Mr. Denninger and Gold or Why the Dollar-Deflationists Are Wrong

In case you need some clarification on fiat (funny) money and gold:
  
From Gordon Gekko's Blog


Those who know Mr. Denninger know that he, well, for lack of a better word, hates Gold. It only goes to show the level of disinformation and ignorance prevalent in our society when even smart people like Karl fail to get it. From what I hear anybody even mentioning the word Gold runs the risk of being permanently banned from one of his "forums". In a recent commentary entitled "Ten Things for 2010" he was at it again bashing Gold. Here is what he had to say:

We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse…If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them.  Why?  Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it.  If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working.  My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)

Really Karl? LEAP Calls? In a hyperinflation? That’s a good way to lose 5% your portfolio. I’m assuming you know what hyperinflation is - in a hyperinflation the currency becomes worthless, as in toilet-paper. Why would anyone want to get paid their "winnings" in a worthless currency, assuming there are stock indices and counterparties left who can pay off these worthless winnings when countries collapse? 
And the tax structure is FAR more favorable for Gold than ANYTHING else, if only you are not in the habit of bending over. Buy cash and keep your mouth shut – it’s very simple – or just move to another country where the government is not as intent on raping its citizens. I know privacy is a foreign concept in America these days, but still. All your other assets, including stock market profits, are fully open to the government and there is nothing stopping them from taxing them to the hilt. Trust me, when it all hits the fan Gold in your personal possession will be your best friend. 
Which brings me to my favorite part:

gold has never performed well on a contemporary basis .vs. inflation

Poor Gold. The thing gave an instant 75% profit when Roosevelt confiscated it in 1933 and rose 24x (yes, that’s 24 TIMES) from $35 to about $850 in a space of 10 years from 1970 to 1980. And even during the past decade from 2000-2010 it has risen 5x outperforming ALL asset classes. Overall, from 1933 till date it has risen about 60x. That is, if you simply held Gold since 1933 you would be now 60 times richer, at least in nominal terms. Yet nobody remembers all that. All they remember is the lousy 20 years from 1980-2000 when the full force of the derivatives market was brought to bear upon it to suppress it’s price (well, that’s a topic for another post), as is being done even now absent which it would have easily crossed 10x (from the 2000 low) by now – which it will at some point in the future as the market cannot be suppressed forever. Indeed, the longer the suppression, the more forceful the eventual price rise as happened when the London Gold Pool collapsed during the late sixties soon after which Gold shot up 24x during the next decade. If you’re not that devoted a disciple of Karl I suggest you hang on to your Gold for a little while longer. In my humble opinion, it will outpace all gains in all other asset classes since the creation of the dollar – in not only nominal, but real purchasing power terms.
And then there was this again:

The last time I checked they didn't take 100oz bars at WalMart, but they sure do take $100 bills

And the last time I checked Karl, they weren’t taking stock certificates and bonds either. Also, there was a funny thing I noticed: there was NOTHING stopping me from getting dollar bills, euros, yen – you name it – for my Gold. In fact, everytime I sold some Gold I got even more paper tickets than the last time – which meant that I could buy even more stuff with the same amount of Gold. How surprising, no?
Well, Karl was definitely surprised:

Precious metals will not be a safe haven: Clean miss.  Gold and silver have both performed well.

And talk about reaching wrong conclusions:

Discovery that the metals market has been "polluted" to the point of irrelevance would mean that those around the world who had bought and were holding alleged gold bars that in fact aren't gold had tendered good money for nothing.  This would be a monstrous deflationary event - after all, the definition of deflation is the destruction of money, and that's exactly what would have happened, just as if you took a stack of $100 bills and burned them in your back yard.

