china confidential
Sunday, November 30, 2008
Will Governments Confiscate Gold?
Replying to a reader's inquiry, The Motley Fool blogger Chris Martenson outlines the improbable conditions under which he will become concerned that gold forfeiture and seizure rules might be in the offing:1. Gold climbs to some meaningful dollar value that both represents a threat to the perceived value of the dollar and represents a meaningful target for seizure. For me that number begins around $5,000/ounce and becomes critical around $10,000/ounce.
2. Some foreign country with a resource we want demands payment in gold. For example, if some oil-producing nation suddenly demands gold in exchange for oil, I would place a very high probability that gold will be seized under the umbrella of "national security."
3. A major bank, playing the short side of the paper gold trade, gets caught, is unable to deliver, and faces insolvency as a result. Here I might also expect the rules to suddenly be changed to protect yet another "too big to fail" institution.
4. A new international standard of currency exchange arises, based in whole or part on gold. In this scenario I could see all gold in the world being declared off-limits for everybody except for official purposes and uses.
While reason #4 gives me the most pause, I am counting on two things: My ability to see this coming from a long way off, and my ability to sell out at a much higher price prior to it happening.
But the short version of all this is that gold is not money in today's financial system, and it is a tiny asset compared to other more readily identified and liquid assets. Those, like Argentinian bank accounts in 2001, would presumably become the first targets of a desperate government.
Click here to read the whole response.
Obama's First Foreign Policy Tests
President Obama's first foreign policy and national security tests are likely to be the following:
1. The fall of Afghanistan. The country's corrupt central government barely controls the capital, Kabul. It is only a matter of some months before the Taliban again take power, thanks to the Bush administration's failure to wipe them--and Al Qaeda--out after 9/11. Instead of formally declaring war on Afghanistan, which aided and harbored Al Qaeda, allowing it to set up a state within a state, the United States took too long to respond with too little force and relied on notoriously unreliable Afghan warlords, many of them openly pro-Islamist, for most of the real fighting. A swift, massive, merciless, military response to 9/11--including justifiable use of tactical nuclear weapons, if necessary--would have ended the Taliban and Al Qaeda for once and all. The whole world was with the U.S. in the immediate aftermath of the Islamist mega-attacks--the worst-ever attacks on U.S. soil--but the Bush administration, for all its tough talk and conservative rhetoric, backed down from a true, World War II-style campaign that would have delivered mass death to the enemy that delivered mass death to the U.S. in New York City and Washington, D.C.
2. A nuclear armed Iran. Successive, Democratic and Republican U.S. administrations have appeased the Islamists in Iran, starting with the catastrophic Carter administration, which secretly assisted the Islamist overthrow of the pro-U.S. Shah, a modernizing monarch, in a craven, cynical attempt to curry favor with the Ayatollah Khomeini. Along with Afghanistan, Iran should have been hit--extremely hard--after 9/11. The regime should have been obliterated; Iran's war-making capabilities, destroyed for at least a decade. Apparently guided by an idiotic, reverse domino theory--the idea that installing a democracy in Iraq would transform the Middle East--in addition to incredibly faulty intelligence and obvious disinformation, the U.S. under President Bush attacked, invaded and occupied a contained secular enemy that had no meaningful ties to Islamism or 9/11 and allowed Iran to continue its terror-sponsoring, nuclear-developing programs. Obama may have to deal with the awful result--an atomic weapon in Iranian hands--within weeks of moving into the White House. China Confidential analysts believe that Iran's Hitlerian maniac-in-chief, Mahmoud Ahmadinejad (whom President-elect Obama has offered to meet in face-to-face talks) is determined to announce a major nuclear breakthrough in time for this February's 30th anniversary celebrations of the Islamic Republic.
3. A terrorist attack against U.S. targets abroad--or the U.S. homeland. Al Qaeda has no intention of cooperating with Washington while it rescues and tries to rebuild the devastated U.S. economy. On the contrary, the terrorist group clearly believes now is the time to escalate the global jihad. More than seven years after 9/11, suicidal sleeper cells are believed to be present in the U.S., where Islamist organizations and sympathizers have been allowed to take root and actually flourish. Mumba's urban warfare is a likely model, although many experts insist that Al Qaeda remains focused on maga-attacks and weapons of mass destruction.
Sunday, 30 November 2008
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