Honest Money - Gold is Wealth hiding in Oil - Ivo Cerckel – Google’s search-robot boycotts this blog – MSN Yahoo! do not

The Keynesian business model of the UK government should be criminalised.

While USA president-elect Barack Obama told an audience at George Mason University near Washington on Thursday that the USA economy will become “dramatically worse”, wrecking the dreams of a generation of Americans, if Congress does not act quickly to drive through huge fiscal stimulus plans (1),

UK chancellor of the exchequer Alistair Darling was writing on Wednesday in his letter to all members of the Group of 20 advanced and emerging economies (G20), which he copied to the Managing Director of the IMF and the President of the World Bank, that prudential regulation should allow supervisors to prevent firms using business models or practices which increase systemic risk, even if they might be profitable for the firms themselves. (2)

Darling’s argument forms part of his third objective for the April G20 summit in London, following the November 2008 meeting of G20 Leaders and Finance Ministers in Washington trying to determine how to address the global financial and economic crisis affecting us all.

Darling outlines the seven objectives of the London summit as follows:
ONE, to return trust and confidence to financial markets.
TWO, to retain and build on the benefits that open financial markets bring to the world economy, the key to retaining faith in financial markets being to establish and maintain a consensus within the G20 and elsewhere as to the importance of open capital markets.
THREE, to reduce the likelihood of systemic failures in the financial services industry by  improving governance of financial institutions, by ensuring that the scope and reach of regulation is appropriate making sure that offshore jurisdictions do not permit firms to behave in ways that jeopardise financial stability and by enacting prudential regulation allowing supervisors to prevent firms using business models or practices which increase systemic risk, even if they might be profitable for the firms themselves.
FOUR, to prepare better for failure within financial markets ensuring that we have the mechanisms in place to protect depositors; to ensure the orderly wind-up of failed institutions; and to make sure that there are the appropriate international mechanisms to coordinate the management of failed institutions.
FIVE, to increase efficiency in the operation of financial markets, so that they perform the tasks of capital allocation, risk management and facilitating transactions more efficiently
SIX, to conclude better, more reliable arrangements to protect consumers when problems emerge including a more coordinated approach to compensation arrangements and firms themselves need to have robust contingency plans in place.
SEVEN, to reduce systemic risks and to put in place systems to address future failures carry inherent risks.

The second objective is thus to establish and maintain a CONSENSUS within the G20 and elsewhere as to the importance of open capital markets, thereby achieving the key to retaining faith in financial markets. The third objective is then the regulation of business models.

For Darling, it is the banks’ business models which cause banks not to want to lend any more.

A business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.
In the most basic sense, a business model is the method of doing business by which a company can sustain itself — that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain. (3)

The company, here the bank, will do this in accordance with the prerequisites and conditions which the environment imposes. (4)

The problem is that those prerequisites and conditions which the environment imposes are not the real prerequisites and conditions to succeed as a bank.

On the contrary, those prerequisites and conditions are the prerequisites and conditions over/about which there is a CONSENSUS that they are admissible for a bank.

The consensual view considers worthless paper money and fractional-reserve banking as being perfectly admissible practices for a bank.

But that’s of course not what Darling wants to regulate when he’s mumbling about business models having to be regulated.

Or does he want to regulate the business model of his government which is hoping to print its way out of the Greater Depression?

Yes, the printing of unbacked paper money by the Bank of England, conspiring with the UK Treasury, should immediately and retroactively be outlawed.

This outlawing of the printing of unbacked paper money is the way to address the global financial and economic crisis affecting us all.

Ivo Cerckel
http://bphouse.com/honest_money/

NOTES

(1)
http://www.ft.com/cms/s/0/d74ca4d2-dd8e-11dd-930e-000077b07658.html ,

(2)
http://uk.reuters.com/article/businessNews/idUKTRE5065XS20090107

(3)
http://en.wikipedia.org/wiki/Business_model

(4)
Leo Sleuwaegen,  Platel & Partners, and Thinkthank Center of Entrepreneurship, “Het Ondernemingsplan – Aandachtspunten bij het starten van een onderneming – uitgave voor Vlaanderen”, Schoonhoven,The Netherlands,  Academic Service, 1997. p. 21

Maybe Islamic banking and the Church’s social teaching have some lessons to … teach.

We are living not through a banking crisis, but through a crisis of the banking system.

We still don’t know “what” we don’t know about the banking system.
We still don’t know why banks no longer want to lend money, which they can create out of thin air, to each other. (As will appear later in this article, the creation of money out of thin air is indeed what fractional-reserve banking is about.)
This is fortunate because otherwise the present salami-crash in slices would immediately and abruptly come to a halt and become a real crash into the unknown.

That’s the environment in which China is experimenting with trade settlement in yuan. Maybe the yuan does not have the “what”, maybe the yuan does not have the bad characteristic we don’t know. (1)

As this blogger wrote in September 2003:
In Russia, the Middle East and India, there is an increasing aversion against the dollar and is a search for a replacement under way. The present gold fever in China where individuals are since early 2003 again allowed to possess gold implies that in order to be an economic world power by 2012, China could well accede to this world standard, FreeGold. At that moment only physical gold will be traded as the natural vehicle to incorporate one’s wealth, the value of paper gold [contracts embodying wagers concerning the future gold price] will be reduced to nothing, and the value of the euro will increase quarterly upon the marking to market of its gold reserves.
The [European Central Bank] ECB will not define the euro like the old gold standard as a certain quantity of gold, but will use it as a free-trading financial reserve so that each increase in the price of gold will bring about an increase in the value of the euro’s reserves and thus an increase in the value of the euro itself. (2)

That’s also the environment in which the Arab Economic Summit is to be held in Kuwait on 19-20 January 2009.

The Summit’s aim is to find a comprehensive joint Arab vision to face the economic challenges, by accelerating the Arab joint market establishment. (4)  It is indeed unacceptable that the Arab world still lacks a clear view and assessment of the current financial crisis which is affecting it in all areas. (5)

In order to obtain a clear view and assessment of the current financial crisis which is affecting the Arab world in all areas, we should start with the assessment that Islamic banking is a system which incorporates adherence to the principle of riba, usury. It is an important Islamic principle that there should be equality of risk. From a banking point of view this means that the risks and rewards should be shared between borrower, bank and depositor. (6)

Banks used to be allowed to deliver receipts for gold deposited with them. This right was taken away from them by the institution of central banks which now have a monopoly for issuing “money”. The central bank is now ONLY the supervisor of the transaction between depositor, bank, and borrower. The central bank does not, cannot possibly, share in the risk.

After that we should remind ourselves that fractional-reserve banking is the banking practice in which banks are required to keep only a fraction of their deposits in reserve with the choice of lending out the remainder while maintaining the obligation to redeem all deposits upon demand. This practice is universal in modern banking. (7)

Some critics of fractional reserve banking and the related monetary system do however refer to it by the political term debt-based monetary system. Critics of fractional reserve usually note that the banking system “creates money out of nothing”. The insight that banks “create money by extending loans” is not new, and the subject is covered in most introductory economics textbooks and many popular reference works. (8)

We are living not through a banking crisis, but through a crisis of the banking system.

We still don’t know “what” we don’t know about the banking system. (Maybe it’s about the sharing of risk. “Everyone should put his hand to the work which falls to his share, at once and immediately”, wrote Pope Leo XIII in 1891, Pope Benedict reminded us this week in the New Year message of His Holiness.(9))

This is fortunate because otherwise the present salami-crash in slices would immediately and abruptly come to a halt and become a real crash into the unknown.

Maybe the yuan does not have the “what”, maybe the yuan does not have the bad characteristic we don’t know.

Maybe Islamic banking and the Church’s social teaching have some lessons to … teach.

Ivo Cerckel
Siquijor, 02 January 2009

NOTES

(1)
China to experiment with trade settlement in yuan
http://ph.news.yahoo.com/rtrs/20081224/tbs-china-economy-exports-21231dd.html
SNIP
BEIJING, Dec 24 - China on Wednesday took a baby step on the road to making the yuan an international currency when it promised to allow its use in trade between a few provinces and neighbouring states.
The State Council, or cabinet, said the yuan could be used for the settlement of trade between the factory-rich Pearl River and Yangtze River Deltas and the Chinese territories of Hong Kong and Macau.
It also said that members of the Association of Southeast Asian Nations would be permitted to use yuan in their trade with China’s southeastern provinces of Guangxi and Yunnan.

