Tuesday, December 02, 2014

Pathology Update: Gold, Oil And The State

Following the 2008 collapse I mocked the G20 meetings as clueless and useless.  And I wrote that this faux show of unity would eventually devolve into these same predators turning against each other.   When the predators of the state have no one left to prey upon, they will begin preying upon each other.   This is a maxim that can be extended to creatures of the state like capitalism.  That dynamic has driven the biggest M&A boom in history; probably more than $20+ trillion dollars over the 15 year boom period.   Most of the G20 members are involved in some act of violence against another member.   And many of the members are jointly targeting their violence against other  G20 nations.  Russia and China are teaming up.  The U.S. and Europe are teaming up.  Saudi Arabia has tried to team up with Russia and the like.  These efforts have resulted in violence against other G20 members, and indirectly against the citizens of member nations.   That violence may be wrapped in nationalism or even  covert violence but it is often outright belligerence and aggression.  Regardless,  it is there for everyone to see.   Included in that will likely be an oil price war to maintain revenue for increasing slack in the global economy. 

This just published article by Evans-Pritchard is writing of a possible outcome that I wrote would come to pass many years ago when Peak Oil was a rampant, overly accepted social movement.  That is, a coming bust in oil will cause political crisis and possible economic collapse in the Middle East.   Whodathunkit?   As the world reveals itself, more and more of these outcomes will become evident to those who think with their eyes.  Or, worse, those who believe what their masters tell them to believe.  This article also notes that those who believe the U.S. energy boom is a myth, or that it will collapse under the duress of debt or lower prices, may be in for a surprise.  Much of the U.S. oil production may be profitable down to the $28 dollar a barrel range.  With effective subsidies, that profitability could continue at a much lower price level.  And, we can likely expect similar dynamics for natural gas in the U.S..  Certainly, regardless of what the real investment break-even and hurdle rates are, it will hit capital equipment expenditures in the U.S. energy sector and will harm the investor class.  But then a long-time theme on here is the investor class is going kaput anyway. 

Mind you, regardless of what is happening in the energy sector, the collapse in oil is tied directly to the collapse in the global economy.  Similarly, I noted a few months ago that copper was close to breaking down and in recent days it has fallen hard below long term support.  Copper, oil and steel production are highly correlated.  China is the largest steel producer in the world by a factor of about 7x the next largest producer.   A massive problem in itself.  China’s  steel production today is literally in a state of collapse with output readings that are some of the lowest economic readings I have ever seen.  And these are state-provided numbers.  The collapse is so systemic that last year the Chinese government pulled the “official” steel statistics and said it was going to rewrite the way they were calculated. 

We certainly know that oil, copper, gold and every other commodity in this world has been manipulated by Wall Street, London, Russian and other bankers and financial traders around the world. (Like Bill Clinton’s pardon buddy, Marc Rich and his criminal commodity trading firm.)  Oil’s price bubble was created by man and not demand.   That includes both the manipulation of futures prices and the manipulation of underlying physical demand.  Now, the oil bubble has imploded.  Again.  Just as I wrote it would when it was $140 a barrel.  And just as I wrote would happen again.  We may see some attempt at stabilization at this price level, but a long-time theme on here is that oil may retest its 1998 lows of $10 a barrel.  And the reasons behind that have been discussed many times.  But, in a nutshell, an implosion of the global economy and associated oil demand. 

Now, what exactly does this have to do with the price of gold?  Well, I’m glad you asked.  As a refresher for new readers, gold’s historical use as money has been driven by those who own or control it, thus denying those who own little or none of it.  Then enslaving them economically to grub for small amounts of it.  And, those who own or control most of it has always been the state and the economic aristocracy created by the state.   That is, the same great tyranny that is subjugating humanity to unprecedented misery in today’s world.  Gold is the antithesis of democratic money.  And, just like in today’s world, those who historically have owned all of the gold make the rules.  Furthermore, those who own or control gold are almost always “bad men” as Dalberg-Acton presciently remarked. 

A return to a gold trade settlement system would set off a global economic war as noted on here in prior posts.   The U.S. owned all of the world’s gold in 1929 and that was the problem.  The reason why we owned all of the gold is the same reason why the U.S. had such a massive Great Depression that was far worse than the rest of the world.   Now what is the first thing the state is going to do if gold would be re-introduced as a trade settlement system?  Unleash economic violence against humanity in a bid to acquire more gold from other states.  Gold money advocates are either talking up what they own, ie their own self-interest, with little knowledge and even less concern about democratic economics,  democratic money or humanity, or in some way are brainwashed useful idiots for the economic aristocracy that owns all of the gold.   That is, state-created class and hierarchy that worships gold. 

