THE COMING FINANCIAL PANIC
The repeated monetary crises that have plagued the United States
since the early 1960s have not been solved. Washington and New York
have merely applied temporary propaganda palliatives. No effort has
been applied to the fundamental dilemma. To a decade of
mismanagement we can now add Trilateralist ambitions to rule a world
economy in their own image. Consequently, the day of reckoning will
be all the more costly.
The coming financial panic will be a logical consequence of these
repeated financial crises, themselves symptoms of a deep malaise,
the politization of economic activities.
The late Jacques Rueff, that penetrating French financial expert,
commented that the American financial problem “was the outcome of
an unbelievable collective mistake which, when people become aware
of it, will be viewed by history as an object of astonishment and
The “unbelievable collective mistake” made by the New
York-Washington elite, now continued by Trilateral ideology, is the
replacement of a free market system by a fiat money managed system.
We suggest that as ordinary American citizens react and become aware
of what Rueff called “an object of astonishment and scandal,” a
financial panic is likely to be fomented. The realizers will hasten
to protect their threatened assets, and the rush to the exits will
be awe inspiring.
The realizers, a term coined back in the first decades of the
Woodrow Wilson administration when elastic currency was being
debated, are those investors who understand the hollow character of
a politicized monetary system.
Their key attribute is an ability to
think beyond and never move with the herd: the herd instinct is
suicidal. When gold markets are quiet, the realizes is quietly
transferring assets from paper to gold; in fact, many have been
doing just that for a decade. When gold markets are hectic the realizer may lighten up, knowing that all markets react. But when
the day of panic arrives, the realizer’s only problem will be to
protect his store of wealth.
The responsibility for the “collective mistake,” seen only by the
relatively few realizers lies heavily with members of the
Chapter eight concluded with three
. Fixed exchange rates tied to gold will be reintroduced,
contrary to the Trilateral goal to “learn to live with”
floating exchange rates by international monetary
. Reintroduction of gold into the world money arena will pull the
rug from under Trilateral goldless IMF proposals and Bancor, and the
European Currency Unit (ECU) is a first step in this direction.
. Unless the U.S. gets its financial house in order, we shall
witness social upheavals and monetary panic exceeding anything in
We can now (November 1978) see the outline of these observations
reflected in world events:
. The U.S. has embarked on its fiat money, anti-gold
crusade, stifling its Western friends and subsidizing its
. U.S. Establishment-oriented economists predict that the shocks of
1973 to 1975 can never reoccur and that this time their forecasts
will be right. These predictions were broadcast even while a minor
flight from the dollar demonstrated their inaccuracy.
. By contrast, major European governments, led by West Germany and
France, are moving with extraordinary and unparalleled rapidity to
protect Europe from the coming financial holocaust.
While American representatives are jetting around the globe
muttering clichés about “management of interdependence,” “intensive
interactions,” “New World Order,” and similar nonentities, the real
monetary economic world is disintegrating around our ears.
Europe has said to the United States, “We have watched you play the
fool long enough; our patience is exhausted.”
EUROPE MOVES TO PROTECT ITSELF FROM A
The new European Currency Unit (ECU) introduced in mid-1978 by
Chancellor Helmut Schmidt and President Valery Giscard d’Estaing as
a European Community unit of account is a clear warning to the U.S.
that there is financial chaos ahead.
If the U.S. will not act
with the dollar, then Europe is prepared to go it alone. Neither
nor Schmidt, the joint architects of ECU are Trilaterals, and it is
worthy of note that both Schmidt and Giscard are former finance
ministers of their respective countries. Furthermore, there is a
report that European bankers had muffled, but still audible,
reservations about the Giscard-Schmidt plan.
include powerful European bankers:
Baron Leon Lambert
Munchmeyer (German Banking Federation)
Baron Edmond de Rothschild
Anthony Tuke (Barclays International)
Luc Wauters (Kredietbank,
Also, prominent European Trilaterals Raymond Barre (prime
minister of France) and Count Otto Lambsdorff (minister of
economics, Germany) are not prominent in the ECU plan: the ECU plan
appears to be a non-Trilateralist, Schmidt- Giscard creation.
The ECU system, scheduled for operation by January 1979, will link
major European currencies to the German D-Mark. ECU is more than a
broader “snake” and currency defense scheme: its members are
required to place 20 percent of their dollars and their gold into a
pool along with an equal amount of national currencies. The ECU
system is gold based. It reinforces the use of gold as money. It
reintroduces the monetary role of gold.
