The Shape Of Things To Come Part – II

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, Media, Uncategorized by Anuraag Sanghi on October 15, 2008

On March 14th 2008, this blog talked about how

It is being whispered that Barran Wolfet and his team members, Sorg Goros and Rim Joggers had played a major role in the enhancement of these gold stocks – and the formation of IMAR. Initially named as Global Financial Reserve Authority for Development, the IMAR idea was first tossed out over a dinner at the famous Les Ambassadeurs eatery – which offers a classic cuisine by the Ducasse-trained chef, Jean-François Piege.

The US Electoral outcome

There is (seemingly) harmless speculation that next US President may appoint Warren Buffett as the Treasury chief

The two were asked at the beginning of their second presidential debate who would be a good replacement for current Treasury Secretary Henry Paulson who is standing down at the end of the current administration.

“I think the first criteria, would have to be somebody who immediately Americans identify with. Immediately say we can trust that individual,” said McCain. Buffett, chief of the Berkshire Hathaway holding company, has supported Obama in the race for the White House.

Barack Obama’s chance of a lifetime

If Barack Obama wins on 4 November, as looks likely, he’ll inherit an economic mess rivalled only by the one that faced Franklin Roosevelt in 1933.

Everyone is saying …

There is rising chorus that the new President (whoever it may be) should do what Roosevelt did. What they are not saying, but meaning is, do what Roosevelt did. Krugman, this year’s Nobel prize winner, has also suggested that Barrack Obama should emulate Roosevelt’s actions need.

Among the many things that Roosevelt did, the merits of which are debatable, there is one action that made the US into a super power. If only for a short while of 70 years.

Roosevelt nationalized gold.

Nationalization of gold enabled the US Governments to enter costly wars like WW2, Vietnam War, and now the Iraq and Afghan Wars. This allowed to US to walk into the WW2 with 25,000 tons of gold – and impose Bretton Woods on the world. And the nationalization of gold also impoverished the Americans – apart from the poor.

Gold production (from Ghana, South Africa, Australia, Canada, Papua New Guinea, America, etc.,) was controlled by the Anglo Saxon Bloc – and the world’s largest private reserves of gold, in India were controlled by the British. It is this choke on gold reserves that enabled thes sustenance of US as a superpower.

And now they are trying it again.

The methodology

And how do the US ‘thought leaders’ suggest that new President do it … when victory is within grasp, and Obama Faces A New Choice

The opposite argument is that the political costs of voicing pessimism are prohibitive, that there is plenty of opportunity to prepare voters for drastic action after election day, and that a candidate risks worsening conditions by sounding strong warnings. The classic example to support this case is the 1932 Depression-era campaign of Franklin Delano Roosevelt, who said little or nothing while campaigning in 1932 to indicate the contours of his New Deal program.

What are they pulling over our eyes…

This again very interesting. Roosevelt’s economic plan was surprise. Obama (or McCain, doesn’t matter who), will do something similar. Read this with the Warren Buffet silver play and his (possible) appointment as Treasury Chief, and the game becomes clear.

Nationalize gold again?

But What Was Warren Buffet Doing …

Buffett’s Purchases Push Silver Past $7 an Ounce said the New York Times

Separately yesterday, Phibro, a commodities-trading firm, confirmed that it was the dealer for all the silver purchases by Berkshire. Phibro is a unit of the Travelers Group, in which Berkshire has a major stake. Last week, a Canadian investor filed suit in United States District in New York, contending that Phibro had moved silver from warehouses in the United States to hidden locations in an effort to mislead traders about supplies and push the price higher. A Phibro official denied all the charges yesterday.

How did Warren Buffet buy such a large amount of silver without disturbing the market?

The silver purchases by Berkshire Hathaway were made in London, a center of activity in the silver market. The purchases were done with over-the-counter contracts, in which Mr. Buffett bought silver for delivery at future dates. Since he began he has accepted delivery of 87.51 million ounces, which are apparently now sitting in the vaults of London bullion banks. The remaining 42.2 million ounces must be delivered between now and March 6.

