Empire of Fraud no. 5 (Disconnect and Dollar Revaluation)

Monday, November 22, 2010
By Paul Martin

By: Vincent Bressler
GoldSeek.com

The dollar is what it can buy and nothing else. However, gold is money and nothing else.

It is of paramount importance to the Federal Reserve to keep the physical price of gold under control so that the dollar may be viewed as legitimate money.

By extending nearly infinite lines of credit to bankers who trade in the world’s gold and silver futures markets, the Federal Reserve attempts to keep the physical price of gold and silver under control. Over the last several major price cycles, there have been periods of disconnect between the futures market price of gold and silver and the physical price of gold and silver that you would pay at a coin shop or on ebay. These periods of high premiums occur after the electronic price has been rapidly suppressed by bankers. Since the bankers have a near zero interest rate, nearly infinite line of credit at the Federal Reserve, traditional trading tactics to run speculative longs into the ground have been very effective. However, following the collapse of the electronic price, there continues a period of high demand for physical gold and silver, characterized by high premiums over the electronic price. After many months, the physical buyers of gold and silver begin to anticipate that the physical price will once again merge with the electronic price, and the premium goes away.

However, the actual amount of physical gold and silver available is small. The futures markets are fractional reserve systems running at very low reserve ratios, something like 45 to 100 ounces of electronic gold and silver obligations for every unencumbered ounce of physical gold or silver. The day is coming when the physical price of gold and silver disconnect from the electronic price and they can not be brought back together again except through a massive devaluation of the dollar in terms of gold and silver. On this day the future’s markets in gold and silver will be stopped. There will be secret meetings. Those holding electronic gold tickets will be paid in be paid in dollars at the price of gold before the disconnect. And then I believe that there will be an explicit devaluation of the dollar with respect to gold on the order of 20 to 40 times.

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