Gold Dinar vs US Dollar

Gold Dinar vs US Dollar
Wednesday, March 10 2004 @ 05:38 PM EST

James Sinclair - 'Monetary Jihad' will backfire IF Americans wise up
Gold Dinar" is the term for a fairly new development in international finance. It is a second prong to planned Muslim terrorist attacks on the United States, and is intended to annihilate US economic power in a world of rising gold prices and a persistently declining Dollar. With the US government making war on US citizens' liberty instead of terrorists by means of the USA Patriot Acts (versions I and II), by allowing illegal immigrants to overrun our borders unchecked while imposing ever more draconian restrictions on our people at home, by tolerating Mexican military personnel shooting at US Border Patrol agents on US soil, by doing everything to thwart US airline pilots from actually arming themselves after technically permitting them to do so, and by blowing away the US official gold and silver reserves in the name of “supporting” the US dollar, it is doubtful that our elected leaders will come up with a common-sense plan to counter the most serious threat yet to be launched by militant Muslim Jihad warriors against the United States.

Muslim nations, with Malaysia leading the pack, are quietly working on developing a banking and financial infrastructure based on a purely “Islamic” currency, the gold dinar. This system will operate in competition with the current, exclusively fiat-based, world monetary and financial system. This new pan-Islamic currency will be based on gold as the primary medium of exchange and store of value. The emergence of the gold Dinar is a dark omen for the current way in which the US is (and has been) maintaining its predominance in the world fianncial system. However, it can - much to the certain consternation of its Muslim proponents - turn into a massively backfiring gun, leaving the “Jihadis” black in the face and looking mighty stupid.

It all depends on how individual Americans respond - not on how President Bush responds, not on how Congress responds - but on the American people themselves. Let me explain. There are certain aspects of what commonly goes as “modern” economics that only few, if any, outside of the precious metals investment world are aware of, and if they are aware of it they are largely oblivious of the dire and unavoidable consequences of the world's current economic, banking, and financial system. Modern “money” is a pure legal fiction based not on what we commonly perceive as “value,” but rather on its exact opposite: it is based on nothing but debt.

A dollar bill is technically a “note.” If you look on the front of any dollar bill, you will see there printed the words “Federal Reserve Note.” In the old days, the bill said “silver certificate” or Gold certificate.” In legal terms, a note is an instrument evidencing a legal debt. So, what is a dollar “bank note” then? A piece of paper saying that the bank (issuer of the note) owes the bearer (you, if you have it in your pocket) a stated amount of “money.” In the days of the by-gone gold standard, dollar bills were convertible at will to gold or silver. A bank note of those days simply said that you, the bearer, could go to the issuing bank and demand your dollar’s worth in gold, if you so chose. The bank accordingly “owed” the gold to the bearer, and the “note” was redeemable in something generally recognized the world over as a store of value, as well as a medium of exchange - gold.

Compare that to today’s system: Your federal reserve “note” is still an instrument evidencing a debt, but because of our current, world-wide “fiat”(government decree) system of finance, the bank note itself is legislatively declared to be “legal tender.” That means everyone who has a “note” and wants to “redeem” it can do so, but all you will get in return is another note of the same type! In practical reality, this means that the note is backed by nothing but the “full faith and credit” of the United States government. Yes, you can use your note to buy stuff, and you can accept it when you sell stuff, but only because the government forces everyone in the US to accept the “note” (i.e., the evidence of money) as money itself. The problem with this system comes in from several angles:

Angle No. 1:
Internationally, your wealth is in danger under such a monetary regime when all of the debt- based fiat currency exchange rates in the world are allowed to “float” freely in the international monetary system (i.e., the exchange rate is determined by the relative demand and supply of the particular currency). Now it can happen that your government’s “money” (debt instruments) are no longer perceived as such a great credit risk by foreigners, and they sell dollars for other currencies. So your dollar drops in value relative to the other currencies of the world. That means your dollar now buys less foreign goods or services than before, i.e., imports become more expensive.

