Tag Archive | "gold"

Findings & Forecasts 04/17/2013

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Economy and Deflation

In 2010, Credit Suisse took it upon them­selves to create an annual “Global Wealth Report.” The 2012 report is dis­cussed here.

According to the report, “Total global house­hold wealth fell by 5.2 per­cent to 223 tril­lion US dol­lars between mid-2011 and mid-2012, the first annual decline since the finan­cial crisis of 2007 – 2008.” It is noted that most of that loss was seen in Europe, where eco­nomic decline is being expe­ri­enced in every country. The U.S. is por­trayed as on the edge of decline, but was bol­stered by higher stock and com­modi­ties prices in terms of U.S. dollars.

By con­trast, the deriv­a­tives market played mostly by global banks, has a total notional value of at least $700 tril­lion, over three times larger than total wealth. For a graphic depic­tion of the mag­ni­tude of the deriv­a­tives market, click here.

According to The Economist’s Global Debt Clock, “offi­cial” world public debt approx­i­mates $50.5 tril­lion.  Dr. Lawrence Kot­likoff, writing for the St. Louis Fed­eral Reserve in 2006 doc­u­mented that real U.S. gov­ern­ment encum­brance was upwards of $211 tril­lion; if other gov­ern­ments “cook the books” like the U.S. does, then actual global public debt is prob­ably closer to $1,000 trillion.

And, none of this takes into account pri­vate or cor­po­rate debt.

Thus, $223 tril­lion of net worth looks rather puny and fragile: If even 20 per­cent of debt and deriv­a­tives were to default, resulting in losses, it would com­pletely wipe out equity.

I realize that this is a rather short and incom­plete analysis, but it is only to make the point that global finances are still at risk of total col­lapse, and even more so than in 2006 – 2008.

In Jan­uary 2013, Forbes Mag­a­zine wrote “Big Banks and Deriv­a­tives: Why Another Finan­cial Crisis Is Inevitable.” The author notes that bank reform has utterly failed, that banks are pro­moting more deriv­a­tive risk today than ever before, and that they are even less trans­parent than during the last finan­cial crisis. He concludes,

“Ignoring warning signs has inevitable con­se­quences. We ignored them before and we saw what hap­pened. We can say this with vir­tual cer­tainty: if we con­tinue as now and ignore them again, the great white shark of a global finan­cial melt­down will gobble up the meager eco­nomic recovery and make 2008 look like a hiccup.

“We can’t say when this will happen. We can’t say which bank or which par­tic­ular instru­ment will trigger the debacle. What we can say with vir­tual cer­tainty is that if we con­tinue as now is that it will happen. Because the scale of the trading is larger, and because the depleted gov­ern­ment trea­sures are not well placed for another huge bailout, the impact will be worse than 2008.”

There are two take-a-way items here: First, another brick wall is a vir­tual cer­tainty and second, gov­ern­ments do not have the resources for another bailout.

This is the ugly side of defla­tion. When com­pa­nies, indi­vid­uals or coun­tries go bank­rupt (or repu­diate their debt), two things happen. First, the aggre­gate level of debt is reduced. Second, the aggre­gate level of equity is reduced. Any level of credit defla­tion leads to a cor­re­sponding drop in equity. The inverse is not true how­ever: A credit infla­tion does not pro­duce an increase in equity unless there is a direct cor­re­sponding increase in eco­nomic activity. Thus, we can easily con­clude that credit defla­tion pre­cludes any increase in eco­nomic activity.

Around the world, we see that eco­nomic decline and credit defla­tion are two sides of the same coin. They feed on each other and create a defla­tionary spiral that cannot be sati­ated by any kind of mon­e­tary action by cen­tral banks or gov­ern­ments. This is pre­cisely why the U.S. Fed’s pro­grams of Quan­ti­ta­tive Easing have had no pos­i­tive impact on the economy.

In light of defla­tion, Gold’s his­toric plunge between last Friday and Monday is not dif­fi­cult to under­stand. Defla­tion ulti­mately drives down prices in all asset classes — across the board. Along with gold we saw declines in silver, oil and a raft of other “hard” commodities.

The epic error made by gold ana­lysts and pre­cious metals investors, many of whom are friends of mine, is that their dog­matic belief in infla­tion has blinded them to the reality of defla­tion. Most stock ana­lysts are caught in the same trap. The simple fact is that invest­ment strate­gies based on infla­tion are com­pletely dif­ferent than those based on defla­tion, and they are at odds with each other.

