& The Life Rafts of Gold & Silver
Darryl Robert Schoon
Jan 28, 2009
A lifetime is not long.
It is long enough, however, to lead one to believe that life
is far different than it really is.
My uncle, Bobby Schoon, grew
up during the Great Depression. Born in the 1920s, the 1930s
were to be far different than the previous decade. My uncle came
of age when the US led the world into an economic abyss where
human desperation and misery were to become commonplace, an abyss
that is now about to be revisited.
For most born after the 1960s,
the Great Depression was an event that had happened to a previous
generation. They have no idea how an economic collapse could
affect them; that no matter how much they had saved, that their
savings could instantly disappear and that no matter how willing
they were to work, that no work could be found.
The same conditions that led
to the Great Depression in the 1930s have led us to today; and
the one safeguard that was put in place in 1933 to prevent another
depression, the Glass-Steagall Act, was repealed in 1999; and,
with the guard rail now removed, we are again headed over another
cliff into another economic abyss.
HOW FAR IS DOWN
I saw my uncle last week. Now,
in his late 80s, his mind is still sharp and his observations
always of interest. Our conversation moved to the current state
of affairs and my belief that another Great Depression was underway.
My uncle then said:
The difference between the
Depression and today is now how much people owe. Instead of owing
$15 they owe $15,000; and, because they owe so much more, this
time the fall is going to be greater.
And, so it is.
THEN AND NOW
The collapse of the 1920s stock
market bubble in 1929 signaled the beginning of the Great Depression.
The actual descent was to take four years as the depth of the
depression did not begin until 1933. The same might be true today,
or it might not.
This time, the beginning of
the current deflationary collapse was marked not by a stock market
collapse. This time, the event that signaled the current crisis
was when global credit markets suddenly and unexpectedly contracted
in August 2007.
The contraction of global credit
markets is a far more serious event than even a stock market
collapse. This is because in capitalist credit-based economies,
the flow of credit is absolutely essential to all commercial
In today's fiat credit-based
economies, credit markets are the heart of the artificial system
created by bankers. From credit markets flow the credit needed
to support commerce and entrepreneurial activity now addicted
to the bankers' credit. Today, credit markets are barely functioning
and remain frozen.
The contraction of global credit
markets was then in a very real sense, a heart attack, a heart
attack from which the markets have not yet recovered; and, as
with humans, the longer the recovery takes, the greater the damage
and the greater the possibility of death, in this case, parcus
nex, economic death.
What central bankers have been
doing is credit-based CPR in an attempt to revive an increasingly
moribund patient. To date, irrespective of the trillions of dollars
committed and spent, their efforts have been futile. This is
because even before the current heart attack, the health of the
patient had been deteriorating for years.
IN THE ECONOMIC EMERGENCY ROOM
In March 2000, the stock market
collapse popped a speculative bubble larger than any previous
bubble. The dot.com bubble, fed by central bank credit, had taken
on a life of its own in the late 1990s and by so doing threatened
to take the life of the very system that had created it, the
fiat credit-based system of capital (credit) markets called capitalism.
The central bankers knew the
danger the system was in. They were well aware of the severe
deflationary collapse of Japanese markets in 1990 and their previously
smug feeling that they had relegated systemic collapse onto the
scrap heap of history along with gold and the gold standard had
become increasingly less certain.
The events of the next decade,
the 2000s, were to demonstrate how wrong the central bankers
had been and how impotent they were in battling forces they themselves
had set in motion with their artificial system of credit stimulation
and "control" of markets, a "control" that
was to prove increasingly illusory as the decade progressed.
The strategy of central bankers
was lifted from Ben Bernanke's playbook, a strategy that was
based on the theory that systemic deflationary collapse could
be averted by the quick availability of unlimited credit to capital
Bernanke's theory was just
that, a theory whose sole positive attribute was that it had
not been tried during the Great Depression. The fact that it
hadn't been tried, however, did not mean it would work.
That fact that nothing had
worked during the Great Depression, however, left Bernanke's
theory the only response central bankers had in an otherwise
empty tool kit; and when the dot.com bubble collapsed, Bernanke's
theory was trotted out to be tried in the marketplace.
