XMFSinchiruna (28.59)

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#1) On March 31, 2010 at 8:04 AM, binve (< 20) wrote:

Great repository! I am definitely following this one!

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#2) On March 31, 2010 at 8:12 AM, ChrisGraley (31.73) wrote:

Why the market continues to ignore it is amazing.

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#3) On March 31, 2010 at 9:03 AM, workfor (< 20) wrote:

They don't call them banksters for nothing. Sometimes I ask myself if I'm doing "God's work" by investing in "God's money", or if its just simply moral hazard.

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#4) On March 31, 2010 at 3:07 PM, XMFSinchiruna (28.59) wrote:

Here are some fascinating archival minutes from FOMC meetings and such compiled by GATA's Adrian Douglas:

http://gata.org/node/8429

Adrian Douglas: More Fed minutes document gold market manipulation Submitted by cpowell on Sun, 2010-03-14 19:45. Section: Documentation

By Adrian Douglas
Sunday, March 14, 2010

The Federal Reserve's Federal Open Market Committee (FOMC) meets eight times per year to discuss and set interest rate policy. The minutes of these meetings are not released for five years. This ensures that few people will ever read them. Furthermore, the minutes are heavily redacted and edited.

In his 2008 book "Deception and Abuse at the Fed," Robert Auerbach documents how Fed officials perjured themselves when they lied to Congress about the existence of verbatim transcripts of FOMC meetings. The Sunshine Act of 1976 required all "agencies" to promptly make available to the public any transcripts, recordings, or minutes of discussions in official meetings. For 17 years Fed officials misled Congress in denying that verbatim transcripts or tape recordings existed. They claimed that recordings were taped over and transcripts were destroyed, leaving only the redacted and edited minutes in their archives. However, because of direct questioning by U.S. Rep. Henry Gonzalez before the House Banking Committee in 1993, it became clear the Fed had been lying. Shortly thereafter Fed Chairman Alan Greenspan ordered tapes and transcripts to be destroyed.

It is clear from such actions that the information contained in those transcripts must be very damaging or incriminating to the Federal Reserve.

After reading Auerbach's book I was inspired to dredge through published FOMC minutes. My thinking was that if an organization is so inept at covering up that detailed transcripts were retained, then perhaps it is also inept at completely redacting sensitive and incriminating information. What I found is quite astounding and serves as documented evidence by the Federal Reserve itself that it manipulates the gold market.

In the March 21, 1978, FOMC meeting --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19780321meeting.p...

-- the following exchange took place.

* * *

CHAIRMAN MILLER. The Treasury has severe reservations about it. Originally, two weeks ago, they were taking the position that they would not be in favor of it -- that it raised too many problems for them. Since then I think they have become a little more open-minded about it. However, I think the first avenue is apt to be the sale of gold. Sales of gold were under consideration and were deferred partly because of the French elections, which are now over. So I think it's likely that the Treasury will start a program of selling gold, which I personally would favor. There are a lot of advantages in using gold because at least then we don't end up with debt and the currency risks that go with it. So I think that's an avenue that should be pursued. There has been a discussion about the level of gold sales that are possible -- what the market can absorb and that sort of thing. Henry can correct me, but I believe the Treasury feels that they could sell about 300,000 ounces a month.

MR. WALLICH. That would be a very moderate amount -- something like less than 60 million. And bear in mind that unless they can develop a means of selling the gold for foreign currency in a way that doesn't cause holders of dollars to buy that foreign currency in order to buy the gold, it could be completely counterproductive. Then there isn't going to be much of a net effect. There is some because, after all, we are importers of gold, which may reduce the imports of gold and may make the trade balance look a little better. There is some portfolio shift when there is gold in portfolios instead of dollars, so I wouldn't say it's without effect, but there are lots of qualifications on the possible success.

CHAIRMAN MILLER. The nice thing about this problem is that it's surrounded by dilemmas! Everything you do has an adverse effect on something else. Nothing is ideal. I might add that we live in a situation where the market is very realistic, very factual. That's why the possibility that gold would be sold caused the gold price to drop by $5. You don't have to sell gold; you just have to breathe [that you may] one day.

* * *

The last sentence by Chairman William Miller (Fed chairman in 1978 and 1979) telling the FOMC that the gold market can be manipulated by propaganda is very significant. This would certainly make Joseph Goebbels proud. This manipulative deception has been played out time and time again since then. This is why official gold sales are always announced in advance and the announcements are repeated many times, as happened with the International Monetary Fund's gold sales.

At the FOMC meeting of July 9, 1980 --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19800709meeting.p...

-- the following discussion took place.

* * *

MR. BAUGHMAN. Is it considered a political no-no to sell gold in the current environment?

CHAIRMAN VOLCKER. Oh, I don't think so, necessarily. I don't think it's a political problem in the sense that you may be suggesting. It's a question of whether it's very useful or desirable at this stage. [If we sold gold] we'd have to do it alone; I think that's pretty clear. It isn't anything that's ruled out a-priori, but it's a practical matter of whether it's a good idea.

MR. BAUGHMAN. Well, it's between selling assets and borrowing money. That seems to me the significant difference.

VICE CHAIRMAN SOLOMON. The psychology, Ernie, is that [selling gold] seems to be much more effective if it's a component of an overall package of forceful measures than if it is done by itself. In the present climate it would look like a major act of weakness. And that might spur some additional dollar selling unless we did it on an enormously massive scale, not just the levels that we have before. On the other hand, if the situation gets to a point where once again we have to begin thinking carefully of a package, then along with some monetary policy measures it would be appropriate and add to the effectiveness -- this is my own personal feeling -- to do some substantial gold selling. And in that situation I think the Congress would understand that. We'd have less of a political problem also. So I think both factors operate.

CHAIRMAN VOLCKER. I should say, in connection with the political problem, that I don't think there are any great political constraints so far as the thinking in the Administration is concerned. There are politicians who would make a noise that would reflect upon the credibility of the action. If we sell some gold and then immediately get some congressional opposition, the market would say: "Well, they're not going to sell very much because there's too much opposition." And, therefore, it might not be very productive in terms of the impact we'd want to achieve.

MR. BAUGHMAN. There would be some grassroots opposition to it. I can report that, but I don't have any impression. ...

CHAIRMAN VOLCKER. Perhaps I spoke a little misleadingly because that kind of opposition, I think, does reflect on the credibility of the action. It raises questions about whether it could be sustained and what the [total] amount would be and whether it's really an accepted technique or not, even though in some sense I think it's not a political deal for the Administration except in terms of appraising that reaction. I can't quite see the Congress opposing it in a formal sense but there would be a lot of noise by these limited groups. We have to ratify these transactions.

MR. SCHULTZ. So moved.

* * *

What is noteworthy is the comment by Vice Chairman Solomon when he says selling gold "seems to be much more effective if it's a component of an overall package of forceful measures than if it is done by itself. In the present climate it would look like a major act of weakness. And that might spur some additional dollar selling unless we did it on an enormously massive scale, not just the levels that we have before."

This is without a doubt a proposal to undertake gold market manipulation, and what's more it is proposed to be on an "an enormously massive scale." This is not a discussion about selling gold based on a motivation to maximize the profit from such sales. Furthermore, the vice chairman admits to previous gold market intervention when he recommends increased selling of gold that is "not just the levels that we have before."

What is shocking is the apparent cavalier approach to breaking the law. Volcker says, "I should say, in connection with the political problem, that I don't think there are any great political constraints so far as the thinking in the Administration is concerned. There are politicians who would make a noise that would reflect upon the credibility of the action. If we sell some gold and then immediately get some congressional opposition. ..."

Note that the proposal implies that gold sales would occur without the congressional approval required by law.

The "strong dollar policy" was concocted by Treasury Secretary Robert Rubin in 1995. However, the mechanism by which such a policy could be implemented in a supposedly free market was never explained. GATA has long maintained that the policy involved the suppression of the gold price. In December 1994 the following exchange took place at the FOMC meeting --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19941220meeting.p...

* * *

CHAIRMAN GREENSPAN. President Jordan.

MR. JORDAN. I think the main part of our problem right now is inflation psychology. It certainly reflects the lack of a nominal anchor. It suggests that it would be helpful to have a politically supported mandate to attain and maintain a stable value of the dollar. If somehow we could achieve the conditions of a true gold standard -- without gold but the steady purchasing power of money in the minds of people -- over time it would make some of these short-term things that we go through a lot easier to deal with."

* * *

Well, how about that? Achieving the conditions of a true gold standard without gold? Does that sound like a confidence trick? The last sentence of the FOMC minutes above here has been redacted. It would be extremely interesting to know the full extent of the discussion.

In response to a question posed by U.S. Rep. Ron Paul in testimony before Congress in 2005, Fed Chairman Greenspan confirmed that this financial wizardry has actually been implemented:

http://www.lewrockwell.com/paul/paul267.html

* * *

MR. GREENSPAN: So that the question is: Would there be any advantage, at this particular stage, in going back to the gold standard? And the answer is: I don't think so, because we're acting as though we were there. Would it have been a question at least open in 1981, as you put it? And the answer is yes. Remember, the gold price was $800 an ounce. We were dealing with extraordinary imbalances, interest rates were up sharply, the system looked to be highly unstable -- and we needed to do something.