(Not surprisingly, what I would characterize as fanatics and fringe elements have been pushing a meme on the Swiss gold vote that 80% of voters defeated.  That’s because 80% of people around the world don’t own gold and there are actually serious issues that they worry about beyond the predatory class’s worship of gold.  Gold never has had any ability to create wealth.  It is not a measure of wealth either.  The only way gold is any type of faux indicator of wealth is derived through violence.   Period.  Gold won’t feed the poor.  Gold won’t cure cancer.  Gold isn’t a cure for poverty.  Gold can’t invent automation to free people from economic slavery.  And on and on.  Gold does not create one iota of wealth.  If you think it does, you can take all of the world’s gold to a deserted island and see how that works out for you.  You can use its mythical powers to build your castle, cure your ailments, feed you and invent methods of easing your condition.  Gold only derives its value through violence.  That is, the violence of those who control it.  And they have done so by forcing those who have none of it to slave away for small scraps of it.  Gold as always been the money of class, title and privilege used to subjugate humanity to its violence and control.  The game of gold means nothing to the suffering mass of humanity who neither owns gold nor whose problems would neither be solved by gold.  It is a statist game of control.)

I wrote on here many years ago that we were not going back to a gold money system.   But I also wrote that it wouldn’t surprise me if the status quo tried to take us back onto the gold standard or a gold trade settlement system.  We see elements of this not only in Switzerland, an original home of criminal bankers hiding stolen loot from the world’s masses, but elsewhere.   China and Russia (the state) have become large purchasers of gold this cycle.   Mind you, central banks and the state are driven by an intent to control.  So, we certainly know their ability to act and react to events on behalf of humanity doesn’t actually exist.   They react through the perpetuation of violence.  Their intent is to control events, and as a result, to control humanity to perpetuate their own pathological reason for being. 

But what really caused my ears to perk up was that we now have a mainstream economist that is part of a massively incompetent bureaucracy like Citi,  And he is finding the confidence to write about gold being a 6,000 year old  bubble.  This after gold has fallen nearly $1,000 an ounce and gold miners have followed suit. (Gold juniors are down a staggering 85%).  That an economist who is a slave to the existing system is now getting mainstream press may be telling that gold has reached a level of loathing that may portend an important turning point.  The establishment and those who protect the establishment, like economists in Wall Street banks, are usually wrong at major economic, financial and social turning points.  

I have been bearish on gold longer term and remain so.  Gold’s power is an illusionary religion of those who worship the golden calf.  If we have monetary crises around the world, gold will suffer for all of the reasons I have written about in prior posts.  If money becomes useless, so will gold.  At a minimum, I expect gold to return to its 1998 lows for the same reason I expect oil to return to those lows.  But, between “here” and “there” new dynamics in the world are unfolding and new data may be presenting itself.  That new data may involve the crisis between Russia and the west.  And that crisis is being exacerbated by the collapse in the price of oil.  Could that price collapse be engineered to hurt Russia?  Of course it could.  Because the price rise to $150 in the first place was engineered through financial fraud.   The oil markets are just as fraudulent as everything else Wall Street touches.   Do we know if the pricking of the oil bubble is driven by fraud?  No.  But, here is what we do know.  We do know that physical demand for oil is headed in the wrong direction for price bulls.  I noted many times over the last few years that we are awash in more excess or slack oil than when oil was $10 a barrel in 1998.  And the rise in oil production in the U.S. and elsewhere has only made the supply-demand imbalance even worse.   In other words, as noted ad nauseam on here over the years, oil was going to bust contrary to the social mythology of Peak Oil.

Now, let’s move beyond a baseline discussion on oil and gold to the state and new dynamics in the world today.  I have written in quite a bit of detail how Russia may be able to break away from dollar control given its unique position in the world.   A position that China does not share without tremendous pain.   China is a slave to dollar, and to a lesser extent, euro hegemony.  

Let me digress for a minute as it pertains to global events.   We really have no idea what is going on in the Ukraine and why.  The mainstream press has reported one particular view.  But, this is the same mainstream press that lies to the American people incessantly.  One must consider the Ukrainian situation beyond that which it has been framed by the state and by the media.   The Ukraine may be a battle ground between the west and Russia created by either party.   It may actually be Russia that is creating the mess in the Ukraine with a much more profound intent.  That is, to goad the west into action that would allow it to abandon the dollar, and instead demand gold for its energy reserves.   The U.S. may have intelligence or knowledge of what Russia’s true motive is.   Now this is purely speculation.  But it certainly seems rather odd that the U.S. and Europe are responding so aggressively to Russia over a very minor issue in the Ukraine.  And, why is Russia flexing its military capability to an extreme if the only dynamic involved is a small skirmish in the Ukraine?  Are they warning the U.S. and Europe in advance of a demand for gold in their trade settlement of commodities and energy?   Now, Russia itself is not going to bring down the U.S. empire.  But with a contrived crisis in the Ukraine, even regardless of who is responsible for it, Russia now has Europe in its clutches.  Europe is dependent on Russian energy exports.  And that means a trade settlement crisis could be premeditated.  Russia could easily demand gold for trade settlement from Europe for its vast energy reserves, thus bypassing both the euro and the dollar.   And, coincidentally, could that be the real reason why many European nations are attempting to repatriate their gold reserves?  That is, they are privy to western intelligence on what is really going on.   Do we really know what is going on between the west and Russia and why?  The answer is clearly no unless you consider the mainstream press’s regurgitated political talking points as fact.  

