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Welcome to USAGOLD's "Gilded Opinion" pages. We invite you to browse our index of outstanding gold-based commentary.
A Very Slippery Slope!
by Professor von Braun
April 22nd, 2006
What backs the US dollar? Other then apparent military might and
the fact that it is the recognized 'reserve' currency of the world's
banking system, nothing really. It is after all a promise to pay
a promise to pay a promise.
Historically unprovoked attacks, by a country on another country, usually have implied that the country being attacked has something that the attacking country wants. Historically this 'something' was a commodity -- gold and silver being the favorite, oil being another, water and even salt being another. Rarely was a country attacked for their art, women, fashion, food recipes, or tourist attractions.
So what's going on in Iraq? Three years and one month after the invasion we now have oil trading at $75 per barrel (was around $30.00), gold at $632.50 spot, (was at $335.00) and silver at $13.00, (was at $4.40). Rather nice increases for a three year period!
The rationale presented to Congress by Paul Wolfowitz, which was that the 'cost' of this invasion would be offset by oil flowing out of Iraq, obviously was wrong. What's the reward for getting it wrong? You get to run the World Bank of course!
Three years later we see that from the political aspect President Bush's popularity is at an all-time low, that the ongoing disaster that is now Iraq is not producing the promised goods, i.e. cheap oil, as it was supposed to and we have the daily reporting coming to us via the media from the Middle East that sort of suggests this area is about to erupt into a regional war.
Now it is useful to remember that when it comes to ranking oil reserves by country Iran is number 3 and Iraq number 4. Canada is number 2 and Saudi Arabia number 1. Obviously there is no need to attack Saudi Arabia and Canada is unlikely to become Islamic overnight. Depending on whose figures one looks at a combined Iran and Iraq hold an estimated 215 billion barrels of oil reserves, a number second to only Saudi Arabia.
Politics is about remaining in power and popularity polls are suggesting that GWB and his cronies are not winning the hearts and minds of the American public at present, on the contrary; as mentioned according to the latest polls their popularity is at all time lows.
The stated reasons by this administration as to why they invaded Iraq in the first place are so 'wishy washy' that they are now being seen for what they really are which is a pretext. But a pretext for what? Obviously cheaper oil was on the minds of the architects of this foray into a hotbed of religious rivalry otherwise Wolfowitz would not have made the remarks he did to Congress re the cost of the war being offset by the increased flow of oil from Iraq.
The implication that they were after the oil and the result three years later of oil now at $75 per barrel suggests that Plan 'A', if there was indeed a plan 'A', has not worked.
So what's plan 'B'? Well, I suspect that Plan 'B' is now taking shape but it most likely will require the support of the American public and a 33% popularity (even less for the quick-fingered VP, Mr. Dick 'point and pull' Cheney) won't do it. Rearranging the White House staff won't do it either, and even the potential for Karl Rove's departure from the desk of devious policy making won't clear the air.
What this administration really needs is oil at $100 per barrel, or even more, which supports the Wolfowitz rationale for going into Iraq in the first place. Even though as reported by the mainstream press, things appear not to be going according to plan 'A' in Iraq, it is possible that they are going more or less, according to Plan 'B', which was the real plan all along.
The difference between then, March 20, 2003 and today, April 20, 2006 is that the US military is on the ground in Iraq, building military bases as fast as they can. Apart from the giant embassy under construction in Baghdad (the largest ever built anywhere by the US,) as many as 14 military bases of a permanent ilk are either planned or currently under construction. Now what is the country next to Iraq? Why Iran of course and it appears to be headed by someone who neither likes Israel, the US's number one ally in the region, nor particularly cares for the US. Recent statements by this particular gentleman cover a wide range of anti-US, anti-Israel and anti-lower oil prices along with a strong military rhetoric that consists of a 'we can whip your backside' theme.
Then there is all the 'hoo-hah' about the nuclear issue, with Iran's leaders using the same approach -- a 'to hell with you, we can do what ever we like' approach. Now as far as Plan 'B' is concerned this activity by Iran's leaders could not be better orchestrated, even if Karl Rove himself was writing the Iranian president's script, while rising oil prices are now starting to hurt the US consumer and will continue to do so.
How do you turn an unpopular war into a political victory? Why you do what politicians have done for the last hundred years, you offer a solution to a problem, one that affects the majority of the population where it hurts, in the pocket. After all isn't that what Social Security and Medicare are all about?
Blame rising all prices on Iran, who are of course now saying that oil should be at least a $100 per barrel, throw in the nuclear threat -- the mushroom cloud in your backyard, one used previously by Condi Rice pre-2003 re Iraq, coupled with the threat by Iran to remove Israel from the map, as well as Iran's ongoing interference in Iraqi politics, along with substantial support for Israel's enemies and that provides far more 'reasons' as to why Iran urgently needs a new 'democracy'.
What does this do to gold and silver prices? Well they, along with the other metals should keep going up and up. In a recent article in the Financial Times by Gareth Smyth in Tehran demand in Iran for gold coins has increased dramatically. Fancy that!
Businessmen say the rush to gold reflects both growing tension over Iran's atomic activities and the destabilizing economic policies of fundamentalist president Mahmoud Ahnmadi-Nejad. "The direction reverses the years of (president Mohammed) Khatami and increases the role of the state, especially in allocating resources," says one. "It's more like communism than Islam and makes you think some of them want a siege economy ready for war."
Now if the Iranians are buying physical metal with apparently good cause, then what about the rest of the inhabitants of the Gulf region? With massive increases in oil revenues from rising prices (150% since March of 03) coupled with increased instability, who would not be buying gold and gold coins?
And as the readers of this website well know the gold market has suffered an ongoing shortage of supply for several years, one that was kept restrained (read under wraps) by the sale of borrowed gold, lent by Central Banks to bullion bankers and delivered into the physical market. Commentators who have been referring to a short covering squeeze of massive proportions may be far closer to the reality of what's happening to gold prices at present, with the added observation that current price levels do not as yet reflect this squeeze. In other words the referred to short covering squeeze has not started yet.
The Prof can be contacted by email at profvonb2@aol.com
Copyright by Professor von Braun. All Rights Reserved. Reprinted at USAGOLD by permission.
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