Remarks
By Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee
18th CLSA Investors' Forum
Grand Hyatt Hotel, Hong Kong
Wednesday, September 21, 2011
The speaker following me, George Clooney, will be
able to tell you what it's like to be handsome, talented, rich, and famous. I
could tell you what it's like not to be. But instead the conference
has asked me to talk about gold, which at least might make you rich, or help
you preserve some of whatever you've got.
This opportunity is full of risk, because the gold
market long has been manipulated by Western central banks to restrain the
gold price. The Western central banks are slowly losing control of the market
but they are not giving up easily.
Why do Western central banks manipulate the gold
market?
The gold market is manipulated because, despite
Federal Reserve Chairman Ben Bernanke's insistence to Congress a few weeks
ago that gold is not money, just "tradition," gold is indeed
a currency that competes brutally with government-issued currencies and helps
determine not only the value of those currencies but also interest rates and
the value of government bonds.
Gold's competition with currencies was
documented in an academic study published in June 1988 in the Journal of
Political Economy written by Harvard economics professor Lawrence Summers and
University of Michigan economics professor Robert Barsky.
Summers and Barsky found that, in a free market,
there is an inverse relationship between the price of gold and the real rate
of interest:
http://www.gata.org/files/gibson.pdf
The Summers and Barsky
study implied that if governments could get control of the gold price, they
could also get control of interest rates. Of course Summers went on to become
deputy U.S. treasury secretary and then treasury secretary, positions in
which skill in rigging markets is a great asset.
Exactly how is the gold price rigged, and by whom?
It has been rigged openly through outright sales of
gold by central banks, as it was rigged openly in the 1960s by the group of
Western central banks that operated what became known as the London gold
pool, and, following the gold pool's collapse in 1968, rigged both openly and
surreptitiously through central bank sales and lending of gold and by bullion
bank short positions and derivatives that are supported by access to Western
central bank gold.
The Gold Anti-Trust Action Committee has documented
this rigging from official sources whose admissions are compiled in the
"Documentation" section of our Internet site:
http://www.gata.org/taxonomy/term/21
That is, the gold price suppression scheme is not
what it is sometimes disparaged as being, "conspiracy theory."
Rather it is a matter of the most extensive public record -- at least for
those who want to look at the record.
These records include:
-- Public statements by Federal Reserve officials,
officials of other Western central banks, and the International Monetary
Fund.
-- Declassified Central Intelligence Agency
memoranda.
-- The minutes of the Federal Reserve’s
Federal Open Market Committee.
-- Filings and statements in three gold price
suppression lawsuits in the United States; one brought by my
committee’s consultant, Reginald H. Howe, against central banks and
bullion banks in U.S. District Court in Boston in 2001; another brought by
Blanchard Coin and Bullion against Barrick Gold
Corp. in U.S. District Court in New Orleans in 2003; and the third brought
two years ago by my organization against the Federal Reserve in U.S. District
Court for the District of Columbia.
-- These records also include declassified or leaked
U.S. State Department cables.
-- Statistical studies done by market researchers
like Adrian Douglas in the United States and Dimitri
Speck in Germany.
-- And testimony at the hearing about the precious
metals markets that was held on March 25, 2010, by the U.S. Commodity Futures
Trading Commission. That hearing produced testimony that led to the filing of
a massive silver price rigging lawsuit against J.P. Morgan Chase. The revised
complaint against J.P. Morgan Chase, filed last week in U.S. District Court
for the Southern District of New York, contains pages and pages of
extraordinarily specific detail, identifying trades, traders, and dates:
http://www.gata.org/node/10448
An especially incriminating document remains on the
Internet site of the Federal Reserve Bank of St. Louis. It is a detailed plan
from April 1961, discovered in the archive of the Fed’s longest-serving
chairman, William McChesney Martin, for
surreptitiously rigging the currency and gold markets worldwide, a plan that
went so far as to propose the alteration, falsification, or withdrawal from
publication of U.S. government financial reports that otherwise would be
incriminating:
http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf
And:
http://www.gata.org/files/FedBlueprintForIntervention.pdf
My organization possesses and has posted these
records on the Internet, and I would welcome an opportunity to examine and
discuss them in detail, document by document, with any doubters in a public
forum.
But the official record of gold price suppression is
not merely historical. Thanks to my organization's work, it is very
contemporary as well.
