Apr 30, 2008

Ron Paul's "Revolution: A Manifesto" top Best Seller at Amazon

Despite a media blackout, this septuagenarian physician-turned-congressman sparked a movement that has attracted a legion of young, dedicated, enthusiastic supporters . . . a phenomenon that has amazed veteran political observers and made more than one political rival envious. Candidates across America are already running as "Ron Paul Republicans." "Dr. Paul cured my apathy," says a popular campaign sign. THE REVOLUTION may cure yours as well.

Click for more


Apr 29, 2008

Jason Hommel: silver shorts must be desperate!

Jason Hommel is cutting off one-by-one the sticky strings that hold together the tricky web of lies being spun around Silver and the recent PM correction.
It feels almost like deconstructing Saruman's tower in "The Lord of The Rings" and exposing the Orcs, Trolls and Goblins hatcheting the PMs underneath the seemingly "normal" markets! A must read...
Jason Hommel: silver shorts must be desperate!

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James Turk: Inflation fears and food shortages

James Turk, editor of the Freemarket Gold & Money Report, founder of GoldMoney, and consultant to GATA, occupies the Commentator's Corner at Kitco tonight, and he argues that food shortages are being caused by monetary inflation. Following copper, oil, and potash, food now is being monetized -- maybe in part because the Western central banks won't let gold and silver completely fulfil their traditional monetary roles. So for the moment grains of rice may have to do what grains of gold and silver used to...

Inflation Fears & Food Shortages

There have been numerous media reports about food shortages around the globe and the resulting riots caused by empty store shelves. Usually missing from these reports though is the reason for the shortages.

The problem is not agricultural, but rather monetary. In other words, the problem is not too few food staples, but too much money – or too much fiat paper currency to be precise.

In contrast to the classical gold standard, there is today no discipline on the creation of money, with the consequence that it is being created to excess. Rising prices of all goods and services are the inevitable result, and what’s worse, surging inflation has become a global scourge. All currencies are being inflated. Only the rate of debasement is different.

In an inflationary environment, it is basic common sense that soaring prices will empty store shelves. This outcome is also the experience of countless inflationary episodes throughout history. People dump the depreciating currency in favor of tangible, useful assets, and basic staples are high on the list of things to acquire.

The following table of commodity prices is from the April 24th 2008 print edition of The Economist magazine. Note the monthly and yearly increases for food.

The 69.0% increase in food prices over the past year makes a mockery of government reported price indices. Their bogus reports obviously understate the true rate of monetary debasement.

There is of course another problem causing food shortages, and no, it is not the speculators being so roundly blamed by the media. Government – or governments to be more precise – is again the cause. Many of them are acting in ways that cause food shortages.

Price controls and other blunders by foolhardy governments have disrupted the market process. If there were no government meddling and markets were left unfettered, the market process would competently and economically allocate resources, goods and services. This point is skillfully addressed in a recent article by Sean Corrigan posted at the Mises Institute: http://www.mises.org/story/2952

So far the food shortages and riots have occurred in countries with the worst inflation and most stringent government controls. But I expect these occurrences of shortages to broaden as inflation worsens. This point is being demonstrated by events presently taking place in the United States. Shortages of a few basic staples are developing.

Unfortunately, the response by some stores has not been constructive. Rather than increasing the price of goods being demanded, they are unilaterally acting to limit purchases by their customers. Perhaps they have been asked to take those restrictive steps by government agencies. Regardless of their motivation, these actions further disrupt the market process.

With the ongoing printing of fiat currency by governments around the world, inflation will worsen. Therefore, it is logical to conclude that there will be more so-called ‘shortages’ of food and other basic items.

by James Turk

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Apr 25, 2008

Jim Sinclair on Goldseek Radio

Jim Sinclair, Chairman of Tanzania Royalty, sums up the PM markets and "puts the chips down" on Chris Waltzek's Goldseek Radio.
You can listen to it HERE

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Apr 23, 2008

Hugo Salinas Price: Dorothy's silver slippers...

Hugo Salinas Price, president of the Mexican Civic Association for Silver and the world's foremost advocate of restoring silver's role as a circulating currency, addressed GATA's recent conference in Washington by video. His address, "Dorothy's Silver Slippers," detailed his proposal for the issuance of a circulating silver ounce coin for Mexico -- a coin that, not being imprinted with any particular peso value, would never be at risk of withdrawal from circulation because its melt value had come to exceed its face value.

Salinas Price's address to the GATA conference is 23 minutes long and you can find it here:

Hugo Salinas Price: Dorothy's silver slippers...

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Dan Norcini: gold action & commentary

Click chart to enlarge the latest action in gold in PDF format as of April 23, 12:30 pm CST with commentary from Trader Dan Norcini...

click for pdf

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Bill Murphy: The 'strong dollar' policy was gold price suppression

Address by Bill Murphy, Chairman
Gold Anti-Trust Action Committee Inc.
GATA Goes to Washington -- Anybody Seen Our Gold?
Hyatt Regency Crystal City Hotel, Arlington, Virginia
Friday, April 18, 2008

GATA has been working for nine years to expose the manipulation of the gold market by a very cunning Gold Cartel, but one who is now on the ropes. Nonetheles, over a short period of time, they can make life very miserable for our gold/silver camp, as they did a few weeks ago with their orchestrated raid on both markets. Yet, what is so stunning, is that after all these years, the gold and investment world still doesn't get it, or "won't go there." The fact is the now heralded President's Working Group on Financial Markets met on a Monday in March and then gold was bombed for more than $100 an ounce.

Days before this takedown Treasury Secretary Paulson said, "The United States will do what it takes to calm markets," he meant it. So we got deja vu all over again. In May 2006, according to a U.S. senator, the U.S. government ordered the price of gold down after it reached $730 per ounce. That rear-guard action, as with the one of a few weeks ago, only stalled gold's inevitable advance to much higher prices. However, this constant market interference has kept the price of gold to at least half of what it would have been without the price suppression scheme. There are numerous benchmarks to make that claim, including inflation adjusted measures, gold's historic price relationship with oil, platinum, etc.

What is so astonishing to me, after all these years, is that almost no one outside of the GATA camp will come to terms with this market manipulation or even discuss it publicly in a civilized manner. The press will not even acknowledge GATA exists, despite hosting two world class gold conferences in Durban, South Africa and the Yukon's Dawson City. There was not even one financial press inquiry about GATA's $264,00 full page color ad in the Wall Street Journal.

It seems the GATA blackball began nine years when I was interviewed on CNBC by Ron Insana, for the first and last time. As soon as they heard what I had to say in GATA's behalf, that was it -- not only for CNBC, but the WSJ, the Washington Post, NY Times, Barron's, Fortune and Forbes magazine, and the rest of the US financial market press.

Early on, my colleague Chris Powell stated that it appeared we are dealing with an issue that is more sensitive than revealing the secrets about making a nuclear bomb. Perhaps so. For sure, the US financial market media is loathe to give any press time to an ad hoc group taking on the richest and most powerful people in the world. They have made a mockery of the notion we have a free US financial market press. We do not. We have a bought press.

This stifling of the gold truth has also made this conference, at the doorstep of the Fed and Treasury, a useful and timely one. Is using the term "stifling" an exaggeration? I think not.

Five months ago GATA (via Dr. Edwin Vieira, a Washington law firm, and the Freedom of Information Act) requested the US Treasury and Fed explain the true status of US gold reserves. Supposedly the US has 8300+ tonnes of unencumbered bullion in our vaults. If that is the case, it should have taken the Fed and Treasury about 5 minutes to respond to GATA's request, not 5 months, as is now the case. The fact is the Fed is withholding 137 pages from GATA, after making other redactions, is all you need to know how right we are. 137 pages+ we are not allowed to see to explain US gold reserves are all there and not encumbered in any way?

The Treasury remains silent.

There is so much I could get into after 9 years, and so little time, so I thought what might be most valuable today is to deal with what all this means; not only for those of you here who have come from all over the world, but for so many others in my country. And most importantly, to point out how YOU can benefit from knowing what the GATA camp knows.

That certainly was the case for those who came to our GATA African Gold Summit on May 10, 2001 when the price of gold had slumped to the $256 per ounce area. Reg Howe, James Turk and Frank Veneroso explained, utilizing three different methodologies, how the central banks (orchestrated by the US) were going through their available reserves to suppress the price -- as demand for physical gold was FAR greater than mine and scrap supply, as is still the case today. We knew this surreptitious flooding of central bank gold into the market was unsustainable -- that the price of gold would have to rise sharply to ration future demand.

