|
Remarks
by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
International Precious Metals and Commodities Show
Olympia Park, Munich, Germany
Saturday, November 7, 2009
Thank
you for coming to listen to me today. Please forgive my inability to speak
German. I'll be discussing many documents, some of them fairly complicated,
but don't worry if you miss something about them. They'll be posted at GATA's
Internet site with these remarks.
On
Friday, September 25, Jim Rickards, director of
market intelligence for the Omnis consulting firm in McLean, Virginia., was interviewed on the cable television network
CNBC in the United States. Talking about the currency markets, Rickards remarked: "When you own gold you're
fighting every central bank in the world."
That's
because gold is a currency that competes with government currencies and has a
powerful influence on interest rates and the price of government bonds. And
that's why central banks long have tried to suppress the price of gold. Gold
is the ticket out of the central banking system, the escape from coercive
central bank and government power.
As an
independent currency, a currency to which investors can resort when they are
dissatisfied with government currencies, gold carries the enormous power to
discipline governments, to call them to account for their inflation of the
money supply and to warn the world against it. Because gold is the vehicle of
escape from the central bank system, the manipulation of the gold market is
the manipulation that makes possible all other market manipulation by
government.
Of
course what Jim Rickards said about gold was no
surprise to my organization, the Gold Anti-Trust Action Committee. To the
contrary, what Rickards said has been our premise
for most of our 10 years, and we have documented it extensively. Rickards' assertion was spectacular simply because he was
allowed to make it in the mainstream financial news media and was allowed to
keep talking. While the gold price suppression scheme is a hard fact of
history, it is seldom mentioned in polite company in the financial world. I
have been asked to talk about it here. I am grateful for this invitation and
I will try to be polite.
How
have central banks tried to suppress the price of gold?
The
gold price suppression scheme was undertaken openly by governments for a long
time prior to 1971.
That's
what the gold standard was about -- governments fixing the price of gold to a
precise value in their currencies, a price at which governments would
exchange their currencies for gold, currencies that were backed by gold.
Though
the gold standard was abandoned during World War I, restored briefly in the
1920s, and then abandoned again during the Great Depression,
that was not the end of government efforts to control the gold price.
Throughout the 1960s the United States and Great Britain attempted to hold
the price at $35 in a public arrangement of the dishoarding of U.S. gold
reserves. This arrangement came to be known as the London Gold Pool.
As
monetary inflation rose sharply, the London Gold Pool was overwhelmed by
demand and was shut down abruptly in April 1968. Three years later, in 1971,
the United States repudiated the remaining convertibility of the dollar into
gold -- convertibility for government treasuries that wanted to exchange
dollars for gold. At that moment currencies began to float against each other
and against gold -- or so the world was told.
For
since 1971 the gold price suppression scheme has been undertaken largely
surreptitiously, seldom acknowledged officially. But sometimes it has
been acknowledged officially, and with a little detective work, more about it
can be discovered.
You
may have heard GATA derided as a "conspiracy theory" organization.
We are not that at all. To the contrary, we examine the public record,
produce documentation, question public officials, and publicize their most
interesting answers, or their most interesting refusals to answer. I'd like
to review some of the public record with you.
The
gold price suppression scheme became a matter of public record in January 1995,
when the general counsel of the U.S. Federal Reserve Board, J. Virgil
Mattingly, told the Federal Open Market Committee, according to the
committee's minutes, that the U.S. Treasury Department's Exchange
Stabilization Fund had undertaken gold swaps. Gold swaps are exchanges of
gold allowing one central bank to intervene in the gold market on behalf of
another central bank, potentially giving anonymity to the central bank that
wants to undertake the intervention. The 1995 Federal Open Market Committee minutes
in which Mattingly acknowledges gold swaps are still posted at the Fed's
Internet site:
http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p...
The
gold price suppression scheme was a matter of public record in July 1998, six
months before GATA was formed, when Federal Reserve Chairman Alan Greenspan
told Congress: "Central banks stand ready to lease gold in increasing
quantities should the price rise." That is, Greenspan himself,
supposedly the greatest among the central bankers, contradicted the usual
central bank explanation for leasing gold -- which was supposedly to earn a
little interest on a dead asset -- and admitted that gold leasing is all
about suppressing the price. Greenspan's admission is still posted at the
Fed's Internet site:
http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm
Incidentally,
while we gold bugs love to cite Greenspan's testimony from 1998 because of
its reference to gold leasing, that testimony was mainly about something
else, for which it is far more important today. For with that testimony
Greenspan persuaded Congress not to regulate the sort of financial
derivatives that lately have devastated the world financial system.
