Dear Mr. President, Chairman Greenspan

By: Alex Wallenwein | Thu, Nov 27, 2003
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The following letter under the same heading is intended as a petition. The goal is to get as many financial analysts, precious metals commentators, free-market economists, political and economic conservatives, Libertarians, fighters for Liberty, and just about anyone else with common sense, to sign it before it is finally presented to President Bush.

Whether it has the immediate desired effect or not isn't important. What's important is to what degree this petition can build public understanding of the situation in which we find ourselves here inside the US. During a time in which the rest of the world is re-discovering the value-function of gold, we hold on to an illusion of papier-mâché. If we continue this, it will be our undoing.

Freedom is an endangered commodity. Individual ownership of property is the foundation of economic freedom. Without gold, individual property becomes an illusion because its value is so easily diluted. Without gold, Americans will be unable to defend their wealth.

Under normal circumstances, cheap gold is a boon to the wise individual. He can work a little, earn worthless paper, and turn it into a maximum amount of valuable gold - and then wait for the perceived value of paper currency to depreciate against it. But when that low gold price is achieved as a result of his government's squandering the public gold stocks, and if that public gold ends up in the hands of the country's avowed enemies, the country's days of independence are numbered.

Gold can defend an individual's private wealth only if there is a country that can defend the individual. The way things are going, our country is handing the key to the city's gates to our enemies. And there are many enemies - outside as well as inside the city's gates.


Dear Mr President, Chairman Greenspan:

As you know, in May of 2001, members of an organization called the "Gold Anti-Trust Action Committee" has presented to Congress a document entitled "The Gold Derivatives Banking Crisis." The document presented detailed evidence of gold-price manipulation by officials at the highest levels of the Clinton Treasury department, US bullion banks, and Federal Reserve officials. The document was initially well received and spurred a lot of interest and sudden activity among members of Congress - but nothing came of it.

At the time it was most likely deemed politically unwise to do anything about the mounting problem. The plan was probably to let the steam out of this engine slowly, to let bullion banks such as J.P. Morgan Chase and others get out of their crushing gold short-positions slowly and painlessly in order to avoid what was feared would become a meltdown of the US banking system.

It is painfully clear to many citizens that officials at the highest levels of the US banking system probably have many political favors to cash in, and that this forms at least part of the reasons why the bullion banks that amassed such horrendous short positions during the second half of the Clinton administration were not exposed to the consequences of their actions. It appears to many that is was for this reason, and this reason alone, especially during the aftermath of the signing of the Washington Agreement, that these bullion banks were not allowed to bear the brunt of an, eventually unavoidable, change in US policy with respect to the dollar - and gold.

However, times have changed.

The trend of gold prices has firmly turned UP since the turn of the millennium, and continues to go higher, no matter what any US administration, federal reserve system, or banking conglomerate does or doesn't do.

Even hypnotizing Americans with attractive economic figures and a rising stock market will not make this uncomfortable truth go away. Our current economic "boom" is fueled by Mr. Greenspan's money-printing presses. Unnaturally low interest rates are driving this economy, and a collective desire to recoup the losses of 2000 to 2002 is what's driving the stock indices. Running an economy this way is like feeding a steam engine with paper instead of coal. Paper burns too fast and provides too little heat.. This train won't go very far.

We are witnessing, first hand, a period in human history where the rest of the world is moving toward a monetary standard that favors gold as the ultimate arbiter of economic value. This is a time in which Europe, comprising the majority of the G-7 nations, has developed, and successfully launched and internationally propagated, a new currency concept, the euro. The euro is not structurally threatened by high gold prices - as our current US dollar system unfortunately is.

The euro's penetration of the world's central bank reserves has happened at lightning speed, and is still gathering momentum. Even our closest neighbor, Canada, now has currency reserves in euros that almost match those it holds in US dollars.

But, as you know, it is not the euro that drives this new monetary concept that is developing outside the US: it is gold.

The euro's strength and attractiveness to foreign investors lies in the fact that the euro-system of central banks (a) maintains a fifteen percent gold to other FOREX-reserves ratio, and (b) values its gold reserves quarterly at market prices. This gives their currency's reserve position the distinct advantage of rising along with a climbing market price of gold.

And gold is indeed rising.