The central bankers led by
Alan Greenspan knowing of the danger the patient was in decided
on a highly unusual response based on Bernanke's theory, to
wit, although the economy was suffering from the after effects
of an enormous overdose of credit; in accordance with Bernanke's
theory, they decided to give the economy a dose of even more
At first, the central bankers'
strategy worked, but only temporarily. Because of the low US
1 % interest rates, flows of cheap central bank credit flooded
the markets and reversed the downward trend of the stock markets
but they also set in motion something far more dangerous.
The low 1 % central bank rates
created another bubble, a bubble more dangerous than the 2000
dot.com bubble. The bankers' cheap credit created the 2002-2006
US real estate bubble; and the collapse of that bubble was to
result in the severe credit contraction of August 2007 and the
return of the patient to the central bank emergency room just
five years after his previous visit.
This time, the patient was
in far worse shape than in 2000/2001. This time, heavily sedated,
breathing only in short gasps, the economy has been kept alive
only by constant and artificial infusions of even more credit
in the attempt to keep systems functioning until a solution can
However, the central bankers
have no more solutions. Bernanke's theory didn't work, proving
to be no solution to the systemic deflationary collapse brought
on by years of credit abuse administered by previous doctors,
primarily Dr. Alan Greenspan.
FROM THE HOSPITAL TO HOSPICE TO THE
After the central bank emergency
room, hospice is next. The current frantic attempts of central
banks and governments to reverse what they set in motion is analogous
to the application of pain medication given in the hopes of calming
those whose lives they have destroyed.
Governments have extended bankers
the public purse in the hopes the bankers will be able to rescue
them from the coming anger of those whose lives, savings and
livelihoods they were elected to protect but instead plundered
by taxation and inflating the money supply.
Capitalism, a credit-based
economy based on debt-based money issued by central banks is
now claiming its victims, the bankers and governments who benefited
from the system, and producers and savers who were used by bankers
and government as bankers pursued private profit and politicians
pursued public power.
Politicians with notably few
exceptions, e.g. America's Ron Paul, have been willing co-conspirators
with the bankers who plundered the savings and productivity of
society for personal gain.
By indebting society beyond
its ability to ever repay, government and bankers have destroyed
the base of their own profit and own power. The credit contraction
of 2007 is in the process of destroying the banks that created
the crisis and has already virtually destroyed the Republican
Party who abetted them.
Next the Democrats will suffer
as they did little to prevent what is now in motion and now bear
the burden of reversing the damage of what previous generations
of bankers and politicians have done.
THE ECONOMY THE TITANIC & THE
LIFE RAFTS OF GOLD AND SILVER
What has happened to America,
the destruction of what was recently the most powerful economy
in the world could not have happened without the complicity of
politicians of both parties who aided the bankers in their parasitic
plundering of America's wealth, productivity and future.
The Republicans were the primary
tool - and natural home - of the bankers but the bankers could
not have achieved their enormous power and influence over America's
domestic and foreign policy without the complicity of Democrats
along the way.
It was Democrat Woodrow Wilson,
who signed into law the Federal Reserve Act in 1913 that gave
private bankers control over US currency, control that was to
indebt our nation, businesses and people into perpetual indebtedness.
It was Democrat Franklin Delano
Roosevelt who outlawed the possession of gold in 1933 by US citizens
thereby trapping Americans into the paper assets of bankers just
as the bankers wished, putting beyond Americans' reach the gold
that would have otherwise protected them from the banker's debasement
of the US dollar.
And it was Democrat Bill Clinton
who signed the repeal of the Glass-Steagall Act in 1999, thereby
repealing the safeguards set up in 1933 to prevent another Great
Depression and allowed investment banks, insurance companies
and commercial banks to co-mingle America's savings in what was
to be soon the greatest destruction of wealth on a scale never
AND, NOW, ANOTHER DEMOCRAT IS IN THE
We now have a another Democrat
in the White House who has the dubious honor of inheriting a
nation in tatters, its reputation and economy virtually destroyed
by its previous occupant who allowed the nation to sink to previously
unimaginable lows in both fiscal irresponsibility and illegal
I guess that's to be expected
when a fraternity boy moves into the same house his father once
lived in and brought in friends such as Dick Cheney and Donald
Rumsfeld who sent the nation into a war based on lies and then
had legal hacks such as Alberto Gonzales and John Woo justify
torture if done in the name of freedom.
