GOLD WARS
Gibson's Paradox & the Gold Standard
by Douglas V. Gnazzo
March 17, 2006
“The First Casualty of War is Truth” [1]
[1] Aeschylus
Conclusion
The boys seem to be getting a wee bit nervous over interest rate derivatives and other instruments of structured finance – as they might not be quite as structured as they originally thought. Paper derivatives may very well carry the seed of their own self-destruction within. Warren Buffett seems to think so.
The Governor of the Bank of England was so frightened at one time that he stated:
“We looked into the abyss if the gold price rose further.
A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.”
“Therefore, at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded.” [11]
In other words, the Fed is most concerned with the ten-year and thirty-year bond yields. This is their line in the sand. They do not want the long end of the yield curve to rise.
Towards the ultimate goal of protecting the debt market the Fed and Treasury want to keep gold under wraps, and if they can – down and out for the count. They have many weapons at their disposal. Do not underestimate your opponent.
We think we here the sounds of a rider in the distance – the one raging war against gold. Heed the sounds. A battle may be on the horizon of the gold market. It is often times good to retreat and lose the battle, to live to fight another day – to win the war.
The opponent is most dangerous when he appears the weakest and weakest when he appears the strongest. Let him make the first move that starts his downfall.
No comments:
Post a Comment