With infla­tion, cap­ital preser­va­tion (adjusted for infla­tion) demands invest­ment in some form of tan­gible asset that par­tic­i­pates with expan­sion of eco­nomic activity. Defla­tion, where “Cash is king”, is just the oppo­site. In a defla­tionary spiral, it’s increas­ingly dif­fi­cult to get your hands on cash: selling tan­gible assets, inability to borrow from a bank, more dif­fi­culty finding jobs, etc., all put pres­sure on the cash in people’s pockets. Declining eco­nomic activity simply cannot pro­duce infla­tionary returns.

Another crit­ical dynamic pushing eco­nomic decline is changing demo­graphics. Whereas many scare­mon­gers have pre­dicted that humanity would be wiped out because of over­pop­u­la­tion,  just the oppo­site has hap­pened. Birthrates have dropped around the world to levels asso­ci­ated with per­ma­nent pop­u­la­tion decline. This is not hidden infor­ma­tion, either.

Pew Research issued a major report last November titled, “U.S. Birth Rate Falls to a Record Low; Decline Is Greatest Among Immi­grants,” which starts out by saying “The U.S. birth rate dipped in 2011 to the lowest ever recorded.” The birth rate for immi­grant women (e.g. from Mexico) plunged even more. It is a his­tor­ical fact that no pop­u­la­tion group in his­tory has escaped even­tual extinc­tion when birthrates slip below 1.8. Italy’s fer­tility rate is 1.4. Japan is 1.4.

A declining pop­u­la­tion means declining eco­nomic activity at all levels. During hard eco­nomic times, fam­i­lies nat­u­rally resist having addi­tional chil­dren because of the expense, so birthrates are likely to fall even further.

In sum, declines in credit, equity and pop­u­la­tion all point to the same end: Defla­tion. Those who can wrap their head around this will be much better off than those who con­tinue to pro­mote their infla­tionary memes.

— —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  — –  Note: Addi­tional con­tent on this page is avail­able only to Pre­mium sub­scribers of Find­ings & Fore­casts.
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Findings & Forecasts 12/05/2012

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Deriv­a­tives. After the near-total melt­down of the finan­cial sector in 2008, one might expect that big banks would cur­tail their exces­sive risk-taking behavior. Alas, not so. In fact, just the oppo­site has occurred: More risk exists in today’s banks than at any time in history.

The largest nine banks have an overall expo­sure to deriv­a­tives of over $200 tril­lion, a figure that is more than three times the size of the entire global economy. For all global banks, the total “notional” value of deriv­a­tives is well over $1,500 tril­lion; $1,000 tril­lion is $1 quadrillion.

There is no reg­u­la­tion in the deriv­a­tives mar­kets, where only the law of the jungle pre­sides. Preda­tors and prey jockey for sur­vival in dimly lit trading rooms. If a fellow predator gets “eaten,” the news of it is taken with sat­is­fac­tion that more is left over for the remaining survivors.

In sim­plest terms, a deriv­a­tive is a bet on the out­come of some future event. While a bookie takes a bet on the out­come of next week’s horse race, deriv­a­tive traders make bets on events months and years into the future.

A bet works like this. I pur­chase $1 mil­lion in low-rated cor­po­rate bonds that cur­rently yield 6 per­cent and are not due for repay­ment for another 10 years. I’m going for the higher income knowing that there is a higher risk of default. Thus, I seek to find a bettor that will bet against that risk for a tol­er­able fee. Banker X thinks my bonds will be paid off when due, and charges me $25,000 for the assur­ance that if the cor­po­ra­tion does default, the bank will make up any dif­fer­ence. My $25,000 pay­ment is pure income to the bank, and there is no off­set­ting lia­bility recorded.

How­ever, if my cor­po­ra­tion defaults five years down the road, and I lose $800,000 in the process, then banker X imme­di­ately owes me $800,000, which, by the way, is also the so-called “notional value” of the con­tract. Because of all the uncer­tainty, the cur­rent notional value of a deriv­a­tive con­tract can only be guessed at.

If you ask a bookie what his “expo­sure” is, he may say some­thing like $100,000, but he knows that he will not lose all of his bets. Some will cost and some will profit. If he is really good, he will take home a pay­check every week — fewer pay­outs than bets received. If the odds go against him and he cannot pay, then clients with crow­bars are chasing him down the street.

Bankers think the same way about deriv­a­tives. Of course they know that they will lose some bets, but given their mega­lo­ma­niac per­son­al­i­ties, they figure they will win more than they lose and hence, the more bets that they can make, the more money they can pocket. This is why the deriv­a­tives market con­tinues to expand.

