Gold Market Sunk to Keep Bond Market Afloat

The gold market was slammed shortly before the start of the “theatrical release“ of the  Federal Government “shutdown”.  

* chart courtesy of StockCharts.com; Terms of Use here : http://support.stockcharts.com/forums/31090/entries/20485

Historically, government shut downs have been associated with negative financial news.  Governments having to shut down due to financial reasons are generally considered to be in financial stress.  

Negative financial news has historically been a time when gold and silver prices rise do to uncertainty. Gold and silver have long been safe havens against financial calamity including falling currency values, falling bond prices and even rising interest rates, as gold and silver store wealth against borrowing costs.

A quick survey of the last 17 government shutdowns going back to 1976, especially those lasting more than 3 days, we see gold prices never fell during any of those shutdowns.  The longest running shutdown was from December 5th,1995 through January 6, 1996, and during that period gold rose from $386 per ounce to $409 per ounce, a rise of nearly 6%.

The current government shutdown comes during a time period when American debt has never been higher. The Obama administration beginning in 2008 has added more debt to the Federal balance sheet than all other Presidents, from George Washington to George H. W. Bush combined, a staggering $4.2 Trillion dollars.  

The issue of debt is not about total dollar amount, but about interest payments which must either be taxed in existence or borrowed into existence.  By the end of the Obama Presidency, the total debt is likely to be close to $17 trillion and over $6 trillion added during his two terms which as much as the total US Debt at the start of 2002.

The terms of the Federal Reserve Act (1913) did not include demands for repayment of paper money loans made to the Department of the Treasury, (the Constitutional United States Treasury having been ended by law in 1921), but specified interest payments were to be made only in gold and after the gold was gone, the United States declared bankruptcy. Bankruptcy was declared on the carefully chosen date of March 9, 1933. (interesting numerology  3-9-33 or 333-333 ==666! )  After 1933, all property and all potential income of all persons born thereafter was hypothecated to the non Federal no Reserve private banking cartel but this another story.

Interest payments are the primary benefit of banker pretended debt script, except, when the game’s gone too long. In the end, it’s interest payments which finally cause the destruction of debt script, as interest rates rise exponentially until no amount of script can satisfy the the demands for more interest.  

A primary concern of banker debt script managers is interest rates; keeping rates as low as possible is of the highest priority, especially when total debt ‘crosses the Rubicon’ where interest payments on debt already created, significantly affect future interest payments as previous payments are borrowed into existence.  The United States Federal Reserve has crossed the Rubicon and rising interest rates will signal the coming end of the FRN private debt based script.  

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