Eye on the Gold

By Terry Crawford-Browne

South African gold funded the British Empire and its wars. The gold industry was the prime beneficiary of the apartheid system, and left legacies of social breakdown, impoverishment and environmental degradation. Production peaked in 1970 and is now in terminal decline; remaining ore reserves are too deep, too expensive and too dangerous to extract.

With the support of Archbishop-Emeritus Desmond Tutu, Terry launched the New York banking sanctions campaign against apartheid in 1985 as a last nonviolent attempt to avert a civil war. President Nelson Mandela subsequently acknowledged that the campaign was the most successful initiative to end apartheid. It became a major motivation behind South Africa’s relatively peaceful transition to constitutional democracy.

Terry represented the Anglican Church at the parliamentary Defence Review in 1996. His international banking experience had informed him about the arms industry as a globally unethical and corrupt business. European governments pressured South Africa to buy warships and warplanes the country could not afford and did not need. It was then not illegal in English law to bribe foreigners, and in Germany bribes were even tax-deductible as “a useful business expense.” The arms deal unleashed a culture of corruption that has severely undermined the liberation from apartheid.

After more than 20 years of “following the money,” Terry was vindicated in August 2019 when the report of the Seriti Commission of Inquiry into the arms deal scandal was set aside in the landmark court judgment. Judge Seriti had been exposed as pursuing a “second agenda to silence the Terry Crawford-Brownes of this world.”

Since the collapse of the gold standard in 1971, Saudi Arabian oil (black gold) has funded the United States Empire, and its wars. Failed interventions to impose US military and financial hegemony around the globe have prompted increasing demands to replace the dollar as the basis of the international monetary system.

Are bitcoins or other cryptocurrencies the “new gold” of the future?

Terry is married to Lavinia who from 1986 until 2008 was Archbishop Tutu’s personal assistant. They live in Cape Town. Terry is country coordinator in South Africa for WorldBeyondWar, a global movement to end all wars.

‘Terry is a formidable human rights activist and warrior for peace.’

-Archbishop Emeritus Desmond Tutu

• Language: English
• Publisher: Terry Crawford-Browne
• Release date: May 5, 2020
• ISBN: 9780463327579

Book preview

Preface

Are Bitcoins The New Gold?

Despite the calamities of the First and Second World Wars and consequent collapse of the British Empire, a small majority of xenophobic British voters in a referendum in 2016 supported a British withdrawal from the European Union, the so-called Brexit.

Fraudulent claims were made by Brexiteers led by Boris Johnson of vast financial benefits that would accrue, and that Britain would be taking back control of its borders and laws. As Brexit degenerated into a political farce, the commentator Tom Engelhardt noted in an article headlined American Brexit: It’s Not Just Britain Headed for the Subbasement of History:

Remember, we’re talking about the greatest power of the late eighteenth, nineteenth, and early twentieth centuries, the country that launched the industrial revolution, whose navy once ruled the waves, and that had more colonies and military garrisons in more places more permanently than any country in history.

Now, it’s about to fall into what will someday be seen as the subbasement of imperial history. Think of Johnson’s version of Brexiting as a way of saying goodbye to all that with a genuine flourish. Brexit won’t just be an exit from the European Union but, for all intents and purposes, from history itself. It will mark the end of a century-long fall that will turn Britain back into a relatively inconsequential island kingdom.

Across the Atlantic, the election of Donald Trump as president on his slogan Make America Great Again reflected the reality that US military and financial domination of the globe is likewise fast imploding. Trump and his bewildered constituents in rustbelt states thought they could set back the clock to the time when coal was king, and the American dream was two cars in the double garage of a suburban home.

The presidential choice in 2016 had been between a war criminal and a lunatic. Ironically, the lunatic was arguably the better option. Whilst the war criminal would have massaged and prolonged a corrupt and dysfunctional political system, the lunatic has brought about its collapse. In so doing, Trump has inadvertently challenged Americans and the world to construct new financial and political structures fit-for-purpose for the twenty-first century.

Despite superior military technology and seemingly vast financial resources, the US has lost every war it has waged since the Second World War. Devastation has been inflicted upon millions of people, as illustrated by the numbers of refugees and displaced people since 9/11 when Iraq was falsely accused of having weapons of mass destruction.

Yet, just as the British Empire eventually collapsed because of senseless wars around the world, including the South African War from 1899 until 1902, so the US Empire is crippled by the costs of wars in Iraq and Afghanistan, compounded by unregulated and reckless domestic banking practices.

