Submitted by GATA

The Cheviot Asset Management Sound Money Conference
The Guildhall, London
Thursday, January 27, 2011

Most Americans will believe almost anything if it's said with a British accent. I'm not here to ask you to return the favor, but rather to consider some evidence, to be receptive to questions, and to start asking some questions of your own.

In September 2009 Jim Rickards, director of market intelligence for the Omnis consulting firm in Virginia, was interviewed about the currency markets on the cable television network CNBC. Rickards remarked: "When you own gold you're fighting every central bank in the world."

That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the value of government bonds. This was documented in an academic study published in 1988 in the Journal of Political Economy by Lawrence Summers, then professor of economics at Harvard, future U.S. treasury secretary, and Robert Barsky, professor of economics at the University of Michigan -- a study titled "Gibson's Paradox and the Gold Standard":

Though the gold standard was abandoned during World War I, restored briefly in the 1920s, and then abandoned again during the Great Depression, that was not the end of government efforts to control the gold price. Throughout the 1960s the United States, Great Britain, and some of their allies attempted to hold the price at $35 per ounce in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement was known as the London Gold Pool.

As monetary inflation rose sharply, the London Gold Pool was overwhelmed by gold demand and was shut down abruptly in April 1968. Three years later, in 1971, the United States repudiated the remaining convertibility of the dollar into gold -- convertibility for government treasuries that wanted to exchange dollars for gold. At that moment currencies began to float against each other and against gold -- or so the world was told.

In fact since 1971 the gold price suppression scheme has been undertaken largely surreptitiously, seldom acknowledged officially. But sometimes it has been acknowledged officially, and with a little detective work, still more about the price suppression can be discovered.

You may have heard GATA derided as a "conspiracy theory" organization. We are not that at all. To the contrary, we examine the public record, produce documentation, question public officials, publicize their most interesting answers, or their most interesting refusals to answer, and sometimes litigate to get information. I'd like to review some of the public record with you.

The official records

The gold price suppression scheme was a matter of public record in January 1995, when the general counsel of the U.S. Federal Reserve Board, 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. Gold swaps are exchanges of gold allowing one central bank to intervene in the gold market on behalf of another central bank, potentially giving anonymity to the central bank that wants to undertake the intervention. The 1995 Federal Open Market Committee minutes in which Mattingly acknowledges gold swaps are still posted at the Fed's Internet site:

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

Incidentally, while gold advocates love to cite Greenspan's testimony from 1998 because of its reference to gold leasing, that testimony was mainly about something else, for which it is far more important. 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 and its successor agreements at the World Gold Council's Internet site:

Barrick's motion claimed that in borrowing gold from central banks and selling it, the mining 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 at GATA's Internet site:

>http://www.rba.gov.au/publications/annual-reports/rba/2003/pdf/2003-repo...

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:

>http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf

In August 2009 the international journalist and provocateur Max Keiser reported an interview he had with the Bundesbank, Germany's central bank, in which he was told that all of Germany's gold reserves were held in New York. That interview is posted at the YouTube Internet site:

>http://www.zerohedge.com/article/declassified-state-dept-data-highlights...

The cable described the strains on the London Gold Pool, the gold-dishoarding mechanism established by the U.S. Treasury and the Bank of England to hold the gold price to the official price of $35 per ounce. The London Gold Pool was to last only six months longer.

The cable is a detailed speculation on what would have to be done to control the gold price and particularly to convince investors "that there is no point anymore in speculating on an increase in the price of gold" and "to establish beyond doubt" that the world financial system "is immune to gold losses" by central banks.

The cable recommended creation of a "new reserve asset" with "gold-like qualities" to replace gold and prevent gold from gaining value. To accomplish this, the cable proposed "monthly or quarterly reshuffles" of gold reserves among central banks -- what the cable called a "reshuffle club" that would apply gold where market intervention seemed most necessary.

Of course these "reshuffles" sound very much like the central bank gold swaps and leases of recent years.

The idea, the cable says, is for the central banks "to remain the masters of gold."

Also disclosed in 2009 by Zero Hedge's Geoffrey Batt was a memorandum from the Central Intelligence Agency dated December 4, 1968, several months after the collapse of the London Gold Pool. This too has been posted at the Zero Hedge Internet site:

Responding to President Obama's declaration, soon after his inauguration, that the federal government would be more open, GATA renewed its informational requests to the Fed and the Treasury. These requests concentrated on gold swaps.

