Over the past
couple weeks some interesting historical documents relating to the gold market
have surfaced. First up is Zero Hedge’s, Exclusive Smoking Gun: The Fed On
Gold Manipulation which features
an official document uncovered by researcher / historian Geoffrey Batt - a
June 3, 1975 memorandum from Fed Chairman Arthur Burns to [then] President
memorandum was sent] to Gerald Ford, which among others CC:ed Secretary of
State Henry Kissinger and future Fed Chairman Alan Greenspan, discussing
gold, and specifically its fair value, a topic whose prominence, despite
former president Nixon's actions, had only managed to grow in the four short
years since the abandonment of the gold standard in 1971. In a nutshell
Burns' entire argument revolves around the equivalency of gold and money, and
furthermore points out that if the Fed does not control this core
relationship, it would "easily
frustrate our efforts to control world liquidity" but
prejudge the shape of the future monetary system." Furthermore,
the memo goes on to highlight the extensive level of gold price manipulation
by central banks even after the gold standard has been formally
Quoting from pg.
4 of the Burns memorandum,
..a large measure
of freedom for governments to trade in gold a market-related price may easily
frustrate efforts to control world liquidity. For example, such freedom would
provide an incentive for governments to revalue their official gold holdings
a a market-related price. [France has already done so.] This in turn could
result in the addition of up to $150 billion to the nominal value of
countries’ reserrves. Liquidity creation of such extraordinary
magnitude would seriously endanger, perhaps even frustrate, our efforts and
those of other prudent nations to get inflation under reasonable control.
This is a matter of great concern to Mr. Witteveen, the head of the I.M.F.,
and to many other financiers.
Funny, ehh, the
Fed worried about the inflationary impact of a nominal increase in reserves?
source: Hugo Salinas Price
And regarding the
IMF [and World Bank], there are some esteemed market watchers who claim these
institutions have recently “panned” the dollar. For anyone who
wants to take their heads out of the sand, here’s a few words about the
role of the IMF from my friend Rhody, an astute market watcher,
and the World Bank are American institutions added to the Bretton Woods
Agreement on the insistance of the U.S. The World Bank was added to
facilitate the lending of U.S. dollars to the developing world. This fostered
debt and control. The IMF was the bully organization used to enforce the
lending agreements of the World Bank. In a sense, the World Bank was a loan
shark and the IMF was the enforcer that went around and broke legs when
borrower nations got in trouble financially. Add to this the occasional surge
in American interest rates to 20% (1981) and America literally pillaged the
world here. This is the sick system that the G20 seeks to support. I really doubt
that the World Bank and IMF have panned the dollar. They can't. Their
continued survival depends on the dollar. The IMF, for example is hardly
likely to pan the dollar and then turn around and sell 403 tonnes of gold in
return for dollars! Get real.”
There were two
companion pieces to the Exclusive Smoking Gun piece, published by Zero Hedge
about a week earlier; the first of which was a “declassified”
1968 U.S. State Dept. document explaining the inner workings of gold price
manipulation [broadly defined as “re-shuffling”] during the days
of the London Gold Pool –- here.
companion piece is “linked” in the Exclusive Smoking Gun piece -
a declassified 1968 CIA brief, but it’s apparently no longer available.
What the CIA brief outlined was the existence of two markets for gold –
The Official and Private market. The brief went on to outline how South
Africa [by far the world’s largest gold producer at the time] should be
encouraged to sell their output on the “Private” market so as to
help suppress the world gold price.
Woods was abrogated by President Nixon in August, 1971.
But do look at this,
document shows is [then] N.Y. Fed President, Paul Volcker [post Bretton
Woods] acknowledging the existence of the same two gold markets [Official and
Private] instructing the Vatican to sell “their” gold in the
“Private” market – the one acknowledged by the CIA back in
1968 to be utilized for gold price suppression.
to suggest that, when you take the words of Fed Chairman Arthur Burns
together with the words of N.Y. Fed President, Paul Volcker – both
circa 1975 – it’s very clear that the gold price was
highly managed during the “melt-up” in price throughout the
like history repeating itself, eh?
This would seem
to make a mockery of Mr. Volcker’s own words [or show him as having
selective memory, perhaps?] since excerpts of his memoirs were published in
the Nikkei Weekly on Nov. 15, 2004 – referencing a 1973 [10 %] U.S.
Dollar devaluation - where Mr. Volcker stated,
the U.S. announced that the dollar would be devalued by 10%. 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.”
Mr. Volcker may
be technically correct when he states that “joint” intervention
in gold sales was not undertaken; but, it would appear we can all rest
assured, unilateral [American] intervention was.
None of this
should surprise anyone when we all stop and consider the sage words of Mr.
Alan Blinder Esq. – former Vice Chairman of the Federal Reserve –
who appeared on PBS television in the 1990’s and uttered,
duty of a central banker is to tell the public the truth."
It would seem
that old habits really do die hard.
by Rob Kirby
Subscribers to Kirbyanalytics.com
are profiting from paid in-depth research reports, analysis and commentary on
rapidly unfolding economic developments. Subscribe here.