No Karl, the bills still exist – in the bank account of whoever was paid to obtain the said Gold. It is the Goldwhich is discovered to be no longer existing, thus causing the apparent supply to be further reduced and spiking the price. 
Karl thinks he’ll be safe watching these “fireworks” from the sidelines. Not so Karl. By not buying Gold (and holding dollars), you are smack in the middle of them. You are not simply “missing out” on some investment gain but stand to lose everything as the purchasing power of the dollar is decimated. This is why those advocating holding only paper cash as a “safe alternative” are in fact harming those who listen to them.
Now don’t get me wrong - I agree with a lot of what he says in general – he’s a good reporter (which is why I keep him on my “must read” list) - but when it comes to Gold, Karl simply doesn’t “get it”. First of all, when you talk about deflation you have to ask the question, “In terms of what?”.  Most people ala Mish, Prechter, Karl et. al. when they talk about deflation are referring to deflation in terms of the dollar, i.e. they are, in fact, “dollar-deflationists”*. One can’t really blame them since the dollar is considered by most people as “money” today and is therefore their frame of reference. But this is a critical error of perception that will prove fatal to those who hold their life’s savings in dollars when it all finally implodes.  The dollar today is just another fiat currency created at will out of thin air by bankrupt and corrupt governments and their Central Banks. It is an illusion of money, not money; which brings us to the question of: 

What is money?
This is a topic which can fill an entire book, but I’ll just quote the best one I found (Mises):

In the marketability of the various commodities and services there prevail considerable differences. There are goods for which it is not difficult to find applicants ready to disburse the highest recompense which, under the given state of affairs, can possibly be obtained, or a recompense only slightly smaller. There are other goods for which it is very hard to find a customer quickly, even if the vendor is ready to be content with a compensation much smaller than he could reap if he could find another aspirant whose demand is more intense. It is these differences in the marketability of the various commodities and services which created indirect exchange. A man who at the instant cannot acquire what he wants to get for the conduct of his own household or business, or who does not yet know what kind of goods he will need in the uncertain future, comes nearer to his ultimate goal if he exchanges a less marketable good he wants to trade against a more marketable one. It may also happen that the physical properties of the merchandise he wants to give away (as, for instance, its perishability or the costs incurred by its storage or similar circumstances) impel him not to wait longer. Sometimes he may be prompted to hurry in giving away the good concerned because he is afraid of a deterioration of its market value. In all such cases he improves his own situation in acquiring a more marketable good, even if this good is not suitable to satisfy directly any of his own needs.

A medium of exchange is a good which people acquire neither for their own consumption nor for employment in their own production activities, but with the intention of exchanging it at a later date against those goods which they want to use either for consumption or for production.

Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange. Money is the thing which serves as the generally accepted and commonly used medium of exchange... 

(All emphasis mine)
Money was created by the markets; by humans trading goods and services amongst themselves; by the need for indirect exchange. This is one of the major misconceptions of the dollar-deflationists - that money is what the government says it is. Although Governments do their best to convince people otherwise, including putting a gun to their collective heads via legal tender laws, they cannot dictate what money is – not for long periods of time anyways – which is why whereas Gold has been money for thousands of years, you’d be hard pressed to find a fiat currency that has existed past a few decades. The present period is one such short period of mass delusion where the majority has been convinced – including, apparently, Mr. Denninger - that the colored pieces of paper being printed by various men behind the curtains is, in fact, money. 
Gold is the commodity that humans chose to be “money”- the most marketable good. It didn’t happen overnight, but over thousands of years of evolution. Billions of trading decisions over centuries made by free men of their own volition – the collective wisdom – installed Gold as money. It needs no government violence to enforce as money because the force of nature that is the market chose it to be money. Indeed, it was the governments who hijacked the free-market commodity money of Gold into “backing” their various fraudulent paper money scams using fractional reserve systems. Why? Because the power to create money is the ultimate power. It is not for no reason that Mayer Amschel Rothschild said:

“Give me control of a nation's money and I care not who makes her laws.”

And why do we know Gold is still money today? It’s simple – Gold has the highest stocks to flow ratio of any commodity i.e. its total above ground stockpile is very large compared to its annual production which is NOT the case for other commodities. The reason for this is that while other commodities are primarily mined for consumption, Gold is not consumed but hoarded. Its primary function is that of a store of value – a wealth reserve. Why do you think the Central Banks keep Gold on their balance sheet even today? Right. Even the Gold jewellery demand in countries like India is, in fact, investment demand in disguise – hidden firmly behind veils of religion and culture to protect their real wealth from the depredations of various rulers and governments that have pillaged her over the many thousands of years of her existence. 
Moreover, even though most people don’t realize it, even today the dollar is only acceptable as money because it is indirectly “backed” by Gold (via the derivatives market) i.e. you can get Gold in exchange for paper dollars on the open market. The proof of this lies in the fact that were, for some reason, the convertibility of Gold into dollars suspended today [on the open market], the dollar would instantly collapse. 
Gold IS Money – not the dollar, not ANY fiat currency. Period.
As the king of banksters J.P. Morgan himself testified before the Pujo Committee in 1913:

“Gold is money and nothing else”.