60 days from now … Warren Buffet Handle The US Treasury?

Sometime, back there was speculation that Warren Buffet could be a possible choice of US Treasury Chief. This news was sparsely reported – originating with AFP. Google search showed this up only with a few Indian sites and journals.

What does this mean as possible policy outcome? Do a Quicktake – and then a 2ndlook.

Ben Bernanke says a ‘savings glut is the problem …

Ben Bernanke joins a long list of Western propagandists, who find specious’ ways to blame others for Western problems. His most recent propaganda gem was to blame Asia for a savings glut.’

a satisfying explanation of the recent upward climb of the U.S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving–a global saving glut–which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today.

After Ben Bernanke opened the flood gates of such logic with ‘helicopter drop of dollars’ and ‘printing press technology’, and now the savings glut’ – others such ‘economists’ have rushed in to do another tom-tom dance around this logic.

A so called economist, weighed in with two bits, Dani Rodrik: Who killed Wall Street?

…the true culprits lie halfway around the world. High-saving Asian households and dollar-hoarding foreign central banks produced a global savings “glut,” which pushed real interest rates into negative territory, in turn stoking the US housing bubble while sending financiers on ever-riskier ventures with borrowed money. Macroeconomic policymakers could have gotten their act together and acted in time to unwind those large and unsustainable current-account imbalances. Then there would not have been so much liquidity sloshing around waiting for an accident to happen.

The Real Culprits …

Ben Bernanke is not even mentioned even once. Bernanke’s printing press and helicopters are not mentioned even once. The evasion of Federal Reserve on M3 figures is completely ignored. But, Alan Greenspan is mentioned once. China which has funded the US to the extent of US$2 trillion is buried without mention. Japan which has funded the US to the extent of US$1 trillion is ignored.

I rest my case

But Asians countries whose reserves are getting wiped due to dollar depreciation – are instead mentioned as culprits.


This is a new level in brazen-ness. Keep it up, Dani boy. This fraud may yet happen. And Warren Buffet may give cover to this fraud.

What Now, Ben?

Posted in America, Business, Current Affairs, Gold Reserves by Anuraag Sanghi on September 24, 2008

The whole world seems to be blaming US, Ben Bernanke for the global economic – aka Great Recession. Is it fair? Look at his record below.

Helicopter Ben has been transformed to Santa Ben! (Cartoon - Gary Varvel; Pub. Date - 2008-12-17; source and courtesy - cartoonistgroup.com). Click for a larger picture.

Helicopter Ben has been transformed to Santa Ben! (Cartoon - Gary Varvel; Pub. Date - 2008-12-17; source and courtesy - cartoonistgroup.com). Click for a larger picture.

Thus Spake Ben Bernanke

Remarks by Governor Ben S. Bernanke, Before the National Economists Club, Washington, D.C. November 21, 2002 (ellipsis mine)

U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press … that allows it to produce as many U.S. dollars as it wishes at essentially no cost. … …the Fed could find other ways of injecting money into the system–for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities … If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

A terse anouncement by the Federal Reserve Board said,

“On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.

On November 10, 2006 Ben Bernanke justified,

“As I have already suggested, the rapid pace of financial innovation in the United States has been an important reason for the instability of the relationships between monetary aggregates and other macroeconomic variables.”

Ben Bernanke has given ample (and more) indications about what he will do. In fact, more than indications, he was brazen enough to say, what exactly he would do!

How can the world blame him now?

Economy seemed to smooth, then. (Cartoonist - Karl Wimer; Pub. Date - 2009-07-31; source and courtesy - cartoonistgroup.com). Click for larger image.

Economy seemed to smooth, then. (Cartoonist - Karl Wimer; Pub. Date - 2009-07-31; source and courtesy - cartoonistgroup.com). Click for larger image.

What Did Others Do

Some other countries tried feebly, and failed, in creating a third currency bloc as an alternative to the US dollar and the Euro.

