Remarks by Chris Powell,
Gold Anti-Trust Action Committee Inc.
The Cheviot Asset Management Sound Money Conference
The Guildhall, London
Thursday, January 27, 2011
Most Americans will believe almost anything if it's
said with a British accent. I'm not here to ask you to return the favor, but
rather to consider some evidence, to be receptive to questions, and to start
asking some questions of your own.
In September 2009 Jim Rickards,
director of market intelligence for the Omnis consulting firm in Virginia,
was interviewed about the currency markets on the cable television network
CNBC. 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
value of government bonds. This was documented in an academic study published
in 1988 in the Journal of Political Economy by Lawrence Summers, then
professor of economics at Harvard, future U.S. treasury secretary, and Robert
Barsky, professor of economics at the University of
Michigan -- a study titled "Gibson's Paradox and the Gold
This close correlation among gold, interest rates, and
government bond values is why central banks long have tried to control --
usually 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 12 years, and we have documented it
extensively. But while the gold price suppression scheme is a hard fact of
history, it is seldom mentioned in polite company in the financial world. So
it is a thrill for me that everyone here today is being so polite.
How have central banks tried to suppress the price
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 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,
Great Britain, and some of their allies attempted to hold the price at $35
per ounce in a public arrangement of the dishoarding of U.S. gold reserves.
This arrangement was known as the London Gold Pool.
As monetary inflation rose sharply, the London Gold
Pool was overwhelmed by gold 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.
In fact 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, still more about
the price suppression 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, publicize their most interesting answers, or their most
interesting refusals to answer, and sometimes litigate to get information.
I'd like to review some of the public record with you.
The official records
The gold price suppression scheme was 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:
The gold price suppression scheme was again 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 contradicted the usual central bank
explanation for leasing gold -- 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:
Incidentally, while gold advocates 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. 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 in 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 and
its successor agreements at the World Gold Council's Internet site:
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.
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:
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 Reserve Bank's report is still posted at its Internet site:
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
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:
Two years ago a remarkable 16-page memorandum was
found 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. Amazingly, this plan for rigging the currency and gold markets
remains on the Internet site of the Federal Reserve Bank of St. Louis:
In August 2009 the international journalist and
provocateur 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:
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. The Bundesbank quickly replied to Kirby by e-mail with a
denial of Keiser's report, but the denial was actually pretty much a
"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.
A few weeks ago the German journalist Lars Schall, at GATA's urging, pressed the Bundesbank
for clarification about the German gold reserves, and particularly about
whether the Bundesbank had undertaken gold swaps
with any U.S. government agency. Schall sent the Bundesbank 13 questions. But the Bundesbank
brushed him off, even as it seemed to acknowledge meddling surreptitiously in
the gold market:
The Bundesbank replied:
"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
In 2009 a New York financial market professional and
student of history, 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, sent
by someone named Deming at the U.S. Embassy in Paris to the State Department
in Washington. It has been posted at the Zero Hedge Internet site:
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 anymore 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 recommended creation of a "new
reserve asset" with "gold-like qualities" to replace gold and
prevent gold from gaining value. To accomplish this, the cable proposed
"monthly or quarterly reshuffles" of gold reserves among central
banks -- what the cable called a "reshuffle club" that would apply
gold where market intervention seemed most necessary.
Of course these "reshuffles" sound very
much like the central bank gold swaps and leases of recent years.
The idea, the cable says, is for the central banks
"to remain the masters of gold."
Also disclosed in 2009 by Zero Hedge's Geoffrey Batt was a memorandum from the Central Intelligence
Agency dated December 4, 1968, several months after the collapse of the
London Gold Pool. This too has been posted at the Zero Hedge Internet site:
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."
"-- To bring South Africa to sell its current
production of gold in the private market, and thus keep the private price
The third declassified U.S. government document
published by Geoffrey Batt at Zero Hedge in 2009
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 against gold and that 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 has been posted at GATA's Internet site:
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
While the Burns memo is consistent with the
long-established interest of central banks in controlling the gold price, it
was written 36 years ago.
But there is 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 private 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:
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
So there it is: The Federal Reserve today -- right
now -- has gold swap arrangements with "foreign banks," and the
public and the markets must not be permitted to know about them.
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
But now the Fed has admitted such arrangements, if
GATA subsequently sued the Fed in U.S. District
Court for the District of Columbia to gain access to the documents involved.
That suit is pending.
Central banks are out of control
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
It is because, as the documents compiled and
publicized by GATA suggest, suppressing or controlling 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.
