Many have used a pyramid to describe the power structure that the bulk of humanity is subject to - in even the smallest details of our lives. I would like to use it here to address the impending economic collapse, with an eye to explaining what might be going on behind the curtain - what is being hidden and why.

The vertical axis of the pyramid is often described as power, wealth, knowledge, etc. The shape of the pyramid describes the population distribution as measured by the vertical axis. The great bulk of humanity (us) inhabits the lower levels near the base, and the Controllers/Powers That Be/Elites inhabit the lofty levels near the peak.

Control of events at the macro level is administered from the top down by inducing divisions through particular areas in the pyramid. These divisions are made through the use of lies that are designed to achieve particular ends such as war, population reduction, strengthened control, wealth redistribution, etc, right down to plain misery and suffering of the masses.

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Fractal pyramid of control
This pyramidal system of divisions works so well because, at the micro level, we are walking pyramids - telling lies to ourselves and others about the nature of our inner and outer realities. And in between the top and bottom there are all manner of corporations, organizations, states, and groups that take on this pyramidal structure. So pyramids fit within pyramids, while efforts to control and manipulate repeatedly divides people. As above, so below.

In general, most divisions that we can see clearly (sometimes well after the fact) are induced across the lower levels of the pyramid as history can attest (local wars, uprisings, protests, politics). The level in the pyramid at which such division originates may be low and motivated by some private interest gain. But on rare occasions a division is introduced vertically down the pyramid, affecting nearly all levels at the same time. One of these is coming in the form of the collapse of the US Dollar Reserve currency.

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The US Dollar Reserve

Would the collapse of the US dollar come as a surprise? History tells us it shouldn't. On its current trajectory, it seems destined to go the way every other fiat currency in history has gone - towards destruction and collapse. Money creation via debt issuance must be balanced with economic growth. As the debt burden increases, growth increase is required, and when this growth falters, so does the entire system unless the debt is expunged. So, the only questions for the Dollar are:
  • When will collapse happen?
and;
  • Is there a finger hovering above the "Destruct" button?
The difference this time around is that the whole world would be affected if and when a new currency Reserve is selected as a medium for the global balance of trade.

For many, the refusal of most to even consider what seems to me to be a fairly imminent and inevitable collapse, and prepare for its consequences, is an excellent example of normalcy bias - a form of wishful thinking that paralyzes rational thought processes. If yesterday was the same as the day before, then tomorrow will be the same as today.

The US Constitution clearly states that Congress shall coin money of gold and silver. So, what happened to the US dollar? Despite the best efforts of some good folks - among them past presidents - we ended up with a privately owned Central Bank, the Federal Reserve. Federal Reserve notes (paper currency) originally declared direct convertibility to gold, but this was lost to US citizens when gold was confiscated by FDR and revalued upward to $35 per ounce from $20.67, devaluing the dollar by 40% (and attracting much foreign gold into the country). After World War II, the Bretton Woods Agreement among nations established the US dollar as a World Reserve currency and provided for convertibility to gold for any nation's positive trade balance held in dollars. But by 1971 the US gold stock had plummeted from 25,000 tons (at peak) to 8,000 tons. Then Nixon closed the gold convertibility window, and the entire Dollar Reserve system became nothing more than a paper promise (Ponzi pyramid).

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At this point the meaning of "exorbitant privilege" with respect to satisfying demand for the Reserve currency becomes clear. After all, if you have nothing to lose but paper and ink, why not print? US trade imbalance is not a concern, and there is really no incentive to promote domestic production - regardless of all the political lip service. In fact there is incentive to move production offshore and promote mass consumerism at home (including debt) to increase demand for dollars abroad.

Two weeks after 9/11, Bush suggested to people:
"Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed."
It is likely that, in the near future, the US is going to pay dearly for this exorbitant privilege.

Recently, a transcript of an April 1974 meeting between Henry Kissinger (then US Secretary of State) and key members of his staff was released. The subject was the US-desired demonetization of gold reserves in the context of large Western European gold holdings and the European attempt (at the time) to revalue their gold assets (mark-to-market reserves). This took place just three years after Nixon closed the gold window.

