Here’s the central argument of a long piece I wrote on media manipulation of the bail-out story, its effects on the policy debate and on the price of gold, “Nightmare on Wall Street.”
“Gold Underwhelms
By the end of the week, after a month of relentless international friction and spiraling financial and economic collapse exacerbated by make-shift and venal policies from the Treasury and the Federal Reserve, the Dow is actually at 7776.18, a full 700 points higher than at the beginning of March, Gold – the crisis commodity – is below the band of resistance and looking weak, and the Dollar Index is trading strongly over 85.
Gold’s underwhelming performance did not surprise everyone, of course. The Gold Anti-Trust Action Committee, the leading activist group on gold manipulation has alleged for many years that leading bullion banks (such as, Goldman Sachs and JP Morgan Chase) have been colluding secretively with central banks and world monetary authorities to sell gold whenever necessary, so that rising bullion prices don’t tip off the market to insidious currency debasement.
In fact, GATA is now pressing for an independent audit of US gold reserves at Fort Knox, something that hasn’t been done since President Eisenhower.
GATA’s efforts are commendable. But attention needs to go equally to another kind of manipulation – the manipulation of public perception.
Between the Lines
Take the nationalization debate.
On the face of things, nationalization versus private-public partnership seems to be a debate pitting the good guy, the People’s Pundit (Paul Krugman) against the bad guys, the Bankers’ Bozos (Geithner and Bernanke).
But these terms preempt thinking about more limited and nuanced approaches. And that makes you wonder if the public isn’t being set up to be patsies, no matter which of the two sides it picks.
Take Krugman’s March 1 op-ed, “The Revenge of the Glut,” which blames the crisis on Asian savers. It’s published on the Sunday just before the Fed Reserve begins stone-walling on AIG and before Bernanke and Greenspan also decry the Asian savings glut.
On that, the Pundit and the Bozos are singing from the same page.
Then, look at Krugman’s March 6 op-ed, “The Big Dither,” where he demands nationalization at once. His argument is that government is going to have pour trillions into the crisis anyway, so why not now and why not with government control, so the government gets the upside as well?
If that’s the extent of his reasoning, it’s clearly flawed.
For starters, it’s perfectly possible for the government to do nothing now and also nothing later. It could just stick to prosecuting wrong-doers and ensuring a safety net and redress for victims. Throw a few more jail terms at the problem, and some of the money we think has vanished might reappear. Bottom line: There’s no need for the public to absorb the bad debt of banks at all…with subsidized loans or anything else. Just let the bank’s bond-holders take the losses.
Secondly, with such a crooked set of players, why wouldn’t nationalization just put more power into the hands of the banking cartel?
Thirdly, whatever upside potential remaining bank assets might have, they might not cover the explicit and hidden costs of a full-scale government take-over.
Fourthly, the Swedish solution that Krugman likes to push turns out not to have been nationalization at all. In Sweden in the 1990s, only one bank, Gota Bank, was taken over and that only after it had collapsed. So says William Isaac, the only one in the debate who’s actually nationalized a bank (“Bank Nationalization is Not the Answer,” Wall Street Journal, February 24, 2009).
Isaac points out that Sweden’s largest bank was about a tenth as big as any one of the three largest banks in the US. Unlike Sweden, the ten largest banking companies in the US hold two-thirds of the nation’s banking assets.
If what’s needed is to put some institutions into receivership and to make sure bondholders take losses that the public’s now taking, why not just say that? Why use the term nationalization, which has much broader implications and can set precedents we don’t want in other areas?”
More at Gold Seek.
Thank you for “Nightmare on Wall Street”?
From: Stephen A. Vaughn
Sent: Wed 4/01/09 12:48 PM
Much appreciated.
I see the Main Street world as sinking into a bit of a quiet, burbling torpor this Spring. Things will be kinda bad, and about the same, now that Helicopter Ben has “saved the economy.” As much as Wall Street shrieks, Main Street seems more silent.