Now, we did something. The United States. ... Paul Volcker, as you may recall, in 1979 came into office and put a very severe clamp on the expansion of credit, and that led to a long sequence of events here, which we are benefiting from up to this date. So I think central banking, I believe, has learned the dangers of fiat money, and I think, as a consequence of that, we've behaved as though there are, indeed, real reserves underneath the system.

* * *

The last sentence is exactly what Mr. Jordan was pondering in the FOMC meeting of December 1994: How to have a gold standard without using gold. Greenspan says the Fed "behaved as though there are, indeed, real reserves underneath the system."

I think it is safe to say there is some financial wizardry that is apparent by implication. One either has real reserves or one doesn't. To behave as if there are when there are not is a confidence trick doomed to fail at some stage.

In the FOMC meeting of Dec 22, 1992, the Fed governors reveled in the fact that accounting errors in gold shipments could improve the U.S. balance of trade numbers --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19921222meeting.p...

* * *

CHAIRMAN GREENSPAN. Did I hear you correctly when you said that the gold exports in October appear to have come from the coffers of the Federal Reserve Bank of New York? Has anyone looked lately?

MR. TRUMAN. Well, I didn't want to tell too many secrets in this temple!

VICE CHAIRMAN CORRIGAN. Obviously, we knew what happened to the gold, but I don't think we knew what it did to exports.

MR. TRUMAN. What happens in the Census data is that the Federal Reserve Bank of New York is treated as a foreign country. [Laughter] And when a real foreign country takes some of the gold out of New York and ships it abroad, it counts first as imports and then as exports. However, the import side is not picked up in the Census data. So there you get the export side of it.

MR. LAWARE. Great accounting!

MR. BOEHNE. Great confidence building!

MR. TRUMAN. That's because you haven't been filling out your import documents!

MR. ANGELL. Let me run this by again. You mean a country owns gold and has it stored in the Federal Reserve Bank of New York and if they ship it out, that's an export?

MR. TRUMAN. And in the balance of payments accounts it also counts as an import, so it washes out.

CHAIRMAN GREENSPAN. The Federal Reserve Bank's basement is a foreign country. When they move it out of the basement into the United States, it's an import. Then, when they ship it out again, it's an export.

MR. ANGELL. That makes sense!

MR. TRUMAN. And sometimes when they sell the gold, it might be sold into the United States, so it should count as an import. It doesn't necessarily always show up as an export.

MR. BOEHNE. That really clarifies it!

MR. KELLEY. Does it have to get out of your vault at all in order to be considered an import and an export?

VICE CHAIRMAN CORRIGAN. Well, I'm not even going to try to answer that. In this particular case I know what happened, so I think. ...

* * *

The most intriguing part of this discussion is the question by Kelley: "Does it have to get out of your vault at all in order to be considered an import and an export?"

While there is no explanation of the thinking behind Kelley's question (it was probably redacted), it is reasonable to extrapolate the inference that "ledger entries" for gold movements could be made to the import or export accounts without any gold having been physically moved.

At the May 18, 1993, FOMC meeting there was much discussion how gold influences public attitudes toward inflation. There were discussions about interfering in the gold market to change the public's expectation of inflation, and such postulated interference was even regarded as amusing by the FOMC --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19930518meeting.p...

* * *

MR. ANGELL. Here's what I think would happen. I don't think we should increase interest rates by 300 basis points, but, if we did, I'm quite certain the price of gold would immediately begin a [sharp], quick [drop]. It would happen so fast you'd just have to go and watch it on the screen. If we made a 100-basis-point increase in the Fed funds rate, the price of gold surely would turn back down unless the situation is worse than I anticipate. If we made a 50-basis-point increase in the Fed funds rate, I don't know what would happen to the price of gold, but I'd sure like to find out! [Laughter]... People can talk about gold's price being due to what the Chinese are buying; that's the silliest nonsense that ever was. The price of gold is largely determined by what people who do not have trust in fiat money system want to use for an escape out of any currency, and they want to gain security through owning gold. Now if annual gold production and consumption amount to 2 percent of the world's stock, a change of 10 percent in the amount produced or consumed is not going to change the price very much. But attitudes about inflation will change it."

* * *

Later in the same meeting Greenspan pursued this line of thinking:

* * *

ALAN GREENSPAN: I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market. 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. We're not just going through the standard policy where the money supply is expanding, the economy is expanding, and the Fed tightens. This is a wholly different thing. Anyway, I'm most curious to get your views in these various respects, so please don't be afraid to throw things out on the table.

* * *

Greenspan proposed that if the gold price could be significantly depressed, then the public's inflation expectations could be radically altered.

In an FOMC meeting in January 1995 Virgil Mattingly, the Fed's general counsel, said the following --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p...

* * *

MR. MATTINGLY. It's pretty clear that these ESF [Exchange Stabilization Fund] operations are authorized. I don't think there is a legal problem in terms of the authority. The statute is very broadly worded in terms of words like "credit" -- it has covered things like the gold swaps -- and it confers broad authority. Counsel at the White House called the Treasury's general counsel today and asked, "Are you sure?" And the Treasury's general counsel said, "I am sure." Everyone is satisfied that a legal issue is not involved, if that helps.

* * *

This comment suggests that the U.S. gold stock has been mobilized in the market. When GATA urged U.S. Sen. Jim Bunning to pursue this matter with Greenspan, Mattingly responded (http://www.gata.org/node/1181):

"These inquiries focus primarily on a statement attributed to me that appears on Page 69 of the published transcript of the January 31-February 1, 1995, FOMC meeting to the effect that the Exchange Stabilization Fund (ESF) has engaged in 'gold swaps.' Given the passage of time, some six years, I have no clear recollection of exactly what I said that day but I can confirm that I have no knowledge of any 'gold swaps' by either the Federal Reserve or the ESF. I believe that my remarks, which were intended as a general description of the authority possessed by the secretary of the treasury to utilize the ESF, were transcribed inaccurately or otherwise became garbled."

That doesn't pass the smell test. Mattingly's comments "were transcribed inaccurately or otherwise became garbled"? This is the same organization that lied to Congress for 17 years about the existence of any transcripts or recordings of the FOMC meetings. So do we believe him?

Notice the very clever inference -- "I can confirm that I have no knowledge of any 'gold swaps' by either the Federal Reserve or the ESF." He doesn't specify what type of "knowledge" he is talking about. Is it knowledge that any swaps were ever made or is it knowledge of the details of swap arrangements that were made? In any case Mattingly is professing not to know; he is not denying that any swaps have occurred.

The following discussion took place at the July 1991 meeting of the FOMC --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19910703meeting.p...

* * *

ALAN GREENSPAN: Why have commodity prices failed to decline as much as they ordinarily would during recession periods? Now, it also looks as if commodity prices are not spiking upward in a recovery like they ordinarily would. So we have a different picture in commodity prices than I've seen in a recession and, frankly, I'm very puzzled by it. At the same time that commodity prices do not show the extent of the recovery, I think it's somewhat strange that gold prices failed to move down. Given central banks' reduced willingness to own gold, or given what I see as a reluctance in the foreign central banks and others to hold as large gold stocks, given countries in southeast Asia who have changed their attitudes [toward gold], and given the Soviet Union [sales], I don't understand why gold prices do not come down. It suggests to me that there may be some what we call 'crazies' out there who believe that gold is a good [inflation hedge]. And I guess I think that [inflation concern] is in the long bond.

* * *

Greenspan thus labels as "crazies" those investors who want to protect their wealth against the promiscuous money creation of his Federal Reserve. In 1966 Greenspan wrote an essay titled "Gold and Economic Freedom" in which he recognized the unique properties of gold as an inflation hedge --

http://www.321gold.com/fed/greenspan/1966.html

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

And clearly once Greenspan had sold his soul to the devil and become a "statist" himself, he joined the antagonists of gold.

The following is a very enlightening discussion at the July 1995 FOMC meeting --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19950706meeting.p...

* * *

CHAIRMAN GREENSPAN. I think I've got it! [Laughter] You are telling me that the SDR [Special Drawing Rights] certificate comes out of the Treasury and we cancel the Treasury obligation and it is wholly an asset swap so that the debt to the public of the U.S. Treasury goes down by that amount. Is that what happens? That solves President Jordan's problem too! [Laughter]

MR. JORDAN. Can I follow up on that? The same thing happened when we changed the price of an ounce of gold from $35 to $38 and then to $42.22. The Treasury got a windfall of about $1 billion to $1.2 billion in both of those so-called devaluations. So an issue on this is: What was the dollar price of SDRs that we monetized? You say I have an asset on my balance sheet and I don't know what the value of it is.

CHAIRMAN GREENSPAN. It's about $42.

MR. TRUMAN. It's $42.22; it's equivalent to the official price of gold.

