Venezuelan President Hugo Chavez ordered his government to repatriate $11 billion in gold held in banks abroad to safeguard the country from the economic crisis and said he'll nationalize the local gold industry. Venezuela has about 211 tons of its 365 tons of gold reserves held abroad at institutions including the Bank of England, JPMorgan Chase & Co. (JPM), Barclays Plc (BARC), Standard Chartered Plc (STAN) and the Bank of Nova Scotia (BNS), according to a government document. … Chavez, who has said he wants to eliminate the "dictatorship" of the U.S. dollar, has called on Venezuela's central bank to diversify its $28.7 billion in reserves away from U.S. institutions. – Bloomberg
Dominant Social Theme: The government knows best how to manage the money supply, Chavez will lead the way.
Free-Market Analysis: Whoa! Hold the US dollar horses, folks… the global reserve currency game just got a whole lot more interesting. There is, in our humble opinion, a whole lot more to this story than just the repatriation of gold being held at foreign central and commercial banks. It is perhaps the biggest story to unfold in the currency markets in many years.
One thing everyone with an inkling of monetary knowledge is familiar with is that central banks' monopoly over the issuance of fiat currency is a destructive process of wealth redistribution – ultimately enslaving nations under a perpetual sea of debt. International money power ends up controlling the targeted nations' media, government (including the courts) and, via mercantilist corporate activities, its natural resources and productive capacity.
Now, the global currency that has acted as the world's de facto reserve currency is the US dollar. But that is changing. The dollar is dying. In fact, we think it is already dead… we just haven't had the funeral yet. But wait… what Chavez has just done is fire a major shot over the bow of the Federal Reserve and we think this could possibly be the death blow to the US dollar. Here's why…
For astute observers of recent history, we have seen what happens when people like Saddam Hussein or Libya's Muammar Gaddafi threaten to create gold backed currencies or international trade (in particular, oil) that could be settled not in US dollars – but gold. These people have very short life expectancies, to say the least.
The Holy Grail of international central banking and its major building blocks, of which the US dollar is most certainly at the focal point, will be protected at all costs. Bloodshed and human lives are meaningless in the game of global power consolidation, which is only possible as long as the money masters controlling the world's pillars of power are able to create money out of nothing and grant themselves the "legal" license to do that.
Ultimately the plan is to merge, out of the global financial crises, the various major currency building blocks, such as the US dollar and the euro, into one global currency. This merged currency will likely be issued by the Bank for International Settlements and managed by the International Monetary Fund and the World Bank – all non-elected international edifices that stand under the umbrella of the United Nations.
Now, as we have seen in the past, it is usually a death sentence for anyone who departs company with the central bankers and their global US dollar based Ponzi scheme. NATO and the US military-industrial complex are quick to act on CIA reports or other such propaganda that the ever-willing mainstream media enthusiastically trumpet to get the mass voters emotionally charged around some side-car fabricated issue that justifies immediate force be taken. Of course, the real issue of fiat money is not to be discussed at all, for that could lead to people questioning the legitimacy of the Federal Reserve System, which cannot stand up to an honest evaluation.
Today the Internet Reformation is quickly advancing the public's understanding of what money is and what it is not – at least historically speaking. People are starting to see that the money stuff in their wallets is nothing more than a promise to pay – a debt. But a debt to whom? And how do the money lenders collect on the debts? Where did they get the money from in the first place to "lend" to the citizens?
The entire system is a rigged game of deceit whereby the money magicians at the Federal Reserve have been granted license by the US government to "create money out of thin air." The US Constitution has been totally ignored and the Anglosphere power elite that took control of the US government following the American Civil War have been printing themselves into control over US-based assets and enslaving its population in debt and an eternal "time tax" ever since.
Granted, it didn't happen overnight. It took time to subvert the Constitution and install a central bank. The public needed to be in fear of the private market. JP Morgan, acting on behalf of the Rothschilds and others, served their purposes well. G. Edward Griffin has pointed out in his monumental analysis of the true origins of the Federal Reserve Act that it was a shameless deceit intended to pass the key to siphoning off America's growth and productivity back to the Anglosphere elite about whom the Founding Fathers issued many warnings, and against which the Constitution and the Bill of Rights were supposed to protect.
Now here we are, some 100 years into the Federal Reserve's existence and accompanying money manipulation, and money power is facing its greatest challenge from an information medium originally intended to grant greater visibility of "subjects'" activities. Instead, the medium is providing the very impetus that is undoubtedly creating major problems for the short-term implementation of a global super fiat-currency.