The object? To defend European currencies against speculation.
What kind of speculation? Obviously a future flight from fiat
dollars. ECU places the United States and the European Community in
opposite camps, and two competitive world reserve assets will
ultimately emerge: a European gold-based currency (the forthcoming
ECU is only for interbank transfers) and the U.S. dollar based on
the printing press and Washington elitist hot air.
In fact, a
European currency, tentatively called EUROPA, has been under study
for some time at European Economic Community Headquarters in
Brussels, and the gold-backed Europa could well be the world’s
replacement for the declining fiat dollar and the almost worthless
NATURE OF THE COMING FINANCIAL PANIC
The nature and scope of the
forthcoming financial panic can be delineated from historical
precedent but not – as yet - the precise timing of the panic.
Timing of monetary panics usually depends on random events which
trigger underlying distortions, and these events are not always in
themselves major events. The 1907 financial panic, by way of
was triggered by failure of the third largest trust company,
Knickerbocker Trust. The August 1978 run up in the gold price from
$180 to $215 in U.S. currency was a minor flight from the dollar
triggered by the U.S. refusal to face its balance of payments
deficits and domestic price inflation. It was not the full-scale
flight from the dollar which has yet to come.
The United States has major structural defects which guarantee an
ultimate monetary panic. These defects are either not recognized by
the elitists running the U.S. or they do not want to recognize them.
Let’s examine these defects.
THE FIRST INGREDIENT FOR FINANCIAL PANIC:
One ingredient making for ultimate financial panic is the manner in
which Washington finances federal budget deficits. Three basic
deficit financing methods are available to the federal government:
(a) raising taxes
(b) borrowing the deficit and thus channeling
funds from productive private investment to largely unproductive
(c) creating more dollars, thus reducing the
value of all existing dollars (Le.. price inflation).
preferred financing method is (c) when stealing from the value of the
dollar becomes a visible process, dollar holders will dump dollars
for more stable wealth-holding vehicles.
The cumulative U.S. budget deficit from 1962 to 1977, excluding
off-budget accounts is $218.104.22.1687 almost 300 billion dollars,
generated under both political parties, Democrats and Republicans
the only two political parties subsidized by law from public funds.
There is not a whit of practical difference between Republicans and
Democrats in the basic question of fiscal probity.
reduce deficits. Periodically, Congress acts out a charade extending
the “temporary debt ceiling.” As of 31 March 1978, the federal debt
was $798 billion, with a “permanent” ceiling of $398 billion. The
totally dishonest practice of “temporary ceilings” allows Congress
to avoid facing the issue of the federal deficit. The academic
world, for its part, explains the almost $800 billion debt with the
cliché that “we owe it to ourselves,” although precisely how this
vacuous expression bears on the topic of fiscal prudence is unknown.
The crux of the federal deficit is that sooner or later, voluntarily
or involuntarily, this debt monument has to be repaid or the dollar
depreciated to zero value; that is a fraud must be perpetrated on
the debt holders.
The former process is politically impossible.
THE SECOND INGREDIENT FOR FINANCIAL
Another guarantee of ultimate financial panic is a mountain of
state, city, and unfunded private debt - a paper mountain almost
staggering comprehension. The current surplus position of
non-federal institutions is a deception. (As a whole, state and
local governments had a $29 billion surplus in 1977, for the tenth
year running.) Remember that although $68 billion a year flows from
Washington to local governments, Proposition 13-type legislation
will reduce the surplus to zero by 1980.
Within this mountain, the really dangerous trigger for panic is New
York City debts held by New York banks. The 954 banks holding New
York obligations have over 20 percent of their equity capital in New
York obligations. About 70 banks hold more than 50 percent of their
capital in New York securities. While default may not result in
loss of investment, it is doubtful if the psychological tidal wave
unleashed by a New York default could avoid national panic. You are
probably safe until 1982. The big New York banks unloaded New York
securities onto small holders.
This poses a very real question of
fraudulent misrepresentation on their part, now under investigation
by New York State officials. The state investigation has questioned
numerous “small” holders of New York City securities and found they
were misled by major New York banks.
The following is an extract
from the official assembly report:
The individual investor responses indicate that the majority had
never invested in municipal securities before, and 90 percent
responded that a factor in their investment was their belief that an
investment in City securities was “safe and secure.” The survey also
found that, at the time they made their investments:
• 78 percent of the investors believed the City’s bookkeeping and
accounting practices to be excellent or good; and
• 79 percent of the investors believed that the City was in good or
excellent financial condition.