(2)
With Chinese Freegold from a reserve currency to a world standard
Tuesday, 2 September 2003
http://www.free-europe.org/english/2003/09/with-chinese-freegold-from-a-reserve-currency-to-a-world-standard/

(4)
Determined to make Kuwait economic summit a success - official …
Dec 21, 2008
http://www.menafn.com/qn_news_story_s.asp?StoryId=1093225534

(5)
Kuwait summit timing critical – Economists
Published Date: January 01, 2009 http://www.kuwaittimes.net/read_news.php?newsid=MTM3NTE0NjE5Ng==
SNIP
[Board Chairman of the Damascus bourse and Chairman of the Union of Syrian Trade Chambers Ratib Al-Shallah] cautioned that it is unacceptable that the Arab world still lacks a clear view and assessment of the current financial crisis which is affecting it in all areas. The summit should take serious strides in correcting this situation, he remarked.

(6)
Ruqaiyyah Waris Maqsood, “A Basic Dictionary of Islam”, New Delhi, Goodword Books, 1998 (2002 reprint),  verbo “Islamic banking”

(7)
Fractional-reserve banking
From Wikipedia, the free encyclopedia
http://en.wikipedia.org/wiki/Fractional-reserve_banking

(8)
Criticism of fractional-reserve banking
From Wikipedia, the free encyclopedia
(Redirected from Debt-based monetary system)
http://en.wikipedia.org/wiki/Debt-based_monetary_system

(9)
Pope Benedict XVI: A message from God: people have a duty to feed the poor, too
Thursday, 1 January 2009
http://www.independent.co.uk/opinion/commentators/pope-benedict-xvi-a-message-from-god-people-have-a-duty-to-feed-the-poor-too-1220001.html

Le Sommet de Mascate, ces lundi et mardi, a mis en place le Conseil Monétaire du Golfe pour 2009, précurseur de la Banque centrale du Golfe (BCG) qui elle sera existera à partir de 2010.

En ce qui concerne les réserves d’or de la BCG, il a été dit à la conférence de presse :
In reply to a question on gold reserves for the GCC {Gulf Co-operation Council, Conseil de coopération du Golfe (CCG)) Central Bank, [Mohammad Al Mazroui, assistant secretary-general for economic affairs] said “that is a matter to be pondered over later.”We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank,” he said.
(GCC leaders approve Monetary Union as members seek to host Central Bank By Sunil K. Vaidya, Bureau Chief Published: December 30, 2008, 23:46
http://www.gulfnews.com/business/Economy/10271396.html )

L’or se cache dans le pétrole parce que le pétrole est la seule denrée qui soit assez vaste pour que l’or puisse s’y cacher.

Si le CCG avait ouvertement décidé d’immédiatement mettre les réserves d’or du CCG en commun, de faire de ces réserves les réserves du Khaliji, la future monnaie unique du Golfe, et de coter ces réserves périodiquement au prix de marché et non au modèle de 42 dollars tel le trésor américain, chaque augmentation du prix de l’or aurait fait augmenter le prix du pétrole. Du même coup, le prix du pétrole remonterait.

Le CCG ne l’a pas fait ouvertement, mais peut-être l’a-t-il quand-même fait.

L’Opep pourrait tenir une réunion exceptionnelle avant le mois de mars si les cours pétroliers continuaient de chuter, a déclaré mardi [23 décembre] le président de l’Opep Chakib Khelil. Un sommet économique arabe qui doit se tenir les 19 et 20 janvier au Koweit et auquel doivent participer certains ministres de l’Opep pourrait être l’occasion pour l’organisation de réexaminer la situation des prix, a indiqué le président. http://www.agefi.fr/articles/reaction_validee-1058172.html

Le Sommet Economique arabe sera précédé le 14 janvier 2009 d’une réunion des ministres arabes des finances et des gouverneurs des banques centrales arabes.
http://www.uaedailynews.com/middleeast/126.htm

Afin de parachever le développement économique et social arabe, l’Opep pourrait, au Sommet

Le Sommet Economique arabe sera précédé le 14 janvier 2009 d’une réunion des ministres arabes des finances et des gouverneurs des banques centrales arabes.

Afin de parachever le développement économique et social arabe, l’Opep pourrait, au Sommet Economique Arabe à Koweit, alors décider d’immédiatement facturer son pétrole en Khaliji.

Ivo Cerckel
Siquijor, le 31 décembre 2008

In reply to a question on gold reserves for the GCC Central Bank, [Mohammad Al Mazroui, assistant secretary-general for economic affairs] said “that is a matter to be pondered over later.”We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank,” he said.

(GCC leaders approve Monetary Union as members seek to host Central Bank By Sunil K. Vaidya, Bureau Chief Published: December 30, 2008, 23:46
http://www.gulfnews.com/business/Economy/10271396.html )

Tue, 30 Dec 2008 | 11:13 GMT
GCC monetary union agreement ready for leaders’ signature - Al-Shimali
KUNA (Kuwait News Agency)
http://www.zawya.com/Story.cfm/sidZAWYA20081230104902/GCC%20Monetary%20Union%20Deal%20To%20Take%20Force%20By%20Dec%20%2709
SNIP
MUSCAT: Finance and Economy Ministers of six Arab Gulf countries have completed the final formula of the GCC monetary union and referred it to their leaders to sign it, Kuwait finance minister Mustafa Al-Shimali said Tuesday.
“We have discussed the final draft of the monetary union agreement thus paving way for (GCC leaders to) signing it to see the light at a maximum date of December 12, 2009,” Al-Shimali told KUNA after meeting with finance and economy ministers of the Gulf Cooperation Council (GCC).
The monetary union is expected to pave way for the single currency.
Al-Shimali said the ministers have also approved the statute of the monetary council, to be followed by the creation of the Gulf central bank, and was also referred for the GCC leaders for approval.
The creation of the central bank will be mandated with establishing the single currency.
But, Al-Shimali noted, the single currency would be dealt with at a later stage because it has unique legal status. He did not elaborate.

China to experiment with trade settlement in yuan
http://ph.news.yahoo.com/rtrs/20081224/tbs-china-economy-exports-21231dd.html
SNIP
BEIJING, Dec 24 - China on Wednesday took a baby step on the road to making the yuan an international currency when it promised to allow its use in trade between a few provinces and neighbouring states.
The State Council, or cabinet, said the yuan could be used for the settlement of trade between the factory-rich Pearl River and Yangtze River Deltas and the Chinese territories of Hong Kong and Macau.
It also said that members of the Association of Southeast Asian Nations would be permitted to use yuan in their trade with China’s southeastern provinces of Guangxi and Yunnan.

room for creative Omani accounting

1.
Does monetary union equate single currency?

Could it be that Oman is opting out of the Gulf single currency, but not out of Gulf Monetary Union?

We’ll know by Wednesday morning.

I’m still keeping my fingers crossed, arguing that for Oman, Gulf Monetary Union is about the marking to market of the gold reserves of the Gulf Co-operation Council (GCC) states by the Gulf Monetary Authority / Gulf Monetary Council.

For Oman, GMU is MTM of gold reserves by GMA/GMC
September 16th, 2008 by Ivo Cerckel
http://bphouse.com/honest_money/2008/09/16/for-oman-gmu-is-mtm-of-gold-reserves-by-gmagmc/
[If the link does not work, try copy and paste it in your browser.]

I still have one or two GMT+8 nights to dream

2.
We still don’t know “what” we don’t know.

This is fortunate because otherwise the present salami-crash in slices would immediately and abruptly come to a halt and become a real crash into the unknown.

Whereas the USA Treasury marks its gold reserves to the model of USD 42, the European Central Bank marks its gold reserves to market (-price).

Marking to model versus marking to market.

We don’t know what’s happening. This means confusion. Confusion means room for creative Omani accounting.

Only full disclosure of toxic debts will get the West moving again
It has been a year of financial explosions.
by Liam Halligan
Last Updated: 7:34PM GMT 28 Dec 2008
http://www.telegraph.co.uk/finance/comment/liamhalligan/3982447/Only-full-disclosure-of-toxic-debts-will-get-the-West-moving-again.html
SNIP
The money markets are locked because the banks don’t trust each other. Even they don’t know how much toxic debt is out there – and which bank could be the next to fall. That’s why the spread between the London Inter-bank Offered Rate and overnight interest rate swaps of the same maturity remains so wide – and wider in the UK, now, than either the States or the eurozone.
The crucial inter-bank market will remain frozen until the banks are forced, under threat of prosecution, to reveal the true extent of their sub-prime liabilities. Such “full disclosure” won’t be easy – involving the exploration of millions of complex derivative contracts, often across borders – but it simply must be done. UNSNIP

Ivo Cerckel
Siquijor, 29 December 2008

Unbacked paper currencies also!