The
Washington Agreement on Gold, made by the European central banks in 1999, was
another admission -- no, a proclamation that central banks were working
together to control the gold price. The central banks making the Washington
Agreement claimed that, by restricting their gold sales and leasing, they
meant to prevent the gold price from falling too hard. But even if you
believed that explanation, it was still collusive intervention in the gold
market. You can find the Washington Agreement at the World Gold Council's
Internet site:
http://www.reserveasset.gold.org/central_bank_agreements/cbga1/
Barrick Gold, then the largest gold-mining company in the
world, confessed to the gold price suppression scheme in U.S. District Court
in New Orleans on February 28, 2003. That is when Barrick
filed a motion to dismiss Blanchard & Co.'s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase,
for rigging the gold market.
Barrick's motion claimed that in borrowing gold from central
banks and selling it, the mining company had become the agent of the central
banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be
exempt from suit. Barrick's confession to the gold
price suppression scheme is posted at GATA's Internet site:
http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf
The
Reserve Bank of Australia confessed to the gold price suppression scheme in
its annual report for 2003. "Foreign currency reserve assets and
gold," the Reserve Bank's report said, "are held primarily to
support intervention in the foreign exchange market." The bank's report
is still posted at its Internet site:
http://www.rba.gov.au/PublicationsAndResearch/RBAAnnualReports/2003/Pdf/...
Maybe
the most brazen admission of the Western central bank scheme to suppress the
gold price was made by the head of the monetary and economic department of
the Bank for International Settlements, William S. White, in a speech to a
BIS conference in Basel, Switzerland, in June 2005.
There
are five main purposes of central bank cooperation, White announced, and one
of them is "the provision of international credits and joint efforts to
influence asset prices (especially gold and foreign exchange) in circumstances
where this might be thought useful." White's speech is posted at GATA's
Internet site:
http://www.gata.org/node/4279
In
January this year a remarkable 16-page memorandum was discovered in the
archive of the late Federal Reserve Chairman William McChesney
Martin. The memorandum is dated April 5, 1961, and is titled "U.S.
Foreign Exchange Operations: Needs and Methods." It is a detailed plan
of surreptitious intervention to rig the currency and gold markets to support
the dollar and to conceal, obscure, or falsify U.S. government records and
reports so that the rigging might not be discovered. This document remains on
the Internet site of the Federal Reserve Bank of St. Louis:
http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf
In
August this year the international journalist Max Keiser reported an
interview he had with the Bundesbank, Germany's
central bank, in which he was told that all of Germany's gold reserves were
held in New York. That interview is posted at the YouTube Internet site:
http://www.youtube.com/watch?v=EzVhzoAqMhU
Some
people saw the Bundesbank's admission as a
suggestion that Germany's gold had become the tool of the U.S. government.
GATA consultant Rob Kirby of Kirby Analytics in Toronto then pressed the Bundesbank for clarification. On August 24 the Bundesbank replied to Kirby by e-mail with a denial of
Keiser's report, but the denial was actually pretty much a confirmation:
http://www.gata.org/node/7713
"The
Deutsche Bundesbank," the reply said,
"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 centers. This," the Bundesbank
continued, "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 centers in order to conduct its gold
activities."
The Bundesbank did not specify those "gold
activities" and those "trading centers." But those
"activities" can mean only that the Bundesbank
is or recently has been surreptitiously active in the gold market, perhaps at
the behest of others -- like the United States, the custodian of German gold.
In
September this year a New York financial market professional and student of
history named Geoffrey Batt posted at the Zero
Hedge Internet site three declassified U.S. government documents involving
the gold market.
The
first was a long cable dated March 6, 1968, from someone named Deming at the
U.S. Embassy in Paris to the State Department in Washington. It is posted at
the Zero Hedge Internet site:
http://www.zerohedge.com/article/declassified-state-dept-data-highlights...
The
cable described the strains on the London Gold Pool, the
gold-dishoarding mechanism established by the U.S. Treasury and the Bank of
England to hold the gold price to the official price of $35 per ounce. The
London Gold Pool was to last only six months longer.
