The social order, the religious order, the economic order must all be for ONE God! For, know that the Lord thy God is ONE.
Remember, all the earth is the Lord's, and the fullness thereof, and the cattle on a thousand hills. The silver and the gold is lent to thee. Be, then, the ideal steward to the Lord, thy God.
Among the 14,000 or so Cayce psychic discourses are three prophetic readings given during the last seven years of Cayce's life that have been largely overlooked. Nonetheless, they may hold the key not only to the reasons behind the Iraq War but also to the mob rule that was foreseen by Cayce's sources. The pivotal reading, 1598-2, was given in 1938, five months before Hitler would invade Poland.
As we have indicated, America MUST pray more and act like it prays; or else be drawn into that which has been indicated (through this channel) would cause civilization to move – ever - westward.
Q. Will America be drawn into the coming war?
A. That depends upon that just indicated. If America acts AS it prays, no! If it acts in one manner and prays in another, or if there is allowed to be the ruling of those who seek for greater aggrandizement or the fulfilling of self's own desires, then it will be eventually drawn into war.
Here Cayce's source suggests that much more prayer would be needed to keep America out of the looming world war. The reading appears to say that the country cannot pray and then undermine those prayers by acting in contrary ways. However, equally importantly, it suggests that America might also be drawn into war to benefit “those who seek for greater aggrandizement or the fulfilling of self's own desires” and if the country were drawn into war, or these individuals were allowed to rule, then civilization would move westward. The word “aggrandizement” often is used when referring to money, but the dictionary definition uses the words “deification, exaltation and glorification.” The verb is defined as “to make great or greater, to enhance the power, wealth, position or reputation.”
Therefore, if those who sought glorification, wealth, and power were allowed to rule then the United States would be drawn into war and civilization would move westward. Yet, it seems that the United States' entry into World War II heralded a period of great prosperity and world leadership. If reading 1598-2 is correct, civilization will move westward now regardless of our present perceptions.
The second and third relevant readings were given during WWII. These readings detail trouble related to the stability of currency. The 1943 Reading1 is international in its warning, while the 1944 reading speaks of domestic trouble. The 1944 reading was given a month after the United States had concluded the Bretton Woods accord, which set up the post-War monetary landscape. The currency readings were given at a time when Americans had been prohibited from owning gold for ten years.2 Already by 1943, Wall Street's growing power had fully eclipsed London's financial markets and the British pound.
Q) Would it be feasible to work out an international currency, or an international stabilization of exchange values?
A) This, too, will be worked toward. It will be a long, long time before established. There may be another war over just such conditions
…when the present conditions [WW II] have subsided…there will be more and more upsetting in the monetary units in the land.
The financial elites of this country, notably the Morgan, Rockefeller, and Kuhn, Loeb interests, were responsible for putting through the Federal Reserve system, as a governmentally created and sanctioned cartel device to enable the nation's banks to inflate the money supply in a coordinated fashion, without suffering quick retribution from depositors or note holders demanding cash.3
The Federal Reserve website lists its powers and they seem benign. However, Congressman Ron Paul's statement during the April 2003 Humphrey-Hawkins testimony of Federal Reserve Chairman, Alan Greenspan, gives a different appraisal:
And the other challenges we have to look at some day is whether or not we should continue to accept this notion that we can achieve positive economic planning through the monopoly control of money and credit and the setting of interest rates, which is really contradictory to true capitalism. I think that is where part of our problem is. The Austrian economists for years, Mises, Hayek, and Rothbard have argued that this is the source of our problem. That the manipulation of interest rates too low causes the boom and then eventually the bust has to come. And we see this over and over again.
U.S. monetary policy was and still is influenced by the work of the British economist J. M. Keynes. Very simplistically put, Keynes believed that it was possible to issue paper money and/or credit as needed in order to facilitate various business and social objectives. It is important to look briefly at British monetary policy from the end of the First World War until the beginning of the Second World War because these policies, influenced by Keynes, contributed to Britain's demise as a world power. Unfortunately, the United States pushed through many of the same policies at Bretton Woods, and while it took far longer for them to damage the United States, damage it they have. It is these policies that have contributed to the “increasing upsetting of the monetary units of the land,” of reading 5400-1 above.