We still don’t know “what” we don’t know.

This is fortunate because otherwise the salami-crash in slices would immediately and abruptly come to a halt.  (Guess in what direction it will move after the halt.)

Only full disclosure of toxic debts will get the West moving again
It has been a year of financial explosions.
by Liam Halligan
Last Updated: 7:34PM GMT 28 Dec 2008
http://www.telegraph.co.uk/finance/comment/liamhalligan/3982447/Only-full-disclosure-of-toxic-debts-will-get-the-West-moving-again.html
SNIP
The money markets are locked because the banks don’t trust each other. Even they don’t know how much toxic debt is out there – and which bank could be the next to fall. That’s why the spread between the London Inter-bank Offered Rate and overnight interest rate swaps of the same maturity remains so wide – and wider in the UK, now, than either the States or the eurozone.
The crucial inter-bank market will remain frozen until the banks are forced, under threat of prosecution, to reveal the true extent of their sub-prime liabilities. Such “full disclosure” won’t be easy – involving the exploration of millions of complex derivative contracts, often across borders – but it simply must be done.

GCC summit to focus on global financial crisis
P.K. Abdul Ghafour | Arab News
Sunday 28 December 2008 (01 Muharram 1430)
http://www.arabnews.com/?page=6&section=0&article=117596&d=28&m=12&y=2008
SNIP
During the two-day summit the GCC leaders are expected to approve an agreement on monetary union. “This will lead to the formation of a monetary authority that will set out technical details of the new GCC currency, its name and form,” a GCC source said.
Mohammed Al-Mazroui, assistant secretary-general, said the topic of monetary union would be on top of the agenda. “The summit is likely to come up with a final action plan for the unified monetary regime for the GCC states,” he said.
Asked whether the GCC countries would be able to stick to the deadline of January 2010 for achieving the unified monetary union, Al-Mazroui said: “We are very close to that already. The ensuing summit will come out with a definite answer for this.”
He said the summit would also come out with the details of the new unified GCC monetary authority. “The final draft for the GCC Monetary Authority has already been prepared, and it will be submitted for approval at the summit.”
Asked whether the new unified currency would be pegged to the US dollar, he said: “This is something that the new monetary authority will decide.”
He said five of the six GCC members — Saudi Arabia, UAE, Qatar, Bahrain and Kuwait — had already announced their resolve to join the GCC monetary union. Oman has, however, said it would stay out of it in the beginning.
Asked whether Kuwait’s move to link its currency to a basket of currencies would have any impact on the unified currency, he said: “These two (unified currency and currency pegging) are different issues.”
Last September, GCC finance ministers approved the framework for the monetary union but left questions over the timing of the launch of the single currency unanswered.
UNSNIP

Ivo Cerckel

OPEC President Chakib Khelil told Reuters on Friday 19 December 2008 that some OPEC oil ministers will be able to consult further on the state of the market at the Arab Economic Summit to be held in Kuwait on 19-20 January 2009. (1)

The Summit’s aim is to find a comprehensive joint Arab vision to face the economic challenges, by accelerating the Arab joint market establishment. (2)

The 14 January 2009 preparatory meeting for the Summit will be a meeting for Arab Finance Ministers and governors of central banks. (3)

The 29 and 30 December 2008 Muscat, Oman, Gulf Co-operation Council (GCC) Summit will set up the 2009 Gulf Monetary Council (GMC), a precursor to the 2010 Gulf Central Bank (GCB).

Gold is hiding in oil because oil is the only commodity in the world that is large enough for gold to hide in.
If the GCC Summit will pool the GCC gold reserves, make this pool the reserves of the Khaliji, the GCC single currency, and periodically mark these reserves to market (-price), then every increase in the price of gold will automatically lead to an increase in the price of oil. By same token, the present indecently low USA dollar-denominated oil prices will immediately come to an end.

At the Kuwait Arab Economic Summit, the decision could then be taken to immediately price oil in Honest Money, to immediately price oil in Khaliji.

That’s how the Arab Economic Summit to be held in Kuwait on 19-20 January 2009 could be the cornerstone for Arab economic and social development.

Ivo Cerckel
Siquijor, 22 December 2008

(1)
OPEC president says oil price has found floor
Fri Dec 19, 2008 9:37am GMT
http://uk.reuters.com/article/businessNews/idUKENG00045920081219

(2)
Determined to make Kuwait economic summit a success - official …
Dec 21, 2008
]http://www.menafn.com/qn_news_story_s.asp?StoryId=1093225534

(3)
Kuwaiti official visits Damascus to discuss Arab Economic Summit
21 December, 2008 06:10:00
http://www.uaedailynews.com/middleeast/126.html

GCC = Gulf Co-operation Council

Lowest since Feb. 04
FRONT PAGE - Saturday, 20 December 2008 - 22 Thul-Hijjah 1429 H
http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2008122024647
SNIP
LONDON – US light crude for January delivery fell $2.64 to $33.58 a barrel early Friday. It earlier touched $33.44, the lowest since early February 2004.

COMMENT - Muscat Summit must pool GCC gold reserves
As oil is the only commodity in the world that is large enough for gold to hide in, the 29 and 30 December 2008 Muscat GCC Summit should, in order to achieve higher oil prices, decide to immediately pool the GCC gold reserves, make this pool the reserves of the future Khaliji and periodically mark these reserves to market (-price). In that case, every increase in the price of gold will automatically lead to an increase in the price of oil.

Muscat Summit will see launch of GCC Monetary Fund — secretary general
KUNA (Kuwait News Agency)
http://www.zawya.com/story.cfm/sidKUN0016081220081515/Muscat%20Summit%20will%20see%20launch%20of%20GCC%20Monetary%20Fund
SNIP
RIYADH, Dec 20 (KUNA) — The GCC Summit in Muscat will see the launch of the GCC Monetary Fund, as well as a discussion of all obstacles in the way of economic cooperation and integration among the six member states, said GCC Secretary General Abdulrahman Al-Attiyah on Saturday.
In a statement published by Okath newspaper, Al-Attiyah said the economic dossier would feature strongly in the summit, which was expected to launch the GCC Monetary Union and its Monetary Council, thereby paving the way for establishing the GCC Central Bank.

Ivo:
No more talk of a single currency.

Only of the marking to market of the GCC gold reserves by the GCC Monetary Council, the precursor to the GCC Central Bank

That’s FreeGold.

No effort is being spared by the DIFC to prevent the GCC from adopting Honest Money. By the same token, the DIFC wants oil prices to forever remain indecently low.

The 29 and 30 December 2008 Muscat, Oman, Gulf Co-operation Council (GCC) Summit will set up the 2009 Gulf Monetary Council (GMC), a precursor to the 2010 Gulf Central Bank (GCB).

The current worldwide economic situation is due to the phenomena of unbacked paper money (the metaphor of “printing” money is still being used for worthless digital liquidity representing “money”) and fractional-reserve banking.

The USA Federal Reserve will do whatever it takes to keep these phenomena alive. As USA president-elect Barack Obama told reporters this week, after the decision of the USA central bank to lower interest rates to ZERO, the USA is running out of the traditional ammunition that’s used in a recession, which is to lower interest rates. This, said Obama, underscores the case for a big fiscal stimulus. (1)

Obama is thus predicting more free zerodollars, created through the printing press, until the zerodollar vase will break.

Still, in an “Economic Note”, published on 17 December 2008, the Dubai International Financial Centre (DIFC) calls for the GCC single currency, the Khaliji, to be pegged to a basket of global currencies comprising the soon to be broken USA zerodollar, the euro, the Japanese yen and the British pound. (2)

The basket would not only comprise the zerodollar. The zerodollar would determine FORTY-FIVE PERCENT of the basket’s value. (3)

According to the final draft, however, the GMC/GCB will be independent from the governments of the member countries and its aim will be to “maintain price stability”, a senior Gulf official said last month. (3 again)

How will the GMC/GCB be able to maintain price stability if the Khaliji is pegged to a basket of currencies? The question is difficult enough to answer. The question becomes impossible to answer when one realises that almost half of the basket’s value will be determined by the USA zerodollar, which is soon to go lalala.

Price stability concerns the relationship between a currency and a basket of goods and services.

How will the GMC/GCB be able to maintain price stability, if the Khaliji is pegged to a basket of currencies, that is, if the value of the Khaliji is itself determined by a basket of currencies (half of which basket is soon to go lalala)?

How will the stability between those two baskets be achieved?

The Muscat GCC Summit later this month should therefore decide to immediately pool the GCC gold reserves, make this pool the reserves of the Khaliji and periodically mark these reserves to market (-price).

