EDITOR: | December 5th, 2012

Gold: The Antidote For 2013

| December 05, 2012 | No Comments

Gold: The antidote for 2013, what more is there to say? This December, 2013 was already looking to be a most dangerous year. Perhaps the year the Europeans through serial incompetence, finally manage to blow up their euro. Though not before American’s get to play Russian roulette with their economic future, by playing a game of chicken over the “fiscal cliff,” now just 26 days away. Even the incompetent Europeans, can’t manage to break the euro in the next 26 days.

That said, 2013 was looking to be an epic year for the precious metals, even before a rift broke out yesterday between France and Germany, over the form of the new European banking union, that’s supposed to be in place by year end, and a nasty fight broke out between Christian Noyer, governor of the Banque de France, and London Mayor Boris Johnson, over Mr. Noyer’s call in a FT  interview  for the City of London to be side-lined as Europe’s financial hub. Mayor Johnson said Mr Noyer’s call was a “desperate French attack” that shows the usual French “utter contempt” for the principles of the single market. This Christmas season of “peace on earth and goodwill to all men,” is off to something less than a stellar start, in not so Merrie Olde Englande and Austerity Europe this December, with the real action to follow early next year.

But it was the incredible own goal yesterday by the United States Senate, that really sets up 2013 to be a once in a lifetime year. The U.S. Senate approved a key defence policy bill Tuesday stipulating that Washington acknowledges Japanese control of the Senkaku Islands and that they fall under the scope of the bilateral security treaty.  Called the Diaoyu’s in China and claimed by both China and Taiwan, Japan was supposed to give the islands back to the Republic China in the settlement that brought World War Two to its formal end.

But things changed on the ground. Chang Kai-shek’s Republic of China which had been given back Formosa under the settlement, had been replaced by Mao’s murderous People’s Republic of China in 1949. It only lingered on in Formosa, now known as Taiwan. At the time, American policy supported Taiwan, so America held onto and administered the uninhabited island group 1945-1972. But by 1972 America was opening up to Mao’s China, with a visit by President Nixon in February 1972. In 1972, America passed the buck and administration of the island group over to Japan. Japan is now claiming sovereignty over the islands, which America couldn’t transfer since it never owned them, and China has gone ballistic this year in its ever more acrimonious dispute with Japan.

Yesterday the US Senate poured gasoline on to the fire.

“The United States reaffirms its commitment to the government of Japan under Article V of the Treaty of Mutual Cooperation and Security.”

“While the United States takes no position on the ultimate sovereignty of the Senkaku Islands, the United States acknowledges the administration of Japan over the Senkaku Islands,” the bill said, adding, “The unilateral actions of a third party will not affect United States acknowledgement of the administration of Japan over the Senkaku Islands.”

Under the Japan-U.S. security treaty, the United States would defend Japan in the event of an armed attack.  President Barack Obama is expected to sign the bill after passage of the House of Representatives. There is no way to Beijing, that this doesn’t look to be anything other than the USA giving a “Blank Cheque” to Japan, rather like Germany did to Austria, in July 1914, setting off World War One. China, America’s largest creditor, has to take this as an affront.

How this plays out in 2013, is anyone’s guess, but at the least it has to be bad for the dollar in the long run, and America’s trade with China very possibly too. Yet more reasons to hold physical gold and silver, rather than paper currencies that can be produced out of nothing ad infinitum, and generally are by the USA, the UK, the ECB, and Japan.  When President Obama signs the law, expect sparks to fly.



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