going to see inflation or deflation again. What we are now seeing is the "destruction" of our paper monetary system.

The actual buying of gold ( no other metals ) by huge players is not a prediction, it is ongoing.

The price of the metal in currency terms will be made for all to see as it moves quickly upward for a very short period of time
( 30 days ) . After that only black market traders and third world nobodies will understand it's price!

Saturday, April 25, 2009

MK on China and Gold

From the USAGold forum...

MK ( 25April2009; 12:50)
China and gold: In the footsteps of giants

There may be something of a misunderstanding with respect to the increase in Chinese reserves. The bulk of that gold has come from purchases of their own domestic production, not open market purchases. The impact on the price is therefore indirect. However, because China is the largest gold producer in the world, and it is retaining the bulk of its production for reserve diversification purposes, that impact is significant.

Consider, for example, if South Africa had been able to retain the bulk of its production during the years it was the prime producer. It would today be one of the richest countries in the world. As Pierre Lassonde reminded us in the recent past, there haven’t been any large scale in-ground discoveries in many years. That puts China in a very strong position with respect to the gold market, and from what we can gather, it has decided to play that card. Because of its strong exports, it doesn’t need to export gold like South Africa did to sustain and strengthen its economy. China will be able to build gold reserves and make the yuan stronger — its financial muscle the weight of its gold holdings which are likely to grow year to year, and perhaps even accelerate as new fields are brought into production. In addition, as the price of gold rises, so too will the value of its gold reserve. The currency advantage is the one thing the press reports yesterday and this morning overlooked, and as time passes, that may be the most important.

Now, I realize that all of this is not quite so glamorous as China buying up every loose official sector ounce, but, at the same time, what I have described above will have a greater long term impact than any purchase of a one-off official sector sale. China, true to its reputation for patience and steady, long-term progress toward its goals, has taken the golden path and now they want the world to know about it.

Last April in my Golden Gut Check essay I mentioned the importance of China keeping its gold production home. At the time, the market overlooked it as a major factor in future pricing considerations. Now, with publication of a reserve gain which occurred over a five year period, hard numbers are available. China seems to want to make a point and the general market seems to have recognized its importance. (The China gold story made the front page of today’s Financial Times weekend edition.)

Taking this discussion a step further (and this might be worth another essay by itself) at some point, the Chinese might be very interested in a revaluation that compensates it for its dollar stockpile, and others might be willing to go along as the least offensive means to bringing balance to the international economic equation. That revaluation could occur informally with the market moving steadily higher over the years in a free-market dynamic, or it could occur formally as a return to the gold standard. I do not need to explain to this forum’s readers and participants what that would mean to gold owners the world over.

While we ponder the meaning of Chinese gold reserve growth, let’s not set aside the other major gold story from China during the past week. It’s request to the IMF that it sell the entirety of its 3217 tonne reserve coincides with its announcement on reserves and is intended to deliver a message to the financial markets: It sees gold as an important part of the overall international monetary scheme — a scheme that may evolve to a system in time. If China were to purchase the full 3217 tonnes at $1000 per ounce, the price would be $103 billion. With current foreign reserves (of all description) at $1.95 trillion, the purchase price of all the IMF gold would amount to a paltry 5.25% of China’s total reserves. China has made the IMF gold sale bludgeon look more like a wet noodle.

From China’s perspective here’s how it looks:

$1,950 billion total reserves
$ -103 billion cost of 3217 tonnes of IMF gold

$1,847 billion total reserves remaining

(And by the way China would then become the largest holder of gold in the world after the United States and the European Union.)

The message contained in China’s actions of the past week is unmistakable. China knows that gold is making a comeback almost as a force of nature. Its return to the center of value will be dictated by history and events with or without the help of the world’s governments. I believe China is preparing for that day, and from its perspective apparently it cannot prepare fast enough. The first step toward stability for both individuals and nation states is a step in the direction of gold and China has taken it.

Talk about following in the footsteps of giants (with a nod to my old friend, Another). . . . .


Sat Jan 10 1998 21:03

Someone once said, “noone wants gold, that’s why the US$ price keeps falling”. Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely because “too many people are buying it”! Think now, if you are a person of “great worth” is it not better for you to acquire gold over years, at better prices? If you are one of “small worth”, can you not follow in the footsteps of giants? I tell you, it is an easy path to follow! An experienced guide is not needed for this trail, look around you and see. The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is loosing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing? The CBs are no longer lending! They will not anymore! We have reached production costs. Oil will have nothing of “gold paper” if gold must stay in the ground! And a CB values the wishes of oil far above it’s return of leased gold! Hear me now, “if gold tries to go lower than US$ $280 the BIS will buy it OUTRIGHT in the OPEN for all to see”! They must! They will! I know. For no currency system could stand if “Oil” were to bid for gold!

Oil has kept “the deal” as the CBs sold paper to lower golds price! All is fair. Asia will bid for gold not as in the past. They now know that the free flow of oil has more value than the Pacific economy. But the price that was paid may be more than the world currency system can endure.

To close:

The US$ has risen on a flight of fear. That will now end as the LBMA shorts are given to wolves. If this fire burns too hot, gold will turn and it’s trading halted. The price of oil will explode as gold becomes the “world oil currency”! Even now oil has locked the IMFs gold, Asia will bid against them no more. We come to extreame times.

Risk not your wealth in paper, we enter a period of truth.

The complete writings of ANOTHER - (USAGOLD)

Onward my friends and -

Semper aurum,

Michael J. Kosares
The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold
Owner, USAGOLD-Centennial Precious Metals, Inc.



Gold - The Yuan Goes Global – Consequences!
By Julian D. W. Phillips
We do not believe there will be a Gold Standard because it is anathema to all bankers, central bankers included. What is likely to happen is that a formula will be worked out where gold can be used to increase the credibility of and confidence in paper money again.

By Jim Willie
It is my firm belief that the Chinese controlled the G20 Agenda totally, with direct coordination from the Russians, but made gentlemanly agreements not to reveal their control. My firm belief is that the Chinese and Russian leaders at the G20 Meeting in London had contentious private meetings. Premier Wen Jiabao and Dmitri Medvedev probably informed President Obama that the USDollar is dead as a uni-polar global reserve currency, that the Chinese yuan would expand its global function, that the Special Drawing Rights could fill a void until more specific new currencies could be launched in the future, but that the choreographed glitz of the London meeting could proceed on its carefully planned stage.

GATA’s Credibility Soars On China Gold Buying News
By Bill Murphy
As a result of Frank Veneroso’s brilliant supply/demand work in years past, we mentioned that one of the demand areas, that the likes of a GFMS was not accounting for, was China, and that someday their stealth buying would be reported. Voila…


Friday, April 24, 2009

A little light humor... case you missed it at The Ticker.

Here's Karl's warning:

Warning: Not kid-friendly, and not (very) workplace-friendly either, but this pretty much sums up how I feel about all this lawlessness.

Here's my advice:

Turn up your volume if you are at work on Wall Street. ;)

Gene Burnett's albums can be downloaded at:

Thursday, April 23, 2009

Covert Market Operations?

We all know that the twelve members of the FOMC (the Federal OPEN Market Committee) meet eight times a year in private to decide what their OPEN market operations will be in the interim between meetings. The FOMC was created two months after the gold confiscation of 1933 by the Banking Act of 1933 (also known as Glass-Steagall) at the height of the banking crisis. The hope was that it would stabilize the banking system. The FDIC was also created by that same act.

And we also know that at the latest FOMC meeting on March 17-18 they decided to begin OPENLY purchasing long-term Treasury securities, up to $300 billion worth. This is the boldest OPEN market operation ever, as it signifies an open monetization of official US debt even if its stated purpose is to help the housing market by lowering interest rates. The FOMC will meet again next week on April 28-29.

So I think it is fairly safe to say that OPEN market operations have hit historic levels in the past 6 months.

But what about COVERT market operations?

I want to avoid sounding like a conspiracy nut here, so I will focus only on the facts.

On March 18, 1988, President Ronald Reagan signed Executive Order 12631 creating the President's Working Group on Financial Markets. Like Glass-Steagall, this act was a reaction to a crisis. In this case, the crisis was in the stock market. Ronald Reagan created this group as a direct response to "Black Monday", the October 19, 1987 collapse of the stock market with the goal of "maintaining investor confidence". This "Working Group" is a kind of FCMC (Federal COVERT Market Committee), consisting today of Timothy Geithner, Ben Bernanke, Mary Schapiro of the SEC and Michael Dunn, chairman of the CFTC. (Special note: Barack Obama's nominee for chairman of the CFTC is Gary Gensler, "former Goldman Sachs employee and derivatives cheerleader", currently being blocked in the senate.)