This is just what happened. Our African conference marked the bottom of the 20 year gold bear market.

Fast forward 5 1/2 years later to our Yukon conference -- with the price of gold at $436 per ounce. Our highlight film of that conference is available at our GR 21 website. If you have not seen it, I strongly suggest you do so. At that conference numerous speakers explained what The Gold Cartel was doing and why they were going down to a defeat. Several speakers, including myself, predicted the price of gold was going to $3,000 to $5,000 per ounce -- which is no big deal when you think of it in inflation adjusted terms.

One of the delegates was Andrey Bykov, a top economic advisor to President Putin, who told me it was the finest conference he ever attended. Two days later, a quiet gold market erupted, breaking the $6 Price-Capping Rule in the process. The price went up $300 per ounce in the ensuing nine months before the US ordered the takedown, just like they did a few weeks ago.

The price of gold nearly doubled from our first conference to our second and more than doubled since Dawson City. The amount of time for the doublings was cut in half. Will this pattern continue, meaning we get $1900 gold in the next year and Β½? I think so. I surely wouldn't bet against it.

The reasons are simple and will be discussed at this conference. The most important one is that The Gold Cartel is running out of available central bank gold to meet surging demand for physical gold. It is the opinion of the GATA camp that the central banks only have half the gold they say they have in their vaults -- not the commonly bandied about 30,000 tonne number, but less than 15,000 tonnes. A vast portion of what is left isn't going anywhere, so The Gold Cartel's scheme is hitting the wall. This is the main reason the rate of ascent in the price of gold is accelerating. The central banks are running out of ammo. What they have available for sale, compared to growing demand, is a fraction of what it was when they started their price suppression scheme. Surely it is a reason The Gold Cartel is begging the IMF to dump some of its gold.

No matter what others might say about GATA's claims, NO ONE has a better track record over the years predicting what the price of gold would do and why, starting at the bottom of the market. We have never wavered. You would think others might be more curious to know how GATA could get this move so right and most of the gold analysts on Planet Wall Street got it so wrong all this time. Heck, you only have to go back to Barrick and AngloGold's hedging below $300 to know how wrong most of them have been. Funny thing is, they still don't get it. At present, most of the mainstream pundits/analysts are neutral to bearish at these price levels.

The bottom line for me is that anyone who doesn't understand, or deal with, the gold price suppression scheme, doesn't understand the key to the gold market. Therefore, it is impossible for them to do any kind of effective gold market analysis. AND, they don't realize how this perverted scheme has led to the growing financial market crises in the US.

Cutting to that chase, the gold price suppression scheme was the cornerstone of Secretary Treasury Robert Rubin's "strong dollar" policy.

What else was this policy all about, outside of rhetoric? No one over the years has been able to explain this policy to me. Having a policy means doing something and we know what that doing was, and is.

Reg and James can do this more justice, but there is a historic relationship between the price of gold and interest rates -- called Gibson's Paradox, acknowledged by no less a Gold Cartel figure than former US Treasury Secretary, Lawrence Summers. By suppressing the gold price, the US wanted to keep US interest rates lower than they normally would be, keep the dollar stronger, and enhance our stock market -- real estate too.

Simply put, had the price of gold been allowed to trade freely, like oil, the price would already be double what it is today. US interest rates would have been much higher in years past. Thus, the Fed would not have been able to take our Fed Funds rate down to where it was, and is. Therefore, to some degree, a free gold price would have curtailed a fair amount of the US mortgage/housing fiasco and prevented much of the Moral Hazard issues of the day.

This notion is very easy to comprehend. What is the talk from those who live on what I call Planet Wall Street when the price of gold is soaring? It is about INFLATION, CRISIS, or DOLLAR COLLAPSE. None of it is positive for US interest rates, our economy, or financial market for those in the Planet Wall Street crowd. The suppression of the gold price suppresses that line of media chatter.

That is the essence of what you need to know about "the why" of the price suppression scheme. In my opinion it was the lynchpin operation leading to the systemic financial market crises of the day.

We all know how one bad habit can lead to yet another. The recently highly touted Working Group on Financial Markets, the Counterparty Risk Management Group, Exchange Stabilization Fund, and The Gold Cartel went from active management of the gold price to an ever present role in manipulating the stock market, and upping the heralded Moral Hazard problem even further.

This propping up of the stock market kicked into high gear after 9/11. I suspect those doing the constant stock market rigging initially used the national security issue as justification for their interference in the free market process. The problem is this now constant interference is gradually leading to the destruction of our free markets.

As the US real estate bubble grew, Americans were led to believe real estate prices would go up forever: that they could refinance their mortgages to raise cash and go on a spending binge, thereby enjoying a much enhanced lifestyle -- leading to, in many cases, a temporary feel good illusion. Many of us in the Planet GATA camp have a pretty good idea where that illusion is taking us: an escalating disaster.

What most Americans don't realize is that the US stock market is a bit of an illusion too. It just doesn't trade like a free market. Every time the market is about to fall apart, it miraculously turns around. Planet GATA stock market watchers know all too well about the Plunge Protection Team's patented last hour Hail Mary play -- in which the DOW rallies hundreds of points for no apparent reason.

The point here is that these market managers have upped the Moral Hazard ante with their antics. They have taken away the "fear scenario" pertaining to our markets -- why worry, investors think, since "the market always comes back." Thus, the Orwellians in New York and Washington have lulled to sleep the average investor about the downside risk of the markets and potential capital loss. Just as gold is a key financial market barometer, so is the DOW. How many times have we heard the past months how well the DOW was acting despite horrendous economic news? The market managers in New York and Washington know the negative impact a reeling DOW would have on the sentiment and psyche of the average American. Thus, the PPT manages the DOW to manage "expectations."

So they prop the DOW up to foster the notion that everything is fine. For years I have compared this to a Stepfordville, or Matrix, way of thinking/operating. The problem is we are not talking about the movies here. It is our well being and status of our future existence.

It is a main reason we are having this conference in Washington -- to expose the manipulation of the gold market, managing of other financial markets, and also to focus on the distortion of US economic stats, which has led us further and further away from our true underlying economic reality.

This is not the first time GATA has come to Washington to expose the truth. It is ironic that GATA is seen as anti-establishment because we have gone the establishment route to make our findings known in Washington.

-- In addition to our Wall Street Journal ad, we have taken out full-page ads in Washington's Roll Call.

-- Met with U.S. Rep. James Saxton, vice chairman of the House Joint Economic Committee.

-- House Speaker Denny Hastert.

-- The vice-chairman of the sub-Committee on Domestic and International Monetary Policy, U.S. Rep. Spencer Bachus of Alabama.

-- Gone to Austin, Texas, the state capital to meet with two of President's Bush's boyhood friends from Midland, Texas. One, Tom Craddick, is the speaker of the Texas House. He sent a two-page executive summary of GATA's findings to President's Bush's private fax, the day after I met him. I received a postmarked letter that same day from the President's economic advisor at the time, Larry Lindsay.

-- The GATA Army has sent thousands of letters to various Congressman over the years. One prompted Kentucky Sen. Jim Bunning, the Hall of Fame baseball pitcher, to query Fed Chairman Greenspan to clarify legal counsel Virgil Mattingly's use of the term "gold swaps," which GATA found in prior Fed minutes.

Mattingly replied: "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."

Fed minutes garbled? RIGHT!

So, here we are again -- back in Washington -- going the establishment route again and in the American way.

And this conference could not have come at a more opportune time. GATA has long pointed to Goldman Sachs and JP Morgan as The Gold Cartel's hit men -- with Goldman acting for the Treasury and Morgan for the Fed. To appreciate how incestuous these relationships are, we only need go the instantaneous JP Morgan/Fed bailout of Bear Stearns. It is universally accepted that this swift, precedent setting deal was arranged to prevent a systemic US financial market collapse.

But, by doing so, the aptly named Working Group on Financial Markets upped the Moral Hazard/Greenspan put ante once again. Out of nowhere the Bear Stearns shareholders were mostly wiped out -- in part due to the consequences of the market rigging, Market Hazard issue, perhaps a FIRST of many other unintended consequences of the US market manipulation. As our free market process is further interfered with, one day it might lead to 25 Bear Stearns, kicking in one after another -- perhaps due to a derivatives neutron bomb going off. Chaos could reign. The average American won't know what hit him, as life savings go down the drain.

More on that later in the conference.

We are also here to better understand how to profit from the mess the market managers created. In my opinion the best way to do that is to build a conviction the GATA camp knows what we are talking about. This is just what occurred after our other two conferences.