Illegal voting machines aided
by the US Supreme Court and a Democratic Party that rolled over
as easily as a drunken sorority girl at a frat party allowed
Paulson and Wall Street bankers and Washington DC power brokers
free reign at the White House from 2000 to 2008, more than enough
time to apply the coup d'état to a once great nation.
What happened between 2000
and 2008 in the White House is so much more egregious than the
few blow jobs that Clinton got from Monica Lewinsky (all that
money spent and we still never got an exact accounting) and yet
the crimes of Bush and Cheney et. al. will probably never be
investigated nor will justice ever be served on those who so
callously used their power to serve it to others.
The pursuit of Bill Clinton
over a blow job and the non-pursuit of George W. Bush and Dick
Cheney for their callous disregard of the truth and the US Constitution
is an indictment of America itself.
What America chooses to prosecute
and what America chooses to deny is a direct indictment of America
and the "values" it so loudly proclaims to others.
In the future, America should be more careful as the world is
not as swayed by the distorted reflection America sees in its
PRESIDENT BARACK OBAMA
I don't know President Barack
Obama nor did I know any of America's previous presidents but
I do know that I don't envy the man or the task he has in front
of him. It is never easy to lie to a nation (although politicians
do a far better job than most) but Americans have never seemed
to really want the truth which is perhaps one reason it has rarely
been disclosed to them.
The America of today grew up
on bankers' easy credit. The America of tomorrow will be buried
by it. I don't know if President Obama knows this but I do know
the men he has appointed to counsel him in economic affairs know
it and don't care.
Paul Volcker, the hero
of another age, salvaged the bankers' paper money game for another
generation but he did so at the expense of what could have saved
the nation. Volcker later said he regretted not having
earlier managed the price of gold and if his actions in saving
the parasitic system of bankers are to be lauded, then so be
But perhaps the least of all
the men Obama has surrounded himself to counsel him on the economy
is Lawrence Summers, Obama's Chief Economic Advisor. Summers
is the former Chief Economist at the World Bank who at the time
suggested that polluting industries should be moved to 3rd world
countries where the human toll would be less costly, and was
also later fired as President of Harvard University for his statement
that women were intellectually inferior to men.
But Summers' greatest transgression
against true economic freedom guaranteed by gold and its protection
against government power is his 1988 paper he co-authored with
Robert Barsky, Gibson's Paradox And The Gold Standard
wherein Summers argued that manipulating the price of gold would
have a favorable impact on interest rates and the price of paper
Summer's paper served as the
basis for further US government manipulation of the gold market
and does not speak well for future US policy in that regards.
Newly appointed US Treasury Secretary Timothy Geithner also comes
with as much baggage as Volcker and Summers in respect
to his relationships with the investment bankers who have raped
and pillaged our nation.
Timothy Geithner was the man
who last fall stood shoulder to shoulder next to Henry Paulson
as Paulson looted America' treasury for the benefit of his Wall
Street friends and cronies and insured that he would never be
called to task for what he would do.
Geithner is described in Wikipedia
as having Lawrence Summers for his mentor but other sources call
him a "Rubin protégé", neither man a
positive role model. It should be remembered that Robert Rubin,
former Goldman Sachs partner and US Treasury Secretary, lobbied
for the deregulation of financial instruments such as derivatives,
an effort that later helped to destroy our financial system.
Rubin was also instrumental
in the repeal of Glass-Steagall, the Act passed to prevent another
depression and he played an important role in the $4 billion
payout from the US Treasury to Goldman Sachs indemnifying Goldman
Sachs bondholders from any losses on their Mexican bonds in 1995.