One of the meeting exchanges went like this:
Secretary Kissinger: Why is it against our interest to have gold in the system?

Mr. Enders: It's against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings - about 11 billion - a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We've been trying to get away from that into a system in which we can control ...
I guess this shouldn't be a surprise to us given Kissinger's track-record. In 1974 the US wanted to promote the exclusive use of the Dollar Reserve in world trade, and be in a position to satisfy (print) world demand for the reserve currency in a growing world economy. Gold as a reserve asset just muddies the waters and invites continuous evaluation of dollar inflation. Of course the real US interest was power over the rest of the world, cloaked in a veil of fine words about democracy and human rights. US hegemony was always the goal.

So let's fast forward to December 2011 and take a look at the European Central Bank (ECB) balance sheet (published quarterly).
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Quarterly ECB Balance Sheet - December 2011
Lo and behold, line 1 right up top is gold marked-to-market (albeit, a suppressed market) - all 10,000+ tons of it. Compare this to what the US treasury carries as its gold account, marked at $42.22 per ounce, the market price at the time Nixon closed the gold window. Is it any wonder that the US and its Too-Big-To-Fail (TBTF) banks have been working overtime to suppress and control the spot gold price? And how nice of the US regime to mark its gold so low as an example to the world: its mantra has been 'ignore gold and concentrate on the Dollar Reserve'.

The development of the commodity futures market since 1974 has facilitated the fixing of spot gold prices through futures (options) paper trading which trades massive amount of gold paper promises based on physical gold stocks that do not exist (100:1 publically admitted). The TBTF banks can adjust their trading positions to achieve whatever (suppressed) price they want. These same TBTF banks are custodians of the largest (supposedly physical) gold fund ETFs (exchange traded funds, like GLD), and likely draw on these funds for the physical gold they need for the small (relatively) number of options contracts that actually stand for delivery.

Gold has always been the world's number one reserve asset, and I suspect that things are about to change drastically and bring this truth back into focus.

The Powers That Be (PTB)/Elites

Some writers that speak of a coming collapse assume that the PTB/Elites' goal is total destruction, chaos and anarchy, in which some great population reduction will take place while the controllers and high level minions hide out underground in hidden shelters. In this scenario, the entire world financial system comes undone and must be built back up from scratch (with far fewer people).

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From what we know of the modes of operation of the PTB/Elites, they are adept at creating situations, crises, and disasters that allow them to increase control - not lose it. Such a scenario would completely destroy the infrastructure through which they move and operate, from high level finance to media manipulation, to academia, right down to the local public school system. They have been heavily invested in this infrastructure for a very long time.

Regardless of what you may think about the origins of "The Protocols of the Elders of Zion", there is no denying the adept implementation of each one of them over many generations - implementation that originates from the apex of the pyramid. Here, knowledge of human frailties and the power of lies reign supreme. So, would the PTB/Elites' plan the destruction of all this fine control infrastructure only to have to begin all over again? I don't think so.

I think the collapse of the Dollar Reserve has been anticipated and will be used to tighten their grip over the masses without great loss to PTB/Elites' infrastructure. I think there is a finger hovering over the "DESTRUCT" button even now, and that what we are currently seeing are the last breaths of the Dollar Reserve and many currencies tied to it. I also think the US will be sacrificed (maybe deservedly so) and fare worst during the transition to come. But let's not get ahead of ourselves.

Indications and warning

In the late 1990s and early 2000s, two anonymous posters left a very long series of posts on a gold forum describing the collapse/replacement of the Dollar Reserve (and associated debt instruments), US Dollar hyperinflation, and motivations for the creation of the ECB's Euro. They also sought a broader redefinition of financial terms - terms that they felt had been marginalized through generations of programming associated with a worldwide fiat currency debt-based money system.

The handles of these two individuals were Another and FOA (Friend of Another). Since 2008, a blog poster calling himself FOFOA (Friend of Friend of Another) has carried on a deep analysis/commentary on their original forum posts at his website. The archived posts of FOA and Another are, indeed, an education in the world financial system - one that appears unavailable in any of our academic institutions today. It has been speculated that Another was actually a central bank insider with knowledge of long-range world financial plans and the future role of gold in the expected collapse and reset of the World Reserve financial system. The archives of Another's and FOA's posts are also available at FOFOA's website.

