Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
International Precious Metals and Commodities Show
Olympia Park, Munich, Germany
Saturday, November 7, 2009
Thank you for coming to listen to me today. Please forgive myinability to speak German. I'll be discussing many documents, some ofthem fairly complicated, but don't worry if you miss something aboutthem. They'll be posted at GATA's Internet site with these remarks.
On Friday, September 25, Jim Rickards, director of marketintelligence for the Omnis consulting firm in McLean, Virginia., wasinterviewed on the cable television network CNBC in the United States.Talking about the currency markets, Rickards remarked: "When you owngold you're fighting every central bank in the world."
That's because gold is a currency that competes with governmentcurrencies and has a powerful influence on interest rates and the priceof government bonds. And that's why central banks long have tried tosuppress the price of gold. Gold is the ticket out of the centralbanking system, the escape from coercive central bank and governmentpower.
As an independent currency, a currency to which investors can resortwhen they are dissatisfied with government currencies, gold carries theenormous power to discipline governments, to call them to account fortheir inflation of the money supply and to warn the world against it.Because gold is the vehicle of escape from the central bank system, themanipulation of the gold market is the manipulation that makes possibleall other market manipulation by government.
Of course what Jim Rickards said about gold was no surprise to myorganization, the Gold Anti-Trust Action Committee. To the contrary,what Rickards said has been our premise for most of our 10 years, andwe have documented it extensively. Rickards' assertion was spectacularsimply because he was allowed to make it in the mainstream financialnews media and was allowed to keep talking. While the gold pricesuppression scheme is a hard fact of history, it is seldom mentioned inpolite company in the financial world. I have been asked to talk aboutit here. I am grateful for this invitation and I will try to be polite.
How have central banks tried to suppress the price of gold?
The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971.
That's what the gold standard was about -- governments fixing theprice of gold to a precise value in their currencies, a price at whichgovernments would exchange their currencies for gold, currencies thatwere backed by gold.
Though the gold standard was abandoned during World War I, restoredbriefly in the 1920s, and then abandoned again during the GreatDepression, that was not the end of government efforts to control thegold price. Throughout the 1960s the United States and Great Britainattempted to hold the price at $35 in a public arrangement of thedishoarding of U.S. gold reserves. This arrangement came to be known asthe London Gold Pool.
As monetary inflation rose sharply, the London Gold Pool wasoverwhelmed by demand and was shut down abruptly in April 1968. Threeyears later, in 1971, the United States repudiated the remainingconvertibility of the dollar into gold -- convertibility for governmenttreasuries that wanted to exchange dollars for gold. At that momentcurrencies began to float against each other and against gold -- or sothe world was told.
For since 1971 the gold price suppression scheme has been undertakenlargely surreptitiously, seldom acknowledged officially. But sometimesit has been acknowledged officially, and with a little detective work, more about it can be discovered.
You may have heard GATA derided as a "conspiracy theory"organization. We are not that at all. To the contrary, we examine thepublic record, produce documentation, question public officials, andpublicize their most interesting answers, or their most interestingrefusals to answer. I'd like to review some of the public record withyou.
The gold price suppression scheme became a matter of public recordin January 1995, when the general counsel of the U.S. Federal ReserveBoard, J. Virgil Mattingly, told the Federal Open Market Committee,according to the committee's minutes, that the U.S. TreasuryDepartment's Exchange Stabilization Fund had undertaken gold swaps.Gold swaps are exchanges of gold allowing one central bank to intervenein the gold market on behalf of another central bank, potentiallygiving anonymity to the central bank that wants to undertake theintervention. The 1995 Federal Open Market Committee minutes in whichMattingly acknowledges gold swaps are still posted at the Fed'sInternet site:
The gold price suppression scheme was a matter of public record inJuly 1998, six months before GATA was formed, when Federal ReserveChairman Alan Greenspan told Congress: "Central banks stand ready tolease gold in increasing quantities should the price rise." That is,Greenspan himself, supposedly the greatest among the central bankers,contradicted the usual central bank explanation for leasing gold --which was supposedly to earn a little interest on a dead asset -- andadmitted that gold leasing is all about suppressing the price.Greenspan's admission is still posted at the Fed's Internet site:
http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm
Incidentally, while we gold bugs love to cite Greenspan's testimonyfrom 1998 because of its reference to gold leasing, that testimony wasmainly about something else, for which it is far more important today.For with that testimony Greenspan persuaded Congress not to regulatethe sort of financial derivatives that lately have devastated the worldfinancial system.
