AI
Saturday, June 13, 2009 8:48:23 PM
Bill Murphy and Chris Powell, co-founders of the Gold Anti-Trust
Action Committee (www.gata.org), 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 meet with the British media to explain GATA’s findings.
They 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 coalmine’ 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 US government has learned from experience and taken Volcker’s advice.
Given the US dollar’s role as the world’s reserve currency,
the US government has the most to lose if the market chooses
gold over fiat currency and erodes the government’s
stranglehold on the monopolistic privilege that it
has awarded to itself of creating ‘money’.
So the US 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 US government does this by trying to keep the gold
price low, but this aim is an impossible task.
In the end, gold always wins, i.e., 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% per annum.
In fact, against the dollar, gold is actually up 16.3% p.a.
on average for the last eight years.
In battlefield terms, the US 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 also 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% of the world’s money supply consisted of gold, and
the remaining 60% 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%.
The inflationary policies of the 1960s, particularly in
the US, further eroded gold’s role to 2% 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% by 1980.
But gold’s percent of the world money supply thereafter
declined, reaching about 1% in 1999.
Today it still remains below 2%.
From this analysis it is reasonable to conclude that gold
should comprise at least 10% 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 US
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 US government manage the gold price?
They recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank
to do it, by executing trades to pursue the US 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 US
government to absorb all losses that may be taken by the
cartel members as they manage the gold price and further,
to provide 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 circa 1990.
It was introduced by then Federal Reserve chairman Alan
Greenspan in order to bail out the banks back then,
which like now were insolvent.
Taxpayers were already on the hook for hundreds of billions
to bail out the collapsed ‘savings & loan’ industry, so
adding to this tax burden was untenable.
He 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,
that these pockets could be picked by the US government using
its tremendous weight, namely, its financial resources for
timed interventions in the free market combined with its
propaganda power by using the 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 by 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 US bank could borrow Japanese yen for 0.2% and buy US
T-notes yielding more than 8%, pocketing the spread, which
did wonders for bank profits and rebuilding their capital base.
Gold also became a favorite vehicle to borrow because of
its low interest rate.
This gold came from central bank coffers, but they 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 to be 12,000 to 15,000
tonnes, nearly one-half of central banks total holdings and
4-to-6 times annual new mine production of 2500 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 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 one-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 only part with it at a much higher price.
Therefore, where would the gold come from to repay
the central banks?
While yen is a fiat currency and can be created out of thin
air by the Bank of Japan, gold in contrast is a tangible asset.
How could the banks repay all the gold they borrowed without
causing the gold price to soar, further 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 coalmine’ 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
because obtaining the physical gold to repay these
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 its ‘canary in a coalmine’ 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% p.a., while at the same time enable the cartel members
to intervene in the gold market with implicit government
backing in order to earn profits to offset the growing
losses on its gold liabilities.
Its 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 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.
There are only two outcomes as I see it.
Either the gold cartel will fail in the end, or the US
government will have destroyed what remains of
the free market in America.
I hope it is the former, but the continuing flow of events
from Washington, D.C. and the actions of policymakers
suggest it could be the latter.
What about storing metals with the seller or buying ETFs.
No! No! No!
That’s paper metal, and there is no way to
ensure they are actually putting aside the metal and
its easy for gov. to confiscate it all?
We'll thank our lucky stars we had ex..
this Goldcorp low cost gold mines -
http://www.goldcorp.com/operations/red_lake_mine/
CQR PowerPoint Presentation (May 2009
http://www.conquestresources.net/Powerpoint/CQR_20090524.pdf
http://www.conquestresources.net/presentations.php
The price of gold can be volatile in the short term,
gold has always maintained its value over the long term.
Through the years, it has served as a hedge against inflation
and the erosion of major currencies, and thus is
an investment well worth considering....
http://www.goldcorp.com/operations/red_lake_mine/
Gold is strategic long term safety -
ex..strategic penny gold play....
http://www.conquestresources.net/
http://investorshub.advfn.com/boards/board.aspx?board_id=11788
God Bless
Action Committee (www.gata.org), 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 meet with the British media to explain GATA’s findings.
