Gold Cycles & Dollar Final Slide in 2011
12/03/09 INSIIDE Track: “Outlook 2010 – 2011…
‘Period of Testing’
This comes during the culmination of a CRUCIAL 40-year period of testing in America… and at the simultaneous culmination of a trio of 40-year ‘testing periods’.
As I have often discussed, the Bible repeatedly describes a 40-day and a 40-year period of testing. By testing, I mean ‘testing and proving’ or ‘preparing’.
The ancient Israelites wandered in the wilderness for 40 years – a period of testing before they entered the Promised Land (and a period of punishment related to the 40 days they spent surveying the Promised Land before concluding they could not enter it). The city of Ninevah was given a 40-day period of testing in which to repent or be destroyed. Jesus was ‘tested’ in the wilderness for 40 days before his baptism and the start of his ministry.
The ancient Egyptians would ‘prepare’ bodies – through embalming – for 40 days before burial. In modern Christianity, many believers prepare themselves for Easter with a 40-day period of testing known as Lent. Doctors have determined it takes a broken bone about 40 days to heal – a period of preparation before it returns to full use.
Moses returned to Egypt after 40 years in the desert as a shepherd (an interesting precursor to his future). The book of Judges (in the Bible) describes diverse periods of time in Israel’s history, including 40 years of peace – during Gideon’s lifetime – and 40 years of captivity by the Philistines. Ezekiel prophecies about a 40-year period of desolation for Egypt, as punishment for its actions.
In many cases, the number 40 represents an intervening period – AFTER an initial action or decision and BEFORE the resulting consequences. It is a period of reprieve or delayed punishment. In many respects, it is a ‘grace period’ that allows time to reconsider and/or amend for a bad decision.
When this period is correlated to an impending judgement by God, it reinforces His mercy & grace and desire for resolution rather than judgement.
‘Testing: 1, 2, 3; Testing’
There is an even larger example of ‘testing’ that took place about 3,000 years ago. It involved a nation that was considered one of the richest and most powerful on earth. Dignitaries and academia converged on this nation, often bringing their gold and their resources in exchange for the privilege of a meeting or an association with this nation.
As you may have guessed, this nation was Israel – at the height of its power and status.
This nation was started with a founding father leaving his homeland and traveling to a new world where he did not know what to expect. His name was Abraham.
The early history of this nation involved many tests and trials, including disease and drought and multiple wars. However, its greatest triumphs coincided with the closeness of its relationship to God (YHWH). And, its greatest failings usually occurred when it turned its back on God.
At the peak of her standing, Israel had turned her back on God’s plan (to have Judges lead her rather than Kings, like all the surrounding nations) and demanded to do things her own way.
As was often the case, God let her have her way… and Israel had to live with the consequences (a policy often referred to as ‘free will’). However, God gave her not just one but three ‘periods of testing’ before allowing the inevitable consequences to finally take hold.
These three periods of testing were clearly delineated: 40 years of rule by King Saul, 40 years of rule by King David and 40 years of rule by King Solomon. Each period began with great promise as the corresponding leader honored and adhered to what God instructed. And, each 40-year period ended in disgrace, as they strayed.
After this 120-year period – a trinity of 40-year ‘periods of testing’ – Israel was, for all intents and purposes, finished. She was completely divided (sound familiar), actually breaking into two nations – Israel & Judah. Not surprisingly, it was the minority (Judah) who was still attempting to honor God’s wishes.
What is most interesting is that Israel’s prosperity and power continued to grow right up to the end. From all outward appearances, the reign of Solomon was the ‘best of times’, supported by the resources, capital and labor of many other nations. Unfortunately, the foundation of this prosperity was crumbling beneath the surface.
‘Testing: 1, 2, 3; Testing… Again’
Does any of that history lesson ring a bell?
Let’s see… America began when its founding fathers left a distant land and traveled to a new world, in search of the freedom to worship God.
America faced many tests and trials – including disease and drought – and fought many wars throughout much of her early history. Throughout this history, America continually grew and prospered – but not without some setbacks.
A perfect example took place in the late-1920’s when society was consumed with self-indulgence, rampant materialism and when a major court decision dealt a serious blow to the national acknowledgement that this same God (YHWH) was responsible for Creation (Scopes Trial). The 1930’s followed… Depression, drought, dust bowl, etc.