In short, what they described was an end to the petro-dollar and the general use of the dollar as a means for Reserve settlement of trade imbalance. Physical gold, they said, will replace the dollar as the world-acknowledged Reserve, and gold will experience a near-instantaneous upward revaluation - many, many times the current spot price. This revaluation of gold will not be a market-driven event. At the same time, the lending/leasing of gold and gold futures trading will be disallowed - gold ownership will be strictly defined by possession. In other words, artificial inflation of the world's gold stock via paper instruments will end abruptly.
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Gold will re-acquire (it actually never lost it) its function as a true store of value (SOV) and a sink for un-deployed wealth. All manner of credit (debt) derivatives (many trillions of current dollars worth) will be destroyed in the largest historical transfer of wealth ever. In Another's words, "All paper will burn". Banks and financial institutions will be recapitalized based on this debt destruction and revaluation of their physical gold holdings (which is interesting because Central Banks have been net buyers of physical gold lately). The greater parts of the world financial system will remain intact - with some very big changes in the rules.

This is a wealth transfer that cuts right along the vertical dimension of the pyramid we introduced at the start of this article. The majority of the "one percenters" store their wealth in paper instruments and will be left destitute after the reset (as described by Another and FOA,) outside of any physical assets they acquired prior to such a reset. In other words, many near the top of the pyramid will be displaced significantly downward, taking the vertical axis of the pyramid to represent the distribution of wealth.

But what about the wealth transfer going on right now? This wealth transfer is draining the base areas of the pyramid in favor of the upper reaches. It is quite clearly criminal behavior on the part of financial institutions and Wall Street interests. The Federal Reserve has enabled much of this through policies that have promoted artificial asset price bubbles.

In the 1980s and early 1990s, Professor William Black worked as a government regulator and was primarily responsible for the prosecution/convictions of many bank officers and CEOs during the Savings & Loan "crisis" years. Many of these went to jail with stiff sentences. Today he complains that, since that time, some of the greatest financial crimes have been committed by the TBTFs and Wall Street interests - without a single prosecution, let alone conviction. Countless lives are being destroyed by fraud committed at these levels. Black points out that the laws are still there, but no one will bring the cases to prosecution - in other words, it is verboten (forbidden).

In one sense you could look at these crimes of fraud as the last gasps of a dying dollar system. And by extension, ask: could it be an expression of "human nature" (or the "human organism") when faced with imminent collapse? (as Another/FOA have tried to explain in relation to similar behavior)

No, there is a much better explanation.

The rise of psychopaths to positions of great power in government, institutions and corporations is a subject that SOTT.net has been warning of for many years. The psychopath is an excellent puzzle piece in the fractal pyramid due to his/her keen 'instinctive awareness' of who's boss, and can be counted on to always act in perceived self-interest. The actions of psychopaths are wholly without conscience and without benefit to others, certainly not in any intended sense. So, if the actions of fraud at the highest levels, and the inaction against investigation/prosecution are directed and encouraged, what might be the higher-level hidden agenda?
  • Extended life for the Dollar Reserve?
  • Promotion of the 99% versus 1% agenda?
  • Head-fake to hide the system reset and associated transfer of wealth to gold?
  • Reduce the money supply of the masses that might otherwise be used to buy gold (at suppressed prices)?
  • Create dependency of the US masses on government in preparation for the next phase of Fascist control?
  • Or maybe some combination of all of the above?
Regardless, savings of all kinds - investments, pension funds, IRAs, 401ks, etc. - are being hit hard by the policies of financial repression that have been implemented by the Federal Reserve Bank and other Central Banks worldwide. These policies amount to little more than outright theft and they clearly benefit the current financial system and indicate that it is sustained on life-support.


Comment: Financial Repression: A term that describes measures by which governments channel funds to themselves as a form of debt reduction, measures such as:
  • Caps or ceilings on interest rates
  • Government ownership or control of domestic banks and financial institutions
  • Creation or maintenance of a captive domestic market for government debt
  • Restrictions on entry to the financial industry
  • Directing credit to certain industries

If the World Reserve system were to 'reset' as predicted by Another/FOA, these savings accounts that hold paper debt instruments will be wiped out (if a hyperinflation event doesn't destroy them first).

