How Quickly We Forget or We're Forever Blowing Bubbles

Someone, Napoleon, George Santayana, who really said it doesn't matter, observed that those who do not learn from history are condemned to repeat it. Of course, the originator of that quote was himself speaking in an age before mass electronic media and definitiely before those mass electronic media were completely made subservient to corporate con men and pirates.

Just over one year ago the worldwide economy collapsed because a bunch of con men and pirates convinced people who were supposed to know better that securities based on dodgy mortgages were a good thing because everyone, just everyone knew for an absolute fact that home prices would never ever fall and that every person conned into signing a mortgage contract built on incomes just as falsified and inflated as those home prices would make every single payment. Mortgage backed derivitives were a scam just as surely as Bernard Madoff's investment firm was a scam.

As I write this the spot price of gold has reached $1,145.90 and has risen as high as $1,500.00 per ounce of 24kt gold bullion. Just a decade ago the price of gold was at $284.00 per ounce.

Ask yourself a few questions, please.

In the last decade have we stopped mining gold?

In the last decade has three-quarters of  the world's gold supply disappeared?

Is there anything to indicate that there is less gold today than there was a decade ago?

The answer to all these questions is a definitive and resounding, NO!

So why is gold over 400% more valuable in late November, 2009 than it was in late November, 1999?

The answer to that question is, gold is not more valuable now than a decade ago. But what it does signial is that the con is on again. Or as the late Fred Rogers would have said, "That's a big word but can you say it with me? Bubble."

I know that this will be painful for those who have trouble remembering that they were conned just a year ago or those who see the world through the not so Funhouse mirrors of Fox News but we have actually been here before. Let me whisk you back some thirty years and more to the last gold bubble. It was a bubble blown by a silver pipe.

Back in the early 1970s as our fourth truly criminal president*, Richard Nixon, was finally being driven from the office he never deserved to hold in the first place, the Hunt Brothers of Texas, Nelson Bunker and William Herbert, commenced a scheme to corner the world silver market. With the support of some similarly criminal Arab plutocrats, the Hunts drove the price of silver from $1.95 per ounce up to a high of $54.00. Their scheme was virtually identical to that carried out by Jay Gould and Jim Fiske in cornering the gold market a little more than century before. The Nixon Administration's removal of the cap on the price of gold was the immediate spur for the Hunt's actions.

The scheme foundered in March, 1980 when the price of silver dropped by more than 50% in one day and caused a 16% drop in the Dow Jones Stock Market average. The Hunts and their Middle Eastern cronies made a pile of money to add to the piles they already had and, in the meantime, lengthened the economic recession that began under Nixon.

As a corollary to the silver fever that developed and even persisted after the collapse of the Hunts' silver bubble, gold skyrocketed. In mid 1980 it hit about $600.00 per ounce before falling back to less than a third of that high. A lot of con men and pirates profited while a lot of other folks were left hiding $600.00 Krugerrands that were subsequently worth only about $200.00 in safe deposit boxes. The economy continued in the doldrums through 1983.

We hear the same drumbeat today that we heard back in 1980. The world economy is in the crapper. The only safe hedge against inflation is something of intrinsic value like gold. Gold can only go higher. Fear spread by the con men and pirates pulls money out of the economy and into the pockets of the same con men and pirates who were selling you mortgage backed derivitives just over a year ago. The con men and pirates profit from the fear they spread and in a few months someone holding a fist full of $1,200.00 American Gold Eagles, Canadian Maple Leafs or Krugerrands will be out between $600 to $800.00 per coin and the con men will be that much richer.

Can you say, "Bubble?"

We are not simply condemned to repeat the history from which we don't learn. Rather we are condemned to repeat the history that the con men and pirates convince us to unlearn. They appeal to our fear, our greed, our ignorance and our bigotry for their own profit then distract us with tabloid crap until they can run the next scam. Caveat emptor is their battle cry and excuse. Those stupid people whose incomes mortgage brokers inflated outrageously should have known better. Blame the victim of the scam, not the criminal who perpetrated it.

Just remember to sell those Krugerrands bought in 1980 now and stay away from the gold scammers of 2009.

*(Note: I count Rutherford B. Hayes, Warren G. Harding and Calvin Cooledge as first through 3rd of our 7 truly criminal presidents. Herbert Hoover was an ideologue who founded an institution that has become a criminal enterprise. Ronald Reagan and the Bushes, Poppy and Dubya round out the 7.)