However, the discussion of events like this can be very subjective. So, I am more interested in focusing on the cycles and on another kind of ‘testing’ that has taken place in our nation. It is more objective as it deals with the foundation of our currency, which is easily quantifiable but is also directly related to social & civil desires of our nation.
Just as Solomon’s reign – during the third and final, 40-year period of testing for Israel – was accompanied by unfathomable wealth accumulation (often in exchange for little hard assets), a third 40-year period of testing in America has also been accompanied by an unfathomable accumulation of wealth… often in exchange for nothing more than debt-based promises. This latest phase began 38 years ago…
The Third Strike?
On August 15, 1971, Richard Nixon, et al sealed the fate of America and her currency when he closed the gold window and let other nations know that they could no longer convert their paper Dollars into Gold.
This completed a 10-day period following the Congressional announcement – on August 5, 1971 – that recommended devaluing the US Dollar. The Dollar began to drop, prompting the Swiss to pull out of the existing Bretton Woodsagreement. And, then came August 15th, 1971.
The process actually began in 1970 – when speculation against the Dollar greatly reduced its gold coverage – and then it hit an initial crescendo in July 1971, when France demanded $191 million of Gold in payment for Dollars. This was the culmination of the 2nd ‘period of testing’ for America.
In the months and years that followed August 1971, OPEC quickly realized that they were losing money by taking depreciating Dollars in return for their oil. So, they announced that oil would be again linked to the price of gold, sharply escalating its price. America’s economic foundation cracked.
This process initially culminated in late-1973/ early-1974, when Saudi Arabia and other Arab nations conspired to use the ‘oil weapon’ against the West, once an attack on Israel had taken place (which was still future). The attack took place, the oil weapon was engaged and the West was brought to her knees.
Quickly, Nixon, Kissinger, et al recanted and forced concessions out of Israel to appease the Arabs. The ‘weapon’ worked with lightning speed and pinpoint accuracy. As a result of Nixon’s ‘capitulation’, Saudi Arabia increased production in order to drop the price of oil. The message was loud and clear: Oil could always be used as a weapon.
Of course, this was not before a stock market crash had already begun to take hold. From early-1973 into late-1974, the DJIA dropped about 50%. The ramifications and reverberations were felt for the next decade. Another crack in the foundation.
Before elaborating on that final, 40-year period – from 1971-1973 into 2011-2013 – let’s go back and examine the first two, 40-year periods of testing. They are – in many ways – akin to the rule of Saul and David in ancient Israel(remember that the time of David was a time of major military battles and victories that shaped the world of his day)…
1891 – 1893 was a major departure from the sound and solid currency backing by Gold. The Billion Dollar Congress of 1889 – 1891 – with its lavish spending and a government-funded ‘bailout’ of Western silver producers (sound familiar??) – via the Sherman Silver Purchase – led to the Silver crash of 1893, a desperate attempt to rescue the gold standard, the Panic of 1893 and a depression that lasted into 1897. The (120-year) clock began to tick.
1931 – 1933 was another major departure from the sound and solid currency backing by Gold. It actually began with Britain abandoning the Gold standard in 1931 and culminated with the US following suit in 1933, all the while the government was attempting to bailout the entire nation (New Deal).
1971 – 1973 was the final major departure from the sound and solid currency backing by Gold. It culminated with the second modification to the Par Value Act, devaluing the US Dollar by another 10% and setting the price of gold at $42.22/oz., while terminating the two-tiered pricing system for Gold. Using the smoke and mirrors of inflation, the government again bailed out the US economy.
For the ensuing 40 years – or almost 40 years – America’s wealth grew exponentially… at least when measured in material goods. Much of this wealth – like that of Israel in her later years – was been supported by the capital (buying our debt), resources (think of oil, electronics, etc.) and labor (illegal aliens, etc.) of many other nations.
At the culmination of that momentous and decisive third ‘period of testing’, America finds herself as divided as a nation could be… without physically being divided. To hear many pundits synopsize it, there is ‘Blue-State America’ and ‘Red-State America’. America has strayed far from the principles and philosophies of her founding fathers… and is at a monumental crossroads…
The final slide in the Dollar is likely…in 2011, 40 years of testing from when the US slammed the door – or the window – shut on the rest of the world in 1971. (This is not intended to ‘bash’ the US since we – unlike the rest of the globe – had managed to maintain some stable backing until then.)” Dollar/Gold Shift Likely in 2011 [See Dec. 2009 INSIIDE Track for details].