At the end of World War I, Britain dominated the Financial Committee of the League of Nations and set about establishing the pound as the dominant European currency. During this time the United States was still on a gold coin standard and relatively free of inflation. During WWI, England had inflated its currency to pay for the War by going off the gold standard. After the War, it returned to a gold exchange standard. In 1925, Britain stopped using gold coins internally, using only paper for internal circulation. Under the Gold Standard Act of 1925 only bullion would be available for redemption to foreign holders of pounds outside of Great Britain.4 The British then strong-armed other European powers to establish central banks that would not deal in gold, but rather, pounds. The system lasted approximately five years, and during that time the pound became increasingly over-valued. British exports fell. Eventually, the pound fell and central banks with reserves in pounds suffered catastrophic losses bringing on an international banking crisis as the 1930's began.5
If this scheme sounds familiar, it should. The monetary pyramiding invented in the 1920's by the British was essentially the system established by the participants at Bretton Woods, New Hampshire in July 1944. It is probable that Russia's invasion of Finland in June 1944 made signatory nations more compliant with any scheme that the United States suggested because America had emerged as the only power capable of staving off the advancing Soviets. While there were important differences in Bretton Woods from the earlier British scheme, the important similarity was the monetary pyramiding with the dollar taking over the position occupied by the 1920's pound. After 1945, foreign central banks held dollars as their reserve currency. Only the United States would redeem in gold if required. Imbalances in the system were handled by the newly created International Monetary Fund. This allowed the United States to inflate and essentially export its inflation to foreign holders of dollars.
This rise in the supremacy of the dollar did not happen only as a result of winning WWII. The United States had been hoping for “a dollar triumphant” (to borrow Rothbard's phrase) and to be the economic leader of the world many years before Bretton Woods and many years before the start of WWII. FDR was plainly aware of and supported this agenda as can be seen in letters to his son, Elliott.6 Again Rothbard bluntly discusses U.S. motives:
Even before American entry into the war, U.S. economic war aims were well-defined and rather brutally simple: they hinged on a determined assault upon the 1930s system of economic and monetary nationalism, so as to promote American exports, investments, and dealings overseas – in short, the “Open Door” for American commerce.7
When Edgar Cayce gave reading 1598-2 in 1938, he urged that if America were to stay out of war it would have to act like it prayed. That reading was given on May 29, 1938. Twelve days earlier Congress had passed the Vinson-Trammel Naval Expansion Act authorizing 3,000 new planes, fortifying the islands of Midway, Wake and Guam in the Pacific, and authorizing sixty-nine new ships. United States' citizens may have been isolationists, but their government was gearing up for war8 just as reading 1598-2 had feared.
What were the forces pushing the United States toward war and world monetary rule? Principally, two economic camps were behind the move. There was the industrial segment that, for example, wanted to stop the barter arrangements Germany was making with other countries to avoid trading in its weak currency. This is the group that Secretary of State Cordell Hull's Open Door Policy was designed to help. In the second economic camp were the bankers who were looking to take over the banking powers and the preeminent financial position the British had earlier enjoyed.9 The bankers and the manufacturers were likely the individuals to whom Cayce was referring when he said there would be war if there were “the ruling of those who seek for greater aggrandizement or the fulfilling of self's own desires…”
Going to war enabled these financial elites to establish a system where the United States would eventually be able to print fiat currency for a long period of time with seemingly few repercussions - until 1969 when there was a threatened run on the dollar by redemptions in gold. This occurred because the dollar had become highly inflated and was overvalued relative to many of the harder European currencies, and the dollar was still artificially pegged to gold at only $35 an ounce. By 1971, redemptions of dollars in gold were no longer permitted by the United States. Additional aspects of the history of gold's control were presented in an earlier Hutton Commentaries article titled, The Upsetting Of America's Monetary Units.
The 1970's saw an enormous rise in the price of gold, culminating in a price of $850 per ounce in 1980. By the 1990's, under the aegis of Robert Rubin, Clinton's Secretary of the Treasury, the Federal Reserve in concert with other central banks began to manage gold in an effort to depress its price and make the dollar appear stronger. Since the Fed's books are not subject to scrutiny, it is unknown how much they entered into the derivatives market to depress the price of gold. As part of the plan, central banks leased gold to bullion banks, such as JP Morgan at the low interest rate of .5%. The bullion banks then sold this gold and invested it in higher yielding Treasury bonds.
