2ndlook

The 2ndlook Gold Report – 2010

Posted in Business, Current Affairs, European History, Gold Reserves, History, India, Media, politics by Anuraag Sanghi on May 29, 2010

Buy gold … young man!

2ndlook has proposed to all and sundry, to buy gold for the last 20 months. Interestingly, a Chinese-blogger-online financial advisor, with some fan-following, going as Maoxian says, “I’d wager $20 that no one can show me an audited trading record for any system that has traded GLD since its inception that has beaten simply buying and holding GLD since then.”(errata – an American blogger, and not Chinese).

Now, 2ndlook is not a hedge fund, or a financial advisor! And will not pretend to be one either. But 2ndlook will take a 2ndlook, and put a context and perspective that others will not. And answer your question, “Is it the time to buy gold!

How far and how high will gold go? Some history before that.

Nixon and Kissinger - 1972 (Courtesy - nytimes.com)

Nixon and Kissinger - 1972 (Courtesy - nytimes.com)

The Nixon Chop

On August 15th, 1971, ‘Tricky Dick’ Nixon emerged from Camp David, on an evening television show, and announced the end of dollar redemption against gold.

For the 10 years, France had been redeeming gold, even sent a French warship to escort gold from US to France. On August 13th, 1971, Britain also made an official request for dollar-redemption – and Nixon shut the door on that possibility.

And that was the end of Bretton Woods Agreement!

Dollar anchor shifts – from gold to oil

Over the next 10 years, the world saw severe stagflation (economic stagnation + price inflation). Gold prices zoomed from US$35 an ounce to US$800 an ounce.

Gold does not have any price-correlation is traditional wisdom! Correlation like inverse, perverse, reverse, positive!

Gold does not have any price-correlation is traditional wisdom! Correlation like inverse, perverse, reverse, positive!

From 1980, President Ronald Reagan, in the next 8 years, persuaded his Middle East allies to pump out more oil – cajoling, mixed with threats – ranging from the Iran to US-led increase in oil production. The resultant drop in oil prices cooled down inflation, strengthened the US dollar.

Surplus revenues from oil-sales by Middle East oil producers, were used to fund US deficit. By 1990, surplus petro-dollars vanished, with the drop in oil prices, and the increased cost of running welfare states in the Middle East.

In the last decade, it was the turn of the Chinese and the Japanese to prop up the dollar.

IN China, many people refer to the dollar as mei jin, or “American gold.” Government officials, businessmen and people on the street all use the term. So if a Chinese person tells you that he owes you 100 American gold, don’t expect a big fortune, because he’s planning to pay you $100.

US has been able to find lenders to bridge their deficit for more than 50 years. From the 1950s to 2010. Europe till the 70s, Middle East up to the 90s, Japan and China, till 2010!

Can the US find another target to fund their deficits.

The collapse of Soviet Union

In the 70s, with out-sized gains in oil, platinum and aluminum prices, the Soviet economy became a powerhouse, funding anti-US regimes across Africa, South America, Asia and the Middle East. Soviet Russia, one of the largest gold producers in the world, made windfall gains.

The expansion in subsidies by the USSR in the 1970-1990 period to its allies and sympathetic regimes created a huge pressure on Soviet finances. A simultaneous drop in oil and gold prices in the 1985-1995 period severely dented Soviet export earnings, leading to the economic collapse of the Soviet Union. In USSR’s economy, after WWII, commodities like oil, natural gas, metals (like gold, platinum, uranium) and timber accounted for 65%-80% of Russian exports.

Reagan managed to increase oil production, decrease Soviet earnings - and create an economic crisis  in the USSR! (Cartoon by David Horsey from seattlepi.com).

Reagan managed to increase oil production, decrease Soviet earnings - and create an economic crisis in the USSR! (Cartoon by David Horsey from seattlepi.com).

Gold sales by central banks

The Central Bank Gold Sales Agreement, further dented gold prices, 1995 onwards. Gordon Brown, the then British Chancellor of the Exchequer, has been under pressure to ‘reveal’ details of British gold sales during this period.

The (British) bullion was sold in 17 auctions between 1999 and 2002, with dealers paying between $256 and $296 an ounce. Since then, the price has increased rapidly. Yesterday, it stood at $1,100 an ounce.

Dark stories are told that this was stolen gold during WWII, going around as the Yamashita gold, the Nazi gold, with marginal characters like Edmond Safra, playing an important role. It is suspected that the Soviet Union unloaded a lot of gold during the glasnost and perestroĭka period under Gorbachev.

The upshot of this was that for the first time in modern history (1800-2000), ‘declared’ gold reserves of governments across the world, reduced to a historic low of 20% of total global reserves.