The Washington Agreement on Gold, made by the European central banksin 1999, was another admission -- no, a proclamation that central bankswere working together to control the gold price. The central banksmaking the Washington Agreement claimed that, by restricting their goldsales and leasing, they meant to prevent the gold price from fallingtoo hard. But even if you believed that explanation, it was stillcollusive intervention in the gold market. You can find the WashingtonAgreement at the World Gold Council's Internet site:
http://www.reserveasset.gold.org/central_bank_agreements/cbga1/
Barrick Gold, then the largest gold-mining company in the world,confessed to the gold price suppression scheme in U.S. District Courtin New Orleans on February 28, 2003. That is when Barrick filed amotion to dismiss Blanchard & Co.'s anti-trust lawsuit againstBarrick and its bullion banker, JPMorganChase, for rigging the goldmarket.
Barrick's motion claimed that in borrowing gold from central banksand selling it, the mining company had become the agent of the centralbanks in the gold market, and, as the agent of the central banks,Barrick should share their sovereign immunity and be exempt from suit.Barrick's confession to the gold price suppression scheme is posted atGATA's Internet site:
http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf
The Reserve Bank of Australia confessed to the gold pricesuppression scheme in its annual report for 2003. "Foreign currencyreserve assets and gold," the Reserve Bank's report said, "are heldprimarily to support intervention in the foreign exchange market." Thebank's report is still posted at its Internet site:
Maybe the most brazen admission of the Western central bank schemeto suppress the gold price was made by the head of the monetary andeconomic department of the Bank for International Settlements, WilliamS. White, in a speech to a BIS conference in Basel, Switzerland, inJune 2005.
There are five main purposes of central bank cooperation, Whiteannounced, and one of them is "the provision of international creditsand joint efforts to influence asset prices (especially gold andforeign exchange) in circumstances where this might be thought useful."White's speech is posted at GATA's Internet site:
In January this year a remarkable 16-page memorandum was discoveredin the archive of the late Federal Reserve Chairman William McChesneyMartin. The memorandum is dated April 5, 1961, and is titled "U.S.Foreign Exchange Operations: Needs and Methods." It is a detailed planof surreptitious intervention to rig the currency and gold markets tosupport the dollar and to conceal, obscure, or falsify U.S. governmentrecords and reports so that the rigging might not be discovered. Thisdocument remains on the Internet site of the Federal Reserve Bank ofSt. Louis:
http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf
In August this year the international journalist Max Keiser reportedan interview he had with the Bundesbank, Germany's central bank, inwhich he was told that all of Germany's gold reserves were held in NewYork. That interview is posted at the YouTube Internet site:
http://www.youtube.com/watch?v=EzVhzoAqMhU
Some people saw the Bundesbank's admission as a suggestion thatGermany's gold had become the tool of the U.S. government. GATAconsultant Rob Kirby of Kirby Analytics in Toronto then pressed theBundesbank for clarification. On August 24 the Bundesbank replied toKirby by e-mail with a denial of Keiser's report, but the denial wasactually pretty much a confirmation:
"The Deutsche Bundesbank," the reply said, "keeps a large part ofits gold holdings in its own vaults in Germany, while some of its goldis also stored with the central banks located at major gold tradingcenters. This," the Bundesbank continued, "has historical andmarket-related reasons, the gold having been transferred to theBundesbank at these trading centers. Moreover, the Bundesbank needs tohold gold at the various trading centers in order to conduct its goldactivities."
The Bundesbank did not specify those "gold activities" and those"trading centers." But those "activities" can mean only that theBundesbank is or recently has been surreptitiously active in the goldmarket, perhaps at the behest of others -- like the United States, thecustodian of German gold.