In an October 27, 1989 article in the Wall Street Journal titled "Have Fed Support Stock Market, Too", a former Federal Reserve Board member Robert Heller opined that "Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole."

In a January 1997 speech given in Belgium, Alan Greenspan said the Fed could use "direct intervention in market events."

In a 2006 London Telegraph article titled "Paulson Reactivates Secretive Support Team to Prevent Markets Meltdown", George Stephanopoulos, former Clinton aide is quoted saying the Working Group has "an informal agreement among the major banks to come in and start to buy stock if there appears to be a problem."

In 2001, the London Observer reported that "the Fed, supported by the banks, will buy equities from mutual funds and other institutional sellers if there is evidence of panic selling in the wake of last week's carnage."

In March 2002, the FT quoted an anonymous Fed official saying the Fed was considering "buying US equities", and that they could "theoretically buy anything to pump money into the system", including "state and local debt, real estate and gold mines, any asset."

Then in May 2002, the Australian Financial Review attibuted a 234 point surge to this secretive group, saying "There is a belief that this team represents a powerful and secretive hand that is ready to act any time the Dow looks ready to tank big-time." [1]

Now I'm sure that there is plenty that goes on behind the scenes within the hallowed chambers of Wall Street and Washington, DC. But I have identified three main periods of market activity during the past year that have a particular stench.

The first runs from July 15 through September 15, 2008. I chronicled my observations in the post Connecting the Dots:
July 11, 2008 – INDYMAC bank is seized by the FDIC.

July 14, 2008 - This document is signed by the Comptroller of the Currency and the Director of the Office of Thrift Supervision.

July 15, 2008 - It is also signed by the Secretary of the Federal Reserve and the Executive Secretary of the FDIC.

July 16, 2008 – The above document is released which tells banks how much capital they must have. This is an international issue known as the Basel II Accord. It requires banks to be properly capitalized or else foreign (European) banks will be forbidden from doing business with them. These guidelines must be met by the end of the fiscal year, 2008, which is September 30, 2008.... TODAY!

July 15, 2008 – Gold again peaks, stocks hit new lows, and the PPT along with the world's Central Banks go into action. For the next two (2) months, stocks go up, the dollar goes up, and gold goes down. This is a massive intervention effort to give the remaining banks a chance to get in compliance with Basel II. To get recapitalized. Which didn't quite happen like they hoped.

The second period runs through September and October of 2008, when US Treasuries staged an unbelievable rally, ironically called a "flight to safety". Jim Willie describes this questionable period in Gold and Treasury Feeder System:
Notice how the primary impetus behind the supposed USTBond rally was the mountain of purchases this past autumn by the USGovt and UKGovt, as seen in the Caribbean banks, where their fingerprints are often found without any mention in the press whatsoever. The US & UK illicit games conducted in Caribbean banks is given cover from hedge funds and Arab accounts, but not enough to hide what is really happening. In July 2008, the Caribbean bank center ledger item showed $117 billion in USTreasurys. By October 2008 the amount zoomed up to $204 billion. This is not Bermuda and Bahamas redeeming sea conch shells, molasses barrels, and salvaged marine vessels for USTreasury Bonds. These are games played by the syndicates running the central banks.

The bigger question is whether USTBonds were purchased with newly printed money. Clearly they were in my view.

Indeed, Jim, this is the biggest question of all.

The third and final questionable period I will highlight started March 9, 2009 and continues today. It is the ongoing stock rally in midst of a really ugly reality.

Tyler Durden over at Zero Hedge has been beating the drum that Goldman Sachs seems to have an unusually high level of "participation" in this rally:
This is getting surreal. Goldman principal program trading is now well over 5x compared to its customer and agency trades and a 150 million share pick up compared to last week. For yet another week, Goldman's principal trading represents more than half of all NYSE member firm principal transactions.

And from Helena Handbasket in the comments section:
GS traded more than 50% of all trades initiated FOR THEIR OWN ACCOUNT, but that volume (1B shares) was 20% of the total traded on the exchange. As in everyone. 1 in 5 trades on the exchange were initiated by Goldman for their own benefit.

On April 18, Zero Hedge posted The Visible Hand with a 2005 report from Sprott Asset Management exposing the PPT (The President's Working Group). This report is a great read on the subject, but what I found more interesting were a couple comments below the post, presumably by a floor trader. For some reason the first comment was subsequently deleted, but Hat Tip to alek_a for preserving it here on this blog:

[First Comment (deleted)]: It's just an article from years ago confirming the PPT. I didn't read it but here is the real truth.

These days there is no single entity, rather there are 6 large hedge funds located in the Reston Virginia, and DC area who are the commercial accounts.

The commercial accounts take their direction from either the Treasury or Fed depending on which branch has the lead. These hedge funds are the ones placing large orders to GS, JPM, etc... Market moving orders. So when you hear that 'paper is buying' large quantities on the floor you cannot really tell who it is and all you can do is speculate. It looks like it's coming from GS but they are just executing an order for a client. There is no trail back to Uncle Sam.

Do you really think the government would go directly to GS or JPM to place orders? That is laughable. Anyway the end result is the same, you are all getting gamed.

And our hero Tyler is the only one who is exposing the `real` truth so stay tuned to Zero Hedge.

[Second Comment]: The Reston6...

The big block orders(market movers) come into the pit through paper. When I ask paper(GS, JPM,etc) who are they buying or selling for there are 6 funds that always are referenced. The Reston 6.

(Here is an aerial photo of PJM Capital near Reston, Va. Possibly a front operation for the President's Working Group according to the commenter.)

Jesse's Crossroads Cafe describes the recent action in the S&P500 with a bit of asian color:
The action in the SP futures market has been particularly heavy handed and blatant since the heads of the money center banks met with the Community-Organizer-in-Chief at the White House. This market is being shoved around like a gaijin granny on the Tokyo subway in rush hour...

These kinds of COVERT market operations require immense sums of money to pull off. Money that certainly does not come from the sale of Treasuries if they are using it to also buy Treasuries. Think about it.

The Caribbean Treasury purchases in September and October alone were at least $80 billion. So where does this money come from? Sea shell sales? Let's see what Ben Bernanke had to say about this on November 21, 2002:
"...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."

I ask you this; If they are crediting dollars electronically in order to manage the markets, what does this mean? What are the implications? Would this not be bigger than Watergate? Is this not like cheating at poker?

And what about the temptations? Where is all this money ending up? Who is profiting? And who is losing?

And if something like this were credibly exposed, if someone blew the whistle, what would be the consequences? What would China do?

Is a market rally worth the risks? How about the possibility of a resumption of public confidence? Is that worth the risk? Perhaps only private profits are worth a risk like this, assuming it is even happening.

Then again, does it really matter how this is being funded? Or is it simply the appearance of impropriety without credible explanation that really matters? Someone wise once said, "As I've matured, I've learned that it takes years to build up trust, and it only takes suspicion, not proof, to destroy it."


[1] Quotes sourced in "Bad Money" by Kevin Phillips

Tuesday, April 21, 2009

Fear Manipulates Gold

By Hubert Moolman
20 April 2009

There are so many people that write to me stating that gold will not go very high, not even over the $1000 mark, because certain individuals and institutions do not want this and because it is not in their interest, they will take the gold price down.

In addition to this there is so much talk about how the gold price is manipulated. So, I thought that it is time for me to at least say something about this issue.

When I hear of this so called manipulation and how there are powerful people who will keep beating the gold price down, there are two things that stand out. One, is the fact that the focus on the manipulation issue is often about the hidden or unknown to many. Two, is how fear is very pervasive in this issue.

The manipulation in gold and silver is not so much on COMEX, and all other gold and silver markets; it is much bigger than that. Also the gold price is not being taken down; it was taken down a long time ago, when we started using fiat money. Its true value was not taken down, it is still there but we need to realise the value by using it as money.

The big manipulation story is quite simple in that gold and silver are not being used as money and has now been relegated to “just another investment” status, therefore not realising its full value to society. The key manipulators are governments and we the people who keep using the fiat money instead of real money.

The bad thing about this is the fact that actually we the people can fight this manipulation by using (as money) gold and silver and by stop using fiat, but we are helpless or paralysed through fear and lack of knowledge. The starting point would certainly be to save our wealth in gold and silver.

Fear contributes enormously to keeping this manipulation going.