This approach helped the U.S. Treasury market and made interest rates come down. However, a great portion of the leased gold has not been paid back to the central banks by the bullion banks and as the price of gold continues to rise, the bullion banks have also sought to manage the price of gold through derivatives. The following graphic from Softare North's Free Commitment of Traders Charts page (GC) shows this.
In court papers in an important law suit brought by Blanchard, a gold seller, against JP Morgan and Barrick Gold for price fixing and anti-competitive practices, Barrick recently attempted dismissal for failure to join all relevant parties. Barrick admitted it had acted on behalf of the Federal Reserve and claimed that since the Fed had governmental immunity, the suit should be dismissed. The New Orleans judge dismissed Barrick's motion. Hopefully, much important background information on these gold dealings will now be made public.10
Over the last fifty years the United States dollar has become a de facto international currency. Mainland China and many other countries have linked their currencies to rise and fall with the dollar, a testament to the size of the consumer market of the United States. In 1971, the same year the United States permanently de-linked from gold, OPEC made the U.S. dollar its trading currency for all oil produced by member states. OPEC's decision contributed to a massive increase in the use of the dollar since most foreign governments had to have dollar reserves in order to purchase oil. This allowed the United States the historically unparalleled opportunity to print paper money in large quantity without immediate consequences such as a runaway inflation. Between 1949 and 1969, international dollar reserves increased by 55%. Since 1971, however, international dollar reserves have increased over 2000%.
When the Soviet Union fell at the end of the 1980's, the world's need for America's military was halted. Not only is America's military spending of 350 billion dollars a year (Russia spends 40 billion and China spends 20 billion), bankrupting the United States, but it is sending a message of profligate aggression to the rest of the world. The world was willing to bankroll a weak dollar as a trade for protection against Communism. With the threat of Communism gone, countries are and will be increasingly unwilling to cooperate in the dollar-pyramiding scheme. Europe had wanted a united currency for many years before the 1992 Maastricht Treaty, but it was not until sometime after the fall the Berlin Wall that Europe felt safe enough to challenge the dollar. While some have said the euro offers an alternative to the dollar, it is also a fiat currency and the European Central Bank is not committed to gold anymore than the Federal Reserve.
Finally, a new non-dollar age is being born. Moslems in Malaysia have recently issued the gold dinar and Russia has issued the gold chevronet. An Executives Meeting of East Asia-Pacific Banks (EMEAP) was recently held with the supposed purpose of creating an Asian bond fund. However, the real purpose appears to have been to find a means of diversifying Asian U.S. dollar earnings out of dollar investments in U.S. Treasuries. Years of flooding the world with paper dollars have created a short-term bounty but have created many unintended consequences.
The most recent of these unintended consequences may be the United States war with Iraq. While many people no longer believe that Iraq actually had significant quantities of weapons of mass destruction, it is unclear to them why the United States would take on the enormous cost of an invasion and an occupation. The answer may lie in the fact that in 2000 Saddam Hussein stopped taking United States dollars for his country's oil. At that time, he switched to accepting euros. Euro-based countries France and Germany sought to delay the war, asking for proof of WMD. Britain, who had never adopted the euro, fought by the side of the United States. Should Britain later decide to implement the euro, it would be disadvantageous to its entry point if the euro were to strengthen markedly.11
When Hussein started taking euros, Venezuela and Iran both announced they were considering a switch. By invading Iraq, the United States announced to the world its intention to defend the dollar as the reserve currency for oil transactions. In light of the above facts, the words of reading 3976-28 on an international currency and monetary stability bear repeating: There may be another war over just such conditions.
In addition to being the probable reason for the war with Iraq, the fiat dollar has destroyed America's industrial might and sent jobs overseas. China has been the principal beneficiary of this exodus, while India has been the beneficiary of the exodus of service industry jobs particularly those with computer ties. Just as the fiat money scheme of 1920's Britain made British exports uncompetitive, so too has the effort to overvalue the dollar dried up U.S. exports.
