Aldous Huxley On How “Scientific Dictatorships” Induce Compliance

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Aldous Huxley, novelist and social critic, gave a talk at the University of Berkeley  on the dictatorship he saw in the future of the United States, a “scientific” dictatorship, he termed it. In it, control would be maintained by narcotizing the population with conveniences, entertainment, consumerism, and drugs. Ultimately, compliance would become pleasurable..

‘Today we are faced, I think, with the approach of what may be called the ultimate revolution, the final revolution, where man can act directly on the mind-body of his fellows.”

(Huxley, The Ultimate Revolution, University of Berkeley, March 20, 1962)

Europol Now Official Police Agent of EU

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The New American (hat-tip to Michael Rozeff)

“According to the terms of its new status as the “official” criminal intelligence-gathering branch of the EU government, “Europol now benefits from increased powers to collect criminal information and a wider field of competence in supporting investigations.” Among these increased powers is the power to access the voluminous personal data stored on the computers of Scotland Yard if agents suspect a person may be participating in a “preparatory” act that may lead to criminal behavior.

As has been reported in The New American, the database of information compiled and stored by the government of Prime Minister Gordon Brown is the most extensive in any developed nation. The database was established in 1995 and is the world’s largest. It contains the DNA material of over five million Britons, a figure that represents 8 percent of the population of England and Wales. The recording system was initially developed, ostensibly, to aid the police in the investigation of crime scenes and function as a “vital crime-fighting tool” in tracking down elusive offenders.

Now, every byte of that very personal information is available to Europol, without regard for the national laws of the United Kingdom. The relevant data to which Europol now has unfettered access includes political affiliation, routine, places frequented, DNA, tax obligations, voiceprints, and sexual preference. In fine, everything stored on those massive mainframes is now firmly within the province of distant Europol investigators.

The standard for granting Europol access to the personal data of Britons is much different from that governing their own national law enforcement. According to terms of Title VI of the Maastricht Treaty, the Europol Convention, and the new directives, a mere suspicion of likely criminal behavior in the following vague areas will trigger Europol investigation: racism, environmental crime, xenophobia, computer fraud, and crimes against the environment.

You read that correctly, Europol can now extract “behavioral data” on any citizen of any member state that it suspects — rightly or wrongly — is likely participating in any of the above listed “serious crimes.”

T.S. Eliot On The Unsoundness Of The Flesh

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“The wounded surgeon plies the steel
That questions the distempered part;
Beneath the bleeding hands we feel
The sharp compassion of the healer’s art
Resolving the enigma of the fever chart.

Our only health is the disease
If we obey the dying nurse
Whose constant care is not to please
But to remind us of our, and Adam’s curse,
And that, to be restored, our sickness must grow worse.

The whole earth is our hospital
Endowed by the ruined millionaire,
Wherein, if we do well, we shall
Die of the absolute paternal care
That will not leave us, but prevents us everywhere.

The chill ascends from feet to knees,
The fever sings in mental wires.
If to be warmed, then I must freeze
And quake in frigid purgatorial fires
Of which the flame is roses, and the smoke is briars.

The dripping blood our only drink,
The bloody flesh our only food:
In spite of which we like to think
That we are sound, substantial flesh and blood-
Again, in spite of that, we call this Friday good.”

T. S. Eliot, East Coker, IV, Four Quartets

Barack Obama: The Case For Impeachment

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David Lindorff lays out the grounds for impeaching President Obama:

Let’s start with the war in Afghanistan, which Obama has taken full ownership of with an escalation that will bring the number of US troops in that country (not counting mercenaries hired by the Pentagon and CIA) to 100,000 by this August.

The president has authorized the use of Predator drone aircraft for a program of bombing conducted against Pakistan which has illegally expanded the Afghan War into another country without any authorization from Congress. These pilotless drones are known to kill far more innocent bystanders than enemy targets, making them fundamentally illegal on principle as weapons. Furthermore, this wave of attacks in Pakistan is a war of aggression against another nation if the word “war” is to have any meaning at all, and as such it is illegal under the UN Charter. Indeed initiating a war of aggression against a country which does not pose an immediate threat to the invader is described in the Charter and in the Nuremberg Tribunal Charter as the gravest of all war crimes.