Sellers of deriv­a­tives have cul­ti­vated (suck­ered) an industry of pur­chasers who wrongly believe that they can lower their actual risk by adding deriv­a­tives to their overly-risky invest­ments. Put another way, if there were no deriv­a­tive market, people would not make such risky invest­ments in the first place. The temp­ta­tion to take on too much risk because deriv­a­tives are avail­able is called “moral hazard.” In this writer’s opinion, the entire deriv­a­tives market is one big cesspool of moral hazard.

When things go wrong again, this market will destroy the entire global finan­cial system: Cen­tral banks, banks, insur­ance com­pa­nies, wealthy investors, pen­sion funds, sov­er­eign wealth funds, national trea­suries, etc.

How­ever, there is another moral hazard that is enabled by the deriv­a­tives market: That is, for those who long for the death of cap­i­talism, finan­cial armageddon may be per­ceived as only be a few trades away…

Eating our seed corn. It’s farmer’s wisdom to always put enough seed away from this year’s crop to allow for replanting next year. Such wisdom has been lost to the rest of America, which has been rou­tinely eating its seed corn every year for sev­eral years now.

The above chart shows Net Domestic Invest­ment as a per­centage of nom­inal GDP, or Gross Domestic Product. NDI sub­tracts out con­sump­tion of fixed cap­ital, com­monly knows as depre­ci­a­tion. Since 1965, the rate of growth of NDI has steadily declined and is cur­rently stuck at zero growth.

There are a number of things that could be inferred from this chart, but the most promi­nent is that a healthy society con­tin­u­ously replaces its invest­ment cap­ital, and a declining society does not. To truly turn eco­nomic America around would require 6 – 10 per­cent of our GDP to be invested into cap­ital goods and infra­struc­ture — the means of pro­duc­tion. Given the cur­rent eco­nomic con­di­tions, this is absolutely impos­sible… the seed corn is gone.

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Buy gold after it crashes

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By Patrick Wood, Editor

Why buy gold (and silver) now when you can wait for the coming crash and buy it for pen­nies on the dollar?

On 09/09/2009 I wrote,

“… the scramble for cash is on. For three years, I have fre­quently said that “cash is king” in a defla­tionary economy. In con­trast, debt is anathema.”

I first sounded this alarm in 2006, stating that defla­tion would destroy wealth faster than infla­tion could ever imagine. Six years later, this has proven to be exactly the case. Most people equate price declines with defla­tion rather than the destruc­tion of credit. Price declines come as a result of shrinking avail­ability of credit and cash, resulting in forced liq­ui­da­tions of assets that can drive prices down.

In other words, the forced liq­ui­da­tion of debt depresses its under­lying assets, regard­less of what those assets are. Bank­rupt­cies, car repos­ses­sions, home fore­clo­sures, defaults and write-downs are the means of debt destruc­tion. When col­lat­eral assets are reclaimed during the liq­ui­da­tion phase, they are sold at public auc­tion to recoup some money.

Most loans made, but not all, have col­lat­eral pledged against the debt. In a normal economy, a few liq­ui­da­tions are easily absorbed by the local market. In a more gen­er­ally defla­tionary economy, liq­ui­da­tions increase and cannot be absorbed without affecting market prices. Making this sce­nario much worse is the fact that the entire global economy is melting down at the same time, meaning that there is no one to stem the freefall.

In the midst of this, investors of all stripes in every part of the world, including banks, are stam­peding out of equi­ties and risky debt instru­ments and into short-term gov­ern­ment secu­ri­ties. The net effect of this is to a) shrink avail­able cash avail­able for eco­nomic devel­op­ment and b) drive interest rates down. The first part of this vir­tu­ally guar­an­tees that the global eco­nomic con­trac­tion will accel­erate, exac­er­bating the defla­tionary spiral. The second part serves to wipe out invest­ment income for hun­dreds of mil­lions of fixed-income depen­dents, like retirees, retire­ment funds, trust funds, etc.

How­ever, there is another more omi­nous impli­ca­tion when banks buy sov­er­eign debt. This is point­edly defla­tionary because the investors are handing cash back to the trea­sury in return for a paper IOU. This has the oppo­site effect of any quan­ti­ta­tive easing pro­gram, shrinking the cash in cir­cu­la­tion faster than the Trea­sury or Cen­tral Bank can dish it out.

National Trea­suries, on the other hand, are severely lim­ited by an aus­terity mind-set and are reluc­tant or politically-constrained from spending the cash to prop up or expand gov­ern­ment programs.

You can prop­erly view this as two freight trains accel­er­ating toward each other on the same track.