The US Treasury, on the other hand, values the American people's gold stock at a measly $42.22 per ounce - no matter what the market says gold is worth. This causes the dollar to suffer from an undue weakness in the face of rising gold prices, and causes people, US citizens and foreigners alike, to progressively abandon the dollar for fear of a loss in purchasing power as a result of such rising gold prices.

And gold prices are in fact rising.

It is now time for the United States to re-evaluate its position relative to gold. In 1971, after then-president Nixon was forced to abrogate the international gold-exchange standard to avoid a total depletion of US gold reserves at the hands of our trading partners, the US was forced to make the world and the American people believe that the dollar was "as good as gold."

The world, and the American people went along with that claim - for the time being. An ever-increasing flood of dollars helped expand global trade - and US power and influence. The price-inflationary effects of such a massive expansion of the US money supply were not felt at home - because the dollar's exclusive world-reserve and international trade currency status helped export that inflation to other countries.

The world agreed, and supported the dollar - and its quest for lower gold prices - because the dollar was "the only game in town." But since the creation and launch of the euro, this is no longer the case.

Gold is the foundation of all economic value. Even Chairman Greenspan testified before the Senate Banking Committee in 1999 that "gold is the ultimate form of payment."

The right to freely own and trade gold also forms the foundation of all individual property rights - and therefore of all economic individual Liberty. This is the reason our founding documents decree that the states must make nothing other than gold and silver their currency.

Unfortunately, the founding fathers did not foresee that a federal government of later years would find a way to exempt itself from that prohibition and gradually force its citizens to accept an unbacked paper currency that dilutes their right to own property, and leaves them at the mercy of an ever-inflating money supply - all at the behest and whim of politicians and bankers.

But now the price of gold is rising, and people all over the world are divesting themselves of US dollars in favor of gold or other, gold-friendly, currencies.

Communist China, whose brutal totalitarian leaders have only recently threatened to nuke Los Angeles if the US dares to interfere with it's planned invasion of Taiwan, is allowing its citizens to freely own and trade gold. The thus-unleashed added demand for gold, estimated to be in the billions of dollars per year, will only further destabilize the gold-adverse dollar.

Muslim nations, many of whom are ardent supporters of terrorists, are using gold as an economic weapon against a United States they perceive as "the great Satan".

A gold-adverse, unbacked paper-dollar is defenseless against the onslaught of such forces - forces which, combined, essentially represent the entire rest of the world.

It is now time to reevaluate a US policy that attempts to buck this world-wide trend. It is now time to stop trying to protect bullion banks and heavily hedged producers like Barrick Corporation at the expense of the American people.

A point is now reached where the price of gold can no longer be contained by the usual artificial means. A point is now reached where the derivatives positions of bullion banks and over-hedging gold producers will cause their financial ruin anyway, no matter what is being done behind the scenes to support them.

This now presents an unprecedented opportunity, Mr. President, an opportunity of historic proportions. It presents an opportunity now to do right. Today, and for a very short time from today (maybe a year or less) the political consequences of doing right will no longer be more painful than those of continuing to do the wrong thing.

The issue now is to make sure that the United States is not overtaken by its enemies who, ironically, being mainly of a leftist or totalitarian bend, have become pro-gold, while the US, being supposedly "free-market", is stuck defending an anti-gold -- and therefore effectively anti-free market -- status quo.

Our heartfelt advice: drop all attempts to fight gold and all fruitless efforts to defend the dollar by further encumbering the gold that belongs to the American people. All this policy has accomplished in the past was to strengthen the hands of our enemies.

In that spirit, please ask Congress to

  • abolish the law that limits the price at which the US values its gold stocks to a ludicrous $42.22 per ounce. (Vol. 31 United States Code, Section 5117);
  • pass a new law requiring US gold stocks to be valued at market price,
  • vote to buy whatever gold is needed to replenish US gold stocks, and
  • ask Chairman Greenspan to allow the dollar to find its true market-equilibrium price versus gold, (which, incidentally, would also serve to radically cut the twin current-account and trade-deficits), and thus save the US dollar - and our economy that rests on it.

Please give the dollar and the American people a fighting chance to survive the coming world financial crisis with our finances largely intact, by encouraging the citizens of this country to buy gold, and re-establish a true free-market system in the United States. You know as well as any that, once these conditions are met and the monetary playing field between the US and the euro-nations (and China) is thus leveled, there isn't a power in the world that can out-compete the American spirit.

