Lost Control & Economic Mythology

By: Jim Willie CB,
GoldenJackass.com

-- Posted Friday, 7 August 2009

A great question to ask is: what was the first important chapter written in nonsensical Economic Mythology? It gave powerful intellectual protection and coverage by economists, and resulted in widespread acceptance. The answer is clearly the break in the Bretton Woods Accord, when in 1971 Nixon broke the gold standard and permitted the USDollar to float on a cloud of arrogance and on a wave of liquidity that is best described as debt mixed with counterfeit. Little known then, but better known now, is the role of the USMilitary in propping up the value and acceptance of the USDollar. The nation and world were told that greater flexibility would result in order to build economies, deal with cyclical problems, and contend with the needs of global population growth. The momentum of destruction is powerful, damage accelerating, and platforms disintegrating. The key to mythology is to recognize it as nonsense spouted by the high priest economists whose handiwork of destruction must be hidden from view, only to see yet another chapter unfold that captures the attention of the innocent and ignorant. The priesthood is left in charge of the intellectual dogma behind mythology, not much different from communist mumbo jumbo about power to the proletariat, complete with a supporting cast of a Politburo. The US Politburo is hidden from view, a pack of misfit incompetents and established failed figures continuing to spout policy and to manage Fannie Mae, AIG, and now General Motors. The US Federal Reserve is the keeper of the Holy Grail, now manifested in criminal confiscation and disbursement of USCongressional funds, and a secretive balance sheet. Watch them defy the US Supreme Court. Their dogma is mostly vapor with little substance, sufficient to keep the population in participation or at bay, but at least confused.

THE USDOLLAR CRISIS IN FIRST STAGE

The latest nationally advertised but unrecognized mythology is very convenient, since a USDollar crisis has begun. Political and intellectual cover is needed. The USEconomy would benefit from a lower USDollar, due to a quantum jump in export trade. A lower US$ exchange rate would indeed benefit the USEconomy in general, and US corporations in particular, provided the nation had not shipped a significant portion of its industrial base overseas. This aint the 1970 decade. It did so to capture the low cost of foreign labor, without thought given to the lost capital, lost wages, growing debt, and lost sovereignty from foreign creditor dominance. The US pursued financial dominance, and finally failed as Mother Nature wielded the backside of the Inflation Sword. The Chinese now dictate many key policies. They probably ordered President Obama not to renew Bernanke as USFed Chairman. After his appearance three years ago, lecturing the Chinese elite in Beijing, he was told never to return, EVER, deemed persona non-grata. Lost sovereignty has no good side!

The Chinese are the spearhead behind pushing the USDollar off the primal global throne. A lower USDollar will not accomplish much on export trade, given the lost critical mass of export businesses. A lower US$ will, however, spawn a currency crisis, a bank crisis, enough to take the global revolt against the US$ to new levels among creditor nations. The lower US$ will also force a quantum leap in the entire cost structure for the USEconomy, a factor ignored almost totally. The crude oil price has been giving a solid clue on this effect, but it is largely ignored. Somehow, goofy USGovt policy to limit crude oil contract positions is a quick fix ordered by Goldman Sachs. It will not work. In fact, good old Goldman Sachs changed their Euro recommended long position immediately before the Chinese delegation met in the White House last week. The quick rise in the USDollar was met by a fierce decline at the end of the week, as the Chinese were major sellers. GSax gave them a better price.



The powerful reversal pattern evident since last October has finally begun to break down. It is in the stage #1, confirmed by numerous sources who note growing panic, growing dismantlement of support pillars, and growing expectation of a major currency event. The cyclicals are all negative and weak. The crossover of the 20-week moving average below the more stable 50-week MA is a strong bearish signal. The momentous pile-on is to follow. The breakdown in progress is sufficient to take the gold price over the elusive 1000 level once and for all. Some veteran sources report that the gold price breakout move might be extraordinarily powerful, far stronger than even the gold community expects. The Chinese are defending the gold price, if truth be told. They have resources, in the form of over $2000 billion in savings (a war chest). They have motive, in the form of wanting to install the Yuan as a global reserve currency. And they are very angry, in particular at bank bond fraud, but also at debt monetization. They abhor a widely understood USGovt policy of trying to inflate the debts away at foreign creditor expense. This is seen as betrayal. Decisions among creditors have been made, and a path has begun to deal with the problem.

FIRST MYTHOLOGY EXPOSURE

But before entering the current myth chapter, let’s do a quick review. In September 2004, while just a whippersnapper, the Jackass penned an article entitled “Economic Mythologyâ€