The fear factor is so pervasive and is also very evident in how people view the price of gold. So many people are quick to point out how some people with a lot of power will take the price of gold down. This is what in many cases keeps them from accumulating gold and silver.

If you are one of those people, then I would like to give you some advice. Do not be a fool. Rather heed the following advice:

“The fear of man bringeth a snare” - Proverbs 29:25

“fear ye not the reproach of men, neither be ye afraid of their reviling” - Isaiah 51:7

Fear keeps you in bonds, it prevents you from enjoying the benefits that real honest money brings. Fear prevents you from exercising your God given power. The price of gold will soar past the $1000 marks and marks much higher than that. There is nothing that those so called powerful people can do other than also ride the gold bull.

Physical gold and silver is power to obtain what is considered value, whereas fiat money is a right to obtain what is considered value.

There is a big difference: Power is an ability to act or do, and a right is a claim or a title. With a right your ability to act is dependent on whether you are allowed the power to act.

The ability to obtain value for fiat money is dependent on the issuer of the fiat money. If it is electronic fiat, like money in the bank, then you can use your money provided the bank does not freeze your account. The bank therefore gives power to your right. There are many more ways in which to illustrate why fiat money is a right (a very shaky right) and not power.

The fact is that power breeds confidence, whereas a right breeds fear (fear of the one who grants the right). Dependence on rights eventually lead to a welfare state, people who look to a government to provide for everything instead of using their own ability.


The manipulation of gold and silver is not a secret, it is in the open. Everyone knows that we do not use gold and silver as money when it is by far the most superior form of money. The manipulation can be beaten, however, knowledge needs to be increased, and fear needs to be overcome.

Accumulating gold and silver is the best way to fight this manipulation, since having gold and silver is power. The gold and silver price and the value of gold and silver should eventually tell the same story. Currently the gold and silver price is undervalued compared to their value, therefore gold and silver is a must buy.

The price of fiat money is being managed and therefore affecting the paper price of gold, but even so, the paper price of gold cannot be successfully suppressed, because of the nature of fiat money. Also, no group of people have so much power to successfully suppress the paper price of gold, it is just fear that makes them seem so powerful. Fiat money will realise its full value of nothing and therefore true money will prosper.

If you find this information useful, please forward it to friends or family so that I can continue to reach people that would not normally read such informative sites as this one. If you would like to subscribe to my newsletter please send me an email. My newsletter is free and I send it out whenever I have something to “say”. I do accept donations though, so that I can continue to research and write; email me for how.

To read more of my work you can read the rest of my blog:

You can also find my articles at

May God bless you.

Hubert Moolman

You can email any comments to


I also highly recommend these articles by Hubert Moolman:

Gold is money: therefore a hedge against inflation and deflation
If deflation of asset prices continues, from here gold might (a big maybe) temporarily underperform the dollar but as deflation (of asset prices) increases gold will win this battle effortlessly in the end. Why? Because gold is money and it is a capital (real) claim on assets. The dollar is “parading” as money since it is a “debt claim” on tangible assets.

Fake Money, Dead Money and Fake Leaders
The central banks and world leaders know that their system (world monetary system) cannot continue for much longer without gold giving that system credibility and confidence, as it has done for the dollar when it was created. They will therefore have to start using the gold word as a possible solution. The so called current "financial crisis" is testament to the fact that the world's current monetary system is about to end.



Why Gold Owners Are Targets of the Government
By Gary North

At some point, the number of investors who figure out that they had better buy gold is going to go from less than 1% of the public to 5%. When that happens, the supply of gold will not increase, and the price of gold will skyrocket. If as many as 10% of the investing public tries to put 10% of their assets in gold, I suspect the price of gold would go to $10,000 an ounce...

...Who is going to win the gold wars? Holders of gold. The big winners will be Indian wives whose fathers gave them a lot of gold as a dowry. The rest of us gold bugs will also do well. The general public will never catch on in time...


Sunday, April 19, 2009

4/19 Observation Open Forum

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Wednesday, April 15, 2009

Martin Armstrong on Goldman Sachs

Martin Armstrong takes a break from his usual cyclical talk to give us his description of what he has seen "behind the curtain". With nothing left to lose, sitting in prison, Martin is one who claims to have glimpsed behind the curtain, and who is able to talk about it.

You will likely find some of the things Martin says to be shocking. But I have noticed a consistency in his recollections that flows through his various articles. He often mentions different parts of the same stories from his past in his many articles. This makes me think that at least he is not making these things up. They are true recollections.

I believe that to Martin, this may be his most important article written while in prison. It is his "tell all". The following is a text version of his typewritten and scanned pdf which is available here.


Looking Behind The Curtain

The “Real” Conspiracy

April 9, 2009
by Martin A. Armstrong
former Chairman of Princeton Economics Int'l, Ltd.
and the Chairman of the Foundation for the Study of Cycles

Many people have written asking about Goldman Sachs and its conspiracy to control the Financial Markets. I have even been asked whether I believe that the attempt to assassinate me of May 10th, 2007, was connected to Goldman Sachs? Let me explain this subject very carefully. I realize that there is a storm cloud brewing with conspiracy stories with Goldman Sachs at the center. These theories are not perhaps absolutely correct, but they are not far off either.

The February edition of Portfolio Magazine ran an outline of the Goldman Sachs' "conspiracy" written by Matthew Malone. It reported eight (8) essential core elements to why people are beginning to suspect something is going on. Where I differ, what I was investigating was a group of houses and individuals who were banding together to manipulate markets. Goldman Sachs perhaps is the leader no doubt for they control what others cannot - politics! But the core element that is at issue is that we do not live in a world that we think we do. I have been behind the curtain. I was invited to join this "club" expecting me to bring billions of dollars from Japan. I was asked to bring $10 billion back in ·1998. That meeting was with Dov Schlein President of Republic National Bank. To put this in perspective, Republic National Bank was sold to Hong Kong shanghai Bank Corp ("HSBC") for about $10 billion. So these were the days when a billion really was a lot of money — the old days when the prime residential street in London by the Park was still known as millionaire's row, compared to today it is Billionaire's Row. So in modern terms, I was asked to bring over nearly a $100 billion in today's money that the bankers could have fun. with offering only a AAA guarantee from a consortium. I declined. I explained that I would have to personally guarantee such a project by my word, and I would not do that. They wanted to grab the commodities of Russia, and they as a group, did not believe in analysis — They believed in absolute control.

I must praise Portfolio Magazine and Matthew Malone for having the courage to even run this story. You will never see this even hinted at in the major Newspapers. You have no idea that behind the curtain, there is also no free press, for the US Attorney will call and ask for favors. It is like trying to negotiate with a criminal pointing a shotgun in your face. He who has the power, makes the rules. The Executive will not tolerate a free press that would ever expose them. Look at the case of the New York Times journalist Judith Miller thrown into contempt and held in prison until she was willing to testify and turnover the whistle blowers against the Government. D0 you really think there can be any remaining free press after that? who will now reveal the truth to the media? If they do, the journalist can be tortured until they testify against you. what that case did, was turn out the light on American liberty forever. we will never know the truth, because anyone who prints it, can now be imprisoned.

The courage to even print this story by Portfolio Magazine is remarkable. I can only hope that the spirit of independence will not die. We need desperately to restore the free press. In the instant matter, you are not likely to see this story in a major newspaper for two reasons (1) it exposes the truth about the game is rigged, and (2) Goldman Sachs is a powerful force that not merely controls the government in so many ways, but they can dictate the fate of a newspaper by the revenue and by implication with the criminal prosecutorial powers.

In the financial industry, just to get an interview at Goldman Sachs was like appearing before God himself. The image spun around the firm was one that somehow Goldman Sachs was just always better than everyone else, and was someone so smart, they were always able to one-up everyone else. Goldman Sachs got the biggest deals, was able to groom its employees for top level government jobs securing political control both in the United States as well as Europe. They paid the highest bonus deals that amazingly are never criticized even in this atmosphere. It is a popular view that Goldman Sachs is like a cunning cat that always lands on its feet, simply because it has developed an unfair advantage with regulators and politicians alike. As Portfolio Magazine reported, when their alumni were asked about the "some didn't appreciate the joke. Goldman said that such claims are ludicrous." Nobody would expect Goldman Sachs to admit what they have been doing. What we must understand, is why!