The
cable is a detailed speculation on what would have to be done to control the
gold price and particularly to convince investors "that there is no
point any more in speculating on an increase in the price of gold" and
"to establish beyond doubt" that the world financial system
"is immune to gold losses" by central banks.
The
cable recommends creation of a "new reserve asset" with "gold-like
qualities" to replace gold and prevent gold from gaining value. To
accomplish this, the cable proposes "monthly or quarterly
reshuffles" of gold reserves among central banks -- what the cable calls
a "reshuffle club" that would apply gold where market intervention
seemed most necessary.
These
"reshuffles" sound like the central bank gold swaps of recent
years.
The
idea, the cable says, is for the central banks "to remain the masters of
gold."
Also
in September this year Zero Hedge's Geoffrey Batt
disclosed a memorandum from the Central Intelligence Agency dated December 4,
1968, several months after the collapse of the London Gold Pool. This too is
posted at the Zero Hedge Internet site:
http://www.zerohedge.com/article/cia-chimes-gold-control-highlights-hist...
The
CIA memo said that to keep the dollar strong and prevent "a major
outflow of gold," U.S. strategy would be:
"
-- To isolate official from private gold markets by obtaining a pledge from
central banks that they will neither buy nor sell gold except to each
other."
And:
"--
To bring South Africa to sell its current production of gold in the private
market, and thus keep the private price down."
The
third declassified U.S. government document published by Geoffrey Batt at Zero Hedge, also in September this year, may be
the most interesting, because it was written on June 3, 1975, four years
after the last bit of official fixed convertibility of the dollar and gold
had been eliminated and the world had been told that currencies henceforth
would float against each other and gold and gold would be free trading.
The
document is a seven-page memorandum from Federal Reserve Board Chairman
Arthur Burns to President Gerald Ford. It is all about controlling the gold
price through foreign policy and defeating any free market for gold. It is
posted at the Zero Hedge Internet site as well:
http://www.zerohedge.com/article/smoking-gun-fed-controlling-gold
Burns
tells the president: "I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt" -- that's
Helmut Schmidt, West Germany's chancellor at the time -- "that Germany
will not buy gold, either from the market or from another government, at a
price above the official price of $42.22 per ounce."
Burns
adds, "I am convinced that by far the best position for us to take at
this time is to resist arrangements that provide wide latitude for central
banks and governments to purchase gold at a market-related price."
While
the Burns memo is consistent with the long-established interest of central
banks in controlling the gold price, it was still 34 years ago. But now at
last there has been a contemporaneous admission of U.S. government
intervention in the gold market. It has come out of GATA's long Freedom of
Information Act struggle with the U.S. Treasury Department and Federal
Reserve for information about the U.S. gold reserves and gold swaps,
information that has been denied to GATA on the grounds that it would
compromise certain private proprietary interests. (Of course such a
denial, a denial based on proprietary interests, is in itself a suggestion
that the U.S. gold reserve has been placed, at least partly, in private
hands.)
Responding
to President Obama's declaration, soon after his inauguration, that the
federal government would be more open, GATA renewed its informational requests
to the Fed and the Treasury. These requests concentrated on gold swaps. Of
course both requests were denied again. But through its Washington lawyer,
William J. Olson --
http://www.lawandfreedom.com -- GATA brought an appeal of the Fed's denial, and
this appeal was directed to a full member of the Fed's Board of Governors,
Kevin M. Warsh, formerly a member of the
President's Working Group on Financial Markets, nicknamed the Plunge
Protection Team. Warsh denied GATA's appeal but in
his letter to our lawyer he let slip some stunning information:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
Warsh wrote: "In connection with your appeal, I have
confirmed that the information withheld under Exemption 4" -- that's
Exemption 4 of the Freedom of Information Act -- "consists of
confidential commercial or financial information relating to the operations
of the Federal Reserve Banks that was obtained within the meaning of
Exemption 4. This includes information relating to swap arrangements with
foreign banks on behalf of the Federal Reserve System and is not the type of
information that is customarily disclosed to the public. This information was
properly withheld from you."
So
there it is: The Federal Reserve today -- right now -- has gold swap
arrangements with "foreign banks."
