On Economic Terrorism, Currency Wars & Gold Standard
Edition: 1st, 2012 Authors: Khawaja Asad Saeed (email@example.com) Shahzad Masood Roomi (Shahzad.firstname.lastname@example.org) Title Design : Waqar Ahmed Siddiqui Designing : Shahzad Masood Roomi PDF version for mass distribution All Rights are reserved. No part of this publication can be reproduced without the prior written premission from Brsstacks.
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The Economic Battlefield
Return to the Golden Age
Class Warfare Blowback
1 Economic Battlefield Exploring New Frontiers
Shahzad Masood Roomi
Pakistan is in a state of war, being attacked on every axis of national security in a ruthless and overt 4th generation war. In this war, Pakistan is being targeted according to the “Yugoslavia doctrine”, with the dangerous aim of imploding the country by destroying its internal cohesion, social fabric, military strength and economic backbone, as it had been done with former Yugoslavia in the last decade of the 20th century. Like all other fronts, Pakistan’s economic edifice is also facing a destructive onslaught; primarily due to the fact that the artificially installed and the most corrupt “democratic” rulers in our history are shamelessly busy marauding and plundering the national wealth with impunity. All major government run corporations are facing bankruptcy and are draining the national economy due to massive corruption and bad governance. The Government is imposing heavy indirect taxes on almost weekly basis in the desperation to generate revenue that is then siphoned off to overseas accounts. Internal and external debts have been raised to record high levels but still hundreds of billions of rupees in loans have been written off. The IMF runs the national economy while the Government acting merely as a fund manager, continues to impose new back breaking taxes under secretively agreed terms. This systematic onslaught is creating extreme economic frustration and social unrest. The masses have been enraged due to the unchecked price hike of daily commodities and a clear and present threat of complete social anarchy and bloody revolt is looming in the wings. The economic meltdown is occurring in an environment where Pak army and other law enforcement agencies (LEAs) are confronted with multiple internal and external insurgencies, terrorism has ravaged the law and order situation in the urban centers, Pakistan’s western front is facing a real security threat for the first time in its history and our arch rival, India is busy refining her Cold Start war doctrine, specifically perfected against Pakistan. Nothing could be more disturbing than the fact that the country’s political, economic and security managers are ignoring this economic meltdown in a bid to save the “system” while Pakistan’s national sovereignty has already been compromised to a great extent due to foreign dependence on the economic front. These compromises are proving catastrophic as they have promoted the direct and open foreign meddling in Pakistan’s
Pakistan’s judiciary has also failed in effectively combating corruption and mismanagement as well as in preventing unchecked plundering of national wealth by the ruling elite. Despite some brave attempts by the Supreme Court, the government remains defiant and the cancerous corruption has metastasized manifold. Media is compromised and often acts as fifth columnist; instead of generating public pressure on government on corruption and plundering, sensationalizing the sensitive issues remains the only business for the media. Pakistan’s current security outlook has been thus mutilated because all the efforts to combat the 4th generation war remain focused only on the military axis ignoring the fact that information, judicial, political and economic aspects are as critical as the military strategy. Politicians are too busy begging, borrowing and stealing while the country’s economy remains on the mercy of international monetary institutions. There is no realization of the critical point that economic demise is not an isolated phenomenon rather it is an integral part of the ruthless surrogate war Pakistan is confronted with. The Soviet Union and Yugoslavia were once powerful countries but their collapse was ignited by their failed economies and now they cease to exist as nations on the world map. Zimbabwe was a stable economy, during 1980’s and 1990’s, but painted a horrible picture of economic meltdown caused by hyperinflation during 2003 to 2009. The collapse of the Soviet Union had signaled the demise of the communist model of economy as well. Now the impending collapse of the dollar and the Federal Reserve banking system as well as the threats of hyperinflation of paper currency and the desire of the global central banks to abandon the dollar as peg currency and to hedge their bets against gold and real wealth are signaling the death of Capitalism as well. There is a global scramble for gold, silver and real wealth assets, as paper currency based economic models become unstable and their collapse is imminent. These are desperate times for the global capitalist economy and the collapsing system has no internal remedies to prevent a meltdown. The solution is not within the system but outside of it. Conventional economic wisdom, responsible for creating this false paper currency based banking system, which is fractional reserve dependant and not pegged to any real wealth, does not have the capacity, vision, knowledge or the will to find any alternate real wealth based, historically sustainable and natural economic solution. Pakistan’s economic meltdown has been caused due to two critical factors: ♦♦ Massive corruption and hemorrhage of national wealth. ♦♦ Finding the solutions in the fake paper currency and fractional reserve based economic model, which has caused the economic crisis in the first place. The first factor is an administrative and legal crisis only which demands strong leadership and ruthless application of anti-corruption laws. This is the simpler part.
The real challenge for the leadership today is to get rid of the collapsing and conventionally applied capitalist economic policies in order to find truly daring, independent, visionary, ground breaking and sustainable economic model and means to create a real wealth based natural economy solidly grounded in our environment, geography, history and resources. The challenge of finding the alternate, honorable and independent economic strategy is indeed staggering but the rewards are equally magnificent. It is a must-do mission for us and under the present global economic meltdown, it becomes even more critical for Pakistan to abandon the economic imperialism of the West and adopt policies that are homegrown and respond to the requirements of national security and sovereignty.
The State of National Economy Today, Pakistan’s economic situation and governance continues to deteriorate. Following are some of the economic indicators: ♦♦ From being the 42nd most corrupt country, Pakistan has declined to the 34th position on this chart of disgrace. Almost 1000 billion rupees of national wealth have been stolen in 2010 alone according to careful estimates. The entire national leadership, possessing billions of dollars, is under scrutiny on corruption charges with cases registered against them for massive embezzlement and swindling. The President, the Prime Minister as well as a majority of federal ministers have their names in this ignominious list. ♦♦ Pakistan’s total debt (internal and external) has reached a record 10 trillion rupees (US$117 billion), as the government has violated every limit on borrowing imposed in the Fiscal Responsibility and Debt Limitation Act. If this situation is not alarming it is certainly disturbing. In 2008, the per capita debt (debt on each citizen) in Pakistan was PKR 22,000, which has staggered to PKR 57,000 (an increase of 159%) within 3 years. This is a colossal burden considering that 40% of the country’s population is living below the poverty line. ♦♦ Inflation and financial mismanagement has reached a dangerous level and it can inflame a street level upheaval. Inflation in Pakistan has reached an alarming 15% (January 2011 figure). ♦♦ More than US$ 330 billion (PKR. 28 trillion) of national wealth has been stolen over the years and deposited in foreign accounts. The volume of Non Performing Loans (NPL) is growing at a distressing rate as borrowed money is being transferred abroad. ♦♦ Industrial infrastructure is being systematically targeted through artificially created energy crisis undermining Pakistan’s exports and local jobs of millions of workers. IMF loans, direct and indirect taxes along with shameless begging from every corner of the world are the three basic vortexes of the government’s revenue generating policy, which is leading the economy to nosedive into an abysmal chasm. ♦♦ At present, Pakistan’s primary expenditure is debt servicing. More than 35% of the budget is being spent on returning the loans but the government keeps on borrowing from every available internal and foreign creditor. The country’s debt servicing obligations have been constricting the financial resources for social sector development while 70% of the population, particularly in rural areas, lives in the most deprived conditions amidst the lowest economic development level. ♦♦ National transportation and energy infrastructure, particularly Pakistan Railways and PIA, have almost
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governnce, security and political affairs. This external meddling will continue to prevail unless state economy is prioritized as a vital national security front, accorded as much significance as the country’s nuclear and strategic program.
♦♦ Industries are crumbling in the face of severe energy crisis. The textile industry is taking a direct hit due to artificially created gas and power shortages. Similarly, engineering firms in Gujranwala and Gujarat are facing energy shortages. Millions of workers have been rendered jobless in the last few months. ♦♦ Pakistan’s Debt to GDP ratio has crossed 61% and World Bank has announced that Pakistan will default on its obligations if the country’s debt-to-GDP ratio exceeds 80%. ♦♦ Flight of capital (money outflow from Pakistan) has been accelerated due to corruption, bad governance and law and order situation. ♦♦ Government Corporations (Railways, PIA, PSO, PEPCO) are running with Rs. 300 billion deficit every year. Circular debt in government corporations exceeds Rs. 300 billion. ♦♦ Economy is under extra pressure due to continued counter insurgency operations in FATA and the resulting terrorism in the mainland. Pakistan is forced to spend much more on defense requirements, consequently hampering the armed forces’ modernization program as well. ♦♦ The government is relying heavily on printing bank notes to the staggering tune of almost 2 billion rupees per day in order to meet daily expenses, thus devaluating the currency and hyper inflating the economy. ♦♦ Social polarization is getting radical. The middle class and salaried category has almost been crushed to extinction, with only the rich ruling upper class and the struggling lower class appearing as the social and economic classes in the country. Fixed-income, urban, salaried middle class is finding it extremely difficult to survive under massive direct and indirect taxes as well as inflation. The “haves” and the “have not’s” phenomenon is clearly visible. ♦♦ The state officers and offices remain most lavish with expenditures, devoid of all sense of responsibility towards austerity or economy. The State exchequer remains the personal property of the ruling elite with no accountability and shame. ♦♦ Despite being a food surplus country in grains, dairies, fruits and vegetables, artificial food shortages,
cartelization and hoarding of basic commodities keep the prices at hyper inflationary levels making windfall profits for the powerful ruling elite. ♦♦ Despite having the capacity to produce surplus electricity, the nation suffers endless hours of power outages daily, wreaking havoc on industry, trade and education.
Impact of Economic Plight After examining the economic conditions, it would be prudent to discuss the impact of the economic downslide particularly from the strategic point of view. Clear and present threat of a bloody revolt: There is a clear threat of total anarchy and bloody street revolution due to inflation, price hikes and indirect taxes. Millions of workers in Faisalabad and Gujranwala have lost their jobs due to the government’s utter failure in coping with the prevailing energy crisis in the country. These millions are already protesting on the streets due to loss of jobs. As energy and fiscal crisis is deepening, it is only a matter of time when these people will start a march towards Islamabad. Pakistan can turn into the next Egypt or Libya. Such probable aspects of protests have deteriorated the situation further for the clueless government. Apart from these factory workers, the jobless and the fixed income people are the biggest victims of the present price hikes and inflation. Income tax is nothing less than daylight robbery. Pakistan’s working middle class is depleting quickly due to the nuisance of direct and indirect taxes. The real catch is that all these taxes, being collected in the name of development, never serve their purpose and are being stolen by the ruling feudal elite, who themselves never pay the taxes. Wrangling between provinces for resources: Provincial disharmony has reached dangerous and alarming levels during the current regime. Distribution of water remains the source of contention among the provinces but now the distribution of gas has also added to this crisis. Apart from creating energy shortfall, it is creating serious infighting among the provinces particularly between Punjab and Baluchistan. This energy crisis has devastated the industrial base in Punjab, which is consequently rendering more people jobless. The same is true for wheat and grains, where the price of a roti is often up to five times higher in Baluchistan than in Punjab due to hoarding and cartelization of the staple food crop by various power brokers. FDI has vanished: This is the most detrimental impact of current economic crisis that has brought national development to a halt. Apart from the deteriorating law and
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been shattered due to corruption and mismanagement.
Law and Order: It’s the biggest reason behind flight of capital and low FDI. Insurgencies and terrorism in Pakistan remain the ultimate hindrance in attracting any foreign investors. Now it has reached such an extent that many textile units are being shifted to Bangladesh. Flight of capital to foreign banks is also an outcome of the devastating law and order situation.
order situation, the state of corruption and bribery as well as poor infrastructure and energy crisis, are major impedances to FDI in the country. The crisis has been aggravated to such an extent that businessmen are shifting settled businesses to other countries due to non-conducive business environment in Pakistan. Rise of street crimes: Massive joblessness has created severe problems of street crimes in urban centers. On the surface it may look like a minor factor but keeping Pakistan’s current restive environment in sight, every jobless person on the street is a potential asset of countless terrorist outfits waging a callous asymmetric war within Pakistani cities. Karachi is one such violent city where political turf wars, gang wars, sectarian battles and street crimes take heavy toll on human lives and property every day, crippling the city and its economy. Vicious cycle of circular debts: As borrowing and begging remain the only options for the rulers, internal and external debt is increasing at an alarming rate. Loans taken in the name of development are being wasted due to corruption and kickbacks. The government had to pay PKR 900 billion on debt servicing during the fiscal year 2010-11, which is 5 times more than the total development budget. Government Corporations are unable to make payments to their corporate government suppliers resulting in a circular debt. The present circular debt problem faced by PSO is the clearest manifestation of this fact.
