So long as the dollar remains the currency of greatest demand in the world, and more popular than gold (and silver) as a store of value, the dollar-pyramid scam boys will have a field day making money out of driving down the value of other currencies, without regard for the impact this has on the people whose currencies they are cannibalising.

The Japanese yen is now, once again, as in the early nineties, a favoured currency for the scam. This is how it works: #You borrow billions of yen at next to no interest; #you sell them for dollars and buy US Treasury notes which offer a good interest return; #then, when it is time to repay the yen, you sell the US notes and buy yen, in the certainty that with the currency's decreasing value relative to the dollar, you will get a lot more yen than originally borrowed.

This "yen carry trade" has been a contributing factor to the 12 percent decline in the value of the yen since September last. And Reuters announced from Tokyo yesterday, February 22, that Eisuke Sakakibara, the former Japanese financial diplomat known as "Mr Yen," believes that the yen could fall to 150 or 160 to the dollar towards the end of the year. Perhaps they should rather have reported that Mr Yen is hoping that his statement about the further fall of the yen will have the effect of a self-fulfilling prophecy.

What Mr Yen is not taking into account is the extent to which wealthy, savvy Japanese are turning more and more to gold with their yen rather than to dollars. And that could spell very bad news for the dollar-pyramid scam boys. For collectively the Japanese people control one of the largest private pools of capital on earth.

In an article, The New Japanese Gold Rush, posted recently at his web site, the financial market analyst Adam Hamilton shows how the Japanese investor who bought gold in 2000 would have "fared 66% better than a conservative Japanese investor who left money in the various cash-type savings investments so popular in Japan." And, "If our Japanese investor had bought physical gold in 2000 rather than the elite blue-chip Nikkei 225 basket of equities, they would be up 84% compared to their stock-investing brethren . . . !"

No wonder, therefore, that Adam Hamilton is able to report that in the last two months, "gold futures activity has literally exploded in Japan. Open interest has skyrocketed above 400,000 outstanding contracts, with each contract representing 1kg (about 32 ounces) of gold." He concludes that if this potential gold demand of 4,000 tonnes and more "is suddenly about to explode onto the world markets from the long-suffering Japanese investors, there is no way for central banks to quietly sell enough gold to cap the rally at $300", as they have been attempting to do in the last few weeks. And with that the debt pyramid scam will be over. (PS3)

A Japanese government plan to limit what was an unlimited guarantee on certain bank deposits to 10 million yen (about $77,000) is giving impetus to the flight from essentially worthless, digitised yen to gold; especially since a recent report in The Japan Times that the Japanese banking system is on the point of collapse, with a negative net worth of somewhere above the yen equivalent of $1 trillion. (PS4)

THE BAD DEBT EXPOSURE OF US BANKS

The US banks are not yet in such deep shit, but will be in time.

An informative chart at the web site of the Federal Deposit Insurance Corporation, FDIC, shows how the top 25 US banks wrote off $8.8 billion, in the fourth quarter of 2001, up from $3.4 billion in the 4th quarter of 2000. Citigroup, J.P. Morgan Chase and the Bank of America accounted for half the write-offs. And the exposure to Enron and Argentina of these three top US banks totals $10 billion, out of $16.6 billion for all 25 banks. Citigroup's non-performing assets of $10 billion are equal to 12.3 percent of its equity. JP. Morgan Chase, has $3.9 billion of such dud assets, equal to 9.5 percent of its equity, the Bank of America has $4.9 billion, equal to 10.12 percent of its equity, and the 25 banks as a whole have $35.3 billion of non-performing assets, equal to an average 9.69 percent of their equity. (PS5)

To give some meaning to the figures, relate them to the value of almost $25 billion put on the 2,500 tonnes of gold produced last year. And just imagine how the bad debts will escalate when the dollar-pyramid scam collapses, as small to large money savers round the world take up the trend being set in Japan (and China) and turn from dollars to gold and silver.