Goldman Sachs is not interested in controlling the world, just the world economy pulling the strings behind the scenes. We should not expect the SBC nor the US Attorney to admit they look the other—way. All we can do is examine the evidence, for those involved would never admit anything. The whole Sherman Anti—Trust Act was based on precisely this sort of activity. Never has anyone really found a corporation guilty in the essence of what the Anti.-Trust Act was suppose to prevent. The theory that corporations could band together to manipulate markets or industries, would be a bust unless they included members of government. The only way to succeed is by controlling the political powers. Unfortunately, we do not live in a real democracy, for we do not elect the treasurer, head of the Federal Reserve, SEC, or Attorney General. These are positions that are the spoils of politics that can be bought like a hooker.

The alleged Goldman Sachs Conspiracy

The alleged Goldman Sachs Conspiracy as reported by Portfolio Magazine last February, centered around eight (8) primary points.

(1) Hank Paulson let Bear Stems collapse, and be absorbed by J.P. Morgan at a mere $10 per share.

a) Rumors were that traders at Goldman Sachs were shorting the stock of Bear Stems to force its collapse.

b) Conspiracy was that Goldman Sachs and other firms retained a "grudge" against Bear Sterns since 1998 when Bear refused to join in the $3.6 billion bailout of Long Term Capital Management.

Bear Stems was not part of the Investment Bank "club" and thus fought in competition against the organized market manipulations. This will be explained in greater detail below, but the stock of Bear Sterns was aggressively being attacked in an effort that appears to force its collapse.

(2) CEO of Merrill Lynch John Thain was once co-President at Goldman Sachs. Thain in the middle of chaos, sold Merrill Lynch to Bank of America for an actual premium when days later Lehman was bought for pennies by Barclays of Britain.

a) the conspiracy theory was that to protect a former Goldman co-president, the forces behind the curtain moved Geithner and Paulson to urge Bank of America to buy Merrill

It is unlikely that this conspiracy to sell-off Merrill was designed to protect the reputation of Goldman Sachs or of John Thain. There was exposure interrelated and Merrill Lynch was the biggest retail client base.

(3) AIG Bailout of $85 billion, was later raised to $123 billion. It was Hank Paulson who installed who, Ed Liddy as AIG's new CEO who just happened to be another Vice Chairman of Goldman Sachs.

a) the Conspiracy theory claims that rescuing AIG was necessary to protect Goldman Sachs who had $20 billion exposure itself to AIG.

AIG bailout was quite simple, they were one of the founding members of the manipulation club. Gretchen Morgenson of the New York Times reported that it was J .P. Morgan who took the whole idea to AIG about creating the CDS product. AIG participated in numerous market manipulations from London, for that operation was set up outside of the United States to ensure privacy from regulators.

(4) The Paulson $700 Billion Bailout package ended up extorting from Congress a vast amount of money far beyond what the banks needed, as a last ditch effort to grab while Paulson was there. Only $250 billion was drawn down of which $10 billion was given to Goldman Sachs, but Paulson refused to give only $6 billion to LehmanBr0thers, because Goldman wanted their clients.

a) Dick Fuld, CED of Lehman Brothers, was asked by Congress why AIG was bailed out but not Lehman? He responded: "Until the day they put me in the ground, I will wonder."

Lehman had always been a fierce competitor to Goldman Sachs. The chance to put them out of business was far too tempting. Goldman Sachs through Hank Paulson, achieved its goal and took one step closer to eliminating the very competition they disliked so much. The dream at Goldman Sachs was always to be the dominant force no matter how that had to be achieved from the rumors that poured out of that firm.

(5) Goldman Sachs and Morgan Stanley are allowed to become bank holding companies allowing them to take deposits that are now FDIC insured.

a) Lehman was the first to approach the Federal Reserve with this idea, but was resoundingly rejected.

It is amazing that the Federal Reserve would reject Lehman yet support Goldman Sachs and Morgan Stanley who dreamed up these nightmares and sold them to AIG to use their AAA rating and name as a major insurance company. Why did Goldman and Morgan need to become FDIC insured? They were huge in getting their money from money—market funds. That was cheap, but uninsured and the average maturity was at best 30 days. Both Goldman and Morgan needed long—term capital to play with. what they needed were bank deposits from the average person to keep the game going. The business model was changing, and they saw the light, and stole the idea from Lehman.

(6) Outlawing Short-Selling: On September 19th, 2008, the SEC Commissioner Christopher Cox announced a one month ban on short—selling financial companies. It is true that both Bear Stearn and Lehman Brothers long complained to regulators that "traders" were shorting their stocks trying to create a panic. The SBC protected Goldman Sachs and the key manipulation "club" yet when the share prices of Goldman Sachs fell by 20% in just three days, the SEC acted to protect the golden child.

There is no explanation as to why the SEC would never act when the source of short—selling was from Goldman Sachs or friends. The SBC does not in any way protect the markets. They prosecute a lot of small-time offenders to create the image that they have teeth, but they are as corrupt as any third world Banana Republic. They do not audit any of the big houses, and yield to their desires. Even Hank Paulson when he was head of Goldman Sachs argued for greater leverage to stay competitive with overseas. Who was using the leverage overseas? Could it have been Goldman Sachs, Morgan Stanley and of course AIG?

(7) Bailing Out Citigroup: Yes it was true that even after a $20 billion injection for Citigroup, their stock fell by 60% in a single week. This led to another $25 billion package and then the government agreed to add more if their losses exceeded $29 billion.

a) Who was the Citigroup advisor? Robert Rubin, former US Treasury Sec. and another Goldman chairman who was paid $62 million in fees between 2004 and 2007.

Citigroup was too big to fail, but they had Robert Rubin as their white knight. The conspiracy theories that claim this was to help Rubin, are a bit far-fetched.

(8) Obama was the golden Manchurian Candidate of Goldman Sachs, is perhaps a bit over the top. It is true that the employees at Goldman Sachs were among the largest donors to Obama as reported by Portfolio $884,000.

a) the Rumor was that Goldman Sachs manipulates Obama and is on its way to become its own superpower.

Goldman Sachs did not only back Obama. You will see they supported McCain as well. They know how to play politics very well. Goldman Sachs works very hard at controlling government. They groom their own for positions within the executive branch. Yet don't forget New Jersey Governor Jon Corzine. Also do not for a moment think this is limited to the United States. We also see the World Bank run by Robert Zoellick, who was a managing director of Goldman Sachs. We find Mario Draghai, who is leading the European Union response to the crisis is yet an0ther..Vice President of Goldman Sachs previously. Hank Paulson, appointed a 35-year old Goldman Sachs vice president Neel Kashkari to head the $700 billion Troubled Assets Relief Program ('1'ARP). The Goldman Sachs power base is even on both sides of the Atlantic, and we find that the Merrill Lynch CBO John Thain was also a former co-president of Goldman Sachs and the head of Wachovia Robert Steel was a former Goldman Vice Chairman. This amazing group of political connections runs deep into the workings at the International Monetary Fund as well. The real question is; How Can a Treasury Secretary still have stock in Goldman Sachs?

25 Years in the Making

For at least the last 25 years, there has been a group of "professional" so called traders that have not really been interested in trading, but in manipulation. Perhaps it began with the Agricultural markets. Like the movie Trading Places with Eddie Murphy that centered on commodity brokers who were looking to get access to an agricultural report from Government that would move markets, there was some of that going on. But there were others who actually manipulated the inventories by moving product from one warehouse to another. Not all warehouses were within the official exchange inventory. Therefore, moving product in and out of the warehouse could manipulate markets on a short—term basis since the average traders tended to rely upon fundamental news. The advent of technical analysis was the early 1970s. It was a lost art after the 1929 collapse.

The manipulations of this sort dominated the 1970s and 1980s. There were even expansions into the tax arena. Commodity traders invented tax straddles whereby one could buy say gold in December and sell gold in March the next year simultaneously when gold was clearly declining. This would enable the loss in the December contract to afford a tax deduction while the profit offsetting the loss was then moved forward into the March contract for the next year. Thus, a fictitious loss could be taken in one year, pushing off the profit into the next year, avoiding taxation. The IRS then figured out what was going on and put a stop to that trick.

The 1980s, however, brought home a new invention — desk top computers. While I had gone to a computer engineering school back in the 1960s when they still filled a room. Integrated Circuits were born in the 1960s and it became clear that these huge computers that had already shrunk down from a football field running on vacuum tubes with the invention of transistors, the chips allowed us to see that a desk top would be possible. The problem strangely was not building the computer. The question was; what would someone do with it? The vision of just build the baseball field in the middle of the cornfield and they will come, was not exactly business policy. There was no one who could foresee Microsoft. The answer was, build it, and someone else would figure out how to use it.