Reasons Behind Economic Meltdown A brief comparison between Pakistan’s existing economic potential and the core reasons behind the current economic downslide must suffice to establish that Pakistan’s economic encirclement is in progress. Corruption and looting of national wealth: As there is no existing vision or strategy for revenue generation, the current rulers are relying on their strategy of begging, borrowing and stealing. In 2010, directors of Swiss Bank quoted that some US$330 dollars (PKR 28 trillion) of looted money have been deposited in the Swiss banks. With this amount of money, Pakistan can have a tax free budget for the next 60 years, every Pakistani can be paid PKR 20,000/month as financial aid for consecutive 60 years, provide 60 million jobs all over Pakistan, construct 4 lane roads from any village to Islamabad, ensure indefinite supplies to more than 500 social projects, disbanding the need of World Bank and IMF loans. Due to corruption and mismanagement, the difference between national revenue and expenditure has reached a whopping 490 billion rupees, with total income remaining at 989.6 billion rupees while total expenditure
Fractional Reserve Banking System: Banks make money out of thin air through fractional reserve banking which resultantly is depleting the value of the currency, causing massive inflation and price hikes. Banks are pushing and lending more and more make-believe, nonexistent money in the market just to get their own share in the form of interest paid against every loan transaction. Fractional reserve banking is one of the most sinister, dubious, economically devastating and almost satanic banking practice, which is least understood even by the economists themselves and has the most profound contribution in creating economic anarchy in any society. This system of banking only helps the banks to grow phenomenally but it cannot help or save an economy and history of fractional reserve banking proves this fact! As the banks are the functionaries, which create fake fiat money through ledger entries only and take interest on it, so any interest-free economy with real wealth (gold and silver) would purge their need, their rationale to exist and the fake money that they create. So, keeping every economy dependent on the money they create remains the most important task for the banks in world economies today. For decades, US dollar was the global reserve currency for almost all Central Banks of every nation. Every other nation except the US had to maintain their foreign currency reserves in US dollars for trade, oil purchases and imports while the US Federal Reserve Bank could simply print as many dollars as it wanted and loan them to the US government. This is how America has maintained its global economic hegemony despite being the biggest debtor nation of the world, with an obligating of 81.2 trillion dollars to the Federal Reserve and other banks making them more sovereign than the US government. But hyperinflation caused due to the uncontrolled printing of trillions of dollars is now coming home to roost. US dollar is now collapsing as global reserve currency and many nations are abandoning their international trade in dollars and keeping their forex reserves in a basket of currencies or in real wealth i.e. Gold and Silver. China and Russia have recently abandoned bilateral trade in dollars. Iran is working on an oil exchange which would deal in Euro making it possible for other nations to abandon the dollar as well which they had kept as reserve currency to buy oil. The graph below illustrates why the dollar will soon be replaced as the world’s reserve currency. This system of banking only helps the banks to grow phenomenally but it cannot help or save an economy and history of fractional reserve banking proves this fact! As the banks are the functionaries, which create fake fiat money through ledger entries only and take interest on it, so any interest-free economy with real wealth (gold and silver) would purge their need, their rationale to exist and the fake money that they create. So, keeping every economy dependent on the money they create remains the most important task for the banks in world economies today.
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stands at 1.48 trillion rupees, within the first six months of the current financial year. This certainly made the year-end budget deficit target of 4.7% of GDP impossible. The menace of top level corruption has given birth to business cartels in the country that are controlling the prices without any checks and balances.
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Fractional Reserve Banking When money is borrowed from a bank, the bank actually creates new money or “credit” out of nothing. It credits a loan account it has set up on its books with a deposit that can be used by the borrower. Since banks must pay out deposits on demand, the deposit is a liability for the bank that is entered on the debit side of its ledger. On the credit side of the ledger, because the bank charges usury (interest) on this created money, the money borrowed is an asset for the bank earning its income. This is all accomplished by moving some figures from one account to another.
Value of $1 Federal Reserve Note in 1913 Dollars
(Source: US Bureau of
For decades, US dollar was the global reserve currency for almost all Central Banks of every nation. Every other nation except the US had to maintain their foreign currency reserves in US dollars for trade, oil purchases and imports while the US Federal Reserve Bank could simply print as many dollars as it wanted and loan them to the US government. This is how America has maintained its global economic hegemony despite being the biggest debtor nation of the world, with an obligating of 81.2 trillion dollars to the Federal Reserve and other banks making them more sovereign than the US government. But hyperinflation caused due to the uncontrolled printing of trillions of dollars is now coming home to roost. US dollar is now collapsing as global reserve currency and many nations are abandoning their international trade in dollars and keeping their forex reserves in a basket of currencies or in real wealth i.e. Gold and Silver. China and Russia have recently abandoned bilateral trade in dollars. Iran is working on an oil exchange which would deal in Euro making it possible for other nations to abandon the dollar as well which they had kept as reserve currency to buy oil. The graph below illustrates why the dollar will soon be replaced as the world’s reserve currency.
Pakistani Rupee per USD – Monthly Average Exchange Rate
It must be noted that the actual devaluation of rupee, against the real wealth, is much more than what is shown in the documents where Pak rupee devaluation is shown against the US dollar, which itself is depleting against the real wealth (gold and silver). It means that the real depletion of rupee against gold and other precious metals is many times more than what meets the eye. Overwhelming price hikes of gold and other commodities in Pakistan manifest this fact clearly.
Below is a brief description of currency meltdown in Yugoslavia and Zimbabwe which led to economic meltdown of these countries eventually dismembering Yugoslavia. Pakistani currency is also losing its worth due to excessive money supply and the situation can run into hyperinflation in case the current trend of money printing continues. Yugoslavia (January 1994)
Floating Currency & Hyperinflation – Red flag for Pakistan! The international banking cartel introduced the concept of floating currencies in the world where they can control the exchange rate of any currency by increasing or decreasing the supply of dollars. Between 1870 and 1914, the world currencies were backed by gold and the exchange rate was also fixed to gold. Gold standard allowed unrestricted capital mobility as well as global stability in currencies and trade. In 1914, the gold standard was abandoned. After World War II in 1945, Bretton Woods conference decided to peg the currencies again but this time to the US dollar, which in turn was pegged to gold at US$35 per ounce. This was the beginning of a systematic campaign for establishing the US economic hegemony, which was gained in 1971 when the dollar peg to gold was abandoned and dollar was established as the standard for floating exchange rate; it ultimately allowed the US banks to create money out of thin air. Now the US was able to print as many dollars as she desired while the rest of the world had to earn that money for international transactions. A masterpiece of economic manipulation indeed! Years before that, the US had won the case for dollar to be accepted as the global reserve currency.
500,000,000,000 Yugoslav dinar banknote
Yugoslavia went through a period of hyperinflation and subsequent currency “reforms” from 1989-1994. The highest denomination in 1988 was 50,000 dinars. By 1989 it was 2,000,000 dinars. In the 1990 currency “reform”, 1 new dinar was exchanged for 10,000 old dinars. In the 1992 currency “reform”, 1 new dinar was exchanged for 10 old dinars. The highest denomination in 1992 was 50,000 dinars. By 1993, it was 10,000,000,000 dinars. In the 1993 currency reform, 1 new dinar was exchanged for 1,000,000 old dinars. However, before the year was over, the highest denomination was 500,000,000,000 dinars. Yugoslavia’s rate of inflation hit 5 × 1015 percent cumulative inflation over the time period 1 October 1993 and 24 January 1994. Zimbabwe (November 2008)
In the following years, this acceptance of the US dollar as global trading and foreign reserve currency enabled the US to manipulate economies by controlling the supply of the dollar. Inflation is the most poisonous byproduct of this economic model which is caused mainly due to excessive printing of money which in turn deflates the local currency. In economics, hyperinflation is inflation that is very high or “out of control”. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases rapidly as the functional or internal currency, as opposed to a foreign currency, loses its real value very quickly, normally at an accelerating rate. Under hyperinflation the general price level could rise by 5 or 10% or even much more every day. A vicious circle is created in which more and more inflation is created with each iteration of the ever-increasing money printing cycle. Hyperinflation becomes visible when there is an unchecked increase in the money supply usually accompanied by a widespread unwillingness on the part of the local population to hold the hyperinflationary money for more than the time needed to trade it for something non-monetary to avoid further loss of real value. Hyperinflation is often associated with wars (or their aftermath), currency meltdowns like in Zimbabwe, and political or social upheavals, plus an aggressive bidding against the money on currency exchanges.
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In Pakistan, Pak Rupee is getting devalued just like the dollar as State Bank of Pakistan continues to print rupees at a staggering 2 billion per day. The exchange rate of Pak rupee has been raised against the US dollar at an exceptional rate during the last three years as Central Bank continues to pump billions of newly printed fiat bank notes in the money market.
Zimbabwe $100 trillion
Hyperinflation in Zimbabwe began in the early 2000’s, shortly after Zimbabwe’s confiscation of white-owned farmland and its repudiation of debts to the International Monetary Fund, and persisted through till 2009. Figures from November 2008 estimated Zimbabwe’s annual inflation rate at 89.7 sextillion (1021) percent. In April 2009, Zimbabwe abandoned printing of the Zimbabwean dollar, and the South African rand and US dollar became the standard currencies for exchange. As of 2011 the currency has not been reintroduced yet.
Government corporations like Railways are under severe financial strain due to political intervention and mismanagement. Railways are the most used medium of travel in the world for the working classes but in Pakistan, its infrastructure could not be developed on modern basis because this critical medium remains criminally neglected. Every year the government pours billions in this organization but it all goes into the accounts of corrupt ministers and bureaucrats. Agriculture is Pakistan’s biggest economic potential and its national lifeline. Over 20 million Pakistanis are directly associated with agriculture. This sector’s income contributes to 21% of the total national budget but the total allocation for agriculture has not increased even by 1% in the federal budget for the fiscal year 201011. Not a single new agricultural project was announced or any strategic plans devised for food security in the country as global weather changes and water shortages threaten the very core of Pakistani society. Absence of transparent accountability: Complete failure and collapse of the judicial system has encouraged the most corrupt elements to plunder with impunity. Most of the highly corrupt occupy the highest offices of the land and consider themselves as the untouchables by law. Due to the inability of the Supreme Court to enforce and implement its own judgments against corruption and apply articles 62 and 63 of the constitution, the plunderers remain free. On the other hand, the accountability institutions in Pakistan have been politicized and have failed spectacularly in coping with the corrupt and the criminals. The failure of the financial accountability is so stunning that not a single corrupt politician has been disqualified or convicted on the basis of corruption. The current prowling of national wealth would continue if this corrupt regime stays in power and the judiciary continues to delay invoking and implementing the constitution in letter and spirit. Lack of economic vision: Despite holding diverse economic potential and resources, there has been no strategic vision on the economic development and progress ever since independence. Pakistan’s true potential is its vast natural resources and minerals. Pakistan also never tapped its potential to become an industrial powerhouse. On the other hand, during the 1960’s, Pakistan made huge strides in agricultural development but the long-term strategic vision remained shallow and no real effort was made for sustained agriculture development. The world’s focus shifted from agriculture to industrial development but Pakistan could not compete with other economies due to lack of planning. After the dismemberment of the Soviet Empire, Pakistan’s geography emerged as the most vital natural potential but again the opportunity to become a trade and energy corridor in the region was missed due to political corruption and lack of vision. Today, mineral resources are Pakistan’s biggest assets yet we are unable to exploit them to their fullest due to corruption and compromised governments with vested interests. Treacherous mining agreements with corrupt foreign companies have led to a tremendous loss for Pakistan. To date, we have been unable to prioritize the development of our potential for agricultural, industrial, mineral and geographical purposes. It could be started in any order but alas Pakistan’s economic vision remains completely directionless
Transforming Pakistan’s Economy (Strategy / Suggestions/ Way Forward) Pakistan is among the world’s richest countries. Its biggest resource is its youth, equipped with diverse sets of skills. Given the right environment with favorable policies, this young lot of energetic Pakistanis can play a decisive role in bringing about an economic miracle. More than 50% of the Pakistani population consists of people aging from 18-35 years. Pakistan is uniquely placed on the world map with massive land, water and climatic resources due to which it can produce various kinds of crops in all weathers. Pakistani soil is amongst the most fertile lands of the world. For rapid progress, mineral resources of Pakistan have tremendous potential. Thar coal reserves have 175 billion tons of coal, which in terms of energy production are equivalent to 618 billion barrels of crude oil. This is four times the energy potential of the total Saudi Arabian oil. Similarly Riko Diq copper-gold mines are among the world’s most precious mineral resources with an initial estimated worth of US$ 500 billion available on the surface of the earth without the need for deep pit mining. Pakistan can create an economic miracle in the shortest possible period without any foreign dependence, exploiting its own natural, mineral, human and agricultural potential, provided some ruthless and harsh measures are taken to attack the centre of gravity of the economic crisis. Regime change remains the first and most critical element in this strategy. The present lot is too decadent, compromised and corrupt to rise to this gigantic challenge. Once a patriotic and competent government is put in place, we can charge ahead with the major and radical economic reform strategy. The election process cannot bring the clean to the parliament and the country has no more time to waste on such a futile process. For once, there has to be a “selection” to bring the finest to the power. Then these patriots would move in with some severe, A rock from Riko Deq, with clearly visible gold deposits iron-clad measures to transform the economy Eradicate corruption with an iron hand: We will have to be truly ruthless here. Getting rid of corrupt elements from the government and public offices is the fundamental prerequisite for Pakistan’s economic revival. Despite all the propaganda of difficulties in tracking and tracing white collar financial crimes, it is still possible to eradicate corruption with a strong political and judicial will. Corruption should be made a capital offence, the trials must be swift and justice must be seen when dispensed. The corrupt are not brave people to face the gallows with courage. Making a horrible example of the few at the top would send the right signals to all quarters, right down to the bottom to refrain from corruption, embezzlement, kickbacks, commissions and bribery. In China, they send the corrupt to the firing squad and then charge the family for the bullets consumed. Corruption has now become an existential threat for the nation and must be treated at par with treason, terrorism and espionage, without mercy or delay in trial.
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Mismanagement and Ill-Planning: Poor planning is one of the biggest problems for slow development and fiscal mismanagement in Pakistan. Many major development programs and departments are being politically run, failing to contribute to national progress and prosperity. Gawadar seaport is a classic example. Worth of a seaport is associated with its inland connections via road, rail and air. It was connected to another seaport, located in its east (Karachi) through road link instead of connecting it with the northern parts of the country.