This should not be so surprising. For intervening in
markets is what central banks do.. They have no other purpose. They've just gotten
out of control.
Central banks often admit intervening 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, through intermediaries, 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," 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. As GoldMoney's
James Turk notes, 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 --
devices of "quantitative easing."
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 and then finally selling some, or
at least claiming to have sold some. 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, out of nothing, 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.
Just as Lars Schall
recently tried to get some useful information out of the Bundesbank
about its gold reserves, 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 replies from one of its press officers,
Conny Lotze. But they
were all evasive or refusals to answer. Exactly where is the IMF's gold and
who controls it? The IMF wouldn't say:
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 markets to prevent
the markets from coming into balance through ordinary market action lest
certain political interests be disturbed.
Yes, when markets balance themselves they sometimes
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 1913 the country went through a catastrophic deflation every
decade or so. Central banking was created in the name of preventing those
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
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. As has been noted by U.S.
Rep. Ron Paul, the Federal Reserve, an unelected agency of the government,
has come to appropriate and spend far more money than Congress itself does.
Yet the secrecy of central banking now is taken for
granted even in nominally democratic countries.
Now that Paul, an immensely informed critic of the
Fed, has become chairman of the House subcommittee on monetary affairs, there
may be some devastating public inquiries into central banking. But what a
hundred years ago in the United States was called the Money Power is still so
ascendant 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."
Official gold data is disinformation
Government's largely surreptitious agenda in the
gold market is greatly assisted by the widespread falsification of gold
reserve and market data. Gold is the worst understood financial market in
part because most official data about gold is actually disinformation.
Years ago GATA disclosed that the International
Monetary Fund, the leading compiler of official gold reserve data, allowed
its member nations to count gold they had leased, gold that had left their
vaults, as if it was still in their vaults. The effect of this accounting
fraud was to deceive the market into thinking that central banks had much
more gold left to bomb the market with than they really did.
But that's only the start of the false data.
In April 2009 China caused a sensation by announcing
that its gold reserves had increased by 76 percent, from 600 tonnes to 1,054 tonnes. For the
previous six years China had been reporting to the IMF only 600 tonnes. Had China acquired those 454 new tonnes only in the last year? Very unlikely. Most experts
believe that China acquired those 454 new tonnes
over at least several years, largely by purchasing the production of China's
own fast-growing gold mining industry. So for as many as six years the
official gold reserve data about China was way off.
Last June the World Gold Council reported that Saudi
Arabia's gold reserves had increased by 126 percent, from 143 to 323 tonnes, just since 2008. That the world's oil-exporting
superpower had made such a new commitment to gold in its foreign exchange
reserves also caused a sensation.
But a few weeks later the governor of the Saudi
Arabia Monetary Authority, Muhammad al Jasser,
insisted to news reporters that Saudi Arabia had not purchased the
gold cited in the June reports but rather had possessed that extra gold all
along, holding it in what he called "other accounts":
That is, the seemingly new Saudi gold had been held
in accounts not reported officially, just as the true status of China's gold
accounts was not reported officially for six years, if the true status is
being reported even now.
Some analysts think that China and Saudi Arabia have
accumulated far more gold than they’re reporting and are accumulating
still more gold surreptitiously -- China to hedge its dollar foreign exchange
surplus, Saudi Arabia to hedge both its dollar surplus and the depletion of
its oil reserves -- but that China and Saudi Arabia can't acknowledge this
accumulation lest they spook the currency markets, explode the gold market,
and devalue their dollar surpluses before those surpluses are fully hedged.
The United States claims to hold almost 8,200 tonnes of gold. But has any of that gold been swapped
with other central banks through the gold swap arrangements Fed Governor Warsh disclosed in his letter denying GATA's request for
access to the Fed's gold documents? The Fed won't be answering that question
voluntarily. It will be answered only at the order of the federal court in
which GATA is suing the Fed, or at the direction of Representative Paul's
Conflicts of interest at ETFs
Then there are the major gold and silver
exchange-traded funds, which were established in the last few years
supposedly to help ordinary investors invest conveniently in gold and silver.
How much metal do the ETFs have?
While the major gold and silver ETFs frequently report
their metal holdings, studies by GoldMoney founder
James Turk and former GATA board member Catherine Austin Fitts
and her lawyer, Carolyn Betts, suggest that this data is unreliable too:
For the major ETFs won't disclose exactly where
their metal is, and indeed their prospectuses say it's OK for the ETFs not
even to know where their metal is kept among custodians and sub-custodians.