In September this year a New York financial market professional andstudent of history named Geoffrey Batt posted at the Zero HedgeInternet site three declassified U.S. government documents involvingthe gold market.
The first was a long cable dated March 6, 1968, from someone namedDeming at the U.S. Embassy in Paris to the State Department inWashington. It is posted at the Zero Hedge Internet site:
The cable described the strains on the London Gold Pool, the
gold-dishoarding mechanism established by the U.S. Treasury and theBank of England to hold the gold price to the official price of $35 perounce. The London Gold Pool was to last only six months longer.
The cable is a detailed speculation on what would have to be done tocontrol the gold price and particularly to convince investors "thatthere is no point any more in speculating on an increase in the priceof gold" and "to establish beyond doubt" that the world financialsystem "is immune to gold losses" by central banks.
The cable recommends creation of a "new reserve asset" with"gold-like qualities" to replace gold and prevent gold from gainingvalue. To accomplish this, the cable proposes "monthly or quarterlyreshuffles" of gold reserves among central banks -- what the cablecalls a "reshuffle club" that would apply gold where marketintervention 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."
Also in September this year Zero Hedge's Geoffrey Batt disclosed amemorandum from the Central Intelligence Agency dated December 4, 1968,several months after the collapse of the London Gold Pool. This too isposted at the Zero Hedge Internet site:
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 apledge from central banks that they will neither buy nor sell goldexcept to each other."
And:
"-- To bring South Africa to sell its current production of gold in the private market, and thus keep the private price down."
The third declassified U.S. government document published byGeoffrey Batt at Zero Hedge, also in September this year, may be themost interesting, because it was written on June 3, 1975, four yearsafter the last bit of official fixed convertibility of the dollar andgold had been eliminated and the world had been told that currencieshenceforth would float against each other and gold and gold would befree trading.
The document is a seven-page memorandum from Federal Reserve BoardChairman Arthur Burns to President Gerald Ford. It is all aboutcontrolling the gold price through foreign policy and defeating anyfree market for gold. It is posted at the Zero Hedge Internet site aswell:
http://www.zerohedge.com/article/smoking-gun-fed-controlling-gold
Burns tells the president: "I have a secret understanding in writingwith the Bundesbank, concurred in by Mr. Schmidt" -- that's HelmutSchmidt, West Germany's chancellor at the time -- "that Germany willnot buy gold, either from the market or from another government, at aprice above the official price of $42.22 per ounce."
Burns adds, "I am convinced that by far the best position for us totake at this time is to resist arrangements that provide wide latitudefor central banks and governments to purchase gold at a market-relatedprice."
While the Burns memo is consistent with the long-establishedinterest of central banks in controlling the gold price, it was still34 years ago. But now at last there has been a contemporaneousadmission of U.S. government intervention in the gold market. It hascome out of GATA's long Freedom of Information Act struggle with theU.S. Treasury Department and Federal Reserve for information about theU.S. gold reserves and gold swaps, information that has been denied toGATA on the grounds that it would compromise certain privateproprietary interests. (Of course such a
denial, a denial based on proprietary interests, is in itself asuggestion that the U.S. gold reserve has been placed, at least partly,in private hands.)
Responding to President Obama's declaration, soon after hisinauguration, that the federal government would be more open, GATArenewed its informational requests to the Fed and the Treasury. Theserequests concentrated on gold swaps. Of course both requests weredenied 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 wasdirected to a full member of the Fed's Board of Governors, Kevin M.Warsh, formerly a member of the President's Working Group on FinancialMarkets, nicknamed the Plunge Protection Team. Warsh denied GATA'sappeal but in his letter to our lawyer he let slip some stunninginformation:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
Warsh wrote: "In connection with your appeal, I have confirmed thatthe information withheld under Exemption 4" -- that's Exemption 4 ofthe Freedom of Information Act -- "consists of confidential commercialor financial information relating to the operations of the FederalReserve Banks that was obtained within the meaning of Exemption 4. Thisincludes information relating to swap arrangements with foreign bankson behalf of the Federal Reserve System and is not the type ofinformation that is customarily disclosed to the public. Thisinformation was properly withheld from you."