Japan and ASEAN tried setting up the Asian Monetary Fund – after 1997, currency crisis – and were arm twisted by the US to drop the idea. Malaysia proposed The Gold Dinar in 2002-2003. This was initially limited to the Islamic World only. Neither of the proposals got far.

What would be the US reaction to this such attempts?

War, Oil , Dollars & The Middle East

Cut to the Iraqi invasion by the USA.

The justifications for invading Iraq given by the USA, were finally found to be false. The invasion was finally not related to 9/11. Iraq did not have any WMDs either. So, what was were the reasons for Iraqi invasion?

A ring side observer, former Indian Ambassador to Iraq from 1992 to 1994, Ranjit Singh Kalha’s book, ‘The Ultimate Prize’ makes some interesting observations on the genesis of the Iraq invasion.

“The first mistake Saddam made was when he decided in October 2000 to move away from using US dollars as the currency for oil exports, …under the UN ‘oil-for-food’ programme.” Saddam also converted Iraq’s USD 10 billion reserve fund from US dollars to Euros. “Although this act of Saddam was not of very great economic significance in overall terms, it represented for the United States a direct challenge to the use of the dollar as a currency for transactions,” … in his just-released book, “The Ultimate Prize”. Iran followed Saddam’s move and Venezuela started initiating barter deals outside the dollar system. “If most other Organisation of Petroleum Exporting Countries (OPEC) followed the Iraqi and Iranian example, the stability of the US dollar would be at stake,” Kalha, who was posted in Baghdad during the tumultuous 1992-94 period, says.

Sidelined to the (Indian) National Human Rights Commission, Kalha’s book was also buried under a mound of silence, not reviewed and made no impression in the popular media.

One press release by PTI was recycled by The Economic Times, Outlook, Sahara Samay, The Hindu, India Today, and NDTV. Google and Live Search hardly turned up anything. Yahoo.co.in showed some these links.

Bush Whacking Iraq

Bush Whacking Iraq

Another post which made waves was posted in currencytrading.net – which highlighted how some countries were possibly moving away from the dollar peg or /and diversifying dollar reserves.

These 7 countries were Saudi Arabia, South Korea, China, Venezuela, Sudan, Iran and Russia. Venezuela and Iran have already moved away from designating oil sales in US dollars.

The only plausible reason why US worked so hard to get the 123 Agreement for India was to keep India (and hence, South Africa also) away from any third currency bloc efforts – for some time at least .

Let The Games Begin

In the last 5 years, more than US$10 trillion were printed and the world is awash with dollars.Where did this money go? How was this used?

Lendings by US commercial banks in the period 2000 to 2004 soared by altogether USD 1,500bn to USD 6,750bn. In the European Monetary Union lending to the private sector by monetary financial institutions (MFI) climbed from roughly EUR 6,200bn end-1999 to not quite EUR 8,700bn at the end of last year.” Allianz Report, Dresdner Bank.(Links mine)

The recipients of this largesse, mainly Western banks have made (it is whispered) bad loans worth 300-400 billions dollars. I am confident that the actual figure is much higher.

The loans story does not end there.

These loans were in turn sold and re-sold, then packaged and mortgaged, derived and contrived – finally ballooning into the sub-prime’ crisis. Are these welfare payouts by another name? Who will pay for this “lending”? US Consumers are not repaying their housing loans.

Some one has to!

Whats Happening Helicopter Ben?

What's Happening Helicopter Ben?

The Federal Reserve & Ben Bernanke

From March 23, 2006, information regarding M3 data was no longer published. The US printing presses started working 24 x 7 x 365.

From there it was a short step away to predict a financial crisis. Nouriel Roubini started off with an estimate of US$1 trillion to US$2.7 trillion write offs. Charles Morris wrote a book, “The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash”.

Yet $1 trillion is the amount of defaults and writedowns Americans will likely witness before they emerge at the far side of the bursting credit bubble, estimates Charles R. Morris in his shrewd primer, “The Trillion Dollar Meltdown.” That calculation assumes an orderly unwinding, which he doesn’t expect. “The sad truth,” he writes, “is that subprime is just the first big boulder in an avalanche of asset writedowns that will rattle on through much of 2008.” wrote Roubini.