The British tried unsuccessfully for eighty years to subjugate Afghanistan and, exhausted, finally gave up in 1919. The Soviet Union subsequently intervened in 1979, albeit following repeated requests of assistance from the then pro-Communist Afghan government. Bruised and battered, the Russians withdrew ten years later when the Soviet Union collapsed.

Almost one million American troops have served in Afghanistan since 2001. Notwithstanding numerous false claims by generals that victory against the Taliban was imminent, the longest war in US history has dismally failed. The Washington Post finally in December 2019 released what it called The Afghanistan Papers: At War with the Truth.

Thousands of documents reveal how the Pentagon and Presidents Bush, Obama and Trump systematically lied to the American people. Afghanistan was a war built on intentional and deliberate lies, just like the Vietnam War.

As a general assigned as liaison in the White House during the Bush and Obama eras admitted: we didn’t have the foggiest notion of what we were undertaking. The reality is that Afghanistan has confirmed its long history and reputation as the graveyard of empires.

Despite having abandoned ambitions to develop nuclear weapons as long ago as 2003 neighbouring Iran is a much more formidable country militarily. The shooting down in June 2019 of a US drone at an altitude of sixty thousand feet shattered neo-con delusions that a war against Iran would be the culmination of long-intended plans to impose US military and financial hegemony across the globe.

Trump’s reckless order to assassinate Iranian General Qassem Soleimani in January 2020 will speed rather than delay the process. The implications are immense, including the prospective collapse of the US dollar as the world’s reserve currency. Since time began, wars have been the means of transferring wealth from the poor to the rich, hence the wealth of the ruling classes in Britain and the US.

The world’s two most prominent central banks, the Bank of England (BOE) and the Federal Reserve Bank System (the Fed) have been private institutions established to finance such plunder, and thus entrench the power of those ruling classes. Since the Roman era, empires have collapsed when their currencies were debauched because military spending spiralled out of control.

The BOE was created in 1694 to finance expansion of the Royal Navy, including the British Empire’s subsequent looting of India and South Africa. Until 1913, just months before the outbreak of the First World War, the US was the only major country without a central bank.

Two previous American attempts in 1791 and 1816 to model a privately-owned institution after the BOE were rejected because of opposition from Presidents James Madison and Thomas Jefferson. They argued that so much power in the hands of money-lenders and financiers was both undemocratic and politically dangerous.

Financiers act in the knowledge that the costs of wars will be borne by future generations, but that the profits for bankers will be immediate. The notion of central bank independence was and remains a myth. Once the Fed was established, the powers of the Wall Street bankers, American capitalists and dollar diplomacy knew few bounds. New York quickly replaced London as the financial capital of the world.

Just three years later, the US entered the First World War in March 1917. The reality was that Britain was in serious danger of losing that war to Germany, thus jeopardising repayment of loans borrowed from JP Morgan and other New York bankers. The Zimmermann telegram and other fake news of German atrocities in Europe were manipulated to create war hysteria amongst Americans.

The Foreign Espionage Act was passed in 1917 to suppress all criticisms of US involvement in the war under the spurious excuse of countering sedition, and almost two thousand Americans were jailed. This antiquated legislation was resurrected during the Obama administration a century later to prosecute Chelsea Manning, Julian Assange, Edward Snowden and other whistle-blowers.

Pertinently, neither the gold standard nor establishment of the Fed resolved economic instability in the US and beyond. Insistence after the war by the BOE and Winston Churchill (then Chancellor of the Exchequer) that the gold standard should be re-established at the pre-war price naively ignored the economic consequences of wars, and their devastation.

Compounded by mismanagement at the Fed and unrealistically low interest rates, the result was a financial bubble and crash on the New York Stock Exchange in 1929. John Maynard Keynes expressed his extreme pessimism in 1932 whether a complete collapse of modern capitalism could be prevented given the paralytic policy of President Herbert Hoover’s administration.

The price of gold had been set in the US by Congress as long ago as 1792 at US$20.67 per ounce, and had continued until President Franklin Roosevelt devalued the dollar by fifty-nine percent to US$35. In War And Gold, Kwasi Kwarteng records:

Once Roosevelt was inaugurated in March 1933, he declared a national bank holiday, and immediately suspended gold convertibility and foreign exchange dealings. The Emergency Banking Act was passed on 9 March 1933.

The next day, the President issued an executive order extending the restrictions on gold and foreign exchange dealings beyond the banking holiday. On 5 April, an executive order forbade the hoarding of gold, and required all holders of gold, including banks, to deliver their gold to the Federal Reserve Banks by 1 May.