They 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 coalmine’ 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 US government has learned from experience and taken Volcker’s advice.
Given the US dollar’s role as the world’s reserve currency,
the US government has the most to lose if the market chooses
gold over fiat currency and erodes the government’s
stranglehold on the monopolistic privilege that it
has awarded to itself of creating ‘money’.
So the US 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 US government does this by trying to keep the gold
price low, but this aim is an impossible task.
In the end, gold always wins, i.e., 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% per annum.
In fact, against the dollar, gold is actually up 16.3% p.a.
on average for the last eight years.
In battlefield terms, the US 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 also 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% of the world’s money supply consisted of gold, and
the remaining 60% 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%.
The inflationary policies of the 1960s, particularly in
the US, further eroded gold’s role to 2% 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% by 1980.
But gold’s percent of the world money supply thereafter
declined, reaching about 1% in 1999.
Today it still remains below 2%.
From this analysis it is reasonable to conclude that gold
should comprise at least 10% 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 US
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 US government manage the gold price?
They recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank
to do it, by executing trades to pursue the US 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 US
government to absorb all losses that may be taken by the
cartel members as they manage the gold price and further,
to provide 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 circa 1990.
It was introduced by then Federal Reserve chairman Alan
Greenspan in order to bail out the banks back then,
which like now were insolvent.
Taxpayers were already on the hook for hundreds of billions
to bail out the collapsed ‘savings & loan’ industry, so
adding to this tax burden was untenable.
He 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,
that these pockets could be picked by the US government using
its tremendous weight, namely, its financial resources for
timed interventions in the free market combined with its
propaganda power by using the 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 by 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 US bank could borrow Japanese yen for 0.2% and buy US
T-notes yielding more than 8%, pocketing the spread, which
did wonders for bank profits and rebuilding their capital base.
Gold also became a favorite vehicle to borrow because of
its low interest rate.
This gold came from central bank coffers, but they 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 to be 12,000 to 15,000
tonnes, nearly one-half of central banks total holdings and
4-to-6 times annual new mine production of 2500 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 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 one-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 only part with it at a much higher price.
Therefore, where would the gold come from to repay
the central banks?
While yen is a fiat currency and can be created out of thin
air by the Bank of Japan, gold in contrast is a tangible asset.
How could the banks repay all the gold they borrowed without
causing the gold price to soar, further 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 coalmine’ 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
because obtaining the physical gold to repay these
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 its ‘canary in a coalmine’ 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% p.a., while at the same time enable the cartel members
to intervene in the gold market with implicit government
backing in order to earn profits to offset the growing
losses on its gold liabilities.
Its 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 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.
There are only two outcomes as I see it.
Either the gold cartel will fail in the end, or the US
government will have destroyed what remains of
the free market in America.
I hope it is the former, but the continuing flow of events
from Washington, D.C. and the actions of policymakers
suggest it could be the latter.
What about storing metals with the seller or buying ETFs.
No! No! No!
That’s paper metal, and there is no way to
ensure they are actually putting aside the metal and
its easy for gov. to confiscate it all?
We'll thank our lucky stars we had ex..
this Goldcorp low cost gold mines -
http://www.goldcorp.com/operations/red_lake_mine/
CQR PowerPoint Presentation (May 2009
http://www.conquestresources.net/Powerpoint/CQR_20090524.pdf
http://www.conquestresources.net/presentations.php
The price of gold can be volatile in the short term,
gold has always maintained its value over the long term.
Through the years, it has served as a hedge against inflation
and the erosion of major currencies, and thus is
an investment well worth considering....
http://www.goldcorp.com/operations/red_lake_mine/
Gold is strategic long term safety -
ex..strategic penny gold play....
http://www.conquestresources.net/
http://investorshub.advfn.com/boards/board.aspx?board_id=11788
God Bless