In that case, every increase in the price of gold, will lead to an increase in the value (of the reserves) of the Khaliji.

Gold is hiding in oil because oil is the only commodity in the world that is large enough for gold to hide in.

If the Muscat GCC Summit decides to immediately pool the GCC gold reserves, make this pool the reserves of the Khaliji and periodically mark these reserves to market (-price),
then every increase in the price of gold will automatically lead to an increase in the price of oil.

By the same token, the present indecently low USA zerodollar-denominated oil prices in lalala-land will immediately come to an end.

The proceeds from the oil sales can then be converted into Islamic gold dinar to complement the GMC/GCB’s gold reserves. (4)

That’s the way to achieve Honest Money.

But the DIFC prefers to concentrate its efforts on its hopeless attempt to keep the zero-paper-money house of cards standing for a few more seconds.

Ivo Cerckel
Siquijor, 18 December 2008

NOTES

(1)
Fed slashes rates to near zero
By Krishna Guha in Washington
Published: December 17 2008 02:00 | Last updated: December 17 2008 02:00
http://www.ft.com/cms/s/0/a4760824-cbdb-11dd-ba02-000077b07658.html

(2)
DIFC Economic Note Recommends Pegging GCC Common Currency to a Basket of Currencies
Press Release.
17 December 2008
http://www.zawya.com/Story.cfm/sidZAWYA20081217115746/DIFC%3A%20Peg%20GCC%20Common%20Currency%20to%20Basket

(3)
DIFC report urges end to Gulf’s dollar peg
by Daliah Merzaban on Wednesday, 17 December 2008
http://www.arabianbusiness.com/541423

(4)
Islamic gold dinar, Oil, and Khaleej dinar – first exploration
December 8th, 2008 by Ivo Cerckel
http://bphouse.com/honest_money/2008/12/08/islamic-gold-dinar-oil-and-khaleej-dinar-%E2%80%93-first-exploration/ - if the link foes not work, try copy and paste it in your browser

On Tuesday 16 December 2008, the Kuwait Times reported that inflation is surging in Saudi Arabia. (1)

One way to control inflation is to raise interest rates.

On Wednesday 17 December 2008, the Kuwait Times nevertheless reported that Saudi Arabia cut its interest rates “as the world’s largest oil exporter feels the repercussions of the global economic slowdown.” (2)

There is a Hadith of Prophet Muhammed (Peace and Prayers Be Upon Him) in the Sahih Muslim which teaches:
“Abu Said Al Khudri reported Allah’s messenger as saying: “gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt. (When a transaction is) like for like, payment being made on the spot, then, if anyone gives more or asks more, he has dealt in riba, the receiver and the giver being equally guilty.”

This Hadith of Prophet Muhammed establishes two things:

ONE ‘money’ in Islam is either precious metals such as gold and silver, or commodities such as wheat, barley, dates and salt.

TWO when gold, silver, wheat, barley, dates and salt were used as money, their value was ‘inside’ and not outside’ the money. Hence, it is established that ‘money’ in Islam must possess intrinsic value. (3)

Gold, silver, wheat, barley, dates and salt are no longer being used as money.

Therefore, Saudi Arabia is using interest rates.

And therefore, Saudi Arabia has lost all direction.

Ivo Cerckel
Siquijor, 17 December 2008

(1)
Saudi consumers urge action on high prices
Published Date: December 16, 2008
http://www.kuwaittimes.net/read_news.php?newsid=NjE0MTc0MzUz
SNIP
Like other countries in the Gulf Arab region, Saudi Arabia has been battling a surge in inflation which peaked at almost 11 percent in the summer but has eased only slightly since then to 10.35 percent in September.

(2)
Saudi cuts interest rates by 0.5 percent
Published Date: December 17, 2008
http://www.kuwaittimes.net/read_news.php?newsid=NjYwNzUyMzQ2
SNIP
RIYADH: Saudi Arabia’s central bank yesterday slashed its key interest rate by 0.5 percent as the world’s largest oil exporter feels the repercussions of the global economic slowdown, bankers said. The Saudi Arabian Monetary Agency (SAMA) reduced its repurchase rate to 2.5 percent from 3.0 percent, the fourth cut in its benchmark rate since October. The move comes ahead of a meeting by the US Federal Reserve on Tuesday expected to further reduce US interest rates, and as Saudi Arabia’s economy slows on the back of a sharp fall in oil prices.

(3)
Imran N. Hosein, “Explaining the Disappearance of Money with Intrinsic Value”, paper delivered at the International Conference on the Gold Dinar Economy, held in Kuala Lumpur on 24 and 25 July 2007, p. 1

The USA Securities and Exchange Commission (SEC) is criticising itself for having failed to detect Mr Madoff’s alleged USA dollar 50 billion Ponzi scheme though his consistently high returns had aroused suspicions over the years and sparked complaints to regulators. (1)

The good thing about this is that our Masters will be foreclosed from bailing out Madoff who himself admitted he was a Ponzi scheme.

The efficient market hypothesis states, in its simplest form, that the current market’s valuation of an asset accurately reflects all past and present information from which each and every shareholder thus receives the full benefits. (2)

Right, it follows from the efficient market hypothesis that the current market’s valuation of an asset does not reflect future information about the asset.

That’s why the sheeple need a government, financed through taxation whereas the thief does not come back periodically, nor does the thief pretend to stealing in the public interest.

The SEC should have alerted the sheeple to Madoff being a Ponzi scheme.

But we are still not being told what would have been Madoff’s Ponzi scheme.
This is still future, science-fiction, information.

The SEC was established by the United States of America congress in 1934 as an independent, non-partisan, quasi-judicial regulatory agency following years of depression caused by over production of goods, the introduction of consumer credit, and the Great Crash of 1929. The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting. The SEC was given the power to license and regulate stock exchanges, says Wikipedia. (3)

The Greater Depression nevertheless started this fall.

The SEC is utterly incompetent.

The efficient market hypothesis says that the current market’s valuation of an asset accurately reflects all past and present information. Like the current market’s valuation of the asset, the SEC cannot provide future information about that asset

What’s then the use of the SEC? What kind of information which the market cannot provide does the SEC provide?

Still, the Internal Revenue Service (IRS) of the USA is extracting funds from honest people to keep the SEC bureaucrats alive.

Repeal the SEC immediately!

Ivo Cerckel
17 December 2008

NOTES

(1)
SEC chief criticises failures in Madoff case
By Joanna Chung in New York
Published: December 17 2008 02:25 | Last updated: December 17 2008 02:25
http://www.ft.com/cms/s/0/92bd4c68-cbd7-11dd-ba02-000077b07658.html

(2)
Arthur B. Laffer, “Do Investors need More Information?” in:  M. Bruce Johnson, ed., “The Attack on Corporate America”, McGraw-Hill, 1978, 107

(3)
http://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission

A court of appeal in Brussels, Belgium, says that banks should consult shareholders before agreeing to being carved up. (1)

The court dares not challenge fractional-reserve banking.

The court thereby recognises that under no circumstances, it will protect depositors.

The court will only protect banksters and their shareholders.
The court will only promote usury, to the benefit of the banksters’ shareholders.

The court allows banksters to continue creating money out of thin air through fractional-reserve banking, just like the court’s Masters, the government of Belgium, can create money out of thin air through the use of the printing press.

Yes, Belgium, the court’s Masters, is a member of the European Monetary Union. So only the European Central Bank (ECB) can print money in Belgium.

But ECB president Jean-Claude Trichet says this morning in the Financial Times that the ECB will continue its Ponzi scheme. (2)

The Brussels court of appeal agrees.

To repeat:
Fractional-reserve banking
From Wikipedia, the free encyclopedia
http://en.wikipedia.org/wiki/Fractional-reserve_banking
SNIP
Fractional-reserve banking is the banking practice in which banks are required to keep only a fraction of their deposits in reserve with the choice of lending out the remainder while maintaining the obligation to redeem all deposits upon demand. This practice is UNIVERSAL in modern banking.