Beginning in October 1933, the US government started to buy gold from abroad. Roosevelt believed that government purchases would spur inflation and thereby reduce debt burdens and raise commodity prices.

Having severed their ‘golden fetters’, policymakers in the US and Britain were able to adopt more expansionary monetary and fiscal policies designed to spur the recovery of their economies.

The losers were the nations still on gold. Following the devaluation of the dollar, gold and capital flowed into the US, and by the end of 1936 the US held about seventy percent of the world’s central bank gold reserves.

In the process, Roosevelt actually saved the capitalist system from collapse, yet corporate America and Wall Street bankers were incensed by the social and economic impacts of FDR’s interventions during his first one hundred days in office. They plotted a revolution, and fumed that Roosevelt was a socialist, or even a communist. A senior Treasury official resigned and declared that devaluation of the dollar against gold marked the beginning of the end of western civilization.

Led by executives from JP Morgan, US Steel, Du Pont, Heinz, Goodyear and General Motors conspirators began plotting a coup d’état. Their objective included a fascist dictatorship modelled after Italy’s Benito Mussolini.

They intended to muster an army of half a million former soldiers, and to hold Roosevelt hostage or, alternatively, to replace him with a retired but still highly popular general in the US Marines, General Smedley Butler. To their dismay and shock, Butler exposed the plot and testified at congressional hearings:

It may seem odd for me, a military man to adopt such a comparison. Truthfulness compels me to. I spent thirty-three years and four months in active military service as a member of this country’s most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major General. During that period I spent most of my time as a high-class muscle man for Big Business, for Wall Street and the bankers.

Butler famously also wrote a little booklet entitled War Is A Racket which, eight decades later, remains highly relevant:

War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars, and the losses in lives. If anyone gets the cream of the profits in war, it is the bankers.

Roosevelt reportedly cut a deal with the conspirators. He would refrain from prosecuting some of the wealthiest men in America for treason, or jailing them. In turn, they would agree to end Wall Street’s opposition to his New Deal programmes.

Ten years’ later, however, the same Wall Street bankers were ready to take revenge at the Democratic Party’s convention in Chicago in July 1944. Roosevelt’s nomination for a fourth term was almost unanimously supported, but FDR was already a dying man. Vice President Henry Wallace was considered to be FDR’s heir apparent, and was committed to continue the New Deal programmes.

Wallace was accordingly hated by financiers, but equally – because of his outspoken opposition to colonialism in Asia and Africa – by the British and French governments. Churchill, most especially, was apoplectic about Wallace’s references to British imperialism, and economic exploitation of the colonies. Wall Street, Democratic Party bosses, British espionage and propaganda services combined to smear Wallace as a communist.

The convention degenerated into a travesty of foul play, manipulation and outright corruption. Truman won on the third ballot, and became Vice President. The resultant political animosity between American red and blue states continues to this day, as still evident in antipathies between Republicans and Democrats in the Trump era.

In his update to Confessions of an Economic Hitman, John Perkins writes:

A recent Oxfam report revealed that almost half of the world’s wealth is now owned by just one percent of the population, and that seven out of ten people live in countries where economic inequality has increased in the past thirty years.

Over the past three decades, sixty of the world’s poorest countries have paid US$550 billion in principal and interest on loans of US$540 billion, yet they still owe a whopping US$523 billion on those same loans.

Such a system must inevitably fail, illustrated by the reality that more than half of federal government tax revenue is presently squandered on so-called defence, plus the continuing financing costs of past wars. In addition to other but equally useless military paraphernalia, an estimated US$12 trillion was squandered just on developing US nuclear weapons, yet President Barrack Obama proposed wasting yet another US$1 trillion to modernise them.

Whilst the US has focused on cyberwarfare and unproductive weapons systems, the Chinese have surpassed the American technologically, and are also determined to regain their historic economic and global domination of the world by the year 2035 – or perhaps sooner. With Trump’s trade wars in addition to US weaponization of the dollar via sanctions, that prospect has accelerated dramatically as friends as well as foes rush for the exit and dump the dollar.

To the astonishment of the rest of the world, the US federal government periodically closes down when its legislated debt ceiling is reached. That ceiling was suspended in July 2019 for two years until 2021, the reason being that past practice of simply raising the debt ceiling and/or interest rates is no longer viable because of the scale of the American debt trap.

Even a modest one percent rise by the Federal Reserve Bank in interest rates could burst the Wall Street bubble and increase debt levels by several trillion dollars. Alternatively, negative interest rates would bankrupt the pension funds. A report by the McKinsey & Co consultancy warns that more than half of the world’s banks are already so weak that they may not survive a looming economic downturn.