The typ­ical gov­ern­ment argu­ment against a train wreck is that eco­nomic growth will bail them out. Um, which eco­nomic growth are they talking about? The entire globe is spi­raling toward depression.

We see what hap­pens to a national gov­ern­ment when global dis­trust shuts them out of cap­ital mar­kets. Both Greece and Spain are in eco­nomic and polit­ical chaos because they are iso­lated and shunned by the global finan­cial com­mu­nity. Both are at risk of com­plete gov­ern­mental melt­down and national bankruptcy.

In my opinion, the global finan­cial system is the Titanic and Greece and Spain are merely the tip of the ice­berg that has been struck. The ship is taking on water, but the crew still believes that the Titanic is unsink­able. Like the Titanic, there is every cer­tainty that today’s global finan­cial system will be resting at the bottom of the ocean before the struggle is over.

My “titanic” fore­cast is that when investors ulti­mately turn in their Trea­suries and demand return of their cash, gov­ern­ments will resort to dumping their gold reserves to raise cash to pay debt holders. This will be the last act of the defla­tionary spiral, causing a major crash in the price of gold.

Eco­nomic and polit­ical times will cer­tainly be extremely dif­fi­cult at that stage but this is where you will want to take all the cash you can get your hands on and sell it back to them for gold! For those who have such cash, it will be poetic jus­tice to buy back the pre­cious asset from those who stole it in the first place.

When will gov­ern­ment Trea­suries and Cen­tral Banks ulti­mately abandon their gold? When investors ulti­mately demand a return of cash. What will happen to gold when the col­lapse is over? It will go up in price, regard­less of the which cur­rency you deal with.

This is one more reason why I con­tinue to say, “Cash is king.”


Former hedge fund man­ager Raoul Pal is fore­casting the “biggest banking crisis in world his­tory.” I strongly sug­gest that you view the entire slide pre­sen­ta­tion. He con­cludes that the entire global finan­cial system will col­lapse (as early as 6 months from now) and require a “reset” from scratch. Banks will col­lapse and sov­er­eign gov­ern­ments will default, thus com­pletely vapor­izing the frac­tional banking system.

This would also be the end of defla­tion and leave the world in a trade­less state.

During the process of gov­ern­ment defaults, all gov­ern­ment assets will be thrown over­board to cred­i­tors. This includes gold that has been lit­er­ally locked up for decades with no expo­sure to the free market. The short-term poten­tial for gold to be “cheap as dirt” is very high.

Another con­clu­sion is that holding an increasing amount of actual cash may be desirable.

Unfor­tu­nately, any direc­tion we take is fraught with risk, and even if we “make it through” the col­lapse, the eco­nomic land­scape will be charred and smol­dering for years afterward.

[Invi­ta­tion: If you want to follow my eco­nomic and market fore­casts on a weekly basis, I invite you to accept my offer of a FREE 30-day trial to my pre­mium newsletter, Find­ings & Fore­casts, avail­able through this site. Simply click here to sub­scribe.]
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Trilateral Plan to Corner World Gold Market?

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Editor’s note: mem­bers of the Tri­lat­eral Com­mis­sion and com­pa­nies with Com­mis­sion rep­re­sen­ta­tion appear in bold type.]

Since 1973, this writer has made inquiry as to the loca­tion and own­er­ship of the vast stores of mon­e­tary gold (400 oz., .999 pure bars) in the world. There has not been a formal audit on Fort Knox, for instance, since the Eisen­hower admin­is­tra­tion. Offi­cial sta­tis­tics on gold hold­ings are often con­tra­dic­tory. Get­ting plain answers from any Cen­tral Bank in the world, including the Fed, is vir­tu­ally impossible.

This paper points out a pat­tern of manip­u­la­tion that has been clearly observed by many people. How­ever, pat­terns do not exist in a vacuum, but rather they are evi­dence of the exis­tence of a stable and con­sis­tent method­ology. Clearly, more study needs to be done in iden­ti­fying the finer parts of the method­ology and its designers, but this is a good start!

When Richard Nixon can­celed the Bretton Woods system in 1971, exchange­ability of paper dol­lars for gold was ter­mi­nated. In 1970 alone, avail­able gold vs. dol­lars out­standing had shrunk from 55 to 22 per­cent, thus exerting pres­sure for investors to switch to gold to avoid fur­ther dilu­tion of dollar assets.

Although the eco­nomic and finan­cial experts swore that gold was an out­moded, inef­fec­tive and use­less finan­cial asset, cooler heads knew better. In recent years, these same experts have reversed field and are now pro­claiming that gold is still, and always has been, a con­sis­tent mon­e­tary asset. Why the flip-flop?