Two years ago, using the federal Freedom of
Information Act, the Gold Anti-Trust Action Committee asked the Federal
Reserve to provide access to its gold records, particularly its records
involving gold swaps. Gold swaps are trades of gold between central banks,
enabling one central bank to intervene in the gold market at the behest of
another, keeping the other central bank's fingerprints off the intervention.
Gold swaps are a primary mechanism of the gold price suppression scheme.
While the Fed refused to give us access to its gold
records, in adjudicating our request internally the Fed did make, perhaps
inadvertently, a sensational disclosure. On September 17, 2009, the member of
the Fed's Board of Governors who was acting as the judge of our request,
Kevin M. Warsh, wrote a letter to GATA's lawyer,
William Olson of Vienna, Virginia, confirming the Fed's denial of access.
Among the records being withheld from us, Warsh
disclosed, were records about the Fed's gold swap arrangements with foreign
banks, which, he wrote, "is not the type of information that is
customarily disclosed to the public":
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
This admission that the Fed has gold swap
arrangements with foreign banks plainly contradicted previous statements by
the Fed that it was not involved in the gold market in any way.
As GATA was not willing to let Fed Governor Warsh's letter be the last word on access to the Fed's
gold records, on December 31, 2009, we sued the Fed in U.S. District Court
for the District of Columbia under the Freedom of Information Act. The Fed
told the court that the Fed really couldn't find many records involving gold.
Implausible as this was, the judge, Ellen Segal Huvelle,
denied GATA's request to interrogate Fed officials under oath about what
seemed to us to be their wholly inadequate search. Whereupon the judge
reviewed, privately in her chambers, the few documents the Fed had submitted,
and on February 3 this year she ruled that the Fed indeed could keep secret
all but one of those documents. She ordered the Fed to disclose that one
document to GATA within two weeks.
On February 18 this year, heeding the court's order,
the Fed released the document -- the minutes of the April 1997 meeting of the
G-10 Gold and Foreign Exchange Committee as compiled by an official of the
New York Federal Reserve Bank. The minutes showed government and central bank
officials from around the world conspiring in secret to coordinate their gold
market policies:
http://www.gata.org/node/9623
Perhaps of equal importance, the Fed claimed not to
be able to find minutes of any other meeting of the G-10 Gold and Foreign
Exchange Committee. Either the the G-10 Gold and
Foreign Exchange Committee has met only that once, in April 1997, or the Fed
was not represented at any other such meetings, or such minutes were
conveniently misplaced to keep them away from GATA's lawsuit.
Thus GATA's lawsuit established that, despite its
public denials, the Fed has many gold secrets after all. Our lawsuit also
managed to pry a couple of those secrets loose and publicize them -- first,
that the Fed has gold swap arrangements, and second, that at a secret meeting
in 1997 the Fed was conspiring with other central banks to coordinate their
gold market policies and that there was never any announcement of this
undertaking.
Almost as gratifying to us was that, since the court
found that the Fed illegally withheld from us the minutes of the secret G-10
Gold and Foreign Exchange Committee meeting, the Fed was ordered to pay court
costs to GATA, which the Fed did in May, sending us a check for $2,870:
http://www.gata.org/node/9917
But the Fed is far from the only central bank that
has been proven to be involved in suppressing the price of gold.
In August 2009, while GATA was pressing its
freedom-of-information claim against the Fed, our consultant, Rob Kirby of
Kirby Analytics in Toronto, wrote to the German central bank, the Bundesbank, to confirm a news report that most of the
German national gold was being kept outside Germany, particularly in New
York, presumably at the New York Fed.
The Bundesbank replied to
Kirby as follows:
http://www.gata.org/node/7713
"The Deutsche Bundesbank
keeps a large part of its gold holdings in its own vaults in Germany, while
some of its gold is also stored with the central banks located at major gold
trading centres. This has historical and
market-related reasons, the gold having been transferred to the Bundesbank at these trading centers. Moreover, the Bundesbank needs to hold gold at the various trading centres in order to conduct its gold activities."
So the Bundesbank says it
keeps much of its gold at "trading centers" so that it may conduct
its "gold activities."
Exactly what are those activities?
In late 2010 the German journalist Lars Schall sought to follow up with the Bundesbank,
posing 13 questions about those "gold activities," particularly as
to whether the Bundesbank has any gold swap
arrangements with the United States. The Bundesbank
replied to Schall as follows:
http://www.gata.org/node/9363
"In managing foreign reserves, the Bundesbank fulfils one of its mandated tasks as an
integral part of the European System of Central Banks. We trust you will
understand that we are not able to divulge any further information regarding
this activity. Particularly with respect to the confidential nature of information
about where gold holdings are kept, we are unable to go into any greater
detail concerning exact locations and the quantities stored at each of these.