Additional comments volunteered by a number of these individual
investors concerning their experiences with these investments were
overwhelmingly negative, and indicated quite clearly that, in their
purchase of City securities, they had been “misled.” 2 The year 1982
is a key date to hold in mind because the statute of limitations on
such misrepresentations runs out then. You can be sure Congress will
oblige New York City with interim financing until this critical
And it will be a miracle if the New York State investigation
progresses to the point of indictments.
THE THIRD INGREDIENT FOR FINANCIAL PANIC:
Another debt mountain consists of dollar and foreign currency
denominated obligations and stateless currencies held overseas in a
variety of forms. private and public:
. The giant multinational banks generate an uncontrolled
$400 billion plus market in Eurocurrencies, a global
transnational money market outside the control of
governments and central banks. These funds could be used to collapse
the dollar either deliberately, by sheer weight of transfers or by
. The U.S. Treasury owes more than $86 billion in dollar denominated
Treasury securities to foreign central banks and the Organization of
Petroleum Exporting Countries (OPEC).
. More importantly, the U.S. Treasury owes substantial amounts in
Swiss franc denominated bonds (more below).
THE FOURTH INGREDIENT
FOR FINANCIAL PANIC:
The European Currency Unit will be based on European gold reserves.
At this time Europe has about twice the gold reserves of the United
Moreover, the U.S. does not have $11 billion of good delivery gold
as suggested in the establishment financial media.
The U.S. gold
stock, as we noted in chapter eight, is as follows:
. Forty-eight million ounces of
good delivery valued at $2 billion officially and $9.6
billion in the market place
. The balance in coin melt
Whether this gold belongs in fact to the U.S. Treasury or even
exists, has been disputed.
U.S. gold reserves have not been inventoried since 1933. The
treasury persists in conducting audits (i.e., checks of the vault
seals) when only inventories (counting, assaying, and weighing) will
answer the critics.
The skimpy checks are reportedly due to the cost of inventories.
Yet, Washington will, for example, spend $46 million on a lavish
memorial to FDR who seized citizens’ gold in 1933 - and $122 million
on a third Senate office building - a fraction of which expenditures
would provide the amount needed for an inventory of the U.S. gold
stock. If reluctance to inventory reserves continues, we may have
reason to assume that even the 48 million ounces of good delivery is
not there. Furthermore, the U.S. has sufficient other hard money
debts that we can state the U.S. is technically “bust.”
The fact that 80 percent of U.S. gold reserves is coin melt, not
salable on the world market, is not realized even at highest elitist
levels. For example, the July 1978 issue of Foreign Affairs
by the Council on Foreign Relations) has an article by Jahangir
Amuzegar, executive director of the IMF and ambassador-at-large for
Iran. Amuzegar’s article, “OPEC and the Dollar Dilemma,” records
U.S. gold stocks at 277 million ounces valued at “near $50 billion.”
This over-valuation assumes the stock is good delivery. It is not.
If OPEC is unaware of the true quality of U.S. gold stocks, the
impact of the awakening has yet to be felt.
THE GOLD ROAD AHEAD
With this massive debt mountain, a fiat (paper) currency and a
miniscule stock of good delivery gold, the U.S. is in a precarious
position -far more precarious than generally realized. While ECU is
a unit of account and does not circulate, ECU is a forerunner of a
gold-based European currency which will be a circulating medium; and
a European gold-based circulating currency will come within five
In brief: By 1984 the United States will have to face squarely a
global contest between a fiat dollar and gold-backed European money.
Fiat money has never won this battle. Fiat money cannot win.
The United States will then be faced with two choices:
a. Either allow the present fiat dollar to depreciate to zerovalue
Replace the fiat dollar with a gold-backed dollar at a
ratio of 10 for 1, or 10,000 for 1.
Quietly, while proclaiming the health of the mighty fiat
mini-dollar, Washington has prepared for these eventualities:
duplicate dollar currency is already printed and stored away at the
Culpepper, Virginia, facility of
the Federal Reserve and at
Weather in Virginia.
According to Carl Mintz, on the staff of the House Banking
Committee, “I believe it’s in the billions of dollars, and it’s
buried in lots of places.” This duplicate currency will remain
buried, unissued, and virtually unknown until confidence in the
present fiat dollar is completely shattered.