The Fiat Money Scam
Throughout history no fiat currency has survived – ever. There is a reason for it. Paper money is inherently a scam – a scheme to loot the people who actually produce the goods and services in the economy. Just because it is legalized and its perpetrators hold fancy government titles does not mean it is not a fraud. The issuer can create unlimited pieces of paper – or computer bits today – at essentially no cost and use them to appropriate real goods and services in the economy. So whereas you and I have to actually do real work to procure it, the printers of the currency can basically print whatever they need. This is why there is a constant inflation of money supply under a fiat money regime as has been the case since the Federal Reserve was established in the US in 1913, as constant theft requires constant creation of new money. The evidence of this inflation is the annihilation of the dollar’s purchasing power since then:

The Dollar's Purchasing Power Since the Creation of the Federal Reserve in 1913

This is why we have legal tender laws making the unconstitutional Federal Reserve Notes legal tender with the monopoly of the private banking cartel (i.e. the Federal Reserve) enforced by the courts enabling the banks and the government to essentially enslave the populace. This is also exactly why the founders of America prohibited anything except Gold and Silver to be used as money, and why the governments go to great lengths to suppress their price. Indeed, America today is the very antithesis of what its founders intended.

The fraudulent money system today is the source of all the rottenness. The various scams in progress today - the entrenched corruption - can be all be traced back to it. The rot is at the very top of the pyramid from which the fountain of fiat money emanates. It is indeed telling that the two World Wars occurred right after creation of the Federal Reserve. Further, no amount of prosecution will fix the system because the prosecutors themselves have been corrupted. As Ayn Rand said:

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world? You are.”

It is too lucrative a scam to be given up voluntarily by those owning the printing press while the going is still good. It is like expecting a thief to stop stealing while not only being immune from any sort of legal prosecution, but actually having the power to create laws. The system cannot be fixed - the only way this will stop is a collapse of the existing system so that a new one can be built – and we are in the middle of it right now.

Deflation in Terms of Gold, Hyperinflation in Terms of the Dollar

By its very nature, due to economic control being concentrated in a few hands and fraudulent creation of money out of thin air, the fiat money system creates massive misallocations of capital and resources throughout the economy. The economy under a fiat money system is no different than a centrally planned one, such as the Soviet Union.  Moreover, since the entire world is on a fiat money standard today – with the various fiat currencies themselves being “backed” by the fiat dollar - misallocations of capital have occurred throughout the world resulting in malinvestments. These misallocations are both material and human, as exemplified by the skyrocketing unemployment rate. The malinvestments now need to be liquidated i.e. converted to the most liquid form – “the most marketable good” or money - so that the capital can be reallocated to more productive uses. Loans are called in as they can no longer be serviced. This results in deflation, i.e. rising demand for money in relation to everything else, and consequently falling prices and increasing purchasing power of money. Moreover, economic uncertainty means that more and more people want to hold “the most marketable good” i.e. money thus further increasing the demand for money.

Now normally – since a lot of debt-money is destroyed in the process and there is a rising demand for money - this would lead to a rising dollar (in terms of purchasing power, not the meaningless DXY), but that would mean that the whole “theft-via-inflation” scam would fall apart. The government can’t tax a rising purchasing power! They simply CANNOT allow deflation in a fiat money regime as it would defeat its very purpose – that of allowing them to appropriate resources from the rest of the economy. This would threaten their very existence.  This is why holes created on the banks’ balance sheets by defaulting loans – which would normally create deflation - are being eagerly filled by the Central Banks. This is why the Fed is now simply printing money out of thin air – both overtly and covertly, with the derivatives market being cleverly used to absorb the excess money creation (so you were wondering why the derivatives monster is increasing exponentially in size?) - to fund the government’s operations as there is not enough money in the market to lend to the government. Hiding under esoteric nonsense terms like “quantitative easing” does not change the fact that it is simply creating money via ledger entries and outright STEALING. 