Within the country also, there are hundreds of billions of rupees of looted wealth, defaulted loans, and embezzled funds by the ruling elite who cannot justify their sources nor have ever declared those assets or paid taxes. Bringing back the looted wealth is an integral and critical axis of the strategy to resuscitate the national economy. This returned wealth must be reflected in the national budget and used for national development and to give tax relief to the citizens. Defer IMF debt servicing for 3 years: There are spaces in international laws, resolutions and protocols that can be invoked as legal justification to refuse the external debt and demand cancellation. One of these justifications is called the rule of “State of Necessity”. This rule is characterized by a situation that jeopardizes the economic or political survival of a country such as the situations which create the factor of impossibility of fulfilling the very basic needs of the population (health, education, food, water, housing etc). The “State of Necessity” justifies the repudiating of debt, since it implies the establishing priorities among different obligations of the State.
years and diverted the huge debt payment installments towards national economic rebuilding, making a radical turnaround for the national economy. Under this law Pakistan is justified to cancel all external debt payments since it jeopardizes the economic and political survival of a country. Recent earthquake and flood disasters as well as the permanent state of war due to insurgencies and terrorism, provide ample justification to invoke this law. One of the resolutions adopted by the UN Human Rights Commission in 1999 asserts, “The exercise of the basic rights of the people of the debtor countries to food, housing, clothing, employment, education, health services and a healthy environment cannot be subordinated to the implementation of the structural adjustment policies, growth programs and economic reforms.” Another resolution of the UN commission on International Law 1980, states, “A state cannot be expected to close its schools, hospitals and universities, abandon public services to point of chaos, simply to have money to repay its foreign debts.” Pakistan must defer debt servicing to IMF and other international monetary/financial institutions in order to get a breather and carry out recommended economic reforms. Today, more than 30% of the national budget goes into debt servicing. Pakistan’s economy would kick start with the diversion of funds and can resurrect its industrial, mineral and agricultural infrastructure. Restore law and order: The prevailing law and order situation in the country is one of the biggest hurdles in domestic economic development and attracting FDI (direct foreign investment) in Pakistan. Traditionally, lack of infrastructure was blamed as the major impedance to FDI but after 9/11, terrorism and insurgencies are not only discouraging foreign investors but local investors are also shifting their businesses to other countries. Here also ruthless and harsh measures would be needed to bring sanity on the streets. Right now, there is no fear of law among the terrorists who are ravaging the state and society. Military courts will have to be invoked to try and execute all insurgents and terrorists mercilessly as the civil judiciary has totally collapsed against this threat. The Afghan policy will also have to be redefined as all terrorism and drug related, illegal money comes into Pakistan from Afghanistan. Eliminate all un-Islamic taxes: Pakistan is an Islamic country and as per its constitution, no law can be made in contradiction to the Quran and Sunnah. But unfortunately, its financial system is interest based and practices brutal fractional reserve banking. Pakistan’s economic and taxation system is not only unjust and against the Islamic Laws but is also in direct contradiction of the national constitution. The present capitalist taxation system is brutally cruel and is crushing the middle class, directly and indirectly taxing the poorest strata and destroying the social fabric ruthlessly igniting the class wars in the society. Conventional economists cannot think of an economic model where taxes are non-existent or reduced to the minimum but as per Islamic laws, no tax can be imposed on income or sales (except on agriculture) rather taxes are imposed on savings.
We have a number of precedents in history when democratically elected governments in debtor countries refuse debt payments on account of “State of Necessity”. Latin American countries, including Argentina, Burkina Faso, Peru, Mexico, Paraguay, and Ecuador took such positions in the past. Argentina had almost a $100 bn loan of IMF at almost 30% interest, paying almost $30 bn in annual interest repayments. On the advice of Malaysian prime Minister Mahathir Mohammed, Argentina defaulted for 3
Pakistani masses are victims of direct and indirect taxes like income tax and the more treacherous sales tax. This dual taxation system is the biggest hurdle in the socio-economic progress of the poor and middle classes of the society. Indirect taxation is a curse of the present economic system where a common man has to pay taxes at every transaction for consumable commodities. Only the poor are taxed while wealthy and the corrupt are immune from this economic impact. Income and sales tax are the most cruel and unnatural form of taxation and must be abolished immediately.
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Bring back the looted wealth: Pakistani courts, media and the military will have to do everything in their power to bring back the looted wealth. This staggering amount alone can sustain the national budget for years to come without taxing the nation, directly or indirectly. Billions of dollars of national wealth is stashed in overseas accounts and flouted shamelessly with impunity without fear by the rulers and the elite.
It is time for the restructuring of national economy on the basis of Islamic taxation system. All revenue collected through income and sales taxes can be generated many times over if the Islamic taxation system is implemented, corruption is blocked and looted wealth is brought back into the system. It has never been tried, hence considered impossible by the capitalist economists to have a system where there are no income and sales taxes. In reality, this is being done in Saudi Arabia even today where state wealth is so surplus that these direct and indirect taxes are not applied. The same strategy can be further polished and applied in Pakistan as well. With return of looted wealth as an integral part of revenue generation, these harsh taxes can be eliminated without causing any stress on the national revenue. Disinformation propaganda by the compromised economic managers projects that Pakistan would implode without foreign aid, fractional reserve banking and current taxation system. This is classical rubbish. For 1400 years, the greatest of Muslim civilizations that ruled the world thrived on Islamic system of economics, without paper currency or interest based lending or income and sales taxes.
Gold Dinar and Islamic Silver Dirhams are the legal tenders. The US state of Utah is also considering reverting to Gold coins as US dollar becomes fake and worthless paper with each passing day. Pakistan has almost $500 bn dollars worth of real gold reserve in Reko Deq, a God gifted reserve and opportunity to revert to gold standard without any foreign help or loan. Diversify the Foreign Currency Reserves into Gold: All foreign reserves must immediately be converted into gold and silver and trade between countries should be encouraged in gold. Trade deficit settlements can later be adjusted by exchanging gold at the end of the year. This arrangement for trade purposes between Muslim countries was also suggested by former Malaysian PM Mahathir Muhememd. Paper currency dollar reserves should first be diversified into a basket of currencies and then a Gold reserve should be built to act as state reserve. All major central banks of the world are now making their reserves in Gold. Many nations are in a hurry to convert their reserves into Gold including China, Germany, India, Japan and Russia to name a few.
The Muslim empire stretched over 2.2 million square miles at the time of Hazrat Umar (R.A), yet even at that time, ingenious methods were devised to collect Zakat from each and every individual. The Ottoman Empire was stretched almost 23 million Square kilometers during its zenith. They also applied the Islamic economic models and were the most prosperous and wealthy civilization on earth in their times. It is only when the Ottomans adopted the western banking practices and adopted paper currency and started to tax their citizens to pay the lenders that their downfall began. The capitalist system is collapsing globally. The solution does not lie in adopting its failed policies but in abandoning them in favor of Islamic and most sustainable financial and economic practices. Existing economic and taxation system is in complete contradiction to Zakat and usher in its very nature. The existing Zakat system implemented in the country is a practical joke with Islamic laws and has neither the capacity nor the transparency to cater for Zakat collection and has to be overhauled on the model of Khilafat-e-Rashida using every available means and resource. A properly deployed Zakat and Usher collection system has the capacity to generate state revenues in far greater amounts than the existing income and sales tax regimes. Also, a strict implementation of Usher would also remove the controversy of Agri tax so bitterly debated on in the country. Reverting to Gold standards and Elimination of Fractional Reserve Banking: The Constitution of Pakistan as well as the last speech of QUAID-E-AZAM at the inauguration of State Bank of Pakistan, categorically state that interest based economic system will not operate in Pakistan. However, Pakistan has operated under the western laws of banking and finance, which is interest based and formulates fractional reserve as the basis for lending. In an unending debt creation cycle, State Bank of Pakistan is printing an excess of Rs 2 billion per month. This results in the devaluation of Rupee causing inflation and destruction of Pakistan’s economy. Fractional Reserve Banking (FRB) along with fiat paper currency creates inflation and devaluation of currency. The solution lies in eliminating FRB and introducing real wealth based currency, either paper currency backed by gold or real gold and silver coins as is being practiced in Kulantan state of Malaysia where Islamic
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It is a misfortune that despite having provisions of Islamic taxes like Zakat and Usher in the constitution, Pakistani people are being taxed multiple times at staggering rates as per the Western economic model.
Currently the US dollar is Pakistan’s foreign reserve currency but under the global health of the dollar, this is a dangerous and risky proposition. The dollar’s devaluation is eating into Pakistan’s forex reserves by millions of dollars per month. China has recently announced adopting Yuan as the trading currency by the end of 2011. The Chinese President has recently declared, “the dollar as reserve currency is a product of the past.” In her bilateral trade with China, Russia has also vowed to abandon dollar. China and European Union has already adopted Euro. Dollar is not accepted on many of the currency exchange shops in Europe, like in Amsterdam. In Germany special ATM machines with gold bars have been installed for the people who are keen to convert their savings from paper currency to gold bars. Gold is re-entering in trade as well in many parts of the world. Gold coins are becoming acceptable once again across the globe with a greater realization about the ultimate fate of any paper currency backed by fractional reserve banking system.
Many global economies are reverting to real wealth base system. One such example is the state of Kelantan, a northeastern state of Malaysia. On 12th August 2010, Kelantan became the first state to introduce the gold dinar and silver dirham as its official currency. The exchange rate for the gold and silver coins to the Ringgit paper money are; 1 dinar = RM581, 1 dirham = RM13. Introduction of real wealth currency is taking place for the first time in a 100 years, since the fall of the Caliphate. Muslim nations were divided into small states with national considerations. Since then, four generations of Muslims have not seen Gold Dinar and Silver Dirham. The introduction of Gold Dinar and Silver Dirham in the state of Kelantan is a radical step but essentially it is not a new experiment by any means, it is a return to the medium of exchange that has been known for 1400 years throughout the Islamic civilization as Money of Shariah taking its legislation from Allah’s Revelation and Rasul’s (sm) Sunnah.
Kelantan’s gold and silver dinar and Dirham It is time for Pakistan to immediately abandon the dollar as foreign reserve and Pakistani masses must start to purchase gold and silver at their own strength to bring about an influx of gold and silver into the country. Buying gold would be certainly not possible for everyone but there exists a better alternate: Silver. Historically, in case of hyperinflation, silver always proves a better investment and the present situation in this regard is no different. Under today’s circumstances, the parity between gold and silver is 1 to 53 which is decreasing fast. As a result silver prices are rising sharply compared to gold to close the huge parity difference. As the gold prices rise against dollar, silver prices increase manifolds respectively. Purchasing gold and silver at the masses level is the one thing that can ease the collapse of dollar and give our economy a soft landing. But before that, Pakistan must make sure that it abandons the US dollar as her reserve currency! Ensuring food Security: Pakistan must embark on a major program on war footings to secure its food supply, as water has become a commodity over which nations would go to war. Pakistan and India are locked in a bitter water dispute and it is expected that in future, both countries may actually go to war over water. Pakistan is located in a region of seasonal drought and natural calamities, therefore, securing food supplies in
To solve the issue of investments required in order to bring vast lands of Baluchistan under cultivation, Pakistan can opt for joint ventures with brotherly countries on crop sharing basis, where they will finance such projects and share the produce. Many countries, including India are leasing large territories of lands in foreign countries to grow their food supplies. Arab countries including Saudi Arabia are also seeking lands to grow their crops. These joint ventures can be beneficial to Muslim countries. Similar projects can also be initiated in livestock, which is another ignored field. Earning foreign reserves by meat export is a real possibility for Pakistan. Baluchistan is the region, which holds the key to progress in this dimension as well. Vast dairy and cattle farms can be established by inviting foreign investors. Pakistani entrepreneurs can also learn from their experience. Any such joint venture or foreign investment would help in bringing down meat prices in the local market as well. National mineral and fuel wealth to be exploited: It is due to corruption, mismanagement and foreign sponsored insurgencies that Pakistan has failed to exploit its own fuel and mineral resources. Even now, Pakistan has the potential to rely on local gas and fuel reserves, reducing its dependence upon imported fuel. Presently, Pakistan’s major imports include oil and petrochemical to meet the energy requirements. It is again an unfortunate and bitter fact that despite having massive potential of power generation from water, gas, coal, wind and solar energy Pakistan is still relying on imported oil which is putting a tremendous burden on Pakistan’s foreign exchequer. Pakistan can earn from Thar coal and Riko Diq mines. Excavation license must be given in such a way that any foreign investor would pay 40% of allowed excavation as upfront. Even the license cost for small area excavation can bring in hundreds of billions of rupees as FDI in no time. China, Russia, India and even US fully exploit their coal reserves to generate energy, sometimes up to 50% of national power and energy requirements are fulfilled. In Pakistan, we don’t even use 1% of coal, which we possess in billions of tons. The same is true for gas and local petrol which we do not exploit and instead import furnace oil for power generation. These are pure and deliberate acts of treason by the corrupt leaders and energy cartels.
Sample Budget Breakdown For decades, IMF, the World Bank and their paid cronies in State Bank, Finance Ministry and CBR have done extensive propaganda in Pakistan that the economy of Pakistan cannot survive without the capitalist interest based banking system, foreign debts, taxes and fractional reserve system. Every discussion on the prospect of implementing an Islamic economic model met with severe criticism by national economic managers and bankers. Even now, the case regarding interest free banking is pending in the Supreme Court and the federal
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Trading with gold and silver coins
any kind of circumstances in critical, an aspect that has been criminally overlooked. Pakistan has vast uncultivated land area in Baluchistan with underground water at the depth of few meters. This water is independent of our river and canal systems and hence would not be a source of dispute between provinces nor would harm the existing crops. No government has ever tried to utilize these vast lands for corporate farming so that Pakistan can secure food supplies not only for her own needs but to cater to the needs of other brotherly countries as well. A strict ban must be imposed on staple food exports and proper storage spaces should be constructed to secure surplus corps.
Total Expenditure: Rs. 3,000 Billion
It is always said by these IMF paid cronies that Pakistan would not able to design its annual budget without the current western economic model and the terms given by the IMF. It is said that Zakat based tax free economic model is not possible and would cause an economic collapse. Pakistan’s budget, designed by the IMF and their cronies, states no provision to bring back the looted wealth or to find alternate means to direct and indirect taxes which break the back of the poorest and the middle classes. The budget is always a jugglery of complex terms but is meant to maintain the status quo, which suits the corrupt and the exploitative ruling elite and their foreign paymasters.
