The following documentation and
statements were presented in Reg Howe's lawsuit filed in the District Court
of Massachusetts against Defendants: Bank for International Settlements, Alan
Greenspan, William J. McDonough, J.P. Morgan & Co. Inc., Chase Manhattan
Corp., Citigroup, Inc., Goldman Sachs Group, Inc., Deutsche Bank AG and
Lawrence H. Summers, Secretary of the Treasury.
*In July 1998, Fed Chairman Alan
Greenspan, testifying before the House Banking Committee, stated: "Nor
can private counterparties restrict supplies of gold, another commodity whose
derivatives are often traded over-the-counter, where central banks stand
ready to lease gold in increasing quantities should the price rise." This
statement amounted to a declaration that the gold price had been and would
continue to be controlled.
*According to reliable reports received
by the plaintiff, this effort was later described by Edward A. J. George,
Governor of the Bank of England and a director of the BIS, to Nicholas J.
Morrell, Chief Executive of Lonmin Plc:
We looked into
the abyss if the gold price rose further. A further rise would have taken
down one or several trading houses, which might have taken down all the rest
in their wake. Therefore at any price, at any cost, the central banks had to
quell the gold price, manage it. It was very difficult to get the gold price
under control but we have now succeeded. The U.S. Fed was very active in
getting the gold price down. So was the U.K.
The "abyss" comment made by
George and related by Morrell is no rumor monger talk. Morrell quoted George
in front of three people that I know personally pursuant to the dramatic rise
in the price of gold following the surprise Washington Agreement announced on
September 26, 1999.
The evidence that the GATA Army has
collected over the past year since Reg Howe filed his Complaint fully
supports Morrell's comment that the central banks would do anything to "manage" the
price of gold. Tragically, "anything" came to mean lying, deceiving
and breaking various laws.
The essence of the Washington Agreement
was that 15 European banks agreed to limit the sales of central bank gold to
400 tonnes per year for 5 years and not to increase their lending of gold
over that time. The British and the Americans were not clued in prior to the
announcement.
The reaction of the gold price to the
Washington Agreement was the most dramatic rise in the price of gold ever. That
is not what any of the central bankers had in mind. They were just perturbed
at the tactics of The Gold Cartel to suppress the gold price and wanted to do
something about it. They had no intention of creating financial chaos.
How could they have been so surprised at
what occurred? Easy. They were working off the inept gold industry gold loan
numbers of less than 5,000 tonnes. The real number was more than double that
at the time, which means the central banks had FAR less gold in their vaults
than they realized.
The announcement set off a panic because
the yearly supply/demand was running over 1600 tonnes (again, more than they
realized) and there would be no way to hold the gold price down under the new
agreement. The scheming Gold Cartel was in deep trouble. Something had to be
done FAST. A solution had to be found that would allow the central banks and
The Gold Cartel to calm down the market by feeding central bank gold into
that market to satisfy the strong gold demand.
The problem for The Gold Cartel and the
central banks was they needed to come up with a way to get the job done and
not let the investment world realize the seriousness of the situation. Some
sort of plan of deception had to be devised and one was - in Santiago, Chile
in October 1999 by the IMF. The plan centered around
IMF central bank members "swapping out" their gold, yet still
accounting for that gold as a central bank gold asset.
To put it bluntly, they would perpetuate
a lie about what the true status of central bank gold really was. We know
that to be the case as a result of the super-sleuthing of GATA Army's Andrew
Hepburn of Canada.
Andrew asked the IMF the following:
Why does the IMF insist that members record swapped gold as an asset when a legal
change in ownership has occurred?
The IMF answered:
"This is
not correct: the IMF in fact recommends that swapped gold be excluded from
reserve assets. (see Data Template on International Reserves and Foreign
Currency Liquidity, Operational Guidelines, para. 72,)"
Yet, the following can be found on the
central bank of The Philippines website:
"Beginning
January 2000, in
compliance with the requirements of the IMF's reserves and foreign currency
liquidity template under the Special Data Dissemination Standard (SDDS), gold
swaps undertaken by the BSP with non-central banks shall be treated as
collateralized loan. Thus, gold under the swap arrangement remains to be part
of reserves and a liability is deemed incurred corresponding to the proceeds
of the swap."
The central banks of Portugal, Finland, and the ECB itself, then
all confirmed (in writing) the Philippine's treatment of gold swaps to
Hepburn.