As painful as this year's big job cuts have been, what's even more painful is that many of those jobs are never coming back, as U.S. employers in a wide range of industries move more and more jobs overseas. That's old news for manufacturers, who have been cutting jobs and moving them offshore for decades, but it's a trend that's also starting to gather steam in a number of service industries, especially information technology, formerly one of America's best-paying industries.12
Why not let the dollar fall and save U.S. industries? Why inflate the money supply creating a consumer society that buys products overseas creating plants, equipment and jobs in other countries? The reason there has been a willing transfer of jobs overseas is that labor accounts for around 60% of the cost of a product and there is a substantial improvement in gross margins employing workers who are willing to work for longer hours in conditions and for wages Americans and Europeans would consider unacceptable.
Asian central banks currently hold 1.5 trillion in United States dollar denominated reserve assets. Foreign companies selling in the United States use their money to buy U.S. real estate, Treasuries and stocks. If the dollar were to drop precipitously, these markets would all be crucially impacted if foreigners wanted out of dollar denominated U.S. investments. Figures on foreign investment in U.S. debt markets are disquieting. Foreigners own more than 48% of U.S. Treasuries and 24% of U.S. corporate bonds. They also own 13% of the equity market and in total 8.2 trillion of U.S. assets. Foreign ownership has risen from 33% of U.S. GDP in 1990 to 78% today.
One might argue that sending jobs overseas is part of the leveling process often advocated in Cayce's readings. It must be pointed out, nonetheless, that countries like China and India have poor domestic consumer markets that are presently unable to absorb the products they produce for export. Their economies are going to suffer greatly from the spiraling debt of the United States and a fiat dollar increasingly meeting its day of reckoning.
For the American worker the problem of currency manipulation has become a matter of survival. The desperate May 14, 2003 Congressional testimony of the Assistant Director for International Economics, Public Policy, AFL-CIO shows the gravity of the situation.
The unemployment figures released earlier this month show that 95,000 manufacturing workers lost their jobs in April alone. It is a startling number, but not surprising. For 33 straight months, manufacturing has lost jobs, the longest such stretch since the Great Depression. Since April 1998, the United States has lost 2.6 million manufacturing jobs, nearly 13 percent of the total manufacturing workforce. Manufacturing job loss accounts for staggering 90 plus percent of total job loss since March 2001.13
Increasing joblessness tells only part of the story. Of most concern, is the debt overhang. At all levels, governmental, corporate and private, America is awash in debt. The United States current account deficit is 1 million dollars a minute and 503 billion dollars for 2002. In 1973 the national debt was 470 billion dollars; in 2003 it will be 6.4 trillion dollars. Consumer debt is up 12% from last year. The NY Fed's latest figures on household debt as a percent of disposable income are at a record high of 74%. Before 1997, consumers had borrowed 50 billion dollars against their homes. Five and a half years later that figure is 200 billion dollars.
Since 2001, banks will have processed 27 million mortgage refinances by the end of this year, according to the Mortgage Bankers Association. Out of those, homeowners will have converted more than $270 billion of home equity into cash…14
Rates on mortgages cannot fall below 4% because banks need a risk premium in case they are handed the keys. Rates on 15-year mortgages are getting perilously close to 4%. Prices on luxury homes and second homes have not risen in 2002 in most areas, and there is a large backlog of upper-bracket homes.
Yet even as house prices start to wobble, many housing experts continue to insist that “this time is different”: because interest rates will not rise significantly in the near future, they say, a slump in house prices is unlikely. This survey has argued that even if interest rates stay low, house prices could tumble, undermined by dwindling demand from first-time buyers and waning confidence. However, the experts are right to say that this housing boom is different from previous ones, in two worrying ways. First, inflation today is close to its lowest for half a century. This means that overvalued house prices cannot regain their long-term equilibrium mainly through inflation, as they have done in the past… house prices will have to fall by at least 20%...
A second important difference is that this time the surge in house prices has gone hand in hand with a proportionately larger jump in household debt.