MR. JORDAN. We do this at the official U.S. Treasury price of gold?

CHAIRMAN GREENSPAN. Do you mean that we can lower the debt to the public by moving the price of gold up to the market price? That could cut the debt back by a not insignificant amount!

MR. JORDAN. I have been trying not to mention that publicly for fear that someone might want to do it.

CHAIRMAN GREENSPAN. It's probably too late; we just mentioned it.

MR. JORDAN. It will become known five years from now!

MR. LINDSEY. Five years from now it will be read in the transcript for this meeting.

MR. BLINDER. By which time it already will have been done.

* * *

This exchange is extremely significant because it recognizes that external debt of the United States eventually will have to be balanced with the amount of gold claimed to be held by the Treasury. Interestingly enough the Fed doesn't want this information to be known, as this would essentially devalue the dollar overnight and give instant hyperinflation. But as Greenspan points out, it would inflate away the debt.

The five-year delay in releasing information to the public is clearly viewed by the Fed as a way to disadvantage the public. When the Fed and Treasury are forced by market conditions to balance the U.S. government's debt with its gold holdings, the dollar will be massively devalued and gold will be multiples of its current price. This would certainly make it advantageous to be one of the "crazies," as Greenspan affectionately calls gold investors.

I think the true crazies will be shown to be those people who have drunk the Kool-Aid to believe that a currency can maintain its purchasing power when the central bank confesses to employing a confidence trick -- that it is "behaving" as if there were real reserves underneath its currency system.

What can be concluded from these insights into the deliberations of the FOMC?

-- On several occasions the Fed discussed targeting gold prices with its policies.

-- The Fed admits that propaganda is effective against gold investors, insofar as just mentioning the possibility of selling gold can drive down the gold price.

-- The Fed at least contemplated interfering in the gold market, and on a massive scale. The Fed admits that the U.S. government has sold gold with the intention of reducing gold's price.

-- The record shows that the Fed opined that the statutes of the Exchange Stabilization Fund have legitimized "the gold swaps." Despite claims that this statement has been inaccurately transcribed or garbled, recent information suggests otherwise. In response to GATA's request to the Fed last year under the Freedom of Information Act for access to Fed documents about gold swaps, Fed Governor Kevin M. Warsh confirmed that the Fed does indeed have gold swap agreements with foreign banks:

http://www.gata.org/node/7819

-- The Fed does not want it to be known that the external debt of the United States could be substantially reduced by revaluing official gold at the market price, lest someone wants to do that. This is an admission that the official U.S. price of gold of $42.22 per ounce is a matter of smoke and mirrors. The ability of the Fed and Treasury to create money is linked to the only liquid collateral they have, gold. The gold price that is required to make the value of U.S. gold equal to the dollars issued is multiples of the current price, and is heavily dependent on how much unencumbered gold the Treasury still holds.

-- The Fed expressed the utility of having the virtues of a gold standard without using gold itself. Greenspan later confirmed that the Fed was behaving as if it was on a gold standard, as if there were "real reserves" underneath the system. This supports GATA's claims that the gold price has been suppressed by an increase in the supply of "paper gold" -- gold that investors believe they have bought and own but is really no more than a certificate saying they own the gold. This is the case with the London Bullion Market Association's unallocated gold accounts, unbacked exchange-trade funds, pool accounts, and gold derivatives.

The demand for real physical gold bullion is surging in the face of an impending daisy-chain of sovereign debt defaults. This threatens to expose the confidence trick -- that much more gold has been sold than exists. I have explained this in a previous essay, "The Tiny Market that is the World's Biggest":

http://www.gata.org/node/8248

The Federal Reserve can "behave" as if there are real reserves under the U.S. dollar, but there are none. A study of the heavily redacted and edited minutes of the Federal Open Market Committee reveal a penchant for targeting and manipulating gold prices, and deceiving Congress and the public.

The words of Alan Greenspan from "Gold and Economic Freedom" could not be more relevant:

"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Like clowns at a rodeo, there are too many academics creating a distraction discussing whether we will have deflation or inflation. We are now in an era of unprecedented deficit spending -- which means that confiscation of wealth will also be unprecedented. One of the most prolific money creators of all time has told us what to do to prevent it: Buy gold. But buy real physical gold, not a gold receivable.

 

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#5) On March 31, 2010 at 3:20 PM, XMFSinchiruna (28.59) wrote:

 

This advertisement, sponsored by GATA
and costing $264,426.26, was published
in The Wall Street Journal on Thursday,
January 31, 2008.

Complete documentation of the statements
cited in the advertisement can be found
as follows:

-- Paragraph 2, statement by J. Virgil
Mattingly, general counsel for the
Federal Reserve:

http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p...

-- Paragraph 3, statement by Federal
Reserve Chairman Alan Greenspan:

http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm

-- Paragraph 4, motion by Barrick Gold
Corp.:

http://www.lemetropolecafe.com/img2003/memoformotiontodis.pdf

-- Paragraph 5, statement by William S.
White of the Bank for International
Settlements:

http://www.gata.org/node/4279

-- Paragraph 6, U.S. Treasury Department
international reserve position reports:

http://www.gata.org/node/5637

-- Paragraph 7, Sprott Asset Management
report:

http://www.sprott.com/docs/PressReleases/20_not_free_not_fair.pdf

-- Paragraph 7, Cheuvreux report:

http://www.gata.org/files/CheuvreuxGoldReport.pdf

-- Paragraph 7, Citigroup report:

http://www.gata.org/files/CitigroupGoldReport092107.pdf

-- Paragraph 7, Redburn Partners report:

http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf

 

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#6) On March 31, 2010 at 3:35 PM, XMFSinchiruna (28.59) wrote:

James Turk: A Short History of the Gold Cartel

http://www.gata.org/node/7402

By James Turk, Editor
Freemarket Gold & Money Report
http://www.fgmr.com/
Sunday, May 3, 2009
Copyright 2009 by James Turk. All rights reserved.

This week Bill Murphy and Chris Powell, co-founders of the Gold Anti-Trust Action Committee Inc. (www.gata.org), will be in London, England. Their trip is part of GATA's ongoing effort to raise awareness of the gold cartel and its surreptitious intervention in the gold market.

Bill and Chris will meet with the British news media to explain GATA's findings. They will also attend an important fund-raising event being held in support of GATA's work. Their trip is another important step by GATA aimed at creating a free market in gold, one which is unfettered by government intervention.

Governments want a low gold price to make national currencies look good. Gold is recognizable the world over as the "canary in the coal mine" when it comes to money. A rising gold price blurts the unpleasant truth that a national currency is being poorly managed and that its purchasing power is being inflated.

This reality is made clear by former Federal Reserve Chairman Paul Volcker. Commenting in his memoirs about the soaring gold price in the years immediately following the end of the gold standard in 1971, he notes: "Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake." It was a "mistake" because a rising gold price undermines the thin reed upon which all fiat currency rests -- confidence. But it was a mistake only from the perspective of a central banker, which is of course at odds with anyone who believes in free markets.

The U.S. government has learned from experience and has taken Volcker's advice. Given the U.S. dollar's role as the world's reserve currency, the U.S. government has the most to lose if the market chooses gold over fiat currency and erodes the government's stranglehold on the monopolistic privilege it has awarded to itself of creating "money."

So the U.S. government intervenes in the gold market to make the dollar look worthy of being the world's reserve currency when of course it is not equal to the demands of that esteemed role. The U.S. government does this by trying to keep the gold price low, but this is an impossible task. In the end, gold always wins -- that is, its price inevitably climbs higher as fiat currency is debased, which is a reality understood and recognized by government policymakers.

So recognizing the futility of capping the gold price, they instead compromise by letting the gold price rise somewhat, say, 15 percent per year. In fact, against the dollar, gold is actually up 16.3 percent per year on average for the last eight years. In battlefield terms, the U.S. government is conducting a managed retreat for fiat currency in an attempt to control gold's advance.

Though it has let the gold price rise, gold has risen by less than it would in a free market because the purchasing power of the dollar continues to be inflated and because gold remains so undervalued notwithstanding its annual appreciation this decade.

These gains started from gold's historic low valuation in 1999. Gold may not be as good a value as it was in 1999 but it nevertheless remains extremely undervalued.

For example, until the end of the 19th century, approximately 40 percent of the world's money supply consisted of gold, and the remaining 60 percent was national currency. As governments began to usurp the money-issuing privilege and intentionally diminish gold's role, fiat currency's role expanded by the mid-20th century to approximately 90 percent. The inflationary policies of the 1960s, particularly in the United States, further eroded gold's role to 2 percent by the time the last remnants of the gold standard were abandoned in 1971.

Gold's importance rebounded in the 1970s, which caused Volcker to lament the so-called mistakes of policymakers. Its percentage rose to nearly 10 percent by 1980. But gold's share of the world money supply thereafter declined, reaching about 1 percent in 1999. Today it still remains below 2 percent.

From this analysis it is reasonable to conclude that gold should comprise at least 10 percent of the world's money supply. Because it is nowhere near that level, gold is undervalued.

