Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Standard Chartered's
"Earth's Resources" Conference
J.W. Marriott Hotel, Hong Kong
Thursday, June 21, 2012
The Henley Group Client Seminar
Club Lusitano, Hong Kong
Thursday, June 21, 2012
Hong Kong Gold Investment Forum
Renaissance Harbour View Hotel, Hong Kong
Tuesday, June 26, 2012
This conference is important because gold long
has been money and may again be the best and most important money. Most
investment houses don't understand this; some of the few that do understand
it fear to acknowledge it. But far from being a quaint antique, gold is
actually the secret knowledge of the financial universe.
Gold is so important that Western central
banks -- particularly the U.S. Treasury and its Exchange Stabilization Fund,
the Federal Reserve, and allied central banks -- rig the gold market every
day, even hour by hour. Why do they do this?
It's because gold is a powerful competitive
currency that, if allowed to function in a free market, determines the value
of other currencies and influences interest rates and the value of government
bonds.
There is much academic literature supporting
gold's influence over currencies, interest rates, and government bonds
throughout history. Prominent in this literature is the study written by
Harvard economics professor Lawrence Summers and University of Michigan
economics professor Robert Barsky in the June 1988
edition of the Journal of Political Economy, a study titled "Gibson's
Paradox and the Gold Standard." As with all the documents I'll cite
today, the Summers and Barsky study is posted at my
organization's Internet site, GATA.org:
http://www.gata.org/files/gibson.pdf
Summers went on to become treasury secretary
of the United States, so his study of gold's influence on currencies,
interest rates, and bond prices is pretty good authority. The Summers and Barsky study implied that governments could achieve their
ideal of low interest rates and strong government bond prices by getting
control of the price of gold.
As it turns out, controlling the currency
markets generally by rigging the gold market particularly is the most
efficient mechanism of imperialism. There is much history of this. Indeed,
rigging the currency markets was the primary mechanism by which Nazi Germany
expropriated occupied Europe during World War II. Expropriation by force of
arms was actually only a small part of the Nazi conquest. The rigging of the
currency markets turned every citizen of an occupied country into an agent of
the occupation every time he used money. This currency market rigging
directed all production in the occupied countries into Nazi Germany and
blocked any return flow. It enabled Nazi Germany to run without consequence
the same sort of fantastic trade deficit lately run by the United States. The
United States learned all about the Nazi expropriation of Europe through
currency market rigging because it was documented by the November 1943
edition of the U.S. War Department monthly intelligence letter, Tactical and
Technical Trends:
http://www.gata.org/node/10457
Exactly how do Western central banks and
particularly the U.S. government rig the gold market?
They used to do it conventionally and in the
open by dishoarding their gold reserves at strategic moments, and then by
dishoarding their gold reserves regularly, every day, as the United States,
United Kingdom, and seven of their Western European allies did during the
1960s through a public operation called the London Gold Pool. The London Gold
Pool held the gold price at $35 per ounce until it collapsed in March 1968
under rising demand that drained the U.S. gold reserve from 25,000 tonnes down to just more than the 8,000 tonnes officially reported today:
http://en.wikipedia.org/wiki/London_Gold_Pool
After the collapse of the London Gold Pool the
United States and its allies regrouped to figure out how to rig the gold
market surreptitiously -- not just with dishoarding but also with the
so-called leasing of gold; the issuance of gold derivatives, including
futures and options; and, more recently, high-frequency trading undertaken
through investment houses that were happy to serve as government's intermediaries
in the gold market as they could front-run government trades. When the
rigging is done surreptitiously like this, much less central bank gold has to
be dishoarded and the dishoarding that is done has far more
suppressive influence on the price.
But Western central bank market rigging goes
far beyond gold. In an essay published in 2001 and titled "The
Debasement of World Currency -- It Is Inflation, But Not as We Know It"
--
http://www.gata.org/node/8303
-- the British economist Peter Warburton
discerned that central banks were using investment banks to issue derivatives
throughout the commodity futures markets to siphon away money that was
looking for a hedge against inflation -- to siphon money away from the
hoarding of real goods, hoarding that would have driven up consumer price
indexes and made inflation plain to the markets and the public. These
derivatives are essentially naked short positions that cannot be covered.
Warburton concluded that the prerequisite of a hedge against monetary
debasement would have to be some asset that was not associated with a futures
market, like good farmland or clean water supplies. For as the saying goes:
"The futures markets are not manipulated; the futures markets are
the manipulation."
This market rigging by central banks and their
intermediaries explains the great disparagement of gold: that, despite its
tremendous price increase over the last decade, gold has not kept up with inflation
since gold's last great rise around 1980. Somehow no one disparaging gold
asks why it has not kept up with inflation. The answer is that gold
derivatives have created a vast imaginary supply of gold for which delivery
has not been demanded, most gold investors choosing to leave their gold
purchases on deposit with the bullion banks that "sold" them the
gold. As a result the world now has a fractional-reserve gold banking system
that is leveraged in the extreme.