Income Resources: Source
To blow this myth once and for all times to come, a breakdown of federal budget is given below in a well researched hypothetical scenario, where the volume of the budget is assumed at Rs. 3,000 billion.
The following breakdown assumes that all the above recommended reforms have been made. All figures are an estimation based on the existing budget. For decades, IMF, the World Bank and their paid cronies in State Bank, Finance Ministry and CBR have done extensive propaganda in Pakistan that the economy of Pakistan cannot survive without the capitalist interest based banking system, foreign debts, taxes and fractional reserve system. Every discussion on the prospect of implementing an Islamic economic model met with severe criticism by national economic managers and bankers. Even now, the case regarding interest free banking is pending in the Supreme Court and the federal Shariat court since the last 25 years. It is always said by these IMF paid cronies that Pakistan would not able to design its annual budget without the current western economic model and the terms given by the IMF. It is said that Zakat based tax free economic model is not possible and would cause an economic collapse. Pakistan’s budget, designed by the IMF and their cronies, states no provision to bring back the looted wealth or to find alternate means to direct and indirect taxes which break the back of the poorest and the middle classes. The budget is always a jugglery of complex terms but is meant to maintain the status quo, which suits the corrupt and the exploitative ruling elite and their foreign paymasters. To blow this myth once and for all times to come, a breakdown of federal budget is given below in a well researched hypothetical scenario, where the volume of the budget is assumed at Rs. 3,000 billion. The following breakdown assumes that all the above recommended reforms have been made. All figures are an estimation based on the existing budget. The breakdown, shown on next page, assumes the following: 1. Replacement of corrupt government with an honest one. 2. Usher collection has been added to federal list of subjects. Currently provinces are responsible to collect Usher. 3. The looted wealth is also being recovered from the corrupt and returned to the national treasury.
Zakat Usher Natural Resources (oil & gas) Government earnings Import duties (20% of current import bill of $20 billion) Corruption recovery FDI Cut in excessive govt. spending (V.VIPs protocols, personal security, lavish offices)
250 350 500 200 400
Estimated Receipt (in billion PKR)
700 500 100
It can be seen that this is a model in which there are no income and sales taxes, which would give a direct relief to the common people in all spheres of life. With no taxes, the fuel cost would also be drastically reduced for the transport system, bringing the entire cost of production and transportation to extreme lower levels. The fuel and gas produced in the country does not have to be sold at the cost of the imported oil but the corrupt governments and the cartels do not pass that relief to the nation. In fact, the profit of the locally produced oil is not even shown in the budget figures. The Pakistani Diaspora of nearly 10 million globally is fiercely patriotic and has the capacity to fund billions of dollars of development projects every year in the country, provided they have faith in the government and are given the respect they deserve. We have had many such examples in the past where billions of dollars of investment by expat Pakistanis was blocked and refused because the ruling elite demanded bribes and shares in the projects. Conclusion: The bottom line is that Pakistan can be turned into an economic powerhouse, literally over night within the existing resources and wealth it possesses, provided we have daring, patriotic, visionary and honest leadership! The leaders will have to be ruthless to eliminate corruption and terrorism – the two cancers that have brought Pakistan to the brink of economic precipice. These are desperate times and demand equally fierce and desperate measures. Pakistan is on the verge of losing its freedom, sovereignty and dignity due to the economic collapse, which is by all standards self inflicted and deliberately orchestrated. Pakistan army and the Supreme Court do not have too much time to correct the dangerous imbalance in national politics. The economic meltdown is simply too momentous. The current fragile economic situation and dependence on foreign aid and begging from the international financial institutions is the weakest and the most humiliating link in Pakistan’s national sovereignty. The shackles of economic slavery have to be broken if Pakistan has to rise to reclaim its rightful place as the leader of the Muslim world and to act as the key player in the regional and global geo-politics.
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Shariat court since the last 25 years.
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A great destiny awaits Pakistan. Pakistan has waited a long time to find the right breed of people to realize that fascinating destiny. It is within our grasp now and we have the means, capacity, resources and the ideology to make it happen. All we need is the will and the courage to dare to achieve what the others consider impossible. InshAllah, it will be done. Pakistan Zindabaad!
2 Return to the Golden Age
Khawaja Asad Saeed
With massive fiscal imbalances on all fiat money based balance sheets around the world, Europe at the brink of default, confidence in the US dollar at an all time low, prices around the world skyrocketing, what could be the new form of money or let’s say currency which could stabilize the financial systems once again and flush out all toxic debt and assets from around the world?! The developments may surprise a few, the events may shock many, but the solution has no argument against it, whatsoever!
China Proposes To Cut Two Thirds of Its $3 Trillion In USD Holdings Latest data shows that the Chinese foreign exchange reserves increased by $197.4 billion (US) in the first three months of 2011 to $3.04 trillion. A member of the monetary policy committee of the central bank, Xia Bin, recently said that $1 trillion would be enough and that the rest should be invested more “strategically”. He mentioned they should use the rest to acquire resource and technology needed for the “real” economy. On the private sector front, chairman of China Everbright Group, Tang Shuangning, also recently took his take on this issue. Not surprisingly, he mentioned that China should diversity its foreign exchange reserves thus reducing her holdings in US dollars. According to him, the current reserve amount is too high and that the foreign exchange reserves should be restricted within the range of $800 to $1.3 trillion. Bottom line: Confidence in US dollars is at an all time low. The largest creditor nation in the world, China, is about to dump a large chunk of US dollars and move into real assets like gold, silver and national welfare improving assets like investing in education, health, overseas investments and strategic resources. This is a message to the world that the US dollar is not a viable investment and the domino effect is just around the corner.
times. What is mindboggling in this case is that just about 10 years ago, The U.S. economy was three times the size of China’s!
IMF bombshell: Age of America Nears End
When Amscel Rotchschild said, “Give me the power of the money and it will not matter anymore who is commanding”, he expressed the true nature of international or global finance. The new front man for Bretton Woods II is none other than the famous international investor, George Soros. This is the same person who, in The Alchemy of Finance wrote, “To put it bluntly, I fancied myself as some kind of god or an economic reformer like Keynes … As I made my way in the world, reality came close enough to my fantasy to allow me to admit my secret, at least to myself.”
Finally, the IMF has accepted the fact that the “Age of America” will end. How long will it take? 2050? 2040? 2030? 2020?! NO! Mark it down in your calendar, its 2016! This is the year when the international organization estimates China’s economy will surpass, in real terms, that of America. This is just 5 years from now!
When the Chinese finally decide to let their currency float a bit more freely, it will send the Renminbi higher and the cost of Chinese goods to the Americans sky high! The result would be hyper inflation in the U.S. Furthermore, if the Chinese let their currency float and it doubles in value because of their ever increasing exports, the Chinese economy would double over night! To present a doomsday scenario for the Americans here, gold, silver and oil are sky-rocketing signaling a declining value of the US dollar. Less purchasing power and loss of the international reserve currency set up will send the U.S. back many decades in purchasing power terms. The case in point is what will replace the U.S. dollar as the international reserve currency? Naturally, the world should revert to the gold standard with silver in the mix. However, recent events have shed light on yet another sinister plan by the western bankers, but they are failing miserably now.
Bretton Woods II - The Last Ditch Effort to Enslave Mankind!
The Bretton Woods II conference was sponsored by INET, The Institute for New Economic Thinking. Some of the attendees and speakers at the INET conference included: ♦♦ Paul Volcker, former Chairman of the Federal Reserve and chairman of the current President of the United States of America’s Economic Advisory Board. ♦♦ Gordon Brown, former U.K. Prime Minister. ♦♦ Economist Jeffrey Sachs, Director of The Earth Institute. ♦♦ Joseph E. Stiglitz, former Senior Vice President and Chief Economist for the World Bank. ♦♦ INET Executive Director Rob Johnson, former Managing Director at (George) Soros Fund Management Data Source : IMF, April 2011
So in five years, the Chinese economy will be the largest in the world. But a closer look at their analysis unveils a flaw in their methodology. Gross Domestic Product (GDP) of the two countries is being compared but by using current exchange rates and that is a very misleading comparison in real terms. As Pakistanis know better, exchange rates change quickly, and Chinese exchange rates are far from being “fully priced”. They are actually phony. The Chinese have artificially undervalued its currency, the Renminbi or Yuan, through huge intervention in the markets. Under the current analysis, the Chinese economy will increase from $11.2 trillion this year to $19 trillion in 2016 while the US economy will increase from $15.2 trillion to $18.8 trillion. This means the Chinese share of the world output would rise to $18+ trillion and America’s would go down to 17.7%, the lowest in modern
♦♦ Jeffrey Sachs, Columbia University Professor who was written about by Aaron Klein in WND. “Sachs is, a special advisor to the U.N. Secretary-General Ban Ki-moon, is founder and co-president of the Soros-funded Millennium Promise Alliance. He has a been a World Bank consultant who formerly directed Harvard’s Institute for International Development, which he turned into a major conduit advocating for World Bank and International Monetary Fund’s use for structural adjustment program in the Third World and beyond.” "A Millennium goal called for a "currency transfer tax," a "tax on the rental value of land and natural resources," a "royalty on worldwide fossil energy projection — oil, natural gas, coal," "fees for the commercial use of the oceans, fees for airplane use of the skies, fees for use of the electromagnetic spectrum, fees on foreign exchange transactions, and a tax on the carbon content of fuels."
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That was in May, 2011. Reports coming out early June from the US Treasury show that China has “divested” 97% of her US Treasury holdings, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury. Short term Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the country’s debt. So the fate is sealed now. The only buyer left for the US treasuries is the Federal Reserve Bank which prints money out of thin air and then buys the US treasuries and then the US government taxes the public to pay them back. The never ending debt spiral is set to implode in the next few years. The situation has become so dire that the credit rating agencies like Moody’s, Fitch Ratings and Standard & Poor, which are usually in bed with the US banks creating a massive moral hazard, have been forced to warn the US that her credit ratings will be slashed if the US chooses to default on her loans, even temporarily. Hence, the Republicans and Democrats in Washington are fighting over cuts in fiscal spending or raising the debt ceiling. The case is clear. The debt is so large that the US cannot pay it back in today’s money. So the only path they will follow is print even more money and devalue the dollar so as to pay back in dollars which are worth less and less. This is how it looks like for the United States.:
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All the so called elite have joined in for a last ditch effort to further enslave mankind. For this to become reality, a one-world currency will be required, implemented through what they are calling now a “Super IMF”! No Wonder IMF is working day and night to collateralize resources everywhere from the United States to Europe to Africa to Asia when loans are offered. This would be a dream come true for the International Bankers. However, it should be noted that although, these rich elite do make money of fractional reserve banking, they always hold onto and increase their holdings of gold and silver which is real wealth. So in either case, the Special Drawing Right Unit that the “Super IMF” plans to issue and use as reserve currency for international settlements, it will need gold and silver in the mix, which brings us to the point of who has seen through this game and started buying gold and silver at an aggressive rate?! The answer should not surprise you.
the Chinese public. It is an open secret now that China wants to own more Gold than every other country in the world. She is desperate to mine more gold and buy as much as she can. (Hello Reko Diq in Pakistan!) The Chinese are the largest producer and consumer of gold. Do we still need “western” expertise?! Once the fall in paper currencies goes parabolic, China could start floating her currency (which is pegged to the US dollar) and that may play a big role in international trade. So to avoid speculative attacks, which Pakistanis are well aware of, the Chinese will HAVE to back her currency by a good chunk of gold and silver and that is exactly what they are planning. Is someone else also?
The Curious Case of Zimbabwe
World Gold Council Bombshell The World Gold Council just announced that China has surpassed every nation in the world in purchases of Gold. Now China is not only the largest producer but also the largest consumer of gold. What else?! The Chinese banned the exports of silver in late 2009 and encouraged their population to start saving in gold and silver by opening bullion shops and silver and gold accounts. Where she used to export 100 million ounces on average, the imports are now north of 200 million ounces every year! Add local mining and buying through the SCO camp which is not reported. The Chinese saw the coming inflation and saved their public’s purchasing power which also helps in inflationary times which are already here. The public has not panicked and stayed calm as inflation arrived, unlike the Middle Eastern countries. The purchasing power was left intact for
We are all familiar with how Zimbabwe recently went through hyperinflation in the past few years. The country was devastated as it printed and printed to pay off .. you guessed it! DEBT! (Federal Reserve and United States of America anyone?!). A lot of people still think that the country still trades in their Zimbabwe dollars! They actually use gold and US dollars now! But the Central Bank of Zimbabwe just announced that they believe the US dollar is no longer stable. So they are now considering selling their diamonds for gold, so they have a fully gold-backed currency. This is what the Central Bank there has proposed in their most recent paper. A country totally devastated with hyperinflation will now probably have the soundest currency in the world if the plan is approved and implemented. Imagine the capital inflows into the country. Look for Chinese to sky rocket her trade with Zimbabwe if this happens. The European countries are totally devastated. As we write this article, riots have broken out in Greece, Spain is no far away, Portugal has sold her soul to the IMF at the tune of $35 billion and Italy is panicking as well as
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the bond payments arrive. British Pound is on its death bed. The Euro is doomed. As we showed in the previous article, the west just cannot pay off her debt anymore. So, to instill discipline in the system again, there is for sure going to be a gold standard implemented in this decade which means gold and silver will be revalued against paper currencies. If that happens against the dollar, gold will have to go up to $15,000/oz. and silver to $500. Currently, they are at $1530/oz and $36/oz. That’s appreciation in value of a 1000% in gold which has already appreciated by 500% in the last decade and a 1400% appreciation in silver, which has already appreciated by 1000% in the previous decade. That’s multiple thousands in the making!
