Gold Market Sunk to Keep Bond Market Afloat

The gold market was slammed shortly before the start of the “theatrical release“ of the Federal Government “shutdown”.

Historically, government shutdowns have been associated with negative financial news. Governments having to shut down due to financial reasons are generally considered to be in financial stress.

Negative financial news has historically been a time when gold and silver prices rise due to uncertainty. Gold and silver have long been safe havens against financial calamity including falling currency values, falling bond prices and even rising interest rates, as gold and silver store wealth against borrowing costs.

A quick survey of the last 17 government shutdowns going back to 1976, especially those lasting more than 3 days, we see gold prices never fell during any of those shutdowns. The longest running shutdown was from December 5th, 1995 through January 6, 1996, and during that period gold rose from $386 per ounce to $409 per ounce, a rise of nearly 6%.

The current government shutdown comes during a time period when American debt has never been higher. The Obama administration beginning in 2008 has added more debt to the Federal balance sheet than all other Presidents, from George Washington to George H. W. Bush combined, a staggering $4.2 Trillion dollars.

The issue of debt is not about total dollar amount, but about interest payments which must either be taxed in existence or borrowed into existence. By the end of the Obama Presidency, the total debt is likely to be close to $17 trillion, and over $6 trillion added during his two terms, which is as much as the total US Debt at the start of 2002.

The terms of the Federal Reserve Act (1913) did not include demands for repayment of paper money loans made to the Department of the Treasury, (the Constitutional United States Treasury having been ended by law in 1921), but specified interest payments were to be made only in gold, and after the gold was gone the United States declared bankruptcy. Bankruptcy was declared on the carefully chosen date of March 9, 1933. (interesting numerology 3-9-33 or 333-333 ==666! ) After 1933, all property and all potential income of all persons born thereafter was hypothecated to the non Federal no Reserve private banking cartel, but this another story.

Interest payments are the primary benefit of banker pretended debt script, except, when the game’s gone too long. In the end, interest payments finally cause the destruction of debt script, as interest rates rise exponentially until no amount of script can satisfy the the demands for more interest.

A primary concern of banker debt script managers is interest rates; keeping rates as low as possible is of the highest priority, especially when total debt ‘crosses the Rubicon’ where interest payments on debt already created, significantly affect future interest payments as previous payments are borrowed into existence. The United States Federal Reserve has crossed the Rubicon, and rising interest rates will signal the coming end of the FRN private debt-based script.

Over the past several years, it has been noted that the gold and silver and platinum and palladium have exhibited price behaviors consistent with being managed prices. Prices of gold and silver, especially, have been manipulated, both to keep the purchasing power of the dollar from falling quickly and to keep prices of US bond products high, resulting in unnaturally low and stable interest rates.

Contrary to reality-based, un-coerced, markets, where gold and silver, and other precious metals, rise as a currency is being over printed, the US Fed and complicit banks and brokerage houses have conspired to cause monetary metals to fall in prices, even as debt levels rise to all time highs more than doubling since 2002.

Rising interest rates are a sign that banker pretend debt script exists in far greater quantities than products to purchase in a market. Rising quantities of script mean more money available to purchase non increasing numbers of goods. As more money demands product, but production fails to rise, prices rise signaling shortages, as extra money supply attempts to purchase more product. Rising interest rates reduce demand for money and shrink the money supply as loans are paid off, and fewer new loans are sold.

However, when a banker pretend debt script is being borrowed into existence to meet the demands of pure spending, with no connection to products in the market, bankers and co-conspirators must manipulate interest rates lower to prevent catastrophic rises in interest payments. The end result is rising interest payments that soon become unstable because any rise in interest rates will soon fully destroy the financial system’s ability to make payments on all non fixed rate debt.

Gold and silver prices are being deliberately and criminally destroyed by bankers hoping to keep the financial system alive a little longer as the wealth of the economy is transferred to bankers in the form of interest payments. Keeping the financial system functioning while manipulating gold and silver prices (and other schemes, such as interest rate derivative attached to bond purchases) is a madman scheme – soon to end with the full destruction of the bond market and dramatic collapse of dollar purchasing power.

During the “shutdown” of the government, done for political purposes including forcing Obamacare to be funded and to act as a distraction or excuse for a coming interest rate calamity, gold and silver prices have been forced lower and lower to keep interest rates stable.

Lowering prices of gold and silver is equivalent to boosting the value of the dollar and simultaneously strengthening face value of government debt. Rising dollar purchasing power is equivalent to an increase in interest rates, as bond holders receiving payments in dollars realize an increase in purchasing power. Rising or stable exchange values for the dollar keep money in dollars – rather than safe havens such as gold and silver. Destroying the price of gold and silver to maintain purchasing power of the dollar moves money from investments in gold and silver to government debt which rises in value relative to gold and silver.

*chart courtesy of StockCharts.com
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As can be seen from the chart above, gold prices were being forced down in May as the 10-year yield (interest rate) on Treasury notes began rising, signaling an on-coming debt-interest rate calamity and the collapse of the US Bond prices. Metal prices were frantically slammed to slow the rise in interest rates on approximately June 17, 2013.

Slamming the price of gold helped slowed the rate of increase in the 10-year yield temporarily, preventing an interest rate crisis. Note again, after October 1st, interest rates stopped falling and started climbing, and, again, a gold smack down was engineered beginning in the second week.

The price of gold and silver are being pushed lower at great cost. In order to engineer the sell down, naked short selling and flash trading are being used, both of which are causing the depletion of physical gold and silver, as prices encourage foreigners and individual investors to continue buying gold and silver at significant discounts.

As the physical supply is being reduced and prices are falling below production costs of the metals, the physical supply will soon dwindle forcing rising prices, regardless of the paper traded value of gold and silver.

In the very near future, the physical shortage of gold and silver will lead to default in the commodities market exchanges (comex and other metals exchanges) creating a crisis in metals delivery and, for a short time, making gold and silver unavailable at any price.

At the same time when gold and silver prices rise exponentially and the metals exchanges default, bond prices will fall like a rock triggering financial system destroying interests rates.

The only protection bond holders and dollar holders have is to sell both before interest rates begin to rise. Since owning Federal Debt is the same as buying into a Ponzi scheme, only those that sell early will see any of their money returned.

Buying gold and, preferably, silver and other safe assets is the only hope to save your wealth. Time before collapse is not long – please hurry.

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Jack Mullen has been a businessman for more than 25 years, owning 3 radio stations, several technology based companies and a resource development company.