Another/FOA/FOFOA are not the only ones who have suggested this reset of the World Reserve and transfer of wealth. In a recent article, Chris Powell of the Gold Anti-Trust Action Committee (GATA) writes,
"This is an utterly totalitarian and parasitic system. It is also just the latest manifestation of the everlasting war of the financial class [debt/lenders - easy money] against the producing class [savers], only it is hidden well enough that the producing class hasn't yet figured it out."
He goes on to say how this might end:
"The system may end at the insistence of the developing world with an official worldwide revaluation of gold and gold's formal restoration to the international monetary system. .... Or the system may end as part of a plan by central banks to avert the catastrophic debt deflation that now threatens the world."

"For example, a 2006 study by the Scottish economist Peter Millar concluded that to avert such a catastrophic debt deflation, central banks would need to raise the gold price by a factor of seven to 20 times in order to reliquefy themselves and devalue their currencies and society's debts generally."
This revaluation event (and subsequent paper destruction) is what FOFOA refers to as Freegold - the freeing of gold to reclaim its traditional role as a world-recognized SOV and World Reserve. FOFOA estimates the reset value of gold to be closer to 50:1 relative to today's spot prices. The transfer of wealth, then, is from the paper (debt) wealth to the savers that hold gold in their possession. Paper currencies continue to exist as a national internal medium of exchange - however, the value of a given national currency is determined by gold, not the other way around.

When or if this reset comes about, there will be chaos, anarchy, and disruptions in commodity supplies for an extended period. But I don't think the descent into chaos/anarchy will be a permanent one. On the other hand, preparation for the worst would be very wise. The focus of this preparation should be acquisition of a state of relative independence from government handouts, commodity/food availability, and many services we have taken for granted - particularly for those in the US.

US Hyperinflation

The US Fed need not 'print' a single additional dollar for hyperinflation to take hold in the US. All that need happen is for the rest of the world to begin disgorging their Dollar Reserve accounts in favor of other currencies or other means of settling trade accounts with trading partners. This is already happening as many countries have struck trade agreements in their own currencies. What happens is that these disgorged dollars find their way back home (to the US) through the purchase of US products, real estate, businesses, etc. The money supply in the US rises drastically and the velocity of this money increases - driving up prices in a kind of positive feedback loop in which there is a general rush to spend dollars before they lose too much value. There are many historical examples but Weimar-Germany is a good one.
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FOFOA/FOA makes the argument that US hyperinflation is already underway and "baked in the cake" so to speak. John Williams of Shadowstats estimates the current annualized rate of inflation to be over 9%, according to the US government methodology used prior to 1980. This inflation is well-hidden by financial repression policies and overactive media support. In reality, savers (think of all the folks on fixed incomes) cannot hope to make a showing against inflation without moving money into stock equities or other high-risk investments - an intended result of these monetary policies.

Today, one of the things keeping the Dollar Reserve afloat is the fact that oil imports must still be paid for with US dollars - the Petro-dollar. A country that is a net importer of foreign oil must maintain a reserve account in US dollars. This was brought to the fore recently by Finnian Cunningham in a Sunday column remark for Press TV. Quoting the article,
"China - the second biggest economy in the world and a top importer of oil - has or is seeking oil trading arrangements with its major suppliers, including Russia, Saudi Arabia, Iran and Venezuela, which will involve the exchange of national currencies," he wrote, warning that the development threatens "the petrodollar and its global reserve status."

Cunningham said Beijing's November 20 notice about plan to "shift its risky foreign exchange holdings" in US dollars for other currencies "is a harbinger that the American economy's days are numbered."

"But, in the imperialist, megalomaniac mindset of Washington, the 'threat' to the US economy and indebted way of life is perceived as a tacit act of war. That is why Washington is reacting so furiously and desperately to China's newly declared air corridor. It is a pretext for the US to clench an iron fist," concluded the analyst.
The failure of the Petro-dollar may spell the end of the Dollar Reserve.

