Today a former Assistant Secretary of the US Treasury warned King World News that the Federal Reserve’s recent market interventions are a clear sign that there is something desperate going on behind the scenes. Former Assistant of the US Treasury, Dr. Paul Craig Roberts, also cautioned KWN that the Fed is trying to maintain control so the whole scheme doesn’t blow up. Below is what Dr. Roberts had to say in the first part of two extraordinary interviews which will be released today.
Dr. Roberts: “As I have explained, the orchestrated move against gold and silver is to protect the exchange value of the US dollar. The Federal Reserve is creating one trillion new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as a reserve currency.
The result is an increase in supply and a decrease in demand. That means a falling price. The orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.
When the Federal Reserve can no longer print due to dollar collapse which printing would make worse, bank deposits and pensions will be grabbed in order to finance the deficit….
“The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced. It is an act of desperation. If bullion were not a threat, the government would not be attacking it.
The fact that the Federal Reserve is short selling bullion means that there is something desperate going on, and I assume it’s related to the US dollar. If the dollar drops sharply in exchange value the Fed can’t control the interest rate and the bond price and so all of the bubbles would blow up.
All of the recent reports of countries moving away from the dollar to settle their international payments has most likely caused a great many countries to look at getting out of dollars. We not only have the BRICS moving away from the use of the dollar, but also China, Japan, and all of the East Asians.
Recently we have even seen reports out of Australia that they are going to deal directly with China in their own currency. So this drop in demand for dollars when the Fed is creating one trillion new dollars every year means the exchange value of the US dollar is untenable.
The first move out of the dollar is in to gold. In fact this has been going on since the beginning of the 21st century. But the Fed doesn’t want that because if the price of gold rises too rapidly in terms of dollars it scares everyone. Also, if you had a sharp movement out of dollars you would in fact see a sharp fall in the exchange value. At that point the Fed has lost control and the whole scheme blows up.
So that is what the situation is. They are desperate. They are having to drive down the obvious alternative to the dollar, which is gold, in order to affect the psychology of people throughout the world. But China sits on the largest collection of dollars in the world and they have to be worried about it. In fact they have been lecturing us for years about our irresponsible monetary and financial policies. So they will be very glad to get out.
Now I don’t think this attack on gold on the part of the Fed can last much longer because the Indians will buy gold here as well. The BRICS will also use this opportunity to get rid of dollars. But what this is designed to do is break up the sentiment among Americans and gold bugs. It scares them. It is designed to stop the flow of money from ordinary citizens into gold.
The Fed is also hoping the offsetting run of the central banks buying gold won’t be enough, at least any time soon, to push the price of gold back above where the Fed has capped it. The Fed has been at this for a long time. First they capped the gold price (at around $1,900), and then they drove it below $1,750. Gold would come back to and even above the $1,750 level and the Fed would drive it back down.
But now they have it even lower. I think the last couple of days there has been an amazing amount of selling on the part of the Fed. It’s paper shorts, not actual people selling bullion. But they are trying to bust up the momentum in gold so they can hold on to their low interest rates, high bond prices, and continue printing money.
You see if the Fed can’t print money they can’t finance the federal budget deficit. Printing money is also how the Fed buys the bonds to drive up the derivative debt-related instruments on the banks’ books. It makes the banks look solvent.
If the Fed can’t print money they can’t buy the bonds to keep the banks solvent and buy the bonds to keep the Treasury operating. The rising gold price is a threat to that. So the Fed is taking desperate action against gold. I agree with you that this will be temporary. I don’t know how long this will last, how long they can get away with it, but certainly not for very long.”
**IMPORTANT – Part II of Dr. Paul Craig Roberts extraordinary KWN written interview will be released within hours.