Criticism of fractional-reserve banking
From Wikipedia, the free encyclopedia
(Redirected from Debt-based monetary system)
http://en.wikipedia.org/wiki/Debt-based_monetary_system
SNIPS
Some critics of fractional reserve banking and the related monetary system may refer to it by the political term debt-based monetary system
+
Critics of fractional reserve usually note that the banking system “creates money out of nothing”. The insight that banks “create money by extending loans” is not new, and the subject is covered in most introductory economics textbooks and many popular reference works

Ivo Cerckel
Siquijor, 15 December 2008

NOTES

(1)
Belgium vows to press on with Fortis sale
By Michael Steen in Amsterdam
Published: December 14 2008 18:10 | Last updated: December 14 2008 18:10
http://www.ft.com/cms/s/0/b5046408-ca08-11dd-93e5-000077b07658.html
SNIP
The Belgian government said on Sunday it was “determined” to press ahead with the €14.5bn ($19.4bn) sale of Fortis to BNP Paribas, in spite of a surprise court ruling that freezes the transfer of a majority stake to the French bank.
In a decision late on Friday, that shocked political and business circles, the Brussels Court of Appeal found in favour of a group of shareholders seeking to block the carve-up of Fortis.
It said shareholders should be consulted on management decisions in October that led to the nationalisation of Fortis in the Netherlands and the sale of its Belgian operations to BNP Paribas.

(2)
Trichet’s Ponzi scheme
December 15th, 2008 by Ivo Cerckel
http://bphouse.com/honest_money/2008/12/15/trichet%E2%80%99s-ponzi-scheme/
If the link does not work, try copy and paste it in your browser.

Bernard Madoff , the former Nasdaq chairman who was arrested last week for allegedly running the biggest USA dollar Ponzi scheme of all time, immediately admitted to prosecutors that his was a Ponzi scheme. (1)

Jean-Claude Trichet, president of the European Central bank, does not.

Trichet only mumbles about the need for reflection on the fragility, not only of global finance but of the global economy itself.  (2)

Granted, if Trichet is prepared to question unbacked paper money, then he is not intellectually dishonest.

The Ponzi scheme began with a vengeance on 15 August 1971, when USA president Richard Nixon ended the remnants of the gold standard, and unleashed entirely discretionary monetary policy on the world. (3)

Ivo Cerckel
Siquijor, 15 December 2008

NOTES

(1)
HSBC joins victims of Madoff’s alleged fraud
By Francesco Guerrera and Henny Sender in New York and Victor Mallet in Madrid
Published: December 14 2008 23:24 | Last updated: December 14 2008 23:24
http://www.ft.com/cms/s/0/5446156e-ca1f-11dd-93e5-000077b07658.html
SNIP
Prosecutors alleged that he said his operations were “just one big lie” and “basically a giant Ponzi scheme” – a structure where investment managers pay old investors with money raised from new investors to cover their losses.

(2)
Trichet warns on fiscal indiscipline
By Ralph Atkins and Lionel Barber in Frankfurt
Published: December 14 2008 23:31 | Last updated: December 14 2008 23:31
http://www.ft.com/cms/s/0/83c0905c-ca16-11dd-93e5-000077b07658.html
SNIP
Mr  Trichet argues that the global financial market crisis has posed a serious threat to industrialised economies. “We cannot afford in future to put the concept of the market economy at risk as we did . . . The fragility, not only of global finance but of the global economy itself, is something that we should reflect on.”

(3)
December 13, 2008
The Age of Madoff
Posted by Lew Rockwell at December 13, 2008 01:36 PM
http://www.lewrockwell.com/blog/lewrw/archives/024400.html

Former Nasdaq chairman Bernard Madoff was arrested last week for allegedly running the biggest dollar Ponzi scheme of all time.

According to the Securities and Exchange Commission (SEC)’s statement, Mr Madoff has confessed to losses of “at least”  USA Dollar 50 billion.

A giant Ponzi scheme? What was the actual scam?

We are not allowed to know what Madoff did wrong.

According to prosecutors (Ivo: from the SEC?), when asked by the FBI agents about his revelation to his amazed sons that his business was collapsing, he said simply: “There is no innocent explanation”, says The Telegraph. (1)

Along the way, the sheeple are coming to realise how bad the Crisis really is.

We have been living beyond our means for too long and have displayed the utmost creativity to continue doing that. That creativity has now come to an end.

Without collateral or anchor, no valuation can be trusted. Hence, the purchasing power of one USA dollar varies according to the place where you want to establish that purchasing power. The same product geographically varies in price.

FreeGold would put an end to these different valuations.

The dollar debt system is losing all its credibility.

Only universally valuable FreeGold can restore this credibility to “our” globalising economy.

At that moment, the same product will have the same price all over this planet.

Or will German chancellor Merkel continue to argue that there is now a general consensus to negate all economic laws? (2) (3)

This horrific fraud is a perfect icon of the era of central banking, which began with a vengeance on 15 August 1971, when Richard Nixon ended the remnants of the gold standard, and unleashed entirely discretionary monetary policy on the world. (4)

Ivo Cerckel
Siquijor, 14 December 2008

NOTES

(1)
Bernie Madoff: Profile of a Wall Street star
Bernard Madoff launched his high-flying career with a few thousands dollars raised from summer jobs as a lifeguard and garden sprinkler installer, and ended it in a pale blue bathrobe and slippers.
By Philip Sherwell in New York
Last Updated: 12:04AM GMT 14 Dec 2008
http://www.telegraph.co.uk/finance/3742427/Bernie-Madoff-Profile-of-a-Wall-Street-star.html

(2)
Wirtschaftspolitischer Rat
Vom Krisentreffen zur konzertierten Aktion
Von Andreas Mihm, Konrad Mrusek und Manfred Schäfers
13. Dezember 2008
http://www.faz.net/s/Rub0E9EEF84AC1E4A389A8DC6C23161FE44/Doc~E5E18EB9107EB439EB8363930B20AFD4C~ATpl~Ecommon~Scontent.html
SNIP
Der Blick zurück auf dem Weg nach vorn ist gewollt. Der stellvertretende Regierungssprecher Thomas Steg sprach mit Blick auf das Treffen im Kanzleramt an diesem Sonntag von einer „ideellen konzertierten Aktion“. Es sei zwar nicht beabsichtigt, die Runde zu einer dauerhaften Einrichtung zu machen, aber denkbar, dass das Treffen wiederholt werde. Auf jeden Fall steckt hinter der Einladung die Absicht, einen breiten gesellschaftlichen Konsens für das erwogene zweite Konjunkturpaket zu erzielen (lesen Sie die Namen auf Merkels Gästeliste).

(3)
“Madame Non” Merkel switches to “yes” as EU motto
Fri Dec 12, 2008 10:24am EST
By Kerstin Gehmlich
http://www.reuters.com/article/vcCandidateFeed2/idUSTRE4BB4OX20081212
SNIP
BRUSSELS (Reuters) - German Chancellor Angela Merkel on Friday laughed off the “Madame Non” nickname critics have given her over her European policies, saying “yes” had been her credo during climate and economic talks at an EU summit.
Merkel, who faces a general election next year, left the meeting with a mixed bag of gains and setbacks that might give some relief to German industry, but will also see Berlin pay more for climate measures in eastern Europe than it intended.
“‘Yes’ has been the motto of the day,” a smirking Merkel told a news conference at the end of the two-day meeting of European leaders, when asked about her “Madame Non” image.

(4)
December 13, 2008
The Age of Madoff
Posted by Lew Rockwell at December 13, 2008 01:36 PM
http://www.lewrockwell.com/blog/lewrw/archives/024400.html

Central banks should stop thinking independently from reality.

The Fallacy of Causal Confusion - ECB interest-rate independence means independence from reality – Petitio principii – The Principle of Non-Contradiction

Interest rates are not, as Lord Keynes thought (1), the price of money. (2)

Interest rates are the price spreads between the stages of production. The former is only a reflection of the latter. But it requires no Keynesian labyrinths to explain this phenomenon. (3)

When those price spreads change, interest rates should follow suit.

Not so for the European Central Bank (ECB).

ECB governor Axel Weber, central bank governor of Germany (president of the Bundesbank), says that the ECB’s monetary policy is not subject to any kind of automatic mechanism. (4)

Weber’s ECB colleague Athanasios Orphanides, central bank governor of Cyprus, even argues that interest rates are tools for promoting expansion and goes on to argue that the idea that monetary policy becomes ineffective and cannot provide expansionary impetus when the short-term interest-rate is very low, or zero, is a fallacy. (5)

Orphanides’ argument presupposes that the level of interest rates causes economic expansion, c.q. economic decline.

Orphanides attributes a certain type of effect (economic expansion, c.q. economic decline) to a subject (interest rates) which, in itself, does not cause such effects. This is the fallacy of “causal confusion” which is false, precisely because it attributes certain effects to the subject of interest rates which interest rates do in themselves not cause. (6)

Prosperity is the result of hard work, savings and/or investment. Prosperity is not the result of interest-rate manipulation or use of the money printing machine. (7)

The fallacy of “petitio principii”, otherwise known as “begging the question”, occurs whenever something which the conclusion seeks to establish (8) is being used as a premise to prove the very same conclusion. (9)

Orphanides makes an argument of the fact that there is an automatic mechanism which says that  interest rates cause expansion, c.q. decline, of economic activity.