The president, as commander in chief, has also, in collusion with Attorney Eric Holder, blocked any prosecution of those who authorized and perpetrated torture against captives in the War in Iraq, the War in Afghanistan, and the so-called War on Terror–notably Federal Appeals Court Judge Jay Baybee, and Berkeley Law Professor John Yoo, who as Justice Department attorneys authored the legal briefs justifying torture– and has in fact continued to permit the application of torture against captives. All of this is in clear violation of the Geneva Conventions, which as a signed set of treaties, are part of the law of the United States. Under those treaties, failure on the part of those up the chain of command to halt or to punish those who commit torture are themselves guilty of the crime of torture.

As commander in chief, President Obama has also overseen a strategy in Afghanistan of expanded attacks on civilians in Afghanistan. As in Iraq under the Bush administration, this current phase of the war in Afghanistan is seeing more civilians killed than enemy combatants, because of the widespread use of weapons like helicopter gunships, aerial bombardment, fragmentation bombs, etc., as well as a tactic of night raids on housing compounds where insurgents are suspected of hiding–raids that frequently lead to the deaths of many women and children and innocent men. It is significant that even the recent execution-style slaying of nine students, aged 11-18, by US-led forces, has not led to an investigation or prosecution of a individual. Rather, the incident is being covered up and ignored, with the clear acquiescence of the White House and the leadership at the Pentagon.

It is also widely believed that under the command of Gen. Stanley McChrystal, who is known to have directed a large-scale death-squad operation in Iraq before moving to his current position, a similar death-squad campaign of assassination is being conducted now in Afghanistan--a campaign that like the notorious Phoenix Program in the 1960s in Vietnam, is almost certainly resulting in the deaths of many innocent Afghans.

Domestically, the president has continued to allow the policy of detention without trial of hundreds of captives in Guantanamo Bay and other prisons, including Bagram Airbase in Afghanistan, and his director of national security has even stated that it is the policy of this administration that American citizens deemed by the administration to be enemy combatants or terrorists may be targeted for summary execution. Such officially sanctioned state murder is a blatant violation of the Constitution’s insistence that every American has a right to a presumption of innocence and to a trial by a jury of his or her peers.

The president has also continued and in some ways even expanded the Bush/Cheney administration’s program of warrantless spying by the National Security Agency on the electronic communications of millions of Americans. A part of that program, the monitoring of communications of a now defunct Islamic charity, was just declared illegal by a federal judge in a case that was brought against the Bush/Cheney administration, but which continued to be defended by the current administration. There has not been a decision as yet by the Obama administration about whether to appeal that decision. While the case in question does not represent a crime by the Obama administration, it is clear that it only represents the very tip of the huge iceberg of domestic spying, and the administration’s vigorous efforts to shut down this case or to win it are clear evidence that the NSA is continuing to do the same thing on a vast scale. In fact, the only reason this case even got to trial is because of a government error that resulted in a memo describing the monitoring being mailed inadvertently to the victims of the spying.

While we’re at it, I would also suggest that there is ample evidence to call for the impeachment of Treasury Secretary Timothy Geithner, who appears, as head of the New York Federal Reserve, to have colluded in an effort to cover up a massive fraud at Lehman Brothers, and who has subsequently as Treasurer, participated in unprecedented giveaways of taxpayer funds to several of the country’s largest banking institutions.

The above enumeration of criminal and Constitutional transgressions makes it clear that this president, like his predecessor, has, almost since his first day in office, continued down a road of criminal and unconstitutional behavior that threatens the survival of Constitutional government in the United States.

Let me state it simply: President Barack Obama, as well as Attorney General Eric Holder, Secretary of Defense Robert Gates, and Treasury Secretary Geithner, should be impeached for war crimes and high crimes against the Constitution.”

Hedge Fund Lobby Steps Up The Lobbying..

