Our House of Cards
Paul Craig Roberts and Dave Kranzler

As John Williams (shadowstats.com) has observed, the payroll jobs reports no longer make any logical or statistical sense. Ask yourself, do you believe that retailers responded to the very disappointing Christmas season by rushing out in January to hire 46,000 more retail clerks?

Perhaps those 46,000 retail jobs is the BLS telling us that they have to come up with new jobs to report whether or not there are any.

As we have reported on a number of occasions, whenever the price of gold in the futures market starts to rise, massive uncovered shorts are suddenly dumped on the market. As the shorts dramatically increase the supply of future contracts all at once, the supply overwhelms demand, and the price of gold is driven down despite the fact that the demand for gold in the physical market is strong. (Remember, the price of gold is determined in the futures market in which contracts are largely settled in cash and seldom in gold. The physical market is where gold bullion is purchased, not paper claims on gold for speculation.)

Last Friday the attack on gold was coordinated with the announcement of the suspicious jobs report. The price of gold was hit hard with an avalanche of uncovered gold futures contracts dumped at the same time that the U.S. Government’s Bureau of Labor Statistics (BLS) released what can only be described as an incorrect employment report. The avalanche of paper contracts that were dumped onto the Comex (both the trading floor and electronic trading computer system) took the price of gold down $39 in three hours, with most of the price hit occurring in the first 40 minutes after the jobs report was released.

The volume of contracts that traded after 8:00 a.m. on the Comex was unusually high for a Friday, running about 60% above Thursday’s volume for the same time period.   Such departures without cause from normal trading patterns are indicative of market manipulation, and Friday’s price smash capped a week in which the price of gold was taken lower every day at 8:30 a.m. after the release of economic reports, most of which reflected a deteriorating condition of the U.S. economy.

Gold is a refuge in times of uncertainty. With yen, dollars, and euros all being created at a faster rate than goods and services are being produced, with both stock and bond prices at bubble levels, gold is definitely an attractive refuge. Confidence in gold would pull money out of the rigged markets for financial instruments and make it more difficult to maintain the appearance that all is well. To attack gold simultaneously with issuing a happy jobs report doubles the encouragement to remain invested in financial paper and to continue to hold the over-printed currencies.

The expectation is that more money will be printed. The prices of troubled sovereign debt have been bid unrealistically high because of expectations that quantitative easing by the European Central Bank will result in central bank purchases of the troubled sovereign debt. In the US the 100 percent and more than 100 percent auto loans have been securitized and sold as investments. Borrowers whose trade-in value is less than their remaining loan can borrow more than the purchase price of the new car in order to pay off the old car loan.

The lenders made their money on loan fees, but as defaults rise the securitized loans and associated derivatives will likely require a bailout like the securitized mortgages.

Anyone looking at these prospects is tempted by gold, but a rising gold price could bring down the fiat currencies and, thus, must be prevented.

In other words, those who have rigged the system know that it is a house of cards.

Hon. Paul Craig Roberts is the John M. Olin Fellow at the Institute for Political Economy, Senior Research Fellow at the Hoover Institution, Stanford University, and Research Fellow at the Independent Institute. A former editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service, he is a nationally syndicated columnist for Creators Syndicate in Los Angeles and a columnist for Investor's Business Daily. In 1992 he received the Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists.

He was Distinguished Fellow at the Cato Institute from 1993 to 1996. From 1982 through 1993, he held the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies. During 1981-82 he served as Assistant Secretary of the Treasury for Economic Policy. President Reagan and Treasury Secretary Regan credited him with a major role in the Economic Recovery Tax Act of 1981, and he was awarded the Treasury Department's Meritorious Service Award for "his outstanding contributions to the formulation of United States economic policy." From 1975 to 1978, Dr. Roberts served on the congressional staff where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy.

In 1987 the French government recognized him as "the artisan of a renewal in economic science and policy after half a century of state interventionism" and inducted him into the Legion of Honor.

Dr. Roberts' latest books are The Tyranny of Good Intentions, co-authored with IPE Fellow Lawrence Stratton, and published by Prima Publishing in May 2000, and Chile: Two Visions - The Allende-Pinochet Era, co-authored with IPE Fellow Karen Araujo, and published in Spanish by Universidad Nacional Andres Bello in Santiago, Chile, in November 2000. The Capitalist Revolution in Latin America, co-authored with IPE Fellow Karen LaFollette Araujo, was published by Oxford University Press in 1997. A Spanish language edition was published by Oxford in 1999. The New Colorline: How Quotas and Privilege Destroy Democracy, co-authored with Lawrence Stratton, was published by Regnery in 1995. A paperback edition was published in 1997. Meltdown: Inside the Soviet Economy, co-authored with Karen LaFollette, was published by the Cato Institute in 1990. Harvard University Press published his book, The Supply-Side Revolution, in 1984. Widely reviewed and favorably received, the book was praised by Forbes as "a timely masterpiece that will have real impact on economic thinking in the years ahead." Dr. Roberts is the author of Alienation and the Soviet Economy, published in 1971 and republished in 1990. He is the author of Marx's Theory of Exchange, Alienation and Crisis, published in 1973 and republished in 1983. A Spanish language edition was published in 1974.

Dr. Roberts has held numerous academic appointments. He has contributed chapters to numerous books and has published many articles in journals of scholarship, including the Journal of Political Economy, Oxford Economic Papers, Journal of Law and Economics, Studies in Banking and Finance, Journal of Monetary Economics, Public Finance Quarterly, Public Choice, Classica et Mediaevalia, Ethics, Slavic Review, Soviet Studies, Rivista de Political Economica, and Zeitschrift fur Wirtschafspolitik. He has entries in the McGraw-Hill Encyclopedia of Economics and the New Palgrave Dictionary of Money and Finance. He has contributed to Commentary, The Public Interest, The National Interest, Harper's, the New York Times, The Washington Post, The Los Angeles Times, Fortune, London Times, The Financial Times, TLS, The Spectator, Il Sole 24 Ore, Le Figaro, Liberation, and the Nihon Keizai Shimbun. He has testified before committees of Congress on 30 occasions.

Dr. Roberts was educated at the Georgia Institute of Technology (B.S.), the University of Virginia (Ph.D.), the University of California at Berkeley and Oxford University where he was a member of Merton College.

He is listed in Who's Who in America, Who's Who in the World, The Dictionary of International Biography, Outstanding People of the Twentieth Century, and 1000 Leaders of World Influence. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: [email protected]

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