Of course both requests were denied again. But through its Washington lawyer, William J. Olson (>http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

Warsh wrote: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4" -- that's Exemption 4 of the Freedom of Information Act -- "consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

So there it is: The Federal Reserve today -- right now -- has gold swap arrangements with "foreign banks," and the public and the markets must not be permitted to know about them.

Eight years ago Fed Chairman Alan Greenspan and the general counsel of the Federal Open Market Committee, Virgil Mattingly, vigorously denied to GATA, through two U.S. senators who had inquired of the Fed on our behalf, that the Fed had gold swap arrangements, even though FOMC minutes from 1995 quote Mattingly as saying the U.S. has engaged in gold swaps:

It is because, as the documents compiled and publicized by GATA suggest, suppressing or controlling the gold price is part of the general surreptitious rigging of the currency, bond, and commodity markets by the U.S. and allied governments; because this market rigging is the foremost objective of U.S. foreign and economic policy; and because this rigging cannot work if it is exposed and the markets realize that they are not really markets at all.

This should not be so surprising. For intervening in markets is what central banks do.. They have no other purpose. They've just gotten out of control.

Central banks often admit intervening 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. There is even evidence that the Federal Reserve and Treasury Department, through intermediaries, have been intervening frequently in the U.S. stock markets since the crash of 1987.

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

The Federal Reserve injects billions of dollars into the stock and bond markets every week, on the public record, through the major New York financial houses, its so-called primary dealers in federal government bonds, using what are called repurchase agreements and the Fed's Primary Dealer Credit Facility. The financial houses thus have become the Fed's agents in directing that money into the markets. As GoldMoney's James Turk notes, the recent rise in the U.S. stock market matches almost exactly the money funneled by the Fed to the New York financial houses through repurchase agreements and the Primary Dealer Credit Facility -- devices of "quantitative easing."

Meanwhile, for years the International Monetary Fund, the central bank of the central banks, has been openly intervening in the gold market by threatening to sell gold and then finally selling some, or at least claiming to have sold some. The IMF said its intent in selling gold was to raise money to lend to poor nations. This explanation was ridiculous on its face, though the IMF has never been challenged about it in the financial press. No, the financial press has been happy to tell the world that central banks that lately have effortlessly conjured into existence, out of nothing, fantastic amounts of money in many currencies could find a little money to help poor countries only by selling gold.

Of course the intent of the IMF and its member central banks was not to help poor countries but to intimidate the gold market and control the gold price.

Just as Lars Schall recently tried to get some useful information out of the Bundesbank about its gold reserves, in April 2008 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 replies from one of its press officers, Conny Lotze. But they were all evasive or refusals to answer. Exactly where is the IMF's gold and who controls it? The IMF wouldn't say:

Years ago GATA disclosed that the International Monetary Fund, the leading compiler of official gold reserve data, allowed its member nations to count gold they had leased, gold that had left their vaults, as if it was still in their vaults. The effect of this accounting fraud was to deceive the market into thinking that central banks had much more gold left to bomb the market with than they really did.

But that's only the start of the false data.

In April 2009 China caused a sensation by announcing that its gold reserves had increased by 76 percent, from 600 tonnes to 1,054 tonnes. For the previous six years China had been reporting to the IMF only 600 tonnes. Had China acquired those 454 new tonnes only in the last year? Very unlikely. Most experts believe that China acquired those 454 new tonnes over at least several years, largely by purchasing the production of China's own fast-growing gold mining industry. So for as many as six years the official gold reserve data about China was way off.

Last June the World Gold Council reported that Saudi Arabia's gold reserves had increased by 126 percent, from 143 to 323 tonnes, just since 2008. That the world's oil-exporting superpower had made such a new commitment to gold in its foreign exchange reserves also caused a sensation.

But a few weeks later the governor of the Saudi Arabia Monetary Authority, Muhammad al Jasser, insisted to news reporters that Saudi Arabia had not purchased the gold cited in the June reports but rather had possessed that extra gold all along, holding it in what he called "other accounts":

Some analysts think that China and Saudi Arabia have accumulated far more gold than they’re reporting and are accumulating still more gold surreptitiously -- China to hedge its dollar foreign exchange surplus, Saudi Arabia to hedge both its dollar surplus and the depletion of its oil reserves -- but that China and Saudi Arabia can't acknowledge this accumulation lest they spook the currency markets, explode the gold market, and devalue their dollar surpluses before those surpluses are fully hedged.