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The hedge fund lobby is stepping up the..er… whining and dining in DC, says, Crain’s:

“With all the political and media focus on healthcare reform over the past few months, the financial industry enjoyed a brief respite from attacks and, as would be expected, spent its time and money wisely.

The hedge fund lobby, called the Managed Funds Association, doubled its spending during the last three months of 2009, according to data recently released by the Federal Election Commission. The MFA strategically sprinkled more than $1 million around Washington in the fourth quarter, compared to just $520,000 spent during the same period in 2008.”

Apparently, the hedgies don’t mind registering. What they’re kicking at are some other things:

1. Treating compensation as regular income (with its higher tax rate) rather than capital gains (with its 15% tax rate)

2. The banning of proprietary trading by banks, until now a lucrative source of income, the so-called Volcker rule.

The part I found really interesting in the Crain’s piece is that industry CEO Richard Baker apparently thinks there is a “growing alignment between hedge funds and millions of Americans.”

Oh yeah.

That would be that trader-activist mystique thing where Loeb, Paulson, and Chanos are really doing it for the little guy…….the money is just a side dish.

Um. Yeah. I get that.

And talking about side dishes, I hear that Rachel Uchitel’s interests are just aligned with  Joe Six-pack’s too. She isn’t an extortionist and a gold-digger. Oh no. That’s just what it looks like. She’s a conjugal activist. She trying to get Tiger and all those other rovin’ eyes out there to be better husbands…..

Ron Paul: Fight Draconian Biometric ID In US

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A message from Ron Paul and the Campaign for Liberty:

“This is getting to be like a bad movie. You know the ones where the villain, dead and buried more times than you can count, somehow mysteriously reappears in a place you don’t expect him? Well, here comes… a new fight over a biometric national ID card — and if you don’t have the card, you can’t work.

Right now, freedom-stealing statists Senator Lindsey Graham (R-SC) and Senator Chuck Schumer (D-NY), banding together with other statists from both parties, are scheming to sneak a massive power grab into a new “immigration reform” bill.

This bill is a statist’s dream — “amnesty” for illegal immigrants and a biometric ID card for virtually everyone else.

That’s right. Instead of controlling the border and enforcing the rule of law, these statists want to control you.

That’s why it’s vital you sign the petitions to your Senators IMMEDIATELY. http://www.chooseliberty.org/NationalId3.aspx?pid=3

You see, a National ID scheme — complete with biometric tracking technology — is embedded in the new “Comprehensive Immigration Reform Bill” being pushed by Senators Graham and Schumer, as well as other Big Government members from both parties.

And if passed, the “Comprehensive Immigration Reform Bill” would require a new National ID card that would:

*** Include biometric identification information, such as fingerprints, retinal scans or scans of veins on the back of hands. Depending on the technology used, the ID card could easily
be used as a tracking device;

*** Be required for all U.S. workers regardless of place of birth, and make it illegal for anyone to hold a job in the United States who doesn’t obtain the ID card;

*** Require all employers to purchase an “ID scanner” to verify the ID cards with the federal government. Every time any citizen applies for a job, the government would know –– and you can bet it’s only a matter of time until “ID scans” will be required to
make even routine purchases, as well.

Of course, the most dangerous part of the bill is the biometric tracking technology which would allow federal bureaucrats to track our every move.

Allowing our government to have this much “prying power” in our lives will ultimately result in the TOTAL loss of freedom.

This is exactly the type of battle that often decides whether a country remains free, or continues down a slide toward tyranny.

Government goon squads with all our personal information — information they do not need and constitutionally should not have — is a recipe for disaster for our nation.

You see, once “well-meaning” government bureaucrats know exactly how we live our lives, it won’t be long until they try to run them.

In fact, it will only be a matter of time until they spend their workdays making sure you and I don’t go anywhere we “shouldn’t,” buy anything we “shouldn’t,” read anything we “shouldn’t,” eat
anything we “shouldn’t” or smoke anything we “shouldn’t.”

You see, this fight isn’t really about immigration. Whatever you think of that fight, it’s simply being used as cover.