Geithner, as a Rubin "protégé",
obviously comes highly recommended and well connected to the
same core of investment bankers who have done yeoman's work in
destroying America's economy while at the same time lining their
own deep pockets.
It is my belief that President
Obama should fear both the enormity of the task in front of him
and the counsel of those he has surrounded himself with;
and, while I wish him the best I cannot help but suspect the
wisdom he will receive from men like Lawrence Summers, Paul Volcker,
and Timothy Geithner will do little to serve the national interest.
Three out of three, the odds
aren't good and we should not take false refuge in what the US
government may or may not do - or even can do in these perilous
times. The guard rail designed to protect us from another depression
was removed in 1999 and we are now sliding rapidly out of control
towards the precipice ahead.
THE GREAT DEPRESSION
Although my parent's generation
grew up in hardship during the Great Depression, the family as
a whole did remarkably well considering the circumstances. Most
graduated from college, no small feat during those difficult
times and all raised families and achieved more than a measure
of personal success.
It would do us well to remember
the achievements of those before us as we again move into more
difficult times, times that will test our inner strength as well
as our character. The life of ease afforded us by easy credit
is a thing of the past. What will replace it we do not yet know.
It will be, however, far different than what we have known.
THE PRICE OF GOLD AND SILVER
The price of gold and silver
has now made significant moves towards its previous highs, gold
pushing above $900 and silver above $12 but there remains much
volatility between now and their ultimate ascent, an ascent guaranteed
by the accelerating debasement of fiat paper currencies as governments
attempt to shock their moribund economies into life with unlimited
amounts of fiat money and credit.
Whether gold and silver's recent
moves are a portent of more shortly to come or if they will be
met again with renewed resistance from central banks remains
to be seen. Either way, rest assured that the battle between
the paper boys of Wall Street, the power brokers of Washington
DC and the free market is still in progress.
Wall Street may be but a badly
damaged shadow of its recent past but its co-conspirators in
manipulating the markets, the central bankers and their enablers
in government are still committed to maintaining their fiefdoms
no matter how high the cost - as long as those costs are born
by the taxpayers.
Someday, in the future however,
a future that is closer today than it was yesterday, gold and
silver will triumph despite the best efforts of central bankers
and government manipulators to prevent it
For central bankers and those
in government are up against the market itself and no matter
how much paper they have at their disposal, their supplies of
gold are limited. Each ounce bought takes another ounce out of
the arsenal governments use to suppress gold's price, an arsenal
comprised of our central banks.
Buy gold. After all, it was
yours and still for only a short while, it is being subsidized
by your government as it continues its fight against your interests
and a free market unfettered by bankers' credit.
Have faith and buy gold and
silver until better days arrive.
Darryl Robert Schoon
About Darryl Robert
I majored in political science with a focus on East Asia (B.A.
University of California at Davis, 1966). My in-depth study of
economics did not occur until much later.
In the 1990s,
I became curious about the Great Depression and in the course
of my study, I realized that most of my preconceptions about money
and the economy were just that - preconceptions. I, like most
others, did not really understand the nature of money and the
economy. Now, I have some insights and answers about these critical
In October 2005,
Marshall Thurber, a close friend from law school convened The
Positive Deviant Network (the PDN), a group of individuals whom
Marshall believed to be "out-of-the-box" thinkers and
I was asked to join. The PDN became a major catalyst in my writings
on economic issues.
When I discovered
others in the PDN shared my concerns about the US economy, I began
writing down my thoughts. In March 2007 I presented my findings
to the Positive Deviant Network in the form of an in-depth 148-page
analysis, "How to Survive the Crisis
and Prosper In The Process."
to my presentation, though controversial, generated a significant
amount of interest; and in May 2007, "How To Survive The
Crisis And Prosper In The Process" was made available at
www.survivethecrisis.com and I began writing
articles on economic issues.
in the book and my writings has been gratifying. During its first
two months, www.survivethecrisis.com was accessed by over 10,000
viewers from 93 countries. Clearly, we had struck a chord and
www.drschoon.com, has been created to
address this interest.