GOLD (Au) PRODUCERS

[NYBob]

Adrian Douglas: Central banks are NOT ordinary gold investors
Submitted by cpowell on Tue, 2009-08-18 04:11.
Section: Daily Dispatches

By Adrian Douglas
Monday, August 17, 2009

Financial market letter writer Adam Hamilton's latest essay, "Central Bank Gold Agreement," which can be found at Gold-Eagle here --

http://www.gold-eagle.com/gold_digest_08/hamilton081409.html

-- at 24hGold here --
http://www.24hgold.com/english/home.aspx

http://www.24hgold.com/english/news-gold-silver-billions-for-the-bankers-debt-for-the-people.aspx?article=726396844G10020&redirect=false&contributor=Money+as+debt

-- and at GoldSeek here --

http://news.goldseek.com/Zealllc/1250269200.php

-- is a fairy tale. Hamilton writes that central banks are
just investors in gold like everyone else.

What Hamilton and most people overlook in analyzing central
bank gold sales is that they are a farce that beats the best
Monty Python sketches.
The central banks have printing presses and now computers
that can generate loads of fiat money.
It is beyond side-splittingly funny that we should take
central banks seriously that they need to sell gold in
exchange for the stuff they manufacture for free.

Can you imagine the Saudis selling oil in exchange for sand,
or Eskimos selling fish in exchange for ice, or Paul
McCartney selling an apartment in London in exchange for a
Beatles poster autographed by himself?
Yes, you think those examples are funny, don't you?
So why not have a big fat laugh at a central bank selling
its gold for the funny paper it produces in infinite
quantities?

Central banks run the world's biggest Ponzi scheme,
issuing bits of paper that people will accept in return
for real goods and services.
If you enjoyed this privilege to the tune of a few trillion
dollars that finance an empire, expending a few tonnes
of gold to keep it going would be a no-brainer.

Central banks do not sell gold to get a few billion of
their own fiat money in return, money they probably
would throw on top of the stack of half a trillion
freshly printed notes that rolled off their presses
just that morning.
No, central banks sell gold to make it appear that the
paper stuff is more desirable than its true supply and
demand fundamentals would allow.
And when the game looks like it's coming to an end,
the central banks can always buy back the gold.

It is not a problem to buy back the gold at even
$50,000 per ounce when any amount of paper currency
can be printed.

What is a big problem is if the currency loses its value
so fast that no one will sell the central banks any gold
for any amount of paper.
(Try buying gold with Zimbabwean dollars.)

If that happens, the central banks lose and the people
win, because when the music stops the people have the gold
and the central banks are stuck with the depreciating paper.

Central banks have to use their gold to support their Ponzi
paper creation, but they have to control the destruction
of their currency's purchasing power so they can still
buy their gold back with their own paper before the game
ends and they have to start a new one.

When the paper currency has little purchasing power left
but the central banks have bought back their gold, they
can introduce a new currency and start the cycle all
over again.

In this way they leverage their gold instead of having
something honest like one-for-one backing in a classical
gold standard.
They have even found ways of having more leverage by
selling paper promises for gold to make it look as if
they have 10 or 20 times as much gold as they really have.

There is another problem.
What if someone else with a large amount of worthless
paper currency gets the idea to buy back your gold
before you do?

Do you ever wonder why China kept so quiet about the
450-tonne increase in its gold reserve over the last
five years?
Clearly China would not want to tip off the Western
central banks that it was going to beat them at their
own game.
If China has admitted to acquiring 450 tonnes of gold,
it probably has a lot more than that.

This is all about world dominance.
Whoever has the most gold is king.

Is it any surprise that GATA has been denied its
Freedom of Information Act requests to
the Federal Reserve and Treasury Department about
the U.S. gold reserve?
We asked to see how the magician does his tricks.
We have been told that this is a "trade secret."
You betcha it's a "trade secret"!

-----

Adrian Douglas is a member of GATA's Board of Directors
and publisher of the Market Force Analysis letter
( http://www.MarketForceAnalysis.com ).

* * *

Join GATA here:

The Silver Summit 2009
Thursday-Friday, September 24-25, 2009
Davenport Hotel, Spokane, Washington
http://thesilversummit.com

Toronto Resource Investment Conference
Saturday-Sunday, September 26-27, 2009
Intercontinental Hotel, Toronto, Ontario, Canada
http://www.cambridgeconferences.com/ch_tor2009.html

New Orleans Investment Conference
Thursday-Sunday, October 8-11, 2009
Hilton New Orleans Riverside Hotel, New Orleans, Louisiana
http://www.neworleansconference.com/

* * *

Support GATA by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16