Dear Friend of GATA and Gold:
Interviewed this week by Craig Hemke of the TF Metals Report for Sprott Money News, financial commentator Doug Casey charges that complaints of gold market manipulation by governments are "ridiculous" and "laughable" because governments "don't care" about gold. Casey adds that while GATA's officers are "nice" and "sincere" people, "they really wear tinfoil hats when they start talking about this stuff."
Yet just a few seconds earlier Casey acknowledges that governments do care about gold.
"Of course governments want a low gold price," Casey says, "because that would indicate that there's no inflation and that there's nothing to worry about economically or financially."
"But," Casey continues, "are they suppressing the price of gold? They want a lower gold price but they're not doing anything about it."
Such a bold assertion implies detailed knowledge of everything governments and central banks do all the time, and while Casey may be a smart guy, is he really omniscient? In his interview he cites no authority for his conclusion.The gold price, Casey notes, has risen from $35 in 1971 to nearly $1,300 today. He asks: "Is that successful gold price suppression?"
Yet the common disparagement about gold is that its price has not kept up with inflation as other assets have done, nor with the world's monetary base. So yes, even a rise of nearly more than $1,200 in nearly 50 years might be considered successful suppression. If suppression had been any more successful, supply of the metal might have ceased, exposing and exploding the suppression scheme.
Governments "couldn't even suppress the price of gold at $35 per ounce" when that was the official price, Casey says. "How can they do it now? ... It's impossible."
Yet since modern central banking began early in the last century, the United States and its allies have frozen the gold price for long periods at various levels, including $35, and have done so in the open as well as surreptitiously. Omniscient as Casey seems to consider himself, he should have heard of the London Gold Pool, the public mechanism of Western central bank intervention that, with dishoarding of central bank reserves, froze the gold price at $35 during the 1960s before being overwhelmed March 1968. It wasn't "impossible" at all; it worked for eight years:
https://en.wikipedia.org/wiki/London_Gold_Pool
How, Casey asks with incredulity, can governments suppress the gold price now?
Someone of Casey's omniscience also might have heard of gold swaps, leases, and derivatives, like those maintained by the agent of all major governments and central banks, the Bank for International Settlements, which, according to its own financial reports, intervenes secretly in the gold market every month on behalf of its members and refuses to explain the purpose of its interventions:
http://www.gata.org/node/18228
http://www.gata.org/node/17793
The British economist Peter Warburton observed in 2001 that by using derivatives central banks easily and inexpensively could control not only gold prices but the prices of all major commodities traded on futures exchanges:
The director of market operations for the Banque de France, Alexandre Gautier, answered the "how" question at a meeting of the London Bullion Market Association in Rome in September 2013. Gautier said the French central bank trades gold for its own account "nearly on a daily basis" and is "active in the gold market for other central banks and official institutions":
http://www.gata.org/node/13373
Asked about this intervention a couple of years later, Gautier, like the BIS, refused to explain it, adding that the French central bank seldom gives interviews:
http://www.gata.org/node/14954
If, as Casey pontificates, governments "don't care" about gold, why such secrecy about their activity in the market?
Indeed, the supposed indifference of governments to gold is further disproved by the discounts given to them for their secret trading in the monetary metals futures markets operated by CME Group, discounts of 15 percent. Confirming Warburton's thesis, CME Group gives governments and central banks discounts for secretly trading all commodity and financial futures contracts:
http://www.gata.org/node/17976
Continuing his exoneration of governments in the gold market, Casey asks: "Why would they want to suppress it, if they could, because the Russian and Chinese governments have been buying huge amounts of gold for years? Should the U.S. be suppressing the price of gold so that the Russians and Chinese get a bargain in buying it?"
Casey seems unaware that his merely rhetorical question actually frames a primary suspicion about U.S. government policy in the gold market, a suspicion recently expressed by a financial expert who has had U.S. government security clearance, James G. Rickards. Having spoken confidentially with officials around the world, Rickards maintains that the U.S. government indeed has been providing Russia and China with bargain prices in gold to forestall their dumping U.S. Treasury bonds from their foreign exchange reserves, gold being a hedge against the dollar's eventual devaluation:
http://www.gata.org/node/18235
Two American economists, Paul Brodsky and Lee Quaintance, came to a similar conclusion in a paper published six years ago:
http://www.gata.org/node/11373
GATA's documentation file contains much more official acknowledgment of the largely surreptitious involvement of governments and central banks in the gold market and related markets in recent decades and continuing to the present.
For example, a former member of the Federal Reserve Board of Governors, Kevin M. Warsh, writing in The Wall Street Journal in December 2011, just months after he resigned from the board, confirmed market rigging by central banks.
Warsh wrote: "Policy makers are finding their authority, credibility, and firepower being tested. In turn they are finding it tempting to pursue 'financial repression' -- suppressing market prices that they don't like. But this is bad policy, not least because it signals diminished faith in the market economy itself."
Warsh's essay can be found here:
http://www.gata.org/node/10839
The material GATA has compiled and published is not mere "conspiracy theory" but official public record from government archives and public statements and memoirs from central bankers, even if those statements were made and memoirs were written when central bankers thought only their colleagues were listening:
http://www.gata.org/taxonomy/term/21
Those central bankers may have been confident that someone who considers himself as omniscient as Casey does would never notice anything they said or put in writing, much less anything they did.
At the New Orleans Investment Conference in October 2014 your secretary/treasurer was assigned to debate Casey about gold price suppression. Your secretary/treasurer wanted to review in detail the documentation of the suppression policy and came with a PowerPoint presentation showing some of the documents that GATA had compiled. He hoped to discuss them with Casey one by one:
http://www.gata.org/node/14617
But Casey declined to address them. Casey didn't just contend that governments don't care about gold; he contended that central banks themselves don't matter. That refusal to address the evidence precluded any real debate.
Casey describes himself as an "anarcho-capitalist" but governments and central banks can't be wished away by mere ideology. The free markets of Casey's ideology may win eventually but we live in the present and eventually may be a long way off, when most of those alive now are dead. Government agencies empowered to create infinite money and bestow it secretly as central banks are empowered are the actual rulers of the world, since they control the value of all capital, labor, goods, and services.
Just holding major governments and central banks accountable for what they do is terribly hard and is yet to be accomplished anywhere, not even in nominally democratic countries. GATA does what it can but in refusing to examine the evidence and instead whitewashing central banking, Casey protects the totalitarianism he purports to oppose.
Casey's comments on gold price suppression run from the 12:50 mark to the 15:24 mark at the Sprott Money internet site here:
https://www.sprottmoney.com/Blog/ask-the-expert-doug-casey-june-2018.htm...
CHRIS POWELL, Secretary/TreasurerGold Anti-Trust Action Committee Inc.CPowell@GATA.org* * *
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