Asians Are Funding the US

Total US debt has crossed 300% of GDP (all sectors). What this means is that if every income earning member of the US were to assign 30% of their income, every year, for the next 25 years (at current interest rates and borrowing rates), US debt will come to possible close to zero level. Government debt in comparison to GDP is fluctuating between 50% to now nearly 100%. Some claim that the debt burden is actually declining.

Who is stuck with this hoard of dollars – getting devalued daily. China (with more than 2 trillion dollars), Japan (another trillion dollars), Russia (400 billion dollars), India (300 billion dollars) are the top 4 countries.

Asia lost last year (my estimate) more than US$300 billion dollars due to the monetary policy of the USA. Deliberate, well thought out monetary policy by the USA Government.

The truth is that American lifestyle is being maintained due to Asian stupidity. The Chinese, Japanese, Indian, and other ASEAN countries have lent the USA – which is in the hock by over, US$4 trillion dollars. They will lose US$ 400 billion for the privilege of lending US$4 trillion to the USA. They designate trade in US dollars worth another few trillion dollars a year – which is zero-cost-to-US depreciating currency ‘float’ that the US benefits from.

The Big Mac index (based on two simple ideas of PPP and a standard industrial product) shows the dollar is overvalued against most currencies of the world. This over-valuation range is about 53% in case of India. What that means is that the US pays India only half the amount of what it should actually pay. And India pays double for whatever it buys from the USA.

The Tail That Wags The Dog

Kenichi Ohmae made his reputation with many books at the height of the Japanese boom – holding forth to spell bound audiences on the ‘miracles of Japanese management.’ One of his interesting observations was the quantification of currency trading – which he saw as a positive. “As Kenichi Ohmae observes in his book The Borderless World, the “tail” of foreign exchange trading has in recent years vastly outgrown the original “dog” (Money Meltdown, By Judy Shelton, Page 104).

Living upto his reputation, ” Kenichi Ohmae, nicknamed “Mr. Strategy” during his 23 years as a McKinsey & Co. partner, called for a $5 trillion “international facility” to be made available to financial institutions.” as a solution to the 2008 US-dollar crisis.

What has happened as a result of unsustainable policies (simultaneous budget and current account deficits, and loose monetary and fiscal policies) in the US is that a huge liquidity bubble of $7-10 trillion has caused massive inflation in global prices for all asset classes: property, stocks, commodities, etc. – Percy S Mistry / New Delhi February 28, 2008 (bold letters mine).

The ICBC IPO received subscriptions of half a trillion dollars! IMF estimates of funds with Sovereign Wealth Funds (SWFs) is US$2-3 trillion – and “foreign assets under management of SWFs could reach US$6–10 trillion by 2013“. The same IMF study also estimates that global financial assets are currently valued at US$190 trillion. Commodity prices are going through the roof.

Very soon, major movements will be measured in trillions – thanks to the humongous printing presses, that the US has used in the last few years. Daily trading volumes total US$1.5 trillion in the Forex Markets. To that add trading volumes of debt markets, stock markets and commodity markets. Combined global trading volumes now cross US$3.0 trillion – and growing. This degree of hysterical trading had made the US$ into a giant wrecking ball – which goes out of control very few years.

To overcome this crisis, Kenichi Ohmae says it will require another US$ 5 trillion. The bill for US$ 62 trillion of CDS (Credit Default Swaps) write downs, has just started coming in. Credit card debt of another US$ 10 trillion has just started.

Does George Bush Even Know How Many Zeroes In Trillion?

Does George Bush Even Know How Many Zeroes In Trillion?

How Many Zeroes In A Trillion?

Does Dubya know?

To put it in perspective. The whole of India, produced last year, goods and services worth US$1 trillion. And the US – US$14 trillion.

Did banks lend out 7-10 trillion US$ in doubtful loans (Why didnt I get any of this?)? Who will pay the price for this? How will this get financed? Can we continue running the world financial system like this?

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