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The great precious metals managed retreat
Published : November 05th, 2012
1122 words - Reading time : 2 - 4 minutes
( 4 votes, 5/5 ) Print article
 
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Writing today for Resource Investor, Jeffrey Lewis of Silver-Coin-Investor.com notes the irony that even though we're "in the age of the LIBOR scandal, Financial Accounting Standards Board mark-to-market rule changes, high-frequency trading programs front-running retail investors, MF Global's dramatic demise, and Bernie Madoff's outrageous Ponzi scheme ... it continues to be taboo to even entertain the idea that the precious metals markets could actually be managed."

But Lewis more than entertains the idea. A central bank that arranges or backstops price suppression in the monetary metals "can print effectively unlimited amounts of dollars to pay for its losses, and it would never be forced to deliver physical metal it did not have because it would generally be trading futures on the short side," Lewis writes. "Since the seller of a futures contract controls physical delivery, it can simply opt not to deliver and cash-settle instead."

A central bank trading secretly in gold and silver? While it may sound fantastic, in the United States it is actually the law, and has been for a long time, the Treasury Department's Exchange Stablization Fund having been established in 1934 specifically for that purpose, and the ESF's mandate having been expanded since then to authorize secret trading in any market:

http://www.treasury.gov/resource-center/international/ESF/Pages/esf-inde...

All anyone has to do to expose the scheme is to ask central banks about it. Their refusal to answer some simple questions is telling:

http://www.gata.org/node/11862

Fortunately for central banks, the prerequisite for mainstream and respectable financial journalism is never to put a specific question to a central bank and complain publicly about its refusal to answer. There couldn't possibly be any news in central banking's control of the value of all capital, labor, goods, and services in the world.

This is pretty much what the British economist Peter Warburton figured out about central banks, their investment bank allies, and commodity markets 11 years ago in his groundbreaking essay, "The Debasement of World Currency: It Is Inflation, but Not as We Know It":

http://www.gata.org/node/8303

"What we see at present," Warburton wrote in 2001, "is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front the central banks preside over the creation of additional liquidity for the financial system to hold back the tide of debt defaults that would otherwise occur. On the other they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities, or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets. ...

"How much capital would it take to control the combined gold, oil, and commodity markets? Probably no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have overtraded their capital so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices."

Despite the abdication of mainstream financial journalism, Lewis writes today, the scheme is being found out. "The market seems to be progressively reaching the point where 'everyone knows' that the price of silver, gold, and just about every other commodity is being politically managed to the point where underlying fair value across the board has become remarkably distorted."

Now we just need to reach the point where everyone does something about it. In recent months GATA has solicited several leading and immensely prosperous and powerful figures in the monetary metals world, people whose names you would instantly recognize and who almost singlehandedly, on their own or by helping GATA, could pull the plug on the gold and silver price suppression schemes. But even with introductions from mutual friends, those figures don't want the slightest trace of association with GATA.

To some extent this is understandable. Those people are as respectable as mainstream financial journalists and have a lot to lose at the hands of government, and they have already made their fortunes and achieved their privileged positions and think that they can leave the world to fend for itself.

But if you ever run into any of them at conferences or shareholder meetings, you might ask them why, with so much wealth, they won't help GATA, won't send even a contribution like the $20 sent the other day by credit card over the Internet by a guy in California, who thereby donated to GATA $20 more than, for example, Newmont Mining has donated since GATA was founded in January 1999. If you challenge their indifference, one or two or the rich and powerful guys may at least feel a little guilty about it.

If you're inclined to help GATA, you can donate even $1 via our credit card mechanism on the Internet here --

http://www.gata.org/node/16

-- and thereby become more relevant to the struggle for free markets in the monetary metals than the world's biggest gold and silver mining companies. With sufficient support, we'll undertake new freedom-of-information litigation against the U.S. Federal Reserve, Treasury Department, and State Department:

http://www.gata.org/node/11606

We have beaten the Fed once already --

http://www.gata.org/node/9917

-- and what we've learned will help us beat the Fed again along with the other secret market riggers in government here and around the world.

Lewis' commentary is headlined "The Great Precious Metals Managed Retreat" and it's posted at Resource Investor here:

http://www.resourceinvestor.com/2012/11/02/the-great-precious-metals-man...

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

* * *

 

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

 

 

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Chris Powell

Chris Powell is the secretary of the Gold Anti-Trust Action Committee (GATA) which has been organized to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities.
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