Fortunes have been made and there are more fortunes to come. The price of gold has gone up 3 to 4 times since our first conference. Silver went up around 5 times. If a number in our camp are correct, those prices will go up 3 to 5 times again from present levels. There is a great deal of money on the table here -- money that most on Planet Wall Street don't want you to know anything about. Because of them, the investing public is totally clueless about the gold/silver investment opportunities that have been, and are, clear as can be.

I hope you enjoy this conference as much as I have enjoyed the other two, and that this one will be just as meaningful for you. My GATA experience has been the most fulfilling of my life, as my GATA journey has been a Triple Ph.D. learning experience about the gold market, as well as to how our US financial system is really operating. This new found knowledge is very empowering and I am extremely grateful for this fascinating education.

* * *

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Apr 22, 2008

Alex Stanczyk: GATA went to Washington

Alex Stanczyk
21 Apr, 2008

As many of you know, the Gold Anti-Trust Action Committee (GATA) just had a conference in Washington DC. For those of you who follow GATA’s work, you know that they have accumulated an overwhelming body of evidence that points to the ‘management’ of the gold price.

I have had mixed feelings over the likelihood of such a conspiracy, and until I can prove something or at least be able to use available evidence to form an educated opinion I tend to dis-believe such things. However, one thing I can say after attending the conference this weekend, is that there are some very suspicious interactions on the part of the Fed, the Treasury, and the IMF when dealing with GATA. Specifically, GATA has requested through the Freedom of Information Act, information that supports the governments’ claims of the current physical gold reserve of the United States. One thing that I find very curious is that to date the Fed, and Treasury have failed to produce any materials in response to this request. Now, maybe I am just being cynical here, but I think most folks who have any common sense would agree that if the government does not want the public to have transparency into an issue, it is usually because it is being naughty, and there is something that they don’t want the public to know. For the life of me I cant see why there would be anything to keep secret, even if it is a National Security issue, unless of course the gold isn’t there anymore, in which case it would very well indeed be a National Security issue. Now of course if the gold IS gone, then it just supports GATA’s assertion that it has been used to suppress the gold price for decades.

I will recap what I got from each speaker in brief:

Dr. Edwin Vieira Jr., The Foremost Authority in the United States on Constitutional Money –

* Only a return to Gold and Silver can stabilize our currency.
* Desperate people start to ask questions, and shortly thereafter that, assign blame. If our politicians want a long and successful career ( or life ) they should be aware of this.

Reginald Howe, Golden Sextant Advisors LLC –

* Out of all commodities, gold is the one best suited for use as money
* The ‘gold price’, should actually be termed ‘exchange rate’ as with all currencies
* Central Banks are now lending gold at negative lease rates, effectively paying institutions to sell gold into the market
* Since the day the gold window has been closed, the Supreme Court has refused to hear any case challenging the current monetary system

James Turk, Goldmoney –

* The Chinese are indeed buying gold, using intermediaries and proxies to do so
* Chinese Proverb: Wisdom begins by calling a thing its proper name. Gold is not an investment, it is money.
* Do not put dollars into gold expecting a return, expect preservation of purchasing power. To get a return, it implies there must be a risk, and gold has held its purchasing power better than anything else in history.
* We are looking at huge problems, possibly as soon as this summer.
* Be prepared for Capital Controls in the US soon.

Peter George, Trinity Asset Management -

* Many hedge funds are having liquidity issues right now, when they see a bid, they are hitting it.
* It will take 10 years to bring new ultra-deep mining operations at 5000meters or deeper online.
* Since 1994 virtually all commodities have gone vertical and pulled away from gold.
* Goldfields has the largest un-hedged position in the WITS Basin, which holds an approximately 40,000 more tons of gold.
* Anglogold Ashanti is hedged $7Billion
* Barrick is hedged $9Billion
* Oil will go to $500 a barrel in time

Adrian Douglas, Market Force Analysis

* Gold is the investment opportunity of a lifetime.

John Embry, Sprott Asset Management –

* This is the best opportunity I have seen in 45 years in the investment business

In summary, by hearing views from almost every sector that touches the gold and silver markets such as mining, fund managers, analysts, attorneys, constitutional law experts, private bullion custodians, it appears obvious that there is indeed something fishy going on with the price of gold. The only players that affect the gold markets who didn’t have anything to say was the Fed, the Treasury, and the CFTC. How curious.

This is all fine and good of course, because I own gold and silver, so when this whole thing does come unglued and make the Enron scandal look like romper room on Paxil in comparison, some of us will be getting quite rich.

Got gold yet?


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Apr 21, 2008

Edwin Vieira Jr: Silver and gold guarantee freedom

Address by Edwin Vieira Jr.
Gold Anti-Trust Action Committee Inc. conference
GATA Goes to Washington -- Anybody Seen Our Gold?
Hyatt Regency Crystal City Hotel, Arlington, Virginia
Friday, April 18, 2008

Silver and gold are not merely valuable commodities, investments, and media of exchange. More importantly, they are key "checks and balances" in America's legal and political institutions.

The fight against the use of silver and gold as money that has been waged by bankers and rogue politicians since the 1870s as to silver and the 1930s as to gold --and will intensify as fiat currencies collapse throughout the world -- is ultimately directed against America's national independence, her constitutional government, and every common American's individual liberty and prosperity.

The Constitution of the United States adopted a monetary system consisting of silver and gold coin, in which the standard is the "dollar," containing 371 1/4 grains (troy) of fine silver, with the values of gold coins to be measured in "dollars" according to the free market's rate of exchange between silver and gold. Neither the general government nor any state is authorized to emit paper currency.

These restrictions prevent rogue public officials from turning public debts into currency, as a means for redistributing wealth from society to political elitists and their clients in special-interest groups.

Furthermore, although the Constitution does not mention banks, either public or private, its only correct construction requires separation of bank and state -- extirpation of all inherently fraudulent fractional-reserve banking schemes -- and rigorous regulation of all other fractional-reserve arrangements that might operate fraudulently. (See Edwin Vieira Jr., "Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution," second revised edition, 2002.)

But since the early 1800s rogue politicians and bankers have steadily subverted the Constitution by forging an increasingly tight relationship between bank and state. Through the grant of one abusive special privilege after another, politicians have immunized fractional-reserve banking against the just economic and legal consequences of its own inevitable failures, so that public officials and bankers could turn both public and private debts into currency -- thus separating the supply and the purchasing power of currency from the economic discipline of the free market, and rendering those matters largely political in nature.

Under the Federal Reserve System, Americans no longer enjoy "money" in the economic sense but are subjected to what must be denoted as "political currency," with emphasis on the adjective. Political currency is emitted on the basis of political debts --that is, either 1) public debts or 2) private debts for the payment of which the creditors expect public bailouts if their debtors default.

Unfortunately, the Federal Reserve System is inherently unstable, and must lurch from one self-generated crisis to another, each increasing in severity, until its house of financial cards self-destructs.

Having separated society's medium of exchange from the production of real goods and services in the free market -- and instead linked the currency to creating, packaging, marketing, servicing, and eventually salvaging political debts -- the Federal Reserve system encourages, facilitates, and rewards irresponsibility on the part of both lenders and borrowers, in the private as well as the public sector.

For those who benefit from the system to continue to loot society, the supply of political currency must expand. For that supply to expand, political debts must increase.

True enough, political debts can increase, even geometrically, because political currency can be created (as the saying goes) "out of nothing" to float them. But real wealth cannot be generated simply by the emission of paper promises. Neither can new paper promises pay off old ones.

So, avarice being unlimited, insatiable, and imprudent, the whole operation must cumulate and culminate in an unsustainable bubble of debts that either implodes in a depression or explodes in hyperinflation.

Although the Federal Reserve System is fatally flawed, the wealth and power of elitists in high finance, big business, and the political class depend on maintaining it -- or replacing it in a timely fashion with something of equal serviceability for their ends.

As it cannot long be maintained, it must and will soon be replaced. With what remains a matter for speculation. Not open to the slightest doubt, however, is that, as crises have rocked the system, the establishment has always moved farther away from the Constitution -- deeper into the sump of lawlessness -- to shore up the banking cartel, and always at the expense of common Americans.