The Great Collusion

By the end of The Great Depression, and the start of WWII, public sector (all the Governments of the world) owned some 50%-65% of the gold in the world. That is now reduced to less than 20%.

Will the State(s) sit back and allow the citizenry to become so independent – and the State to become ‘powerless’?

Improbable!

Global conclaves on economic matters (the G20 Summits, WTO Summits, the Copenhagen Summit) are getting organized easily and often. A global, mass nationalization of gold to ‘save the global economic system’ may be called for! Instead of warring with each other, Governments may decide to collude and jointly loot their respective citizens in a coördinated manner!

Was the US crackdown on Swiss banks a precursor to the global gold nationalization?

Central Banks own ≈20% of the world’s gold

Central banks the world over, claim to own something over 30,000 tonnes of gold – about 20% of the world’s total gold stocks. Officially, that is. Some of it is double counting. The most obvious example is IMF gold.

Most of IMF’s gold reserves are actually pledge papers by founder-member countries that they will pony up the gold. A book entry. This pledge was covered by a back-to-back with a reverse sale agreement by the IMF back to the pledgor -called ‘restitution agreement’ in IMF lingo.

The Bretton Woods agreement gave birth to IMF and World Bank (Pictured above: Treasury Secretary Henry Morgenthau speaking at the opening of the Bretton Woods conference on July 8, 1944.; picture credit - nytimes.com).

The Bretton Woods agreement gave birth to IMF and World Bank (Pictured above: Treasury Secretary Henry Morgenthau speaking at the opening of the Bretton Woods conference on July 8, 1944.; picture credit - nytimes.com).

The hoax of IMF gold

Of the 3005 tons which is held by IMF at ‘designated’ depositories (meaning pledgor central banks), 2600 is covered by the restitution agreement. Of the balance, 403 tons, only some 191 tons remains with IMF. In fact, IMF does not have any gold – apart from 191 tons.

What it has, are pieces of paper that various central banks have given, ‘promising’ gold to the IMF – and this ‘promised’ gold was held in safe custody by the pledgor-central bank on behalf of the IMF.

Is this the right gold price

Estimated global economic output is some US$70 trillion. Gold is now ruling at some US$1200-1250 (per ounce). Total global reserves of gold (private, public, central banks, et al) are estimated at 130,000-140,000 tonnes. In dollar terms, the value of gold stock is US$5.0-5.5 trillion.

Gold futures (Image Source - Wall Street Journal).

Gold futures (Image Source - Wall Street Journal).

If all the liquid capital in the world is measured in gold, then the total capital to output ratio turns out to be 1:14 ratio. For every 1 unit of gold, there are fourteen units of economic production (US$5 trillion of gold gives an output of US$70trillion). Of course, to make this liquid capital productive, other forms of capital are also required – namely land, buildings, factories, technology, education, healthcare, et al. Those could also be similarly valued – and added to the gold capital in the form of gold. Currency would become proxy for gold – and hence all currency units will be ignored as store of capital. Looking at the past, adjusting for inflation,

Gold is still at half the peak set in 1980, after adjusting for inflation. Then, prices rose to $US850, equal to $US2266 today.

If one were to measure gold as a proportion of global /national economy, it may give us a better idea about where gold is headed. Looking at it from this perspective, the upside for gold is definitely less than 100%. Based on current pace of liquidity creation – that is printing of Euros, dollars, yuan, yen, rupees, that various governments are printing. In Western markets, it is seen that

The yellow metal remains in a $1220-$1260 channel for the time being, and is still showing a Kilimanjaro-sized 975 tonne pile of long positions standing and casting a…long shadow in the market.

and … gold revealed some ‘disconcerting’ technical signals on the price charts and that in coming days ‘prices may not ‘necessarily strengthen.’

These weak signals, are largely due to some expected dampening in demand from India during June to September, in the generally slack monsoon season (though not quite so, last year).

Helicopter Ben is using his famous 'printing' technology!

Helicopter Ben is using his famous 'printing' technology!

Gold shortage!

There have been many reports about shortage of gold – in coins and bars form. Now this is strange.

In India, there is no such talk or shortage! The probable reason is that in India, gold lumps are also accepted by customers – without hallmarking! The jewellers, assayers and valuers are dime a dozen. Hence, gold fraud by the trade can be easily detected – especially in raw gold. Not to mention, that there are ‘dharam-kantas’ in every town and village across India – which does gold assaying for free.

In jewellery form, however, there is rampant mis-declaration of purity. So, buying gold in India is, as of now, not a problem!

Due to this ‘shortage’ in some Western markets, for sometime gold futures were cheaper than gold for physical delivery. The US mint and the Perth mint in Australia have suspended coin sales – supposedly, as they were swamped by orders, and demand.

Let us look at old mining and productions figures, to get some context.