Weber says that there is no automatic mechanism.

Aristotle’s principle of non-contradiction says that is impossible to be and not be at the same time and in the same respect.

Contrary to what many authors argue, this principle, or law, is not applicable to reality, only to thought. Thought is submitted to it. Reality is not. (10)

Orphanides’ thought contradicts Weber’s thought because they both deny the nature of interest rates.

Central banks should stop thinking independently from each other and from reality.

Ivo Cerckel
Siquijor, 13 December 2008

NOTES

(1)
Murray N. Rothbard, “Man, Economy, and State – A Treatise on Economics”, Auburn, Alabama: Ludwig von Mises Institute 2001, (originally published 1962)., p. 691

(2)
George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois, Jameson books, 1998. 3rd ed., p 863

(3)
Rothbard, op. cit., p. 691

(4)
ECB’s Weber says markets will have to wait for next rate cut
AFP
FRANKFURT, Dec 12, 2008 (AFP)
http://www.zawya.com/story.cfm/sidANA20081212T074325ZAQW48/ECB%27s%20Weber%20says%20markets%20will%20have%20to%20wait%20for%20next%20rate%20cut
SNIP
Influential European Central Bank governor Axel Weber [says …]
“Our monetary policy is not subject to any kind of automatic mechanism.”

(5)
ECB confident on power to fight downturn
By Ralph Atkins in Frankfurt
Published: December 12 2008 12:35 | Last updated: December 12 2008 19:44
http://www.ft.com/cms/s/0/f0313446-c843-11dd-b86f-000077b07658.htmlhttp://www.ft.com/cms/s/0/f0313446-c843-11dd-b86f-000077b07658.html
SNIP
The European Central Bank could deploy exceptional monetary measures even if interest rates fell to zero, a senior policymaker has argued, indicating that the ECB feels it still has plenty of ammunition to fight the economic downturn.
Athanasios Orphanides, central bank governor of Cyprus, argued that “the idea that monetary policy becomes ineffective and cannot provide expansionary impetus when the short term interest rate is very low, or zero, is a fallacy.”

(6)
Juan Jose Sanguineti, “Logic”, Manila: Sinag-Tala Publishers, (first published in 1982 in Spanish by the Ediciones Universidad de Navarra), 1992. p. 170

(7)
Roland Leuschel and Claus Vogt, “Das Greenspan Dossier, Wie die US-Notenbank das Weltwährungssystem gefährdet. Oder: Inflation um jeden Preis”, www.finanzbuchverlag.de, 2006, 3rd ed.,, p. 50

(8)
Madsen Pirie, “How to Win Every Argument – The Use and Abuse of Logic”, Continuum Books, 2006, p. 123

(9)
Sanguineti, op. cit., p. 171

(10)
Fernand Van Steenberghen, (F.-X. de Guibert, ed.), Philosophie fondamentale , Longueuil, Québec, Editions du Préambule, 1989, footnote p. 296:
Contrairement à ce qu’affirment beaucoup d’auteurs, ces principes [the principle of non-contradiction, the law of the excluded-middle and the law of identity] sont des lois logiques ou des lois de pensée comme telle et non des lois de l’ordre réel.

Here’s a 08 December 2008 video of the Canadian Business News Network where at minute 12,
in reply to the question whether the USA central bank, the Fed, is not a hedge fund,

Lyle Gramley, Fed Governor from 1980 to 1985 and current senior advisor at Stanford Group,

says that the Fed balance sheet includes USA Treasury gold certificates,

that these certificates could be marked to market(-price) (MTM-d) instead of being priced as they are now at USD 42,

and that, and I paraphrase, if the Fed did that, its balance sheet would not look so leveraged.

Ivo:
The question arises to what level the price of gold would then rise.
The question presupposes that there is some gold left at Fort Knox.

Trading Day : December 8, 2008 : Special: Part One [12-08-08 2:30PM]
http://watch.bnn.ca/trading-day/december-2008/trading-day-december-8-2008/#clip119798
Making sense of the financial crisis, the possible cures, and the future of global business. Special guest host Niall Ferguson, author and professor, Harvard University, joins Marty Cej and Frances Horodelski. BNN interviews Lyle Gramley, former Fed Governor and current senior advisor, Stanford Group, and John Taylor, CEO, and founder, International Foreign Exchange Concepts Inc.

Ivo:
During my “research” for this post, I came across this;:
August 12, 1981
Policy Analysis no. 2
Monetization Practices and the Political Structure of the Federal Reserve System
by Richard H. Timberlake Jr.
http://www.cato.org/pub_display.php?pub_id=868&full=1
SNIP
The late 1950s and early 1960s saw a resurgence of world trade, one effect of which was an outflow of gold from the United States to foreign central banks and treasuries at a rate of approximately $1 billion a year. The Fed effectively sterilized the loss of gold by matching the losses in the titles to gold (gold certificates) with acquisitions of government securities. The U.S. money stock, therefore, did not decline in the classical fashion. The gold standard was not allowed to operate.

The high profile effort to agree legislation to lend $14bn to the USA auto industry collapsed on Thursday night, leading the Bush administration to hold open the possibility that it would seek funds from its financial rescue plan instead, says the Financial Times this morning.

As a result, Asian stock markets collapsed this morning and European markets are now collapsing also.

There are now two possibilities.

Either the whole (financial) “system” will collapse.

Or our masters will print money.

Gold wins in either case.

That’s why gold is unique.

Our Detroit friends even dare to use the threat of domino-cascade collapses.
In that way, they are making sure that the prophecy of hyper-inflation will be fulfilled.

Ivo Cerckel

Morgan Stanley UAE wants a world where the USA dollar regime can continue to unilaterally export its hyper-inflations over the planet.

Last October, the United Arab Emirates (UAE) Central Bank, whose currency, the dirham, is pegged to the USA dollar refused to follow the USA central bank, the Fed, in cutting interest rates.

“Dollar peg pays off” headlines The National in Abu Dhabi this morning. (1)

The unexpected move has been successful “so far”, says The National, because the country’s economic needs differ from those of the USA. The UAE needs to keep a check on inflation
[Ivo: check on inflation – inflation which was exported to the UAE and the rest of this planet by the USA and its dollar regime]
while America needs growth, which is why the USA Federal Reserve reduced its key interest rate by half a percentage point in late October, argues The National.

What? There is no danger of inflation in the USA? Does The National really think that the USA bailouts can be financed in another way than through printing more unbacked paper money out of thin air (the metaphor of “printing” money is still being used for creating worthless digital liquidity representing “money” out of thin air)?

Economists have decreed that there is now shift of market sentiment allowing the UAE Central Bank to keep its key interest rate slightly higher than the Federal Reserve’s, says The National. The newspaper quotes Mohamed Jaber, an economist at Morgan Stanley, as saying that contrary to what was thought possible a few months ago, forward markets are now pricing in a depreciation of the dirham. I suppose that’s vis-a-vis the USA dollar to which the dirham is pegged. How is a depreciation vis-a-vis the USA dollar possible if the dirham is pegged to that worthless piece of paper?

And then it comes:
Standard economic wisdom dictates that maintaining a fixed exchange rate in relation to the dollar requires a country to mirror US monetary policy exactly, or risk creating a situation where speculators could borrow money in the US at lower rates and deposit it here for an easy profit. Such cash flows would be large and rapid, and likely to destabilise the economy.
However, despite predictions to the contrary, economists say the Central Bank seems to have been able to prevent such flows of money. The fact that the markets are now betting on a slight devaluation of the dirham during the next 12 months has allowed the Central Bank to maintain slightly higher interest rates than the US without inviting in large amounts of speculative money,
says The National

The refusal to follow the USA Fed rate cut was in October 2008.

And now, only two months later, the economists quoted by The National can already argue that standard economic wisdom has been turned upside down.

Dr Henry Hazlitt teaches that standard economic wisdom looks not merely at the immediate but at the longer effects of any act or policy; and that standard economic wisdom consists in tracing the consequences of that policy not merely for one group but for all groups. (2)

One thing is certain; the economists quoted by The National only look at the short-term consequences of the Central Bank’s decision not to follow USA interest rate cuts.

I am not sure that these economists will still hold the same view when the USA dollar will accelerate on its path towards hyper-inflation.

Yes, our American Masters are still thinking they will be able to subdue the monster of the USA dollar hyper-inflation.

This mastering by the USA of the imminent USA hyper-inflation will be one of the factors which will demonstrate whether the economists quoted by the National can be taken seriously when they argue that the dollar peg is good for the UAE.