So given the ongoing dollar debasement being pursued by U.S. policymakers, keeping gold from exploding upward to a true free-market price is the first thing they gain from their interventions in the gold market. The other thing they gain is time. The time they gain enables them to keep their fiat scheme afloat so they can benefit from it, delaying until some future administration the scheme's inevitable collapse.

So how does the U.S. government manage the gold price?

They recruit Goldman Sachs, JP Morgan Chase, and Deutsche Bank to do it, by executing trades to pursue the U.S. government's aims. These banks are the gold cartel. I don't believe that there are any other members of the cartel, with the possible exception of Citibank as a junior member.

The cartel acts with the implicit backing of the U.S. government, which absorbs all losses that may be taken by the cartel members as they manage the gold price and which further provides whatever physical metal is required to execute the cartel's trading strategy.

How did the gold cartel come about?

There was an abrupt change in government policy around 1990. It was introduced by then-Federal Reserve Chairman Alan Greenspan to bail out the banks back then, which, as now, were insolvent. Taxpayers were already on the hook for hundreds of billions of dollars to bail out the collapsed "savings and loan" industry, so adding to this tax burden was untenable. Greenspan therefore came up with an alternative.

Greenspan saw the free market as a golden goose with essentially unlimited deep pockets, and more to the point, saw that these pockets could be picked by the U.S. government using its tremendous weight, namely, its financial resources for timed interventions in the free market, combined with its propaganda power by using the news media. In short, it was easier to bail out the insolvent banks back then by gouging ill-gained profits from the free markets instead of raising taxes.

Banks generated these profits through the Federal Reserve's steepening of the yield curve, which kept long-term interest rates relatively high while lowering short-term rates. To earn this wide spread, banks leveraged themselves to borrow short-term and use the proceeds to buy long-term paper. This mismatch of assets and liabilities became known as the carry trade.

The Japanese yen was a particular favorite to borrow. The Japanese stock market had crashed in 1990 and the Bank of Japan was pursuing a zero-interest-rate policy to try reviving the Japanese economy. A U.S. bank could borrow Japanese yen for 0.2 percent and buy U.S. T-notes yielding more than 8 percent, pocketing the spread, which did wonders for bank profits and rebuilding the bank capital base.

Gold also became a favorite vehicle to borrow because of its low interest rate. This gold came from central bank coffers, but central banks refused to disclose how much gold they were lending, making the gold market opaque and ripe for intervention by central bankers making decisions behind closed doors. The amount lent by central banks has been reliably estimated in various analyses published by GATA as between 12,000 and 15,000 tonnes, nearly half of total central bank gold holdings and four to six times annual gold mine production of 2,500 tonnes. The banks clearly jumped feet first into the gold carry trade.

The carry trade was a gift to the banks from the Federal Reserve, and all was well provided that the yen and gold did not rise against the dollar, because this mismatch of dollar assets and yen or gold liabilities was not hedged. Alas, both gold and the yen began to strengthen, which, if allowed to rise high enough, would force marked-to-market losses on those carry-trade positions in the banks. It was a major problem because the losses of the banks could be considerable, given the magnitude of the carry trade.

So the gold cartel was created to manage the gold price, and all went well at first, given the help it received from the Bank of England in 1999 to sell half of its gold holdings. Gold was driven to historic lows, as noted above, but this low gold price created its own problem. Gold became so unbelievably cheap that value hunters around the world recognized the exceptional opportunity it offered and demand for physical gold began to climb.

As demand rose, another more intractable and unforeseen problem arose for the gold cartel.

The gold borrowed from the central banks had been melted down and turned into coins, small bars, and monetary jewelry that were acquired by countless individuals around the world. This gold was now in "strong hands," and these gold owners would part with it only at a much higher price. So where would the gold come from to repay the central banks?

While the yen is a fiat currency and can be created out of thin air by the Bank of Japan, gold is a tangible asset. How could the banks repay all the gold they borrowed without causing the gold price to soar, worsening the marked-to-market losses on their remaining positions?

In short, the banks were in a predicament. The Federal Reserve's policies were debasing the dollar, and the "canary in the coal mine" was warning of the loss of purchasing power. So Greenspan's policy of using interventions in the market to bail out banks morphed yet again.

The gold borrowed from central banks would not be repaid after all, because obtaining the physical gold to repay the loans would cause the gold price to soar. So beginning this decade, the gold cartel would conduct the government's managed retreat, allowing the gold price to move generally higher in the hope that, basically, people wouldn't notice. Given gold's "canary in a coal mine" function, a rising gold price creates demand for gold, and a rapidly rising gold price would worsen the marked-to-market losses of the gold cartel.

So the objective is to allow the gold price to rise around 15 percent per year while enabling the gold cartel members to intervene in the gold market with implicit government backing in order to earn profits to offset the growing losses on their gold liabilities. The gold cartel's trading strategy to accomplish this task is clear. The gold cartel reverse-engineers the black-box trend-following trading models.

Just look at the losses taken by some of the major commodity trading managers on their gold trading over the last decade. It is hundreds of millions of dollars of client money lost, and the same amount gained for the gold cartel to help offset their losses from the gold carry trade -- all to make the dollar look good by keeping the gold price lower than it should be and would be if it were allowed to trade in a market unfettered by government intervention.

As I see it there are only two outcomes. Either the gold cartel will fail or the U.S. government will have destroyed what remains of the free market in America. I hope it is the former, but the flow of events from Washington and the actions of policymakers suggest it could be the latter.

------------

James Turk is founder and chairman of GoldMoney.com, editor of the Freemarket Gold & Money Report, co-author of "The Coming Collapse of the Dollar," which was recently updated in a new edition as "The Collapse of the Dollar" (www.dollarcollapse.com), and a consultant to the Gold Anti-Trust Action Committee Inc.

 

 

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#7) On March 31, 2010 at 3:48 PM, XMFSinchiruna (28.59) wrote:

KingWorldNews interview with the GATA crew: 3-31-10

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/31_GATA.html

This is a wonderful conversation about this developing story from last week's CFTC hearing.

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#8) On March 31, 2010 at 10:48 PM, workfor (< 20) wrote:

Sinch,

Thanks for all your work here on CAPS regarding precious metals. Sometime down the road people will wish they had listened to you. The approaching short squeeze on the banksters will be poetic justice for anyone invested in gold and especially silver. I can't imagine a more satisfying way to make money!

 

 

 

 

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#9) On March 31, 2010 at 11:02 PM, megalong (< 20) wrote:

Hey Sinch, have you ever looked at Capital Gold Corp (CGC)?  A new issue, not many followers on CAPS yet.  Just caught my eye.

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#10) On April 01, 2010 at 12:25 AM, fockewulf (< 20) wrote:

Assassination attemp on the whistleblower....the whole gold market is a massive fraud...100 paper claims to 1 oz. of physical...ponzi scheme.

 

That GATA interview isn´t dynamite, it´s flat out fiscal hydrogen bomb material.

 

You´ve outdone yourself Sinch yet again.  When you said you had an article coming, you were not kidding.  Excellent job!

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#11) On April 01, 2010 at 12:26 AM, fockewulf (< 20) wrote:

Assassination attemp on the whistleblower....the whole gold market is a massive fraud...100 paper claims to 1 oz. of physical...ponzi scheme.

 

That GATA interview isn´t dynamite, it´s flat out fiscal hydrogen bomb material.

 

You´ve outdone yourself Sinch yet again.  When you said you had an article coming, you were not kidding.  Excellent job!

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#12) On April 01, 2010 at 3:19 AM, fockewulf (< 20) wrote:

Another analysis about the GATA interview.

 

http://www.youtube.com/watch?v=L5mFbMBMrkM Report this comment

#13) On April 01, 2010 at 5:18 AM, fockewulf (< 20) wrote:

How To Corner The Gold Market: (5 page .PDF format)

http://www.tavakolistructuredfinance.com/Gold.pdf

 

Godd analysis about the article and the current saga.

http://www.youtube.com/user/silverfuturist#p/a/u/0/wK8JbJLOj14

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#14) On April 01, 2010 at 5:53 AM, fockewulf (< 20) wrote:

Denninger´s response: http://market-ticker.denninger.net/archives/2138-Dont-Invest-In-Ridiculously-Rigged-And-Thin-Markets.html

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#15) On April 01, 2010 at 7:55 AM, XMFSinchiruna (28.59) wrote:

workfor

I will profit from the short squeeze, but I will not permit myself to be happy about it. Underlying this event is the pain and suffering of masses of unsuspecting people who do not deserve just a fate just because they either trusted the government or bankers too much or because they simply swallowed what has essentially been a longstanding propaganda campaign to paint the notion of criminal conspiracies as demanding an automated judgment of lunacy.

