No Debt Deal, Central Banks Go Long Gold

And, at long last, the Republicans and the Democrats compromise to ensure the United States government will be saddled with yet more debt. It was a “historic, bipartisan compromise” to procrastinate.

The deal is comprised of severely limited cuts, and, for the most part, merely speaks of future cuts. The $1 trillion in immediate cuts consist of almost only caps on future spending. Further, none of these cuts are required to be implemented by congressional bodies of the future.

Still to come, a bipartisan committee of Representatives and Senators has been issued the task of finding an additional $1.5 trillion in savings from the federal deficit. Of course, as the two parties will squabble in the public eye over what exactly can be cut, the powers-that-be at central banks and capstone international financial institutions will come up with decisions behind closed doors.

Playing the part of opposition, for the time being, Speaker of the House John Boehner said that it is “effectively…impossible for [the] Joint Committee to increase taxes.”

The officials in the White House disagreed, saying that “revenue-increasing reform” (higher taxes and lower social services) remains an option, despite the fact that Congress would likely not pass such proposals.
No matter if the aforementioned Committee can reach a near-term agreement, “deep ‘real’ spending cuts, which are painful to both sides, will take effect.” This, of course, means the men, women and children on the streets would be strapped with IMF-modeled austerity measures and structural readjustments. (1)

Yet again, the can has been kicked down the road. Are you surprised?

The “wise-men” who make markets and “our” politicians love to trumpet progress, but, when one reads through real history, it is clear not much has changed over the centuries. Maybe this is what progress is all about?

The world learned from Dutch modern finance. For example, the Anglo-Dutch merger in 1688 introduced our once arch-nemesis turned Anglo-American axis partners, the British, to a number of Dutch-pioneered financial institutions.

In 1694, the Bank of England was founded to manage the government’s borrowing as well as the national currency in a manner similar (to be sure, not exactly) to the workable Amsterdam Wisselbank founded eighty-five years prior.

London, namely the City of London, managed to import also the Dutch system of national public debt, which was funded through a Stock Exchange, in which long-term bonds could easily be bought and sold.

This allowed governments to borrow at significantly lowered interest rates. Thus, large-scale projects, which rarely benefited the people of the country, were far easier to afford.

Daniel Defoe notes what such cheap credit could do for/to a country:

Credit makes war, and makes peace; raises armies, fits out navies, fights battles, besieges towns; and, in a word, it is more justly called the sinews of war than the money itself….Credit makes the soldier fight without pay, the armies march without provisions…it is an impregnable fortification…it makes paper pass for money…and fills the Exchequer and the banks with as many millions as it pleases, upon demand.

Sophisticated financial institutions had made it possible for Holland not only to fund its own brand of globalism, but also to protect itself with state-of-the-art naval power. Such institutions, starting with the Bank of England, were now to be put to use on a larger-scale in England.

This sophisticated financial system altered the way of the world, allowing a scary few to orchestrate British international policies for the centuries to come. Moreover, these very few ensured the system spread to much of the globe through central banks. They were keen on the interdependence of nations, and not, as is so crucial to the American tradition, the sovereignty of nations. (2)

These central banks, today, are now net-buyers of gold and commodities in general. In other words, for them, paper does not pass for money. (3)

1. Miller, Zeke. “The Truth About the Debt Deal: It’s Pretty Much Meaningless, Business Insider, 1 August, 2011.
Accessible at: http://www.businessinsider.com/truth-about-debt-deal-2011-8

2. Ferguson, Niall (2004). “Empire: How Britain Made the Modern World,” Penguin Press, pages 23 and 293.
For purchase at Amazon: http://www.amazon.com/Empire-Britain-Made-Modern-World/dp/0141007540/ref=sr_1_4?ie=UTF8&qid=1312265646&sr=8-4

3. Tong, Sebastian. “Central banks turn net gold buyers, cut euro zone debt: survey, Reuters, 12 April, 2011.