If the dollar peg was really that good, why does the UAE not scrap the dirham and adopt the USA dollar? Because then it could not take independent interest rate decisions?

According to Mr Jaber, it is in the interest of the Central Bank to keep interest rates slightly higher, given that lowering them could add to inflationary pressures by making foreign goods more expensive, says The National.

Lowering interest rates would, I suppose, lead to the lowering of the exchange rate of the dirham, thus to higher USA dollar-denominated oil export revenues. Remember that Dr Hazlitt said that the art of economics consists in looking for the consequences of interest rates for ALL groups in society.

If the 29 and 30 December 2008 Muscat, Oman, Gulf Co-operation Council (GCC) Summit decides to pool the GCC gold reserves, make this pool the reserves of the Khaleej dinar and periodically mark these reserves to market (-price), then every increase in the price of gold will automatically lead to an increase in the price of oil.

By same token, the present indecently low USA dollar-denominated oil prices will immediately come to an end.

I am afraid, the UAE dollar peg, and the hyper-inflations unilaterally initiated by the dollar regime, will have to suffer the same fate and be relegated to the dustbin of history.

Ivo Cerckel
Siquijor, 11 December 2008

Malaysia, Russia and Europe want multi-polar world
December 11th, 2008 by Ivo Cerckel
http://bphouse.com/honest_money/2008/12/11/malaysia-russia-and-europe-want-multi-polar-world/
If this link does not work, try to copy and paste it in your browser.

NOTES

(1)
Dollar peg pays off
Travis Pantin
Last Updated: December 10. 2008 8:35PM UAE / December 10. 2008 4:35PM GMT
http://thenational.ae/article/20081210/BUSINESS/960292012/1005

(2)
Henry Hazlitt, “Economics in One Lesson”, New York: Arlington House Publishers, 1978, 2nd ed. (first ed. published 1946 by Harper and Brothers), p. 17
http://jim.com/econ/chap01p1.html

The 29 and 30 December 2008 Muscat GCC Summit will give the start to the process of re-establishing the link of money to gold.

During a 23 October 2008, Bloomberg TV interview former Malaysian Prime Minister Tun Dr Mahathir Mohamad reiterated his belief that governments worldwide should consider a new international monetary system that doesn’t depend on any single currency.
“You may have to use a number of currencies for trading purposes, or you may have to use a special trading currency, probably based on gold,” Mahathir said. “Gold has intrinsic value. Money has no value, just pieces of paper and government assurances.” (1)

Russia and Europe also want a multi-polar world that doesn’t depend on any single government, says Lorna Thomas in the 09 December 2008 Global Politician. (2)

It seems that the 29 and 30 December 2008 Muscat, Oman, Gulf Co-operation Council (GCC) Summit, where the 2009 Gulf Monetary Council (GMC), a precursor to the 2010 Gulf Central Bank (GCB), will be set up, will be adopting the Islamic gold dinar as reserve for its Khaleej dinar.  (3)

It was the same Dr Mahathir who on 26 March 2002 proposed that international trade balances be settled in Islamic gold dinar. The proposal included the proposal that the dinar be held as central bank reserve. (4)

The new international monetary system will thus definitely re-establish the link of money to gold.

As Dr Mahathir said on 04 December 2008, we are linked to the world economies via trade but that the Bretton Woods agreements, which linked the USA dollar to gold and all other currencies to the USA dollar, are no longer in force since 15 August 1971 when USA president Richard Nixon broke them. (5)

The 29 and 30 December 2008 Muscat GCC Summit will give the start to the process of re-establishing the link of money to gold.

Ivo Cerckel
Siquijor 11 December 2008

NOTES

(1)
Mahathir predicts further doom and no end to current financial crisis
http://202.190.175.188/index.php/malaysia/11053-mahathir-predicts-further-doom-and-no-end-to-current-financial-crisis

(2)
Russia and Europe want a multi-polar world
Lorna Thomas - 12/9/2008
http://globalpolitician.com:80/25307-russia-europe-united-states-foreign-policy

(3)
Islamic gold dinar, Oil, and Khaleej dinar – first exploration
Posted: 08-Dec-2008
http://blogs.zawya.com/goldiswealth/081208025939/

(4)
Mahathir proposes gold dinar as currency for international trade
Muslim News, Thu, 28 Mar 2002 08:10:32 -0000
http://www.freelists.org/archives/news/03-2002/msg00060.html

(5)
Dr M’s way to sustain brand
http://malaysianeconomist.blogspot.com/2008/12/dr-ms-way-to-sustain-brand.html

“Our” bankers are still not realising that their undercapitalised institutions which daily commit the crime of fractional-reserve banking are slowly dying from dollar poison.

Here’s a Khaleej Times article of today, 10 December 2008, which quotes a report by Abu Dhabi Commercial Bank (ADCB) arguing that the UAE will be able to tide over the global economic melt-down as the country is well-positioned to maintain fiscal surplus in 2008 and 2009 since it has the lowest “break-even oil price” in the GCC of $23 (Dh84.48) per barrel against the IMF’s baseline petroleum price projection of $68 per barrel for 2009. (1)

Look, the article mentions the oil price also in dirham. Why is that?

The very large volume of hysteria which has been raised predicting a coming “recession” is probably the clearest indication that the USA central bank, the Fed, is going to go insane in the opposite direction. Think about it. The Fed doubled the [USA] money supply during the decade of the 1980s. Here in 12 weeks, the Fed has multiplied Federal Reserve Credit by 2.5, times with Dallas Fed chief Richard Fischer predicting a triple by the end of December.
So, if you have one ounce of common sense, you know that the “error” the Fed makes this time will be the same “error” they make every time: TOO MUCH MONEY. (2)

This means inflation. This means a rising gold price, thus a rising price of the reserves of the Khaleej dinar, thus a rising value of the Khaleej dinar.

The recession hysteria will lead our Masters to hyper-inflate their currencies.

This is what reflation is about.

Will this lead to an economic crash?

What will happen after that?

As a first step, the Khaleej Times article which I quoted above mentions the price of oil in dirham.

Ivo Cerckel

NOTES

(1)
UAE Can Maintain Fiscal Surplus at $23 Oil
Khaleej Times 10 December 2008
http://www.zawya.com/Story.cfm/sidZAWYA20081210042914/
DUBAI - UAE will be able to tide over the the global economic melt-down as the country is well-positioned to maintain fiscal surplus in 2008 and 2009 since it has the lowest “break-even oil price” in the GCC of $23 (Dh84.48) per barrel against the IMF’s baseline petroleum price projection of $68 per barrel for 2009, a report by Abu Dhabi Commercial Bank (ADCB) said.

(2)
Gold - on the Cusp
By Howard Katz
Dec 8 2008 11:26AM
http://www.kitco.com/ind/katz/dec082008.html

The way forward for Kuwait to achieve decent oil prices.

Kuwait will take precautionary measures to counter the present economic crisis following the Eid holidays. (1)

In view of the current worldwide economic situation, especially concerning oil prices, Kuwait will formulate a financial plan that will help insulate the country against any instances of recession due to the fall in oil prices.  (1, again)

The current worldwide economic situation is due to the phenomena of unbacked paper money (the metaphor of “printing” money is still being used for worthless digital liquidity representing “money”) and fractional-reserve banking.

The solution to this problem is that the 29 and 30 December 2008 Muscat, GCC Summit, where the 2009 Gulf Monetary Council (GMC), a precursor to the 2010 Gulf Central Bank (GCB), will be set up, will pool the GCC gold reserves, make this pool the reserves of the Khaleej dinar and periodically mark these reserves to market (-price).

In that case, every increase in the price of gold, will lead to an increase in the value (of the reserves) of the Khaleej dinar.

Gold is hiding in oil because oil is the only commodity in the world that is large enough for gold to hide in.

If the Muscat GCC Summit decides to pool the GCC gold reserves, make this pool the reserves of the Khaleej dinar and periodically mark these reserves to market (-price),
then every increase in the price of gold will automatically lead to an increase in the price of oil.

By same token, the present indecently low USA dollar-denominated oil prices will immediately come to an end.