…the sheer size of Fannie Mae and Freddie Mac (which at the end of 2002 accounted for 44% of all mortgage debt) could pose a risk to the whole financial system. If house prices fell, some of the mortgages they hold in their portfolio could go into default and they would not have enough cash to pay the holders of their bonds. The agencies' debt is priced as if it were guaranteed by the government, yet there is no explicit guarantee, so it is not clear whether government would bail them out in a crisis. A default on their bonds would have serious knock-on effects because mutual funds, banks and savings-and-loans institutions are all large holders. But the cost of a bailout could dwarf any previous ones.15
Since the fall of the stock market beginning in September 1999, the equity Americans have in their homes has been an important form of savings. It was more than seventeen years after 1929, before even 50% of the stocks reached their 1929 prices. Not until the early 1950's did the Industrials regain its '29 high. It remains to be seen whether baby boomers will live to recover their stock losses.
The possibility of a downward correction in housing reducing the amount of equity Americans have in their homes, comes at a time when the demographics of retirement could not be worse. According to a 2002 report by the American Savings Education Council16, Americans are facing a bleak retirement. Even if a way is found around the un-funded 44 trillion liabilities of Social Security, Medicaid and Medicare, there is still trouble. Social Security replaces only 40% of retirement income. 46% of workers have saved less than $50,000. 15% have saved nothing. 70% don't know what they need to live on in retirement. Even a worker who had saved $100,000 for retirement at 65 would, after taxes, have less than $5,000 per year to live off of over a 20 year expected life span.
It is unclear why so many are unprepared for what is ahead. Considering the financial state of working America, a time of unparalleled social turmoil seems to lie ahead.
[There is a] Lack of godliness in the hearts of some of those that direct the affairs of groups.
Man's answer to everything has been POWER - Power of money, Power of position, Power of wealth, Power of this-that-or the other. This has NEVER been GOD'S way, will never be God's way. Rather little by little, line upon line, here a little, there a little, each thinking rather of the other fellow rather than himself.
In the Introduction to A History of Money and Banking in the United States by Murray N. Rothbard, Joseph T. Salerno sums up Rothbard's analysis of all governmental authority, which he says “is inherently an oligarchic enterprise”17
The ruling class, however, confronts one serious and ongoing problem: how to persuade the productive majority, whose tribute or taxes it consumes, that its laws, regulations, and policies are beneficial; that is, that they coincide with “the public interest” or are designed to promote “the common good” or to optimize “social welfare.” Given its minority status, failure to solve this problem exposes the political class to serious consequences. Even passive resistance by a substantial part of the producers, in the form of mass tax resistance, renders the income of the political class and, therefore, its continued existence extremely precarious. More ominously, attempts to suppress such resistance may cause it to spread and intensify and eventually boil over into an active revolution whose likely result is the forcible ousting of the minority exploiting class from its position of political power. Here is where the intellectuals come in. It is their task to convince the public to actively submit to the State's depredations because the alternative is anarchy and chaos. In return for fabricating an ideological cover for its exploitation of the masses of subjects or taxpayers, these “court intellectuals” are rewarded with the power, wealth, and prestige of a Junior partnership in the ruling elite.18
When a reading spoke of “the ruling of those who seek for greater aggrandizement or the fulfilling of self's own desires…” it made an interesting choice of words in the word “rule.” America does not generally speak of its leaders or citizens as ruling, but rather “governing.” The use of the word rule is a less democratic usage and more related to presiding over, controlling, commanding, exercising dominion over according to the thesaurus. If Rothbard's analysis is correct then a U.S. ruling class would employ apologists in academia, in the media, and in politics.19 Foreigners often comment that the news on our networks is markedly different from the news they get. An example of this would be the media coverage in the weeks preceding the Iraq War, where the public was treated to endless news about the finding of “weapons of mass destruction” when the probable real reason for the war was the fight to keep the dollar as the preeminent international currency. Most dissenters in Congress were quiet, although on the Senate floor in May, Senator Robert Byrd said that Mr. Bush lied about WMD and that his duplicity would be uncovered. “This house of cards, built of deceit, will fall.” As Thomas Jefferson said: “If a nation expects to be ignorant and free, it expects what never was and never will be… The People cannot be safe without information. When the press is free, and every man able to read, all is safe.”