All the gold in the world

Annual global gold production at some 2200 tons, is itself seen as an issue! Gold mining companies are “digging deeper to extract dwindling reserves, with mines in South Africa extending as far as 3.8km down” Apart from having to dig deeper, the other issue is “Ore grades have fallen from around 12 grams per tonne in 1950 to nearer 3 grams in the US, Canada, and Australia.”

China, Australia and the 16 other largest mining nations averaged weekly output of 42.3 tonnes last year, researcher GFMS estimates. Even though prices have fallen 5.8 percent to $US1177.10 from a record $US1249.40 an ounce May 14, the median prediction in a Bloomberg survey of 23 traders, analysts and investors is that it will reach $US1500 by the end of the year.

Investment, including bars and coins, almost doubled to 1901 tonnes last year, exceeding jewellery demand for the first time in three decades, according to GFMS. Jewellery will jump 19 per cent to 2100 tonnes this year and industrial use 8 per cent to 398 tonnes, Sydney-based Macquarie Group says.

The gap in demand and supply is being met by scrap sales.

In Southeast Asia, scrap sales, which are routed through Australia and sold on to India, are already up.

“When gold gets to these sorts of levels, Southeast Asia gets interested in dishoarding,” said Nigel Moffatt, treasurer at the Perth Mint in Australia. “We’ve been seeing it now for some weeks.”

Which way the wind blows?

With the world’s largest private reserves of gold, and as the world’s largest consumer of gold, India has a significant role to play in gold prices.

The Bloomberg poll of 23 traders (linked and extracted above), gives a consensus estimate of some US$1500 an ounce.(31.1034768 grams). Which translates to about Rs.21000-23000 per tola (10 gm) range. Dollar rupee exchange rate will also make a difference. That is an appreciation of about Rs.3000-5000 – some 15%-25% from current prices (Rs.18,100-18,500 range). A strong and stable gold price during July-September period could easily see gold cross 21,000 by October. A weak 3 quarter, will corner gold to the 20,000 barrier.

In another post, Maoxian remarks,

Two years ago when I wrote the post, Jim Sinclair’s Crazy Bet, I annoyed the tinfoil hatters. One commenter wondered where a pajama blogger dude sitting in a crappy little Third World apartment would get the money to take a million dollar bet. :-)

I thought it was time for an updated post/chart given the Greek drama and Euro crisis. Recall that Sinclair’s wager was: “Gold will trade at USD $1650 before the second week of January 2011.” Price could still make it there, but looking at the chart, it seems as improbable to me now as it did back in 2008.

Will Government’s scam people out of gold

Let us deconstruct this price upmove.

A US$1650 gold price @Rs.50 to a USD price means some Rs.26,500 per tola. At that rate, in Jan 2ndweek, we are talking about a 45% appreciation in 6 months. Take gold at US$1650 @Rs.42 to a USD, translates to about Rs.22,300 per tola.

At about 21,000-23,000, Indian consumer buying is likely to be anemic – and investment demand from OECD+China will have to make up for weak Indian demand. At Rs.26500 per tola, the Indian consumer may start selling gold – and we may see a small replay of the Hunt Brother’s silver saga in gold. Scrap sales of gold out of India may dampen prices much.

The third scenario may see gold at about 33000-36000 per tola. To do this the Indian rupee must trade at Rs.60 to a dollar, to get Indian consumers to part with their gold. Like the successful scam by Winston Churchill-Montagu Norman between 1929-1939 to loot the Indian peasant of his gold.

We may see a variation on that play!

Bretton Woods – What they wont teach or tell you …

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, History, Media, Uncategorized by Anuraag Sanghi on October 8, 2008

Prequel to Bretton

Keynes’ first book that gained him some following in the world of economics was the ‘Indian Currency And Finance‘. This work examined in significant detail the workings of the Indian currency system. The Indian colonial currency system was anchored to the British pound – and various other local Indian currencies were in use – and even legal tender in large parts of India.

G5 will take on G8

G5 will take on G8

Thus there was always great pressure on Britain to keep the British pound on gold standard – as there was always the option for the common citizen to use coinage from other kingdoms and princely states. In 1900, the British colonial Government tried to enforce circulation of British sovereigns in India – which failed.

Of course, gold importation into India was severely restricted. The gold blockade against India was effective as the major gold production centres were under Anglo Saxon occupation (Australia, Canada, USA, South Africa, Rhodesia, Ghana, etc.).

The Birth Of Bretton Woods

As WW2 was winding down, the Anglo Saxon Bloc went ahead and devised the Bretton Woods system. This system was a copy of the Indian currency system – where instead of the British pound, the American dollar became the Index currency.

