Did Government Try To Murder The Canary Before It Could Get Sick?

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Monty Pelerin / EconomicNoise.com

A related event of importance, which I believe has not received enough attention, is the Cyprus bank “bail-in.” Telegraphing to Europe and the rest of the world the fact that deposits in banks are no longer safe was a government act of idiocy. For those who believe government is terminally stupid, Cyprus was an act which exceeded even these low expectations.

Actions regarding the confiscation of assets (retirement accounts, pensions and other wealth) are routinely discussed by those who know there is no way out of this mess. The actions in Cypress validated these ideas to a large portion of the masses who otherwise believed such talk to be “kook-babble.” Cyprus demonstrated government’s willingness to do anything to survive. It telegraphed the danger to non-believers.

Gold is a natural escape for storing wealth. It has been for thousands of years. It cannot be debauched like fiat currency, and it is easy to hide or transport. In short, it is the perfect money (and this is why government always tries to discredit it).

The reason to flee banks was established. Once that cat was out of the bag, it was necessary to destroy the key means of escape — gold. Not attacking gold ran the risks of bank runs and wealth disappearing from government control.

I do not believe that Cyprus and the signal it sent to citizens around the world can be overstated. It revealed the true nature of government and the danger that we all face.

3. The Dishonesty in the Gold Markets

The amounts of gold claimed to be held by various financial intermediaries, including the US Federal Reserve and perhaps Fort Knox, seem to be fallacious. There has been no public, physical audit of these stocks for many decades. Rumors have been circulating for years that the Fed has leased out its gold to bullion banks, who then have sold it into the marketplace partly as an effort to depress gold prices.

Sovereign countries store a lot of their physical gold in the US. Recently, Germany requested a return of their physical gold, a process that should take about a week to accomplish. Germany was told that it would receive its gold over a period of seven years! Does that make you wonder whether the gold is actually where our authorities say it is?

If the gold was leased and then sold into the marketplace by bullion banks, then these banks have to buy it back to be able to return it. Most of this gold was sold at much lower prices than today, making it virtually impossible to buy it back without bankrupting many of these institutions. Similarly, rumors of massive short positions in gold by large investment banks suggest further bankruptcies or financial hardships should this gold have to be delivered.

All of these political problems are lessened when the price of gold falls.

Did Government Shoot Itself in the Foot?

The reaction to the gold take-down has been rather remarkable. The manipulation of the paper market in gold has created enormous demand in the physical markets. Gold dealers have seen runs on their inventory by customers. Many have trouble keeping gold in stock. Michael Snyder reports:

The crash of the price of paper gold on Monday has unleashed an unprecedented global frenzy to buy physical gold and silver.  All over the planet, people are recognizing that this is a unique opportunity to be able to acquire large amounts of gold and silver at a bargain price.  So precious metals dealers now find themselves being overwhelmed with orders in the United States, in Canada, in Europe and over in Asia.

Will this massive run on physical gold and silver soon lead to widespread shortages of those metals?  Instead of frightening people away from gold and silver, the takedown of paper gold seems to have had just the opposite effect.  People just can’t seem to get enough physical gold and silver right now.  Those that wish that they had gotten into gold when it was less than $1400 an ounce are able to do so now, and it is absolutely insane that silver is sitting at about $23 an ounce.  If the big banks continue to play games with the price of gold, we are going to see existing supplies of physical gold and silver dry up very quickly.

And once reports of physical shortages of gold and silver become widespread, it is going to absolutely rock the financial world.  But this is what happens when you manipulate free markets – it often has unintended consequences far beyond anything that you ever imagined.

It seems that government’s attempt to discredit gold has served to awaken the awareness of gold’s value as a protection against predatory government and an economic future unlike anything we have seen before.

continue article at EconomicNoise.com:

http://www.economicnoise.com/2013/04/26/did-government-try-to-murder-the-canary-before-it-could-get-sick/