The United States claims to hold almost 8,200 tonnes of gold. But has any of that gold been swapped with other central banks through the gold swap arrangements Fed Governor Warsh disclosed in his letter denying GATA's request for access to the Fed's gold documents? The Fed won't be answering that question voluntarily. It will be answered only at the order of the federal court in which GATA is suing the Fed, or at the direction of Representative Paul's subcommittee.

Conflicts of interest at ETFs

Then there are the major gold and silver exchange-traded funds, which were established in the last few years supposedly to help ordinary investors invest conveniently in gold and silver. How much metal do the ETFs have?

While the major gold and silver ETFs frequently report their metal holdings, studies by GoldMoney founder James Turk and former GATA board member Catherine Austin Fitts and her lawyer, Carolyn Betts, suggest that this data is unreliable too:

For then the world might understand why even at its recent price above $1,300 per ounce gold has not come close to keeping up with the inflation, the currency debasement, of the last few decades, why gold has not completely fulfilled its function of hedging against inflation.

That is, gold's enemies figured out how to increase gold's supply by vast amounts without going through the trouble of digging it out of the ground. They invented "paper gold" -- imaginary gold that many buyers accepted, never suspecting that major financial institutions might deceive or defraud them.

Negligent journalism about gold

The misunderstanding of the gold market is worsened with the awful journalism about it.

The falsity of the data about the gold market practically screams at financial journalists:

-- There is the omission by official gold reserve reports of leased and swapped gold.

-- There are the sudden huge changes in official gold reserve totals.

-- And there are the deception and conflicts of interest built into ETF prospectuses.

The valid documentation about the gold market also practically screams at financial journalists as well:

-- There are the huge and disproportionate gold, silver, and interest rate derivative positions built up at just two or three international banks, positions that never could be undertaken without the express or implicit underwriting of government, particularly the U.S. government.

-- And there are the many official records, records collected and publicized by GATA over the years, demonstrating the plans and desire of the U.S. government to suppress and control the price of gold.

But somehow financial journalists just don't ask about these things. After all, who are the major advertisers in the financial news media? The market manipulators and governments themselves.

Here are a couple of examples of this gross failure of journalism in the last year.

Last June the Bank for International Settlements, the central bank of the central banks, disclosed, via a footnote in its annual report, that it had undertaken a gold swap of unprecedented size, 346 tonnes. But the BIS provided no explanation for this. A newsletter writer was the first to come upon the information; only then did it leach into the major financial news media. What was going on here?

The reporters for the major financial news media didn't bother going to the source, didn't bother asking the BIS itself. It was simply assumed that central banks never give serious answers about what they do, particularly in regard to gold. Instead the reporters called various gold market analysts for what they hoped would be informed speculation.

A few days after GATA ridiculed the Reuters news agency for not demanding answers from the source of the swaps, the BIS, Reuters did try putting some questions to the bank, and on July 16 last year Reuters reported: "The BIS said the gold in question was used for 'pure swap operations with commercial banks' but declined to respond to further questions from Reuters on the transaction":

GATA has been gaining publicity, if with difficulty. Last year the Financial Times did a big story about gold that was half about GATA’s complaints about gold price manipulation by central banks and their agents, the bullion banks. But amazingly the FT reporter failed to put any questions to any central bank or government official:

Why gold and silver are mysteries

Why is gold such a mystery? Why is it, along with silver, kept such a mystery?

It's because the two precious metals are not only money but, from the point of view of free people, the best sort of money, less susceptible to what governments see as the most desirable quality of money -- the susceptibility to control by government and particularly susceptibility to devaluation. You can print or otherwise issue gold and silver derivatives to infinity, but not the metals themselves.

Gold particularly is kept such a mystery because it is the key to unlocking the currency markets, which long have been the most efficient mechanisms of imperialism.

Many of you have heard about the looting of Europe undertaken by the Nazi German occupation during World War II. But most of that looting did not take place as it is imagined, at the point of a gun. No, it took place through the currency markets.

This looting through the currency markets was spelled out by the November 1943 edition of a military intelligence letter published by the U.S. War Department, a letter called Tactical and Technical Trends. Of course the Nazi occupation seized whatever central bank gold reserves had not been sent out of the occupied countries in time. But then the Nazi occupation either issued special occupation currency that could not be used in Germany itself or, in countries that had fairly sophisticated banking systems, took over the domestic central bank and enforced an exchange rate much more favorable to the reichsmark. Or else the Nazi occupation simply printed for itself and spent huge new amounts of the regular currency of the occupied country.

This control of the currency markets drafted everyone in the occupied countries into the service of the occupation and achieved a one-way flow of production -- a flow out of the occupied countries and into Nazi Germany.