Yes, all commodity futures markets have
created paper promises of supply that could not be covered by real product
and have always been settled in cash. But most commodity markets are for
goods that are to a great extent delivered and consumed. Gold is
different, for gold is not consumed but rather hoarded, as a means of
exchange, as money, and most gold purchased in the futures markets is never
delivered at all but rather left on deposit with those financial institutions
that purport to sell it. This system has produced a very disproportionate
amount of imaginary, elastic, but undeliverable supply, even as people buy
gold precisely because they assume that its supply is not elastic,
that its supply is limited to total past production plus annual mine
production.
That assumption is a terrible mistake.
You can get an idea of the vast imaginary
supply of gold by reviewing the incomprehensibly huge gold and interest rate
derivative positions attributed to the U.S. investment bank JPMorganChase in the reports of the U.S. Comptroller of
the Currency. These derivative positions are almost certainly not MorganChase's own positions at all but, as GATA
consultant Rob Kirby of Kirby Analytics in Toronto has written, rather U.S.
government positions effected through MorganChase:
http://news.goldseek.com/GoldSeek/1249407911.php
After all, the U.S. Treasury Department's
Exchange Stabilization Fund is expressly authorized by law to trade secretly
in all markets, including the gold market, on the U.S. government's behalf.
And the law expressly exempts the ESF from answering to anyone but the
treasury secretary and the president:
http://www.treasury.gov/resource-center/international/ESF/Pages/esf-inde...
Gold market expert Jeff Christian of CPM Group
testified to a hearing of the U.S. Commodity Futures Trading Commission on
March 25, 2010, that the ratio of "paper gold" to real metal in the
so-called London physical market may be as high as 100 to 1:
http://www.gata.org/node/8478
Christian provided a similar account 10 years
earlier in his essay "Bullion Banking Explained":
http://www.gata.org/node/8627
And if leverage of 100 to 1 ever triggers a
short squeeze, well, as Federal Reserve Chairman Alan Greenspan testified to
Congress in 1998, "Central banks stand ready to lease gold in increasing
quantities should the price rise":
http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm
Greenspan did not give similar
assurances about soybeans or pork bellies.
How can we prove this market rigging?
GATA has compiled and published at its
Internet site copies of dozens of records. These include minutes of
government agency meetings, interviews with government officials,
declassified intelligence agency memoranda, and public statements and memoirs
by central bankers:
http://www.gata.org/taxonomy/term/21
These documents are not mere
speculation and "conspiracy theory." They are the evidence, proof,
and acknowledgement of long-established government policy -- policy that used to be public and readily acknowledged,
as with the London Gold Pool.
Some of these documents are quite current. For
example, in a brochure distributed to central banks being recruited as
members in 2008, the Bank for International Settlements even advertised
its services intervening surreptitiously in the gold market to help rig
currency markets generally:
http://www.gata.org/node/11012
Also among the records GATA has collected are
admissions of gold market rigging -- yes, admissions -- from four former chairmen
of the U.S. Federal Reserve -- William McChesney
Martin, Arthur Burns, Paul Volcker, and Greenspan --
http://www.gata.org/node/10909
-- and the Netherlands central banker Jelle Zijlstra, who was
simultaneously president of the Dutch central bank as well as the Bank for
International Settlements:
http://www.gata.org/node/11304
It's hard to find better authority than these
men.
To obtain some of these proofs, GATA has sued
central banks and particularly the U.S. Federal Reserve, against which in
2011 we won a freedom-of-information lawsuit in U.S. District Court for the
District of Columbia. The lawsuit produced a written admission by a member of
the Federal Reserve Board of Governors, Kevin M. Warsh,
that the Fed has secret gold swap arrangements with foreign banks and that
the Fed cannot ever permit these gold swap arrangements to become public:
http://www.gata.org/node/9917
The only purpose of secret gold swap
arrangements is secret intervention in the gold market.
Interestingly, last December, soon after
resigning from the Fed’s Board of Governors, Warsh
wrote an essay in The Wall Street Journal complaining about the new central
bank policy called "financial repression." He asserted that
government policymakers now are "finding it tempting to pursue
'financial repression' -- suppressing market prices that they don't
like":
http://www.gata.org/node/10839
Warsh did not mention gold specifically, but gold was an
obvious candidate for such suppression. Unfortunately three Wall Street
Journal reporters refused my request that the newspaper question Warsh in pursuit of the big story he had just dropped in
the newspaper's lap.