Angle No. 2:
Domestically, a pure fiat system puts your wealth in danger in either of two ways:

1) When your government decides to “just print” more money whenever its expenditures are too high. So more money goes into circulation, and your dollar buys less (because there now are more dollars “chasing” - or bidding for - the same amount of goods and services in the economy, driving up their price), and

2) When “the Fed” (your friendly federal reserve bank) decides to lower the interest rates regular banks pay for borrowing money from the Fed. That lowers their borrowing costs, which they can now pass on to their customers (you) in the form of lower interest rates. So, individuals and businesses can now afford to borrow more money, because it’s cheaper.

The way “fractional reserve banking” works in a fiat currency system is this: when banks “loan” you money, they don’t really give up anything of value. When you borrow your neighbor’s lawnmower, he foregoes the use of his lawnmower until you return it. When your grandpa borrowed gold from a bank, the bank coughed up the gold, and he had to return it, usually with interest (or the bank parted with cold, hard paper notes that represented an equal claim to gold). In our modern system, your local bank parts with precisely nothing when it loans you money. It creates a bookkeeping entry in your account that says “credit” while at the same time recording that you owe it that same amount of money in its receivables column. You can now use that money to write checks, etc., but you in contrast to the bank, you have to WORK for that money to pay it back to the bank. You give up something of value, and the bank doesn’t, but now you owe the bank interest on top of that. Thus, whenever the bank makes a loan, the domectic money supply is increased in the same amount - out of nothing. Fair deal?

Anyway, this situation (piles of debt piled onto further piles of even more debt) has created an untenable situation for the powers of international finance. The dollar, which is based on debt, was declared the international “reserve currency.” That means that dollar-denominated assets (usually Treasury bonds, another form of debt instruments) are what other countries’ central banks hold “in reserve” to back up the value of their respective (also debt-based) currencies. Debt piled on debt, piled on debt, used to “back up” even more debt. Since 1971, no country in the entire world has been allowed (under current IMF rules) to back its currency with anything other than what essentially amounts to debt. This nightmarish system has become so entrenched in our way of thinking that nobody thinks of it anymore at all - except for pro-American gold bugs ... and certain anti-American Muslims.

These Islamist Muslims have recognized that such a system is inherently vulnerable to attack, and they have figured out the best, most sure-fire means of attacking it. Their plan is to create the gold dinar as an Islamic competitor to this debt based system; a competitor that is based on real value: Gold. It is not hard to see how they could succeed with their plans. Imagine that only about half of all the Islamic countries in the world join together and form this new gold dinar system. Gold is a commodity that rich (and even poor) Muslims have hoarded for generations. They know that gold is ALWAYS accepted as a store of value and a medium of exchange, especially during emergencies when the non- Islamic world is in turmoil and undergoes heavy financial crises.

The gold dinar's primary target is the US dollar, that ultimate symbol of American wealth and economic prowess. The US dollar is already suffering internationally from the consequences of a Bill Clinton/Alan Greenspan-induced credit binge that powered the incredible economic expansion of the mid-to-late nineties through lower interest rates. But credit-induced economic expansions are always relatively short-lived, and always lead to inflation and mal-investment. A series of successive interest rate cuts in the mid-nineties caused more borrowing. In the process of borrowing, more “money” is created out of nothing and loaned into circulation. This new money normally floats around in the domestic economy, driving up prices. However, in the recent credit boom the excess money did not end up in the regular economy, driving up prices there, but served almost exclusively to further balloon an already burgeoning stock market. People loved it, because their stocks went up while prices for other “stuff” stayed low. The 1990s’ inflation happened in the stock markets, not in the goods and services sector. So everybody got high on this credit binge and people even hocked their homes to invest more money in stocks. And foreigners got in on it, sending their money to the US to participate in it all.