Another available option is discussed in the July 1978 newsletter of
the Johannesburg Chamber of Mines:
It has become increasingly obvious now that at this time of
widespread currency instability, political and economic
uncertainty, spiraling inflationary expectations and increasing
protectionism, the struggle to eliminate one of the major
monetary reserve assets from the international monetary
system, has been a futile exercise. It would make more sense to
recognize the advantages of gold and to acknowledge its role as a
stabilizer in the system and to concentrate instead on underpinning
the dollar to avoid its further depreciation against other major
In brief, the Chamber of Mines proposes the U.S. return to gold and
abandon its anti-gold crusade.
As holders of fiat dollars grasp the gold versus paper picture, a
common picture in monetary history, the flight from the dollar will
begin -at first slowly as in early August 1978, then picking up
speed, to culminate in panic. Because of media brainwashing, it is
unlikely that most American investors will become realizers (i.e.,
learn the true nature of the con game) until after the dust of
monetary panic has finally settled.
In the period immediately ahead, fiat dollars are going to be
exchanged by the realizers in increasing quantities, initially for
gold and silver, then for gold-based currencies (such as the coming
European currency) and in the final phase, anything which represents
Will the United States ban imports of gold in the coming struggle in
an attempt to force its edict of fiat dollars? One school of thought
suggests the treasury will allow gold imports as long as possible,
as long as anyone wants to exchange gold for paper dollars. Another
school suggests that on the contrary, the treasury will clamp down
on gold imports.
The policy of gold imports which is finally adopted may well depend
on the time frame in question. Remember, the treasury bureaucrats do
not recognize gold; they do not understand gold.
Truly, these people
believe that gold is a “barbarous” relic. Absurd as it may seem to
you and me, the academics involved in the so-called demonetization
of gold have a mindset that gold will have no meaning in the New
World Order. While the experts in charge retain this mindset, it is
improbable that gold imports will continue freely in the years
ahead. The treasury is likely to clamp down on imports, and-this
will send the price of gold soaring.
However, at some time, pressure
of circumstances or politics or new ideas will emerge and then the
ban will again be lifted.
TREASURY CONFESSES TO STUPIDITY AND
A prime contemporary example of the cost of the treasury mindset
to the American taxpayer was revealed earlier this year. On 19 April
1978 Anthony M. Solomon, Trilateral commissioner and under secretary
of the treasury for monetary affairs went cap-in-hand before the
House Subcommittee on International Trade Investment and Monetary
Policy, to confess to what Solomon called “some fairly important
developments;” that is, the treasury had lost its shirt gambling in
Swiss francs since 1961.
In brief, the Treasury Exchange
Stabilization Fund has been selling Swiss franc denominated U.S.
Treasury notes while the franc moved from 22 cents to over 50 cents.
The story goes like this…
Back in the 1960s and early 1970s, the treasury, under the guidance
of three Trilateralists, Robert Roosa, (deputy under secretary for
monetary affairs, Bruce MacLaury, (now president of the Trilateral
think-tank Brookings Institution), and Paul A. Volcker, (Federal
Reserve Bank of New York), held to a superstitious notion that the
price of gold should be precisely $35.00 (later $40.00) per troy
ounce, a magic figure which originated over President Roosevelt’s
breakfast table in the 1930s. To preserve an artificial gold price
of $35.00, the treasury under Roosa lost most of the U.S. gold
stockpile. The stock went from $25 billion in 1949 to $11 billion in
In 1960 gold was moving out’ of the U.S. too rapidly even for
the treasury, and Roosa hit on the idea of issuing non-marketable
certificates and treasury notes to foreign, creditors and
denominated in foreign currencies.
In the past decade the U.S.
Treasury with its anti gold mind set has lost the U.S. taxpayer
billions of dollars betting these foreign denominated securities
against gold and the Swiss franc. As of June 1978, $901,000,000 is
outstanding in securities denominated in Swiss francs and issued by
the U.S. Treasury to the Swiss National Bank (the Roosa bonds).
fact, new Swiss-franc denominated securities are still being issued
as well as redeemed by the U.S. Treasury: the latest known at time
of writing being $75 million issued 9 June 1978, due 29 October 1979
with an interest rate of 7.9 percent, payable in Swiss francs. The
position for 1977 is contained in table 101.
In brief, the treasury has gotten itself in debt up to its neck in
Swiss francs. Even worse, the total losses to the U.S. taxpayer from
treasury speculation in Swiss francs may well total $1 billion, when
the chips are counted. 3 The treasury covers its shame by arguing
that this gambling in Swiss francs meant the U.S. was able to retain
36 million ounces of gold.