3 Currency Wars
Real Wealth vs Fait Money
What of Pakistan? Khawaja Asad Saeed
The important question is where Pakistan is in this mix?! We have arguably the largest gold mines in the world and so much silver can be extracted from them. It is important to bring to our readers’ attention that only 30% of the silver supply of the world comes from purely silver mines and 70% is a by-product of gold and copper mining. Pakistan has the 4th largest copper belt in the world and as mentioned, probably one of the largest gold mines. What are we waiting for?! The Central Bank needs to start accumulating gold and silver at an aggressive pace. We do not have much time. We need to diversify our foreign reserves into real wealth. Our banks need to start accumulating gold and silver to account for the loans they have issued. It should start right now! As silver and gold prices sky rocket, so will our foreign reserves and our banks will become the most profitable around with no need to charge interest to make money. We will easily break the shackles of fractional reserve banking and the interest based banking system. Every Pakistani banker wants this in their heart. They are sick and tired of this interest based set up. They can see how people are suffering because of it and they just cannot take it anymore. In a few years, we will be a debt free nation! It is as simple as that! We are at the tipping point of a financial disaster. The financial markets are crumbling while gold and silver stay rock solid! There is no argument left, none whatsoever against gold and silver anywhere! The time is NOW! NOW OR NEVER!
All the criminal money printing around the world by Central Banks, including the State Bank of Pakistan (SBP) is leading the world into massive inflation. If the current rate is not high for you yet, then brace yourself. Some countries have gone into turmoil because of rapid hyperinflation and more will follow. This prevailing concept of paper money printing without any backing of real assets is one of the key factors in disharmonizing the socio-economic fabric of the society particularly the middle-class. Pakistan has experienced rapid inflation in the last few years and it is about to go into overdrive in the second half this year. Are there ways for Pakistanis to protect themselves in such an event? Can the government do anything about it? Should we default on our loans? Should we just keep printing money? What is the way forward? The analysis presented here takes everything into perspective and provides a practical way to fight and even do well in the challenges that lie ahead both on an individual and collective level. There is no doubt in any finance expert’s mind that the second decade of the 21st century is going to see the start of arguably the greatest transfer of wealth from the West to the East. However, the world has already observed this shift and the trend is expected to increase and going to conclude in this decade resulting in the rising of the East. Economists and national economic policy makers are trying to gain vested short-term interests and ignoring the larger gains for their respective countries and entities they represent as a result of this shift of wealth from West to East. To get a clear picture of where the world is heading in the coming decade, we analyzed the case of debtor vs. creditor nations.
The Case of Debtor vs. Creditor Nations In general, people think that the world, as we know it, started at the turn of the 19th and 20th centuries. Most of us think the world was languishing in the dark ages and no real trade existed before then. It was challenging and painful to do business back then, when you only did barter to survive and make transactions. We also think that the concept and implication of modern central banks came to the rescue of the world and gave us formal and regulated financial institutions, medium to transact in shape of fiat money (paper currency) and the financial & derivative markets. So we are now supposedly rich because of these “innovations”. With fiat
We have established the case for a doomsday scenario for the paper currency in general and US dollar in particular in our previous month’s article. The question that takes centre stage is what can replace the US dollar for trade when the Euro’s future is also leading for a nose dive and at much faster pace than US dollar (the EU is printing as many Euros as it can to bail out her debtor nations). A lot of people do not accept the fact that the US dollar or the Euro will be worthless one day, possibly not far from today (historically, every single currency which was not backed by some commodity or a precious metal has gone to zero). But in order to clearly understand the depth of this topic, we will use the following chart that shows some interesting facts about the western nations, especially the one that is bantered repeatedly in Pakistan, and that is GDP/(external)debt ratio.
GDP is how much you produce in goods and services within a country. That is how much income you generate. If you borrow money, you should use it to produce something so you can pay it all back. In the 1970’s, developed western nations were generally the creditor nations and the debtor side of the globe was mainly in the east. Then, slowly and gradually, the western nations got hooked onto consumption, without limits. Whatever they borrowed, they consumed and started out sourcing productive capacity to the so-called under developed or developing nations where labor was apparently, cheap. When we went into the 21st century, for every $1 a US resident borrowed, he/she spent $5. Talk about staggering amounts of debt, since the borrowed money was used for consumption, you couldn’t return it as you did not generate any income from it. So how do they keep going? They borrow more money to pay off the previously borrowed money. Then they got another credit card to keep up with the payments of the previous one. The never ending debt spiral begins and it brings along the BOOM and BUST theory, when the economies seem to be growing at a rapid pace and suddenly implode and cause a huge recession. Pakistan went through the same phase during 2000-2007. To applied economists, this should sound familiar. This is exactly what the policy makers in Washington and Wall Street have done in the past half century. They borrowed and consumed while the production capacity of the world has shifted to China. But before we get there, let us examine the state of the United States and UK. Both are the largest debtor nations in the world with a GDP/debt ratio of estimated 100% and 428.8%
External Gross debt (as External % of Debt GDP)
$2.25 trillion $172.5 billion $9.12 trillion $2.128 trillion
Foreign Reserves External GDP Foreign (as % of per capita Reserves Gross External Debt) $535,529 $2.1 billion 0.0933% $149,281 $107 billion 1.17%
$1.2 trillion $314.7 billion $2.44 trillion $660 billion
$271 billion 22.8% $46 billion 1.89%
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Belgium Denmark Sweden Austria France Portugal Hong Kong Finland Norway Spain Germany Greece Italy Australia Hungary United States
326.7% 307.3% 269.7% 251.4% 244.3% 231.2% 224.7% 215% 208.8% 176.9% 176.8% 167.2% 141.3% 121.9% 120.6% 98.4%
$1.25 trillion $607.8 billion $893.9 billion $809.2 billion $5.23 trillion $537.8 billion $678.3 billion $383.7 billion $558.4 billion $2.40 trillion $4.97 trillion $557.4 billion $2.45 trillion $1.03 trillion $224.3 billion $13.9 trillion
$120,267 $110,502 $98,664 $98,554 $79,982 $50,230 $96,142 $73,082 $119,805 $59,459 $60,357 $51,916 $42,267 $48,787 $22,650 $45,302
$27 billion $77 billion $48 billion $22 billion $166 billion $21 billion $269 billion $9.6 billion $46 billion $32 billion $217 billion $6 billion $159 billion $42 billion $45 billion $134 billion
2009 GDP est.
$383.4 billion $197.8 billion $331.4 billion $321.8 billion $2.09 trillion $232.6 billion $301.8 billion $178.8 billion $267.4 billion $1.36 trillion $2.81 trillion $333.4 billion $1.74 trillion $851.1 billion $186 billion $14.14 trillion
2.16% 12.67% 5.4% 2.72% 3.17% 3.9% 39.7% 2.5% 8.24% 1.33% 4.37% 1.01% 6.5% 4.05% 20% 9.6%
Source: Consumer News and Business Channel (CNBC) & IMF data on current foreign exchange reserves of reporting countries
respectively. They are also in an ever increasing recession. Once admirable economies, US & UK have no way to pay back this amount other than by printing money which will lead to the devaluation of their currencies, and a complete shutdown of their economies in near future. However, they can surely use their foreign reserve to pay some of it off. That’s why the data compiled here has Foreign Reserve/Gross External Debt ratio to do justice with the case at hand. This particular ratio for UK is 1.17%, it means for every dollar UK owes as external debt, it has 0.0117 pennies in to pay it back. For the US, the same ratio stands at 9.6% and declining at a rapid pace. The chart below is a list of the top 20 debtor nations in the world. Barring Hong Kong, as it has the highest reserves compared to the western nations. These nations cannot keep up with their payments to their creditors. Neither do they have the productive capacity anymore, nor do they have any able reserves left to sell. Ireland got a bailout a few months ago because it couldn’t make her bond payment to international creditors. Bailout is a fancy name for central banks to print money and give it to the debtor. They create money out of thin air, but you have to pay it back in real wealth, for example if you can’t pay paper money which Ireland won’t because it has no productive capacity, they have to sell their national assets.
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money, paper currency, assisting the local and international trade swiftly. We have credit cards, smart consumer and corporate products facilitating every type of complex business proposition, fractional reserve banking system and interest rates which are advertised as “profits” when you inquire about their philosophy.
The Case For a Default & Restructure of External Loans 39
We are used to listening and reading stories in international and Pakistani media about economic meltdown of Pakistan and rumors about it being a failed state. Let us first categorically correct these misguided statements that going bankrupt and being a failed state are not mutually inclusive. In fact, if we look at history many countries have declared bankruptcy or default on their liabilities and started over again. It may come as a surprise to the naysayers and the so called “foreign trained” economists that Argentina, Mexico and Venezuela defaulted in 1982. The following year, Brazil and Chile defaulted. Furthermore, Costa Rica, Ecuador, Panama, Peru, Uruguay and the Dominican Republic defaulted as well. These are the same economies that are making a very strong impression of their prosperity, with their return from the bankruptcy Brazil, Venezuela and Mexico are now the profound economies of the world with ever increasing share in the world trade. None of these countries remained slaves to the liabilities. Look at Brazil, one of the fastest growing economies in the world. A country like Russia defaulted on its loans in 1998. Argentina defaulted in 2002. The following table gives a glimpse of these defaults: Country Venezuela Russia Ukraine Ecuador Ukraine Peru Argentina Moldova Uruguay Dominican Republic Belize Ecuador
Sovereign Debt $270 million - domestic currency bonds $72 billion – Treasury obligations, foreign currency obligations, MINFIN III foreign currency bonds $1.27 billion $6.6 billion $1.06 billion –DM-denominated Eurobonds & USD denominated bonds $4.87 billion $82.21 billion $145 million $5.7 billion $1.62 billion $242 million $3.2 billion
Note: there were other sovereign debt defaults that occurred during this period, including Ivory Coast, Grenada and Seychelles, but these countries did not have Moody's ratings on their sovereign bond obligations at the time. Also note that default does not always mean that you refuse to pay the debt. It can also mean you are deferring payment for a few years. It was also mentioned in the previous month’s article that Pakistan should default on its external debt for 3 years and divert the funds towards nation building. The advice was supported by a resolution of UN’s Human Rights Commission in 1999 and another of UN’s commission on International Law 1980. It should be clear now that other countries have successfully defaulted or rescheduled their loans and done well for themselves. So why can’t we?
Measuring the Strength of a Currency vs. Real Wealth In fact, the more a country is to delay rescheduling or the default, the more money is being printed which is highly inflationary for the economy and devalues the currencies further and hence the standard of living. Such is the case with the European countries and especially, the US. The best way to measure the strength of a currency is to measure it against real assets like gold and silver. Unlike paper money, gold and silver cannot be printed at will. As a result, they hold their value and in the case of depreciating paper money, appreciate in value. The following chart shows that before the advent of Federal Reserve, dollar was backed by real assets and hence its value remained the same, while after Federal Reserve was created, the value decreased so much that an item that used to incur a cost of $1 in 1913 was incurring the cost of $27 in 2009:
Default Period July 1998 August, 1998 September 1998 August 1999 January 2000 September 2000 November 2001 June 2002 May 2003 April 2005 December 2006 December 2008
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Among the countries listed in the table above, Greece went first. It could not keep up with the bond payment terms so Greeks have to accept a joint bailout package from the EU and IMF, which enforced strict austerity measures in the new budget. This also means less potential for productive capacity and savings of the common men simply vanished. Greece will probably need more money as her debt is staggeringly huge. The group of failing states is emerged as “PIIGS” (Portugal, Ireland, Italy, Greece & Spain), with massive debt problems, empty pockets and sovereign debts maturing within next 12 months. These debts are so huge that they cannot be recovered through bailout and more loans. Ireland has a debt of 1305% of GDP while its foreign reserves are only 0.0933% of GDP. We can expect Portugal to ask for a bailout as soon as the bond payments and new budget approaches. All the countries mentioned above are doomed if they select not to declare insolvency and if they do, expect the Euro to break apart and the currency to go into a freefall.
From 1774-1913, there was on average, zero inflation. Back then, we used real money and inflation netted out to be zero. Since the advent of the Federal Reserve and money printing at will of national policy makers (either in shape of politicians, civil servants or private entities of influence like Federal Reserve), a good that went for $1 now goes for more than $27. That’s an increase of 2700%. This is the answer to the thought in your head that why do our parents don’t have any stories of their parents and grandparents of rampant inflation to tell. It is indeed a very frightening picture of what’s about to unfold in the near future. Plus the US dollar has depreciated massively since 1913, the year Federal Reserve came into existence. Massive inflation is just around the world. A lot of it is already happening, but more is on the way. So how can Pakistanis protect themselves from this scenario on an individual and on a collective basis? There are things that rise in real value
Cost & Pricing of goods during Inflation Gold and Silver are God’s money and they will always remain that way. In the last 10 years we have seen rapid inflationary pressures around the world, ballooning debts, burst of dot com bubble, real estate crisis, and now a currency crisis. A lot of people invest in the financial markets to beat inflation and the most preferred market is the American financial market. The Dow Jones index is a great benchmark to establish the value of equities, currencies, commodities, agricultural products and precious metals. The following chart shows the Dow Jones Index which is much like the Karachi Stock Exchange Index. The top market capitalization companies, what they call as a “blue-chip companies” carry a heavy weight into the index. So, if the companies are doing well, so is the index and so is the market and the economy. As you can see that it has on average been going up in dollar terms. But we know that this is the age of inflation. So let’s see where the Dow really stands:
Declining Value of the US Dollar (USD)
It can be clearly seen that even though the Dow Jones was going up in nominal terms, it was actually free falling in terms of gold and silver. This means that while you were under the illusion of making positive returns in dollar terms, people holding gold and silver were easily outperforming you and the index. This is the power of real money.