So there it is: The Federal Reserve today -- right now -- has gold swap arrangements with "foreign banks."
Eight years ago Fed Chairman Alan Greenspan and the general counselof the Federal Open Market Committee, Virgil Mattingly, vigorouslydenied to GATA, through two U.S. senators who had inquired of the Fedon our behalf, that the Fed had gold swap arrangements, even thoughFOMC minutes from 1995 quote Mattingly as saying the U.S. has engagedin gold swaps:
But now the Fed admits such arrangements.
Of course Fed Governor Warsh did not say that the Fed has actuallyswapped any gold lately, only that it has arrangements to do so -- and,just as important, that the Fed does not want the public and themarkets to know about those arrangements, does not want the public andthe markets to know about the disposition of United States goldreserves.
GATA is preparing to sue the Fed in federal court to compel disclosure of these gold swap arrangements.
There is a reason for the Fed's insistence that the public and themarkets must not know what the Fed is doing in the gold market.
It is because, as the documents compiled and publicized by GATAsuggest, suppressing the gold price is part of the generalsurreptitious rigging of the currency, bond, and commodity markets bythe U.S. and allied governments, because this market rigging is theforemost objective of U.S. foreign and economic policy, and becausethis rigging cannot work if it is exposed and the markets realize thatthey are not really markets at all.
And the rigging increasingly is being exposed and understood.
In complaining about the manipulation of the gold market, GATA hasnot been called "conspiracy nuts" by everyone. We have gained a gooddeal of institutional support over the years.
First came Sprott Asset Management in Toronto, which in 2004 issued a
comprehensive report supporting GATA. The report was written bySprott's chief investment strategist, John Embry, and his assistant,Andrew Hepburn, and was titled "Not Free, Not Fair -- the Long-TermManipulation of the Gold Price." It remains available at the SprottInternet site:
www.sprott.com/docs/PressReleases/20_not_free_not_fair.pdf
Then in 2006 the Cheuvreux brokerage house of Credit Agricole, themajor French bank, issued its own report confirming GATA's findings ofmanipulation in the gold market. The Cheuvreux report was titled"Remonetization of Gold: Start Hoarding," and you can find it at GATA'sInternet site:
www.gata.org/files/CheuvreuxGoldReport.pdf
And in 2007 Citigroup -- yes, Citigroup, a pillar of the Americanfinancial establishment -- joined the supposed conspiracy nuts. Itpublished a report titled "Gold: Riding the Reflationary Rescue,"written by its analysts John H. Hill and Graham Wark, declaring: "Goldundoubtedly faced headwinds this year from resurgent central bankselling, which was clearly timed to cap the gold price." You can findthe Citigroup report at GATA's Internet site:
Even those authorities who do not want to run afoul of governmentinstitutions that with a few computer keystrokes can create virtuallyinfinite amounts of money may have to admit the opportunity for centralbanks to manipulate the gold market. For it is widely acknowledged thatannual world gold production is about 2,400 tonnes, that annual networld gold demand is about 3,400 tonnes, that gold production has beenfalling as demand has been rising, and that the thousand-tonne gapbetween production and net demand has been filled mainly by centralbank dishoarding and leasing.
What do you suppose the gold price would be if central banks were not supplying more than a quarter of annual demand?
That dishoarding was not all innocent management of a foreignexchange reserve portfolio. Much of it was meant as market intervention-- and after all, market intervention is exactly why central bankingwas invented.
Intervening in markets is what central banks do. They have no other purpose.
Central banks admit intervening often in the currency markets,buying and selling their own currencies and those of other governmentsto maintain exchange rates at what they consider politically desirablelevels. Central banks admit doing the same in the government bondmarkets. There is even evidence that the Federal Reserve and TreasuryDepartment have been intervening frequently in the U.S. stock marketssince the crash of 1987.
You do not have to settle for rumors about the "Plunge ProtectionTeam," also known as the President's Working Group on FinancialMarkets. Again you can just look at the public record.
