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Volcker confirms central bank need to suppress gold to stabilize exchange rates at 'critical point'

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Published : January 27th, 2012
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Dear Friend of GATA and Gold:

Former Federal Reserve Chairman Paul Volcker today defended government intervention in the gold market to counter "exchange rate instability at a critical point."

Volcker's comments came in response to inquiry from the German freelance journalist Lars Schall, who noted GATA's reference to Volcker's expression of regret, recorded in his memoirs, about the failure of Western central banks to intervene to suppress gold prices during a currency revaluation in 1973. Volcker's support of gold price suppression was cited by your secretary/treasurer in his address to the Vancouver Resource Investment Conference last Saturday:

http://www.gata.org/node/10909

In his comments to Schall today, Volcker added that, "to the best of my knowledge," the United States has not intervened in the gold market for more than 40 years.

Nevertheless, the former Fed chairman confirmed the profound interest central banks have in the price of gold because of its effect on the currency markets, an interest that may justify intervention at any "critical point."

This contradicts oft-repeated assertions by certain gold market analysts, like Kitco Jon Nadler, that central banks have no interest in manipulating the gold market:

http://www.gata.org/node/8717

Schall's initiative demonstrates what is so lacking in the mainstream financial media. He tracked down a central banker, put the gold price manipulation question to him, and got a noteworthy answer on the record -- a feat not yet attempted by, for example, the Financial Times, The Wall Street Journal, The New York Times, Reuters, Bloomberg News, the Associated Press, and on and on.

Imagine the news that might result from persistent questioning of central bankers in public about market intervention. Of course that's exactly why it's seldom done or permitted.

Schall's account of his search for Volcker is appended.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

By Lars Schall
Thursday, January 26, 2012

At the Vancouver Resource Investment Conference on January 21, Chris Powell, secretary/tresurer of the Gold Anti-Trust Action Committe Inc., gave a presentation entitled "Gold-Market Rigging Has Many Whistleblowers; They're Just Always Ignored":

http://www.gata.org/node/10909

Powell said: "Paul Volcker was the U.S. Treasury Department's undersecretary for international monetary affairs from 1969 to 1974 and became Fed chairman in 1979. He lately has been an adviser to President Obama. Volcker has written some memoirs that as far as we can tell have been published only in excerpts by The Nikkei Weekly in Japan.

"On November 15, 2004, The Nikkei Weekly published the following excerpt from Volcker’s memiors about the U.S. dollar revaluation that took place on February 12, 1973. Volcker writes:

"'That day the United States announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.' (http://www.gata.org/node/8209.)

"Got that? A former Federal Reserve chairman, the one credited for wringing inflation out of the U.S. dollar in the late 1970s and early 1980s, now a presidential adviser, says that for the U.S. government not to rig the gold market was a mistake.

"Volcker is still around to answer questions, but as far as we know, no financial journalist has ever asked him why not rigging the gold market was a mistake."

After I read the remarks by Powell, I sent in the past few days more or less the same e-mail message to the press offices of the Group of 30, the Trilateral Commission, the Council on Foreign Relations, the White House in Washington, and Klaus-Dieter Frankenberger, foreign editor of the Frankfurter Allgemeine Zeitung and a member of the Trilateral Commission. My message said:

"Dear Ladies and Gentlemen,

"My name is Lars Schall. I am a freelance journalist from Germany. I write to you with Chris Powell, secretary/treasurer of the Gold Anti-Trust Action Committee Inc.

"Could you forward the following message to Paul A. Volcker, please? Thank you!

"Dear Mr. Volcker,

"On November 15, 2004, The Nikkei Weekly published the following excerpt from your memiors about the U.S. dollar revaluation that took place on February 12, 1973. You wrote:

"'That day the United States announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.'

"As Powell and I understand it, you are saying here that for the U.S. government not to rig the gold market was a mistake.

"Is this indeed what you want to say? If so, why was it a mistake? And do you think the U.S. government has learned from that mistake ever since? In other words: Does the U.S. government intervene in the gold market from time to time in order to support the dollar and other currencies against gold?

"An answer from you, Sir, for the public would be much appreciated.

"Best regards, Lars Schall."

Today I received via Anke Dening, Volcker's wife and longtime assistant, this message:

"Dear Mr. Schall:

"The quotation you cite is about an event almost 40 years ago. It pertained to the possibility of speculation in the gold market leading to exchange rate instability at a critical point.

"The U.S. has not, to the best of my knowledge, intervened in the gold market for more than 40 years.

"Sincerely, Paul Volcker."

 

 

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