In the 1930s, in response to the collapse of the fractional-reserve racket, rather than reforming the operations of the banks, the Roosevelt administration and a pliant Congress seized the American people's gold and outlawed almost all public and private contracts promising to pay in gold. In the 1950s and through the 1960s, until the Nixon administration terminated redemption of Federal Reserve notes in gold in 1971, the inflationary policies of the Federal Reserve System drained off more than half of America's national stock of gold to foreign banks and the profiteers operating through them. And during the last few decades, surreptitious manipulation of the precious-metals markets has kept the price of gold (measured in Federal Reserve notes) suspiciously low, even as this country's financial structures have become increasingly shaky.

The price of gold has been manipulated for two reasons, one being the suppression of evidence, the other the throttling of monetary evolution.

First, an ever-increasing price of gold reflects the breakdown of the Federal Reserve System -- just as an ever-increasing temperature reveals that the human body is sick, and when it reaches a critical point that death is imminent.

Second, those who fatten off of political currency need to prevent ordinary people from realizing that only a return to silver and gold as common media of exchange can stabilize America's economy, and especially from actually employing silver and gold in preference to Federal Reserve notes in their day-to-day transactions. However, as the Federal Reserve System experiences ever-more-frequent, ever-more-serious, and ever-less-tractable problems, downward manipulations of the prices of gold and silver will become impossible. And that the system is beyond repair will become apparent to all.

At that point, the question will arise -- and behind the scenes doubtlessly already has arisen among bankers and politicians -- as to how and with what to replace the banking cartel.

When a political currency has failed, the traditional trick of the bankers and politicians has been to introduce a new, supposedly more stable currency -- often within a new, supposedly more stable banking apparatus. This was the sleight of hand that moved America from the independent state banks in operation prior to the Civil War, through the partially cartelized national banks created in the 1860s, to the fully cartelized Federal Reserve System established in 1913.

Throughout this devolution, the progression of illegality became increasingly stark.

The state banks violated Article I, Section 10, Clause 1, of the Constitution. But at least they operated only regionally. The national banks violated Article I, Section 8, Clause 2, and operated throughout the country. But at least their emission of paper currency was limited by the amount of public debt a generally thrifty Congress was willing to incur.

The Federal Reserve System, though, is a corporative-state (or fascist) structure that purports to delegate Congress' supposed monetary powers to private interests; and the system's bubble of both public and private debts will expand to the limit of the avarice of the cartel's operators, their clients, and their political henchmen.

Nonetheless, as unconstitutional and economically unsound as they were and are, all these schemes operated and even now operate under color of the national sovereignty and laws of the United States, subject in principle to overarching control by the American people. Indeed, Section 30 of the Federal Reserve Act still explicitly reserves to Congress the right to repeal, alter, or amend the system at will. But with the Federal Reserve System the bankers and politicians have gone about as far as they can go within the economic and political institutions of the United States. And they have separated paper currency from the discipline of free markets about as far as possible, while still pretending to maintain some semblance of a connection to free markets.

So as the Federal Reserve System shakes itself to pieces, the likelihood is that first, a new currency will arise outside of the United States in some regional supra-national entity such as the proposed North American Union; and, second, the value of this new currency will not be controlled by free financial markets but, instead, propping up the currency's value will be the excuse for extensive governmental intervention in and manipulation of the markets.

This plan is so alien to the experiences and desires of most Americans that its implementation will probably require a controlled meltdown of the Federal Reserve System to bludgeon them into accepting the North American Union as the only way to obtain a new, supposedly stable currency and to return to something approaching economic normalcy. Yet even a controlled meltdown, along with the accompanying absorption of the United States into a new Northern Hemispheric political order, will unavoidably generate extensive economic, social, and political unrest that will threaten the financial establishment's power.

Even dumbed-down Americans will not long suffer conditions of depression akin to those of the 1930s, let alone South American levels of inflation as well. Desperate people will ask questions and assign blame. Perhaps not just a few will abandon debt currency altogether and substitute silver and gold as their media of exchange. They and others will conclude that the Federal Reserve System is unconstitutional -- and therefore that its operations are arguably a complex of criminal offenses. (See 18 U.S.C. §§ 241 and 242.)

Many will realize that the establishment's scheme for replacing Federal Reserve Notes with a supra-national currency is a political crime on a more stupendous scale yet, because it depends upon destroying both the Constitution and the Declaration of Independence. Then an aroused people will take political action against the institutions and individuals responsible for foisting the funny-money scheme on their country.

On the other side, the establishment will not be idle. It will do anything and everything possible to maintain its position. Obviously the Constitution and the Declaration of Independence will be expendable, because the establishment has been trying to whittle away the former on a piece-by-piece basis over the years, and intends to do away with the latter at one fell swoop in the near future. So this country, as an independent nation, will be expendable too. And if this country, why not the freedom and prosperity of common Americans as well?

Will ordinary Americans -- at least 80 to 90 million of whom are armed -- meekly put up with a program aimed at their own country's assisted suicide? Why should they, when they have nothing to lose economically or politically? If they refuse to knuckle under, the establishment's only recourse will be to attempt to lock down the whole country under a para-militarized police state, perhaps with the assistance of "peacekeepers" from Canada and Mexico (for the employment of whom negotiations are apparently already in progress).

That is why careful observers conclude that the paranoia being generated by politicians and the big media over "homeland security" -- and the frenetic para-militarization of law-enforcement agencies at the national, state, and even local levels in the name of "homeland security" -- are not caused by or aimed at foreign "terrorists" at all, but instead target ordinary Americans in their own home towns.

The establishment is preparing to force justifiably angry Americans into line when its financial house of cards comes tumbling down, either in a controlled demolition or otherwise.

Americans will not be the only victims of such repression. The establishment must prevent other peoples, in other parts of the world, from jumping off the financial treadmill of political currency. That will require the use not only of economic and political pressure, but also -- indeed, especially -- of military coercion. For the provision of which the establishment will attempt to force common Americans to pay, and to send their sons and even their daughters off to fight, die, and be maimed and sickened in foreign lands.

Little good, then, will it do for an ounce of gold to soar to $2,000, $3,000, or higher -- and for silver to increase in value proportionately too -- if the ultimate consequences are a police state in America, then a supra-national regime replacing the United States, accompanied by endless military conflicts throughout the world.

In the grand scheme of things, gold and silver are far less important as economic investments or hedges against hyperinflation or depression than as guarantors of individual freedom -- and then to the fullest extent only when they are actually used as media of exchange throughout society. Silver and gold as currencies supply the foundation necessary for economic democracy and limited government; whereas fiat currencies inevitably function as the tools of fascism, socialism, and every other form of financial imperialism.

Thus, the fight over gold and silver as media of exchange is about more than mere money, let alone making money. For it is a fight with only two possible outcomes: either control of their own lives by the people themselves, or control of the people and their lives by political and economic elitists. To achieve the first and avoid the second no price will prove too great to pay.


Edwin Vieira Jr. is a lawyer, author of "Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution," and a consultant to GATA. He lives in Virginia.

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Apr 19, 2008

Chris Powell (GATA): There are no markets anymore, just interventions

Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
GATA Goes to Washington -- Anybody Seen Our Gold?
Hyatt Regency Crystal City Hotel, Arlington, Virginia
Friday, April 18, 2008

Groucho Marx made a small fortune in vaudeville and then lost it all in the stock market crash of 1929. His sense of humor was no help to him then. One day in the early 1930s he was sitting in a bar with his friend Morrie, and Morrie was trying to console him.

"Yes," Morrie told Groucho, "we've lost a lot of money and it hurts, but we’ve still got our health and our lives ahead of us, and some people don’t even have that. Take my cousin Fred. He's much worse off than we are but he’s pressing on as best he can. Fred lost his leg in a carriage accident when he was 5. His parents were killed in a tenement fire when he was 12. His wife ran off with his best friend when he was 27. And then he had diabetes at 29."

Groucho was not to be consoled; he had lost too much money in the crash. He snarled back at Morrie: "Diabetes at 29? That's nothing. I had Radio at 104."

We investors in the precious metals have taken some hard blows lately, if not quite as hard as the blows taken by, say, investors in Bear Stearns. But we've taken such blows regularly over the last decade and still have come out ahead, so we should be able to put things in perspective.

It may be a little easier for those of us in the Gold Anti-Trust Action Committee. The committee was founded in 1999 to expose manipulation of the gold market and the rigging of related markets. From the start we were ridiculed as "conspiracy nuts." But hardly a day goes by now without evidence of official market rigging showing up in even the establishment news media.

We in GATA haven't minded the "nuts" part that much. But we're actually public record nuts.

For the scheme to suppress the price of gold is increasingly a matter of ordinary public record.