Those who have reviewed the evidence with an independent and rational assessment and concluded that select conspiracies can and in fact DO exist have known all along that the real lunacy lies in a system with this much corruption and dishonesty being given the benefit of the doubt time and time again. It's unfortunate that dirty dealings like the gold and silver suppression scheme designed to strengthen and prolong the life of a structurally deficient fiat U.S. dollar is not known to more prior to its failure, but in no way can I take pleasure in the result. I am afraid it will be ugly. I wish the best for everyone out there, and hope beyond all hope that I am 100% wrong about it all.

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#16) On April 01, 2010 at 7:57 AM, XMFSinchiruna (28.59) wrote:

megalong

I haven't had a chance to look at that one. Thanks for the reminder... I will try to take a gander over the weekend. Send me an e-mail if you don't hear back from me.

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#17) On April 01, 2010 at 8:05 AM, XMFSinchiruna (28.59) wrote:

fockewulf

My article hasnt't appeared yet. :) Today being April 1, I thought it best to hold it for tomorrow. As if the topic hasn't been dismissed with sufficient quantities of unwarranted ridicule over the years...

Anyway, I hope all Fools understand there is an important difference in terminology between a blog post and an article. Fool articles are published pieces that go out through the financial media portals like Yahoo Finance and MSN to reach a much wider audience. The articles go through Fool editors for complete fact checking and review before they are published, whereas my blog posts have no such review process.

I'm a big fan of blogging for the immediacy of it all, the ease of promoting discussion with my readers, etc... but I don't want people to lose sight of the fact that online published articles are not the same as blog posts.

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#18) On April 01, 2010 at 8:08 AM, XMFSinchiruna (28.59) wrote:

Speaking of April Fools... I don't think England is laughing today about this one:

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7543794/Gordon-Brown-accused-of-cover-up-over-sale-of-Britains-gold.html

The Prime Minister has been accused of a "cover-up" over the sale of Britain's gold reserves after Treasury documents indicated that the Bank of England had refused to support the policy.

An email released under freedom of information laws shows that in December 1998 senior officials at the Bank refused to back a Treasury move to sell almost 400 million tons of gold. Hundreds of pages of documents thought to detail the Bank's concerns and advice to the chancellor have been withheld by the Treasury. Gordon Brown was chancellor at the time.

The decision to sell the gold has since been described as one of the worst ever taken by the Treasury, costing the country about £7 billion due to a sharp rise in the price of bullion. The Treasury has declassified only limited information on the sale and refused to release most of the key documents. Some pages have been heavily censored.

Mr Brown last week told the House of Commons that he was "happy" for all the documents surrounding the controversial sale to be released. The Treasury said last night it would not be releasing further information.

George Osborne, the shadow chancellor, said: "Under questioning from David Cameron, Gordon Brown said he would be happy to publish the truth about his disastrous decision to sell off Britain's gold at the bottom of the market.

"Now we see key passages have been redacted. What has Gordon Brown got to hide? After all, we can't get the gold back. If he doesn't publish the documents in full, people will suspect there is a cover-up."

Lord Oakeshott, the Liberal Democrat's Treasury spokesman, said: "It is clear from the documents that the Treasury was desperately trying to get the Bank involved. Ed Balls and Gordon Brown were trying to suck the Bank into the decision-making."

The documents show that in late November 1998 Treasury officials prepared a "secret" submission for Mr Brown on the gold sales. The Bank was asked to comment on it, but the released records make no reference to any being received.

On Dec 23, an aide to Mr Brown sent an email to the Treasury officials asking for Bank backing. "The Chancellor is keen that officials at the Treasury and the Bank work together," the email said. "As I understand it the latest proposal is not a joint one."

Senior Bank of England sources confirmed that they had not supported the Treasury's proposal to sell the gold reserves. "This was a policy decision to be made by the Treasury and therefore it was not the responsibility of the Bank to support a proposal or prepare a joint proposal," the source said. "Private advice was offered."

The Treasury has unsuccessfully fought for more than four years to suppress all documents on the gold sales after freedom of information requests from The Daily Telegraph. However, the Information Commissioner finally ordered the Government to release some information last month. But the Treasury has been allowed to censor large swaths of the documents.

A spokesman for Mr Brown denied there had been a cover-up or that Parliament had been misled: "As the Prime Minister said at PMQs last week, it is a matter for the Information Commissioner and the Treasury which documents are released."

 

 

 

 

 

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#19) On April 01, 2010 at 9:15 AM, XMFSinchiruna (28.59) wrote:

While this is not part of the evidentiary record that I sought to amass with this post, it is nonetheless a relevant part of the discussion.

No doubt feeling the heat from the breaking story about his company's alleged price-fixing in silver, Dimon appears to be in proactive damage control mode:

http://www.nakedcapitalism.com/2010/04/jamie-dimon-complains-about-demonization-of-megabanks.html

Jamie Dimon Complains About Demonization of MegaBanks

One has to wonder whether anyone in a position of influence really believes what he is selling. At best, Jamie Dimon’s defense of too big to fail banks like his own JP Morgan is a vivid illustration of Upton Sinclair’s saying, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” But Dimon’s patently self-serving argument is more likely part of a broader industry push to try to win over the public it just looted.

The Financial Times took note of his salvo, which comes in his letter to shareholders:

In the current political environment, size in the business community has been demonized, but the fact is that some businesses require size in order to make necessary investments, take extraordinary risks and provide vital support globally. America’s largest companies operate around the world and employ millions
of people. This includes companies that can make huge investments – as much as $10
billion to $20 billion a year – and compete in as many as 50 to 100 countries to assure America’s long-term success. Combined, big and small businesses spend $1.5 trillion per year on capital expenditures and $300 billion on research and development. It is estimated that more than 70% of the capital expenditures are made by large companies.

The productivity of our workers and the huge economies of scale of our corporations (generated from years of investing and innovating) are what ultimately drive our economy and income growth. Employees at large companies share in that productivity: Compensation and benefits for employees at large companies are substantially higher than at small firms.

It is estimated that large enterprises and large foreign multinationals active in the United
States have accounted for the majority of U.S. productivity growth since 1995.
Companies such as Ford, Boeing, Pfizer, Caterpillar, Apple, Microsoft and Google are exemplars of initiative and innovation worldwide. Cutting-edge companies like Hewlett-Packard underpin vibrant networks of small and midsize suppliers and vendors. Academic research shows that these investments abroad actually create more jobs in the United States.

Large companies such as the ones mentioned above need banking partners with large
enough balance sheets to finance transactions around the world. And it’s not just multinational corporations that rely on such scale: States and municipalities also depend on the capital that a firm like JPMorgan Chase can provide.

 

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#20) On April 02, 2010 at 6:58 PM, ttboydxb (30.20) wrote:

Wow.....   Unbelievable reading....   Think I'm going to start getting a few physical Bars of Gold and Silver to keep in the safe....   just in case!  Nice work Sinchi!  I think some people who own GLD and SLV ETF's are going to have a shock one day when they realize nothing might be there to back up their shares??

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#21) On April 03, 2010 at 3:53 PM, fockewulf (< 20) wrote:

Finally found some news over at CNBC.  Had to do a search under "silver" to find it.  You would think this would be a top story.  Not yet...but soon.

http://www.cnbc.com/id/36160274

Silver Short Squeeze Could Be Imminent

FORT LEE, N.J., April 3, 2010 /PRNewswire via COMTEX/ -- The National Inflation Association today issued a silver update to its http://inflation.us members: On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn't a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position." JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce.

NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.

 

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#22) On April 03, 2010 at 5:21 PM, Starfirenv (< 20) wrote:

Strongman- Kudos on your work in progress here. Truely Hurculean effort. Very well presented- clear, concise and factually referenced. Excellent Journalism. Invaluable imformation. Hopefully your efforts will have a much larger impact than "Foolish" education here. I've always (since the Hunt Bros) preferred the metal to the miners (OK, Ive dabbled) but never paper. I agree with your $50+ target as this thing unwinds and when the $ loses status of reserve currency add a zero. Also, I put in a good word for you on TopSecret's "old homepage" Blog (Jeremy's watching) as your work above (and many others) is a testament to your value here. Again Kudos, thanks and regards

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#23) On April 04, 2010 at 8:22 AM, XMFSinchiruna (28.59) wrote:

It's starting to gather momentum:

It's Ponzimonium in the Gold Market:

http://www.huffingtonpost.com/nathan-lewis/its-ponzimonium-in-the-go_b_519893.html

We've had a string of amazing revelations recently regarding the world's precious metals market. This is important stuff for anyone (like me) who holds gold as a means to avoid currency turmoil and counterparty risk.

(My earlier post on shenanigans at the Comex gold market.)

This news has been actively suppressed in the mainstream media.

The Commodity Futures Trading Commission, a U.S. government regulatory agency, held hearings in Washington D.C. in late March regarding position limits in the futures market.

People involved in the markets have known/suspected for years that they have been manipulated by certain large entities, notably JP Morgan and Goldman Sachs.

Analysts like silver maven, Ted Butler, hedge fund giant, Eric Sprott, and the Gold Anti-Trust Action Committee (GATA) have been collecting evidence of this manipulation for years.

These hearings were supposed to be a non-event. However, despite the media lock-down, the word is getting out.