If there is good news in this fight, thanks to the help of grassroots citizens like you, it’s that we’ve been able to render the Big Government politicians’ REAL ID nearly toothless in more than two dozen states.

Now, the statists are growing nervous. They know Americans are FED UP with their mad rush to take over our health care system, expand Federal Reserve power and regulate and control every aspect of our lives.

We’re FED UP with trillion dollar deficits. We’re SICK AND TIRED of radical schemes like Cap and Tax.
We’re done with their out of control spending on foreign affairs and nation building all over the globe.
They also see that our anger is producing results. Many of their schemes are failing.

Rallies are growing in strength. Candidates are rising up in state after state to say “Enough!”
So the statists are trying a bipartisan “backdoor” scheme to impose more control on American citizens.
They’re hoping that after months of Big Media mouthpieces decrying the “poisonous and partisan politics” in Washington, the American people will jump for joy at the sight of a Democrat from
liberal New York and a Republican from conservative South Carolina “working together to solve our immigration mess.”

Well, you and I know better. After all, liberty activists can hardly find two Senators with
bigger vendettas against the liberty movement than Senator Chuck Schumer and Senator Lindsey Graham. Senator Graham himself has very publicly denounced the limited government R3VOLUTION launched by Dr. Ron Paul. He’s stated that we’re not welcome in HIS party. And now, he’s proving why the one who should not be welcome in any party that values freedom is LINDSEY GRAHAM.
That’s why it’s up to you and me to FIGHT back.

Unfortunately, the only way to DEFEAT a new National ID card is to contact Americans from coast-to-coast and explain EXACTLY what’s at stake.

They’re not going to get the real story from the media. It’s up to you and me to reach them.
Already, I’ve prepared email blasts, blog posts and other internet activities to alert liberty-loving Americans to the National ID scheme included in the new “Comprehensive Immigration
Reform Bill.”

But that’s not all. Campaign for Liberty staff tells me if I pull out all the stops, there’s an additional twelve million folks I can reach through our mail and phone programs. And finally, if I can raise the resources, I’d also like to run hard-hitting newspaper, radio and TV ads in New York and South
Carolina, explaining to the citizens of those states exactly what Senators Schumer and Graham are up to.

With all the battles we’ve faced over the past several months to save AUDIT THE FED and stop ObamaCare, I simply don’t have the resources to do everything. So please sign the petition and chip in with a quick contribution of $5, $10 or even $25 IMMEDIATELY!

http://www.chooseliberty.org/NationalId3.aspx?pid=3

You see, this isn’t a fight we can afford to lose. Passage of the National ID card would virtually guarantee the last vestiges of freedom we enjoy as Americans would be seriously
jeopardized.

And if you and I don’t defeat it, who will? There is already a strong, “bipartisan coalition” developing,
and the American people barely know what’s going on.

So I have to ask you — in addition to your signed petition — can I count on you to help out with a $5 or more donation?
http://www.chooseliberty.org/NationalId3.aspx?pid=3

Sincerely,

John F. Tate

President

P.S. Embedded in Senators Lindsey Graham’s and Chuck Schumer’s “Comprehensive Immigration Reform Bill” is the groundwork for a National ID card — complete with biometric tracking technology
— for everyone with a job in America. If passed, it would require every American to obtain the card to
work legally in the U.S. — and you can bet it will only be a matter of time until they’re required even for simple purchases.

So please sign the petition and help out with a quick contribution of $5, $10, $25 or whatever you can afford right away.

http://paracom.paramountcommunication.com/ct/4099816:6090536223:m:3:187725201:99DF108C4BE0121D524C70E176DF1CFF

India Begins First Biometric Census

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India launches the first biometric census today, reports the BBC.

“India is launching a new census in which every person aged over 15 will be photographed and fingerprinted to create a biometric national database. The government will then use the information to issue identity cards.

Officials will spend a year classifying India’s population of around 1.2 billion people according to gender, religion, occupation and education. The exercise, conducted every 10 years, faces big challenges, not least India’s vast area and diversity of cultures.