The eco­nomic chaos in the world today is a direct result of poli­cies set in motion to foster a New Inter­na­tional Eco­nomic Order (NIEO). The NIEO was the explicit cre­ation of the Tri­lat­eral Com­mis­sion, founded by David Rock­e­feller and Zbig­niew Brzezinski in 1973, and their early papers and task force reports clearly asserted their NIEO plans.

Mem­bers of the Tri­lat­eral Com­mis­sion were instru­mental in cre­ating the Euro­pean Union as well. The EU is the pro­to­type of global gov­er­nance that will soon exert its influ­ence to reshuffle world relationships.

Since 1973, Tri­lat­er­al­ists have dom­i­nated the Exec­u­tive Branch of the U.S. gov­ern­ment with politi­cians like Jimmy Carter, George H. W. Bush, Bill Clinton, Al Gore and Dick Cheney. This has led to dom­i­na­tion of the world trade mech­a­nisms like the World Bank and nego­ti­a­tion of free trade agreements.

Six out of eight pres­i­dents of the World Bank have been mem­bers of the Com­mis­sion. Eight out of ten of the U.S. Trade Rep­re­sen­ta­tives (USTR) have been Commissioners.

Indeed, the Tri­lat­eral Com­mis­sion has had undue influ­ence and con­trol over the devel­op­ment of glob­al­iza­tion, and it was self-interested at best.

With today’s total melt­down in eco­nomic and global finan­cial mar­kets, one must ask, “Are these people just plain stupid?”

The answer has to be “No”, con­sid­ering their great suc­cess at con­sis­tently dom­i­nating polit­ical and eco­nomic processes over a span of thirty-five years.

So what else is going on?

There is mounting evi­dence that there has been a larger plan underway to corner the global supply of gold, thus laying the ground­work for a global cur­rency exclu­sively con­trolled by Tri­lat­erals and their friends. By exten­sion, eco­nomic and polit­ical mech­a­nisms would be con­trolled to the same extent.

From a Tri­lat­eral per­spec­tive, the Bretton Woods system had two flaws:

  • Gold was rapidly being decen­tral­ized into non-Trilateral hands
  • It lim­ited the arbi­trary cre­ation of paper money to finance projects launched by Trilateral-related global companies.  (Read Tri­lat­erals Over Wash­ington (Sutton & Wood) for detailed doc­u­men­ta­tion on this process)

The breakup of Bretton Woods and the resulting oppor­tu­ni­ties may have been the prin­cipal ratio­nale for the cre­ation of the Tri­lat­eral Com­mis­sion in the first place.

Since 1973, there has been an over­ar­ching plan to qui­etly cen­tralize gold into pri­vate hands, using incre­men­tally cre­ated wealth made pos­sible by rapidly inflating paper currencies.

This theory must be explored and tested, because if true, it rep­re­sents not just the hijacking of America (already thor­oughly demon­strated else­where in this writer’s papers), but the hijacking of an entire planet!

In 1976, Antony Sutton wrote,

“The assault on gold today is an inte­gral part of a planned move into a new eco­nomic order under the dom­i­nance of a single country. It was Nazi Ger­many in the 1940’s; it is the United States in the 1970’s. In brief, the war on gold that we observe today, and dis­cuss below, is dollar impe­ri­alism, designed to main­tain the U.S. dollar as the only world cur­rency without com­peti­tors. The pur­pose is the for­ma­tion of a world total­i­tarian state under Wall Street dom­i­nance.” (The War on Gold, Antony C. Sutton, 1976, p. 63)

Sutton’s view was lim­ited because he had not yet dis­cov­ered the Tri­lat­eral frame­work just cre­ated three years ear­lier in 1973. We can see now that the total­i­tarian state is still clearly in view, but the self-proposed rulers of this new arrange­ment will be mem­bers of the Tri­lat­eral Com­mis­sion, and their mon­e­tary “enforcer” will be gold.

2008 Gold Hegemony

Bill Murphy is the chairman of the Gold Anti-Trust Action Com­mittee (GATA), which has asserted for almost 10 years that a con­cen­trated gold cartel has been manip­u­lating the price of gold. Murphy and GATA are highly regarded around the world on their work to expose this cartel.

On Sep­tember 10, 2008, Murphy made an opening state­ment at the 2008 Las Vegas Hard Assets Invest­ment Con­fer­ence, reprinted in full below. Murphy’s per­spec­tive and argu­ment does not include the Tri­lat­eral Com­mis­sion, but the players in his nar­ra­tive are largely mem­bers or former mem­bers of the Commission.