It was a matter of public record in January 1995, when the Federal Reserve's general counsel, J. Virgil Mattingly, told the Federal Open Market Committee, according to the committee's minutes, that the U.S. Treasury Department's Exchange Stabilization Fund had undertaken "gold swaps." Those minutes are still posted at the Fed's Internet site:


It was a matter of public record in July 1998, six months before GATA was formed, when Federal Reserve Chairman Alan Greenspan told Congress: "Central banks stand ready to lease gold in increasing quantities should the price rise." That is, Greenspan himself contradicted the usual central bank explanation for leasing gold -- supposedly to earn a little interest on a dead asset -- and admitted that gold leasing was all about suppressing the price. Greenspan's admission is still posted at the Fed’s Internet site:


Incidentally, while we gold bugs love to cite Greenspan's testimony from July 1998 because of its reference to gold leasing, that testimony was mainly about something else, for which it is far more important today. For with that testimony Greenspan persuaded Congress not to regulate the sort of financial derivatives that lately have devastated the world financial system.

The Washington Agreement on Gold, made by the European central banks in 1999, was another admission -- no, a proclamation that central banks were working together to control the gold price. The central banks in the Washington Agreement claimed that, by restricting their gold sales and leasing, they meant to prevent the gold price from falling too hard. But even if you believed that explanation, it was still collusive intervention in the gold market. You can find the Washington Agreement at the World Gold Council's Internet site:


Barrick Gold, then the largest gold-mining company in the world, confessed to the gold price suppression scheme in U.S. District Court in New Orleans on February 28, 2003. On that date Barrick filed a motion to dismiss Blanchard & Co.'s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase, for rigging the gold market.

Barrick's motion said that in borrowing gold from central banks and selling it, the company had become the agent of the central banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be exempt from suit. Barrick’s confession to the gold price suppression scheme is posted here:


The Reserve Bank of Australia confessed to the gold price suppression scheme in its annual report for 2003. "Foreign currency reserve assets and gold," the RBA's report said, "are held primarily to support intervention in the foreign exchange market." The RBA's report is still posted on the Internet at the central bank's site:


Maybe the most brazen admission of the Western central bank scheme to suppress the gold price was made by the head of the monetary and economic department of the Bank for International Settlements, William S. White, in a speech to a BIS conference in Basel, Switzerland, in June 2005.

There are five main purposes of central bank cooperation, White announced, and one of them is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." White's speech is posted at GATA's Internet site here:


Last October the editor of the Freemarket Gold & Money Report and the founder of GoldMoney, James Turk, a longtime consultant to GATA who will be speaking at this conference, revealed some U.S. Treasury Department reports showing that since May last year the U.S. gold reserve has been mobilized for leasing to suppress the gold price. Those records are available on GATA's Internet site:


In complaining about the manipulation of the gold market, GATA has not been called "conspiracy nuts" by everyone. We have gained a good deal of institutional support over the years.

First came Sprott Asset Management in Toronto, our main sponsor for this conference. In 2004 Sprott issued a comprehensive report supporting GATA. The report was written by this conference's keynote speaker, Sprott's chief investment strategist, John Embry, and his assistant, Andrew Hepburn, and was titled "Not Free, Not Fair -- the Long-Term Manipulation of the Gold Price." It remains available at the Sprott Internet site here:


Then in 2006 the Cheuvreux brokerage house of Credit Agricole, the major French bank, issued its own report confirming GATA's findings of manipulation in the gold market. The Cheuvreux report was titled "Remonetization of Gold: Start Hoarding," and you can find it at GATA's Internet site:


And in September last year Citigroup -- yes, Citigroup, a pillar of the American financial establishment -- joined the conspiracy nuts. It published a report titled "Gold: Riding the Reflationary Rescue," written by its analysts John H. Hill and Graham Wark, declaring: "Gold undoubtedly faced headwinds this year from resurgent central bank selling, which was clearly timed to cap the gold price." You can find the Citigroup report at GATA's Internet site here:


Even those authorities who don't want to run afoul of government institutions that with a few computer keystrokes can create virtually infinite amounts of money may have to admit the opportunity for central banks to manipulate the gold market. For it is widely acknowledged that annual world gold production is about 2,400 tonnes, that annual net world gold demand is about 3,400 tonnes, that gold production is falling as demand is rising, and that the thousand-tonne gap between production and net demand is being filled mainly by central bank dishoarding and leasing. What do you suppose the gold price would be if central banks were not supplying more than a quarter of annual demand?

Just prior to the smashing down of the gold price in March, the gold lease rate turned negative. That is, the usual miniscule interest rate charged on borrowed gold was not enough incentive for bullion banks to keep borrowing gold from central banks and keep selling it into the market. No, central banks began to pay bullion banks to short gold. (Remember this the next time you hear assertions that central banks lease gold to make money from a "dead asset.")

So a bigger question today is not whether central banks and their agents manipulate the gold market -- even Citigroup sees it now -- but why this should ever have been a mystery or a controversy in the first place. For the manipulation of the gold market by central banks is only the most basic economic history.

That's what the gold standard was about -- governments fixing the price of gold to a precise value in their currencies, a price at which governments would exchange their currencies for gold, currencies that were backed by gold.

Though the gold standard was abandoned amid the Great Depression, that was not the end of government efforts to control the gold price. The United States and Great Britain attempted to hold the price at $35 per ounce throughout the 1960s in a public arrangement of dishoarding that came to be known as the London Gold Pool. The London Gold Pool was overwhelmed by demand and was shut down abruptly in April 1968.

Since then there have been sporadic selling of gold by central banks and, increasingly, leasing of gold by central banks, even as the gold price has continued to rise.

That the London Gold Pool was a scheme to manipulate the gold price is not denied even as the purposes of the more recent selling and leasing by central banks may be disputed.

But it is all much bigger than that. Gold is only part of it.

For market intervention is exactly why central banking was invented. Intervening in markets is what central banks do. They have no other purpose.

Central banks admit intervening daily, even hourly, in the currency markets, buying and selling their own currencies and those of other governments to maintain exchange rates at what they consider politically desirable levels. Central banks admit doing the same in the government bond markets. Now there is even evidence that the Federal Reserve and Treasury Department have been intervening frequently in the U.S. stock markets since the crash of 1987.

You don't have to settle for rumors about the "Plunge Protection Team," also known as the President's Working Group on Financial Markets. Again you can just look at the public record.

The Federal Reserve injects money into the stock and bond markets every day, on the public record, through what are called repurchase agreements the Fed makes with the major New York financial houses, its so-called primary dealers. The financial houses become the Fed's agents in directing that money into the markets.

As of this week the money that has been deployed into the stock, bond, and derivatives markets by the Fed through the repo pool stood at about $360 billion. Last October the repo pool was only $160 billion. In only six months the money in the repo pool has far more than doubled.

Three hundred sixty billion dollars are plenty for pushing all sorts of markets around or propping them up. Indeed, market manipulation is the only purpose of the repo pool.

Now central banks are trying to scare the gold market with the plan of the International Monetary Fund to sell 400 tonnes of gold in the name of rotating into supposedly superior investments, like government bonds -- as if anything else with so little risk could match gold's increase in value in dollar terms, 300 percent over the last 10 years, an average of 30 percent per year. But if you look closely, you will find that the IMF says its gold sales are only to substitute for any unfilled quotas in the Western central bank agreement on gold sales, the Washington Agreement, and so are not to add to the annual dishoarding of official-sector gold. And if you look even closer, you may begin to wonder whether the IMF even has any gold at all.

This month I wrote to the managing director of the IMF, Dominque Strauss-Kahn, with five questions about the IMF's gold. I copied the letter to the IMF's press office by e-mail, and quickly began to get some answers from one of its press officers, Conny Lotze.

My first question was: "Your Internet site says the IMF holds 3,217 metric tons of gold 'at designated depositories.' Which depositories are these?"

Conny Lotze of the IMF replied, but not specifically. She wrote: "The fund's gold is distributed across a number of official depositories," noting that the IMF's rules designate the United States, Britain, France, and India as IMF depositories.

My second question was: "If you'd prefer not to identify the depositories for security reasons, could you at least identify the national and private custodians of the IMF's gold and the amounts of IMF gold held by each?"

Conny Lotze replied, again not very specifically: "All of the designated depositories are official."

My third question was: "Is the IMF's gold at these depositories allocated -- that is, specifically identified as belonging to the IMF -- or is it merged with other gold in storage at these depositories?"

Conny Lotze replied, still not very specifically: "The fund's gold is properly accounted for at all its depositories."

My fourth question was: "Do the IMF's member countries count the IMF's gold as part of their own national reserves, or do they count and identify the IMF's gold separately?"