Since GATA beat the Fed in our
freedom-of-information lawsuit, the court compelled the Fed to pay us legal
costs. While the payment was only nominal, a check for $2,800, that check is
a formal finding by a court that GATA is on to something and so the check too
is posted at our Internet site:
http://www.gata.org/files/FedCheckLegalCosts.jpg
And since the court recognized the Fed's right
to conceal most of its gold-related documents, in part because disclosure
would reveal "proprietary" information about other banks, the
lawsuit demonstrated that the Fed is keeping many gold-related secrets. Why
should the Fed be allowed to have any secrets about gold?
GATA also has proven gold market manipulation
by examining trading data, most notably in a study by our board member and
market analyst Adrian Douglas showing that the gold price during trading in
the London market has gone down steadily for 10 years even as the worldwide
gold price has gone up steadily in that time. That is, anyone buying gold on
the opening of the London market and selling it on the close every day over
the last decade would have lost a huge amount of money even as the gold price
rose steadily around the world:
https://marketforceanalysis.com/articles/latest_article_081310.html
The London Gold Pool of the 1960s suppressing
the price continues to operate today, only with different mechanisms.
Why does all this matter?
It matters because rigging the gold market is
part of a general scheme by which a secretive and unelected elite in the
United States controls the value of all capital, labor, goods, and services
in the world -- controls the value of everything. This is a
totalitarian and parasitic system. It needs only to be exposed to be
overthrown. But the mainstream financial news media in the West refuse to
examine the documentation of this scheme and to put critical questions to
central banks. Indeed, the first rule of financial journalism in the West is
that central banks cannot and must not be questioned. As
central banks intervene more and more to defeat
markets, this rule makes most Western financial journalism simply irrelevant.
What are the investment consequences of this
situation?
First, much if not most institutional
investment gold and even central bank gold is only "paper gold,"
only imaginary, a claim against financial institutions that do not have on
deposit all the gold to which they have issued claims. So there is a huge
naked short position in the investment forms of gold around the world. If you
don't have physical possession of your gold, or if it is not kept for you in
"allocated" form outside the fractional-reserve gold banking
system, your gold probably doesn’t exist and may not be available to
you when you really want it.
Second, despite the silence in the West about
gold market rigging, it is no secret in the East. Both the Russian and
Chinese governments have issued public statements about it. That is, the
Russian and Chinese governments know all about the Western gold market
rigging scheme and are positioning themselves to profit from its end:
http://www.gata.org/node/4235
http://www.gata.org/node/10380
http://www.gata.org/node/10416
Third, gold investing is surrounded by
political risk, including the risk of confiscation of both gold bullion and
mining properties by desperate governments, the risk of prohibitive mining
royalty requirements, and the risk of prohibitive capital gains taxes. Thus
diversification in gold investing and gold location is vital.
And fourth, gold investing also offers the
prospect of great reward upon a sudden official upward revaluation of gold.
For example, a 2006 study by the Scottish economist Peter Millar concluded
that central banks would need to raise the gold price by a factor of seven to
20 times in order to reliquefy themselves, devalue
their currencies, and avert the sort of catastrophic debt deflation that is
occurring today:
http://www.gata.org/node/4843
And the U.S. economists and investment fund
managers Lee Quaintance and Paul Brodsky last month
published a report asserting that central banks now likely are engaged in
redistributing gold reserves among themselves in preparation for just such an
upward revaluation of gold and for gold's return as formal backing for
currencies:
http://www.gata.org/node/11373
But the purpose of all this market rigging is
to suppress not only the price of gold but to suppress commodity prices generally.
It is just the latest manifestation of the everlasting war of the highest
levels of the financial class against the producing class, only this time the
producing class hasn't yet figured out what's going on. Most tragically, much
of the gold mining industry itself doesn't understand what is being done to
it -- doesn't understand that it's not just digging metal out of the ground
but minting money and competing with all other issuers of money and that this
competition is far more cutthroat than imagined.
GATA hopes to change that.
If you are unable to locate something at
GATA's Internet site, please e-mail me at CPowell@GATA.org and
I'll help you. And if you find GATA helpful, please consider making a
financial contribution to us:
http://www.gata.org/node/16
We're a non-profit educational and civil
rights organization sustained only by donations from believers in free and
transparent markets. With enough financial support I'll be able to go home,
and maybe even come back here again to keep spreading the word.
Join GATA here:
Toronto Resource Investment Conference
Thursday-Friday, September 27-28, 2012
Toronto Sheraton Centre Hotel
Toronto, Ontario, Canada
http://www.cambridgehouse.com/event/toronto-resource-investment-conferen...
New Orleans Investment Conference
Wednesday-Saturday, October 24-27, 2012
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana
http://www.neworleansconference.com/
* * *
Support GATA by purchasing DVDs of our London conference in August
2011 or our Dawson City conference in August 2006:
http://www.goldrush21.com/order.html
Or 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://gata.org/node/wallstreetjournal
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
|