The CFTC, like the SEC, is a conflicted agency. Some people, notably Chairman Gary Gensler and Commissioner Bart Chilton, seem to want to clean up the sleaze, fraud and corruption.

The CFTC even invited GATA's Bill Murphy and Adrian Douglas to make statements. Would you be surprised to learn that the cameras had a "technical malfunction" during Bill Murphy's statement, which magically righted itself immediately after he finished?

After the hearing, according to Douglas, Murphy was contacted by several major media outlets for more interviews. Within 24 hours, all the interviews were canceled. All of them.

You can follow the links above to see the research that Butler, Sprott and GATA have done over the years. That was only one part of the emerging story.

The second part is the appearance of London metals trader and now whistleblower Andrew Maguire, who understands JP Morgan's manipulation scheme inside and out.

Maguire understands the process so well that he was able to describe it to the CFTC's Bart Chilton on the phone in real time. As in: "in a few minutes, they are going to do this, and then they will do that."

Listen to an extended interview with Maguire and GATA's Adrian Douglas on King World News here.

Maguire has taken some personal risks to tell all this in public. In fact, almost immediately after his initial statements, he was run over by a car while walking down the street. The driver sped away, nearly running over some other pedestrians in his haste to escape. Fortunately, Maguire survived the hit-and-run "accident" with minor injuries. What a coincidence.

The third item was during the question-and-answer session at the CFTC hearings. GATA's Adrian Douglas.

For many years, people assumed that the London Bullion Market Association (LBMA), the world's largest gold market, was a simple bullion market. Cash for gold. However, just in the past few months, more people are realizing that there is actually very little gold within the LBMA system.

Even long-time gold specialists like Maguire have been amazed to learn that there is no gold corresponding to the vast "gold deposits" at the major LBMA banks.

During the CFTC hearings, Jeffrey Christian of CPM Group apparently informed us that the LBMA banks actually have about a hundred times more gold deposits than actual gold bullion.

(GATA on CFTC hearing revelations, including video clips.
ZeroHedge on the LBMA "paper gold ponzi")

This means that there are thousands of clients -- Asian and Middle Eastern governments and sovereign wealth funds among them -- who think they own hundreds of billions and perhaps trillions of dollars of gold bullion, and are being charged storage fees on that fantasy bullion, but they really own unsecured gold loans to the banks at a negative interest rate.

There is nothing new about this. Morgan Stanley paid several million dollars in 2007 to settle claims that it had charged 22,000 clients for storage fees on silver bullion that didn't exist.

Imagine now that you are one of these people who think they own billions of dollars of gold in an LBMA bank depository. Now you find out that this gold doesn't really exist.

You would ask for delivery of your gold immediately. It would be a "run on the bank."

What about things like ETFs linked to gold? Most of them also claim, as assets, these "deposits" at the LBMA banks.

The entire gold market is complete "ponzimonium," a word popularized by the CFTC's Bart Chilton.

This does not even take into account the tungsten gold bar counterfeit issue, which has emerged over the past year or so.

Imagine that you are an LBMA gold bank -- like JP Morgan, Goldman Sachs or HSBC. Your clients start asking for their gold, which you have been telling them is safely stored in your super-safe depository, but the gold doesn't actually exist. It's not so easy to buy it either, because none of the other LBMA members actually have any gold. Can you see the incentive to deliver a phony tungsten counterfeit instead? You might even ask your buddies in the U.S. government whether there is any gold left in Fort Knox that they could use -- this being an issue of National Security and all.

Four 400 oz. LBMA standard bars were discovered to be tungsten counterfeits in Hong Kong. This set off a wave of investigations, turning up more such phony bars worldwide.

These were very high quality counterfeits. According to some investigators, it appears that the original source and creator of these counterfeits was the U.S. government itself. Some people put the possible number of counterfeit bars out there in the hundreds of thousands!

Let's say you are an Asian or Middle Eastern sovereign wealth fund taking delivery on a few billion dollars' worth of gold bullion. You find out that you were given a bunch of phony tungsten by an LBMA bank, whose original source was the U.S. government itself.

Heck, I'd be pissed. I might even want to do something about it.

(Saturday Night Live approximates the Chinese reaction to U.S. government scams and lies.)

There is an easy way to sidestep all the scams, frauds, and phony nonsense. Take delivery on your bullion, whether a 1 oz. Kruggerand or a truckload of 400 oz. institutional bars. Put it in an independent, insured depository that is not affiliated with any bank. Assay all the holdings for tungsten counterfeits. Then audit it periodically, for exact serial numbers and specified weights.

When will the music stop on this merry-go-round of lies and corruption? Who knows. But you can take your seat now, while they are still easy to come by. I suspect those who do not act in advance will eventually find that they are victims of the Ponzimonium.

What if you don't have any gold, and have no interest in owning any? This could affect you too.

Ultimately, a lot of these "gold suppression" schemes amount to dollar-support schemes. Many of the same games were played in the late 1960s, the days of the London Gold Pool.

The London Gold Pool was an agreement among world central banks to stabilize the gold market at $35/oz. This was really an attempt to stabilize the dollar, which tended to decline in value due to the Keynesian "easy money" policies popular in those days (and today as well).

These Keynesian "easy money" policies have consequences. You can't "easy money" your way to prosperity. Prosperity is built on "hard money" -- money that is unchanging in value.

The London Gold Pool eventually blew up, of course, and the dollar fell to about 1/24th of its original value, hitting $850/oz. in 1980. This dollar decline produced a horrible decade of inflation, during the 1970s. We spent most of the 1980s and 1990s just recovering from that disaster.

Click below for a graph of U.S. Treasury interest rates from 1955 to 2005

View image

Thus, when the "New London Gold Pool" blows up, we might find that the dollar decline that has been going on since 2001 could accelerate dramatically.

You would be surprised how little most big hedge funds know about gold. But they do know the scent of blood in the water. And they learn quick.

 

 

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#24) On April 04, 2010 at 8:37 AM, XMFSinchiruna (28.59) wrote:

fockewulf

Thanks for posting this, but we can't call that news. Not to expend too much energy on semantics, but I can't stress how important the distinction is between, for example, a CNBC news piece on this issue, and a press release from a shoddy-looking organization like this NIA that hasn't a chance of ever being viewed as a credible or impartial source.

The internet is a phenomenal medium for rapid exchange of information, but if we permit the lines between opinion blogs and fact-checked published articles -- or the line between mainstream news coverage and press releases from inconsequential organizations with not-so-hidden agendas -- to be blurred ... then we do ourselves a huge disservice.

I'm still glad you posted it, and I thank you very much for continuing to take an active role in trying to disseminate the news of this watershed series of events. I just wanted to be sure we're clear on what constitutes news.

CNBC, for the record, and to my knowledge, has yet to provide a shred of coverage of this issue.

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#25) On April 04, 2010 at 9:14 AM, XMFSinchiruna (28.59) wrote:

Starfirenv

Thank you for the shout-out. :)

From your comments on TopSecret's blog post, it sounds as though you may not be aware that I already am a full-time contributor to TMF.

When I create a blog post like Sinchi's Collected Works, for example, those links are to published TMF articles rather than blog posts. That is an effort to ensure that my fellow CAPS bloggers are following my published content as well as my bogs.

I cover news (and offer commentary) relating to a range of sectors, with precious metals comprising my primary focus and specialty. However, I also cover the coal industry, dry bulk shippers, heavy equipment manufacturers, railroads, copper, and steel. Writing content relating to these diverse sectors has given me a fascinating window into the broader trends within industry both domestically and abroad. 

Following my CAPS blogs is easy ... you all know where to find me. Following my published content is easy, too. All Fools have to do is either bookmark my TMF author's feed:

http://www.fool.com/feeds/authorheadlines.aspx?author=1632&k=w5ptLfHroNOBubtLSj6MLg&p=FoolAuthor&s=ihesitrf0000001

-- or --

bookmark my Twitter feed:

http://twitter.com/TMFSinchiruna

Thank you again for the kind words, and thank you for your continued readership.

Fool on! :)

 

 

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#26) On April 04, 2010 at 9:39 AM, XMFSinchiruna (28.59) wrote:

http://www.commodityonline.com/news/Gold-ETFs-or-fraud-funds-27108-3-1.html

Gold ETFs or fraud funds? Published on: April 03, 2010 at 17:30 By Geena Paul
LONDON (Commodity Online): Almost all market and bullion analysts in the recent years harped on a new investment option — the gold  Exchange-Traded Funds (ETFs). Till a decade ago, there were no easy options to invest in gold like the equities market. Realising this, innovative people brought out the gold ETFs to make gold investment easy for investors. The development of the gold ETF market in 2003 changed the way people invested in bullion. Now, gold ETFs are an efficient way to invest in gold without dealing with the troubles of holding the physical metal.

Gold ETFs are traded just like shares of stock. You can buy and sell a gold ETF just as easily as shares of any company. And they trade on major stock exchanges including New York, London, and Sydney. However, some gold ETFs buy and hold the physical bullion, while others invest in futures contracts.