Some of the most newsworthy events of our time remain grossly under-reported. No one in the mass media extensively covers the debate about the possibility of a dollar landslide, the rapid increase in joblessness, the decimation of a generation's savings in the mounting stock market debacle and what this will really mean over the next thirty years. Reports of the over the 44 trillion unfunded liabilities of Social Security and Medicare are suppressed. Little coverage is given to mass readership on the meaning of the decline in production capacity and the loss of jobs, nor is the enormous wage gap between management and worker reported widely. There is little discussion of how to put the economic ship of the United States aright and now the stage is set for economic trouble more substantial than that faced in the 1930's.
Voting records show that a large part of the citizenry is not engaged in a process of change. Traditionally, presidential election years get the highest voter turnout. Yet, the last election brought only 51% of eligible voters to the polls. Among countries who do not legally require citizens to vote, the United States ranks in the bottom 25% in percentage of eligible voters who vote.
So, in the experience of those that have set and made the conditions are greed, selfishness; that has been practiced in the minds, in the lives, in the experience of the nation. Think not any soul, “Yea, that is true for the other fellow.” But it applies to Jim, to Tom, to those in ordinary walks of life, to those who have been given power in high places, or have wealth about them; THEY are the oppressors. Yea, look within thine own heart! Hast thou not practiced the same?
Ye are to have turmoils, - ye are to have strifes between capital and labor. Ye are to have a division in thine own land, before there is the second of the Presidents that next will not live through his office - a mob rule!
(3976-24, 6 /16/ 1939)
During the late 1960's and 1970's, it was thought that this reading referred to the social unrest that America was experiencing at the time. William Hutton, however, has proposed that this may refer to events that have not yet happened because the word “next” may mean two presidents next after Franklin Roosevelt.20 Additionally, while this country has had social unrest, mass demonstrations and violence, it has never had mob rule. The phrase “mob rule” suggests an attempt at governance in a period of violent overthrow.
If it still seems that social unrest is unlikely, match some of the following statistics with the loss of jobs21, the decline in savings, the loss of pensions, the bursting of the stock market and the housing bubbles, the real possibility of competitive currency devaluations, and a possible rapid decline in the dollar:
In light of the above facts, words of various Cayce readings have meaning as never before.
Every phase of human experience and relationship must be taken into consideration,… weare our brother's keeper. If those in a position to give of their means, their wealth, their education, their position DO NOT take these things into consideration, there must be that leveling that will come.
…there CANNOT be one measuring stick for the laborer in the field, and the man behind the counter, and another for the man behind the moneychangers! ALL are equal - not only under the material law, but under the SPIRITUAL law. And HIS laws, HIS will will not come to naught!
And the laboring man, the daily laborer who lives by the sweat of the brow, shall have equal consideration before the LAW as those that DIRECT the lives of many! For ALL stand the same before the judgment [sic] bar of the Maker; and they that are oppressed, their cry goeth up to Him ever.
Though there may come those periods when there will be great stress, as brother rises against brother, as a group or sect or race rises against race - yet the leveling must come.
Q. As has been indicated…money is the root cause of general economic unbalance of our country. Will you give specifically reasons for this statement, and the approach that can be made toward correction of the money order, as operated today?
A. Fear on the part of those who control or direct the investing of capital into channels, which afford a greater outlet for their kinds of expression. As to how this may be corrected, - only by patience, persistence and a RETURN to the trust in God, and NOT in the power or the might of self! For those who are hungry care not as to the source of strength or power, until there is [a fulfillment of their needs]. Unless there is, then, a more universal oneness of purpose on the part of all, this will one day bring – here - in America - revolution! (Author's emphasis)
Cayce's source does not believe that all can do the same job as is evidenced by the next reading. Nor does he seem to believe in either “social welfare” or wealth without work.
...in that same principle that he who labors may eat, he who labors not, may not eat. These are principles; and, to be sure, capital labors, as well as he who worketh with the hands. [But let any labor not be for a detriment but for the unifying of all who would] be a greater channel of service.
Because there has been a long period of imbalance in domestic and world monetary affairs, the leveling spoken of in the readings is likely to be exceptionally painful. Capital markets will be unusually disturbed, perhaps for a much extended period24, because of the wrongs of the past.
For there must come, first, a stabilization of the monetary unit.