This leads this writer to con­nect some dots between 1973 – 1976 and 1998 – 2008.

In Murphy’s com­ments, note that the famous bul­lion banks of 2008 include Goldman Sachs, JP Morgan Chase, Cit­i­group and Deutsche Bank, all of which have at least one director or senior offi­cial sit­ting on the Tri­lat­eral Com­mis­sion. In addi­tion, the players Murphy names are mem­bers of the Commission.

As Sutton did in 1976, to imply a “war on gold” neces­si­tates an even­tual vic­tory, a victor and a loser. It is already painfully obvious that the cit­i­zens of America are the losers: The middle class is being wiped out and we all hold a debased paper cur­rency that is headed toward destruction.

The ques­tion is, who will the winner be? And what is the victor’s intent over the conquered?

Bill Murphy’s Opening Statements

The Gold Anti-Trust Action Committee’s basic asser­tion for the past 9 ½ years is that there is a Gold Cartel out there sup­pressing the price of gold. It con­sists of the US Gov­ern­ment, including the Fed and Trea­sury, var­ious other cen­tral banks, and bul­lion banks like Goldman Sachs and JP Morgan Chase.

The motives of “the cabal” are to give sup­port to the dollar, keep US interest rates lower than they should be, and to tone down the widely watched US barom­eter of US finan­cial market health, that being the gold price. After all, when­ever the price of gold soars, it con­gers up talk of too much infla­tion, a sinking dollar, or a crisis of some sort … all neg­a­tive for Wall Street and the incum­bent administration.

There­fore, “Shoot the Mes­sen­ger” is The Gold Cartel’s key mission.

The sup­pres­sion of the price of gold was the essence of Robert Rubin’s Strong Dollar Policy. What else did the US do to effect that policy? Talk? Jawbone?

It seems to have all started with Robert Rubin…

Before he was CEO of Goldman Sachs and then US Trea­sury Sec­re­tary, Robert Rubin worked in London for Goldman Sachs. One of his duties was to oversee their gold trading oper­a­tions. We know this because the CEO of Kirk­land Lake Gold, Brian Hinch­cliffe, a staunch GATA sup­porter, worked in London back then for Goldman Sachs and reported directly to Robert Rubin.

This was many years ago and interest rates in the US were very high, say from 6 to 12%. Rubin had Goldman Sachs borrow gold from the cen­tral banks to fund their basic oper­a­tions. They could do so at about a 1 % interest rate. This was like FREE money, as long as the price of gold did not rise to any sus­tained degree for any length of time.

Soon other major finan­cial insti­tu­tions real­ized what GS was doing and copied them. Rubin con­tinued these oper­a­tions as the Goldman Sachs CEO and then took it to a new level as US Sec­re­tary Trea­surer. That is how the gold price sup­pres­sion became the lynchpin of his widely acclaimed “Strong Dollar Policy.” GATA’s Reg Howe caught on to this notion in a paper titled, “Gibson’s Paradox and The Gold Standard,” co-authored by Lawrence Sum­mers in 1988. Sum­mers, a pro­fessor at Har­vard at the time, suc­ceeded Rubin as US Trea­sury Sec­re­tary. The bottom line of Summer’s analysis is that “gold prices in a free market should move inversely to real interest rates.”  Con­trol gold and it will help to con­trol interest rates.

Bul­lion banks such as Goldman and Morgan became The Gold Cartel’s hit men, trading the gold market from the short side and bombing the market in coor­di­nated anti-trust fashion at the beck and call of our gov­ern­ment, making a great deal of money in the process … as you have all wit­nessed the past couple of months.

In a bril­liant piece a few weeks ago Ted Butler reported 3 U.S. banks held a short posi­tion of 7,787 con­tracts (778,700 ounces) of gold in July, and, aston­ish­ingly the same 3 U.S. banks held a short posi­tion of 86,398 con­tracts (8,639,800 ounces) in August, an eleven-fold increase. Gold then declined more than $150 per ounce once Sec­re­tary Paulson (note: Paulson is ex-CEO of Goldman Sachs) gave the order, just as he did in May 2006 when a sim­ilar order was given, according to a US Sen­ator from the state of Wash­ington. Both times, var­ious bul­lion banks made vast amounts of money quickly as the US gov­ern­ment facil­i­tated their short posi­tions by feeding con­sid­er­able clan­des­tine cen­tral bank gold into the phys­ical market.

It was the con­certed, con­cen­trated action of cer­tain BULLION BANKS, which tipped off GATA what was going on nearly a decade ago now.