The Federal Reserve injects billions of dollars into the stock andbond markets every week, on the public record, through the major NewYork financial houses, its so-called primary dealers in federalgovernment bonds, using what are called repurchase agreements and theFed's Primary Dealer Credit Facility. The financial houses thus havebecome the Fed's agents in directing that money into the markets. Therecent rise in the U.S. stock market matches almost exactly the moneyfunneled by the Fed to the New York financial houses through repurchaseagreements and the Primary Dealer Credit Facility.
Meanwhile, for years the International Monetary Fund, the centralbank of the central banks, has been openly intervening in the goldmarket by threatening to sell gold. The IMF said its intent in sellinggold was to raise money to lend to poor nations. This explanation wasridiculous on its face, though the IMF has never been challenged aboutit in the financial press. No, the financial press has been happy totell the world that central banks that lately have effortlesslyconjured into existence fantastic amounts of money in many currenciescould find a little money to help poor countries only by selling gold.
Of course the intent of the IMF and its member central banks was notto help poor countries but to intimidate the gold market and controlthe gold price.
That the IMF intimidated the gold market so long with this threat ofgold sales was all the more remarkable because the IMF probably hasnever had any gold to sell in the first place.
In April 2008 I wrote to the managing director of the IMF, DominqueStrauss-Kahn, with five questions about the IMF's gold. I copied theletter to the IMF's press office by e-mail, and quickly began to getsome answers from one of its press officers, Conny Lotze.
My first question to the IMF was: "Your Internet site says the IMFholds 3,217 metric tons of gold 'at designated depositories.' Whichdepositories are these?"
Conny Lotze of the IMF replied, but not specifically. She wrote:"The fund's gold is distributed across a number of officialdepositories." She noted that the IMF's rules designate the UnitedStates, Britain, France, and India as IMF depositories.
My second question was: "If you would prefer not to identify thedepositories for security reasons, could you at least identify thenational and private custodians of the IMF's gold and the amounts ofIMF gold held by each?"
Conny Lotze replied, again not very specifically: "All of the designated depositories are official."
My third question was: "Is the IMF's gold at these depositoriesallocated -- that is, specifically identified as belonging to the IMF-- or is it merged with other gold in storage at these depositories?"
Conny Lotze replied, still not very specifically: "The fund's gold is properly accounted for at all its depositories."
My fourth question was: "Do the IMF's member countries count theIMF's gold as part of their own national reserves, or do they count andidentify the IMF's gold separately?"
Conny Lotze replied a bit ambiguously: "Members do not include IMFgold within their reserves because it is an asset of the IMF. Membersinclude their reserve position in the fund in their internationalreserves."
This sounded to me as if the IMF members were still counting astheir own the gold that supposedly belongs to the IMF -- that the IMFmembers were just listing the gold assets in another column on theirown books.
My fifth question to the IMF was: "Does the IMF have assurances fromthe depositories that its gold is not leased or swapped or otherwiseencumbered? If so, what are these assurances?"
Conny Lotze replied: "Under the fund's Articles of Agreement it is not authorized to engage in these transactions in gold."
But I had not asked if the IMF itself was swapping or leasing gold.I had asked whether the custodians of the IMF's gold were swapping orleasing it.
This prompted me to raise one more question for Conny Lotze. I wroteher: "Is there any audit of the IMF's gold that is available to thepublic? I ask because, if the amount of IMF gold held by eachdepository nation is not public information, there does not seem to bemuch documentation for the IMF's gold, nor any documentation for theassurance that its custody is just fine. Without any details ordocumentation, the IMF's answer seems to be simply that it should betrusted -- that it has the gold it says it has, somewhere."
And that was the last I heard from Conny Lotze. She didn't answer meagain. I had spoken a word that is increasingly unspeakable in the goldsection of central banking: audit.