You asked “what’s going on with gold?’ and made the following brilliant observation (and I find it brilliant because it parallels my own concerns over the last year or so…)
Gold’s underwhelming performance did not surprise everyone, of course. The Gold Anti-Trust Action Committee, the leading activist group on gold manipulation has alleged for many years that leading bullion banks (such as, Goldman Sachs and JP Morgan Chase) have been colluding secretively with central banks and world monetary authorities to sell gold whenever necessary, so that rising bullion prices don’t tip off the market to insidious currency debasement.
GATA’s efforts are commendable. But attention needs to go equally to another kind of manipulation – the manipulation of public perception.
<p>The paradox of the free market is that a tree ONLY makes a noise in the forest when NOBODY is observing it. An awful analogy, but intended as thus. When EVERY player in the market is driven by selfishness and greed, than the market follows an honest path, and tells what the desire and abundance of something truly is. When there are players who trade FOR THE PURPOSE of pegging the market to a certain behavior or standard, then the market behaves goofy because it is driven by something apparently illogical
Gold blew a tire in 2008 (so did oil, by the way) and dropped significantly. It’s not driven by classical commodity valuation – stuff becomes cheap because money becomes dear, and interest rates boom, and EVERYTHING gets cheaper. Instead, a BOODLE of big-lot gold fell onto the market and drove down the prices – when all the while, small-lot, mom-and-pop commemorative 1-10 oz. gold was nowhere to be found. The mints were running extra shifts to melt it down and pump out small pieces.</p>
Somebody wanted a lot of dollars in a hurry.
I think it’s our Uncle, Sam. He’s not telling us the truth about his financial situation. He just unloaded tons of gold, and cratered the market. (Also see platinum – an industrial metal – which cratered, too, thanks to the auto industry unloading reserves; and the rhodium market, which was SHEER speculation, and showed itself too.)
Many people measure the dollar in terms of gold price – so the effect was the same as the covert US buying up of futures, causing the “markets to stabilize” – which means that the markets were manipulated to fool the investors.
You’re on the right track, Lila. I’m worried that Uncle had to retreat to dumping Fort Knox to save the dollar – in 2008, no less! When we get to the last brick of gold in Kentucky, then we are in for it
All the best,
Steve V
Albuquerque NM
From: Stephen V
Sent: Wed 4/01/09 12:54 PM
If you want to see gold unmasked, please look at her most unattractive
sister – lead; or rather, lead in its most unsavory form, ammunition.
The market has skyrocketed, with shortages, price hikes, hoarding and all
sorts of dreadful stuff. Since the civilian ammunition market is fairly
untouched by planning, we see what may be gold unmasked.
The counterpart, the military ammunition market? The United States
purchases (and therefore, I assume, uses) about 2.3 BILLION rounds of
SMALL-ARMS ammunition. This is not the big ka-boom! stuff that goes off
ships and out of cannons, but regular stuff that goes into
civilian-available arms – .223, .45ACP and such. Quick math shows that we
use about 100 rounds/year per US man, woman & child. Shazzam.
The military & police use (not included above) also affects the market.
Take a look! It’s up 70% in sales over the last 12 months.
Steve V
Albuquerque NM
Nightmare on Wall Street?
From: Pete
Sent: Wed 4/01/09 2:44 PM
Dear Ms. Rajiva,
Thank you for the excellent analysis and enormous effort put into this
article. Consider me a regular reader of your work from now on. While
there are certainly brave and forthright people, along with yourself,
trying to dissect and bring to attention the enormity of this
unprecedented fraud being perpetrated on the citizens of the US and
other countries, I think the efforts amount to spitting in the wind.
We citizens of Earth are most certainly headed for the global
devastation of our civilization, manufactured by these self-styled
“Masters of the Universe”, which will plunge humanity, or what will be
left of it, into a dark age from which we may never recover. I only hope
these parasitic cannibals ultimately get what they deserve; relentless
pain and suffering of a magnitude equal to that which they have and are
causing.
In case it is not obvious from my statements, like many others, more
than half of what I worked my life to accumulate is gone and will never
be able to be recovered. In vain, I hope for an asteroid just big enough
to take out DC, preferably during the State of the Union address.
I appreciate your efforts and please continue. Who knows, maybe the
walking dead of America will finally realize that real death is
preferable to slavery.
