On Friday, September 25, Jim Rickards, director of
market intelligence for the Omnis consulting firm in McLean, Va., was
interviewed at length on the cable television network CNBC. Talking about the
currency markets, 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 influences interest rates and the prices of
Of course such an assertion in itself was no
surprise to my organization, the Gold Anti-Trust Action Committee. To the
contrary, that assertion has been our premise for most of our 10 years and we
have documented it extensively. It was spectacular that an analyst should
have expressed it in the mainstream financial news media and have been
allowed to keep talking. But since we met here in New Orleans last year there
have been many spectacular disclosures of what central banks meant to be
surreptitious intervention in the currency markets to suppress the price of
gold -- particularly intervention by the central bank of the United States.
You may have heard GATA derided as a
"conspiracy theory" organization. We're not that at all. To the
contrary, we examine the public record, produce documentation, question
public officials, and publicize their most interesting answers, or refusals
to answer. I'd like to review the spectacular disclosures of the last year.
First, in January, was the discovery of a 16-page
unsigned memorandum 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.
This document remains on the Internet site of the Federal Reserve Bank of St.
Then in August the international journalist Max
Keiser reported an interview with the Bundesbank, Germany's central bank, in
which he was told that all of Germany's gold reserves were held in New York:
Some people saw that 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. On August 24, the Bundesbank replied to Kirby by e-mail with a
denial of Keiser's report that was actually pretty much a confirmation:
"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
The Bundesbank didn't 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.
Then last month an financial market professional and
student of history named 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, from
someone named Deming at the U.S. Embassy in Paris to the State Department in
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
speculators "that there is no point any more 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
The cable recommends creation of a "new reserve
asset" with "gold-like qualities" to replace gold and prevent
gold from gaining value. To accomplish this, the cable proposes "monthly
or quarterly reshuffles" of gold reserves among central banks -- what
the cable calls a "reshuffle club" that would apply gold where
market intervention seemed most necessary.
These "reshuffles" sound like the central
bank "gold swaps" of recent years.
The idea, the cable says, is for the central banks
"to remain the masters of gold."
Then Zero Hedge's Batt disclosed a memorandum from
the Central Intelligence Agency dated December 4, 1968, several months after
the collapse of the London Gold Pool:
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."
And "-- To bring South Africa to sell its
current production of gold in the private market, and thus keep the private
The third declassified U.S. government document
published by Batt at Zero Hedge 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 gold
and gold would be free trading.
The document is a seven-page memorandum from Federal
Reserve Board Chairman Arthur Burns to President Ford. It is all about
controlling the gold price through foreign policy and defeating any free
market for gold:
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
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 still 34 years ago.
But now at last there has been 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 proprietary interests, is in itself a suggestion
that the U.S. gold reserve has been placed, at least partly, in private
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
Warsh denied our appeal but in his letter to Olson
he let slip some stunning information:
Warsh 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 you."
So there it is: The Fed today -- right now -- has
gold swap arrangements with "foreign banks."
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, that the Fed had gold
swap arrangements, even though FOMC minutes from 1995 quote Mattingly as
saying the U.S. has engaged in gold swaps:
But now the Fed admits such arrangements.
Of course Fed Governor Warsh did not say that the
Fed has actually swapped any gold lately, only that it has arrangements to do
so -- and, just as important, that the Fed doesn't want the public to know
about those arrangements, doesn't want the public to know about the
disposition of the country's gold reserves.
There is a reason for the Fed's insistence that the
public must not know what it is doing in the gold market.
GATA believes it's because, as the recently
disclosed documents suggest, suppressing the gold price is part of the
general surreptitious rigging of the currency and bond markets by the U.S.
government and that this rigging is the foremost objective of U.S. foreign
and economic policy, and because this rigging can't work if it is exposed and
the markets realize that they aren't really markets at all.
And the rigging increasingly is being
Jim Rickards, the analyst who remarked the other day
on CNBC that "when you own gold you're fighting every central bank in
the world," was not quite right. For lately a few central banks -- those
in China, Russia, and even in Europe -- have hinted that they've figured the
so-called gold market out and are not playing along anymore. Now there is
open reporting and commentary on what is being called the Chinese put on
gold, and even open reporting and commentary on international collaboration
to replace the dollar as the world reserve currency.
Meanwhile, as in the last months of the London Gold
Pool 40 years ago, there has been vast dishoarding of Western central bank
gold, and the supplies necessary to suppressing the gold price are drying up.
World gold production has fallen dramatically because the rising price is not
yet close to the price necessary to make more production profitable. And
investors are realizing that most paper gold is not backed by real gold but
rather that each ounce of real metal is probably supporting paper claims to
20, 50, or even a hundred ounces.
In any case, there's an important international
story here, and GATA plans to pursue it by suing the Federal Reserve in U.S.
District Court in Washington for the information being withheld from us about
the U.S. gold reserve. Given all the new documentation, we hope that
financial journalists and gold market analysts will get interested and start
pressing central banks for detailed answers about gold.
This story is important despite this week's dramatic
rise in the gold price. For even as the price of gold has been rising, we
really don't yet know what a fair price, a free-market price, for gold is,
since gold has not traded in a free market for many years. Indeed, since
central bank intervention in the currency, bond, and equities markets has
exploded over the last year, we don't really know what the market price of anything
is anymore. Thus this 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's a currency war going on
between central banks. There has been such a war for many years, only the
victims were not really fighting back. Now some of them are. Signs of this
war are now everywhere -- like the story this week by Robert Fisk in the
British newspaper The Independent, which rocked the currency and gold
It described an international plan to replace the
dollar in oil trading.
Gold and silver are currencies and will be
remonetized by markets eventually if not by central banks as well. But when
you invest in currencies like gold and silver, you risk getting caught in the
crossfire of the currency war. There was crossfire last night when several Asian
central banks intervened in the currency markets to support the dollar:
But this intervention was not officially
acknowledged. Much central bank intervention is undertaken secretly.
As in any war, truth is the first casualty in the
currency war, even as secrecy is always the first principle of central
Meanwhile, not asking the right questions of the
right people seems to be the first principle of most financial journalists
and even many gold and silver market analysts. These journalists and analysts
take government secrecy for granted, even as the evidence of market
intervention and manipulation explodes all around them. Their acceptance of
secrecy reminds me of the bumbling police detective played by Leslie Nielsen
in the "Naked Gun" movies, particularly his performance in this
Well, there is something to see here.
The precious metals promise great rewards to
investors, but to get the necessary information you have to do a lot more
work than other investors.
And you have to remember the remarkable properties
of gold and silver. It's not just that gold is the most malleable and
lustrous of metals, or silver the most conductive and reflective, but also
that, once they get into the hands of central banks, bullion banks, and
exchange-traded funds, gold and silver become invisible.
If you would like to help GATA, we're recognized by
the U.S. Internal Revenue Service as a tax-exempt educational and civil
rights organization, and financial contributions to us are federally
tax-deductible in the United States. Our Internet site is www.GATA.org and the documentation we have discovered is posted
there. We'll be grateful for your help and promise to try to make good use of
Secretary / Treasurer
Gold Anti-Trust Action Committee
How to Help
by Chris Powell
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