Census officials must also contend with high levels of illiteracy and millions of homeless people – as well as insurgencies by Maoists and other rebels which have left large parts of the country unsafe.
President Pratibha Patil was the first person to be listed, and appealed to fellow Indians to follow her example “for the good of the nation”. “Everyone must participate and make it successful,” she said in Delhi.

‘Unstoppable’
This is India’s 15th census and the first time a biometric element has been included.”

If only it were an April Fool’s prank. Unfortunately, it’s the real thing.

The master mind behind it is Nandan Nilekani, the co-founder of IT outsourcing giant Infosys, hero of the Gideon’s Bible of globalization, Thomas Friedman’s “The World Is Flat” (a book I confess I’ve given a small thrashing to), and the man who coined the irritating meme in the first place.

As this Times article points out, less than 7% of the Indian population of over a billion (that is, around 75 million) pays income taxes. There’s also rampant corruption, a thriving black market, endless bureaucracy, and documentation requirements that make cross-state travel a time-consuming burden.

The ID is supposed to end all that. What it will begin, we can only guess.

As we blogged a while back, even the UK, the Anglophone world’s police-state petri dish, crammed to the gills with CCTV and traffic cameras, managed to squash this frightening initiative when it was introduced there.

Unfortunately, Europe has taken to it, with Germany, France, Belgium, Greece, Luxembourg, Portugal, and Spain among the 100 countries that use compulsory national identity cards.

But India, it need hardly be said, is not Europe. Besides the civil liberties dangers, the costs are heavy. In the UK, they were estimated to have been between 10-20 billion pounds. In India, they are said to be around 3 billion pounds (other figures I’ve seen are $6.6 billion and 300 billion rupees), an enormous burden on the public treasury. And the number is only an estimate, which, like all government estimates of future costs, is almost 100% certain to be over optimistic.

The other major mandate that Nilekani claims is that the new ID will help bring services and subsidies to the poor and prevent their theft or loss. This would be more reassuring if Nilekani didn’t count among former clients of Infosys such experts at combining doing good with doing well as Goldman Sachs.

The Times article describes the card thus:

“A computer chip in each card will contain personal data and proof of identity, such as fingerprint or iris scans. Criminal records and credit histories may also be included.

Mr Nilekani, who left Infosys, the outsourcing giant that he co-founded, to take up his new job, wants the cards to be linked to a “ubiquitous online database” accessible from anywhere.”

Nilekani is head of the newly-created Unique Identification Database Authority of India (IDAI) and he has received 19 bids for its first project from vendors including Tata Consultancy Services, Wipro, HCL, IBM, and his own company, Infosys.

For every rupee of IT spending on the project, industry experts estimate, around 60 per cent of this will go to hardware vendors (see Biometrics4You)

Update:

Biometrics4You lists other aspects of the initiative:

The Reserve Bank of India (RBI – the central bank of India) has announced plans to roll out new guidelines to help financial institutions use biometrics at ATMs in rural areas without access to banking. The Orwellian term for this is un-banked or under banked...as though there were some optimal level of banking every square foot of the earth should have.

Roubini: Significant Risks Of Gold Correction

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Downside risks to gold, writes Nouriel Roubini at The Globe and Mail:

“But, since gold has no intrinsic value, there are significant risks of a downward correction. Eventually, central banks will need to exit quantitative easing and zero-interest rates, putting downward pressure on risky assets, including commodities. Or the global recovery may turn out to be fragile and anemic, leading to a rise in bearish sentiment on commodities – and in bullishness about the U.S. dollar.

Another downside risk is that the dollar-funded carry trade may unravel, crashing the global asset bubble that it, with the wave of monetary liquidity, has caused. And since the carry trade and the wave of liquidity are causing a global asset bubble, some of gold’s recent rise is also bubble-driven, with herding behaviour and “momentum trading” by investors pushing gold higher and higher. But all bubbles eventually burst. The bigger the bubble, the greater the collapse.

Gold’s rise is only partially justified by fundamentals. And it is not clear why investors should stock up on gold if the global economy dips into recession again and concerns about a near depression and rampant deflation rise sharply. If you truly fear a global economic meltdown, you should stock up on guns, canned food and other commodities that you can actually use in your log cabin.”