It was this clan­des­tine feeding of cen­tral bank gold into the mar­ket­place which clued GATA into the gold price sup­pres­sion scheme. Three GATA con­sul­tants, Reg Howe, Frank Ven­eroso and James Turk, using inde­pen­dent, sophis­ti­cated method­olo­gies, came to the same con­clu­sion years ago … that the cen­tral banks have far less gold than the 30,000 tonnes of gold they say they have. The GATA camp research shows they have less than half that amount in their vaults, the dif­fer­ence being the amount that has been fed into the phys­ical market to sup­press the price. Since demand for phys­ical gold exceeds mine and scrap supply by well over than 1,000 tonnes per year, this cen­tral bank gold is vital to pre­vent the price from exploding.

GATA is not alone in rec­og­nizing the cen­tral banks are not accounting for their gold prop­erly. GATA revealed an IMF paper which cor­rob­o­rates GATA’s claims that much of the cen­tral bank gold has been double counted and that the cen­tral banks are not prop­erly accounting for the gold no longer in their possession.



“14. Regarding the sta­tis­tical treat­ment of gold swaps, its treat­ment should be con­sis­tent with that of other reverse trans­ac­tions, as pre­sented in para­graph 7 above. Thus, swapped gold should be excluded from both reserve assets and IIP (demon­e­ti­za­tion). This is a log­ical con­se­quence, and over­stating of reserve assets can be avoided. On the other hand, this results in a decrease in the finan­cial assets of the mon­e­tary authorities.”

Gold swaps and gold leasing are at the heart of the gold price sup­pres­sion scheme. For example, the US cannot sell its 8,133.5 tonnes of gold without an Act of Con­gress, but they could lease or swap it. In 2006 the Pres­i­dent of the Bun­des­bank made an aston­ishing state­ment for a cen­tral banker: “We have been asked to nego­tiate with other cen­tral banks’ about poten­tial swap deals involving gold.”

Is this stuff hush hush? I guess so. in Jan­uary 1995, 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.” When the GATA camp had Ken­tucky Sen­ator Jim Bun­ning inquire Alan Greenspan what that was all about, Mat­tingly came back and said the Fed tes­ti­mony was GARBLED … Right…

Recently GATA filed Freedom of Infor­ma­tion Act requests to the Fed and Trea­sury about US gold swaps. The Fed redacted 300 pages of infor­ma­tion and refused to send another 400 pages. Now, think about it … if the US gold is, and has been, just sit­ting in our vaults, without a true inde­pen­dent audit since the Eisen­hower Admin­is­tra­tion, what is their to withhold?

As for GATA’s request to the Trea­sury about any Exchange Sta­bi­liza­tion Fund activity into the gold market, they answered in the neg­a­tive by refer­ring to the Exchange STABILITY Fund. Can they be that lame?

Is the gold price manip­u­lated? You don’t need to read through GATA’s count­less evi­dence to appre­ciate what is going on. It is on the public record…

begin­ning with Alan Greenspan’s tes­ti­mony before Con­gress in 1998:

“Central banks stand ready to lease gold in increasing quan­ti­ties should the price rise” … which is just what they have done!

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.

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.”

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, JP Morgan Chase, 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.

Is the gold price manip­u­lated today? Former Fed­eral Reserve Chairman Paul Vol­cker wrote the fol­lowing in his memoirs:

“Joint inter­ven­tion in gold sales to pre­vent a steep rise in the price of gold (in the 1970s), how­ever, was not under­taken. That was a mistake.” …

Robert Rubin and gang took heed … as are more and more in the main­stream finan­cial world. Just last week, the highly regarded Don Coxe of the Bank of Mon­treal stated the fol­lowing in an audio pre­sen­ta­tion last about recent market action to the bank’s clients:

“The Most Mas­sive Inter­ven­tion Of Gov­ern­ment Into The Cap­ital Mar­kets, Or The Finan­cial Mar­kets, Since Pres­i­dent Roo­sevelt Closed The Banks Back In 1933,”

It’s wake up time, finally.

Recently, there has been talk about the Working Group on Finan­cial Mar­kets (more com­monly known as The Plunge Pro­tec­tion Team), which con­sists of the Pres­i­dent, Trea­sury Sec­re­tary, and heads of the CFTC and SEC. Think about it … why are bureau­crats included in meet­ings about the mar­kets except to look the other way regarding gov­ern­ment intervention?

To give you an idea just how per­va­sive and insid­ious our mar­kets have become, I bring your atten­tion to the Coun­ter­party Risk Man­age­ment Group. Ever hear of it?