Further, the custodians for the major gold and
silver ETFs are, perhaps not so coincidentally, also the two major
international banks -- J.P. Morgan Chase and HSBC -- that report having the
biggest short positions in gold and silver, short positions that give these
banks and metal custodians a powerful interest in suppressing the
price of the assets they supposedly are holding for investors who want those
assets to rise in price.
How much gold do the major gold and silver ETFs
really have in their vaults? How much of it is encumbered in some way? ETF
investors themselves may never be permitted to know.
The biggest so-called "physical" gold
market in the world is run by the London Bullion Market Association. The LBMA
publishes statistics on how much gold and silver are traded by its members.
But these statistics show spectacular volumes, more metal than could exist.
Of course much of this metal could be sold and resold back and forth many
times every day. But an expert in that market, Jeffrey Christian of the CPM
Group, acknowledged at a hearing of the U.S. Commodity Futures Trading
Commission last March, as he had acknowledged in an explanatory report
published in 2000, that the London bullion market is actually a
fractional-reserve gold banking system built on the assumption that most gold
buyers will never take delivery of their metal but rather leave it on deposit
with the LBMA member banks from which they bought it.
GATA board member Adrian Douglas has studied the
LBMA statistics and Christian's work and estimates that the great majority of
gold sold by LBMA members doesn't exist -- that most gold sales by LBMA
members are highly leveraged. How leveraged? How much gold is due from LBMA members that doesn't really exist? Of course the LBMA
doesn't report that. Like the Fed's gold swap arrangements, the world must
not be permitted to know that much of the gold the world thinks it owns is
imaginary. The consequences might be catastrophic for the banks that have
sold that imaginary gold.
For then the world might understand why even at its
recent price above $1,300 per ounce gold has not come close to keeping up
with the inflation, the currency debasement, of the last few decades, why
gold has not completely fulfilled its function of hedging against inflation.
That is, gold's enemies figured out how to increase
gold's supply by vast amounts without going through the trouble of digging it
out of the ground. They invented "paper gold" -- imaginary gold
that many buyers accepted, never suspecting that major financial institutions
might deceive or defraud them.
Negligent journalism about gold
The misunderstanding of the gold market is worsened
with the awful journalism about it.
The falsity of the data about the gold market
practically screams at financial journalists:
-- There is the omission by 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 ETF prospectuses.
The valid documentation about the gold market
also practically screams at financial journalists as well:
-- There are the huge and disproportionate gold, silver,
and interest rate derivative positions built up at just two or three
international banks, positions that never could be undertaken without the
express or implicit underwriting of government, particularly the U.S.
-- And there are the many official records, records
collected and publicized by GATA over the years, demonstrating the plans and
desire of the U.S. government to suppress and control the price of gold.
But somehow financial journalists just don't ask
about these things. After all, who are the major advertisers in the financial
news media? The market manipulators and governments themselves.
Here are a couple of examples of this gross failure
of journalism in the last year.
Last June the Bank for International Settlements,
the central bank of the central banks, disclosed, via a footnote in its
annual report, that it had undertaken a gold swap of unprecedented size, 346 tonnes. But the BIS provided no explanation for this. A
newsletter writer was the first to come upon the information; only then did
it leach into the major financial news media. What was going on here?
The reporters for the major financial news media
didn't bother going to the source, didn't bother asking the BIS itself. It
was simply assumed that central banks never give serious answers about what
they do, particularly in regard to gold. Instead the reporters called various
gold market analysts for what they hoped would be informed speculation.
A few days after GATA ridiculed the Reuters news
agency for not demanding answers from the source of the swaps, the BIS,
Reuters did try putting some questions to the bank, and on July 16
last year Reuters reported: "The BIS said the gold in question was used
for 'pure swap operations with commercial banks' but declined to respond to
further questions from Reuters on the transaction":
Ever since Federal Reserve Governor Warsh admitted to GATA that the Fed has secret gold swap
arrangements with foreign banks, I have been urging financial journalists to
call the Fed to ask about those arrangements. As far as I know, no news
organization has put such questions to the Fed officially. But, a bit
intrigued, a reporter for a major news agency, having failed to get her
editor's authorization to pursue a story about gold, called the Fed on her
own and did ask about the gold swap arrangements. She told me that a Fed
spokesman had told her: "Oh, we never talk about those things."
GATA has been gaining publicity, if with difficulty.