Why Gold & Silver are GOD’s money? Quran states that it is possible for us humans, to like something which is not good or harmful and to dislike something which is beneficial for us. ALLAH (swt) has not left it to society or to a group of people to express its own evaluation of the measure of benefits and losses as drawn out of the goods or the services, by either fixed or variable monetary units. Islam has rather specified these monetary units by which society expresses
the values, i.e. the prices of goods and services. We reached to this conclusion that gold and silver are units of money prescribed by ALLAH (swt) and His beloved Prophet (saw) with following cases: 1. It is prohibited in Islam to hoard wealth and to not generate income for all societal sectors by employing humans, animals and other resources in businesses. In this regard, it specifically prohibited the hoarding of gold and silver, despite the fact that any possession could be referred to as wealth. Wheat for instance is a type of wealth, so are dates and money. However, the hoarding is reflected in the money, not in the goods and services. As for the other commodities, their accumulation would not be known as Kanz, i.e. hoarding, but as monopoly. Hence the verse which prohibited the hoarding of gold and silver would in fact be intended for the hoarding of money. The verse has specified the money which Allah (SWT) has prohibited its hoarding, and this is gold and silver. ALLAH (SWT) says in Al-Quran "And those who hoard gold and silver and do not spend it in the way of ALLAH, let them know that a severe punishment is awaiting them" (verse 34, Al-Taubah). No matter this gold and silver is in the form of minted coins, casted bars or coins or even a jewellery. This above verse applies to all cases. 2. Islam has a very well-formulated penal system where the laws are directly described by ALLAH (swt) and His Prophet (saw) with practical examples from the life of Prophet (saw) and his companions. Some of the penalties are physical in nature, however, some of them are financial in nature and they are linked with gold and silver to a set of fixed rules. In his letter to the people of Yemen, the Messenger of Allah (saw) was reported by Al-Nassa'i on the authority of Amr Ibnu Hazm to have said: “The blood money for the one soul would be 100 camels, and for those who deal in gold it would be 1000 Dinars.” Imam Bukhari also reported on the authority of Sayyeda Ayisha (ra) that the Messenger of Allah (saw) also said: “The hand would be cut for the theft of 1/4 Dinar and upward.” By fixing certain rules of penalties by the Dinar and the Dirham, a monetary unit by which the values of goods and services are measured. This monetary unit is the money, and it is the basis of the currency of Islamic economic system. This serves as evidence that the currency is solely restricted to gold and silver.
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during inflationary periods. In fact, historically speaking, those who placed their assets in gold and silver were able to shield and hedge themselves from hyperinflation.
4. ALLAH (swt) decreed the Zakat of wealth and liquid assets, He (swt) made it obligatory in the gold and silver, and He (swt) determined a Nisab for the Zakat in gold and silver. Therefore, to consider the Zakat of money as being gold and silver would establish the money as being gold and silver. Even the present day scholars of Islam prescribed to give the Zakat and Sadaqat in the form of commodities, which are real in nature in order to obey the orders of ALLAH (swt) and serve the purpose of helping the have-nots in the most effective manner. The prohibition of hoarding of form of money, the obligation of Zakat in money, the decreeing of the rule of exchange for it, the approval of the Messenger of Allah (saw) of it, and the linking of the Diya (blood money) and the cutting of the hand in theft with reference to money, would make the opinion in such a matter subject to the Sharia'a text. The fact that Sharia'a has expressed that money is gold and silver, through the rules, related exclusively to it and also through those linked to it, this serves as clear evidence that the currency should be gold and silver, or based on gold and silver. Therefore, the type of currency determined by the Sharia'a rules must be adhered to. Thus the money in Islam should be gold and silver. However, to exclusively determine gold and silver as money would not necessarily mean that it would be forbidden to conduct any exchange in other than gold and silver. The exchange can be in any real asset or even in paper currency backed by any real asset. The monetary policy makers initially tempered with real asset base currency by reducing the percentage of the backing from 100% to say 90%, so on and so forth, which is not acceptable in Islam as the currency is gold, silver or anything backed completely by real asset.
Prices in gold and silver Inflation is when the average prices of goods start to increase, while ‘deflation’ is the phenomenon when prices of goods and services start decreasing. The above charts show that prices are indeed increasing for goods every single day, but only when measured against paper currency. If you price them in terms of silver and gold (the real money), they are actually decreasing. You need less and less gold and silver to buy the same amount of goods. For example, a brand new Toyota Corolla used to cost around Rs. 1 million, 5-6 years ago. Gold was around Rs. 14,000 per tola. It required seven gold bars of 10 tola each to buy one Toyota Corolla. These days, the new Toyota Corolla costs Rs. 1.5 million. The price has gone up by 50%. But this is the case only when you measure it in terms of paper currency. Now, gold is trading for around Rs. 46,000 per tola. To buy the Rs. 1.5 million Corolla, you need only around three 10 tola gold bars. Even though, the price in paper notes has gone up by 50%, it has actually gone down by 50% in terms of gold. The same formula applies with different percentage value to Silver as well. This is the power of real money in times of crisis like these.
Trading of Oil The biggest benefit in reverting towards real wealth for our foreign reserves will be the price of oil. Oil is traded in the US dollar in the international markets. The price of oil is going up in the world because the US dollar is depreciating because of hyper money printing from Fed and EU Central Bank. Each dollar buys less oil every day. So the suppliers are demanding more and more for it. The government needs to take a deep look at the gold oil ratio. When the price of oil is going up, there is inflation and at the same time, the value of gold and silver also increases. Real assets and wealth hedge against the rising prices of oil. The gold oil ratio stays at 15.4 on average. This illustrates that one ounce of gold buys 15.4 barrels of crude oil.
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3. The Messenger of Allah (saw) has fixed the weight of gold and silver to the method adopted by the people of Makkah. Abu Dawood and Al-Nassa'i reported on the authority of Ibnu Omar that the Messenger of Allah (saw) said: “The weight should be that of the people of Makkah.” When reviewing the monetary weights in Islam, we would conclude that the legal ounce would equal 40 Dirhams, the Dirham would be 6 Daniqs, the Dinar would equal 24 carats and every 10 Dirhams would equal 7 miskals. The weights of Madinah were established according to this order. The Messenger of Allah (saw) has determined gold and silver as the monetary standards, and made them exclusively the monetary measure by which the goods and services are evaluated, and all transactions used to be conducted on their basis.
Key Action Points On an individual level, following are the key steps to be taken by people all over the world in general and Pakistanis in particular: ♦♦ Convert all your paper based assets into real assets ♦♦ Only buy physical gold and silver and not the gold and silver backed investment certificates. ♦♦
Educate, encourage and influence people around you to save in gold and silver.
♦♦ Initiate mechanisms by closely knitted collaboration with likeminded people to facilitate the conversion of paper based assets into real assets, developing framework that would facilitate this process and designing secured physical locations to place the real assets. ♦♦ Channelize the real assets into profitable initiatives that would enable circulation of wealth among the society ♦♦ Only use real assets to give Zakat, Sadaqas and all other forms of charity. Listed below are some key steps to be taken by the Economic managers of the State of Pakistan. ♦♦ Shift the current denominators of the Pakistani Rupee to real assets ♦♦ Foreign currency reserves of the State of Pakistan should be immediately converted into gold and silver ♦♦ Negotiate with other countries and important international bodies to trade in the real assets instead of paper currency ♦♦ Control of wealth in local markets should be taken back from the private banking systems, as they create inflationary impact by making fake money out of thin air ♦♦ Provide regulations to facilitate the Islamic trading and investment options through the effective use of monetary policy
4 Financial Terrorism Khawaja Asad Saeed
The month of August, 2011 brings us the 40th anniversary of when President Richard Nixon of the United States of America took the world off a partial gold standard in the name of “the best interests of the United States” and every currency in the world became fiat (worthless paper in circulation by the decree of the government, and sadly accepted by the public). 40 years on, financial markets in turmoil around the world but gold making record nominal highs and explosive silver prices, riots taking over the entire continent of Europe and the US economy in doldrums. The Financial Terrorists are making a killing everywhere! The big capital investment banks are running the US government’s economic policy and that of the world, via the Federal Reserve which holds the printing press for the reserve currency of the world. In this piece, we analyze how these financial terrorists hold so much power and how they are creating havoc around the world, yet making profits at the same time in terms of food price hikes, violent riots, war and poverty. We again present our solutions like we did before which have passed the test of times and are being adopted by many policy makers around the world. In our April, 2011 edition of the magazine, our piece titled “Currency Wars” presented the macroeconomic situation of the western world. It was estimated that the dire situation will most likely lead to massive political instability and civil disobedience, and that it could happen any moment. It just required a few clicks. This is precisely what has transpired. In a matter of months, we have seen the Standard & Poor rating agency downgrade U.S. credit rating, which led to a massive sell off in the global financial markets. In reality, the S&P did not downgrade the US enough. The US bonds deserve junk status for the simple reason that was explained in “Currency Wars” and the June, 2011 piece, “The Return to The Golden Age”. The US will print money to get out of debt which will in return cause massive inflation around the world which will lead to riots everywhere. Why lend someone money when you are going to get less in return?! All this printed money was loaned not only to the investment banks inside the United States of America, but it has come to light that around $10 trillion+ was loaned to foreign banks by the Federal Reserve in secret! All this is funny money. It is money created out of thin air. It does not exist as real money like gold and silver. It’s just paper floating around until people lose faith in it, which is exactly what is happening and hence, gold prices recently hit a record high of $1875.00/oz. or Rs. 61,000/tola! Only a month or so ago it was only at $1485/oz. (Rs. 48,000/tola). Silver is
about to make all time highs very soon as well! The funny money loaned out to the foreign banks by the US Federal Reserve in secret, is a tool to create political instability around the world and collapse regimes and start war. If there is too much money trapped inside a place, it loses value and prices skyrocket and the middle class is wiped out. The funny money made its way to Tunisia first, then Egypt, Libya, China, India, Europe, Latin America, creating massive food inflation and as a result, riots all over the place. Tunisia fell, Egypt fell, Libya is being destroyed, Greece and Portugal have sold out to the IMF, Spain and Sweden are burning and recently, Germany experienced a wave of arsonists burning down “FAT Cars” or luxury cars in retaliation to the ever increasing gap between the rich and the poor. The severity of the situation is shown in the images here. What about the UK?! It experienced the worst riots in modern history with the situation getting so out of control that they had to consider deploying the army to regain control. Where ever the fiat money makes its way, it brings along destruction. But this is not a new phenomenon. Monetary history teaches us that every time a government has tinkered with real money (gold and silver) and introduced fiat money (worthless paper), it has always gone back to its intrinsic value: ZERO! The US dollar as we know it has cancer, it’s on its death bed and the time is not far when it will be part of history books just like every other paper currency that ever existed.
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Here’s Why it Happened The world has totally lost confidence in the US dollar now. The stock markets plunged by more than 10% in just a week while gold exploded on the upside by more than 10% and silver, 15%. So people are exiting paper assets and going into something very real, something very monetary in nature, GOLD & SILVER! It was suggested again and again that The State Bank of Pakistan should start acquiring at least some gold and silver to diversify her foreign reserves. If that had been done back then, our debt in total and interest payments would have gone down by now, rather than reaching more records highs. In the meantime, many central banks have increased their gold holdings in the past couple of months like China and India. There are some new comers to the list too. Below is that list: ♦♦ South Korea: 25 tones of gold
♦♦ Thailand: 19 tones gold ♦♦ Mexico: 90 tones of gold As stated before, the funny money concept started in 1971, when the world went off the partial gold exchange standard. A lot of money was printed. This money needed a place to go to! Wherever it went, it created temporary booms and then eventual busts. The larger the amount of funny money created, the larger the boom and hence, the bust. It first ended up in the West, and there was massive inflation. It then ended up as “petrodollars” and oil prices exploded! All this funny money ended up in Middle Eastern hands. Again, this funny money needed a home. At that time, only the western banks could handle this big of an amount. So it ended up in the so called BIG banks. The banks needed to loan this money as soon as possible to use fractional reserve banking and make even more funny money to make even more “profits”. The money ended up in the Latin American countries and booms followed busts with massive inflation and in some cases hyperinflation, destroying many lives and families. The funny money turned around and went into global stock markets and US bonds in the world and then it exited giving us the Black Monday, 1987, when the markets plunged! The money then ended up in technology stocks creating another massive stock market bubble in 1999-2000, which as expected went bust. Finally, the money ended up in the real estate markets in the world which boomed
till 2006 and then as expected, bust! This should ring a bell as to how the property and stock market bubble came into existence in Pakistan and then, went bust. But still, more funny money is being created by Central Banks every single day. Now this money is about to exit US bonds and the stock markets again, but this time the funny money is conservatively 10 times bigger what it was in the 70’s which means that this time the bust is going to be so huge, the whole world will feel it. Already we are seeing massive riots around the world, regimes being toppled, families denied their basic rights and economies in peril. Eventually, all this funny money is going to end up in the safest store of value, gold and silver and that will be the time when prices for these monetary metals will go parabolic. The countries that learn from this piece of history and apply it will be in much better shape compared to the rest of the world. In our April 2010 “Currency Wars” piece, we compiled a list of gold reserves for the top 20 debtor nations. Lately, in just the past 2 months, new faces have emerged who can see the global hyper depression coming. They are taking action!
Hugo Chavez Bombshell & The GOLD Rush Hugo Chavez recently nationalized the entire gold industry in order to rack up the national gold reserves. Venezuela holds around 365 tones of gold, 221 of which are held in US, European, Canadian and Swiss institutions. Hugo Chaves just demanded physical delivery of all the 221 tones from the foreign institutes. This shows a lack of trust or discomfort at holding gold with “developed” nations. The game is exposed. The world is waking up to the fractional reserve system which is not just prevalent in paper dollars but also “paper” gold and “paper” silver. These two monetary metals have been leased out again and again by the Western Banks on “paper” to suppress their prices so people don’t lose confidence in the US dollar and other paper currencies. They can’t do it anymore. Central banks and people around the world are demanding physical delivery of gold and silver rather than just certificates which have no backing in reality. This only increases the price every month. The time is now to move into these two monetary metals.