Regards,
Pete
Betsy Cooke
Sent: Wed 4/01/09 2:48 PM
My suspicion is that the Oligarchs must have some stranglehold on
whoever gets elected to Congress or the Presidency and that it
involves money, i.e. elections bought and paid for, because it doesn’t
seem to matter who gets into office or what they promised Americans in
order to get there, the tune changes once in office. Europeans seems
much more proactive than Americans; something so blatant as
appointing Goldman Sachs execs, one after another, to head economic
watchdog institutions in the middle of a crisis in which Goldman Sachs
was a principle player (as if there were not equally qualified
independent economists and execs) I think would have caused
demonstrations in the streets of London, Paris, or Brussels. Until
the American citizens gets rolling along those lines, I don’t think we
will take the measures proposed by the Austrian school of economics
that seem to hold more promise of actually aiding a recovery; allow
the megabanks to go into receivership, stop the recovery funds, break
up these banks into smaller units etc. A more transparent accounting
might help get our blood boiling to the correct temperature to make
that happen! Thank you for the very informative article.
Betsy Cooke
Nightmares on wall street?
From: KEITH S
Sent: Wed 4/01/09 2:51 PM
Overheard last night:
“I’m addicted to Ameritrade, I’m on it all day at work at my desk trading
stocks. I sold my APPLE at 20% (gain? Loss?)…I have no risk aversion…I
just had to make sure and put x amount and only play with that. I bought
CITIBANK at 1.60 (approx) and sold it for 2.50. I know, it ridiculous to
make that much money on a stock that costs so little. I mean obviously
financials are under valued-buy financials” -girl early thirties NOT in
financial field.
“I wish I had the guts to put some money in. I Just don’t know what to
buy…” -her friend
“I know nothing about stocks”-first girl.
I think al lot of the models as to what gold, dow, etc will do don’t and
can’t account for modern behaviors, tech advances, speculation, etc. Like
you wrote a lot has to do with perception right or wrong. If a well paid
non-wall street world yuppie with dispensable income is playing Ameritrade
like Atlantic City then how many day traders, brokers, and those with real
money are doing the same. Guess right and catch the roller coaster on a 90
cent uptick and you make quite nice sum. There’s no real investing here just
buying and selling. I think last summer’s oil price had some speculation
driving it as well. It’s not whether it’s good or bad. It exists.
On another subject I think I’m starting to understand some of the blogosphere
terms and behavior. Skulker? Is that someone that follows a particular blog
without contributing or commenting? Sorry for the silly questions, I’m
rather ignorant of the culture.
From a previous email:
please drop in and comment…I have a lot of skulkers who will come out
How does one participate? Pretend you are instructing your grandfather. Hmm
now I sound stupid AND old. Be gentle, I’m new to this. Really have to learn
how to type. Way too slow.
Keith
The People’s Republik of New York
march events?
From: Herrmann Pepping
Sent: Wed 4/01/09 2:53 PM
great march summary on goldseek.com
thanks
Hans Pepping
Osaka
Comment
From: mario
Sent: Wed 4/01/09 3:00 PM
Your article on wall street was very good,it was long and took a lot of work to make
Zombie economy
From: Vladimer Papava (papavavladimer@yahoo.com)
Sent: Wed 4/01/09 4:03 PM< To: lrajiva@hotmail.com
Dear Dr. Rajiva,
I have read your article “Nightmare on Wall Street” on http://www.lewrockwell.com/rajiva/rajiva16.html and like it very much.
I want to share with my ideas on the Zombie Economy:
http://www.marketoracle.co.uk/Article8736.html
Regards,
Vladimer
Dr. Vladimer Papava
Senior Fellow,<br />
Georgian Foundation for Strategic and International Studies (GFSIS),<br />
3a, Shio Chitadze Street,<br />
Tbilisi, 0108,<br />
Republic of Georgia,</p>
<p>www.papava.info<br />
http://www.gfsis.org</p>
Nightmare on WS?