This week the IMF at last announced the disposal of some of the 400tonnes of gold it long had been threatening to sell. Two hundred tonneshave been purchased by the Reserve Bank of India. This may or may notbe a real transaction, a real transfer of gold from an IMF vault to avault of the Reserve Bank of India. More likely this transaction isonly a bookkeeping entry among IMF member central banks. But in anycase it seems likely that the gold with which the IMF has beenthreatening the market for years is never going to hit the market, ifit even exists. Rather, this gold will remain in the mysteriouspossession of central banks.
Lately central bankers often have complained about what they call"imbalances" in the world financial system. That is, certain countries,particularly in Asia, run big trade surpluses, while other countries,especially the United States, run big trade deficits and consume farmore than they produce, living off the rest of the world. Thesecomplaints by the central bankers about "imbalances" are brazenlyhypocritical, since these imbalances have been caused by the centralbanks themselves, caused by their constant interventions in thecurrency, bond, and commodity markets to prevent those markets fromcoming into balance through ordinary market action lest certainpolitical interests be disturbed.
Yes, when markets balance themselves they often do it brutally,causing great damage to many of their participants. The United Statesenacted a central banking system in 1913 because for the almost 150years before then the country went through a catastrophic deflationevery decade or so. Central banking was created in the name ofpreventing those catastrophic deflations.
The problem with central banking has been mainly the old problem of power --- it corrupts.
Central bankers are supposed to be more capable of restraint thanordinary politicians, and maybe some are, but they are not always oreven often capable of the necessary restraint. One market interventionencourages another and another and increases the political pressure tokeep intervening to benefit special interests rather than the generalinterest -- to benefit especially the financial interests, the bankingand investment banking industries. These interventions, subsidies tospecial interests, increasingly are needed to prevent the previousimbalances from imploding.
And so we have come to an era of daily market interventions bycentral banks -- so much so that the main purpose of central bankingnow is to prevent ordinary markets from happening at all.
By manipulating the value of money, central banking controls thevalue of all labor, services, and real goods, and yet it is conductedalmost entirely in secret -- because, in choosing winners and losers inthe economy, advancing infinite amounts of money to some participantsin the markets but not to others, administering the ultimate patronage,central banking cannot survive scrutiny.
Yet the secrecy of central banking now is taken for granted even in nominally democratic countries.
Maybe the Federal Reserve's intervention to rescue Bear Stearnsthrough the Fed's de-facto subsidiary, JPMorganChase, will cause somedevastating public inquiries by Congress and the news media. But what ahundred years ago in the United States was called the Money Power is soascendant today that it sometimes even boasts of its privilege. Whatother agency of a democratic government could get away with theprinciple that was articulated on national television in the UnitedStates in 1994 by the vice chairman of the Federal Reserve, AlanBlinder? Blinder declared: "The last duty of a central banker is totell the public the truth."
The truth as GATA sees it is this:
First, gold is the secret knowledge of the financial universe, butit is becoming an open secret. That is GATA's work -- to break thesecret open, to show how the gold price has been suppressed by centralbank creation of imaginary gold in amounts to match and thus helpconceal the vast inflation of the world's money supply. We willcontinue to use freedom-of-information law against the Fed and theTreasury Department about their policies toward gold and thedisposition of the U.S. gold reserve. Of course central banks can nomore afford to account fully for their gold reserves than the Fed andJPMorganChase can afford to disclose details of their negotiations forthe rescue of Bear Stearns. Indeed, as my correspondence with the IMFsuggests, the disposition of Western central bank gold reserves is asecret more closely guarded than the blueprints for the manufacture ofnuclear weapons.
Why can't the public and the markets be permitted to know exactlywhere central bank gold reserves are? Because in the hands ofgovernments gold is a deadly weapon -- as the Reserve Bank of Australiaacknowledges, the main weapon of currency market intervention.
Second, all technical analysis of markets now is faulty if it fails to account for pervasive government intervention.
And third, the intervention against gold is failing because ofoveruse, exposure, exhaustion of Western central bank gold reserves --we estimate that the Western central banks have in their vaults onlyabout half the 32,000 tonnes they claim to have -- and the resentmentof the developing world, which is starting to figure out how it hasbeen expropriated by the dollar system, a system in which people doreal work and create real goods and send them to the United States inexchange for mere colored paper and electrons.
