Category Archives: Economic interventionism
Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy. Economic intervention can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting equality, managing the money supply and interest rates, increasing profits, or addressing market failures. The term economic intervention assumes the state and economy are inherently separate from each other, and therefore applies to capitalist market or mixed economies where government action would make an “intervention” (although this does not apply to state-owned enterprises that operate in the market).
April 24, 2013
By Paul Craig Roberts
For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.
When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than eight months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the United States dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1T annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver?
The Federal Reserve realized that its massive purchase of bonds in order to keep their prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Fed was concerned that large holders of U.S. dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in U.S. bond and stock prices.
Intelligent people could see that the U.S. government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from off-shoring millions of U.S. middle-class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for gold and silver.
Central banks are slower to act. Saudi Arabia and the oil emirates are dependent on U.S. protection and do not want to anger their protector. Japan is a puppet state that is careful in its relationship with its master. China wanted to hold on to the American consumer market for as long as that market existed. It was individuals who began the exit from the U.S. dollar.
When gold topped $1,900, Washington put out the story that gold was a bubble. The presstitute media fell in line with Washington’s propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011.
The Federal Reserve used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Fed was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3 drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27.
The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.
For now it seems that the Fed has succeeded in creating wariness among Americans about the virtues of gold and silver, and thus it has extended the time that it can print money to keep the house of cards standing. This time could be short or it could last a couple of years.
For the Russians and Chinese, whose central banks have more dollars than they want, and for the 1.3B Indians in India, the low dollar price for gold that the Federal Reserve has engineered is an opportunity. They see the opportunity that the Fed has given them to purchase gold at $350-$400 an ounce less than two years ago as a gift.
The Fed’s attack on bullion is an act of desperation that, when widely recognized, will doom its policy.
The Fed is creating 1T new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices and a rising interest rate and collapsing bond, stock and real estate markets.
The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for it to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.
When the Fed can no longer print due to dollar decline which printing would make worse, U.S. bank deposits and pensions could be grabbed in order to finance the federal budget deficit for a couple of more years. Anything to stave off the final catastrophe.
By its obvious and concerted attack on gold and silver, the U.S. government could not give any clearer warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt.
How the Fed Tanked Gold & Silver
By Paul Craig Roberts
I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the U.S. dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.
A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big to fail” balance sheets. The financial system would be in turmoil and panic would reign.
Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price, trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.
According to bullion trader and whistle-blower Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can significantly drive down the market price.
A naked short is when the short seller does not have or borrow the item that he shorts, but sells shorts regardless. In the paper gold market, the participants are betting on gold prices and are content with the monetary payment. Therefore, generally, as participants are not interested in taking delivery of the gold, naked shorts do not need to be covered with the physical metal. In other words, with naked shorts, no physical metal is actually sold.
Consider the 500 tons of paper gold sold on April 12. At the beginning gold price that day of about $1,550, that 500 tons comes to $24.8B. Who has that kind of money?
What happens when 500 tons of gold sales are dumped on the market at one time or on one day? It drives the price down. Investors who want to get out of large positions would spread sales out over time so as not to lower their sales proceeds. The sale took gold down by about $73 per ounce. That means the seller or sellers lost up to $73 dollars 16 million times, or $1.2B. [Over the next two days it dropped $200 per ounce. That equals a $3.2B fall.—Ed.]
Who can afford to lose that kind of money? Only a central bank that can print it.
Paul Craig Roberts is a former assistant undersecretary of the U.S. Treasury and former associate editor of The Wall Street Journal. He is the author of many books including The Tyranny of Good Intentions, Alienation and the Soviet Economy, How the Economy Was Lost and others.
- The Assault On Gold – Paul Craig Roberts (paulcraigroberts.org)
Freedom was illegal in the Colonies in 1776 and Freedom is still illegal in America today. Those that signed the Declaration of Independence knew that a tyrannical government would never relinquish its power without resistance.
Governments are supposed to protect the rights of the people, but if they are not held in check, they will begin to abuse the people that they were created to protect. Rather than protecting the people, governments tend to protect the ruling class and enslave everyone else. This scheme will work as long as the people cling to the illusion that they are free.
Goethe, a well known German philosopher, once stated “None are more hopelessly enslaved than those who falsely believe they are free.”.
