Washington Signals Dollar Deep Concerns
By Paul Craig Roberts
May 19, 2013
Clearing House" -
Over the past month there has been a statistically improbable
concurrence of events that can only be explained as a conspiracy
to protect the dollar from the Federal Reserve’s policy of
Quantitative Easing (QE).
Quantitative Easing is the term given to the Federal Reserve’s
policy of printing 1,000 billion new dollars annually in order
to finance the US budget deficit by purchasing US Treasury bonds
and to keep the prices high of debt-related derivatives on the
“banks too big to fail” (BTBF) balance sheets by purchasing
mortgage-backed derivatives. Without QE, interest rates would be
much higher, and values on the banks’ balance sheets would be
Quantitative Easing has been underway since December 2008.
During these 54 months, the Federal Reserve has created several
trillion new dollars with which the Fed has monetized the same
amount of debt.
One result of this policy is that most real US interest rates
are negative. Another result is that the supply of dollars has
outstripped the world’s demand for dollars.
These two results are the reason that the Federal Reserve’s
policy of printing money with which to purchase Treasury bonds
and mortgage backed derivatives threatens the dollar’s exchange
value and, thus, the dollar’s role as world reserve currency.
To be the world reserve currency means that the dollar can be
used to pay any and every country’s oil bills and trade deficit.
The dollar is the medium of international payment.
This is very helpful to the US and is the main source of US
power. Because the dollar is the reserve currency, the US can
cover its import costs and pay for its cost of operation simply
by creating its own paper money.
If the dollar were not the reserve currency, Washington would
not be able to finance its wars or continue to run large trade
and budget deficits. Therefore, protecting the exchange value of
the dollar is Washington’s prime concern if it is to remain a
The threats to the dollar are alternative monies--currencies
that are not being created in enormous quantities, gold and
silver, and Bitcoins, a digital currency.
The Bitcoin threat was eliminated on May 17 when the Gestapo
Department of Homeland Security seized Bitcoin’s accounts. The
excuse was that Bitcoin had failed to register in keeping with
the US Treasury’s anti-money laundering requirements.
Washington has stifled the threat from other currencies by
convincing other large currencies to out-print the dollar. Japan
has complied, and the European Central Bank, though somewhat
constrained by Germany, has entered the printing mode in order
to bail out the private banks endangered by the “sovereign debt
That leaves gold and silver. The enormous increase in the prices
of gold and silver over the last decade convinced Washington
that there are a number of miscreants who do not trust the
dollar and whose numbers must not be permitted to increase.
The price of gold rose from $272 an ounce in December 2000 to
$1,917.50 on August 23, 2011. The financial gangsters who own
and run America panicked. With the price of the dollar
collapsing in relation to historical real money, how could the
dollar’s exchange rate to other currencies be valid? If the
dollar’s exchange value came under attack, the Federal Reserve
would have to stop printing and would lose control over interest
The bond and stock market bubbles would pop, and the interest
payments on the federal debt would explode, leaving Washington
even more indebted and unable to finance its wars, police state,
and bankster bailouts.
Something had to be done about the rising price of gold and
There are two bullion markets. One is a paper market in New
York, Comex, where paper claims to gold are traded. The other is
the physical market where personal possession is taken of the
metal--coin shops, bullion dealers, jewelry stores.
The way the banksters have it set up, the price of bullion is
not set in the markets in which people actually take possession
of the metals. The price is set in the paper market where
This bifurcated market gave the Federal Reserve the ability to
protect the dollar from its printing press.
On Friday, April 12, 2013, short sales of gold hit the New York
market in an amount estimated to have been somewhere between 124
and 400 tons of gold. This enormous and unprecedented sale
implies an illegal conspiracy of sellers intent on rigging the
market or action by the Federal Reserve through its agents, the
BTBF that are the bullion banks.
The enormous sales of naked shorts drove down the gold price,
triggering stop-loss orders and margin calls. The attack
continued on Monday, April 15, and has continued since.
Before going further, note that there are position limits
imposed on the number of contracts that traders can sell at one
time. The 124 tons figure would have required 14 traders with no
open interest on the exchange to sell all together in the same
few minutes 40,000 futures contracts. The likelihood of so many
traders deciding to short at the same moment at the maximum
permitted is not believable. This was an attack ordered by the
Federal Reserve, which is why there is no investigation of the
Note also that no seller that wanted out of a position would
give himself a low price by dumping an enormous amount all at
once unless the goal was not profit but to smash the bullion
Since the April 12-15 attack on the gold price, subsequent
attacks have occurred at 2pm Hong Kong time and 2 am New York
time. At this time activity is light, waiting on London to begin
operating. As William S.Kaye has observed, no entity concerned
about profits would choose this time to sell 20,000 to 30,000
futures contracts, but this is what has been happening.
Who can be unconcerned with losing money in this way? Only a
central bank that can print it.
Now we come to the physical market where people take possession
of bullion instead of betting on paper instruments. Look at this
chart from ZeroHedge.
The demand for physical possession is high, despite the assault
on gold that began in 2011, but as the price is set in the
non-real paper market, orchestrated short sales, as in the
current quarter of 2013, can drive down the price regardless of
the fact that the actual demand for gold and silver cannot be
While the corrupt Western financial press urges people to
abandon bullion, everyone is trying to purchase more, and the
premiums above the spot price have risen. Around the world there
is a shortage of gold and silver in the forms, such as one-ounce
coins and ten-ounce bars, that individuals demand.
That the decline in gold and silver prices is an orchestration
is apparent from the fact that the demand for bullion in the
physical market has increased while naked short sales in the
paper market imply a flight from bullion.
What does this illegal manipulation of markets by the Federal
Reserve tell us? It tells us that the Federal Reserve sees no
way out of printing money in order to support the federal
deficit and the insolvent banks. If the dollar came under attack
and the Federal Reserve had to stop printing dollars, interest
rates would rise. The bond and stock markets would collapse. The
dollar would be abandoned as reserve currency. Washington would
no longer be able to pay its bills and would lose its hegemony.
The world of hubristic Washington would collapse.
It remains to be seen whether Washington can prevail over the
world demand for gold and silver. Can the dollar remain supreme
when offshoring has deprived the US of the ability to cover its
imports with exports? Can the dollar remain supreme when the
Federal reserve is creating 1,000 billion new ones each year,
while the BRICS, China and Japan, China and Australia, and China
and Russia are making deals to settle their trade balances
without the use of the dollar?
If the consumption-based US economy deprived of consumer income
by jobs offshoring takes a further dip down in the third or
fourth quarter--a downturn that cannot be masked by phony
statistical releases--the federal deficit will rise. What will
be the effect on the dollar if the Federal Reserve has to
increase its Quantitative Easing?
A perfect storm has been prepared for America. Real interest
rates are negative, but debt and money are being created hand
over foot. The dollar’s demise awaits the world’s decision how
to get out of it. The Federal Reserve can print dollars with
which to keep the bond and stock markets high, but the Federal
Reserve cannot print foreign currencies with which to keep the
When the dollar goes, Washington’s power goes, which is why the
bullion market is rigged. Protect the power. That is the agenda.
Is it another Washington over-reach?
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