2ndlook

Gold Production & The World Financial System

Posted in America, Business, Current Affairs, Gold Reserves by Anuraag Sanghi on January 21, 2008

The Great Wave off Kanagawa by Katsushika Hokusai (October or November 1760 – May 10, 1849. Image courtesy - ixley.com). Click for a larger image.

The Great Wave off Kanagawa. Painting by Katsushika Hokusai (October or November 1760 – May 10, 1849. Image courtesy - ixley.com). Click for a larger image.

Too many Tsunamis

Every 10-25 years, the world seems to go from one financial crisis to another. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe.

What the poor (and not so poor) economists don’t see is that the Anglo Saxon clique has a choke-hold on 80% of the world’s gold production. Why has this system been such a failure?

Simple!

The Bretton Woods system.

The world after WW2, has been governed by a financial system that has been a failure – the Bretton Woods Agreement, a millstone around the developing world. As WW2 came to a close, British-American economists came together and devised this system. The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.

It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Did anyone notice how much Britain resisted and finally did not join the European currency Union. This system has swamped the world with an accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

The Truck That Ran Away (Cartoon by John Spooner; dated April 14th 2008, source and courtesy - theage.com). Click for a larger image.

The Truck That Ran Away (Cartoon by John Spooner; dated April 14th 2008, source and courtesy - theage.com). Click for a larger image.

Bretton Woods also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries, their client states like Japan, OECD, etc. have 65% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.

The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved – which are tied to imports from these Anglo Saxon countries.

Highly paid (mostly western) consultants are paid by aid recipients from debt funding – who recommend more debt and more imports which creates greater indebtedness and rising interest payments which need more aid for which more highly paid consultants are required. At the other end, some of this aid, finally ends up with corrupt bureaucrats and politicians – who tax the citizenry more to pay increasing debt.

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the dollar for gold – at a rate of US$35. This was supposed to be done out of the London Pool system. Within 20 years, the first promise was broken. Redemption of dollar for gold to individuals was stopped in 1968 (March15th).

The Developing World provides the labour, funding, raw materials for the developed world. (Image source and courtesy - egpl.com.au).

The Developing World provides the labour, funding, raw materials for the developed world. (Image source and courtesy - egpl.com.au).

The Bretton Woods system worked for 20 years because Indians were Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

Morarji Desai’s break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

In 1971 (August 15th), the world got the Nixon Chop - where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$225 per ounce – 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world – especially the poor, developing countries. And the fraud continues.

Some Western countries, especially France redeemed their dollar holding with gold before the float.

Behind Bretton Woods – Gold

The world believed that only the Anglo-Saxon Bloc could deliver. Why?

In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.

Total Gold Production - 2009 Mine Production - TOTAL: 2572mt (Image source and courtesy - goldsheetlinks.com). Click for larger image.

Total Gold Production - 2009 Mine Production - TOTAL: 2572mt (Image source and courtesy - goldsheetlinks.com). Click for larger image.

Things are still the same

The Anglo-Saxon bloc of ABC countries is still the largest gold production bloc in the world. The Anglo-Saxon Bloc (countries, colonies and companies) still control more than 50% of world’s gold production – and significant natural resources, like oil. They administer 3 out of the 5 largest countries in the world. Hence, their currencies still have significant heft. Apart from military power.

Hence, financial manipulation is still easy for them. The USA is trillions of dollar in debt – and Ben Bernanke, the Fed Chief says we can always print more money – or drop it from a helicopter.

What happens to the Indians, Chinese, Russians who invested in the American dollar? Well! Anglo Saxon law says, caveat emptor – buyer beware!! Their latest victims – good old India and China. India and China have significant dollar holdings. The value of dollar had depreciated by 75% in the last 10 years – from US$225 to US$900.

Most of the economic growth in Post WW2 for the poor countries is due to trade growth, de-colonisation, better health care – and decelerating war engines.

What Can Change

India has emerged as the largest (private) reserve of gold in the world. The countries of South Africa, Ghana, Peru, Indonesia, China, Russia, Papua New Guinea account for nearly 50% of the world’s gold production - though gold operations in these countries are controlled by largely Anglo Saxon Bloc.

A currency bloc, underpinned by India’s private gold reserves – and future expansion of the currency system guaranteed by 50% of the world’s gold production is a feasible start point.

This will make the world more equitable and reduce financial volatility. This will also wean the world away from the savagery of the Anglo Saxon bloc countries who have been involved in every major conflict for the last 400 years.

7 Responses

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  1. [...] Gold Production & The World Financial System It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Notice how much Britain resisted and finally did not join the European currency Union. … [...]

  2. [...] Read the rest of this great post here [...]

  3. admin said, on September 23, 2011 at 10:31 pm
  4. Manu said, on May 2, 2012 at 8:39 am

    How do you explain gold price from
    1980 paul volcker onwards till browns bottom of 2000-2002… The value of usd actually rose in gold terms

    • Anuraag Sanghi said, on May 2, 2012 at 9:33 am


      Mystery of the missing Russian gold

      The 2ndlook Gold Report – 2010

      Indian Gold Reserves – No Loot, Without Luck and No Slaves

      Between 1971, after the Nixon Chop, in little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories below), gold prices were ‘managed’ and brought down to US$225 per ounce. Co-incidentally, along with oil prices. This reduction in gold and oil prices simultaneously, severely undermined the health of USSR’s economy – these two being the most valuable ‘hard currency’ exports from USSR.

      A simple explanation may be that the central bankers of the erstwhile USSR used a lot of that gold to ‘support’ alliances. Much in the manner of the USA, which does the same with its USCAP system. To this add the possibility that Soviet apparatchiks did not want to divvy up Soviet gold with members of the CIS and the subsequent splinter countries of the USSR, or lose it to ‘impatient’ and ‘opportunistic’ Western creditors.

      This ‘unexplained’ reduction in gold reserves, was done according to Gosbank head, Gerashchenko, to “to avoid the seizure of assets during talks with foreign governments and private creditors on the restructuring of Moscow’s Soviet-era debts.” Russian authorities also “questioned the $50 billion figure reported by Skuratov. They said $1.4 billion was the most FIMACO ever managed at one time, in 1994″. After his stint at Gosbank, Geraschenko became chairman of the Yukos board. Yukos is the company that belonged to the jailed billionaire, Mikhail B. Khodorkovsky.

      • manu said, on May 2, 2012 at 11:25 am

        Besides that …the anglo saxon central banks did sell a lot of gold in this 20 year period….. Gordon brown is famous for selling it rather cheaply… For every seller there is a buyer… So much gold can only hide in oil … And besides Arabs I dont see anyone else big enough to buy that kinda tonnage…. None of this is reported though.. We know the gold was sold by central banks…. But to who (all based on the premise that gold was sold) ?

        • Anuraag Sanghi said, on May 6, 2012 at 4:23 pm
          In all about 5000 tons was sold under the CBGA agreement. These sales were absorbed by: –

          - Retail customers in India, of course,
          - By some Arab dictators (like I pointed in my coverage of Arab Spring).

          The big outcome of this was the collapse of the Soviet Union.


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