On the other hand, the treasury also
tells us that gold is a valueless, barbarous commodity!
WHO IS RESPONSIBLE?
Many are responsible for monetary chaos, but Trilaterals in key
treasury slots stand out. And one man stands out above all others:
Trilateral Commissioner and former under secretary of the treasury,
Robert Roosa. In August 1967 the business journal Fortune described
Roosa’s handling of that particular year’s monetary crises as
No man has done more than Roosa did in this year at
Treasury to try to make the existing monetary system continue
to work. The famous “twist” in interest rates, the “Roosa”
bonds, the many “swap” and other emergency credit
arrangements all stand as monuments to his ingenuity. 4
Roosa’s stopgap measures also stand as monuments to the utter lack
of principle and ability among the self-perpetuated elite. Their
ingenuity has been to dig a bigger monetary grave for the United
States. Ingenuity has been used to stave off the ultimate day of
reckoning for another decade and thus make it ultimately worse for
the American people.
THE COMING FINANCIAL PANIC
The coming financial panic will, of course, be a traumatic
experience. It will be far deeper than the panic of 1907, when no
credit at all was available at any price, and more pervasive than
the depression of 1930.
Yet, such a panic is not to be feared by those who are prepared by
those we call the realizers. A panic is symptomatic. A panic is the
economic system purging itself of excesses. The panic will be deep
and more pervasive than any previous monetary crisis because the
excesses committed in the name of a “welfare state,”
“interdependence” and “globalism” have been deeper and more
pervasive than in the past.
Panic need be feared only by those dependent on the hand of the
state to feed them or keep them in luxury or by those who use the
power of the state for personal vested interests. These groups will
be losers. The storm can be weathered by those who have taken
precautions to protect themselves, by those who are self-sufficient,
and certainly by those who do not depend on the politicians’ whims
and on bureaucratic regulation.
Timing? The leading indicators are flashing the seventh post-war
recession. The political manipulators may try to postpone this
recession, to convert it into what is called a growth recession; or
incoming overseas funds induced by the recent “benign neglect” of
the dollar may well give an aura of false prosperity come election
time. If left alone, the seventh post-war recession will go deeper
than other recessions.
Recovery from the sixth recession has been
incomplete because the Keynesian demand stimulation locomotive is
running down and the economy is strangled by statist intervention.
Subsequent recovery will be weaker, the eighth post-war recession,
deeper; and the roller coaster is now in a secular down trend.
The final flight from the fiat dollar is not, however, necessarily
related to any phase of the economic cycle. Panic can be triggered
by a random event which catches public fancy and snowballs as
successive waves of investors dump paper dollar-denominated assets.
Financial panics always need a trigger event. Some event, usually
unforeseen, trips off the cumulative spiral and the subsequent panic
to protect wealth before all is lost.
Although a likely trigger for financial panic in 1979-80 is price
inflation and a liquidity crisis. the probabilities are against
in the next twelve to twenty-four months. While prices are stable or
increase smoothly, holders of fiat dollars have no doubt of
that is, that dollars can be used to purchase goods and services. In
brief, under these conditions dollars are still a store of value.
During periods of price inflation, some holders will seek
alternative means of wealth storage. In prolonged periods of price
increases or-during sudden upward price spurts, contagion sets in;
and the relatively few seekers of safe storage vehicles become many.
The search for gold, silver, and diamonds becomes contagious.
brief, there is a flight from paper -a flight from fiat money which
is now illiquid because it will not command goods and services.
Illiquidity is a sure sign that panic is approaching.
The monetary die was cast back in the early 1960s by men who
(strangely) now occupy a key segment of the Trilateral Commission:
Roosa, MacLaury, Volcker, Parsky, Ball, McCracken, Peterson, Solomon
A flight from paper cannot ultimately be controlled by this
establishment. Their recourse will be to adopt Hitlerian or
measures: a Schachtian economy or a Soviet economy - if they can.
ENDNOTES: CHAPTER TEN
1. Jacques Rueff, The Monetary Sin of the West (New York: Macmillan,
2. "The Bank and the Municipal Crisis: Public Responsibility and
Private Profit," State
Assembly of New York Special Report (New York, 15 November 1976).
3. Interested readers are referred to Annual Report for 1977 of
Fund (Department of the Treasury).
4. "How Paper Gold Could Work," Fortune (August 1967)
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