Of course another alternative may be that the world is generally as it seems (Not likely given the massive bubble we see in state power and associated secrecy.), and Russia and the Middle East may actually need to back their collapsing currencies with gold to promote some degree of confidence within the predatory financial system given their primary exports, energy are under substantial duress.  (Middle Eastern oil fiefdoms peg their currency to the dollar but that peg will eventually decouple and if oil continues downward their currencies will implode just as I have noted many times the yuan will.)  Regardless, the only dynamic through which I can see demand to catalyze for gold is some level of forced state demand.  Similar to that of the forced state demand for money that props up its valuation.  And, simply from a cyclical standpoint the entire gold complex has been obliterated.  Yet, the price of gold has held very steady at current levels for some time.  That said, gold needs a catalyst to rise from the washout.     

My intent in putting up this post is not to present a completely factual perspective.  Parts of it are highly speculative.   I don’t know all of the facts.  Neither does anyone else.  But, what I do know is the Soviet Union in some respects still exists.  It has simply reconstituted itself.  The same state apparatchiks who controlled the masses in the Soviet Union now control the masses in Russia.  The power that the state uses to control the masses has simply been transformed from communism to capitalism.   And with the acceptance of capitalism by those apparatchiks, the Russian state has new tools of marketing and advertising (propaganda and control) at its disposal to manipulate its own people and the world.  But the same predatory power structure with the same pathological elements are still in control.  All that has happened is one state created ism has been replaced with another.   The same Soviet military-industrial complex still exists.  The same corporate complex enslaving the masses to a dumbed-down culture of work for the benefit of state actors still exists.   And most importantly, same pathological state still exists.   What has really changed other than window dressing?

As noted in prior posts, Putin appears to me the closest comparative to Hitler in today’s world.  His cult of personality in Russia is all-consuming.  He has stolen from the Russian people to amass a fortune as Hitler did.  And his recent shows of military force are a reminder of Hitler’s many antics leading up to war.   Remember, the known evil of the 1930s was the British Empire.  Yet, it was another evil, Hitler, that arose to become the greatest threat to humanity.   And just like then, many liberals and capitalist alike found solace in supporting Hitler and now, Putin.   I’m not stating that Putin is going to declare war on the west.  Nor am I stating that he is the world’s greatest threat.  But, what I am stating is that the parallels to history and state megalomania are there.   Many people cheer for Putin simply because of the evils of U.S. empire.  But those people should remember that placing their faith in the rule of man, any man, and an associated personality cult is a proposition that always ends badly.   It is this misplaced faith that created Hitler, many modern day leaders including Obama and countless other useless, clueless or pathological state actors in between.    It is this cult of personality or faith in man as a savior that has been the basis for massive state power grabs and has ultimately created the all-powerful state.  Decades of this misplaced faith are the very basis for the demagogy and outright deceit of state actors that has landed the United States in its current economic, social and government crises.

If Russia would ever demand payment in gold, whether premeditated or out of its instincts of survival, it would be an act of violence.  Maybe an act of self-defense but still an act of violence.  But then this is exactly what I wrote would happen between G20 state actors.   That they would eventually turn on each other.   There is no doubt in my mind that much of the pathology of the Russian state has a deep hatred of the west and the U.S. in particular for past aggression, humiliation and loss.   State pathology ensures that any past transgressions are seldom forgotten.  Especially when they are still being committed as is certainly the case with U.S. empire today.  We don’t really know the reasons why the west and Russia are at odds.  Sure, small bits have been leaked.  Maybe with intent.  But I seriously doubt all of this has anything to do with a few pawns in the Ukraine.   The state enslaves billions of people to its violence every single day and the situation in the Ukraine really is not that profound in comparison to the level of responses from Russia or the west.

Here is what we do know.  Oil is crashing.  Gold has shown many signs of a wash out.  And the actions of the state continue to devolve into greater and greater attempts at control aka violence.  Gold may be one of the last great tools of state violence that remains.  And it may be used to destabilize the existing U.S.-dominated world financial system, or to stabilize financial systems attempting to break free from it.  Whether that is premeditated or out of survival or a little of both, all could be possible. 

If humanity doesn’t stand to account, this trend of greater and greater state violence will continue and so will the resultant suffering of the human family and the natural world.   Whenever the constructs of the global economy fail, and it is going to fail, the misery around the world could be beyond our comprehension if left to state actors.   The only uncertainty is what dynamics will drive that failure.  But, we know one thing for certain.  Without humanity interceding, it will be rooted in state violence.

Watch the gold market and the possible actions of Russia over the next year.

posted by TimingLogic at 7:34 PM

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