Eight
years ago Fed Chairman Alan Greenspan and the general counsel of the Federal
Open Market Committee, Virgil Mattingly, vigorously denied to GATA, through
two U.S. senators who had inquired of the Fed on our behalf, that the Fed had
gold swap arrangements, even though FOMC minutes from 1995 quote Mattingly as
saying the U.S. has engaged in gold swaps:
http://www.gata.org/node/1181
But
now the Fed admits such arrangements.
Of
course Fed Governor Warsh did not say that the Fed
has actually swapped any gold lately, only that it has arrangements to do so
-- and, just as important, that the Fed does not want the public and the
markets to know about those arrangements, does not want the public and the
markets to know about the disposition of United States gold reserves.
GATA
is preparing to sue the Fed in federal court to compel disclosure of these
gold swap arrangements.
There
is a reason for the Fed's insistence that the public and the markets must not
know what the Fed is doing in the gold market.
It is
because, as the documents compiled and publicized by GATA suggest,
suppressing the gold price is part of the general surreptitious rigging of
the currency, bond, and commodity markets by the U.S. and allied governments,
because this market rigging is the foremost objective of U.S. foreign and
economic policy, and because this rigging cannot work if it is exposed and
the markets realize that they are not really markets at all.
And
the rigging increasingly is being exposed and understood.
In
complaining about the manipulation of the gold market, GATA has not been
called "conspiracy nuts" by everyone. We have gained a good deal of
institutional support over the years.
First
came Sprott Asset
Management in Toronto, which in 2004 issued a
comprehensive report supporting GATA. The report was written by Sprott's chief investment strategist, John Embry, and his
assistant, Andrew Hepburn, and was titled "Not Free, Not Fair -- the
Long-Term Manipulation of the Gold Price." It remains available at the Sprott Internet site:
http://www.sprott.com/docs/PressReleases/20_not_free_not_fair.pdf
Then
in 2006 the Cheuvreux brokerage house of Credit Agricole, the major French bank, issued its own report
confirming GATA's findings of manipulation in the gold market. The Cheuvreux report was titled "Remonetization
of Gold: Start Hoarding," and you can find it at GATA's Internet site:
http://www.gata.org/files/CheuvreuxGoldReport.pdf
And
in 2007 Citigroup -- yes, Citigroup, a pillar of the American financial
establishment -- joined the supposed conspiracy nuts. It published a report
titled "Gold: Riding the Reflationary Rescue," written by its
analysts John H. Hill and Graham Wark, declaring:
"Gold undoubtedly faced headwinds this year from resurgent central bank
selling, which was clearly timed to cap the gold price." You can find
the Citigroup report at GATA's Internet site:
http://www.gata.org/files/CitigroupGoldReport092107.pdf
Even
those authorities who do not want to run afoul of government institutions
that with a few computer keystrokes can create virtually infinite amounts of
money may have to admit the opportunity for central banks to manipulate the
gold market. For it is widely acknowledged that annual world gold production
is about 2,400 tonnes, that annual net world gold
demand is about 3,400 tonnes, that gold production
has been falling as demand has been rising, and that the thousand-tonne gap between production and net demand has been
filled mainly by central bank dishoarding and leasing.
What
do you suppose the gold price would be if central banks were not supplying
more than a quarter of annual demand?
That
dishoarding was not all innocent management of a foreign exchange reserve
portfolio. Much of it was meant as market intervention -- and after all,
market intervention is exactly why central banking was invented.
Intervening
in markets is what central banks do. They have no other purpose.
Central
banks admit intervening often in the currency markets, buying and selling
their own currencies and those of other governments to maintain exchange
rates at what they consider politically desirable levels. Central banks admit
doing the same in the government bond markets. There is even evidence that
the Federal Reserve and Treasury Department have been intervening frequently
in the U.S. stock markets since the crash of 1987.
You
do not have to settle for rumors about the "Plunge Protection
Team," also known as the President's Working Group on Financial Markets.
Again you can just look at the public record.
The
Federal Reserve injects billions of dollars into the stock and bond markets
every week, on the public record, through the major New York financial
houses, its so-called primary dealers in federal government bonds, using what
are called repurchase agreements and the Fed's Primary Dealer Credit
Facility. The financial houses thus have become the Fed's agents in directing
that money into the markets. The recent rise in the U.S. stock market matches
almost exactly the money funneled by the Fed to the New York financial houses
through repurchase agreements and the Primary Dealer Credit Facility.