Likewise, owing to the strategic nature of the activity, we are not at
liberty to provide you with more detailed information about gold
transactions."
That seems like a pretty good confession that the Bundesbank has undertaken gold swaps as part of what it
considers "strategic activity."
Another confession of the secret maneuvers being
played with gold by central banks came at the hearing held by U.S. Rep. Ron
Paul's House Subcommittee on Domestic Monetary Policy and Technology on June
23 this year, a hearing I attended. The Treasury Department's inspector
general, Eric M. Thorson, testified that he had been told that no part of the
U.S. gold reserve was encumbered or compromised. But he did not say exactly
who told him this, so his comment was only hearsay. And when Thorson was
asked just where the gold pledged by the United States to the International
Monetary Fund is kept and how it is accounted for, Thorson couldn't say:
http://www.gata.org/node/10037
Three years ago when GATA put similar questions to
the IMF -- "Exactly where is your gold, and do you possess it directly
or is it just a claim on the gold reserves of your member nations?" --
the IMF was at first evasive and then abruptly cut off the correspondence
without answering:
http://www.gata.org/node/6242
But then most official gold data is actually
disinformation.
For the six years prior to 2009 China reported to
the IMF that it held 600 tonnes of gold. But in
April 2009 China reported that its gold reserves had increased by 76 percent,
from 600 tonnes to 1,054 tonnes.
Had China obtained the new 454 tonnes only in the
past year? Of course not; China had been accumulating gold steadily, through
its foreign exchange agency, without reporting it for six years. Only in
April 2009 was the gold transferred from China's foreign exchange agency to
its central bank and reported to the IMF:
http://www.gata.org/node/7380
There is more confirmation of the false reporting of
gold reserves. In June 2010 the World Gold Council reported that Saudi Arabia
had increased its gold reserves by 126 percent since 2008, from 143 tonnes to 323 tonnes. But a few
weeks later the governor of the Saudi Arabia Monetary Authority said Saudi
Arabia had not been purchasing gold lately and that the 143 tonnes in question had been held all along in what he
called "other accounts" -- exactly what China had done, holding
gold in accounts not reported officially:
http://www.gata.org/node/9094
Thanks to diplomatic cables from the U.S. embassy in
Beijing to the State Department in Washington, cables obtained by the Wikileaks organization and published this month, we now
know that the Chinese government agrees with GATA that Western central banks
suppress the price of gold to support their own currencies.
One U.S. Beijing embassy cable, dated April 28,
2009, summarizes a commentary attributed to the Chinese newspaper Shijie Xinwenbao (World News
Journal), which is published by the Chinese government's foreign radio
service, China Radio International. The cable's summary reads:
"According to China's National Foreign
Exchanges Administration, China's gold reserves have recently increased.
Currently, the majority of its gold reserves have been located in the United
States and European countries. The United States and Europe have always
suppressed the rising price of gold. They intend to weaken gold's function as
an international reserve currency. They don't want to see other countries
turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing
the price of gold is very beneficial for the U.S. in maintaining the U.S.
dollar's role as the international reserve currency. China's increased gold
reserves will thus act as a model and lead other countries toward reserving
more gold. Large gold reserves are also beneficial in promoting the
internationalization of the renminbi."
Two other U.S. Beijing embassy cables from the same
period quote other semi-official Chinese commentaries to the same effect.
These cables also are posted in the "Documentation"
section of GATA's Internet site:
http://www.gata.org/node/10380
http://www.gata.org/node/10416
Because central banks know that gold, far from being
a quaint antique, is actually the determinant of the value of all other
currencies, the true disposition of national gold reserves has become a
secret more sensitive than the disposition of nuclear weapons. For gold is a
weapon just as powerful -- a weapon crucial to the currency wars that flare
up every few years, like the currency war that is raging now.
That is, gold is the secret knowledge of the
financial universe. And while nuclear weapons can be used for blackmail,
currency market rigging is a far more effective mechanism for looting the
world.
Many of you have heard about the looting of Europe
undertaken by the Nazi German occupation during World War II. But most of
that looting did not take place as it is imagined, at the point of a gun. No,
it took place through the currency markets.