The individual reading the above may worry what practical response should be made. Such a response must be material and spiritual. When Cayce referred to mounting upsets of the monetary units of the land, he was referring to the increasing abandonment of the gold standard and the pyramiding of the dollar among central banks. In 1933 during the New Deal, individuals were forced to turn over their gold to the government at a legally mandated price. After 1975, Americans were once more allowed to hold gold. Gold is just emerging from a twenty-year bear market while the stock market is in the first phase of very long, very brutal bear market. Nearly all bubbles end below the point where they began, which means the stock market will again be valued either at its 1980 or its 1974 levels depending on when one considers the bull market to have begun. Gold coins and gold stocks are under valued. The following numbers showing the ratio of the Dow Industrials to gold illustrate how skewed this relationship has become:
In 1897 the ratio was 1. That is, the Industrials were priced the same as an ounce of gold.
In 1929, the ratio was 18. That is, gold could be divided into the Industrials 18 times – showing how overvalued the stock market had become.
By 1932, the ratio was 2, indicating that the stock market had plunged in value relative to gold.
In 1982, the ratio was again 1 indicating that gold was overvalued and that the Industrials were selling at a bargain.
In 2000 the ratio was 41.5, illustrating the bubble quality of stocks and the years of manipulating the price of gold downward.
In May of 2003, the ratio was 25 – a bargain still.
At the moment, there is a widespread debate going on between various knowledgeable people as to whether what lies ahead is a deflation or an inflation. The Federal Reserve is terrified of deflation because of the debt problem. They can't lower nominal rates below zero. If prices continue to fall and nominal rates are at zero, the Fed is powerless to stimulate the economy. The game of paying debt off with inflated money will be over.
If that should happen it does not mean that Americans will experience a feeling of deflation because the dollar may have a precipitous decline making many goods from overseas more expensive. Also, real interest rates will probably rise (and perhaps sharply). In order to make exports more attractive and employ restive unemployed workers, countries will devalue their currencies and that will cause international monetary, social and economic turmoil. A prologue to this was the Asian currency crisis in 1997, precipitated by the Chinese government's de facto devaluation in 1994. Investing in another fiat currency like the euro may provide only illusory benefits.
What lies ahead is complicated and the timing is unknowable, but since gold is undervalued relative to most asset classes, investing now should provide insurance in a time of currency instability without carrying much risk. Graphs of gold show accumulation on the part of large investors and there are indications that the gold move upward will be of several years duration.
Gold stocks should also do well, and some pay dividends. You should be aware that gold tends to rise in approximately the first half of the year, and stagnate or fall in the second half or so of the year - although of course there are exceptions to this. As to whether the government could again successfully seize gold, no one knows. However, it is equally unknown how citizens would react to such a dictate. Lastly, remember that although capital gains tax rates are favorable now, in times of economic upheaval, tax rates may become extraordinarily punitive.
Reading and becoming financially literate are the foundations of wealth stewardship. A beginning list of websites and books, which may prove helpful, follows this article.25 In the years ahead, the United States is going to suffer greatly, but poorer nations will suffer vastly more. It is important for all of us to remember that, and to remember also that our country has had a part in world monetary problems.
Does mankind consider he is indeed his brother's keeper? And this is the manner in which man may answer the question. There will be no want in bread for mankind when mankind eventually realizes he is indeed his brother's keeper. For the earth is the Lord's and the fullness thereof, and the bounty in one land is lent (author's emphasis) to man to give his brother. Who is his brother? Our Father – then each of every land, of every color, of every creed is brother of those who seek the Father, God. (Author's emphasis) This instill as you interpret. Be faithful to the trust given thee.
(5398, L-1, 6/13/44)
Q. Will it be possible to maintain a fair standard of living for our own people while helping to raise economic standards in other parts of the world?
A. Not only MUST it be possible, it MUST be DONE! if there will be ANY lasting peace!
As economic storm clouds gather, it is well to remember the gentle wisdom of reading 1467-18 given on April 10, 1944.
Don't think that there will not be trouble, but those who put their trust wholly in the Lord will not come up missing but will find conditions, circumstances, activities, someway and somehow much to be thankful for.
The 1943 Reading was part of the 3976 Readings. Among these were a series of sixteen psychic discourses on world affairs given between 1932 and 1944.
Gold coins of historic value or general numismatic value in a collection were still allowed.