Meanwhile,
for years the International Monetary Fund, the central bank of the central
banks, has been openly intervening in the gold market by threatening to sell
gold. The IMF said its intent in selling gold was to raise money to lend to
poor nations. This explanation was ridiculous on its face, though the IMF has
never been challenged about it in the financial press. No, the financial
press has been happy to tell the world that central
banks that lately have effortlessly conjured into existence fantastic amounts
of money in many currencies could find a little money to help poor countries only
by selling gold.
Of
course the intent of the IMF and its member central banks was not to help
poor countries but to intimidate the gold market and control the gold price.
That
the IMF intimidated the gold market so long with this threat of gold sales
was all the more remarkable because the IMF probably has never had any gold
to sell in the first place.
In
April 2008 I wrote to the managing director of the IMF, Dominque
Strauss-Kahn, with five questions about the IMF's gold. I copied the letter
to the IMF's press office by e-mail, and quickly began to get some answers
from one of its press officers, Conny Lotze.
My
first question to the IMF was: "Your Internet site says the IMF holds
3,217 metric tons of gold 'at designated depositories.' Which depositories
are these?"
Conny Lotze of the IMF replied,
but not specifically. She wrote: "The fund's gold is distributed across
a number of official depositories." She noted that the IMF's rules
designate the United States, Britain, France, and India as IMF depositories.
My
second question was: "If you would prefer not to identify the depositories
for security reasons, could you at least identify the national and private
custodians of the IMF's gold and the amounts of IMF gold held by each?"
Conny Lotze replied, again not
very specifically: "All of the designated depositories are official."
My
third question was: "Is the IMF's gold at these depositories allocated
-- that is, specifically identified as belonging to the IMF -- or is it
merged with other gold in storage at these depositories?"
Conny Lotze replied, still not
very specifically: "The fund's gold is properly accounted for at all its
depositories."
My
fourth question was: "Do the IMF's member countries count the IMF's gold
as part of their own national reserves, or do they count and identify the
IMF's gold separately?"
Conny Lotze replied a bit
ambiguously: "Members do not include IMF gold within their reserves
because it is an asset of the IMF. Members include their reserve position in
the fund in their international reserves."
This
sounded to me as if the IMF members were still counting as their own the gold
that supposedly belongs to the IMF -- that the IMF members were just listing
the gold assets in another column on their own books.
My
fifth question to the IMF was: "Does the IMF have assurances from the
depositories that its gold is not leased or swapped or otherwise encumbered?
If so, what are these assurances?"
Conny Lotze replied:
"Under the fund's Articles of Agreement it is not authorized to engage
in these transactions in gold."
But I
had not asked if the IMF itself was swapping or leasing gold. I had asked
whether the custodians of the IMF's gold were swapping or leasing it.
This
prompted me to raise one more question for Conny Lotze. I wrote her: "Is there any audit of the IMF's
gold that is available to the public? I ask because, if the amount of IMF
gold held by each depository nation is not public information, there does not
seem to be much documentation for the IMF's gold, nor
any documentation for the assurance that its custody is just fine. Without
any details or documentation, the IMF's answer seems to be simply that it
should be trusted -- that it has the gold it says it has,
somewhere."
And
that was the last I heard from Conny Lotze. She didn't answer me again. I had spoken a word
that is increasingly unspeakable in the gold section of central banking:
audit.
This
week the IMF at last announced the disposal of some of the 400 tonnes of gold it long had been threatening to sell. Two
hundred tonnes have been purchased by the Reserve
Bank of India. This may or may not be a real transaction, a real transfer of
gold from an IMF vault to a vault of the Reserve Bank of India. More likely
this transaction is only a bookkeeping entry among IMF member central banks.
But in any case it seems likely that the gold with which the IMF has been
threatening the market for years is never going to hit the market, if it even
exists. Rather, this gold will remain in the mysterious possession of central
banks.
Lately
central bankers often have complained about what they call
"imbalances" in the world financial system. That is, certain
countries, particularly in Asia, run big trade surpluses, while other
countries, especially the United States, run big trade deficits and consume
far more than they produce, living off the rest of the world. These
complaints by the central bankers about "imbalances" are brazenly
hypocritical, since these imbalances have been caused by the central banks
themselves, caused by their constant interventions in the currency, bond, and
commodity markets to prevent those markets from coming into balance through
ordinary market action lest certain political interests be disturbed.