Food Derivatives: Speculating with Food Prices
The Financial Terrorists
http://www.wdm.org.uk/sites/default/files/hunger%20lottery%20report_6.10.pdf http://www.theecologist.org/News/news_analysis/931513/a_guide_to_food_speculation_how_to_argue_ with_a_banker.html
Reading all this may make you feel that immense wealth has been and will be lost or destroyed around the world. However, wealth is always transferred. Whenever these booms and busts happen, there are always a few people who end up becoming extremely rich while the middle class keeps shrinking. How does this happen? It’s very simple. The financial terrorists, big investments banks on Wall Street in the United States of America, who jointly own the Federal Reserve create these massive booms and then exit when the masses start coming in. As a result, they end up transferring the wealth of the middle class towards them. The government then has to give a lot of benefits to the unemployed which again, are outsourced to these banks, like JP Morgan, who manage the food stamps business in the United States of America. Currently, there are in excess of 44 million people in the United States of America living off food stamps as of February 2011! That is such a huge number that tent cities around the United States of America have emerged because these people just cannot afford to even feed themselves. They have lost everything to the corrupt financial terrorist’s investment banks.
Suicide Banker: Lioyd Blankfein, Goldsmith Sachs CEO People are living off food stamps in the USA because they cannot own basic living. As we can see, another banking crisis and financial crash is in the making! One wonders if 50%-70% of the population in the United States of America will be on Food Stamps then. That will mean excessive money printing again by the Federal Reserve which loans it out to the government who taxes the workers to pay these loans off! But in this case, there will not be many workers and the government will keep borrowing and hyperinflation will ensue. That is the doomsday scenario for the world! Only people with gold and silver will survive.
These financial terrorists have even started speculating on our food now! This adds to the global spike in food prices. In 2011, the “food derivative” speculation has taken over the financial derivative as the hot new trend promoted by the financial terrorists like Goldman Sachs and JP Morgan. So the same banks which caused the 2008 financial crash are now responsible for skyrocketing food prices! It is estimated that in 2011 alone, Goldman Sachs made $1 billion profits alone by speculating on food prices. The reports found in these links are very informative on this issue, if one has the desire to study this in detail:
What is even more horrific is that the same banks are now buying vast lands in the third world which is now at the mercy of the IMF! In 2009, the Oakland Institute presented a research project which revealed the terrifying facts about the financial terrorist’s land grab. The published report, “The Great Land Grab”, which shows how the big banks work in collusion to seize vast amounts of land, break the back of the farmer, and send prices skyrocketing can be found here: http://media.oaklandinstitute.org/sites/oaklandinstitute.org/files/LandGrab_final_web.pdf Furthermore, The International Food Policy Research Institute (IF PRI) has reported on this in extensive detail as well, estimating that around 40 million acres of farms in the developing world was seized from 2006 to 2009. The institute revealed the International Financial Corporation, which is the private sector branch of the World Bank, played a major role in “corporatization” of global agriculture. Another World Bank agency, The Foreign Investment Advisory Service (FIAS) has been shown to have played an important role in pressuring
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Any more economic upheaval could send gold and silver parabolic. It’s just a matter of time now. Pakistan needs to make its move soon as suggested many times previously. When the prices go parabolic, we can pay off our debt very easily and break the shackles of debt. This will give us the freedom to focus on investing into our economy and future. If we don’t act now, another great opportunity will be missed!
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ignorant government in the United States labels these banks as “Too Big to Fail” or as we call them “Too Pig to Fail”, borrows money from the Federal Reserve which prints it and hands it to the banks and then the government charges higher taxes to the public to pay these loans off to the Federal Reserve! Recently, these financial terrorists have started attacking nations as a whole. The procedure is to create a financial crisis by ill advising the corrupt regimes, funded by the same investment banks, and in the end up giving them loans which the nations cannot pay back so they can then sell their national assets to these financial terrorists! Keep in mind that these “loans” are funny money! It does not exist! They just issue a digital number and the world accepts it.
Portugal, Ireland, Itlay, Greece & Spain (PIGS): Before and After IMF Raid The IMF loans that Pakistan accepted do not exist in reality. They are just digital numbers and when the payment is due, IMF borrows from these same investment banks which do not have the money, who borrow from the Federal Reserve, which just creates it out of thin air by printing it! What kind of a system are we accepting in this world and Pakistan in general?! It is because of the corrupt, incompetent and sold out government and our central bank that these looters keep piling on debt upon debt on us until our interest payments become so huge that we cannot afford to even pay for our basic necessities and massive riots ensues because we would be paying them back by printing our own fake funny money which will create massive inflation and eventually, hyperinflation inside Pakistan! It is time that we wake up to this con! The world has lived under this fake pretext of paper money being real money for too long now. Enough is enough! Even in our own schools and universities in Pakistan, the teachers and even professors have no clue about this. No one has ever even
mentioned this in public. These “foreign trained” economists just keep teaching the same failed economic policies that were taught to them by the “western” institutes which are funded by the same financial terrorist’s investment banks, who just keep the public brainwashed as to how economics of the world really operates so they can keep plundering the world while the common man thinks they are there to help them. It is this ignorance that has led us to this tipping point in our history as a nation. Are we going to keep living at the mercy of these financial terrorists or going to take control of our destiny and eventually introduce gold and silver as legal tender for all trading inside Pakistan which brings no inflation along with it and is a real job creator as proven in our previous articles. It has worked before, it is still working in some parts of the world, and it will become the standard very soon in the future. We do not have much time. The time is now. Let’s educate ourselves on this issue and preserve our wealth in gold and silver. Let’s do this Pakistan! **********************************
5 Class Warefare Blowback Khawaja Asad Saeed
With Goldman Sachs conquering Europe, Occupy Wall Street protests going global, Global Insurrection Against Banker Occupation (GIABO) going viral, the European Union and its currency – The Euro, teetering on the brink of collapse, more Central Banks adding to their gold reserves, 2012 is poised to be the most fascinating year of the 21st century so far. These are truly testing times for every paper currency in the world. All of them are getting devalued against real money – gold and silver. 2012 should take this devaluation to the next step – daily volatile swings. Already, the markets around the globe have become so volatile that it’s a big risk to second guess any market now. As people are finding out now, nothing is for sure. Only gold and silver are. They have never lost value or become worthless ever since their inception. So let’s first turn our attention to what’s causing havoc in the international markets and every single economy around the globe. The New Masters of the Euro Zone: It was mentioned in our previous articles and especially the one titled “Currency Wars” in the April - 2011 edition of this magazine that the eurozone is on the verge of collapse. It was shown that the debts far exceed the annual income. These countries, also mentioned previously, issue debt-instruments –bonds, to run their governments. The public sector is at the mercy of these debt instruments and as long as there is confidence that the governments will keep making payments, there will not be any problem. But then again, it turned out that these countries were bankrupt but still were able to keep up with the payments. What came to light was that these nations were printing money and paying back in worth less amounts of paper currency. This is where investors lose confidence. The payments you receive are worth less and less every month and buy you less amounts. In such a scenario, investors now have 2 choices: 1 Sell your holdings of bonds and exit the country, or 2. Ask for a higher return (a higher interest rate) Both of the above can also take place as they did in Greece! The yield on the 1 yr bond reached as far as 100%! It is natural for the interest rate to go up as investors want a higher return to compensate for the loss in pur-
chasing power of the printed currency. This is exactly the same thing that happened in the United States of America. But over there, the central bank, which is private bank, the Federal Reserve, stepped in and bought all the bonds when no one else wanted to buy at such low interest rates. They called it Quantitative Easing 1 and then 2. The net result was massive inflation. That nation is trapped now. If it lets the interest rates go up, the country goes bankrupt because the debt payments will go sky high. If the Federal Reserve keeps printing money and buying all the debt instruments from its own government, net result is hyperinflation down the road. In either case, you are a defaulter! They have chosen the path of defaulting via hyperinflation. But in the eurozone, the European Central Bank (ECB) has so far to an extent resisted the call to buy bonds from the different governments that are in trouble, namely the PIIGS – Portugal, Ireland, Iceland, Greece & Spain.
During all this mess, bankers have taken control of high profile positions in the eurozone to push for policies that they deem fit for them. It is interesting to note that all of them currently or previously belonged to a bank we identified as the biggest Financial Terrorist in our previous article, Goldman Sachs! ♦♦ Ireland – Peter Sutherland: Former Attorney General of Ireland; prominent voice during Ireland’s “bailout”; non-executive director of Goldman Sachs International ♦♦ France – Antonio Borges: Former head of IMF’s European Department (resigned in November, 2011); former chairman of Goldman Sachs International ♦♦ Italy – Mario Monti: Italy’s new prime minister; international advisor to Goldman Sachs ♦♦ Belgium – Karel van Miert: Former EU Commissioner and ex-international advisor to Golman Sachs ♦♦ Germany – Otmar Issing: Former board member of Bundesbank and the ECB; helped create the Euro; advisor to Goldman Sachs ♦♦ Greece – Lucas Papademos: Greece’s new prime minister; ran the central bank of Greece during the controversial derivatives deals with Goldman Sachs that enabled Greece to hide the size of its debt ♦♦ o man Sachs
Petros Christodoulou: Head of Greece’s debt management agency; began his career at Gold-
♦♦ European Union – Mario Draghi: New head of the European Central Bank; former managing director of Goldman Sachs International Europe stands at the brink of a crisis partially orchestrated by the bankers to get more control over policy making. The governments are not bailing out themselves or the people. It is the bankers that stand to lose if the governments default on their debts. Majority of these debts are held by private banks with a habit for uncontrolled gambling on commodities, foreign exchange, stocks and bonds, disguised as “trading”.
The eurozone might be able to buy some more time like the United States of America by printing money. But it’s more difficult here because there are many countries that have different languages and culture and they have a past of total war. Not all of them are on the same page. Already, the UK has voiced concern about Germany taking over the entire eurozone if it buys debt of certain countries in need. We know the history of these two countries. So the stage is set. Every single option required printing more money now. It is the public vs. the bankers! The governments are in the pockets of these bankers. The civil unrest and riots in the eurozone covered in the last article are poised to go viral in the entire eurozone. Civil liberties are being quashed and new laws put in place to make it seem like a civil martial law now. The Euro will fall apart and not exist as we know it today. The eurozone and with it NATO, faces utter annihilation in the shape they are today not long from now.
United States of Americans on Food Stamps Another month, another record! According to the Supplemental Nutrition Assistance Program (SNAP), the usage of food stamps, the minimal way subsistence, hit an all time record of 46.3 million in the United States of America! The rate of increase is frightening for anyone to observe. The economy is not recovering at all, and simply cannot as the fundamentals are so woeful; it makes the hair on the back of your head stand up!
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The reason is the largest economy in the zone – Germany. This particular country is wary of such an act as it remembers the hyperinflation it experienced under the Weimer Republic in the 1920’s when massive amounts of paper was printed to back the debts incurred after the Treaty Of Versailles put all the cost of World War 1 on Germany. So what happened when the ECB resisted?! The interest rates on the bonds for Greece, Italy and Spain shot up! Italy is the third largest economy in Europe and its failure to keep up with her debt payments has dealt a huge blow to the entire eurozone. So what exactly is going on here?! It is interesting to note that Italy now has a technocratic government run by bankers after Prime Minister Silvio Berlusconi was forced to resign during the crisis! The entire eurozone is rolling over its debt – paying off previous debt by buying new debt! That’s like paying off one credit card from another. It does not solve the problem, it just delays it! So what all these governments have done is to “kick the can down the road” and buy some time. The plan is to collateralize national heritage sights, ports and natural resources to the newly issued debt. This is what happened to Greece and this is exactly what is being done to Italy and Spain now. In between, the ECB has offered to buy bonds by printing money, but the amount required is somewhere around $6 trillion which will unleash hyperinflation down the road in the eurozone too! So the debate rages on, and the end game keeps on being delayed. The further the delay, the bigger the bust! This collapse will make the Great Depression of the 1900’s seem like a walk in the park.
Bond In/(Out) Flow - Trailiing 6 week Running Total (SMM)
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With ever increasing dependency of the public on government subsidies or free giveaways to just survive, financed by printing more money, the capacity to support many wars around the globe seems like a dream. This particular dream is turning into a nightmare for the United States of America as foreigners have started dumping the US treasuries (bonds) at a record pace and amount. We have explained in detail in the past articles that how the United States of America has financed its entire economy and war machine on the back of fake paper money that was de pegged from gold in 1971 and the usage of US treasuries (bonds). Well, now since the world is waking up to the fact that this nation is just printing money and paying the bills, other nations around the world have started accumulating gold and silver as they want real wealth that always retain its value in times of crisis, when everything else is falling apart.
Feb 2003-Sept 2011: Another precursor to the next round of Quantitative Easing (QE3)?!
Jan 2008-Oct 2011: Increasing when the Federal Reserve buys the US treasuries by printing money, Quantitative Easing 1 & 2. Inflation went from 2% to 10%-12% now. The recent drop may call for another round of quantitative easing (QE3) that will unleash hyperinflation down the road. 20%-50%. Once it goes to those levels, there is no way to stop it from going higher.
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It is interesting to note that whenever a crisis starts to unfold in the US dollar, some massive war campaign starts and fear mongering begins. The idea is to get people back into buying US treasuries as they are considered a “safe-heaven” in times of crisis. Well now, the crisis is coming home to the United States of America and this time, as more fear mongering is being spread about Iran, Middle East and Pakistan, China and Russia have had enough! In the report published in October, 2011, a record number of US treasuries, $74 billion, were sold in 6 consecutive weeks. Cunningly, the US would like this to become $740 billion, but judging by the response of previous metals; gold and silver appreciated to this news to this sell off in treasuries as the exited money entered the metals market, the US better wait until it forces the Federal Reserve to intervene and buy out all the bonds to finance the already bankrupt government when again, there is no buyer left. So the stage is set on this side of the Atlantic as well! 2012 will bring more money printing both in Europe and the United States of America. It will make things look a bit rosy for a little as the politicians use the media to say how this is the time of so-called “economic recovery” like President Obama of the United States of America dubbed the summer of 2010 as the “Recovery Summer”. What recovery indeed! One year on, gold skyrocketed to an all time high in the summer of 2011, record number of food stamps issued, and zero jobs created in August-2011! ZERO! Not even part time jobs. So when the cover comes off the lid, and inflation skyrockets further and possibly heads towards hyperinflation, more people are laid off, diminishing purchasing power of fiat currencies goes mainstream, there could be huge civil unrest around the globe. In this case again, there is no choice but to print money for the politicians!