But when the gold ETFs came into the market, nobody anticipated a fraud will spoil the image of ETFs within 10 years of its existence. So, last week, when the Commodity Futures Trading Commission (CFTC) heard a case regarding manipulations in bullion market by gold cartels, the gold ETF scam hit the investors like a bolt from the blue. Now, the gold ETFs’ image is at stake. Soon, investors are set to question the credibility of the gold ETFs. The reason is the facts emerged during the CFTC hearing.

The whistle-blower in this biggest gold fraud was Andrew Maguire, an experienced precious metal trader in London.  In an riveting interview (which is available on the internet all over the world) with GATA director, Adrian Douglas, Maguire describes a new dynamic impacting gold. The fact is that, there is a huge short position in the market.

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. And, how? The gold cartel has accumulated a huge short position and the huge short positions are ‘naked’, which means these positions are not hedged. There is 100-times more paper-gold outstanding than physical gold.

So, if you are buying ETFs, be sure that there is no gold guarantee for your piece of paper which offers you the ownership of some specific quantity of the yellow metal. In reality, it is just a piece of paper which you bought paying huge sums.

Recently, the World Gold Council reported that the world’s total gold ETF market grew 85% relative to 2008.

During the hearing Adrian Douglas of GATA said: I would just like to make a comment. We are talking about the futures market hedging the physical market. But if we look at the physical market, the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22 billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount it is about one and a half times the US economy; that is not trading 100% backed metal; it’s trading on a fractional reserve basis. And you can tell that from the LBMA’s website because they trade in “unallocated” accounts. And if you look at their definition of an “unallocated account” they say that you are an “unsecured creditor”. Well, if it’s “unallocated” and you buy one hundred tonnes of gold even if you don’t have the serial numbers you should still have one hundred tonnes of gold, so how can you be an unsecured creditor? Well, that’s because its fractional reserve accounting, and you can’t trade that much gold, it doesn’t exist in the world. So the people who are hedging these positions on the LBMA, it’s essentially paper hedging paper. Bart Chilton uses the expression “Stop the Ponzimonium” and this is a Ponzi Scheme. Because gold is a unique commodity and people have mentioned this, it is left in the vaults and it is not consumed. So this means that most people trust the bullion banks to hold their gold and they trade it on a ledger entry. So one of the issues we have got to address here is the size of the LBMA and the OTC markets because of the positions which are supposedly backing these positions which are hedges, but it is essentially paper backing paper.

So the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the real physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for real physical gold that can not be met from their own stocks.

 

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#27) On April 04, 2010 at 9:41 AM, XMFSinchiruna (28.59) wrote:

http://www.commodityonline.com/news/Will-fraud-lift-gold-prices-to-$10000ounce-27107-3-1.html

Will fraud lift gold prices to $10,000/ounce?

By Geena Paul
NEW YORK (Commodity Online): After the sub-prime catastrophe in banking and realty sector, which led to the global recession in 2008-09, it is the turn of bullion markets now.

‘FRAUD’, that is the one word which comes to any investor’s mind when s/he reads about the Commodity Futures Trading Commission (CFTC) hearing on manipulations in bullion market by gold cartels.

So, the small and clean investors have been short-changed by big cartels during the past many years, especially during the recent boom time in bullion markets. Otherwise, how will you explain the biggest boom in paper gold (Exchange Traded Funds, ETFs) in the recent past with hardly any gold available in the market.

In fact, there is no gold left in this world if all the Gold ETFs ask for physical delivery. And, if that happens only god knows what will be the gold prices in the coming months — $10000 per ounce? Maybe, even more. Because, price of a commodity which is not available at all can go up to any level due to the sheer fact that it is not there in the market.

Now read about the Commodity Futures Trading Commission (CFTC) hearing last week about a London whistle-blower who had explained to the CFTC how JP Morgan Chase has been manipulating/capping precious metal prices. In a shocking parallel to the inaction by the US Securities and Exchange Commission (SEC) after receiving warnings from Harry Markopolos about the Madoff ponzi, the CFTC has apparently been sitting on the information on gold cartels.

Did you visit the websites of GATA and CFTC this week? If you do, you can see a lot of articles and responses from investors who have been keenly watching the developments in bullion market.

The whistle-blower in this biggest gold fraud was Andrew Maguire, an experienced precious metal trader in London.  In an riveting interview (which is available on the internet all over the world) with GATA director, Adrian Douglas, Maguire describes a new dynamic impacting gold. The fact is that, there is a huge short position in the market. 

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. And, how? The gold cartel has accumulated a huge short position and the huge short positions are ‘naked’, which means these positions are not hedged. There is 100-times more paper-gold outstanding than physical gold. You must be saying Oh, My God! Then wait, there is more to it.

Sub-prime crisis was peanuts before this scam. The bullion market is now slowly taking in the impact of these revelations. The result is, there will be no gold in the market. Because, if people ask for physical delivery of gold for their ETFs, who will give all the gold. THERE IS NO GOLD! And the price of gold can be $5,000 per ounce, $10,000 or may be even more. Who can predict the value of a commodity which is not there is the market?

To add fuel to fire The Wall Street Journal wrote: “The objective of this manipulation is to conceal the mismanagement of the US dollar so that it might retain its function as the world’s reserve currency. But to suppress the price of gold is to disable the barometer of the international financial system so that all markets may be more easily manipulated. This manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world.”

So, the gold cartel now has a big target. It is inevitable that the big traders and hedge funds will push the naked shorts to the wall by asking for physical metal. If there is a squeeze on the naked shorts, the sky is the limit for precious metal prices.

There have been reports that over the past 10 years, the gold cartel has staged a controlled retreat. It has been fighting the advancing gold price with propaganda, paper short sales and the occasional dishoarding of physical metal from central bank vaults and more recently, the IMF. This retreat is about to turn into a rout, which means the upside potential for the precious metals is huge.

The CFTC hearing came about in part because of long-term complaints from organizations such as the Gold Anti-Trust Action Committee and individual analysts such as Ted Butler, Reg Howe, James Turk, Frank Veneroso and Adrian Douglas that the gold and silver commodity markets have been subject to blatant extensive price suppression manipulation by the US government and its trading partners.

In November 2009, Andrew Maguire, a former Goldman Sachs silver trader in that firm’s London office, had contacted the CFTC Enforcement Division to report the illegal manipulation of the silver market by traders at JPMorgan Chase. He described how the JPMorgan Chase silver traders bragged openly about their actions, including how they gave a signal to the market in advance so that other traders could make a profit during the price suppressions.

Maguire had a series of emails with Eliud Ramirez of the CFTC enforcement division explaining how the manipulations were tied to the Bureau of Labor Statistics monthly release of non-farm payroll figures and other recurring events.

In effect, the commissioners were told that almost all of the trading activities on the London exchange were merely settled by paper for paper, not for physical metals as the exchange supposedly requires. Further, the commissioners were told that it was impossible for the London exchange to ever deliver all the gold and silver owed to the owners of contracts.

After the hearing, GATA publicly released copies of Maguire’s e-mails with the CFTC.

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#28) On April 04, 2010 at 9:59 AM, catoismymotor (61.69) wrote:

#27 - Very, very interesting! If it should play out anything like they specdulate it will I wonder what they think the new floor will be for gold and silver.

Thanks, as always, Chris.

Cato

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#29) On April 04, 2010 at 10:15 AM, XMFSinchiruna (28.59) wrote:

This story has gained serious traction on blogs over the weekend:

The World's Largest Fraud

Manipulating Gold (GLD) and Silver (SLV): A Criminal Naked Short Position that Could Wreck the Economy

Media Blackout

Gold, Silver, the CFTC & Conspiracy Theories

A "New Dynamic" in the Gold Market

CFTC's Silver Involvement Grows Serious

 

Oh, and here's one that is bound to get some of you fired up. This lame attempt at damage control was effectively rebuffed in comment #1 with GATA's rebuttle. 

This story can not be deflated by half-witted attempts at damage control. The information is out and part of the permanent public record. You simply can not stuff the cat back into this bag.

 

GATA's rebuttle contained a link to a Jason Hommel article, which in turn offered this terrific image of CFTC's plaque hanging at the entrance to the hearing room where the revelations unfolded.

 

 

 

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#30) On April 04, 2010 at 11:46 AM, fockewulf (< 20) wrote:

Thanks Sinchi for the comment.  Your right, not everything posted on the net is "news", and anybody can use a tool like PRNewswire or COMTEX to get their 2 cents across to the masses.  I´ll be more careful in the future.  Forgive my "newby" transgression.