This looting through the currency markets was
spelled out by the November 1943 edition of a military intelligence letter
published by the Military Intelligence Division of the U.S. War Department, a
letter called Tactical and Technical Trends:
http://www.gata.org/node/10457
Of course the Nazi occupation seized whatever
central bank gold reserves had not been sent out of the occupied countries in
time. But then the Nazi occupation either issued special occupation currency
that could not be used in Germany itself or, in countries that had strong
banking systems, took over the domestic central bank and enforced an exchange
rate much more favorable to the reichsmark. Or else
the Nazi occupation simply printed for itself and spent huge new amounts of
the regular currency of the occupied country.
It was this control of the currency markets that
very efficiently drafted everyone in the occupied countries into the service
of the occupation and achieved a one-way flow of production, a flow out of
the occupied countries and into Nazi Germany.
For a few years Nazi Germany had a hell of a trade
deficit -- and couldn't have cared less about it. For as it controlled the
currencies of occupied Europe, Nazi Germany never had to cover that deficit,
at least not as long as its military occupation continued.
Since the United States now issues the reserve
currency for the world, the dollar, the United States now more or less
occupies most countries economically, even those countries that have their
own currencies, since even those countries choose to hold most of their foreign
exchange reserves in dollars. Thus what we see now, the current one-way flow
of production -- out of the rest of the world and into the United States.
This exploitation is not well-publicized but it is
no secret.
In the 1960s France's finance minister called it an
"exorbitant privilege" for just one country -- the United States --
to be able to issue the world reserve currency.
In 2004 the deputy chairman of the Bank of Russia,
Oleg Mozhaiskov, told the London Bullion Market
Association conference held in Moscow:
"Although there are several reserve currencies,
the blatant lack of discipline is demonstrated by the U.S. dollar. I am
leaving aside the main aspects of this problem, such as the social and
economic injustice of a world order that allows the richest country in the
world to live in debt, undermining the vital interests of other countries and
peoples. What is important for us today is another aspect, which is connected
with the responsibility of the state issuing the reserve currency and for the
international community preserving that currency's buying power."
Mozhaiskov recognized the role of gold price suppression in maintaining the
dollar's place as the world reserve currency. For the only words of English
spoken by Mozhaiskov in that speech were "Gold Anti-Trust Action Committee." Mozhaiskov said gold price movements were often so
"enigmatic" that the laws of market supply and demand did not seem
to apply. The Bank of Russia long had been following GATA's work without our
knowledge. With his speech in 2004 Mozhaiskov was
telling the Western bullion bankers that Russia was on to them:
http://www.gata.org/node/4235
And just a few weeks ago Russia's prime minister,
former president, and perhaps future president, Vladimir Putin, called the
United States a "parasite" on account of its huge external debt and
the international dominance of the dollar:
http://www.gata.org/node/10193
The gold price suppression scheme -- a
dollar-support scheme -- can be exposed by any serious questioning of central
bankers. My organization has found that central bankers refuse to answer the
most ordinary specific questions about gold. But who else will ask the
questions? The scheme survives in large part because of negligent journalism
about gold.
The scheme has lasted so long because, with the
assistance of Western central banks, the major Western bullion banks,
investment houses that deal in gold, have developed a fractional-reserve gold
banking system. They realized that they could sell a lot more gold than they
really have, because many major gold buyers -- financial institutions and
large investors -- never take delivery of their metal. These investors accept
depository receipts instead. The fractional-reserve nature of the bullion
banking system was confirmed in detail at last year's hearing of the U.S.
Commodity Futures Trading Commission:
http://www.gata.org/node/8478
But this is changing.
The gold price spike that began just after GATA's
Gold Rush 21 conference in Dawson City, Yukon Territory, Canada in August
2005 was probably caused by the withdrawal of the Russian gold reserves that
had been on deposit with bullion banks in London.
You may have heard a few weeks ago that Venezuela is
demanding the return of its gold reserves from deposit at the Bank of England
and various U.S. bullion banks. The Venezuelan action seems to have given much
support to the gold price.
Now there is constant public discussion in the most
informed circles in China about the need for that country to obtain gold to
diversify its foreign exchange reserves and support its currency.
Western gold reserves are being depleted as Eastern
and developing-world central banks become gold buyers.
What is necessary to bring the gold fraud to an end
is publicity that reaches financial markets around the world generally.
There is a big story here. For the falsity of the
data about the gold market practically screams at financial journalists:
-- There is the omission from official gold reserve
reports of leased and swapped gold.
-- There are the sudden huge changes in official
gold reserve totals.