Whether they “allow” it or not deflation WILL take place – not in terms of dollars, but in terms of Gold. It’s simply forces of nature – the market – at work. The dollar deflationists expect the dollar to suddenly reverse its 100 year long drop in purchasing power. Ain’t gonna happen. What the government is doing now – i.e. spending raw printed money into a contracting economy - assures us that we will end up with the hyperinflation of the dollar. The only thing they can do is prolong its demise with intermittent bouts of induced apparent “deflation” to keep the inflationary scam going a little bit longer - remember 2008? (h/t Gary). Initially, of course, many people (such as Mr. Denninger) – mistakenly thinking the dollar to be “money” – will rush to its perceived safety causing the dollar to rise.  But ultimately, as more and more people realize that the government will not – indeed, cannot – stop inflating the currency into oblivion, will choose to hold the ultimate “marketable good”, i.e. Gold. This is the reason why Gold is the only asset class at new all time highs. Rest assured, even the big boys are holding Gold in their private vaults, not dollars. Is there any sense in holding something you can create at will?

Ultimately, there can only be deflation in terms of commodity based money such as Gold since it cannot be created out of thin air. Indeed, we have already been deflating in terms of Gold for the past decade. Just look at the various commodities, the stock market, real estate – pretty much anything - priced in Gold – it’s all going down.

SPX priced in Gold (2000-2010)

As capital goes down the liquidity pyramid in search of the most marketable good, all the money derivatives – including the dollar – will collapse returning all capital to where it came from: Gold; a global reset, if you will, with only holders of Gold left standing when the dust settles:

Exter's Liquidity Pyramid

You Cannot Eat Gold, But You Can’t Eat Dollars Either

That has to be one of the lamest arguments against Gold – ever. It is the sign of a closed mind. It shows that you don't know ANYTHING about human history, which is not surprising considering the sorry state of our government controlled "education system". You cannot eat FRN’s either – why not just burn them? The function of money is not to be eaten but to be used as a medium of exchange and store of wealth i.e. to get what you want to eat at an indefinite time in the future. And while with Gold you are assured of getting at least somethingin return in the future, whether it is an edible product or not, it is not so with dollars. Fiat money has a problem in that it lasts only as long as the government enforcing its use does. In times of economic uncertainty, such as today, when the very survival of various governments is at stake (yes, that includes the US Government) do you want to hold Gold or their worthless colored paper tickets? Gold is the only money that has outlasted empires and governments - no fiat currency has. Think about it - what will your dollars be worth when there is no government to enforce it as legal tender? Yup – zip, zilch, ZERO. And to those who say that we will not need Gold (but something else like food or guns) in such extreme circumstances, I say that empires and governments have constantly collapsed throughout history but it did not mean the end of the world. As long as you believe that human society will exist and there will be division of labor, you need money (i.e. Gold) – because:

a) You cannot store indefinitely all your needs especially perishable items such as food.

b) You do not know with 100% certainty what you will need in the future.

c) You cannot produce/manufacture everything that you will need today or in the future by yourself.

Even if the government does not collapse there is nothing stopping it from devaluing the currency at will in a step function thereby instantly appropriating a vast amount of your savings, as has already happened not once buttwice with the dollar since the creation of the Federal Reserve. I mean really, the facts are so obvious that you have to be either be in total and complete denial (perhaps due to having already put all your eggs in the dollar basket) or in collusion with the people promoting the paper money scam.

Gold is the currency beyond Governments. It is the most liquid form of money accepted throughout the world – the true reserve currency of the world - whereas Dollars, Yuans and Euros etc. are only guaranteed to be accepted within their own respective countries, and as long as their respective governments last. Why would you want to tie yourself down to the paper currency of a particular nation, especially in times of such turbulence? It points to a very limited sphere of thinking when you advocate that holding only dollars is the best strategy. It is a fallacy to believe that there is no refuge outside the system; that you have to be trading paper tickets all the time to “keep up” with the dilution of your purchasing power or just stand by idly holding dollars while the government rapes you. Gold is your refuge outside the system. 

