Report: Russian Spies are "Goldbugs" Who May be Plotting to "Destroy the Value of the U.S. Dollar"

Russian Spies Story Attempts to Scapegoat Russia for the Dollar's Collapse
Chris | InformationLiberation

Jun. 29, 2010

In what can only be described as a laughable piece of propaganda, CNN/Fortune is reporting the recently caught Russian spies are actually "Goldbugs" who may be secretly plotting to "destroy the value of the American dollar." That the US dollar has been collapsing in value for the last 100 years due to the Federal Reserve's inflationary policies is somehow conveniently missed. Instead, Russia is gearing up some Soviet style espionage plot to destroy the dollar by instituting a "new global currency" backed by gold. Again, that the Russian government itself benefits heavily from having its own inflationary fiat central bank is also somehow conveniently missed.

What is not missed is the basic message: People who own gold are on the side of the enemies plotting to bring down the value of our dollar!

From Russian 'spies,' goldbugs and the struggling dollar:
When federal officials arrested 11 alleged Russian spies yesterday, it seemed natural that the accused agents would be interested in the CIA leadership, the Obama administration and Afghanistan. But who knew that they were goldbugs?

James G. Rickards, senior director for market intelligence at Omnis, pointed us to the fact that the FBI complaint mentions that the global gold market was one of the key sources of interest of the Russian Federation and its intelligence agency, SVR.

"On a number of occasions, the SVR specifically indicated that information collected and conveyed by the New Jersey conspirators was especially valuable. Thus, for example, during the summer and fall of 2009, Cynthia Murphy, the defendant, using contacts she had met in New York, conveyed a number of reports to [Moscow] Center about prospects for the global gold market."


Murphy's alleged tips about the gold market must have been quite powerful. It's impossible to tell how they influenced Russian economic policy or thinking, but we can look at some of Russia's moves at the time and notice some striking trends that show that Russia dramatically reversed its stance on gold in late 2009.

Before October 2009, Russia had been planning to sell nearly 25 tons of gold into the market. In November 2009, however, one month after Murphy's alleged report to the SVR about gold, Russia started stocking up on the precious metal. In November 2009, Russia's central bank bought more than $1 billion of gold from the foreign exchange market in order to better control the price of the ruble, central bank deputy chairman Alexey Ulyukayev told Reuters at the time. Russia also said at the time that it might buy gold from the state repository, Gokhran.

Critics at the time noted that Russia's move into gold could be interpreted as a manifestation of disappointment with the U.S. dollar and U.S. economic policy under Fed Chairman Ben Bernanke; partly, this was because, as Russia was buying gold it also stopped buying U.S. agency mortgage bonds, the Fannie and Freddie bonds that packed over half of the Fed's balance sheet.

Of course, it's difficult to impute this shift solely to Russia (or Murphy's market tips). Yes, as of this year, the Russian central bank was still buying gold, loading up on 26.6 tons in the most recent quarter, bringing its holdings to over 668 tons. But Russia is hardly an outlier. The central banks of several countries have been loading up on the precious metal, including China, Venezuela and India, which on its own bought 200 tons in November 2009.

The problem with all the gold buying, of course, is that it often reads as a global central bank reproach to several currencies, but particularly toward our troubled U.S. dollar. As the World Gold Council wrote in a February report on gold, currencies and the money supply, "gold exhibits a strong negative correlation to the dollar."

This is where central bank currency moves could get sinister. Rickards wrote a paper, "Economics and Financial Attacks," and created an imaginary Pentagon war game describing a crisis situation in which Russia used its gold reserves to create a new global currency and destroy the value of the American dollar. In the May 2009 paper, Rickards suggested that U.S. intelligence agencies would do well to track the gold reserves of other countries -- just in case.
This story is absolutely fascinating for several reasons. First, everyone who is anyone owns gold and knows it's a much better investment than the fiat dollar. It involves no "espionage plots" to realize the value of the dollar is going to keep going down, as it's done for almost 100 years straight, as a result of the government printing up record amounts of money. It's simple math, putting more currency in circulation devalues the value of the currency already in existence. No plot required, no espionage or "contacts in New York" needed. All you need is common sense and basic math. That this is glossed over as though it's not the *real* reason for Russia's actions should tell you all you need to know.

Second, what is so significant about this report is it's scapegoating Russia ( or China if you read the full report (.pdf) ) for the practically inevitable demise of the US dollar. The demise for which the Federal Reserve is solely to blame. Not only does this serve to keep the Federal Reserve from facing the repercussions of its inflationary policies, but it serves to inflame the American people into thinking Russia and China are secretly plotting to destroy us, it sets the stage for World War Three.

In the past, similar propaganda was put out saying how North Korea was counterfeiting masses of US dollars. No conclusive proof was ever shown and yet similarly the news at the time tried to suggest any inflation the US was experiencing, or was going to experience, may be due to North Korea! That the Federal Reserve can print endless reams of counterfeit money, and does every single day, is considered completely irrelevant.

The value of the dollar is going to collapse thanks to the policies of the Federal Reserve, a gold standard or quasi-gold standard is extremely likely to make a comeback after the markets finally adjust, already the price of gold skyrocketing to highs of $1265, from just $200 or so a decade ago, shows this is taking place. The trend is all but guaranteed to continue as the Federal Reserve has shown no indication it at all seeks to reverse its policies and skyrocket interest rates to shore up the dollar. Instead, everything they're doing indicates they're going to print themselves into oblivion.

It's clear with articles like this one they are indeed going to continue as they are, yet they will attempt to scapegoat Russia or China when hyperinflation finally kicks in. Additionally, they will act as though gold is some evil communist subversive force seeking to bring America down. Look for more stories like this to come in the future. If people actually believe this propaganda we are in for a wild ride. - InformationLiberation

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