As to the argument that such a policy would cause an explosion in the price of gold and thus threaten the dollar and the US economy - this explosion is about to happen, anyway. You and Mr. Greenspan know that. The longer we wait, the worse we will be off. With individuals owning and freely trading gold, there is at least some chance at economic survival. The status quo is no longer defensible.

US fiat-dollar hegemony is an illusion built on a lie, and has outlived its usefulness (if it ever had any, beyond unconstitutionally shifting power away from the individual citizenry in favor of ever-more centralized government). The truth is that this dollar-"empire" truly has no clothes - and is about to be stripped even of its pretense of a wardrobe by our enemies - if we let them.

If all political correctness is left aside, it is very clear that China is not a "trading partner," Russia is not a "strategic partner," and Europe (i.e., "Old Europe") is no longer a true US "ally."

Both Russia and China are powerful enemies who know perfectly well how to play their cards. In attempting to "defend" the dollar by squandering our gold reserves, we are currently playing into their hands. This must stop. "Old Europe," meanwhile, is happily playing alongside them.

Even the incredible might of our US military - if founded upon, and paid for with, a systemically weak and vulnerable dollar - cannot prevail for long when that dollar becomes practically defunct. We cannot attack the entire world to defend the dollar, and we can only defend our country if the dollar retains value.

As gold rises under the current dollar set-up, the dollar tanks. As the dollar tanks, people lose confidence in it and divest themselves of it - and the dollar tanks further. That is what is currently happening around the world. Only Japan and the other Asian "tigers" (minus China) are buying dollars to preserve their export markets - but even that is not stopping the dollar's fall.

Internationally, the US has zero control over this process. Why? Because the world now has a fresh alternative to the debt-ridden and over-issued dollar. Already, Russia has shifted its oil sales to euro, thus reducing dollar-demand dramatically, which continues to lower the dollar's FOREX value. This was a calculated move, designed to demonstrate to other nations that they will "get away with it" as well. Others will inevitably follow.

As oil settlement worldwide is shifting toward euros, the dollar's use in international trade will decrease by necessity - and drastically so. Central banks will continue to divest themselves of dollar and US treasury reserve holdings - as they already have - causing a dollar-backwash of epic proportions into the domestic US economy. You know that this will inevitably lead to massive US inflation, even hyper-inflation.

These are pure market forces over which even the US' sole military super-power status cannot exercise effective control. Truly, to say it with Rudyard Kipling: the "gods of the copybook headings" are never defied for long. The United States, historically the sole defender of free-market forces world-wide, should not be put into a position to suffer defeat at the hands of exactly the very market forces it claims to champion.

Past US policy - which long pre-dates your administration, President Bush, and for which the blame cannot be laid at your feet - has undermined America's natural heritage as the champion of individual freedom and Liberty. But the current continuation of this policy, probably driven by political "realism" (may we call it "expediency"?) Has resulted in the uncomfortable situation where the enemies of freedom on the Left are using exactly the same arguments to criticize current policy lapses as do conservatives on the right - although for vastly different ideological purposes.

This should not be allowed to continue.

The beauty of the current situation is that it is one of those rare moments in history when political expediency and the need for doing the right thing coincide - by dire necessity.

We, the undersigned, believe that America must once and for all forego the illusory benefits of a currency that is based on nothing but debt piled on even more debt. The danger of walking over the edge of an abyss is not avoided by pretending that there is no abyss.

We, your undersigned supporters, believe that the freedom of the entire world ultimately depends on the resoluteness and the principled leadership of the United States. Once the dollar goes the way of all thing paper, this country will be defenseless to those who have hitched their wagons to the free-market power of gold.

Mr. President, please show the world - and most of all, the American people - that this nation and its leadership are indeed a force for good, for righteousness, for free-market capitalism, and for true individual Liberty and Freedom, at home and around the world.

Thank you for listening.

Signed:


If you want to sign this petition, please e-mail me at gold-investor@houston.rr.com , and indicate if you want your web site URL included under your name. I will try to get this petition posted at Bruce Eberle's www.millinsofamericans.com .

Am I crazy? Am I presumptuous? What the heck. There's only one America.


 

Author: Alex Wallenwein

Alex Wallenwein
Editor, Publisher
The Euro vs Dollar Monitor

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