Libertarian Living: New Initiatives In Cooperative Health Care

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Kevin Carson at The Center for a Stateless Society has a long, fascinating paper, “The Health Care Crisis: A Crisis of Artificial Scarcity,”about different new initiatives in providing health services that bypass the high expenses of the current delivery system. One example he cites:

“A New York doctor is offering flat-rate health care for the uninsured for $79 a month, but he has run afoul of state insurance regulations in a case that challenges the established norms of the U.S. health system….
Dr. John Muney, president of AMG Medical Group, said he started the program in September after noticing that many of his patients were losing their jobs, and therefore, their health insurance coverage.

About 500 people have registered for Muney’s $79-a-month plan, accounting for 15 percent of patients at the practice, which has offices in each of New York’s five boroughs. The monthly $79 fee… covers unlimited preventive visits and onsite medical services such as minor surgery, physical therapy, lab work and gynecological care. Ilana Clay, a 28-year-old who works in marketing for a jewelry firm, said she signed up in March because she could not afford her employer’s health insurance, which would have cost around $300 a month. “I hadn’t been to a doctor in a couple of years at that point,” she told Reuters. She had a scar removed in a quick onsite procedure that was covered by the plan. Muney said another patient came in with a tumor on her finger: “Somebody else asked $3,000 to remove it. The first visit, we were able to remove it, 15 minutes it took us.”
So far the program has not turned a profit, but Muney said he estimates that it could be profitable with 4,000 patients. In the meantime, he said, his motive is to give something back and provide a model of how healthcare can be more efficient.

“Our healthcare system lends itself to abuse, fraud and waste,” he said, adding that bypassing insurers saved on administrative costs, which he said were about 25 percent of the price of care. “With this model, we’re bypassing all that.”

Muney said he received initial complaints from state insurance authorities in November. “The law says you can do preventive checkups unlimited, but if they come for sick visits you have to charge your overhead costs,” he told Reuters.

In February he received a letter instructing him that he must charge that minimum cost, which he calculates at $33 a visit—a price he says will deter people from signing up. Troy Oechsner, deputy superintendent of the state insurance department, said the rules were designed to protect consumers.

“Our concern is … making sure that consumers can rely on any promises made to them and that they will get the services they paid for when they need them,” he said. Protecting consumers by making them pay $33 per visit instead of $10. As Cool Hand Luke would say, “Wish you’d stop being so good to me, Cap’n.”

Muney’s comments on the savings from bypassing insurance, by the way, are suggestive of the
ways that reforms in delivery of service—say, by incorporating finance into the cooperative organization of service—may also be a solution to the insurance crisis. The provision of most primary care through such member-financed setups with no insurance paperwork cost, no incentive to pile on additional services, and strong incentives to minimize overhead given the inability to profit from 10,000% markups for supplies and drugs, may well be the future of medicine. Absent the perverse incentives and high overhead that prevail in bureaucratic hospitals, it’s really not surprising Muney can do it for $79.”

A Brief History Of The War On Gold

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GATA posts a helpful compilation of links to articles on gold price manipulation and a page on the history of that manipulation at The Privateer.com. And excerpt from that (from the period after 1960):

“The End Of the “Fixed” Dollar

Gold War I – The “London Gold Pool” – 1961 to 1968
By the beginning of the 1960s, the $US 35 = 1 oz. Gold ratio was becoming more and more difficult to sustain. Gold demand was rising and U.S. Gold reserves were falling, both as a result of the ever increasing trade deficits which the U.S. continued to run with the rest of the world. Shortly after President Kennedy was Inaugurated in January 1961, and to combat this situation, newly-appointed Undersecretary of the Treasury Robert Roosa suggested that the U.S. and Europe should pool their Gold resources to prevent the private market price for Gold from exceeding the mandated rate of $US 35 per ounce. Acting on this suggestion, the Central Banks of the U.S., Britain, West Germany, France, Switzerland, Italy, Belgium, the Netherlands, and Luxembourg set up the “London Gold Pool” in early 1961.