Conny Lotze replied a bit ambiguously: "Members do not include IMF gold within their reserves because it is an asset of the IMF. Members include their reserve position in the fund in their international reserves."

This sounded to me as if the IMF members are still counting as their own the gold that supposedly belongs to the IMF -- that the IMF members are just listing the gold assets in another column on their own books.

My fifth question to the IMF was: "Does the IMF have assurances from the depositories that its gold is not leased or swapped or otherwise encumbered? If so, what are these assurances?"

Conny Lotze replied: "Under the fund's Articles of Agreement it is not authorized to engage in these transactions in gold."

But I had not asked if the IMF itself was swapping or leasing gold. I had asked whether the custodians of the IMF's gold were swapping or leasing it.

This prompted me to raise one more question for Conny Lotze. I wrote her: "Is there any audit of the IMF's gold that is available to the public? I ask because, if the amount of IMF gold held by each depository nation is not public information, there doesn't seem to be much documentation for the IMF's gold, nor any documentation for the assurance that its custody is just fine. Without any details or documentation, the IMF's answer seems to be simply that it should be trusted -- that it has the gold it says it has, somewhere."

And Conny Lotze ... well, that was 10 days ago, and she has not answered that question yet, and I don't think she is going to. For I'm beginning to find that the only thing that offends a government officer more than a four-letter word is that five-letter word: A-U-D-I-T.

That the International Monetary Fund apparently refuses to account for the gold it claims to have should be potential news for the financial media. We hope they will pursue that issue before they next attempt to scare the gold market with stories about IMF gold sales.

But GATA may have somewhat bigger news than that today.

Last week GATA's Washington law firm, William J. Olson P.C. of McLean, Virginia, received a letter from the Federal Reserve in response to the freedom-of-information request we sent to the Fed and the Treasury back in December, seeking access to all documents in their possession that mention "gold swaps." The Fed's letter confirms that it has such documents and says that some of them will be made available to us but others will not be made available or will be redacted because they contain, among other things, "trade secrets" and "privileged or confidential" memorandums or letters. By telephone the Fed has told our law firm that about 400 pages are being reviewed for release to us.

Right now we can only speculate about these documents, but the Fed's letter does admit something important: that the U.S. government knows things about gold that it does not want the public to know, that the U.S. government has secrets about gold, and that these secrets involve the gold market, not the mere location of U.S. government gold reserves.

Maybe the financial media should pursue these issues too. For what is there to hide about the U.S. gold reserves unless it involves market manipulation?

But since even Citigroup acknowledges it now, it should be no secret that the price of gold has been manipulated through the strategic dishoarding of gold by central banks and their sale of gold futures and options at strategic moments. So the biggest question of all may be why central banks manipulate the gold price and what this means for investors.

Gold has been manipulated by central banks because it is a currency that competes with their own currencies, a currency whose price helps set the price of government currencies and helps determine interest rates. More than that, gold is the ticket out of the central bank system, the escape from coercive central bank and government power. As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.

In recent months central bankers often have complained about what they call "imbalances" in the international financial system. That is, certain countries, particularly in Asia, run big trade surpluses, while other countries, especially the United States, run big trade deficits and consume far more than they produce, living off the rest of the world. These complaints by the central bankers about "imbalances" are brazenly hypocritical, since these imbalances have been caused by the central banks themselves, their constant interventions in the currency, bond, commodity, and derivatives markets to prevent those markets from coming into balance through ordinary market action lest certain political interests be disturbed.

Yes, when markets balance themselves they often do it brutally, causing great damage to many of their participants. The United States enacted a central banking system in 1913 because for the almost 150 years before then the country went through a catastrophic deflation every decade or so. Central banking was created in the name of preventing those catastrophic deflations.

The problem with central banking has been mainly the old problem of power -- it corrupts.

Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest -- to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.

And so we have come to an era of daily market interventions by central banks -- so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all.

Central banking controls the value of all labor, services, and real goods, and yet it is conducted almost entirely in secret -- because, in choosing winners and losers in the economy, advancing infinite amounts of money to some participants in the markets but not to others, administering the ultimate patronage, central banking cannot survive scrutiny.

Yet the secrecy of central banking now is taken for granted even in nominally democratic countries.

Maybe the Federal Reserve's intervention to rescue Bear Stearns through the Fed's de-facto subsidiary, JPMorganChase, has been grotesque enough to prompt some devastating public inquiries by Congress and the news media. But what a hundred years ago in the United States was called the Money Power is so ascendant today that it sometimes even boasts of its privilege. What other agency of a democratic government could get away with the principle that was articulated on national television in 1994 by the vice chairman of the Federal Reserve, Alan Blinder? Blinder declared: "The last duty of a central banker is to tell the public the truth."

The truth as GATA sees it is this:

First, gold is the secret knowledge of the financial universe, but it is becoming an open secret. That is GATA's work -- to bust the secret open. We will continue to use freedom-of-information law against the Fed and the Treasury Department about their policies toward gold and the disposition of the U.S. gold reserves. Of course central banks can no more afford to account fully for their gold reserves than the Fed and JPMorganChase can afford to disclose details of their negotiations for the rescue of Bear Stearns. Indeed, the disposition of Western central bank gold reserves is a secret more closely guarded than the blueprints for the manufacture of nuclear weapons.

Second, all technical analysis of markets now is faulty if it fails to account for government intervention.

And third, that intervention against gold is failing because of overuse, exposure, exhaustion of Western central bank gold reserves -- we estimate that the Western central banks have in their vaults only about half the 32,000 tonnes they claim to have -- and the resentment of the developing world, which is starting to figure out how it has been expropriated by the dollar system, a system in which people create real goods and send them to the United States in exchange for mere colored paper and electrons.

The Western central banks are attempting a controlled retreat with gold, bleeding out their reserves so that gold's ascent and the dollar's decline may be less shocking. But GATA believes that the central banks may have to retreat farther than anyone dreams: that when the central banks are overrun in the gold market, as they were overrun in 1968, and the market begins to reflect the ratio between gold supply and the explosion of the world money supply of the last few decades -- as the market begins to perceive the difference between the real and the unreal -- there may not be enough zeroes to put behind the gold price.

Not quite a hundred years ago Rudyard Kipling wrote a poem that foresaw the decline of his country's empire and attributed it to a loss of the old virtues, the virtues that were listed at the top of the pages in the special notebooks, called "copybooks," that were given to British schoolchildren -- virtues like honesty, fair dealing, Ten Commandments-type stuff. The name of Kipling's poem is "The Gods of the Copybook Headings," and its conclusion is a warning to the empire that succeeded the one he was living in:

Then the Gods of the Market tumbled,
And their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled
And began to believe it was true
That All is not Gold that Glitters,
And Two and Two make Four,
And the Gods of the Copybook Headings
Limped up to explain it once more.

As it will be in the future,
It was at the birth of Man.
There are only four things certain
Since Social Progress began:
That the Dog returns to his Vomit
And the Sow returns to her Mire,
And the burnt Fool's bandaged finger
Goes wabbling back to the Fire;

And that after this is accomplished,
And the brave new world begins,
When all men are paid for existing
And no man must pay for his sins,
As surely as Water will wet us,
As surely as Fire will burn,
The Gods of the Copybook Headings
With terror and slaughter return.
I quoted that much of Kipling at Doug Casey's conference in Arizona last month and when I got to the part about terror and slaughter returning, all I could conclude with was "Have a nice day." I was a little ashamed of that this week as I walked with my daughter to the Lincoln Memorial just across the river here and stood on the portico where Martin Luther King stood 45 years ago as he spoke of renewing Lincoln's pursuit of liberating humanity. "Let us have faith that right makes might," Lincoln said, "and, in that faith, let us, to the end, dare to do our duty as we understand it."

GATA has the faith that right will make might and thanks you all for coming here to help us with our duty.

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Apr 17, 2008

Why high gold prices haven't led to more production

By Fabrice Taylor
The Globe and Mail, Toronto
Wednesday, April 16, 2008

Ask an economist what happens to the supply of a commodity as its price rises and he'll tell you it eventually goes up as producers try to take advantage of good times.

History shows that it isn't necessarily so with gold, though, and that history makes a pretty good case for the metal.

In the 1970s, bullion prices rose from $35 (U.S.) an ounce to $700, yet gold production fell sharply. Why? In 1970, the gold mining industry was in terrible shape. The majority of production - 80 per cent - came from underground mines, and most of that from South Africa. Underground mining is very expensive.