Hepburn's latest investigative work
reveals the Bank of Italy changing their accounting procedures in October of
1999 to accommodate the IMF's devious scheming. Andrew Hepburn just reported
in with the following:
I had been under the impression that Italy was
very pro-gold and that none of their reserve had been lent/swapped out. I can
now state with a fair degree of certainty that they are indeed
"managing" their reserve. A few days ago I emailed the Bank of
Italy and inquired as to whether or not they had swapped, lent or otherwise
transferred any of their gold to investment banks or other central banks. Today
I received I response which did not answer my question but instead pointed me
to a publication on their website entitled "Monetary and Credit
Aggregates of the Euro Area: the Italian Components".
Unfortunately, the way the site works is
that there are no separate URL's so I can only give the directions for
getting to the report that I'm about to focus on. To quote the email I
received "...you can find the data you requested on http://www.bancaditalia.it/index.html
under the item Publications\Statistics\Supplements to the Statistical Bulletin\
Money and credit aggregates of the euro area: the Italian components in table
1 in
the column "Gold and gold receivables".
The name of the column, "Gold and
Gold receivables" indicates that at least part of the reserve represents
only a paper claim on gold-i.e. not all the gold is in the vaults of the Bank
of Italy.
The next interesting piece of
information is found in the notes/definitions section of the report. On page
45, S034162M, which apparently is the code for an account, reads in the
following manner:
"S034162M - CENTRAL BANK: ASSETS -
GOLD AND GOLD RECEIVABLES
Comprises the gold owned by the Bank of Italy and receivables in respect of
deposits denominated in gold and swaps."
The above essentially confirms that the
Bank of Italy is active in the swaps/deposit market. The next excerpt of note
is found on page 48 of the report. They state that:
"In October 1999, as part of the
harmonization of the Eurosystem statistics, the accounting treatment of the
Bank of Italy's official swaps (in gold and dollars) with the EMI between
September 1997 and June 1998 and with the ECB from July to December 1998 was
modified. The main change was the switch from stating gold assets net of
official swaps to stating them gross of such transactions."
A few things are of interest here. First,
they admit to doing gold swaps. Second and much more importantly in October,
1999 the ECB adopted the collateralized loan approach to accounting for gold
swaps. This is the same treatment that the IMF denied it ever recommended but
we know to be the case. Under this treatment swapped gold remains as a
reserve asset even though the ownership has changed and the gold has left the
vault. Furthermore, this accounting change went into effect around the time
of the Washington Agreement. If I remember correctly, the WA only curtailed
sales and lending; it said nothing about swaps. Because of the new treatment
it is very possible that gold swaps have increased significantly since late
1999.
The term "official swaps" is
in reference to swaps with the EMI and ECB. I'm unsure as to the level of
swaps with the EMI but I believe around 15% of the ECB's reserves are in gold
which means that Italy transferred at least 450 tonnes in that swap
arrangement.
On page 51 in
the "Methodological Index", the following is said when explaining
an account code:
S003675M - AVERAGE LIQUIDITY DATA - NET
ASSETS IN GOLD AND FOREIGN CURRENCY
Net gold and foreign currency claims on non-euro-area residents.
Unfortunately, they do not specify how
much of the claims are on gold and how much on foreign currency. What is
interesting, however, is that the Bank of Italy apparently has a gold claim
on a non-euro-area country. It would be very interesting to see if Italy has a gold swap with the BIS, the IMF or
even the U.S.
Andrew
What Andrew has uncovered ought to be
one of the most important findings ever for the gold industry. The BIS and
GFMS (generally accepted gold industry statistician) state that central bank
gold loans are around 5,000 tonnes. Neither mentions anything about what the
total amount of gold "swapped out" of the central banks might be.
GATA suggests that amount is
significant. So significant that we believe the total amount of central bank
gold that has been lent/swapped is closer to 15,000
tonnes, not 5,000 tonnes.
The difference between the two numbers
has staggering ramifications for all gold market participants and investors. GATA
believes that if the "truth" were known, the price of gold would
have to more than double to
ration the "true" supply of gold left to satisfy demand.
This is just what The Gold Cartel does
not want the investment world or general public to know. That is why they
have stifled GATA's discoveries and refuse to allow our startling findings to
be presented in the mainstream U.S. press.
GATA has caught The Gold Cartel and the
IMF doing something that is very wrong. To allow them to continue to get away
with this sham is even more wrong!
The Gold Anti-Trust Action Committee and
our Army of supporters ask the gold industry to examine the facts and help us
fight to expose the "truth."
Who could be against that?
By : Bill Murphy
Lemetropolecafe.com
Le Metropole Café is a Membership site.
Visit and Experience a 2 week Free Trial !
Bill Murphy is chairman of the Gold Anti-Trust Action Committee
and proprietor of www.LeMetropoleCafe.com, an Internet site devoted to financial commentary
with emphasis on the precious metals.
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