With suspension of the debt ceiling, the Federal government deficit will increase dramatically mainly because of military spending. Despite failure against Iran, the hard-line militarists in Washington now want to turn their sights onto Russia and China.

Until recently, China funded about fifteen percent of Federal government debt plus trillions more in other investments. These loans have been drastically reduced since Trump’s unleashing of trade wars against China, which is now the world’s major producer of gold and has also been a huge importer of gold.

Many analysts insist that China deliberately understates its gold reserves whilst it accumulates more gold ahead of a currency war with the US. Despite world turmoil and wars over the past decade, the gold price has remained stagnant between US$1 200 and US$1 500 per ounce – other than the brief flurry to US$1 900 and excitement amongst goldbugs when the Managing Director of the International Monetary Fund, Dominique Strauss-Kahn was arrested in 2011.

A train loaded with goods made in China can now cross Asia and Europe to reach London within seventeen days, thus dramatically reducing sea-borne freight times from months to literally days, and thus also cost. This also highlights the strategic importance of the Middle East as the bridge between the two continents and, after losing its wars in Afghanistan, Iraq and Syria, America’s diminishing economic role and power.

Having replaced the US as the world’s major importer of oil, China in 2017 stopped paying for oil in US dollars and, instead pays in yuan or sometimes with gold. Saudi Arabia itself teeters on inevitable social and political upheavals that will eclipse the repercussions of the 1979 Iranian revolution that overthrew the Shah.

The yuan (also known as renminbi) will partially but only temporarily replace the petro-dollar, and implications for the US dollar as the world’s reserve currency and US Empire Inc will be enormous. Indeed, China’s continuing trade surpluses and creditor status internationally mean that it is unlikely to be the yuan that replaces the dollar.

The grossly mismanaged euro will not even be a contender. The euro was structurally flawed right from inception after the US, to prevent an alternative to the dollar, blocked gold as the euro’s point of reference.

A new digitised system will emerge as the dollar collapses. Like religion itself, confidence in the international monetary system is no longer whether the US dollar is actually backed by gold in Fort Knox, but simply faith! In fact, gold shipments from the New York Fed and the BoE, the world’s two major gold repositories, often literally take years and are blocked for political reasons as the German and Venezuelan governments learned in 2011 and 2019 when they wanted their gold returned.

Notions of a monetary system dependent upon digging gold out of a hole in South Africa to place in another hole in the US or London have proved impractical and irrational. The costs, dangers and environmental devastation of gold mining are now, however, such that any hopes of reviving the South African golden goose are surely dead.

The millennial generation is also disillusioned and abandoning a clearly dysfunctional political system based on either gold or Saudi oil. The currency analyst Martin Armstrong comments:

The younger generation does not see gold as money as does the aging generation. Older generations remember being taught that at school and the days of the gold standard. The younger generation does not even bother with paper money and pays with cell phones.

This raises the question whether gold will remain a safe-haven investment in the future if the younger generation does not even consider gold suitable for anything other than a trinket. Just as we moved from gold to paper, so we have moved from paper to electronics. There will be those who argue that gold has always been money.

They are simply wrong. Money has been many things to many different societies. The real issue is not whether gold is money, silver, copper, bronze, seashells, sheepskins or cattle.

The real question is whether money will be commodity based with its roots in barter, or will it simply be representative of economic output that can be electronic? Are we passing from a commodity based monetary system to purely electronic?

The 2008 crisis coincided with the development of bitcoins and other cryptocurrencies as an alternative to a collapsing financial system. Satoshi Nakamoto wrote a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System that remains a nine-page bible for a disruptive and revolutionary payment system using digital transfers through the Internet. He writes:

Commerce on the internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions it still suffers from the inherent weaknesses of the trust-based model. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.

When Snowden in 2013 exposed the National Security Agency’s surveillance of the Internet, he commented that US spying on everyone in the world actually contributes nothing to security, but there will be no end to this obsession until the US goes bankrupt. Such surveillance includes a top priority obsession to target bitcoin operators and the blockchain, and to smear them as conduits to fund terrorists and criminal money laundering.

In particular, a bitcoin administrator named Ross Ulbricht was targeted in what became a gross travesty of the American judicial system. Ulbricht was sentenced in 2015 to jail time of two life sentences plus forty years without the possibility of parole.

He had no prior history of crime, and his supporters contend he is the victim of rogue government officials. As a social and political libertarian, he was however naive in ignoring the hornet’s nest that he was stirring up amongst the banking and surveillance industries.