Until 1968, the price of gold was fixed by central banks at $35/ounce. (It was called the Gold Pool). The cost of mining wasn't fixed at all, of course, so the profitability of gold mines was crushed. So producers started high-grading their ore bodies, stripping out the richest ore rather than taking a little good rock and mixing it with a little lower-grade rock.

Production rose because the mills kept running at capacity, by and large, but were processing higher-grade ore, and were thus putting more ounces of gold into the market.

At the same time, producers cut back on exploration and development to conserve cash.

This explains why by the time the Gold Pool, and the broader Bretton Woods accord, were fully unwound as the decade turned over, production was peaking, and why, in the seventies, as the price soared, production fell. Mine operators -- the ones that survived that is -- had to start putting lower-grade ore through their mills because the good stuff was gone.

They hadn't spent enough on exploration, so they hadn't replaced their reserves either. They didn't have the money to expand after so many lean years. Plus, although the price rose for much of the seventies, costs also rose rapidly because of inflation.

Sound familiar? The situation today isn't much different. Gold prices are way up, but producers aren't making much money. And despite a rise in bullion prices -- a big and drastic rise -- there's not a lot of new capacity coming on stream.

According to the U.S. Geological Survey, world gold production peaked in 2000 at 2,600 tonnes. Gold prices pretty much bottomed, with respect to the current cycle, around that time. In six years, production fell to 2,460 tonnes. There will likely be a small decline when the 2007 numbers are published. Production in 1970 hit 1,480 tonnes before falling to 1,200 in 1975, where it stayed for several years before climbing sharply in the eighties.

But there's a difference between today and the 1970s, says gold maven and stockbroker (and my former business partner) Murray Pollitt, who provided me with the above information.

In the eighties, when gold prices stabilized around $350-$400/ounce, production moved in earnest from underground mining, which is expensive and generally smaller scale but higher grade, to big open-pit mines, which are relatively cheaper but low grade. A lot of tired underground mines, stripped of their juiciest ore, became open pits, thanks to advances in technology and cheap fuel (open pits use a lot of diesel). That allowed ore that was previously uneconomical to see the light of day, literally and financially. But the industry's fortunes didn't improve much, and they really started to turn south in the following decade.

The upshot is that today, while we have rising prices (especially in U.S. dollar terms), we also have soaring costs, dropping production and a dearth of inventory in terms of untapped reserves. Imagine what oil at $112 (U.S.) a barrel will do to open-pit mines.

Look at some of the big projects that are touted as a big deal: Barrick's Pascua Lama, which is way up in the mountains of Chile and has a huge royalty on it, not to mention the billions in investment required to get it going. Galore Creek, in British Columbia, which was mothballed when the cost of getting it producing skyrocketed. Hope Bay? Dubious also.

In a nutshell, supply today is falling, perhaps irrevocably so. Demand? Rising, in fits and starts. There's inflation in the air, there are ETFs that make it easy for retail investors to buy gold directly and there are sovereign funds with tens of billions of dollars looking for a home and probably not looking for more U.S. Treasuries.

The demand side would be even more bullish if gold was still viewed as money. How likely is that ever to happen again?

Well, maybe more likely than you think.

For the past few decades, governments, led by the United States, have done their best to strip gold of its role as currency in favour of paper money. But history is long, and in its fullness, gold has spent far more time playing the role of money than not.

As Mr. Pollitt points out, not that long ago the United States preferred gold to fiat money. As owner of both a creaky financial system and the single biggest depository of bullion, it might be tempted to return to that preference one day.


Fabrice Taylor is a chartered financial analyst.

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Apr 15, 2008

Ron Paul: Bailing Out Banks

From Congressman Ron Paul's Texas Straight Talk:

Bailing Out Banks

There has been a lot of talk in the news recently about the Federal Reserve and the actions it has taken over the past few months. Many media pundits have been bending over backwards to praise the Fed for supposedly restoring stability to the market. This interpretation of the Fed's actions couldn't be further from the truth.

The current market crisis began because of Federal Reserve monetary policy during the early 2000s in which the Fed lowered the interest rate to a below-market rate. The artificially low rates led to overinvestment in housing and other malinvestments. When the first indications of market trouble began back in August of 2007, instead of holding back and allowing bad decision-makers to suffer the consequences of their actions, the Federal Reserve took aggressive, inflationary action to ensure that large Wall Street firms would not lose money. It began by lowering the discount rates, the rates of interest charged to banks who borrow directly from the Fed, and lengthening the terms of such loans. This eliminated much of the stigma from discount window borrowing and enabled troubled banks to come to the Fed directly for funding, pay only a slightly higher interest rate but also secure these loans for a period longer than just overnight.

After the massive increase in discount window lending proved to be ineffective, the Fed became more and more creative with its funding arrangements. It has since created the Term Auction Facility (TAF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF). The upshot of all of these new programs is that through auctions of securities or through deposits of collateral, the Fed is pushing hundreds of billions of dollars of funding into the financial system in a misguided attempt to shore up the stability of the system.

The PDCF in particular is a departure from the established pattern of Fed intervention because it targets the primary dealers, the largest investment banks who purchase government securities directly from the New York Fed. These banks have never before been allowed to borrow from the Fed, but thanks to the Fed Board of Governors, these investment banks can now receive loans from the Fed in exchange for securities which will in all likelihood soon lose much of their value.

The net effect of all this new funding has been to pump hundreds of billions of dollars into the financial system and bail out banks whose poor decision making should have caused them to go out of business. Instead of being forced to learn their lesson, these poor-performing banks are being rewarded for their financial mismanagement, and the ultimate cost of this bailout will fall on the American taxpayers. Already this new money flowing into the system is spurring talk of the next speculative bubble, possibly this time in commodities.

Worst of all, the Treasury Department has recently proposed that the Federal Reserve, which was responsible for the housing bubble and subprime crisis in the first place, be rewarded for all its intervention by being turned into a super-regulator. The Treasury foresees the Fed as the guarantor of market stability, with oversight over any financial institution that could pose a threat to the financial system. Rewarding poor performing financial institutions is bad enough, but rewarding the institution that enabled the current economic crisis is unconscionable.

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Apr 13, 2008

John Browne: Gold might be shaking off central bank shackles

A Toast to Gold Power

By John Browne
Pittsburgh Tribune-Review
Sunday, April 13, 2008

In 2003 a bottle of 1785 Chateau d'Yquem once belonging to Thomas Jefferson was sold in London for $56,588, making it the most expensive bottle of white wine and earning d'Yquem the title of "liquid gold." What more fitting wine for a toast to the alluring yellow metal that has fascinated humankind for most of recorded time?

Why is it now an appropriate time to drink to gold? Because gold is possibly near to shaking off a sustained and coordinated attack on its monetary credibility by some of the world's most powerful central banks. Investors could win back an asset that offers protection against the financial abuse of governments.

Most wines are priced as commodities on the basis of quality, supply and demand. Others, undrinkable, such as the 200-year-old d'Yquem, are sold as collectors items or investments.

Interestingly, the d'Yquem did not command the highest-ever price. That fell to a bottle of 1787 Chateau Margeaux, also once owned by Jefferson. It had been insured and was broken in a table accident; the insurer paid $225,000!

This episode illustrates another key value of gold -- insurance against catastrophe.

Employed as an industrial metal in jewelry, dentistry, sophisticated electronics, and space hardware, gold is no ordinary commodity. It has a high value-to-weight ratio, making it one of the oldest, most trusted forms of money. It cannot be produced; it must be found and mined. This rarity value gives it credibility as an honest store of wealth.

For centuries the "honesty" of gold has been the bane of financially dishonest governments, which have even diluted the gold content of their coins to deceive holders as to their face value.

Around 1670 London goldsmiths introduced notes as certificates of their clients' ownership of gold. Gradually, the notes were used by goldsmiths' clients to transact commercial business without incurring the expensive and risky transportation of the underlying gold. Eventually these notes became widely accepted, becoming the first effective paper currency.

Soon rulers learned the key advantage of paper money -- leverage! Progressively, and often in return for financing wars, institutions called "banks" were permitted to issue bankers' (shop) notes, each promising redemption in gold, but in multiples of the physical amounts of customers' gold they held on deposit.

Soon national or central banks got in on the act. Economies grew rapidly, based on this new, miraculous "liquidity" of the new "paper" gold standard, a downgrade of the full gold "bullion" standard.

In World War I major governments dropped the gold standard, issuing vast amounts of paper money and debt. Yet post-war economies declined, calling paper money into question.