Instead of milking only India, the Anglo Saxon Bloc could now milk the whole world. Keynes noted how America when dealing ‘her dependencies, she has herself imitated almost slavishly, India.’ So, when the time came, it took very little time for the US to scale the Indian currency model on the rest of the world.

The success of Bretton Woods-I depended on blockading India from buying gold – which was effectively done by Morarji Desai. (I wonder why the ungrateful Anglo Saxon Bloc has not made a statue of Morarji Desai at Mount Rushmore). He has after all been the single biggest contributor to their prosperity for the last 50 years.

What was Bretton Woods

The world stamped their approval on Bretton Woods.

As per the agreement, all countries of the world would use the dollar as the index currency – for international trade and foreign exchange reserves and for nominal exchange rate fixation. This system allowed the USA to print ‘excess’ dollars. These ‘excess’ initially in limited quantities, but soon at an accelerating pace. Today the USA has flooded the world (and the USA markets with more than US$50 trillion) of excess currency. The housing bubble, the M&A frenzy, the credit crisis are by products of this printing of dollars. With these excess dollars, the US consumers and others bought what they wanted – and US went ahead and printed some more dollars.

Bearing the dollars cross

Bearing the dollar's cross

Behind Bretton Woods – Gold

If the Bretton Woods system was defective, unfair, weighted et al, why was it accepted? Why did the world believe 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.

The Cornering Of Gold Supplies

For the last 150 years, the ABC countries (America, Australia, Britain, Canada) comprising the Anglo Saxon bloc (countries, colonies and companies) have controlled 90% of the world’s gold production. Till (a large part of) India was a British Colony, they also controlled more than 50% of the above-the-ground gold reserves. This gave them absolute liberty to print depreciating currency and flood the world pieces of paper(called dollars and pounds), manipulate the world financial system and keep other populations poor and backward.

Who paid for the dollar hegemony

Who paid for the dollar hegemony

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the US dollar for gold – at a rate of US$35. Anyone could (except Indians and Americans) buy an ounce of gold from the USA for US$35 – managed by the the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).

The Bretton Woods system worked for 20 years because 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.

His 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 (and even now) plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

The Bretton Woods Twins

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.

Bretton Woods Fraud

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. Notice how much Britain resisted and finally did not join the European Currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

Nixon Chop And Bush Whack

From the Nixon Chop to the Bush Whack final months of Dubya’s Presidency, the Bush Family has been in the Presidency for 12 years of the 37 years. And in positions of lesser power for the entire period. George Bush Sr. was the US representative to the UN during the Nixon era – when Nixon made his infamous remarks to Kissinger about the ‘sanctimonious Indians’ who had pissed on us (the US) on the Vietnam War’. George Bush Sr. was also the US Vice President during the 8 years of Reagan Presidency.

The bend in the flow

The bend in the flow

During these 37 years – between the Nixon Chop (1971) and the Bush Whack (2008), the world has changed significantly.

The Nixon Chop

On August 15th, 1971, President Nixon after a two day huddle with 15 advisers at Camp David, delivered the Nixon Chop to the world. The Nixon chop (my name for this event), one month after his China breakthrough, cut the convertibility peg of US$35 to gold as US gold reserves were severely depleted.

The French had been regularly redeeming gold for their dollar earnings – and for this ‘perfidy’ the US had not forgiven France. This was much like the pre-WW2 French methodology of devaluation, new peg, old debt for new gold routine which got the US hackles up. Many decades have passed since these redemption by France, and the new French President, Sarkozy believes it is now possible to renew US-French relations again.

On the opposite side of the world, a beleaguered Indian Prime Minister was celebrating 24 years of Independence with a “ship-to-mouth” economy, dependent on PL-480 grain. Private gold reserves in the Indian economy after nearly 25 years of post-colonial rule, were steadily rising. Over the next 10 years, the western world (and most of the rest) blamed OPEC for post-1971 inflation, gold scaled US$800 an ounce; the Hunt Brothers launched their bid to corner the silver market; stagflation made an entry and Soviet power grew. Nixon Chop , itself the result of many years of gold reserves erosion, was one in many steps that brought the US$ to its knees.

Can the dollar be fixed?
Can the dollar be fixed?

On August 15th, 1971, 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$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories links), gold prices were managed and brought down to US$225 per ounce – but still 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.

Every Few Years

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 bloc with 80% of the world’s gold production in a choke-hold does what it wants.

On December 31st, 1974, nearly forty years after Roosevelt nationalized private American gold stocks, Americans were allowed to invest in gold again. Again Indian liberalization (1991) of gold imports happened a good 17 years after the US laws (1974) were liberalized. I wonder, how that was tied.

And that is what has happened for the last 60 years. Of course, all good (for the Anglo-Saxon Bloc) things come to an end. And so has Bretton Woods – I & II.

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.

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