By Lars Schall
Sunday, November 13, 2011

The politics of central bank gold is rife with speculation, ill-informed comment, and outright disinformation, and many relevant questions remain unanswered even after decades.

Take as an example this publication by Zero Hedge's Geoffrey Batt from September 27, 2009:

http://www.zerohedge.com/article/smoking-gun-fed-controlling-gold

It presents what is said to be a declassified memorandum dated June 3, 1975, written by the chairman of the Federal Reserve, Arthur Burns, to President Gerald Ford. Zero Hedge called it a "smoking gun" for the manipulation of the gold price by the Fed in cooperation with the West German government, then headed by Chancellor Helmut Schmidt, while the German market analyst Dimitri Speck, in his German-language book "Secret Gold Politics," considers the letter a hoax, noting that it was published by Zero Hedge without an indication of its source.

This lack of sourcing may cause some people to consider the Burns letter to be a product of "conspiracy theorists" spinning yarns. So to prove that the supposed "conspiracy theorists" sometimes can work more thoroughly than is thought, I wrote to Schmidt's secretary, asking that the following letter be forwarded to him.

"Dear Mr. Schmidt:

"Though I am a German financial journalist (I come from the Ruhr area), I have to write you in English, since I send you this inquiry together with my American friend Chris Powell, who is a journalist from Connecticut and secretary/treasurer of the Gold Anti-Trust Action Committee Inc., which is based in the United States.

"Powell and I have some specific questions related to a letter that was written by the then-chairman of the Federal Reserve, Arthur Burns, to then-president of the United States, Gerald Ford. While some people question the authenticity of this letter (among them Dimitri Speck in his excellent book 'Geheime Goldpolitik: Warum Zentralbanken den Goldpreis steuern,' Finanzbuch Verlag, Munich, 2010, Page 201), maybe the information itself contained in the letter is actually correct.

"To clarify this, could you please take a look at the document, about which Powell has written:

"'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: http://www.gata.org/files/FedArthurBurnsOnGold-6-03-1975.pdf

"'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.'"

"Now what we would like to know from you with regard to the letter is this: Are its references to you correct and what have you perceived as the objectives of the policy Burns describes in the letter?

"Moreover, since you are concerned both with Germany's future and the financial system of the United States, I would like to take the chance to ask you about a different gold-related issue. Powell, the Canadian financial analyst Rob Kirby, and I have tried to get some answers about the German gold reserve located in New York City and London. See here: http://www.gata.org/node/9363, http://www.gata.org/node/9871, and especially
http://www.gata.org/node/10550.

"Could you maybe tell us your opinion related to this critical topic, please?

"Thank you very much for your attention, sir."

"Best regards, Lars Schall."

After not receiving any response, I wrote again to Schmidt's secretary a few days later, prompted by a newspaper story about the German gold reserves:

"Dear Ms. Niemeier:

"Could Mr. Schmidt now give a comment related to Germany's 'barbarous relic,' addressed here?:

"'Financial Times Deutschland Joins Hunt for Germany's Gold': http://www.gata.org/node/10656.

"'The long clamor about the German gold reserves by GATA and particularly by our friends, the German journalist Lars Schall and the German market analyst Dimitri Speck, this week caught the attention of the German edition of the Financial Times, which published a story headlined 'Speculation and Rumors: The Hunt for the Treasure of the Bundesbank.'"

"Otherwise I have to publish next Monday something that says that Mr. Schmidt refused to make any comment, which I would find quite regrettable. Sooner or later he has to say something on this, I believe.

"Best regards, Lars Schall."

Mr. Schmidt maintained his silence. While this is perhaps a shame, it was predictable. However, Mr. Schmidt, who enjoys a tremendous reputation among the German public, missed the chance to clarify a question of history and fertilize what is becoming an international debate about the German gold reserves.

Politicians talk, philosophers are silent. As for gold, Mr. Schmidt seems to be among the philosophers.

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