IBM a decade later, created the desk top computer. During the late 1970s, there were companies creating word processors using 8" floppy disks like 3M Corp. But it was IBM that saw the future and gave it a shot. The first desk top computers that were the top—of-the-line were about $6,000 in the early 1980s. Nevertheless, this allowed much more sophistication that was soaked up by the Investment Banks.

The problem with the modeling employed by the Investment Banks, was the limited scope of data. They turned more to professional math genius types who lacked the experience in trading. This blending was a disaster and contributed greatly to the (hash of 1987. Models used by the industry were short-term. Even today, most system offering screens and charting for stocks and commodities, only now provide any long—term charts back as far as 1980. If your database is this short, then no model will ever be able to comprehend, no less forecast, an event like a Great Depression.

The modeling on derivatives was far too short-sighted to see the long-term trends. The mind-set of the Investment Bankers was still captivated by the 1970s and the efforts to rig the game. Like Leona Helmsley was quoted saying that taxes were for little people, the Investment Bankers view "speculation" was also for little players. The sure bet was the key to consistent success.

During the late 1970s, the silver market was claimed to be "cornered" by the Hunt Brothers. That was far from true, for what they failed to understand, was that the attitude of the major brokerage houses was not that you were a pure trader-customer, but someone to pick—off for profit. During the 1980s, I had to take on some hedging projects that were awesome. One was in platinum. When you are the largest trader in a narrow market, they watch everything you do. If I was to sell, they assume the whole lot is being sold and jump in front. You suddenly find yourself trapped. I was a witness to the Hunt collapse. They couldn't get out of the market at any price. The dealers were selling in front of them taking short positions looking to buy back when the Hunts were in a state of panic dumping at any price.

I learned early on that to professionally hedge, one had to navigate the brokers. The only way to deal with them, was to play one-off-against-another, use related markets to confuse and hide your strategy, or else fall prey to the Investment Bankers. In other words, if you had a large position of gold that you wanted to sell, you go to a broker asking for a market in silver. He gives you a quote, and you then buy taking what will become an intentional loss. You go back to the same broker and now ask for a quote on the real market you are trying to sell - gold. He will anticipate you intend to buy because of the silver, shifting the quotes to pick up extra profit assuming you are a buyer. when you sell the gold, you just got a higher bid, you are out of the position, and he is scrambling to cover with other brokers. If you hit all the brokers the same way at precisely the same time, they are all now short, and are trapped trying to get out selling back gold that they just bought from you.

These games are at times necessary in the cash markets because the brokers themselves are not satisfied with just making a real market. They need to create an edge. So when you are the 800 pound gorilla, you need defensive measures. It helps to understand the method to the madness of the game.

The market manipulations that really began back in the 70's with force, became intermixed among the Investment Bankers with technology. we began to see grouping of houses by the later 1980s and early 1990s. Perhaps at first, they were looking for another Hunt. They needed to sell some billionaire on the virtues of cornering and manipulating a market.

The first real coordinated scheme began back in 1993 that I could verify. The target market was silver, and the central player, broker-dealer, was Phillips Brothers who were a big commodity outfit in Connecticut, picked up by Salomon Brothers who was later absorbed as well. This ms known as PhiBro of the same fame relating to Marc Rich.

PhiBro had a huge client who they were acting for to buy up the silver market in 1993. This was an aggressive professional strategy. The Commodity Futures Trading Commission could easily see where the buying was centered in real force. They went to PhiBro demanding to know who their client was. PhiBro refused to give up the name. The CFTC ordered PhiBro to just get out of the market. They did. They just dumped everything at the market wiping out small investors in the blink of an eye.

The CFTC just walked away. Had this been a small broker or money manager, he would have been criminally prosecuted. But the CFTC is notorious for never even once bringing a complaint against a major house. The sources I relied upon, gave me the name of the client —Warren Buffett. Based upon this information and belief, when his name came up again in 1997, it ms not a shock.

Nevertheless, this incident set in motion the origins of our current debacle. It is why AIG set up its financial division in London, out of the way of US regulators and the freedom to manipulate whatever markets they desired. Moving to London, was caused by this CFTC failure to regulate.

Manipulations began to spread like wildfire. Rhodium, platinum, silver, British pound, Japanese yen, and even the Russian bond market just to mention a few. They began to move in packs, one to cover up a manipulation by making it appear to be a broad market move, and second, to buy strength in numbers. Yes, they even tackled oil and while oil should have gone up to about $100 for 2007, they had their analysts tout like those at Goldman Sachs that oil was headed to $300. The trick is always over-shoot the target to create sucking-in power.

It was during the 1990s that the group began to be called behind closed doors, the "Billionaire's Club." For short, the word "club" was entirely sufficient. They relied upon the well known fact even among those that covered the prosecutions of the CFTC and the Securities and Exchange Commission ("SEC"), and admitted to me personally, that neither the SEC nor the CFTC would bring charges against the big New York houses. Just as you saw there were whistle blowers on Madoff that the SEC would never investigate, had those whistle blowers been a “club" member, the SEC and CFTC would then prosecute whoever the "club" handed them.

Michael Milken at Drexel Burnham is a classic example. Drexel was a Philadelphia firm originally, not New York. Milken created the junk bond market and was truly a brilliant visionary. But Drexel created a market those in New York wanted desperately. The way to get that market, was to instigate the powers of government to take down a competitor.

Drexel was not part of the "club" of "white shoe" members. Drexel embarked on creating a new market based upon debt popularly called "junk bonds" that were thus focused upon profit, rather than the equitable model employed by even the "club" and the Federal Reserve. There were companies with great potential, but could not qualify using collateral other than intellectual property so—to—speak. Alcoa Aluminum was perhaps a classic example of the problem. The inventor of aluminum went to all the banks, showing his discovery, but not a single bank would lend money. The last bank he went to was that of Andrew Mellon (1855-1937). Mellon personally called the inventor into his office. He told him his bank could not lend him any money. He then informed him, he would do so personally. The Fed model prevents innovation, the very source of economic growth.

What Milken did at Drexel was perhaps the most innovative advancement in the history of banking so to speak. He created a market for innovation that did not exist, and the "club" felt they were left behind. They conspired as always with those in power at the Department of Justice to bring down competitors These government lawyers are the people who dictate the fate of nations through their own personal greed and self-interest of furthering their career. They are responsible for so much economic damage that far more innovation has left the nation than many suspect. They were the sole reason for breaking up AT&T, and tried very hard to destroy Microsoft. They did destroy Drexel Burnham, and that was certainly not in the public interest.

The S&L Crisis was used as the excuse to destroy Drexel. To set the record straight, James Baker came up with the idea of creating a G-5, back in 1985. The whole idea was to manipulate the dollar down by 40% so they could increase US exports. I personally wrote to the white House warning that this was crazy, would lead to excessive volatility, that would end in a crash. Beryl Sprinkle, Chief Economic Advisor to Ronald Reagan, wrote back. He explained that Princeton Economics was the only firm with volatility models and until others concurred, they could not rely only upon one model. when the 1987 Crash hit, we were urged to immediately provide our analysis since now everyone agreed, "volatility is the number one problem." The 1987 Crash took place because of the G-5, and the failure to understand the offset of the Capital Account against the Current Account. The more foreign investment that poured into the United States, goes through the Capital Account, but the profits in the form of interest and dividends go through the current Account confusing many that the problem is trade that will result in declining sales and domestic jobs. They forgot, the Japanese had bought almost 33% of the National Debt, real estate, and stocks. Manipulating the dollar down 40% set—off a massive selling of US assets that resulted in the 1987 mash. When traders call their broker asking why the Dow was down 500 points, the answer was "I don't know!" It was a currency induced Crash caused by the formation of the G-5.

The Democrats gaining control of Congress, wanted more taxes from the rich. They altered the amortization of real estate. They created the S&L Crisis for they destroyed the investment trend in that sector that created a one-way market to just sell. Property values crashed and then their insane regulations of the S&L industry more-or-less required that they lend into the local market with the focus of real estate using the collateral equity model. Suddenly, the S&Ls had portfolios that the taxes wiped out and the mark-to-the-market accounting rendered many insolvent.

The Government prosecuted two people trying to blame them for their own mistakes. Charles Keating became famous for his S&L went broke defaulting on bonds that the prosecution theory was he knew 7 years in advance that he would default and thus it was a criminal fraud. Keating spent some time in jail, but his conviction was later quietly overruled and new prosecution was blocked as being political. The other high profile became Milken, targeted because many S&Ls purchased junk bonds that declined with the 1987 Crash. The "club" supported the destruction of Drexel to take the market they created, and my sources reported even instigated it.