Got Gold, Mr. Denninger?

---

*In general we can state that they are “fiat-money deflationists” since the process of money creation is same in all the countries i.e. money is created as debt and the collapse will follow a similar route. The only caveat in my opinion is that since the dollar backs all the other fiat currencies, it *might* collapse last. Also, to keep things simple, for the rest of the discussion, we’ll simply use the term “dollars” with the understanding that it can be used interchangeably with the general terms “fiat currency” or “fiat money” since it is one itself.

Greece urged to give up euro

Jim Sinclair’s Commentary
Not exactly a bad idea except for the fact that the drachma would be blasted to oblivion.
This is a typical not-practical academic solution that would fail.


Greece urged to give up euro Robert Watts
May 30, 2010
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
Greek politicians have played down the prospect of abandoning the euro, which could lead to the break-up of the single currency.
Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR, said: “Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.
“So part of the package of leaving the euro must be to convert the debt into the new domestic currency unilaterally.”
More…


Related:  Spain is trapped in a 'perverse spiral' as wage cuts deepen the crisis


More: French Budget Minister: Keeping Our AAA Rating Will Be A "Stretch"

Chomsky regards himself as a supporter of Israel

From AngryArab:


"...the reference to Israel "harming itself" as Chomsky put it, is telling enough. It is time that we learn that we dont have to stand and applaud any White Man who comes to our region with some criticisms of Israel, OK?  I mean, imagine if a supporter of the struggle of blacks against Apartheid were to say: I count myself as a supporter of the Apartheid  regime."


Read all




 Related:
"It’s particularly interesting in the case of Palestine to see where US intellectuals and progressives decide that it’s necessary to be 'realistic' and where 'principled;' where they choose to accept more or less the general media consensus about 'the boundaries of acceptable discourse' and where they reject it. In the case of Palestine, people who are generally on record as calling for forthrightness and honesty in the demand for justice in political discourse, who criticize a false 'pragmatism' oriented toward the corporate media and academic political consultants and who question generalizing statements about popular consensus, suddenly become believers in pragmatism and the limits of what the discourse will allow. An interview with Noam Chomsky published on Znet under the title 'Justice for Palestine?' (Znet, March 30, 2004) is an exemplary contribution to this genre of left apologetics. Since it contains so many of the arguments generally advanced to legitimize some form of continued existence for an Israeli system of colonialism and Apartheid—and to shore up rear-guard support for it among US progressives—it is worth examining in full."

Read all

Did an American Mine Sink South Korean Ship?

By Yoichi Shimatsu | New America Media | May 27, 2010 
Alethonews

BEIJING – South Korean Prime Minister Lee Myung-bak has claimed “overwhelming evidence” that a North Korean torpedo sank the corvette Cheonan on March 26, killing 46 sailors. U.S. Secretary of State Hillary Clinton claimed that there’s “overwhelming evidence” in favor of the theory that North Korea sank the South Korean Navy warship Cheonan. But the articles of proof presented so far by military investigators to an official inquiry board have been scanty and inconsistent. 

There’s yet another possibility, that a U.S. rising mine sank the Cheonan in a friendly-fire accident. 

In the recent U.S.-China strategic talks in Shanghai and Beijing, the Chinese side dismissed the official scenario presented by the Americans and their South Korean allies as not credible. This conclusion was based on an independent technical assessment by the Chinese military, according to a Beijing-based military affairs consultant to the People Liberation Army. 

Hardly any of the relevant facts that counter the official verdict have made headline news in either South Korea or its senior ally, the United States. 

The first telltale sign of an official smokescreen involves the location of the Choenan sinking – Byeongnyeong Island (pronounced Pyongnang) in the Yellow Sea. On the westernmost fringe of South Korean territory, the island is dominated by a joint U.S.-Korean base for anti-submarine warfare (ASW) operations. The sea channel between Byeongnyeong and the North Korean coast is narrow enough for both sides to be in artillery range of each other. 

