Mining stock promoter Bob Moriarty, proprietor of 321Gold.com and author
of the new book "Nobody Knows Anything," was at least speaking for
himself the other day when he claimed that central banks care a lot about
interest rates but not at all about gold.
In commentary headlined "A Zombie Financial System, Black Swans, and
a Gold Share Correction" --
http://www.321gold.com/editorials/moriarty/mo...arty082416.html
-- Moriarty wrote:
"As a measure of just how important gold is to the world financial
system in comparison to interest rates, interest rate derivatives are about
1,300 times greater than gold derivatives. We have a lot of me-too parrot
websites talking about manipulation and conspiracies but logic tells us
central banks worry about interest rates and couldn't care less about the
price of gold."
But central banks care about gold precisely because its price has a long
historical correlation with interest rates and government bond prices, a
correlation studied and documented by central bankers and economists alike,
including, in their 1988 study, "Gibson's Paradox and the Gold
Standard," Harvard economics professor Lawrence Summers, who went on to
become U.S. treasury secretary, and University of Michigan economics professor
Robert Barsky:
http://www.gata.org/node/1373
A few weeks ago another academic paper, written by a professor of
accounting and finance at the University of Western Australia in Perth, Dirk
Baur, confirmed that the relationship between interest rates and the gold
price gives central banks a powerful incentive to influence interest rates by
intervening surreptitiously in the gold market:
http://www.gata.org/node/16611
Baur even quoted from the transcript of the May 1993 meeting of the
Federal Reserve's Open Market Committee, which includes an exchange about
gold and interest rates between Fed Chairman Alan Greenspan and Fed Board of
Governors member Wayne D. Angell, comments that have been cited by GATA many
times over the years.
Greenspan: There's an interesting question here because if the gold
price broke in that context, the thermometer would not be just a measuring
tool. It would basically affect the underlying psychology. Now we don't have
the legal right to sell gold but I'm just frankly curious about what people's
views are on situations of this nature because something unusual is involved
in policy here."
Angell: We can hold the price of gold very easily. All we have to do is
to cause the opportunity cost in terms of interest rates and U.S. Treasury
bills to make it unprofitable to own gold. I don't know how much change in
the fed funds rate and the Treasury bill rate it takes to do that, but I'd
sure like to find out.
And just yesterday GATA consultant Robert Lambourne reported that the Bank
for International Settlements, the central bank of the central banks,
recently jumped back into the gold swap business, apparently to relieve tight
conditions in the gold market:
http://www.gata.org/node/16704
Indeed, three years ago the director of market operations for the Banque
de France, Alexander Gautier, told the London Bullion Market Association
meeting in Rome that the French central bank trades gold for its own account
"nearly on a daily basis" and is "active in the gold market
for other central banks and official institutions":
http://www.gata.org/node/13373
If central banks "couldn't care less about the price of gold,"
why are they trading it "nearly on a daily basis" and why is the
BIS arranging gold swaps?
Of course GATA has compiled an enormous amount of official documentation
showing that central banks care desperately about the gold price and
about concealing their intervention in the gold market, and always will care
as long as gold is considered money, a form of money competing with central
bank currencies. A summary of that documentation can be found here:
http://www.gata.org/node/14839
Still more of it can be found here:
http://www.gata.org/taxonomy/term/21
So why does Moriarty insist that there is nothing to this even as he fails
to address even one document? Why does he constantly misinform his readers?
Is it because the stock-touting business is a lot easier when nobody knows
anything?