For a few years Nazi Germany had one hell of a trade deficit -- and couldn't have cared less about it. For being in the position to print the currencies for occupied Europe, Nazi Germany never had to cover that deficit, at least not as long as the military occupation continued.

Since the United States now issues the reserve currency for the world, the dollar, the United States now more or less occupies most countries economically, even those countries that have their own currencies, since even those countries hold most of their foreign exchange reserves in dollars.

Free-trading and widely accessible gold always has been and always will be doom to the rigging of the currency markets, always will be the escape from overbearing government generally and from any overbearing government in particular. That is why those U.S. government records compiled by GATA over the years candidly discuss or advocate or describe controlling and suppressing the gold market -- and suppressing the truth itself.

The secret knowledge

The truth as GATA sees it is this:

First, gold is the secret knowledge of the financial universe and its true value relative to currencies is vastly greater than its nominal price today, since much of the gold that investors think they own doesn't exist. The actual disposition of Western central bank gold reserves is a secret more closely guarded than the blueprints for the manufacture of nuclear weapons. For gold is a deadly weapon against unlimited government.

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

And third, the intervention against gold is failing because of overuse, exposure, exhaustion of Western central bank gold reserves from gold sales and leasing, 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 do real work and create real goods and send them to the United States in exchange for nothing but colored paper and electrons.

For years now the Western central banks have been attempting a controlled retreat with gold, bleeding out their reserves with sales, leases, and especially derivatives so that gold's ascent and the dollar's inevitable decline may be less shocking. Central bankers often convey part of this strategy in code; they warn against what they call a "disorderly decline" in the dollar, as if an "orderly" decline is all right.

The rise in the gold price over the last decade is just the other side of that coin -- an "orderly" rise, 15-20 percent or so per year, a rise carefully modulated by surreptitious central bank intervention.

But GATA believes that the central banks may have to retreat farther with gold than anyone dreams, and far more abruptly than they have retreated so far. We believe 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, on one hand, the supply of real gold, actual metal, not the voluminous paper promises of metal, and, on the other hand, 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.

Market analysts talk about what they call "reversion to the mean." But maybe we should talk about reversion to the real.

A century ago Rudyard Kipling anticipated this when he wrote a poem that foresaw the decline of the empire of his country, Great Britain. Kipling's poem attributed this decline to the 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 at that time -- virtues like basic honesty, fair dealing, Ten Commandments-type stuff. Kipling titled his poem "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.

The problem goes far beyond gold price suppression. Indeed, since central bank intervention in the currency, bond, equities, and commodity markets has exploded over the last few years, we don’t really know what the market price of anything is anymore. Thus the gold price suppression story is a story about the valuation of all capital and labor in the world -- and whether those values will be set openly in free markets, the democratic way, or secretly by governments, the totalitarian way.

The specifics of the gold price suppression operation are complicated, but you don't have to remember them all if you know what they mean.

They mean that there is a currency war going on between countries and their central banks, and a war being waged by central banks against the people of their own countries. There has been such a war for many years, only the victims were not really fighting back. Now some of them are, countries and individuals alike, by buying and taking delivery of the monetary metals. (Now all we need to do is find a safe planet to keep them on.)

The focus on London

London may seem like the belly of the beast of Anglo-American imperialism, being home to both the LBMA and the Bank of England, whose surrender of the better part of Britain's gold reserves a decade ago, at the bottom of the market and at the onset of a short squeeze, makes sense only as part of the gold price suppression scheme and the rescue of influential bullion banks that were caught short at the market's turn.

But let us instead see this scheme as an aberration and London as the city where the rescue of all decent civilization was arranged even as the bombs of the most horrifying evil fell on it. The St. Paul's that was so famously surrounded by the fire and smoke of those bombs is just around the corner from this grand old building; please forgive a rube tourist for being a bit in awe of it all. GATA actually has a few friends in this city and hereabouts. So this may be as good a place as any to clamor for the most cosmic justice. After all, isn't it practically in your anthem?

And did the Countenance Divine
Shine forth upon our clouded hills?
And was Jerusalem builded here
Among these dark, Satanic ... central banking systems?

I don't think Blake would mind too much about that rewriting if he was still around and knew the facts of the situation. He might even make it rhyme.

We in GATA have our bow of burning gold; we have our arrows of desire. But we can always use more, and with your help we will do more to restore our dear countries, Britain and America together, to their principles and ideals of democratic, transparent, limited government, and, really, the brotherhood of man, which, in the end, are what the monetary metals are about.