Steve Quayle News Alerts

February 11, 2004

After every primary bull market there comes a primary bear market. The greatest primary bull market in history ended during 1999-2000. What we're seeing now is an attempt by the central banks to hold off the forces and the effects of a primary bear market. Duncan gives us the words and the numbers of what's happening to ward off the bear. And what's happening is almost unbelievable.

The central banks of the US and Japan are attempting to hold off the bear market by printing "wealth." And as I've said all along, no power on earth can "manufacture" true wealth out of "thin air." Wealth is created by the brains, the brawn, the risk-taking and the creativity of man. "No," says the central banks, "We control money and when we say the dollar and the euro and the Canadian Dollar and the Australian Dollar and the British Pound are money, that's it -- believe it."

Of course, sane men know that all a government can do is make a pronouncement about currency. Governments don't create wealth. A government can simply say, "Here's our paper. We declare that this is "legal tender" for the payment of all debts.

But is legal tender manufactured in endless quantities by a central bank actually money? Of course not. The very concept of a government "printing non-intrinsic money" is both absurd and immoral.

And Alan Greenspan, who was a staunch defender of gold during the '60s, is today one of the participants in the great money scam. So instead of denouncing fiat money as a fraud, Greenspan has become a chief participant in the paper-money fraud.

On top of everything else, we now witness a phenomenon never seen before in world history. We see half of the population of the world now entering the global economy as new members. And instead of being a force for consumption, the populations of China, India and Asia have become forces for cheap production, or I should say cheap over-production.

Ironically, this new force of over-production has also been a force for world deflation in prices. This the entrance of Asia on the world economic scene has accentuated the deflationary forces that normally accompany a bear market.

In the end, the power of the primary bear market will prevail. When this happens, I believe we'll see total disillusionment and disbelief in the value of paper money. This could set off a panic to move out of fiat money and into real, intrinsic money -- gold.

But the situation will have to be solved. How it will be solved I honestly don't know. It may be that in order to revive faith in paper money -- paper money will again have to be backed by gold. At what price gold I don't know -- perhaps gold at $1,000, $2,000 or more an ounce. Will those who hold actual gold be allowed to keep their gold? How will it all be resolved? I'm sorry to say that I don't know, not does anyone else at this point.

The Financial Times article below simply points to the problem and to the incredible efforts seen today to hold off the forces of the bear.

Ultimately, two concepts will come to the fore --

(1) Once a bull market tops out and a bear market begins, the bear will have its way. The more desperate the forces to hold back the bear, the more excesses will be built into the world economy. We're seeing that now.

(2) -- Paper currencies manufactured by central banks may be "legal tender" but they are not true money, this despite decades of government propaganda all dedicated to inculcate in people's minds that paper currency is real money. The coming trend will be a distrust of paper money.

It's as simple as that -- creating money out of thin air with no work or sweat or risk involved is basically immoral -- it's a fraud. In the end, fraudulent currency used as true money must collapse and become worthless. In the end, the only recourse the investor has to protect him from this monetary fraud is real money -- gold.

http://www.321gold.com/editorials/russell/russell021204.html