The theory used to destroy Drexel on behalf of the New York institutions, was to flip inside trading upside down. Unfortunately, the Judiciary protects nobody and will allow the Executive to circumvent the law as if it were a dictatorship. The inside trading issue emerged from the Great Depression. The crime was that a director of a company knew it was broke. He then sold all his stock on inside information, and delayed his action of making a public announcement.

Rudolf Giuliani flipped it all on its head. Suddenly, if two people decided to take-over another company, the crime became that a third person was defrauded out of the same opportunity to make money. No one lost money. The courts should have applied the strict construction, but accommodated the will of prosecutors destroying over 50,000 jobs in the process. Office managers at Drexel came into trading—rooms and just told the people to go home. There was no company any more. Never had insider trading ever been used in reverse. Because you cannot win when the courts are not real but controlled by the same employer, everyone was forced to plead. There was one exception. A small timer went to trial, and the jury acquitted him.

The Club is probably the most powerful force behind the curtain. There have been conspiracy theories about secret groups; but they work together like Anti—Trust groups to just rig the financial markets. They do not aspire to control all governments. They evolved into professional market manipulators that led to both the 1998 Long Term Capital Management crisis, and now the current crisis that began from the very same source. Even Gretchen Morganson of the New York Times traced the idea for the Credit Default Swaps to J.P. Morgan Stanley, who took the idea to AIG in London.

The Club has been untouchable because they can hire government attorneys directly, or "recommend" a large law firm who relies on their business hire one as a favor. In Congress, a politician cannot go immediately work for a lobbyist. There are no such ethical restraints on government attorneys who truly control far more than anyone has been willing to expose.

We kept track of what the "club" was doing and warned our clients whenever their antics were conflicting. One of the big ones that blew the lid off, was again silver. In 1997, I warned that silver was going to rise from $4 to $7 between September and January 1998. I was even invited to join them, and told to stop fighting, and put out false forecasts. I declined. Their strategy became insane.

At first, a friend of mine who had been Prime Minister Thatcher's economic advisor became a board member of AIG in London. He called one day and asked if he could drop in to Princeton the next morning when he arrived from London. I naturally said OK. To my surprise, he arrived with the head trader from AIG London who then proceeded to try to convince me to stop talking about the manipulations. I told him I would not ever reveal any names, and the government didn't care anyway.

Things got insane thereafter. An analyst on the payroll of PhiBro had a main contact at the Wall Street Journal. They decided to slander me and get the press to target me claiming I was trying to manipulate the market. It was an interesting strategy, but one I cared nothing about since I was primarily a institutional and corporate advisor, and they were not really interested in silver.

The journalist from the Wall Street Journal called me. He accused me of this nonsense and we argued. It got quite heated. He said if silver was being manipulated, then give him the name. I told him he wouldn't believe me anyway. He demanded the name and so I said fine, go ahead, let me see you print it, knowing he never would. The name I gave him was Warren Buffett. He laughed. Told me everyone knew Buffett did not trade commodities I told him that was how much he knew.

The Wall Street Journal published the article. The London newspapers were fed stories by the "Club" that I was now the largest silver trader in the world. This became all a joke to me. Even the CFTC could look at positions and knew I was not a big player in silver.

The mistake made by the "Club" by turning out the press against me, was they actually created such a worldwide story that the CFTC was forced to call me. They knew I was not the source. They asked me, where was the manipulation taking place? I told them it was in London, out of their jurisdiction. They told me that they could pick up the phone and find out. I told them that they had to make that clear decision. I hung up. Never did I expect that they would really do anything.

A few hours later, my phone rang. It was a good source in London who also was helping to monitor the "Club" actions. He told me that the Bank of England had called an immediate meeting of all silver brokers in London in the morning. I was shocked. The CFTC had made the call. But then again, I had given them no names so perhaps in their mind, this was fair game.

Within the hour, Warren Buffett made a press announcement. He admitted he had purchased $1 billion worth of silver, in London. He denied he was manipulating the market. Claimed the silver was a long—term investment. Everyone was shocked that Buffett was suddenly exposed as a commodity trader after all The next day, the wall Street Journal called me. The writer asked — "How did you know?" I told him it was my job to know! Silver thereafter declined and made new lows going into 1999. So much for the long-term investment.

Curious enough, Warren Buffett has now been exposed to be human. He has lost about 50% like everyone else. But there is the curious purchase regarding oil. Buffett invested in 011 at; the very top at the same time Goldman Sachs was forecasting oil would nearly double. The burning question is; Did Buffett get trapped in at the top in oil along with those manipulating oil this time around?

Warren Buffett has admitted he was "dead wrong" in his oil purchase. Buffett had to post a 62% decline in net income, but the revealing loss comes from oil and derivatives that he publicly criticized others for getting involved in. The so called "Oracle of Omaha" had to explain his derivative losses suddenly claiming he was just managing the risk. Yet the other contradiction is the huge purchase of Conoco Phillips stock when oil prices were at their high. Does this have anything to do with his old contacts at PhiBro at a time that all the "club" members were seriously long oil and had their analysts telling the public it would still double? Its called talking your own book.

There have been organized market manipulations in search of that perfect trade based upon inside information for a long time. The whole inside information crime is bogus. It is one thing for a director of a company to sell his shares before he announces the company is broke, but it is a difference concept when the inside info is to get your hands on government reports or watching what someone else does. There is no 100% guarantee in such a setting. In fact, the movie wall Street with Michael Douglas portrayed inside information as a young broker following executives around and guessing correctly what the merger would be. Sorry, that is not a crime unless the prosecutors want to make a name for themselves.

What we are talking about is much more close. to corruption than inside trading. There have been major manipulations of markets such as rhodium and then there was the manipulation of Platinum. Cornering a supply is far too risky. What the "club" did was to join forces with Russian politicians. The deal struck was to recall the Russian supply of platinum to suddenly take an inventory. Platinum soared in price. Of course the long positions were already laid in before the announcement. Russia had never before recalled its entire supply to take an inventory. Nevertheless, it worked. They were able to force platinum up for the auto—industry were buyers. At the top, the "club" sold their long positions, reversed into short positions, and then instructed the Russians to end the inventory. Platinum crashed. Even Ford Motor Company sued over that one.

The first major failure was 1998 - the Long Term Capital Management bailout. It has been widely reported that this was a failure of their derivative trading. That is only partially correct. The derivatives were E the cause of the chaotic event, but merely the domino in a complicated chain. The real target was Russia. The "club" was deeply involved with Russia and saw this as an opportunity that was perhaps a once in a lifetime.

You will recall that Russia was borrowing heavily from the International Monetary Fund ("IMF"). The interest rates were exceptionally high for short—term paper. I was again approached to join the "club" and was invited to Washington, DC where Edmond Safra of Republic National Bank had rented the entire National Gallery for a party he paid for in honor of the IMF. Everyone was there. Both current and past politicians and dignitaries, right down to Paul Volker.

They were trying persistently to get me to join the "club" for it was not just money, they were trying desperately to get me to join to tout their ideas. You must understand. Princeton Economics was renowned for our independence. We provided key research to governments, but mostly in times of crisis. We never charged for our service, but always contributed our .time as a public service. The primary reason for this generosity, was self preservation. Once you accept government funds, you suddenly find requests attached. Suddenly, you are asked to generate reports that support predetermined outcomes. You are quickly turned into a Economic Prostitute. This is why when the European Union was forming, a request for a delegation to attend an institutional lecture in London was received. When the Asian Crisis hit, I was requested to fly to Beijing to meet with the Central Bank. China did not pay anything, we would never accept any funds from any Government. This was the primary reason for our stellar reputation, but it was also a target to destroy the messenger, when the result cannot be controlled.

Government has not been the only one who wants to control forecasting. As early as 1983 I was invited to Geneva where the Gaon family held a huge party for me and was trying to impress me by introducing me to the mover & shakers of Europe. They had :offered we $5 million to use my name to create "Armstrong" Financial or brokerage of something like that. I hesitated, confused why someone would offer me so much to just use my name. I was invited to the grand opening of Herald Square in New York that I was led to believe was owned and built by the Gaon family.

For those who are not European, you may not know who the Gaon family was. They owned the Hilton Hotel Chain in Europe known as the Noga Hilton. They had also owned the Nigerian oil reserves before the coup and nationalization. It was the Nigerian issue that caused the GALN family to bake in silent partners. 'Do show how "conspiracy" theories are not always nuts, the events that followed was like receiving a shock treatment.