But now, everyone is tapped out. Stocks have been dropping for three years in a row, and the economy is teetering. Foreigners stopped sending their money to us, and the dollar’s value keeps dropping as foreigners perceive us to be “not so sterling” a credit risk any longer. Now, with the dollar being the reserve currency of the world’s central banks, if a significant number of these foreign central banks (say, half of the Islamic countries) should find a more secure, more valuable “reserve asset”, they will dump their treasury bonds and buy whatever else they think is more worthy. And the Muslims have correctly recognized that gold is worth more than debt - which is all that the US dollar is based upon. The gold Dinar 'monetary Jihad' would not be so dangerous had the US government not been so foolish as to surrepticiously agree with certain powerful bullion banks to squash the dollar-price of gold whenever it looked like it was going to go up. This was done to 'assure' Americans that it was still safe to spend like crazy and throw more money at the stock market in order to keep the artificial expansion going. In order to control the price of gold, the US Treasury, through the secretive 'Exchange Stabilization Fund' (operated entirely under the president’s executive power, wholly outside congressional oversight) backed the bullion banks’ continuous efforts to sell gold “short”, flooding the market with borrowed gold, lowering its price, and thus scaring skittish little gold investors our of their pants, causing them to sell as well.

This now has almost totally deprived the US Treasury and the Fed of the American citizens’ official gold reserves, making this country even more vulnerable to the Islamists gold dinar attack. For most of US gold has been loaned or “swapped” out. Nobody really knows how much is left - if any. So far, it all looks pretty bad for the good old USA. The official gold is (largely) gone, silver stockpiles are completely gone, the US government is hocked up to the hilt, the stock market is tanking, and the economy is lackluster due to corporate scandals and war fears. Are the "Jihadis" going to win this war against US economic supremacy? Not if Americans wake up for just a little while and pay attention. (I know, it’s hard.) While our stupid government under selfish Bill Clinton (and now under George Bush's failure to expose Clinton’s policies) blew away our official gold holdings, Americans individually now have the chance of a lifetime. If every individual American with any sense at all now goes and privately invests in gold in the same fashion in which we earlier threw money at the stock market, Americans can accomplish two things that will turn out to be the Islamists' undoing:

- They exchange something essentially worthless (paper dollars) into something of absolute value (gold), and

- they make sure that (despite foolish government policies) the US is not left out in the cold in a future world financial system where commerce is based on gold and neither the US government nor individual Americans themselves own any.

For, the great miscalculation of the Jihad-freaks lies in thinking that by giving birth to the gold Dinar, they will topple America itself. Instead, they will help cut out a cancer that has been eating away at not only America, but the entire world of the last three decades; and that cancer is a purely fiat-money, debt-based, financial system. The real question is not: will the gold dinar or the US dollar prevail? The real question is: Which of these two monetary systems will prevail: honest gold, or lying paper? What the Islamists do not understand is that the private ownership of gold, and a financial system based on gold convertibility, is the greatest guarantee of individual Liberty that has ever existed, and individual Liberty is what extremist Muslims are essentially attacking when they attack America, for their own system abhors individual liberty - especially of the religious kind.

Gold cannot be manipulated like paper can. Gold cannot be “printed” at will, and it cannot be loaned into existence, so a gold-based money supply cannot be artificially inflated. That means tHt under a gold standard, governments cannot enrich themselves by imposing the hidden tax of inflation on the people. As a result, governments lose power to the same degree in which Gold re-assumes its role as the foundation of the world financial system. And even with the few true freedoms that still exist in this country (despite the decades-long, relentless onslaught by our political and financial elites), especially when compared to the Islamic world, American industriousness, innovation, and and ingenuity will outperform the Muslim countries any day - as they have, even under a pure fiat system. That is the irony of it all. Instead of bringing America to its knees, the gold Dinar will help Americans cure their country from the fiat-currency cancer, and in the process make America stronger than ever - but this is only true IF individual Americans act now!

The fate of your country is literally in your hands