Although we agree that the crises sweeping the world's money marts today do play into the "out of chaos… order" scenario, what doesn't play into that are leaders of nations going their own direction – especially if the road they're taking is built on a currency that has any relationship to a gold backing.
As stated above, NATO and the US military-industrial complex will handle the dirty work of eliminating such threats, should they arise. And here we have the little dictator from Venezuela coming along and demanding the repatriation of his country's gold from the Bank of England at that. This is really not going to go over very well with the powers that be, to say the least.
For it is not simply the fact that Chavez has decided to "bring home the gold" that is of interest here, but the question of why. And herein lies the "golden answer" …
Several months ago, one of our elves, along with an esteemed free-market economist, drafted a proposal that laid out a detailed process by which a nation rich in gold and exports (in this case, oil) could create a dual currency platform – one of which was based on gold. Now, it is important to note that this is not the ideal situation, though it is a step in the right direction, for a gold-backed currency to evolve, should it prove the winner in a free-market currency competition as we believe it would. Ultimately, we believe governments should not be involved in the issuance of money at all.
Having said that, the proposed plan was circulated to government officials within countries that have in place the following dynamics: domestic gold production, a viable export market, and a government that isn't under the control of Western money power. Further, the leaders of the country must be willing to face an international backlash of immense magnitude in order to embark on executing such a plan. In the case of Chavez he certainly doesn't seem to care too much what the US government has to say.
Now, back to the currency war implication running beneath the surface of today's announcement. There is another consideration. How long will it be before the other socialist-leaning governments in South America decide to follow Chavez's lead? We think Ecuador, Bolivia and Peru are all very strong candidates – especially now that the US dollar is devaluing at such a rapid pace. All it takes for this Ponzi scheme to unravel is a blowback of demand and someone to trigger that event on the international markets. … Enter Chavez.
The international oil-game has long been a significant piece to maintaining dollar dominance. Having nations go their own way and seek alternative means to settling that trade would be devastating to the dollar. Once again, neither Iraq nor Libya will see that happen – at least not now. Will Chavez get away with this plan? Or will he face a newfound Western attack unleashed, already in place to unfold when needed?
Will Colombia be recruited to frontline the operation? After all, that country is ripe to launch a gold backing for its currency, but cannot. It receives simply too much monetary aid from the US taxpayers to fight its "war on drugs." Alternatively, perhaps this whole Colombian war on drugs has beem more about the US maintaining a power base from which to bring force, if necessary, within the region.
The other component to the demise of the dollar is a reflection of the awakening of Americans themselves. Regular moms and pops are listening to the likes of Ron Paul – despite mainstream media's attempts to marginalize (and even make invisible) his platform – and these newly attentive Americans are transferring out of the dollar. The Internet, as we have long proclaimed, is a transformative process that brings truth and understanding to the living rooms of all those who wish to understand how the current system works and why it is so parasitically destructive.
People are tired of the bankers' bailouts. They are disgusted by the endless reams of lies that spew forth from their elected officials, all of whom are bought and paid for by international money power. People are tired of the barrage of mainstream propaganda attacking their every sense.
Editor's note: Chavez also announced that he was nationalizing the country's mining industry, clearly not a plan we endorse. It makes no sense for many reasons. Since that is not the principal thrust of this article we will leave opining on that issue to others, except to say this: If Chavez wants to maintain the gold in order to underpin Venezuela's currency then so be it. He would be much wiser, however, to allow private market competition to develop the potential of Venezuela's gold industry – a highly speculative and costly endeavor to say the least – and to retain first right of refusal to buy any gold produced within Venezuela by foreign interests. Of course, the price paid would need to be at international market prices, but so what? Venezuela has tremendous oil exports that can continue to be priced in dollars and the international mining companies could swap their gold production for the paper dollars. The international miners all practice this ridiculous policy anyway, rather than keeping the gold to underpin the value of their shares. However, Chavez has decided to simply nationalize the gold industry, a move that will surely not bring about a robust gold producing scenario for Venezuela.
While we certainly do not endorse Chavez's style of government, today's announcement by Chavez is, in our opinion, important. It appears to be a step towards the implementation of a gold-backed currency in Venezuela. Will it operate as a domestic currency inside Venezuela only – one in which citizens may hold wealth while their fiat-currency continues to be spent abroad? Too early to tell. But something will likely spring forth over the coming months that threatens to further empower the destructive force of Hurricane Reality and the civil chaos that will likely erupt in its wake. Ironically, it is the dictator's own words that sound like the tolling bell of an international currency war, "…he wants to eliminate the 'dictatorship' of the U.S. dollar."
At the time of publishing this report, gold is again hitting all-time highs – trading above US$1825 per ounce.