Murray N. Rothbard, A History of Money and Banking in the United States (Auburn, Alabama: Ludwig von Mises Institute, 2002) 258.
During the 1920's and 1930's America's own monetary system was becoming increasingly destabilized. The Federal Reserve had acted disastrously to ease credit bringing on the bust cycle of the 1930's. Roosevelt abandoned the gold standard by April of 1933, leaving the nations of Europe to fend for themselves in currency blocs, in barter and in an economic warfare whose first salvo was fired by FDR in a message to the World Economic Conference in July 1933.
Smith, “American Foreign Relations, 1920-1942,” 252; Kolko, The Politics of War, 248-249 quoted in Rothbard 479.
While it could be argued that Hitler had already violated the Treaty of Versailles three times by ordering mandatory conscription in 1935, by retaking the Rhineland and by the invasion of Austria (the Anschluss), these were matters of concern for Europe principally, unless, of course, the U.S. wanted a role as a world power. Cayce appears to be against U.S. involvement in a war because of the motives behind such involvement.
The British were swept into accepting the dollar as the reserve currency at Bretton Woods, despite misgivings on the part of various directors of the Bank of England who correctly saw the end of the financial power of the British Empire.
For more information about the management of gold prices by governments and bullion banks go to the Gold Anti-Trust Action Committee website GATA was founded by gold producers who were losing heavily because of central bank efforts to depress the price of gold. They have the latest reports on any lawsuits involving anti-competitive practices
For an excellent article on the Iraq War/Euro/Dollar connection see W.R. Clark's The Real Reasons for the Upcoming War in Iraq-A Macroeconomic and Geostrategic Analysis of the Unspoken Truth.
Mark Gongloff, "U.S. Jobs Jumping Ship," CNN Money, May 2, 2003
Prepared Remarks of Ms. Thea Lee, Assistant Director for International Economics, Public Policy, AFL-CIO before the House Committee on Small Business, May 14, 2003
Jonathan Weisman, “Cash-Outs Let Homeowners Share the Wealth,” The Washington Post, June 8, 2003, Sunday ed.: A1.
“Heading for a brick wall,” The Economist, May 31st 2003: 15.
"Bilderbergers" is a name given to a regular meeting of trans-Atlantic elites and their junior partners. The website, www.bilderberg.org, is an informative, although not scholarly look at these hidden individuals and should be looked at by all who want a greater understanding of the subject.
For a wide ranging look at their pay and facts go to the Chief Executive Officer (CEO) website
Camille T. Taiara, "Winners, Losers," San Francisco Bay Guardian, July 3, 2002.
It is the opinion of this writer that the fall of the Soviet Union has had two largely ignored consequences. The first is the already mentioned notion that nations no longer need the protection of the United States against a Soviet style system and therefore, they will increasingly challenge the shaky omnipotence of the dollar. The second consequence is that, with the Soviet system gone, elites have been free to let wage disparities skyrocket without fear of any meaningful challenge by workers.
After the South Seas Company bubble, it took England more than sixty years to recover.
The following books and websites may be helpful:
Any book by Murray Rothbard, but A History of Money and Banking in the United States is especially informative.
Times of Crisis, ARE Press available from the library at the ARE.
The Politics of Hope by Linda Gerber Quest, ARE Press available from the library at the ARE.
Conquer the Crash by Robert R. Prechter, Jr.
Dow Theory Letters, a daily web report by famed analyst Richard Russell, who called the beginning of the bear market in September of 1999 and the bottom of the bear market in 1974. Considered by the top investment letter rating service gives Dow Theory Letters first place in predictive accuracy. Extremely educational.
KITCO - a website devoted to gold prices, lease rates, bullion, coins and currencies.
Gold Eagle - another website devoted to gold; has interesting articles.
Bloomberg.com - sometimes the columnists have interesting insights
Ludwig von Mises Institute; the web site for the Austrian school of economics in the United States. Books and free information are readily available.
The Privateer Gold Pages has a series of historical articles on seven pages titled "Central Bankers Against Gold - The Demonitisation Of Gold 1933-1980". The article pages are as follows:
Weiss Ratings, Inc. has honest ratings on the liquidity and the safety of your bank, brokerage house, insurance company etc. for a fee. Names of highly-rated banks in any locale are also available for a fee.