-- And there are the deception and conflicts of
interest built into major gold and silver exchange-traded funds, since the
custodians of their metal happen also to be the world's biggest gold and
silver shorters:
http://www.gata.org/node/8600
The valid documentation about the gold market also
practically screams at financial journalists:
-- There are the huge and disproportionate gold,
silver, and interest rate derivative positions built up at just a few international
banks, positions that never could be undertaken without the expressed or
implicit underwriting of government, particularly the U.S. government.
-- There are the many official records, collected
and publicized by GATA, demonstrating the explicit plans and desire of the
U.S. government and its major allies to suppress and control the price of
gold.
Most obvious is the question that should follow the
common disparagement of gold, a question that somehow is never asked. You
well may have heard this disparagement: that even with its recent rise in
price, gold has not come close to keeping pace with inflation over the last
30 years. Oil has kept up, food has kept up, other metals have kept up, all
the things that are used as measures of inflation have, by definition, kept
up with inflation -- but not gold.
So why not? Why hasn't gold kept up
with inflation?
It's because Western governments found ways of
vastly increasing the supply of gold without having to go through the trouble
of mining it -- to dishoard and lease it from central bank reserves and to
issue certificates of deposit against gold that never existed in the first
place.
"Why" is supposed to be a basic question
of journalism. But it has fallen out of financial journalism when it comes to
gold.
In recent years, and especially in recent months, I
have spent much time explaining the gold price suppression scheme to leading
financial journalists in the West. I have given them the documentation. Some
of these journalists seemed interested. But none has ever reported anything
about the issue. One writer who works for a major news agency in the United
States was intrigued enough to call the Federal Reserve and ask about its
gold swaps. She got a very telling "no comment." But unfortunately
she could not get her editor's permission to write a gold story.
Frustrating as all this is,
it is not too surprising. After all, who are the major advertisers in the
Western financial news media and the major sources of financial news? The
market manipulators and governments themselves. And journalists seem to take
for granted that central banks operate in secret, particularly in regard to
gold, so there's no point in questioning them -- even though central banking
now determines the value of all capital, labor, goods, and services in the
world, and does so in secret.
So here I am in Asia, which is a major victim of the
gold price suppression scheme. Maybe there will be more curiosity and
indignation about it here.
But Asia is not the only victim of this scheme. My
own country may be the biggest victim. For this scheme has helped to corrupt
the United States, destroying our once-free markets and the accountability of
our government.
We in GATA do what we can, even though, from our
beginning, we have wondered whether we could really presume to speak for
gold. And not just for gold, of course -- we are not idolaters -- but for the
economic and political liberty of individuals and the national sovereignty
that gold serves and stands for. With gold always under attack precisely for
what it represents, and with no others coming forward to defend it for what
it represents, with even the gold mining industry’s main trade
association refusing to acknowledge the attack, we have hoped that any
presumption on our part might be forgiven.
We remain largely amateurs. At the outset we did not
half understand what was going on and what we were setting about to do. Our
name preserves that imperfect understanding. We thought we had discovered
just another anti-trust violation. It was a while before we perceived that we
were up against government policy and that most of what we were discovering
had been discovered long ago, at least in principle, just not well taught,
publicized, preserved, and made timely again.
Because it can work only through surreptitiousness
and deceit, this government policy will be defeated when it is more widely
understood -- and every day it is being better understood, because it
is getting so brazen. It was more brazen than ever the other day when
Switzerland devalued its franc, the world's leading "safe haven"
currency, apparently leaving the "safe haven" field exclusively to
gold. But just a few minutes before the Swiss franc's devaluation was
announced, unidentified sellers dumped thousands of gold futures contracts on
markets around the world, causing the gold price to plunge along with the
Swiss franc. These sellers plainly did not aim to make a profit from their
gold holdings; if they had intended to make a profit, they would have sold
gradually into the market. No, they meant to knock the price down hard, and
they did.
These sellers almost surely were central banks. But
as far as I could tell, no Western journalist has yet put a question to any
central banker about that strange and counterintuitive action in the gold
market.
I ask for your help in forcing an end to the gold
price suppression scheme. I ask in the cause of giving individuals, nations,
and all humanity a chance at democracy, liberty, and limited government with
a neutral, fair, and impartial international currency that serves not just
one government or another or one class or another but rather the whole
brotherhood of man.
* * *
Chris Powell
Join GATA here:
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Thursday-Friday, October 20-21, 2011
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Wednesday-Saturday, October 26-29, 2011
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