Yes,
when markets balance themselves they often do it brutally, causing great damage
to many of their participants. The United States enacted a central banking
system in 1913 because for the almost 150 years before then the country went
through a catastrophic deflation every decade or so. Central banking was
created in the name of preventing those catastrophic deflations.
The
problem with central banking has been mainly the old problem of power --- it
corrupts.
Central
bankers are supposed to be more capable of restraint than ordinary
politicians, and maybe some are, but they are not always or even often
capable of the necessary restraint. One market intervention encourages
another and another and increases the political pressure to keep intervening
to benefit special interests rather than the general interest -- to benefit
especially the financial interests, the banking and investment banking
industries. These interventions, subsidies to special interests, increasingly
are needed to prevent the previous imbalances from imploding.
And
so we have come to an era of daily market interventions by central banks --
so much so that the main purpose of central banking now is to prevent
ordinary markets from happening at all.
By
manipulating the value of money, central banking controls the value of all
labor, services, and real goods, and yet it is conducted almost entirely in
secret -- because, in choosing winners and losers in the economy, advancing
infinite amounts of money to some participants in the markets but not to
others, administering the ultimate patronage, central banking cannot survive scrutiny.
Yet
the secrecy of central banking now is taken for granted even in nominally
democratic countries.
Maybe
the Federal Reserve's intervention to rescue Bear Stearns through the Fed's
de-facto subsidiary, JPMorganChase, will cause some
devastating public inquiries by Congress and the news media. But what a
hundred years ago in the United States was called the Money Power is so
ascendant today that it sometimes even boasts of its privilege. What other
agency of a democratic government could get away with the principle that was
articulated on national television in the United States in 1994 by the vice
chairman of the Federal Reserve, Alan Blinder? Blinder declared: "The
last duty of a central banker is to tell the public the truth."
The
truth as GATA sees it is this:
First,
gold is the secret knowledge of the financial universe, but it is becoming an
open secret. That is GATA's work -- to break the secret open, to show how the
gold price has been suppressed by central bank creation of imaginary gold in
amounts to match and thus help conceal the vast inflation of the world's
money supply. We will continue to use freedom-of-information law against the
Fed and the Treasury Department about their policies toward gold and the
disposition of the U.S. gold reserve. Of course central banks can no more
afford to account fully for their gold reserves than the Fed and JPMorganChase can afford to disclose details of their
negotiations for the rescue of Bear Stearns. Indeed, as my correspondence
with the IMF suggests, the disposition of Western central bank gold reserves
is a secret more closely guarded than the blueprints for the manufacture of
nuclear weapons.
Why
can't the public and the markets be permitted to know exactly where central
bank gold reserves are? Because in the hands of governments gold is a deadly
weapon -- as the Reserve Bank of Australia acknowledges, the main weapon of
currency market intervention.
Second,
all technical analysis of markets now is faulty if it fails to account for
pervasive government intervention.
And
third, the intervention against gold is failing because of overuse, exposure,
exhaustion of Western central bank gold reserves -- we estimate that the
Western central banks have in their vaults only about half the 32,000 tonnes they claim to have -- and the resentment of the
developing world, which is starting to figure out how it has been
expropriated by the dollar system, a system in which people do real work and
create real goods and send them to the United States in exchange for mere
colored paper and electrons.
For
years now the Western central banks have been attempting a controlled retreat
with gold, bleeding out their reserves with sales, leases, and derivatives so
that gold's ascent and the dollar's inevitable decline may be less shocking.
Central bankers often convey part of this strategy in code; they warn against
what they call a "disorderly decline" in the dollar, as if an
"orderly" decline is all right.
The
rise in the gold price over the last decade is just the other side of that
coin -- an "orderly" rise, 15 percent or so per year, a rise
carefully modulated by surreptitious central bank intervention.
But
GATA believes that the central banks may have to retreat farther with gold
than anyone dreams, and far more abruptly than they have retreated so far. We
believe that when the central banks are overrun in the gold market, as they
were overrun in 1968, and the market begins to reflect the ratio between, on
one hand, the supply of real gold, actual metal, not the voluminous paper
promises of metal, and, on the other hand, the explosion of the world money
supply of the last few decades -- as the market begins to perceive the
difference between the real and the unreal -- there may not be enough zeroes
to put behind the gold price.