Last year the Financial Times did a big story about gold that was half about
GATA’s complaints about gold price manipulation by central banks and
their agents, the bullion banks. But amazingly the FT reporter failed to put
any questions to any central bank or government official:
How can you report complaints of central bank gold
price manipulation without questioning central banks themselves? Again, it is
just taken for granted that central banks operate in secret, particularly in
regard to gold, and there's no point in questioning them.
Why gold and silver are mysteries
Why is gold such a mystery? Why is it, along
with silver, kept such a mystery?
It's because the two precious metals are not only
money but, from the point of view of free people, the best sort of money,
less susceptible to what governments see as the most desirable quality of
money -- the susceptibility to control by government and particularly
susceptibility to devaluation. You can print or otherwise issue gold and
silver derivatives to infinity, but not the metals themselves.
Gold particularly is kept such a mystery because it
is the key to unlocking the currency markets, which long have been the most
efficient mechanisms of imperialism.
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 U.S. War Department, a letter called Tactical and Technical
Trends. 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 fairly sophisticated
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.
This control of the currency markets 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 one hell of a trade
deficit -- and couldn't have cared less about it. For being in the position
to print the currencies for occupied Europe, Nazi Germany never had to cover
that deficit, at least not as long as the 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 hold most of their foreign
exchange reserves in dollars.
Free-trading and widely accessible gold always has
been and always will be doom to the rigging of the currency markets, always
will be the escape from overbearing government generally and from any
overbearing government in particular. That is why those U.S. government
records compiled by GATA over the years candidly discuss or advocate or
describe controlling and suppressing the gold market -- and suppressing the
The secret knowledge
The truth as GATA sees it is this:
First, gold is the secret knowledge of the financial
universe and its true value relative to currencies is vastly greater than its
nominal price today, since much of the gold that investors think they own
doesn't exist. The actual disposition of Western central bank gold reserves
is a secret more closely guarded than the blueprints for the manufacture of
nuclear weapons. For gold is a deadly weapon against unlimited government.
Second, all technical analysis of all markets now is
faulty if it fails to account for pervasive and surreptitious government
And third, the intervention against gold is failing
because of overuse, exposure, exhaustion of Western central bank gold
reserves from gold sales and leasing, 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 nothing but colored paper
For years now the Western central banks have been
attempting a controlled retreat with gold, bleeding out their reserves with
sales, leases, and especially 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, 15-20
percent or so per year, a rise carefully modulated by surreptitious central
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.
Market analysts talk about what they call
"reversion to the mean." But maybe we should talk about reversion
to the real.
A century ago Rudyard Kipling anticipated this when
he 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 basic honesty, fair dealing, Ten Commandments-type stuff. Kipling titled his poem
"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 problem goes far beyond gold price suppression.
Indeed, since central bank intervention in the currency, bond, equities, and
commodity markets has exploded over the last few years, 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, and a war being waged by central
banks against the people of their own countries. There has been such a war
for many years, only the victims were not really fighting back. Now some of
them are, countries and individuals alike, by buying
and taking delivery of the monetary metals. (Now all we need to do is find a
safe planet to keep them on.)
The focus on London
London may seem like the belly of the beast of
Anglo-American imperialism, being home to both the LBMA and the Bank of
England, whose surrender of the better part of Britain's gold reserves a
decade ago, at the bottom of the market and at the onset of a short squeeze,
makes sense only as part of the gold price suppression scheme and the rescue
of influential bullion banks that were caught short at the market's turn.
But let us instead see this scheme as an aberration
and London as the city where the rescue of all decent civilization was
arranged even as the bombs of the most horrifying evil fell on it. The St.
Paul's that was so famously surrounded by the fire and smoke of those bombs
is just around the corner from this grand old building; please forgive a rube
tourist for being a bit in awe of it all. GATA actually has a few friends in
this city and hereabouts. So this may be as good a place as any to clamor for
the most cosmic justice. After all, isn't it practically in your anthem?
And did the Countenance Divine
Shine forth upon our clouded hills?
And was Jerusalem builded here
Among these dark, Satanic ... central banking systems?
I don't think Blake would mind too much about that
rewriting if he was still around and knew the facts of the situation. He
might even make it rhyme.
We in GATA have our bow of burning gold; we have our
arrows of desire. But we can always use more, and with your help we will do
more to restore our dear countries, Britain and America together, to their
principles and ideals of democratic, transparent, limited government, and,
really, the brotherhood of man, which, in the end, are what the monetary metals
* * *
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