It has been the job of the media and government schools to indoctrinate the people into believing that they are free. Slaves are much more productive and easy to control than individuals that know that the financial elite are calling the shots.
Exposed: Harry Reid should not be allowed to manipulate Senate rules to further stifle Senators’ freedoms
On Tuesday, Senate Majority Leader Harry Reid (D-Nev.) accidentally drew back the curtain on fabricated tales of Republican obstructionism and revealed the dark secret of Democrats who have been promoting “gridlock” in the U.S. Senate for nearly a full four years. It happened so quickly anyone who blinked missed it.
Upon filing for Senate consideration of the Transaction Account Guarantee (TAG) Act, Sen. Reid immediately “filled the tree” by offering the maximum amount of amendments permitted under the rules and filed cloture on the bill before any other Senator could speak, offer debate or filibuster the bill.
Senator Reid essentially asked the Senate to consider a bill then immediately asked to end consideration on that bill, all within the space of a mere two minutes. Some have speculated this parliamentary slight-of-hand may have made history with its sheer speed.
While proclaiming the need for filibuster “reform” and complaining of its over use by the minority, Senator Reid continues to apply these tactics, limiting debate and preventing Senators of both parties from submitting their own ideas through amendments. His actions essentially produce a “majority filibuster” which prevents the voices of citizens throughout every one of the 50 states from being heard through their Senators.
Yet, even while setting a new speed record, Sen. Reid’s tyrannical control of the calendar is nothing new. Reid has spent the last four years turning such bold obstruction into regular operating procedure for the Senate – with Tuesday marking the sixth-ninth time Sen. Reid has launched a majority filibuster.
These actions are atrocious in their violation of the purpose of the Senate in our federal government and their steamrolling of two key rights of all Senators.
On the official Senate website, the Senate Historian notes: “All senators have two traditional freedoms that, so far as is known, no other legislators worldwide possess. These two freedoms are the right to unlimited debate and an unlimited opportunity to offer amendments, relevant or not, to legislation under consideration.”
Since Democrat Senate Majority Leader Harry Reid has successfully manipulated standing Senate rules to severely stifle (and in many cases, entirely eliminate) the second of these unparalleled freedoms by routinely “filling the amendment tree,” only one of those freedoms remains. With Reid’s iron-fisted control of the process — frequently preventing even Senators from his own political party from offering their own amendments — it is no wonder Senators of all stripes question the wisdom of removing their remaining freedom. In fact, it is a wonder Majority Leader Reid does not face a mutiny from within his own party.
But the story gets much, much worse. Because Reid cannot capture enough votes (despite a Democratic majority of 55 Senators) to institute his radical rules change under the existing rules (which requires 60 votes), he has proposed a method that ignores the rules entirely. Instead, Reid’s grand plan is to pretend the “Standing Rules of The Senate” simply do not exist during the first day of a new Congress – and only during the first day.
This runs into a major problem through a simple reading of Rule V, Section 2, which itself clearly states that (emphasis added): “The rules of the Senate shall continue from one Congress to the next Congress unless they are changed as provided in these rules.” Furthermore, this rule was initially adopted, at the will of the Senate itself, in recognition of the Senate’s unique place in our legislature.
For Majority Leader Harry Reid to completely ignore the rules in order to re-write the rules (something he promised he would never do) in the name of political expediency would violate matchless freedoms of every U.S. Senator while also violating the Constitution itself.
Ultimately, this boils down to three observations. One, the pervasiveness of majority filibuster and obstructionism of their own agenda has helped slow action in the Senate. Two, this atrocious behavior by the Senate Majority Leader snatches away exceptionally unique freedoms and rights of Senators from both sides of the aisle, and all deprived Senators should demand reform. And three, Majority Leader Reid’s proposal, if carried through, would irreparably depart from the rules and Constitutional provisions guiding our “most deliberative” legislative body.
This is the essence of the current debate between totalitarian forms of government and conservatives: whether existing rules can be ignored for political or popular expediency, or whether the rules must be followed in order to protect the unique freedoms and force compromise which truly moves our nation forward.
Regardless of what reforms are needed in the Senate, the rules are the rules – and those rules must be followed in order to bring about credible, positive and lasting improvement.