From: K. Duffy
Sent: Wed 4/01/09 4:42 PM
To:
Great timeline. Thanks! This whole sordid affair is beyond criminal. Rogers was livid yesterday in his interview with the Queen Bingo Caller on CNBC, calling the WS/banking theft unconscionable on economic and moral grounds. Bartiromo’s non-verbals were priceless.
Great Article today, at Lew Rockwell
From: B Sardi
Sent: Wed 4/01/09 4:43 PM
To: Lila Rajiva
Re: Nightmare on Wall Street
Wonderful citation of how the elites distract, point fingers elsewhere, manipulate price of gold.
B Sardi
Bravo
From: W, David CTR USSOUTHCOM JTFGTMO
Sent: Wed 4/01/09 4:43 PM
To: lrajiva@hotmail.com
Lila,
That was another outstanding article on LRC. It was a bit long for me to share with everyone but I am impressed with your research and timelines
Sincerely,
David F. Wright
Strategic Debriefer
JTF-JIG-ICE
Team 2
SIPR:>
NIPR:
“It is sobering to reflect that one of the best ways to get yourself a reputation as a dangerous citizen these days is to go about repeating the very phrases which our founding fathers used in the struggle for independence.” – Charles A. Beard
“Perhaps the fact that we have seen millions voting themselves into complete dependence on a tyrant has made our generation understand that to choose one’s government is not necessarily to secure freedom. ” F.A. Hayek ( referring to Hitler)
RE: Bravo
From: W. David F CTR USSOUTHCOM JTFGTMO
Sent: Wed 4/01/09 5:05 PM
To:
That is good. There is such a thing as the Silent Majority although they
are too silent. I don’t think so for long. What you are espousing is
actually PRO-AMERICAN. It is the philosophy of the Founding Fathers.
is very American to be critical of one’s government when they are in the
wrong and when corruption is afoot.
My point about many American’s being ignorant is they often get a
knee-jerk reaction to a problem ( i.e. all Muslims are “terrorists” post
9/11) without fully understanding the events taking place or seeing them
for what they are…the road to being subjects and not citizens of a
Republic. It takes more than gold and guns to undo and resist the damage
taking place although they form a base for many future actions.
Nightmare on Wall street
From: Grammas, A.
Sent: Wed 4/01/09 6:40 PM
To:
Just blooming excellent, thank you.
August Grammas
It is no crime to be ignorant of economics, which is,
after all, a “dismal science”. But it is totally irresponsible
to have a loud and vociferous opinion on economic
subjects while remaining in this state of ignorance.
Rothbard
Nightmare on Wall Street
From: siew w
Sent: Wed 4/01/09 7:19 PM
To:
Dear Ms Lila Rajiva
i have just read your article
Nightmare on Wall Street found in LewRockwell.com
What’s your take on the G20 gathering and the likely outcome which will affect the Dow Jones index and gold?
Looking forward to read more of your views.
Regards
retiree
Re Nightmare on Wall St
From: Rich A
Sent: Wed 4/01/09 8:26 PM
To:
Dear Lila.
Thank you for your brilliantly written…and urgently needed overview of
the last 34 days.
Peace
Rich
PS:
If you happen to be in the Boston area on 4/11, please stop by BU to hear
an important talk by Dr David Ray Griffin.
My group has worked hard to bring this event to Boston.
http://www.911blogger.com/node/19584
USNS Impeccable, a survey ship (read, spy-ship)
From: Stombond
Sent: Thu 4/02/09 2:01 AM
To: lrajiva@hotmail.com
What the survey ship was doing was making maps of the bottom for submarines – got to be. Everything else is available for measure from aircraft and satellites.
Nightmare on Wall Street
From:
Sent: Thu 4/02/09 7:29 PM
To:
Lila,
Right on. Wow, your striking appearance (excuse my boldness) is only matched by your fabulous mind. You’re observations are all quite reasonable, and it only makes me wonder if there is a bigger picture once 9/11 is mixed in. But my email is only for praising your wonderful article. Why aren’t the politicians observing instead of looking around acting busy and stuff just flies by right under their noses, aaaaargh. Oh right, they’re politicians! Well, have to go hope to read your next article real soon.
Sebastian S.