Anti-sub warfare is based on sonar and acoustic detection of underwater craft. Since civilian traffic is not routed through the channel, the noiseless conditions are near-perfect for picking up the slightest agitation, for example from a torpedo and any submarine that might fire it. 

North Korea admits it does not possess an underwater craft stealthy enough to slip past the advanced sonar and audio arrays around Byeongnyeong Island, explained North Korean intelligence analyst Kim Myong Chol in a news release. “The sinking took place not in North Korean waters but well inside tightly guarded South Korean waters, where a slow-moving North Korean submarine would have great difficulty operating covertly and safely, unless it was equipped with AIP (air-independent propulsion) technology.” 

The Cheonan sinking occurred in the aftermath of the March 11-18 Foal Eagle Exercise, which included anti-submarine maneuvers by a joint U.S.-South Korean squadron of five missile ships. A mystery surrounds the continued presence of the U.S. missile cruisers for more than eight days after the ASW exercise ended. 

Only one reporter, Joohee Cho of ABC News, picked up the key fact that the Foal Eagle flotilla curiously included the USNS Salvor, a diving-support ship with a crew of 12 Navy divers. The lack of any minesweepers during the exercise leaves only one possibility: the Salvor was laying bottom mines. 

Ever since an American cruiser was damaged by one of Saddam Hussein’s rising mines, also known as bottom mines, in the Iraq War, the U.S. Navy has pushed a crash program to develop a new generation of mines. The U.S. Naval Mine and Anti-Submarine Warfare Command has also been focused on developing counterparts to the fearsome Chinese naval “assassin’s mace,” which is propelled by a rocket engine. 

A rising mine, which is effective only in shallow waters, rests atop a small platform on the sea floor under a camouflage of sand and gravel. Its detection system uses acoustics and magnetic readings to pick up enemy ships and submarines. When activated, jets of compressed air or solid-fuel rockets lift the bomb, which self-guides toward the magnetic center of the target. The blast rips the keel, splitting the ship or submarine into two neat pieces, just as was done to the RKOS Cheonan. 

A lateral-fired torpedo, in contrast, “holes” the target’s hull, tilting the vessel in the classic war movie manner. The South Korean government displayed to the press the intact propeller shaft of a torpedo that supposedly struck the Cheonan. Since torpedoes travel between 40-50 knots per hour (which is faster than collision tests for cars), a drive shaft would crumble upon impacting the hull and its bearing and struts would be shattered or bent by the high-powered blast. 

The initial South Korean review stated that the explosive was gunpowder, which would conform to North Korea’s crude munitions. This claim was later overturned by the inquiry board, which found the chemical residues to be similar to German advanced explosives. Due to sanctions against Pyongyang and its few allies, it is hardly credible that North Korea could obtain NATO-grade ordnance. 

Thus, the mystery centers on the USNS Salvor, which happened to be yet right near Byeongyang Island at the time of the Cheonan sinking and far from its home base, Pearl Harbor. The inquiry board in Seoul has not questioned the officers and divers of the Salvor, which oddly is not under the command of the 7th Fleet but controlled by the innocuous-sounding Military Sealift Command. Diving-support ships like the Salvor are closely connected with the Office of Naval Intelligence since their duties include secret operations such as retrieving weapons from sunken foreign ships, scouting harbor channels and laying mines, as when the Salvor trained Royal Thai Marine divers in mine-laying in the Gulf of Thailand in 2006, for example. 

The Salvor’s presence points to an inadvertent release of a rising mine, perhaps because its activation system was not switched off. A human error or technical glitch is very much within the realm of possibility due to the swift current and strong tides that race through the Byeongnyeong Channel. The arduous task of mooring the launch platforms to the sea floor allows the divers precious little time for double-checking the electronic systems. 

If indeed it was an American rising mine that sank the Cheonan, it would constitute a friendly-fire accident. That in itself is not grounds for a criminal investigation against the presidential office and, at worst, amounts only to negligence by the military. However, any attempt to falsify evidence and engage in a media cover-up for political purposes constitutes tampering, fraud, perjury and possibly treason. 

Yoichi Shimatsu, former editor of the Japan Times, is an environmental consultant and a commentator on Asian affairs for CCTV-9 Dialogue.