Veteran who called some major market junctures
Richard Russell endorses gold manipulation thesis
The way your world works on the surface differs from how it works out of sight. You read about the price of something you might want to buy and assume it’s set by demand and supply. That would be true, up to a point. The price is also manipulated by people who create new money. The fact that a major news outlet carries this story suggests to me that they’re worried about people finally getting angry enough to take action, and don’t want to be identified with the targets of their anger, but want to appear as neutral conduits, mere criers of the news, even though the names on corporate charters and board directorships would tell a different story, a story of squarely taking sides. So, this story being news is news itself.
by Peter Brimelow, CBS MarketWatch, 25 April 2011Dow Theory Letters’ octogenarian Richard Russell has endorsed the thesis that the gold market is manipulated. He says it won’t work -- but the ride will be rough.
Russell is a much-respected veteran, with a remarkable record of calling some major market junctures. He is a long-time gold bug, but for traditional inflationary reasons. He had resisted the argument, developed by writers associated with Bill Murphy’s Le Metropole Cafe website, that the gold price is manipulated by a Washington-Wall Street alliance.
But in his last post last week, on Thursday, Russell wrote:
“The desperate battle to keep gold below 1500 continues. I watched the erratic action of gold near yesterday’s close. The action is now so blatant that it literally screams of manipulation. At its high yesterday, June gold sold at 1506.50. At yesterday’s close, June gold was trading at 1498.10. It’s almost embarrassing to watch the action. What we’re seeing is the anti-gold crowd and the manipulators vs. the great primary trend of gold.”
“The battle about gold closing above 1500 is that once above 1500, technically gold will be on its way to 2,000. And from there 5,000 will be the target…from the anti-gold crowd’s standpoint, gold must be held (on a closing basis) below 1500.”
Spot gold reached $1515 early Monday morning.
The motive for manipulation, Russell argues, can be traced back to the US Federal Reserve’s problems in financing US government debt. He writes:
“When you think about it, it’s no wonder that Wall Street and the Fed hate gold. Gold exists outside the system. The Fed can’t manipulate or create gold the way they do Federal Reserve Notes. When gold rises, as it has been doing, it hoists a red flag over Wall Street, the Fed, and the economy… All the lies, corruption, and secrets of the Fed and the politicians can’t erase the dire message of gold.
Russell prophesies apocalyptically:
“The gold-bears will be defeated. It’s only a matter of time… We’re moving nearer and nearer to the edge of the hurricane. I can feel it in my bones… I can feel them caressing my face -- the early breezes. They are blowing gently and hinting of the forthcoming gold hurricane that will sweep across the US and the planet with all the force and power that was seen when gold was first discovered at Sutter’s Creek during the California gold rush of 1849. The gold rush of the 2000s is in the wings.”
But when? That’s a problem. Russell warns of one possible danger: that “following the end of QE2 [its second round of quantitative easing], the Fed will not immediately jump into QE3. This is feasible, and if it happens, gold could suffer a major correction as the dollar and Treasuries unexpectedly strengthen.
“Therefore, BEFORE the great gold tsunami we might have a frightening gold correction that would clean out all the gold skeptics. This ‘clean out’ may be necessary prior to the big gold tsunami, and it’s a reason to hold some cash and not put ALL your money into gold at this time. Remember the old adage -- “The market always does what it’s supposed to -- BUT NEVER WHEN.”
Russell thinks investors are still in denial about gold. He writes:
“And what do Americans do to protect themselves against rising prices? Easy, they buy stocks or mutual funds on the theory that higher stock prices will protect them from rising prices. How does it help you if stocks go higher, and the item that your stocks are denominated in -- is falling apart?”
Gold bugs generally have a dearly-bought respect for the ability of the Fed to pump things up -- short-term. On that basis, Russell has been recently bullish on stocks. But, in his Delphic way, he seems to be signaling that the short term is coming to an end.
To see the whole article, click here
JJS: You can save or invest. If you save in a bank, your money will be invested for you. In broad categories, you or your broker or banker will invest in capital to create more real wealth, or in buildings in order to capture the socially-generated value of land (locations, actually), or in things with purchasing power, like gold or a stable currency (relative to unstable currencies).
The price of gold rises with inflation, and inflation results from too much debt creating too much money, more than the output of the economy. So now’s a good time to buy gold, many people think. Thus it’s price keeps setting records.
Now’s also the bottom of the business cycle, which is actually a real estate cycle, which is actually a land-price cycle, so now’s also a good time to buy land. One also buys land indirectly by buying into REITs which invest in hotels, or maybe apartments. But not offices, as the off-Wall Street US economy has not yet truly recovered.
Another land looking good to investors and landlords is farmland (tho’ actual farmers don’t reap the lions share; to see the whole article, click here ), due to growing places like China and India raising demand for food and fuel (ethanol). Both those places buy gold for jewelry and art and storing purchasing power. Plus, both places may have their own downturns coming, some worry. So gold’s price is likely to overcome gold’s manipulation.
But none of that would be necessary if we flattened the business cycle. And we could flatten the business cycle if we as a society recovered and shared all the rents we spend for all the Earth we use. Not getting its rent, owners would no longer speculate in land, withhold it from use, or bid up its price. So no more boom-then-bust.
Even just a land tax works wonders. Decades ago when Denmark raised its tax rate on land, inflation fell to 1%. That’s a real 1%, not the phony data governments give out today.
You want an economy you’d feel safe in? One where savings are not the prey of manipulators but a nest egg awaiting your retirement? You better geonomize your government’s revenue policy and you better begin today.
Editor Jeffery J. Smith runs the Forum on Geonomics.
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