The Pool came unstuck when the French, under Charles de Gaulle, reneged and began to send the Dollars earned by exporting to the U.S. back and demanding Gold rather than Treasury debt paper in return. Under the terms of the Bretton Woods Agreement signed in 1944, France was legally entitled to do this. The drain on U.S. Gold became acute, and the London Gold Pool folded in April 1968. But the demand for U.S. Gold did not abate.

By the end of the 1960s, the U.S. faced the stark choice of eliminating their trade deficits or revaluing the Dollar downwards against Gold to reflect the actual situation. President Nixon decided to do neither. Instead, he repudiated the international obligation of the U.S. to redeem its Dollar in Gold just as President Roosevelt had repudiated the domestic obligation in 1933. On August 15, 1971, Mr Nixon closed the “Gold Window”. The last link between Gold and the Dollar was gone. The result was inevitable. In February 1973, the world’s currencies “floated”. By the end of 1974, Gold had soared from $35 to $195 an ounce.

Gold War II – The IMF/U.S. Treasury Gold Auctions – 1975 to 1979
On January 1, 1975, after 42 years, it again became “legal” for individual Americans to own Gold. Anticipating the demand, the U.S. Treasury in particular and many other Central Banks sold large quantities of Gold, taking large paper profits in the process. This had two results. It depressed the price of Gold, which fell to $US 103 in eighteen months. More important by far, it “burned” large numbers of small individual investors.

But this “pre-emptive strike” against the Gold price did not solve the imbalances inherent in the floating currency regime. As the Gold price began to recover from its August 1976 low, the (US-controlled) IMF along with the Treasury itself, began a series of Gold auctions in an attempt to hold down the price through official means. But the problem of yet another free fall in the international value of the Dollar got in the way. Between January and October of 1978, the Dollar lost fully 25% of its value against a basket of the currencies of its major trading partners. By early 1979, due to this precipitous fall, the demand for Gold was overwhelming the amount that the IMF/Treasury dared supply, and the Gold auctions came to an end.

Gold regained its ($195) December 1974 level by July 1978. It then pressed on to new highs, hitting $250 in February 1979 and $300 in July. Also in July, Paul Volcker was appointed as Fed Chairman by a desperate Jimmy Carter. Gold continued to surge, hitting $400 in October. While this was happening, Mr Volcker was attending a conference in Belgrade. There the assessment was made that the global financial system was on the verge of collapse. When Mr Volcker returned to the U.S. from Belgrade, he took a momentous step. He announced that the Fed was switching its policy from controlling interest rates to controlling the money supply.

This new Fed policy took some time to have effect. In the meantime, Gold soared from $381 on Nov. 1, 1979 to $850 on Jan. 21, 1980. The public, who had been burned in 1975, were late on the scene. The great burst of public Gold buying came in the four weeks between Christmas 1979 and the Jan 21, 1980 high. As in 1975, they were “burned” again.

The Paper Era Begins
In early 1980, Mr Volcker’s new Fed policy began to bite. U.S. interest rates began to skyrocket. As they rose, the Dollar first slowed its descent, then stopped falling, and then began to rise. Both the public and the investment community which had stampeded into Gold was lured back into paper by this huge rise in interest rates – and by the prospect of a higher U.S. Dollar. The threat of financial meltdown was averted, but at a cost. The U.S. Prime rate hit 20% in April 1980 and stayed there (with a brief dive in mid-1980) until the end of 1981. There was a rush out of Gold and back to Dollars.

Once interest rates began to come down, in early/mid 1982, the choice of where to put the Dollars faced investors once more. The initial solution was just as it had been in the 1970s. The Dow took off – rising from 776 to almost 1100 between mid August 1982 and late January 1983. Gold started earlier and took off even harder – rising from $296 in late June 1982 to $510 at the end of January 1983.

That’s where the similarity to the 1970s ended. Gold fell $105 in the last four trading days of February 1983. As it fell, the Dow broke above the 1100 point level for the first time. The long bull market in stocks, and the long stagnation of Gold, had begun…..”