Meeting in Rome, the Great Powers saw a return to the gold standard as too recessive; what was needed was a paper "reserve" currency, redeemable in gold. Great Britain's currency, Sterling, was selected.

All worked well until after the Great Crash of 1929, when paper money lost credibility. The collapse of the Creditanstalt and a run on Austrian and German banks led to a rush to convert Sterling into gold. Soon the British gold "window" closed. In the absence of credible international money, world trade dropped and recession morphed into depression.

World War II revived economic activity. In July 1944 the Great Powers, nervous that the post-war recession of the early 1920s would be repeated, met at Breton Woods, New Hampshire, to devise a post-war currency system. This time the U.S. dollar was selected as the reserve currency, but convertible into gold only by central banks (the gold "exchange" standard).

All went well until Vietnam. Rather than finance that war by conventional taxation and borrowing, the U.S. government chose inflation. Because the dollar was the world's reserve currency, other nations initially tolerated this dollar inflation. However, some, such as France, sought conversion of their massive U.S. dollar surpluses into gold; President Nixon then closed the gold exchange window.

This unleashed a series of competitive devaluations. The free-market price of gold rose to levels which caused embarrassment to governments that were inflating and debasing their currencies.

It was recognized that the bulk of gold production was used by industry as a commodity and that the portion used for investment was some 500 metric tons a year. Led by America, major governments decided to de-monetize or discredit gold as an investment.

Covertly, the Central Bank Gold Agreement was concluded; under it, certain central banks agreed to pool some 500 tons of gold a year for coordinated market sales via the International Monetary Fund (IMF). While protesting the opposite, the IMF would intervene to maximize price volatility and discourage investment.

So what are the main influences on the price of gold?

Essentially, investors should note that gold is not priced in a free market and is volatile.

Most gold is likely to continue trading as a commodity, with normal speculation. In recession, gold should experience downward pressure.

At the margin, the investment value of gold has two aspects: "store of value" against inflation and "insurance" against catastrophe, such as a systemic financial meltdown or war.

Two weeks ago evidence of looming recession and worldwide contraction mounted, and gold experienced downward commodity price movement.

Simultaneously, the Federal Reserve's March 17 action was seen as averting a financial meltdown -- and "insurance" selling pressure was exerted on gold.

Furthermore, benign government inflation figures -- still believed by some -- led to "store of value" selling.

Acting covertly, the IMF probably moved to exacerbate market uncertainty. Gold dropped by over 10 percent by March 28.

Recent congressional questions posed to the Fed chairman reflected worrying times with recession, serious Main Street inflation and continued risk of financial chaos.

In worsening circumstances, gold's next upsurge could discourage central banks from continuing to squander their citizens' gold to manipulate the price downward. This would allow for a latent, follow-though surge in gold's free-market price.

Gold is unique. No government can challenge its integrity successfully, over time.

The taste of d'Yquem is exquisite. Alas, it will never be as good as gold.

John Browne, a financial analyst and former member of Britain's Parliament, is a financial and political columnist for the Tribune-Review. He is a frequent commentator on CNBC's "Kudlow & Company." E-mail him at: johndbrowne@yahoo.com.


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Michael Kosares: Golden gut check

Michael Kosares, proprietor of Centennial Precious Metals in Denver and host of its invaluable USAGold Forum, has just done for gold what Ted Butler has just done for silver: evaluated the fundamentals and concluded that scarcity is likely to become shortage.
Further, Kosares concludes, central bank gold sales will lose impact as central bank gold purchases increase. Kosares' analysis is headlined "Golden Gut Check: Why Gold Is Likely to Continue Moving Higher Over the Long Run," and you can find it at Centennial's Internet site HERE

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Apr 10, 2008

Rob Kirby: How derivatives suppress commodities to conceal inflation

In commentary posted last night at FinancialSense.com, Rob Kirby of Kirby Analytics in Toronto, a speaker at GATA's Washington conference April 17-19, shows how commodity prices have been manipulated downward with derivatives and accounting changes to conceal somewhat the explosion in the money supply since the Federal Reserve stopped reporting its M3 measure. Kirby's commentary is headlined "Inflation Revelations" and includes some telling charts, and you can find it HERE

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Apr 8, 2008

GATA: Is gold going east to keep oil principalities in line?

Dear Friend of GATA and Gold:

If one puts today's news together ...

1) The Arabian Gulf oil principalities say they'll stick with the U.S. dollar until they achieve monetary union in 2010 (see the report appended here).

2) The World Gold Council and a commodities group in Dubai announce a gold exchange-traded fund to be operated according to Islamic financial principles.

3) And the International Monetary Fund announces that it has formalized its plan to sell 403 tonnes of gold. ...

... it may be hard not to wonder if the oil states have not made a deal with the United States to continue for another two or three years their cooperation with the U.S. scheme of rigging the currency and gold markets in exchange for whatever gold is to be unloaded in the name of making the IMF solvent -- hard not to wonder whether this is not all part of an orderly hedging of the oil world's dollar exposure.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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UAE Policymakers Say Dollar Peg Stays

By Stanley Carvalho
Monday, April 7, 2008

ABU DHABI -- The United Arab Emirates has no plans to drop or revalue its currency peg to the dollar, and any decisions on currency policy will be taken collectively by Gulf states, the UAE central bank governor said on Monday.

"There will be no revaluation, no dropping the dollar peg," Sultan Nasser al-Suweidi told reporters in Abu Dhabi.

One of the UAE's top businessmen with close links to Dubai's rulers also said he did not expect a government committee that is studying currency policy to recommend any change to the peg.

"Nobody expects them to come out and say let's change," Sultan Ahmed Bin Sulayem, chairman of the sprawling state-owned Dubai World conglomerate, told reporters. Sulayem is seen as one of the key economic lieutenants of Dubai ruler and UAE Prime Minister Sheikh Mohammed bin Rashid al-Maktoum.

Sheikh Mohammed said last week that the UAE had set up a committee to report to him after considering whether the peg should be retained.

Many analysts expect the UAE and its Gulf neighbours to eventually cave in to economic pressures and drop or revalue their currency pegs to the dollar.

Despite strong inflationary pressures, Gulf states with dollar pegs have to cut interest rates in line with the U.S. Federal Reserve, which has been sharply easing monetary policy.

Kuwait dropped its dollar peg last year, switching to a basket of currencies, dealing a major blow to plans by Gulf Arab states to achieve monetary union by 2010.

A meeting of Gulf central bank governors in Qatar on Sunday reaffirmed the aim of monetary union in 2010 -- even though Oman has said it will not join, and Kuwait has a different currency policy from the rest of the Gulf.

Suweidi said on Monday that the Gulf countries would "push ahead with the implementation of monetary union on time in 2010." But many analysts regard this as an impossible goal -- and Suweidi had said himself in the past that a delay was likely.

... Inflationary dangers

Suweidi said last year that he was facing strong social and economic pressure to drop the UAE's peg to the dollar.

Inflation in the UAE, a federation of seven emirates, hit a 19-year peak of 9.3 percent in 2006 and probably accelerated to 10.9 percent last year, according to an estimate by the National Bank of Abu Dhabi. The combination of the UAE's rising prices and falling purchasing power has triggered riots by migrant workers in Dubai and Sharjah.

But on Monday he said surging inflation would not have an impact on any decision about currency policy. He said about 35 percent of UAE inflation was attributable to the decline in the dollar, with the rest due to domestic and other factors.

The head of the central bank of Oman, another of the six nations that make up the Gulf Cooperation Council (GCC), said on Monday that Oman also had no plan to change the dollar peg.

"For a small open economy like Oman, the U.S. dollar is the strongest source of stability for promoting trade and investment and CBO will continue to keep the current peg to the U.S. dollar," Hamood Al Zadjali, executive president of the Central Bank of Oman (CBO), told Reuters.

He added that the dollar was "key to exchange rate stability and CBO remains firmly committed to defending the peg."

But Zadjali repeated that Oman would not join with other Gulf states in monetary union.

Unable to use interest rates to tackle inflation, Gulf countries have tried to use other means to cool their overheating economies.

Traders said on Monday that Saudi Arabia had last week raised bank reserve requirements to 12 percent from 10 percent, the third time the rate has been raised since November.

"The government is opting not to decrease spending and to contain money supply. Money supply will continue to grow at a more measured pace but enough to create inflationary pressures, in addition to high government spending," said John Sfakianakis, chief economist at SABB bank, HSBC's Saudi subsidiary.

The move forces banks to keep more money in their vaults, slowing growth in money supply.

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