For years now the Western central banks have been attempting acontrolled retreat with gold, bleeding out their reserves with sales,leases, and derivatives so that gold's ascent and the dollar'sinevitable decline may be less shocking. Central bankers often conveypart of this strategy in code; they warn against what they call a"disorderly decline" in the dollar, as if an "orderly" decline is allright.
The rise in the gold price over the last decade is just the otherside of that coin -- an "orderly" rise, 15 percent or so per year, arise carefully modulated by surreptitious central bank intervention.
But GATA believes that the central banks may have to retreat fartherwith gold than anyone dreams, and far more abruptly than they haveretreated so far. We believe that when the central banks are overrun inthe gold market, as they were overrun in 1968, and the market begins toreflect the ratio between, on one hand, the supply of real gold, actualmetal, not the voluminous paper promises of metal, and, on the otherhand, the explosion of the world money supply of the last few decades-- as the market begins to perceive the difference between the real andthe unreal -- there may not be enough zeroes to put behind the goldprice.
A century ago Rudyard Kipling wrote a poem that foresaw the declineof the empire of his country, Great Britain. Kipling's poem attributedthis decline to the loss of the old virtues, the virtues that werelisted at the top of the pages in the special notebooks, called"copybooks," that were given to British schoolchildren at that time --virtues like honesty, fair dealing, Ten Commandments stuff. The titleof Kipling's poem is "The Gods of the Copybook Headings," and itsconclusion is a warning to the empire that succeeded the one he wasliving in:
Then the Gods of the Market tumbled,
And their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled
And began to believe it was true
That All is not Gold that Glitters,
And Two and Two make Four,
And the Gods of the Copybook Headings
Limped up to explain it once more.
As it will be in the future,
It was at the birth of Man.
There are only four things certain
Since Social Progress began:
That the Dog returns to his Vomit
And the Sow returns to her Mire,
And the burnt Fool's bandaged finger
Goes wabbling back to the Fire;
And that after this is accomplished,
And the brave new world begins,
When all men are paid for existing
And no man must pay for his sins,
As surely as Water will wet us,
As surely as Fire will burn,
The Gods of the Copybook Headings
With terror and slaughter return.
The gold price suppression story is important despite this week'sdramatic rise in the gold price. For even as the price of gold has beenrising, we really don't yet know what a fair price, a free-marketprice, for gold is, since gold has not traded in a free market for manyyears and is not trading in a free market now.
Indeed, since central bank intervention in the currency, bond,equities, and commodity markets has exploded over the last year, wedon't really know what the market price of anything is anymore.Thus the gold price suppression story is a story about the valuation ofall capital and labor in the world -- and whether those values will beset openly in free markets, the democratic way, or secretly bygovernments, the totalitarian way.
The specifics of the gold price suppression operation arecomplicated, but you don't have to remember them all if you know whatthey mean.
They mean that there is a currency war going on between countriesand their central banks. There has been such a war for many years, onlythe victims were not really fighting back. Now some of them are. Signsof this war are now everywhere -- like the story published a month agoby the British newspaper The Independent that described aninternational plan to replace the dollar in oil trading:
Gold and silver have been and remain currencies and will beremonetized by markets eventually if not by central banks as well,because gold and silver are the only neutral currencies, the only currencies that are not the liabilities of any particular country.
But when you invest in currencies like gold and silver, you riskgetting caught in the crossfire of the currency war. As in any war,truth is the first casualty in the currency war, even as secrecy isalways the first principle of central banking.
Meanwhile, not asking the right questions of the right people seemsto be the first principle of most mainstream financial journalists andeven the first principle of some gold and silver market analysts. Thesejournalists and analysts take government secrecy in central banking forgranted, even as the evidence of market intervention and manipulationexplodes all around them. This acceptance of secrecy reminds me of thebumbling police detective played by Leslie Nielsen in the "Naked Gun"movies, particularly his performance in this scene:
Well, there is something to see here.
The precious metals promise great rewards to investors, but to getthe necessary information you have to do a lot more work than otherinvestors.