It turned out that Herald Square in New York was really the property of the renown Ferdinand Marcos who was President of Philippines between 1965 and 1986 who lost power just as the Economic Confidence Model shifted from a Public to a Private Wave causing a revolution right on time. The other silent partner was the head of Libya — Mu'ammar Muhammad al-Qaddafi. when Marcos fled the Philippines, the FBI was helping to search the world for missing gold reserves. I had long been viewed as an expert on gold after the model accurate pick the precise day for the 1980 at $875 on January 21st, 1980. Adding to the coincidence, I was on the list of invites for the grand opening of Herald Square. If this was not enough, suddenly when the FBI came knocking on my door citing these links, I told then I did not know Marcos, nor did I ever advise him of the Philippines. They then pointed out Marcos had purchase a house in Princeton, New Jersey.

Conspiracy theories are what the FBI and government rely on. It is hard to convince them to the contrary. what the Gaon experience taught me, nothing is always what it seems. We had a client in Geneva, Grainedex, who I believed was a major grain dealer common to Geneva. It turned out they were a front for the KGB. I soon realized, things were different behind the curtain.

Edmond Safra

Edmond Safra of Republic National Bank, has always been one of those nebulous bankers whose reputation was in a constant state of flux. There were rumors that he even assisted the CIA in the Reagan years with Iran Contra laundering of money. This has never been substantiated, but his right hand man, a Mr. Zucker, seems to have been caught up in the whole mess.

Yes, Princeton Economics did business with Republic National Bank to my regret. But they had a AA rating and were too cheap to try to compete with us in Japan. The problem about dealing with Goldman Sacks, they try to steal not merely your clients, but the very business plan itself. One cannot deal with those who are constantly trying to defraud you no matter what.

Edmond Safra was not one of the ranks of Goldman Sachs, but he was clearly one of the main players in the "club" and I believe his death, or better put his plain assassination, was retaliation for lot of questionable dealings. Through Republic I was solicited several times to join the "club" and was told specifically to stop fighting them. The "club" was so well structured, they held literally the keys to government regulation. No one would ever question them, and never would the press utter a single word. To wield such power was truly awesome. But we clashed for one primary reason - I believed in forecasting and modeling - they believed in control and domination.

Based upon solid information and belief, Edmond Safra was deeply involved in a bold plot to control the government of Russia. Boris Yeltsin, former head of Russia, was convinced to take $7 billion from the IMF loans to Russia. Two friends of Edmond were involved, Barisnofsky and Gazinsky. One owned all the media in Russia and the other was a partner with Yeltsin's daughter in the national airline.

The scam was to set up a company in Geneva to pretend it was doing the refurbishing of the Kremlin. $7 billion was wired, and Republic steered the wire through the Bank of New York. The rumor was that Mr. Zucker organized this one for Sara. As soon as the wire took place, Republic National Bank contacted the US Attorney and alleged that Bank of New York, a hated rival, was deeply involved in a $7 billion money laundering scam. The Feds ran in, and the biggest money laundering case was created.

Once Republic got the Feds to go after Bank of New York (not a member of the "club"), they then turned to Yeltsin, instructed him that they would protect him, but he was not to run again, and to appoint either Barisnofsky or Gazinsky as the new head of Russia. Yeltsin, realizing he had been set up, surprisingly turned to former KGB head Putin, who promised to clean up the affair if he was appointed as the new head of Russia. To the shock of the world, Yeltsin, who was preparing for reelection, stepped down, and this is how Putin really came to power.

Almost overnight, Barisnofsky and Gazinsky fled. Their assets were confiscated. On December 3rd, 1999, Edmond Safra was assassinated. All his bodyguards were given the night off. Monaco didn't respond to an alarm at Safra's apartment for nearly 3 hours, and in the end, they charged criminally his male nurse who spent 6 years in prison for starting the fire to try to pretend to save his boss. Nearly 6 years later, a truly amazing event took place. The criminal charges were dropped, the sentence was vacated, and the high court merely stated that the judge and the prosecutor colluded to deny him a fair trial. He was put on a plane and sent home. Never would such a result take place in a Federal American court. They just cannot bring themselves to rule against the government very often. In a high profile case, it is the old Puritan view it is better to admit no wrong, kill them all, and let God then sort it out.

It was August 1999 when Republic banged on the door of the US Attorney to turn in Bank of New York. Again, after nearly 6 years, the two brokers at Bank of New York were sentenced to no jail time, Lucy Edwards and her husband. When the judge asked who was the $7 billion for, they responded, it was a ransom for some rich Russian businessman. The judge asked no more questions. The American courts will hide the truth more so than any other country.

Eliminating Princeton Economics

It was also Republic National Bank that started the case against Princeton Economics and myself . They lied to the US Attorney, SEC and CFIC telling them that we were managing money and hiding losses. what they failed to explain, it was their own staff that were illegally trading in the accounts. On August 29th, 1999, I went to local counsel Richard Altman who sent an email to Dov Schlien, President of Republic National Bank giving them 1 week to return missing funds or we would file suite. By the end of that week, the US Attorney was storming the office, taking as much as they could, including a computer on which I did personal computer modeling. Republic has issued several hundred Net Asset Value letters to Princeton, confirming when funds arrived or how much were in accounts. They were on file and audited by Republic beginning in 1995 up to 1999. To escape these, they told the US Attorney they were false to escape liability. But if they were false, why would they actually be on file within Republic?

The government arrested me without ever speaking to a single note holder. They admitted there was no default. They also admitted that the notes were meaning that they were not the accounts of any client. The notes were issued for (1) purchasing preexisting portfolios of Japanese stocks as part of a bailout plan whereby the face value of the note owed, was not the net asset value when sold, but the original purchase price of the portfolio. The allegations of the Government made no sense insofar as the accounting reported by the note holder was always time face value, not net asset value because this was a bailout no different than buying depreciated mortgages from banks today; and (2) we issued fixed rate notes paying 3-4% in Japanese yen, repayable in yen, and again, no trading with such funds would be the property of a note holder. Hence, the clear allegations were false - these were not managing money for investment purposes with profits or losses flowing back to the note holder.

Removing All Lawyers

I was raised to believe in the United States, that we were a honest and decent country, the beacon of liberty to the world. Then you step behind the curtain and you see a pervasive wholesale corruption. Justice Stevens wrote, "disposing of lawyers is a step in the direction of a totalitarian form of government." Walter v Nat'l Ass'n of Radiation Survivors, 478 US 305, 371 (1985). Indeed, this is the very objective of the government - to win at all costs and cover-up all mistakes. This is why not only is America the largest penal colony in the world even exceeding Russia and China combined, America has risen since 1987 from a 72% conviction rate to 99% exceeding the worst tyrannical institutions in history like the Star Chamber, Spanish Inquisition, Hitler, and we are nearly tied with Joseph Stalin. Prosecutors are very proud in never losing, for they cannot see beyond their own self-interest that what they have done is destroy everything that made us a great nation.

Part of what we call Due Process of law is being served so you are given notice of an action to defend against. In the case of Princeton Economics, there was never any service. The SEC and CHC insisted upon no lawyers, and then appointed their own equity receiver entering into a secret written Memorandum of Agreement directing the receiver Alan Cohen to withhold all evidence from myself, my family, and any partners to prevent any defense whatsoever:. This alone was a criminal act for it amounted to an illegal seizure without notice.

Within about 30 days, Alan Cohen then pled Princeton Economics essentially guilty without ever allowing any defense, investigation, or counsel. Can you image if you were criminally charged, denied any lawyer, and then Alan Cohen stands up and pleads you guilty with no right to even speak?

Alan Cohen also seized all evidence gathered in our investigations of the "club" that was still in the office, and more than 40 tapes recording sources. Alan (then threatened my personal lawyer Richard Altman to imprison him on contempt if he refused to turnover that evidence. This seizure was truly astonishing, for the major firm we were keeping track of Goldman Sachs, and then after seizing the evidence, he was given a job at Goldman Sachs — Executive Vice President in charge of all things, "Global Compliance." How does an Executive Vice President of Goldman Sachs end up running Princeton Economics under court order? And you still believe in Santa Claus?

Martin Weiss had offered to rent Princeton Economic Institute to keep its staff and the publication and forecasting operating. Suddenly, Alan Cohen's counsel had revealed that, just perhaps, this case had something to do with other than fraud. In an email, Tancred Schiavani of O'Melveny & Myers, LLP, to Charles Heck, counsel of Martin Weiss, he insisted that now I had to turnover the source code of the model.