So, what happens in the US with the destruction of the Dollar Reserve and a transition to gold as the World Reserve? Assuming that Fort Knox still stores 8000+ tons of US Treasury gold - and that may be a very big assumption - the US has no choice but to disgorge it to maintain a trade deficit that piles up at the current rate of $50 billion per month. The only ways to stem this tide will be to cut imports (ending consumerism) and/or ramp up US production to compete effectively in the world trade environment. The US is very poorly prepared for either of these options.

The Bigger Picture

The apex of the pyramid is nation-less. It is not occupied by US interests. The US was used via the US Dollar Reserve to encapsulate the rest of the world in the pyramidal structural control through imperial conquest that enlisted banking/financial institutions, multinational corporations, politicians, academic institutions, organized crime, and subversive intelligence services engaging in false flags, fraud, market manipulation, money laundering, drugs, blackmail, and outright murder. The end is coming for the Dollar Reserve - and US hegemony - but as Bob Dylan sings in his song, Senor:
"... There's a wicked wind still blowing on that upper deck ..."
What actually happens, and in what sequence, will remain unknown for now, but there are enough past and present indicators to suggest the rough outline presented above. As such, this article is not about gold advocacy or rushing out to acquire as much physical gold as you can. Gold purchase should be considered a small part of your preparation plan to weather the storm that is coming. Un-deployed wealth/savings are best spent against a comprehensive preparation plan. One approach (among many) is described here.

Wouldn't it be nice to convert that fractal pyramid of lies to something based on truth? Something that might look more like this:
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Truth fractal
Note on Gold Confiscation

Much has been written about a future confiscation of gold by pathocratic governments (all of them, essentially) should such a wealth transfer to gold occur. Can any of us imagine what this would entail in countries like India and China where cultural mistrust of currencies demands that people hold some gold in savings? Even in the US, where is the infrastructure to enforce physical confiscation? No, gold confiscation (in the US anyway) is much more likely to take the form of a windfall profits tax, post-reset. The infrastructure for this theft is already in place in the form of the IRS (Internal Revenue Service).

I agree with FOFOA (via the writings of Another/FOA) when he points out that any country's best interests are served by leaving gold in the hands of its citizens. It is these citizens who will convert their gold into local currency to fuel new business ventures and associated production. The resulting products will be sold into world trade and help bring gold back into the country's coffers. A country that becomes a net producer in the world market will increase its gold stock. A country that becomes a net consumer will disgorge its gold stock until it can no longer consume. Such a "rosy" picture, of course, assumes that the pathocrats/psychopaths in positions of governmental power can see past their immediate self-interest to the greater benefit of all citizens. Based on what we see around us today, this seems very unlikely.

In any event, we should not entertain any illusions of such a transition being permanent (if indeed it occurs roughly as described above). Once a few generations have passed and the horror of what is to come has been forgotten, the pyramid will inevitably move us back to a worldwide fiat Ponzi. And next time it may be a digital currency acting as a medium for slavery, and be far more long-lasting than the Dollar Reserve.

Note on Silver's Role Post-reset

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There are many precious metals pundits who insist silver is a better "investment" than gold. They speculate that silver will rise with gold (whether through the market or during this reset) and retake its historical value ratio to gold of 12:1 (it's currently around 60:1). Therefore, silver has much greater 'upside potential' than gold.

The bottom line is that silver has lost its status as a potential monetary SOV due to its heavy use and demand in industry. A candidate for a SOV must have a very stable stock - that is, no other application of the SOV candidate can be allowed to vary the world stock. Silver cannot meet this strict criterion and is destined to remain a commodity. The best evidence supporting this conclusion is that central banks are not buying silver - they are buying gold. Does the ECB carry any silver stock on its balance sheet? No, it does not. Countries that have been buyers of massive amounts of gold lately are net buyers of silver only to the extent of meeting domestic demand.

Which is not to say that you should not consider owning some silver. In the uncertain and chaotic times to come, it may very well be that silver plays a monetary role in trade prior to the establishment of new currencies and a gold World Reserve. During this time, the use of silver will allow any gold you have to remain very still and un-deployed until things settle down - assuming, that is, that they do.

Again, it's really a matter of preparation and thinking about the scenarios a major systemic crisis may bring.