A
century ago Rudyard Kipling wrote a poem that foresaw the decline of the
empire of his country, Great Britain. Kipling's poem attributed this decline
to the loss of the old virtues, the virtues that were listed at the top of
the pages in the special notebooks, called "copybooks," that were
given to British schoolchildren at that time -- virtues like honesty, fair
dealing, Ten Commandments stuff. The title of
Kipling's poem is "The Gods of the Copybook Headings," and its
conclusion is a warning to the empire that succeeded the one he was living
in:
Then
the Gods of the Market tumbled,
And their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled
And began to believe it was true
That All is not Gold that Glitters,
And Two and Two make Four,
And the Gods of the Copybook Headings
Limped up to explain it once more.
As it will be in the future,
It was at the birth of Man.
There are only four things certain
Since Social Progress began:
That the Dog returns to his Vomit
And the Sow returns to her Mire,
And the burnt Fool's bandaged finger
Goes wabbling back to the Fire;
And that after this is accomplished,
And the brave new world begins,
When all men are paid for existing
And no man must pay for his sins,
As surely as Water will wet us,
As surely as Fire will burn,
The Gods of the Copybook Headings
With terror and slaughter return.
The
gold price suppression story is important despite this week's dramatic rise
in the gold price. For even as the price of gold has been rising, we really
don't yet know what a fair price, a free-market price, for gold is, since
gold has not traded in a free market for many years and is not trading in a
free market now.
Indeed,
since central bank intervention in the currency, bond, equities, and
commodity markets has exploded over the last year, we don't really know what
the market price of anything is anymore. Thus the gold price
suppression story is a story about the valuation of all capital and labor in
the world -- and whether those values will be set openly in free markets, the
democratic way, or secretly by governments, the totalitarian way.
The
specifics of the gold price suppression operation are complicated, but you
don't have to remember them all if you know what they mean.
They
mean that there is a currency war going on between countries and their
central banks. There has been such a war for many years, only the victims
were not really fighting back. Now some of them are. Signs of this war are
now everywhere -- like the story published a month ago by the British
newspaper The Independent that described an international plan to replace the
dollar in oil trading:
http://www.independent.co.uk/news/business/ne...f-the-dollar...
Gold
and silver have been and remain currencies and will be remonetized
by markets eventually if not by central banks as well, because gold and
silver are the only neutral currencies, the only currencies that are
not the liabilities of any particular country.
But
when you invest in currencies like gold and silver, you risk getting caught
in the crossfire of the currency war. As in any war, truth is the first
casualty in the currency war, even as secrecy is always the first principle
of central banking.
Meanwhile,
not asking the right questions of the right people seems to be the first
principle of most mainstream financial journalists and even the first
principle of some gold and silver market analysts. These journalists and
analysts take government secrecy in central banking for granted, even as the
evidence of market intervention and manipulation explodes all around them.
This acceptance of secrecy reminds me of the bumbling police detective played
by Leslie Nielsen in the "Naked Gun" movies, particularly his
performance in this scene:
http://www.youtube.com/watch?v=rSjK2Oqrgic
Well,
there is something to see here.
The
precious metals promise great rewards to investors, but to get the necessary
information you have to do a lot more work than other investors.
And
you have to remember the remarkable properties of gold and silver. It's not
just that gold is the most malleable and lustrous of metals, or that silver
is the most conductive and reflective, but also that, once they get into the
hands of central banks, bullion banks, and exchange-traded funds, gold and
silver can become invisible.
Chris
Powell
Secretary / Treasurer
Gold Anti-Trust Action Committee
www target="_blank".GATA.org
Also
by Chris Powell
GATA is a civil rights and educational organization
based in the United States and tax-exempt under the U.S. Internal Revenue
Code. Its e-mail dispatches are free, and you can subscribe at www.GATA.org. GATA is grateful for financial
contributions, which are federally tax-deductible in the United States.
* * *
Support GATA by purchasing a colorful
GATA T-shirt:
http://gata.org/tshirts
Or a colorful poster of GATA's full-page
ad in The Wall Street Journal on January 31, 2009:
http://www.cartserver.com/sc/cart.cgi
Or a video disc of GATA's 2005 Gold Rush
21 conference in the Yukon:
http://www.goldrush21.com/
* * *
Help keep GATA going
GATA is a civil rights and educational
organization based in the United States and tax-exempt under the U.S.
Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe
at:
http://www.gata.org
To contribute to GATA, please visit:
http://www.gata.org/node/16
|