"So that there is no misunderstanding, we are going to ask the Court direct that any compensation payable to Armstrong, Sr. by Weiss be deposited into a frozen escrow account pending a determination of title and compliance relevant portions of the PI. In part, we are doing this because Armstrong Sr. has refused to turn over the uncompiled source code for the model that is being licensed. Without the uncompiled source code, no one can repair the model other than Armstrong. Accordingly, it looks like Armstrong structured the 'consulting‘ agreement to benefit indirectly from a corporate asset that he has withheld. Among other things, we are concerned about leaving him in a position to constantly blackmail Weiss who have no other choice but to turn to Armstrong to maintain the software as long as it remains missing.

Never would the Government ever admit that they were holding me publicly until they forced me to tum over the model to them. I also believe, that Alan Cohen gave every stitch of programing materials he could uncover to Goldman Sachs. Of course, neither would ever admit to that one. Mr. Weiss made it clear, they did not require the source code, and that a complied version of the model had been running well for years and did not require routine repairs.

Alan Cohen and Tancred Schiavoni threatened our London lawyers with contempt, and put border watches on all partners just in case they tried to come to the United States to assert their property rights. Let one person enter the United States, and they were prepared to have them arrested and thrown in prison without trial for perhaps life under the pretense of contempt. This is the real America most people do not see nor do they even believe is possible. In a letter dated January 25, 2002 from one of our London partners, he quoted the view of our London counsel who said he "hoped he never had to deal with such unprincipled people again." This dynamic duo, have been so oppressive, one cannot even imagine that they would believe in God for they care nothing, and will argue against every Constitutional right shifting the burden to a citizen to prove there is even a Constitution.

How is it possible to pretend publicly that there is a fraud when there was no trading for any third party, and how can they pretend the model is a fraud, yet when the curtain is down, demand that source code as well? By stacking courts with former prosecutors, there is just no hope of ever obtaining a fair trial. There are no rights to liberty or property when the Government is your adversary. To pretend that they are so fair, justice, and magnanimous in front of the curtain, and so evil when you step behind it, is certainly not the America the general public believes in.

When I was thrown in jail on civil contempt on January 14th, 2000, it was for an alleged failure to turnover $1.3 million out of an alleged $3 billion. This was so minor, but when friends were willing to put up the whole $1.3 million in cash for bail, Cohen and Schiavoni objected and prevailed. I was denied bail at any price that could mean only one thing - it never was about money, it was about shutting down Princeton Economics at all costs.

Whatever illegal act it takes to win, Cohen and Schiavoni engaged in based upon my belief. All civilized nations agree in 1992 to prohibit "torture" and of course we know that Bush and Cheney did whatever they wanted in Cuba. They failed to respect that whatever they viewed they could do even to an alleged terrorist, others could do the same to American soldiers. Either we respect International Law, or we have no right to demand others do so when we cross that same line.

Congress enacted the 'Torture Victim Protection Act in 1992, and accepted the world definition of constituted "torture" as the deliberate coercion of indicted persons regarding alleged crimes. This mattered not to the American Government, nor to Cohen and Schiavoni, for they publicly had me thrown into cells along side of alleged terrorists. For more than 7 years, they argued to keep me in jail, even when there was clearly no justification. Instead, they did their best to mislead the press, the public, and the courts to cover up their shenanigans. They had signed secretly a Memorandum of Agreement on or about October 14th, 1999, agreeing with the SEC, CFTC, and the US Attorney, to deprive me of any ability to present a defense by refusing to produce any discovery, including my own files they confiscated. This document set it out plainly and is part of the official court record.

The Receiver and the JPLs acknowledge and agree that they shall not and they shall direct their respective agents and representatives not to provide any non—public information regarding Group or its Assets to Martin Armstrong, Martin Armstrong, Jr., Victoria Armstrong, any person or entity known to be under their direct or indirect control or acting in concert with any of them, any other former officer, director or employee of PEI or PQI, unless the provision of such information is either (a) agreed to by the Receiver and the JPLs, (b) required by applicable law, or (c) required by order of Either Court.

This was about as unconstitutional as you can get. Yet they still would not obey the Constitution or recognize any rights at any time. when Republic National Bank pled guilty in January 2002, they admitted guilt and agreed to pay back what was taken, $606 million, in return for absolute immunity. The "club" was caught, but still the Government would not criminally prosecute and only made them pay back what was missing - nothing else. This should have ended the contempt since why should I remain in prison if all victims were made whole? Cohen and Schiavoni then lied to the court claiming there were still huge losses that predated doing business with Republic, that were not included, yet strangely, there was no actual description of any such fraud. But one existed, as Cohen told the court, and I was then held for another near 5 years without any indictment or even civil complaint describing the alleged crime. There was nothing at all!

ALAN COHEN: Losses that occurred in the Prudential period and at the period at Republic prior to the first false NA[V] letter [by Republic] are not embraced within the restitution of HSBC because obviously they weren't in the predeposition period, they weren't involved in it, and in the period before the false NA[V] there is no as description of criminal liability.
(Transcript; 1/7/02, p17, L1—4)(99—Civ-9667)

Cohen, now Executive Vice President of Goldman Sachs, is informing the court that in his opinion there are huge losses not included, but there is no list of alleged losses, no list of victims, and no charges either civilly or criminally. You may think that in America there has to be at least some charge before we hold people in jail. Think again.

What proof do I have that Cohen and Schiavoni knew they were lying to the court to keep me in prison for another 5 years? The US Attorney was deeply involved and I believe did their best to protect the "club" not merely giving HSBC and Republic Bank absolute immunity for that implies there must have been criminal conduct: at the highest levels or else why even give immunity, but when lies are told consistently for so many years, they slip, and the truth springs forth like a weed in the crack of a sidewalk. Assistant US Attorney Alexander Southwell was so eager to get Judge McKenna to recuse himself when he heard that his wife had represented HSBC in some real estate settlements,the truth came out in 2005, more than 3 years later.

ALEXANDER SOUTHWELL: So to be clear, in the event of a conviction, we will request, your Honor, that there be an order of contribution reimbursing ultimately HSBC, who basically made good and paid out these losses for whatever reasons that they did. They compensated the victims ... We frankly think that there is money available, which is part of the reason why Mr. Armstrong has been held in civil contempt. . .
(Transcript 6/24/05, p11-12)(99—Cr-997)

Suddenly, in 2005 the US Attorney admits that there are no other victims and that any restitution they would want to be paid to the very criminals that they had given absolute immunity. Not only was there no alleged huge losses prior to dealing with Republic, but there was never any such criminal or civil charge. The "club" did what it had to do to prevent me from ever being released, regardless if there was not even an alleged crime.


We are just not the honest and God fearing country we believe we are. The fact that ever since the Willy Horton advertisements, the Judiciary is so afraid of being viewed as "liberal" that the entire Constitution has been reduced to a scrap of dust.

Even when the "club" gets caught with their hand in a cookie jar, they still are told to give the money back and walk away. _The Goldman Sachs Conspiracy as is now being talked about is far broader than most suspect. One must ask; How does Alan Cohen end up running Princeton Economics when we were investigating the "club" that included Goldman Sachs? The answer is simple. The "club" does more than influence politicians, they also control the Judiciary and the Justice Department well beyond anything the most outrageous conspiracy theory can create.

On May 10th, 2007, a murderer pending trial was allowed in my cell. He came in and strangled me from behind. After I passed out, he beat me with a typewriter breaking into pieces. He then jumped up and down on my chest trying to cave—in the bone structure to pierce my heart. His name was Mr. George. Inmates yelled for the guard, but I was told he did not push the panic button and waited for Mr. George to finish and he came out proudly yelling he had killed me. I was taken to Beekman Hospital. I obviously did survive after 1 week in intensive care. Mr. George was never criminally charged. Why? Many people, including my family, believe this was an assassination attempt to get rid of me. Of course, when the Feds prosecute everything, and would not prosecute this event, I am myself skeptical about why it took place. I write today because they do not want me to write. I have no doubt that they would kill me if they could. So I sort of have resolved myself to living only for the moment. When you are in the belly of the beast, there is not much else you can do.

© Martin A. Armstrong

Conspiracy? Is Goldman Sachs Running the Plunge Protection Team?


How Goldman Sachs reported a profit this first quarter...

2008 fiscal year for GS ended Nov. 30, 2008.

In 2009 they switched to a calendar year, making Dec. '08 an "orphan month".

They took a bunch of writedowns in December, which will not show up on either year.

Then with the help of the new FASB rules they had an INcredible profit of $1.8bn in the first quarter of '09.

They promptly used this good news to raise $5bn from stock offerings, so they can return the TARP money and get back to paying big bonuses to their executives.

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