 

I wanted to ask you a question though.  Reading through some of your past postings, I believe you are of the mindset that the US Dollar is on the path towards destruction for various reasons that don´t need to be rehashed here.  I recently just saw this small comment on a blog:

"Raising taxes is irrelevant. We've already set in motion the collapse of our currency. Our present National Debt is $12 trillion, and this is expected to double to over $24 trillion in the next decade. To put this into perspective, a total of 161,000 tons of gold have been mined in human history, as of 2009. This is roughly equivalent to 5.175 billion troy ounces, which at $1000 per troy ounce, would be $5.2 trillion. So even if we gathered up all of the gold in possession of people everywhere in the world, we'd only be able to pay off half the present National Debt, or 1/5th of what it will be in 10 years. Raising taxes is not going to stop us from having our currency collapse."

Pretty scary.  Now, these numbers may be generalizations (the debt is currently at $12,7 trillion), but even if the error percentage is off by some, owning physical gold and silver is about the only true hedge against the a currency collapse.  Maybe diamonds and gems fall into such a catagory as well, but no need to discuss that.

I know you have discussed various mining stocks and you make a powerful case as to why you believe there is good upside potential in many of them, but my question to you is, at what point do you believe stocks based on weak fiat currencys need to be sold despite these companies having strong business fundamentals?  Right now inflation isn´t much of an issue, so stocks can still be attractive assets to own.  The danger of upcoming inflation and currency devaluation is very real however.  At what point do you jump ship? 

 

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#31) On April 04, 2010 at 1:03 PM, XMFSinchiruna (28.59) wrote:

fockewulf

Great question.

I do not plan on jumping ship until I feel the bull market cycle is approaching terminal velocity. Equities can in fact be very important inflation hedges in their own right, since share prices over time will be adjusted to account for dollar devaluation. In the case of mining stocks, not only will their business be booming as prices continue to rise (and I suspect precious metals will be among a very few booming sectors over the next several years), but share prices should undergo that same market-driven revaluation over time to correct for severe currency depreciation.

It is precisely that inflationary impact upon equities that has led me to cease trying to predict where the Dow and other indeces will trade looking forward. All I can say with confidence is that the price of the Dow and the price of gold will move substantially closer to parity (1:1), but at what price that nears is anyone's guess. Let's say we get to 2:1 Dow to gold. Is that at 8,000 Dow and $4,000 gold? 4,000 Dow and $2,000 gold? Or does the pace of inflation leave us all underestimating the impact and we move to parity at $5,000? $10,000? Who knows ... there are too many factors in play to try to predict those kinds of correlations in advance.

I stick with what I am comfortable forecasting with a very high degree of certainty: gold will reach at least $2,000 per ounce, and between now and then high-quality gold and silver mining equities will yield strong leveraged performance to those metal price gains ... even net of inflation.

My present equity-focused strategy will remain in place through the remainder of this bull market cycle, and I have no intention of jumping ship.

Thanks for raising an important question.

C

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#32) On April 04, 2010 at 2:09 PM, Starfirenv (< 20) wrote:

Strongman- I am aware that you are a full time contributor to TMF. I was referring to their choosing not to include you with the other contributors listed on "your" new and improved homepage. Just didn't sit right from my perspective. Do you ever take a day off? Regards and Fool On!

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#33) On April 05, 2010 at 4:33 AM, fockewulf (< 20) wrote:

Not for nothing but, why on earth is this upcoming disaster not being highlighted by The Fool as one of, if not THE, top story?  This is like having knowledge that a 7.5 magnitude earthquake is going happen quite soon in downtown LA, but instead of telling the mayor, your telling the locals in the nearest coffee shop.  They get the hint and react accordingly by hitting the high road, yet millions remain in the skyscrapers.

Granted, this has been a smoldering story for quite some time, but since Andrew Macguire came to light, it´s like Deep Throat spilling the beans AND identifying himself.  Unlike Watergate though, the MSM has kept it´s mouth shut and has kowtowed to some political force powerful enough to keep them shut up.

 It makes me really appreciate your work here C.  Yes, the story is spreading through back channels, second tier websites and Youtube commentaries, but it´s just not enough. At least I was one of the lucky ones who just happened to be in the right coffee shop at the right time.

 

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#34) On April 05, 2010 at 8:09 AM, XMFSinchiruna (28.59) wrote:

fockewulf

It is coming today. :P

April Fools' Day and the subsequent Friday holiday last week intervened to force an unfortunate delay. My article appearing today will be just the first of many on the topic.

Thanks for your patience. The article links to this blog post as wekll to provide readers with additional resources.

I woiuld appreciate the concerted help of each and every one of you to help spread the article around everywhere you can post it once it appears. I will post a link to the article on this blog post the moment it publishes.

 

Starfirenv

Oops... I guess I hadn't been to the home page in several days, so I misconstrued that earlier post of yours. :) Thanks again for the kind words!

 

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#35) On April 05, 2010 at 11:48 AM, XMFSinchiruna (28.59) wrote:

William Murphy Explains his Testimony at the Recent CFTC Hearing and the Future of Precious Metals Markets

http://www.thedailybell.com/940/GATA-William-Murphy-Explains-CFTC-Hearing-Andrew-Macguire-Whistleblower-Statements.html

 

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#36) On April 05, 2010 at 4:00 PM, XMFSinchiruna (28.59) wrote:

Well, while we continue to await widespread mass media coverage of these watershed developments in the metals market, we can not ultimately be surprised by the horrendously poor quality that some of these articles will display.

Case in point: Marketwatch's commentary from 3am Monday morning.

Even the title is offensive:

Paranoids have Enemies, Radical Gold Bugs Have Wall Street

In it, he refers to GATA founder Bill Murphy as a radical gold bug, even though the evidence that GATA has collected alongside the recent revelations irrefutably supports the claims that his organization has made for the past decade. When market experts who have been labelled as conspiracy theorists turn out in time to have the strength of verifiable evidence on their side, does the label rightfully apply? Do not the purveyors of such outmoded and blindly dismissive labels pronounce their own ignorance of a topic when those labels are not adapted to a dynamic public record.

I have already argued as plainly as I am able that the label "gold bug" as it is commonly employed has no basis in reality whatsoever. Certainly, it offers nothing constructive whatsoever to any rational conversation about precious metals and related investments:

"Speaking of lunacy, and in the interest of intelligent discourse, could we consider burying the term "gold bug" once and for all as we approach the new year? I refute the label largely because of the illogical and derogatory associations that it conjures. From my background in anthropology, I know that prevailing attitudes are fluid over time, and my calls for $2,000 gold and $50 silver are no longer met with the same degree of dismissive incredulity as they were when I issued the very same projections back in 2007."

The other poor aspect of Brimelow's treatment of the topic was the blurry line between his own commentary and the quotes from some website that I've never heard of that comprise his final 6 paragraphs. Is he hedging his bets? Is he trying to mask his personal interpretation of the topic by solely parroting the views of what he refers to as a "radical gold bug subscription Webzine"? I submit that any commentary ending in 6 consecutive paragraphs of attributed quotes without any running commentary thereupon can hardly be deemed a serious contribution.

I would love to see more people begin to resist the "gold bug" label. It has no place in intelligent discourse on such an enormously important financial topic. I hope that Brimelow article gets plastered with 1,000 well-formulated retorts.

 

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#37) On April 05, 2010 at 4:28 PM, XMFSinchiruna (28.59) wrote:

Okay Fools... after a very long weekend, here finally is the article I've been waiting to share with you:

http://www.fool.com/investing/general/2010/04/05/is-your-safe-haven-a-house-of-cards.aspx

Please copy this link, and spread it in every corner of the web you can locate where an issue with such sweeping implications will find an eager audience. E-mail it to your friends, post it to discussion boards ... I urge you to do whatever you can to help this article to make the rounds.

I will be doing the same. Perhaps we'll run into each other in the process. :)

Fool on!

http://www.fool.com/investing/general/2010/04/05/is-your-safe-haven-a-house-of-cards.aspx

Is Your Safe Haven a House of Cards?

"A recent extraordinary hearing held by the Commodity Futures Trading Commission (CFTC) to discuss the need for position limits in metals futures morphed unexpectedly into what I will argue was the grandest expose of potential fraud in modern financial history."

"I repeat: "There is a hundred times what there is." Did he learn from Bill Clinton what the definition of is is? I sure hope that kind of leverage never comes toppling down the way lesser leverage did in the mortgage securitization industry. Not to fear, assures Mr. Christian while commenting earlier on the short segment of the market, "there are any number of mechanisms allowing for cash settlements." It appears that he actually perceives no structural problem inherent in a metals market that would seek to deliver cash in lieu of physical bullion to investors who may be inclined to call this paper bluff. In some circles, one could call that for what it would be: default."

 

 

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#38) On April 05, 2010 at 4:35 PM, binve (< 20) wrote:

Hey Sinchi!

Great article!! I reposted the link and intro on my blog: http://marketthoughtsandanalysis.blogspot.com/2010/04/is-your-safe-haven-house-of-cards.html. Thanks for all your work man!!

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#39) On April 05, 2010 at 9:12 PM, XMFSinchiruna (28.59) wrote:

The article was posted on GATA's website:

http://gata.org/node/8510

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#40) On April 09, 2010 at 4:41 AM, XMFSinchiruna (28.59) wrote:

Thunder Road Report has a thunderous impact last fall.

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