Ivo Cerckel

(1)
Kuwait: Emergency financial steps after Eid
Kuwait Times
08 December 2008
http://www.zawya.com/Story.cfm/sidZAWYA20081210051151/Emergency%20financial%20steps%20in%20Kuwait%20after%20Eid

There are signs that the nine-day holiday that started on December 2 was a good breather for United Arab Emirates (UAE) investors. The UAE markets are poised to open on a positive note when trading resumes tomorrow, Thursday, helped by several governments around the world announcing stimulus packages, says Gaurav Ghose, Financial Features Editor at Gulf News. (1)

The Organisation for Economic Co-operation and Development (OECD) says that the USA economy is still facing “sharp downside risks” to growth and that another fiscal stimulus could be needed if things get worse. The big rate cuts by the USA central bank, the Fed, “appear to be roughly appropriate in light of the adverse effect on real activity” of the credit squeeze, and “monetary policy should remain highly accommodative for quite some time to support the economy and the financial system”, says the OECD. (2)

Gulf News says that the stimulus packages have helped the mood of investors.

The OECD says that another fiscal stimulus could be needed if things get worse.

But once the USA economy would revive as a result of the stimuli, the Fed will have to raise interest rates in order to curb inflation.

At the same time, the USA government will have to take steps to reduce public debt.

How will that circle be squared?

Ivo Cerckel

NOTES

(1)
Investors ready to trade as nine-day breather ends
By Gaurav Ghose, Financial Features Editor
Published: December 09, 2008, 23:38
http://www.gulfnews.com/business/Markets/10266012.html

(2)
US faces deep problems, OECD says
By Steve Schifferes, Economics reporter, BBC News
Page last updated at 10:53 GMT, Tuesday, 9 December 2008
http://news.bbc.co.uk/2/hi/business/7772794.stm

QUOTES

“Moreover, by implication, it would also be the end of the irredeemable dollar as we know it. I am convinced that the managers of the irredeemable dollar are not afraid that their prodigious dollar proliferation policy endangers the value of the currency, Quantity Theory of Money notwithstanding. What they are afraid of is that the gold bulls will force Comex to close its gold window by cornering the supply of gold certificates. When that happens, it will be not only “gold is not for sale at any price” but also
“oil is for sale only against payment in gold”.
+
“The “last contango in Washington” refers to the end of the hegemony of the irredeemable dollar that is in no position to throw its weight around any more. The advent of backwardation means that a writing has appeared on the wall: “Mene tekel, upharsin”: the dollar has been weighed and found wanting. On the last day of this year of economic and financial surprises we shall know whether the backwardation in gold is permanent, or whether it will become permanent only after the inauguration of the new president, at the expiration of the next active gold futures contract in February.”

( Has The Curtain Fallen On The Last Contango In Washington?
Posted Monday, 8 December 2008
Source: GoldSeek.com Copyright © 2008
by Antal E. Fekete
Gold Standard University Live
http://news.goldseek.com/GoldSeek/1228744800.php )

Your savings in dollar? - soon to be worthless

How could regulation have prevented this crisis?

We are in a systemic financial crisis.
This crisis is due to the phenomena of worthless digital liquidity and fraudulent fractional-reserve banking.
If we want to solve the crisis, we have to replace these phenomena with something which has value and which is not fraudulent.

Not so for Qatar, nor for the Washington-based Institute of International Finance (IIF).

Qatar, where the central bank is still responsible for banking regulation, is reconsidering the structure of a new super-regulator. (1)

The IFF says that, despite the recent plunge in oil prices, the six Gulf Co-operation Council states are in control of massive funds to allow them to intervene and prevent the collapse of key regional banks. (2)

Qatar and the IIF are not interested in solving this crisis.

Qatar and the IIF want to save/preserve the existing riba-system of worthless digital liquidity and fraudulent fractional-reserve banking at all cost.

Ivo Cerckel

(1)
Financial sector: Regulators seek the right framework
By James Drummond
Published: December 8 2008 16:34 | Last updated: December 8 2008 16:34
http://www.ft.com/cms/s/49469108-c4bf-11dd-8124-000077b07658,s01=1.html
SNIP
But the events of recent months have caused the authorities to reconsider the structure of a new super-regulator. The central bank, still responsible for banking regulation, is a traditional institution. But its strict formulations are credited with maintaining liquidity – so far – in the local banking system.

(2)
GCC will not allow bank collapses amid global financial crisis
By Nadim Kawach  on Monday, December 08, 2008
http://www.business24-7.ae/Articles/2008/12/Pages/12082008_090a25f034104540b0bbd6e79db00c43.aspx
SNIP
Despite the recent plunge in oil prices, the six Gulf Cooperation Council states are in control of massive funds to allow them to intervene and prevent the collapse of key regional banks, the Washington-based Institute of International Finance (IIF) said in a study.

The present weaknesses in the financial system led Malaysia last week to urge Organisation of the Islamic Conference member countries to reconsider the use of the gold dinar for trade, especially with uncertainties in the international currency market.  (1)

The 26 March 2002 proposal of former Malaysian prime minister Tun Dr Mahathir Mohamad to settle international trade balances in Islamic gold dinar included the proposal that the dinar be held as central bank reserve. (2)

Gold is wealth. Oil is the only commodity in the world that is large enough for gold to hide in.

The fact that the dollar is still being used as the intermediary numéraire for oil-trade settlement, as the intermediary basic “standard” by which values are measured for oil-trade settlement, gives this dollar paper the backing of oil (oil becomes an indispensable valuable).

Once oil will see no more reason to support/back the dollar, oil  will “openly” shift towards gold and back it (through demand for gold) so as to create the new market for physical gold in association with the gold-friendly Khaleej-dinar numéraire.
(Khaleej (Gulf) dinar is being considered as one of the possibilities for naming the Gulf Co-operation Council (GCC) single currency.)

On the US dollar, Dr Mahathir said last week that without gold it had no backing at all and was basically a useless piece of paper and that only the demand for the US dollar to settle trade payments kept its value up. (3)

Hence, in a 05 December 2008 Gulf News column, Dr Syed A. Basher, research economist at Qatar Central Bank, argued, on the one hand, that we should not focus our attention on the movement between a national currency and any major international currency such as the US dollar and, on the other hand, that high and rising inflation in Qatar has caused the dollar peg system to become increasingly unstable.
Based on this evidence, Dr Basher concluded that the existing exchange rate system in Qatar is unsustainable and thus immediate exchange rate reform is needed to prevent exchange-rate distortions caused by the riyal’s peg to the dollar. (4)

We could thus well be on our way to seeing the 29 and 30 December 2008 Muscat, Oman, GCC Summit, where the 2009 Gulf Monetary Council (GMC), a precursor to the 2010 Gulf Central Bank (GCB), will be set up, adopting the Islamic gold dinar as reserve for the Khaleej dinar.

In that case, every increase in the price of gold, that is, every increase in the value of the Islamic gold dinar, will lead to an increase in the value of the Khaleej dinar.
As gold is hiding in oil, every increase in the price of gold, that is, every increase in the value of the Islamic gold dinar, will lead to an increase in the price of oil.
By same token, the present indecently low USA dollar oil prices will immediately come to an end.

Ivo Cerckel
Siquijor, 08 December 2008

NOTES

(1)
2008/12/06
Malaysia wants OIC countries to reconsider gold Dinar for trade
http://www.nst.com.my/Current_News/NST/Saturday/NewsBreak/20081206162348/Article/index_html

(2)
Mahathir proposes gold dinar as currency for international trade
Muslim News, Thu, 28 Mar 2002 08:10:32 -0000
http://www.freelists.org/archives/news/03-2002/msg00060.html

(3)
November 27, 2008 16:15 PM
Asia Must Initiate Changes To Monetary, Financial Systems
By Mohamad Nasir Yusoff
http://www.bernama.com.my/bernama/v3/news.php?id=374756

(4)
Qatar’s currency in need of reform
By Syed A. Basher, Special to Gulf News
Published: December 05, 2008, 23:46
http://archive.gulfnews.com/articles/08/12/06/10265034.html

Yes, Mr Trichet, the system of worthless digital liquidity and fraudulent fractional-reserve banking is abnormal.

We are in a systemic financial crisis. This crisis is due to the phenomena of worthless digital liquidity and fraudulent fractional-reserve banking. Our Masters are not planning to replace these phenomena by gold-backed money nor by a full-reserve system. No, they are accusing the past oil prices, which were little higher, of having destabilised the world economy.

1.
The European Central Bank (ECB) is considering printing money to “solve” the crisis. (1)

I suppose that this cannot possibly lead to inflation and that that’s why on Thursday 04 December 2008, the ECB nevertheless lowered “its” interest rates with 75 basis points to 2.5 percent.

At the question and answer session, following the decision, ECB president Jean-Claude Trichet was asked whether the ECB was considering intervention to boost confidence [in the system of worthless digital liquidity and fraudulent fractional-reserve banking]. (2)

He replied to other questions that the ECB has to be active and expeditious [at the point of a gun] but that the market situation