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Jesse: Why the Official Antipathy to Gold and Silver? The Second Oldest Profession

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August 10, 2010 – Comments (7)

Excellent excellent post from Jesse at Jesse's Café Américain

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Why the Official Antipathy to Gold and Silver? The Second Oldest Profession
August 9, 2010

http://jessescrossroadscafe.blogspot.com/2010/08/why-official-antipathy-to-gold-and.html

[excerpt]

Every so often someone asks, 'Why do the government and the banks manipulate the price of gold and silver?'

There is a great deal of circumstantial evidence to support this, even some blatant quotes pertinent to the topic from the likes of Volcker, Greenspan, and Bank of England governor Eddie George. Of course it can all be denied. People can deny anything, even well known historical events with many witnesses, if it suits their bias and purposes.

But putting aside the operational aspects, what is the motive?

Most recently a correspondent from India asked the question 'why do the banks wish to control silver from the short side? Why would they not blow it into a bubble like they do with stocks and make their profit there? Why do the banks wish to hold these prices down and make people think badly of silver and gold which we here value so much?'

When asked this, I will usually attempt some explanation that begins with the fact that the banks involved are the Primary Dealers for the most part, and very involved with the Federal Reserve and the government on a variety of levels in the issuance and arbitrage of official US debt.

The motive therefore involves aspects from an 'official' monetary perspective. It will often include a reference to Gibson's Paradox, a paper by Larry Summers involving the price of gold and its perceptual relationship with the long end of the curve. It might include Volcker's and Greenspan's comments about the price of gold casting a negative light on the stability of the currency if it rises too high or too quickly. I may even get into the Second Bank of the United States, and Andrew Jackson's populist role in exposing its frauds, and refusing to renew its Charter in favor of constitutional money.

But if I am ever asked about this in the future, I can think of no better, no more concise statement of a possible motive for the manipulation of gold and silver than this:

    “The central economic problem plaguing this country since 1913 has been the presence of the Federal Reserve System. Without the Federal Reserve System’s debt-currency scheme having effectively supplanted the constitutional monetary system based upon silver and gold, it would have been impossible - not simply improbable, or difficult, but impossible - for politicians in the public sector and speculators in the private sector to have amassed the staggering level of unpayable, unconstitutional, and unconscionable debt that now bears down upon this country.”

    Dr. Edwin Vieira, Jr., Going to the Roots of the Problem



It's enabling the fraud, always and everywhere, and the power obtained in controlling the supply and issuance of money. As Lord Acton noted,

    "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the Banks."


There are those who are involved in productive labor, and those who wish to unproductively tax it. It is an old story with deep roots in history.

7 Comments – Post Your Own

#1) On August 10, 2010 at 11:25 AM, silverminer (30.49) wrote:

Precisely: a managed gold price is the gateway to sustained or increasing deficit spending. Without it, USD-debt would have no buyers of note, and the true depth of our existing debt crisis would be known and felt by all.

Thanks for the great post.

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#2) On August 10, 2010 at 12:41 PM, binve (< 20) wrote:

silverminer,

Hey Sinch!

>>Without it, USD-debt would have no buyers of note, and the true depth of our existing debt crisis would be known and felt by all.

Exactly man. Thanks!..

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#3) On August 10, 2010 at 1:23 PM, outoffocus (23.49) wrote:

So playing devil's advocate here, for the sake of PM investing, what is to keep these banks from holding down the price of silver and gold indefinitely?

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#4) On August 10, 2010 at 1:43 PM, binve (< 20) wrote:

outoffocus,

Good question. Maybe they do.

I doubt it though. Hedge funds and even governments can distort business cycles but they can't stop them. I think public consciousness is finally coming around to the fact that the US Dollar and all other fiat currencies (some are more profligate than others) are not honest money and gold and silver are. If one accepts this idea (and I do) then I think the bull run in PMs cannot be stopped, just distorted in terms of timing. My $0.02. The best observation is seeing how much gold has moved despite being manipulated..

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#5) On August 10, 2010 at 10:44 PM, ChrisGraley (29.74) wrote:

Great post!

It's not just about enabling fraud though. It's about enabling the lunacy that follows fraud. 

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#6) On August 11, 2010 at 2:36 AM, DarthMaul09 (29.79) wrote:

So playing devil's advocate here, for the sake of PM investing, what is to keep these banks from holding down the price of silver and gold indefinitely?

China still wants gold, silver and other commodity prices to remain low and at the same time have a relatively strong US dollar because they remain a major buyer of PM and commodities.  When they have achieved their buying goals, they will want their PM and commodity assets to be accurately reflected by a weakening US currency.  In other words PM and commodity prices will rise dramatically, in a very short period of time.  The more interesting question is how soon will this happen and will the current spending practices of the US government bring this date into the not too distant future?  What may force China's hand is a rapidly falling US dollar index, since that would reduce the buying power of their US treasury debt holdings.  It is clear that they do not trust the US dollar to hold its value, so it would only seem logical for them to divest into something that has proven to maintain its value over time.  So for now China will go along with the PM fraud since it serves their immediate interest, but the day the dollar dies is now more a question of when than if.

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#7) On August 11, 2010 at 8:41 AM, binve (< 20) wrote:

ChrisGraley ,

Thanks man!

>>It's about enabling the lunacy that follows fraud.

Exactly. It is the 'something for nothing / very little' mentality. And the fact that our *extremely transient* something for nothing occurred during the 90s and the first half of the 2000s became 'taken for granted indefinitely' just shows how predisposed a) people are to that mentality and b) politicians are to reinforcing that mentality.

If something is too good to be true ...

DarthMaul09 ,

Some more good points, thanks!..

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