Senator Chuck Schumer, a New York politician frequently alleged as being in the pockets of the banking industry, publicly pronounced Ulbricht guilty on a variety of crimes ranging from drug dealing to conspiracy to commit murder. Mysteriously, those six unsubstantiated murder charges against Ulbricht were withdrawn on the last day of the trial.

Given the severity of the sentence, Ulbricht’s supporters now describe him as a political prisoner. The case also highlights how Assange, Manning, Snowden and others who speak truth-to-power are treated in the US when as whistle-blowers they disclose abuses of power or state secrets. When governments and banks run scared, they predictably take draconian measures to protect their vested interests.

Internet cryptocurrencies and blockchain technology serve as a new form of money and a payment mechanism that is more efficient, cheaper, and also cuts out banking intermediaries and their exorbitant charges. Consequently, the political establishment has until recently had little hesitation about smearing cryptocurrencies as a bubble, unstable and/or used by organised crime.

That too is fast changing as the US unilaterally imposes economic sanctions on countries, such as Venezuela or Iran or China, that refuse to capitulate to Washington’s abuses of its financial power. In fact, such bullying is prompting governments around the world to investigate de-dollarization of the world economy by way of national cryptocurrencies.

This, in turn, alarms Congressman Brad Sherman of California and others who propose legislation to ban bitcoins and cryptocurrencies because of the threat that they pose to US domination of the world. Sherman declares:

An awful lot of our international power comes from the fact that the US dollar is the standard unit of international finance and transactions. Clearing through the New York Fed is critical for major oil and other transactions.

It is the announced purpose of the supporters of cryptocurrency to take that power away from us, to put us in a position where the most significant sanctions we have against Iran, for example, would become irrelevant.

Whether it is to disempower our foreign policy, our tax collection enforcement or traditional law enforcement, the advantage of crypto over sovereign currency is solely to aid in the disempowerment of the US and the rule of law.

Given the roles of European and North American banks and governments in plundering the world over the past five centuries, Sherman’s criticisms are revealingly instructive. Cryptocurrencies provide a far more rational foundation for the international monetary system than either gold or oil.

In turn, the blockchain is the software which provides a triple-entry accounting system of debits, credits and confirmations. Bill Gates acknowledges that the blockchain is un-hackable. It offers opportunities to record property, identity, health, voting and numerous other transactions that will dramatically reduce the risks of fraud and corruption.

Time will tell. Bitcoins or other cryptocurrencies (collectively known as altcoins) may in future provide a much faster as well as cheaper and more secure method of international payments settlement between countries than shipments of gold. In that process, there would be no need for banks or bankers, or an international monetary system based on US government war debts.

The price of bitcoins exceeded that of gold for the first time in March 2017, and then rocketing to just short of US$20 000 in December that year before crashing to US$3 400 in January 2019. The price then rocketed back to US$14 000 in June 2019 as the crisis with Iran escalated. This volatility is frequently cited to argue that bitcoins are a passing bubble that will fail, yet any new technology is invariably volatile during the early days of its adoption.

The use of digital cash for purchases ranging from cups of coffee to cars, or houses or works of art is fast gaining momentum around the world, and in future may provide a much faster, as well as cheaper and more secure, method of international payments settlement between countries than shipments of gold. Having initially dismissed bitcoins as another scam, even central bankers including the South African Reserve Bank are investigating digital currencies.

The governor of the Bank of England, Mark Carney in August 2019 set the cat amongst the pigeons when he called for a global monetary system to replace the dollar, saying:

A digital currency could dampen the domineering influence of the US dollar on global trade. The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new digital currency, and it displaced the dollar’s dominance in credit markets. By reducing the influence of the US on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies.

The blockchain technology also offers new options of cryptocurrency funding to replace bank loans and/or the stock market for funding of capital projects, be it factories, mines or power plants. Similarly, Albertus Schoeman, a consultant in Pretoria at the Institute for Security Studies who specialises in international crime writes:

The digital currency is run by a decentralised network of computers owned by private individuals, and not by a centralised system such as a bank. This means that no single institution controls the currency. The idea is that bitcoins will bypass the control of banks that currently dominate the financial system, and which have come to be distrusted as complicit in the 2008 financial crisis.

Unlike banking that relies on trust in banks and governments, bitcoins’ decentralised system based on encryption and verification means that governments and banks (as in Zimbabwe) are not able to manipulate the system and simply ‘print’ money to cover debts.

The decentralised and electronic system also means