So, the markets are extremely volatile and in a downtrend, a sell –off in treasuries a reality, where is all this money heading to?
Central Banks Add To Gold Holdings Central Banks are all adding gold and silver to their reserves at a frantic pace. In October alone, Russian central bank added 19.5 tonnes of gold reserves. Thailand, Bolivia, South Korea added as well. All emerging economies are also reporting increases. Furthermore, China is one country which always understates her holdings. Every year, they report a sharp increase in their revised numbers. As mentioned before, China’s target is to have the largest amount of gold reserves in the world before it floats her blocked currency. This will add lots of muscle to it and shield it from speculative attacks. A month after prices rose to a record, Russia, Colombia, Belarus, Kazakhstan and Mexico added a combined 25.7 metric tonnes in October alone. Mexico is talking about a silver backed peso and even their parliamentarians, almost all of them, are no on board. The biggest shift in psychology is the fact that after nearly 2-3 decades, Central Banks around the world are now net-buyers of gold. The chart shows the change clearly. During the first decade of the 21st century, Central Banks were still net sellers and this Russian President, Vladimir Putin shows off some real is while the price was still going up! It rose by a total of 500%! This is the second phase of this bull money
Russia marches on towards its official target of accumulating around 120,000 ounces. Currently at around 28 million. Big orders coming up for sure in 2012!
market is gold (and silver). Central Banks have joined the party and they bring along a huge pile of fake paper currency which for the time being can be redeemable for a lot of gold, but not for long! Prices are set to resume their upward trend after taking a breather in the last month and it will take more and more paper to purchase gold in 2012. This bull market in gold (and silver) is just starting! As mentioned in our previous article, a big game changer that took place was President of Venezuela, Hugo Chavez, claiming physical delivery of the country’s gold holdings that were held with banks in England, Canada, Switzerland and the United States of America. So against all odds, Venezuela took the shipment amidst tight security. The following was reported on November 29th, 2011, by MSNBC on the event: http://www.msnbc.msn.com/id/45481474/ns/world_news-christian_science_monitor/t/venezuelas-firstbatch-repatriated-gold-comes-home/#.TuTcivIppIE “CARACAS, Venezuela — Many experts laughed off the plan, claiming it unfeasible and nothing more than a publicity stunt that would never materialize. Yet, just three months after announcing his intent to bring home Venezuela's international gold reserves and end the “dictatorship” of the US dollar, President Hugo Chávez has pulled off at least the initial portion of the feat, with trademark theater.
George Soros and other elite bankers are attempting to hijack the Occupy Wall Street movement and get the population to become violent. So far, the protestors have been non violent. However, the police have used extensive force against them. Tear gas and pepper spray has been used by the police as if it were normal procedure. Reaction to this has been a movement called “Occupy Everywhere” and this movement has gone global and more than 100 cities around the globe have seen this movement against big banks. In the United States of America, the plan seems to force the protestors to become violent and as a result, the big banks can lobby in Washington to pass laws that would eventually lead to a martial law like situation! The idea would be to hijack such movements and then lobby for bills like Senate Bill S. 1867 which was passed 93-7 in the Senate. Such bills are attempts to give the military the power to detain, arrest, interrogate, and assassinate a US citizen if they the person is deemed “a threat to national security”. This tussle has been going on for the past decade and every year the bankers and the government seize more control over the population. How this movement unfolds is yet to be seen, but what is clear is that the so called elite bankers are looking at every opportunity to seize more and more control over the population.
So, no solution but to print money and civil disobedience movements going global, do the Central Banks, and especially, does the Federal Reserve have any trick up its sleeve to further fool the people and keep the house of cards from falling? The first shipment of the precious metal landed at Caracas’ Maiquetia International Airport late on Friday night to great fanfare. Pallets carrying the ingots traveled along the runway with an armed soldier on top of each. They were loaded onto armored vehicles and carried to Caracas as supporters celebrated in the streets.” Soldiers stand guard as an armored truck containing gold reserves arrives to the Central Bank in Caracas, Venezuela on Friday Nov. 25, 2011. President Hugo Chavez's government has begun repatriating Venezuela's gold reserves from European banks. All this drama of money printing, bond exiting and gold accumulation is not oblivious to the public. People have woken up to the con of paper money and fractional reserve banking system and they are not staying silent anymore.
Occupy Wall Street and Global Insurrecion Against Banker Occupation(GIABO) They public in the United States of America knows that the Federal Reserve has totally taken over the nation’s economy and every decision is now made by big banks. The reaction to this has been movements dubbed as Occupy Wall Street (OWS) and Global Insurrection Against Banker Occupation (GIABO). OWS has taken some serious shape in the past few months. It started off with people in the United States of America camping outside Wall Street in New York and non- violently expressing their anger against the big banks who were
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given “bailouts” or free money by the Federal Reserve with the approval of the US government in Washington. All the free money went to the big banks and nothing to the people, all of it for Wall Street, and nothing for what they call Main Street. This money did not pass on to the public and in the meantime, the banks gave out record bonuses while not really reporting record profits. Wall Street bankers have been lobbying in Washington for a long time and it is no surprise that they are now in total control of the decisions made there. It was shown in the previous article how they plundered farm land in Africa before and now they have taken over the entire eurozone. The United States of America is at their mercy now. It is a matter of time when they attempt to do what many financial war analysts are expecting.
The Chairman of the Federal Reserve, Ben Bernanke, outlined the 5 tools he believes can be used to rein in a collapsing economy that results in deflation. He has gone on record to say that deflation should be avoided at all costs. The policies he outlined are supposed to boost the economy by providing access to cheap(er) money which shall entice more borrowing and investing. So far, he has been true to his policies of avoiding deflation at all costs. The tools he cited can be summarized as follows: 1. Drop Interest Rates to Zero,
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The 5 Tools of Monetary Policy Under a Reserve Currency
2. Offer zero percent interest rates to banks to inject money into the economy,
3. Purchase unlimited treasuries (US bonds) to keep the interest rates low, 4. Manipulate the Treasuries structure to keep interest rates low to boost the housing market by forcing low mortgage rates. All these 4 tools have been implemented as explained in this and the previous articles. All of them have failed. The 5th one can be deduced by the following remarks Bernanke made before the National Economists Club, Washington, D.C. November 21st, 2002. titled, “Deflation: Making Sure "It" Doesn't Happen Here”: “It's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation.” 5. It is obvious that the final tool is revaluating gold. What is also obvious is that under this chairman of the Federal Reserve, inflation was and still is guaranteed! It is comical to listen to economists talk about how the chairman is saving the economy by injecting more money in the system, while at the same time, they fail to recognize that all he is doing is devalue the dollar deliberately and cause inflation to make things look rosy so the war machine can go around the world and plunder natural resources. He has said it in public he will inflate the economy no matter what!
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Whether gold is deliberately revalued or not, it will revalue by itself as mentioned and explained in the previous articles. Eventually, the free market forces will take over as they have for the past thousands of years, and then gold and silver will end up at astronomical numbers. It is certain to take place during this decade. This decade will be unlike any other. 2012 seems to be the start of the next phase of this shift in psychology. It will require nerves of steel to go through the economic Armageddon that’s staring us right in the face. Only the prepared shall survive. Nothing is for certain. Only gold and silver are. Paper assets are poised to collapse when measured against real money.
What of Pakistan? It is very comical that after all these developments, the Government of Pakistan Finance Division Estimates of Foreign Assistance 2011-2012 showed plans to sell Eurobonds worth Rs. 44 billion! A Eurobond is an international bond, denominated in a currency other than the currency of the issuing country. When countries in Europe are begging the world to buy their bonds and US treasuries experiencing a steady sell off, who would want to buy Eurobonds from Pakistan?! Furthermore, there are expectations of loans and grants from the United States of American, Japan, United Kingdom, European Union, Asian Development Bank, Islamic Development Bank and various other countries. These countries are bankrupt themselves. Their economies are in a recession, pensions are being slashed just to finance the current governments, riots have gone main stream, and their financial system is on a path towards total meltdown. Yet our government expects them to provide us with loans and grants. This tells us of the competence level of the advisors, the economic team and the ruling class.
When it’s time to start accumulating real money, gold and silver, and focus on debt reduction rather than debt re-financing, the Ministry of Finance and the State Bank of Pakistan are busy in making use of this interest based banking system. A country that was founded on the basis of a real-wealth based economic system now has so called elite economists telling us how the “modern” banking system is good for us, and we cannot do without this collapsing system! Deep down, even they know that this is most ill-conceived system and not suitable for the world anymore. The world has woken up to this con. Our beloved founder, Quaid-e-Azam Muhammad Ali Jinnah knew about this sick system based on excessive credit and debt. He clearly gave us the right direction at the inauguration of the State Bank of Pakistan on July 1st, 1948. The following is pulled from the Jinnah archives is also available on the State Bank of Pakistan’s website:
The opening of the State Bank of Pakistan symbolizes the sovereignty of our State in the financial sphere and I am very glad to be here today to perform the opening ceremony. It was not considered feasible to start a bank of our own simultaneously with the coming into being of Pakistan in August last year. A good deal of preparatory work must precede the inauguration of an institution responsible for such technical and delicate work as note issue and banking. To allow for this preparation, it was provided, under the Pakistan Monetary System and Reserve Bank Order, 1947, that the Reserve Bank of India should continue to be the currency and banking authority in Pakistan till the 30th September, 1948. Later on it was felt that it would be in the best interest of our State if the Reserve Bank of India were relieved of its functions in Pakistan as early as possible. The date of transfer of these functions to a Pakistan agency was consequently advanced by three months in agreement with the Government of India and the Reserve Bank. It was at the same time decided to establish a Central Bank of Pakistan in preference to any other agency for managing our currency and banking.
Source: Federal Budget: Estimates of Foreign Assistance 2011-2012
As you have observed, Mr. Governor, in undivided India banking was kept a close preserve of non-Muslims, and their migration from Western Pakistan has caused a good deal of dislocation in the economic life of our young State. In order that the wheels of commerce and industry should run smoothly, it is imperative that the vacuum caused by the exodus of non-Muslims should be filled without delay. I am glad to note that schemes for training Pakistan nationals in banking are in hand. I will watch their progress with interest and I am confident that the State Bank will receive the cooperation of all concerned including the banks and universities in pushing them forward. Banking will provide a new and wide field in which the genius of our young men can find full play. I am sure that they will come forward in large numbers to take advantage of the training facilities which are proposed to be provided. While doing so, they will not only be benefiting themselves but also contributing to the well-being of our State. I need hardly dilate on the important role that the State Bank will have to play in regulating the economic life of our country. The monetary policy of the bank will have a direct bearing on our trade and commerce, both inside Pakistan as well as with the outside world and it is only to be desired that your policy should encourage maximum production and a free flow of trade. The monetary policy pursued during the war years contributed, in no small measure, to our present day economic problems. The abnormal rise in the cost of living has hit the poorer sections of society including those with fixed incomes very hard indeed and is responsible to a great extent for the prevailing unrest in the country. The policy of the Pakistan Government is to stabilize prices at a level that would be fair to the producer, as well as to the consumer. I hope your efforts will be directed in the same direction in order to tackle this crucial problem with success. I shall watch with keenness the work of your Research Organisation in evolving banking practices compatible with Islamic ideals of social and economic life. The economic system of the West has created almost insoluble problems for humanity and to many of us it appears that only a miracle can save it from the disaster that is now facing the world. It has failed to do justice between man and man and to eradicate friction from the international field. On the contrary it was largely responsible for the two world wars in the last half century. The Western world, in spite of its advantages of mechanization and industrial efficiency is today in a worse mess than ever before in history. The adoption of Western economic theory and practice will not help us in achieving our goal of creating a happy and contented people. We must work our destiny in our own way and present to the world an economic system based on the true Islamic concept of equality of manhood and social justice.
We will thereby be fulfilling our mission as Muslims and giving to humanity the message of peace which alone can save it and secure the welfare, happiness and prosperity of mankind. May the State Bank of Pakistan prosper and fulfil the high ideals which have been set as its goal. In the end I thank you, Mr Governor, for the warm welcome given to me by you and your colleagues and the distinguished guests who have graced this occasion as a mark of their good wishes and the honor you have done me in inviting me to perform this historic opening ceremony of the State Bank which I feel will develop into one of our greatest national institutions and play its part fully throughout the world. Well, it is obvious the direction was not acted upon. We now live in a Pakistan that is infected with the disease of fractional reserve banking where so many people are now living off savings bonds or simply, interest payments, not realizing that such policies are inflationary in themselves. Instead of honest money, people are being forced to resort to â€œeasyâ€? money. The system is designed to discourage people from even attempting to make honest money. Debt financing and printing of currency has led to so much inflation in the past four decades that it is impossible for the majority to support their families. We have promoted the idea of accumulating gold and silver on an individual and collective basis for a couple of years now. What is also required is an overhaul of the current fractional reserve banking system in Pakistan as well. The steps to be taken to install a gold (and silver) standard inside Pakistan will be discussed in the upcoming articles.
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This decision left very little time for the small band of trained personnel in this field in Pakistan to complete the preliminaries, and they have by their untiring effort and hard work completed their task by the due date which is very creditable to them, and I wish to record a note of our appreciation of their labours.