It con­sists of major players in the invest­ment banking/hedge fund com­mu­nity in New York, including Goldman Sachs. Cit­i­group, JPMorgan Chase, and Deutsche Bank (all defen­dants in GATA’s Reg Howe’s suit against The Gold Cartel in 2001).  There are a number of other par­tic­i­pants such as the famed hedge fund of Paul Tudor Jones.

On July 27, 2005, E. Gerald Cor­rigan, former Pres­i­dent and CEO of the Fed­eral Reserve Bank of New York, and now a Man­aging Director of Goldman Sachs, wrote:

The Report of the Coun­ter­party Risk Man­age­ment
Policy Group II

Addressing it to:

Mr. Henry M. Paulson, Jr.
Chairman and Chief Exec­u­tive Officer
Goldman, Sachs & Co.

(all roads always lead back to Goldman Sachs)

He stated; “since we know that finan­cial dis­tur­bances and even finan­cial shocks will occur in the future, and we know that no approaches to risk man­age­ment or offi­cial super­vi­sion are fail-safe, we also know that we must pre­serve and strengthen the insti­tu­tional arrange­ments whereby, at the point of crisis, industry groups and industry leaders, as well as super­vi­sors, are pre­pared to work together in order to serve the larger and shared goal of finan­cial stability.”

This Orwellian shared goal of finan­cial sta­bility, which began with the serious rig­ging of the gold price under Robert Rubin, has led us to the finan­cial market mess we have today.  It is wrong and must be stopped!

Is the cat out of the bag?

In the 2007 May/June issue of For­eign Affairs, Benn Steil pre­sented his paper, The End of National Cur­rency. Steil is Director of Inter­na­tional Eco­nomics at the Council on For­eign Rela­tions. In his report, Steil stated,

“So what about gold? A revived gold stan­dard is out of the ques­tion. In the nine­teenth cen­tury, gov­ern­ments spent less than ten per­cent of national income in a given year. Today, they rou­tinely spend half or more, and so they would never sub­or­di­nate spending to the strin­gent require­ments of sus­taining a commodity-based mon­e­tary system. But pri­vate gold banks already exist, allowing account holders to make inter­na­tional pay­ments in the form of shares in actual gold bars. Although clearly a niche busi­ness at present, gold banking has grown dra­mat­i­cally in recent years, in tandem with the dollar’s decline. A new gold-based inter­na­tional mon­e­tary system surely sounds far-fetched. But so, in 1900, did a mon­e­tary system without gold. Modern tech­nology makes a revival of gold money, through pri­vate gold banks, pos­sible even without gov­ern­ment support.”

This is hardly far-fetched. Zbig­niew Brzezinski noted in 1972 that “the nation-state as a fun­da­mental unit of man’s orga­nized life has ceased to be the prin­cipal cre­ative force: Inter­na­tional banks and multi­na­tional cor­po­ra­tions are acting and plan­ning in terms that are far in advance of the polit­ical con­cepts of the nation-state.”

Cracks in the dam

Noted Romanian econ­o­mist, Pro­fessor Antal Fekete, released a crit­ical report on December 5, 2008, enti­tled “Red Alert: Gold Backwardation.”

For the first time in his­tory, gold futures sold below spot price and cre­ates a poten­tial crisis in gold delivery at the end of December. Fekete states,

“According to the December 3rd Comex delivery report, there are 11,759 notices to take delivery. This rep­re­sents 1.1759 mil­lion ounces of gold, while the Comex-approved ware­houses hold 2.9 mil­lion ounces. Thus 40% of the total amount will have to be deliv­ered by December 31st. Since not all the gold in the ware­houses is avail­able for delivery, Comex supply of gold falls far short of the demand at present rates. Futures mar­kets in gold are breaking down. Paper gold is pro­gres­sively being discredited…”

 “Gold going to per­ma­nent back­war­da­tion means that gold is no longer for sale at any price, whether it is quoted in dol­lars, yens, euros, or Swiss francs. The sit­u­a­tion is exactly the same as it has been for years: gold is not for sale at any price quoted in Zim­babwe cur­rency, how­ever high the quote is. To put it dif­fer­ently, all offers to sell gold are being with­drawn, whether it con­cerns newly mined gold, scrap gold, bul­lion gold or coined gold. I dubbed this event that has cast its long shadow for­ward for many a year, the last con­tango in Wash­ington ― con­tango being the name for the con­di­tion oppo­site to back­war­da­tion (namely, that of a pos­i­tive basis), and Wash­ington being the city where the Paper-mill of the Potomac, the Fed­eral Reserve Board, is located. This is a tongue-in-cheek way of saying that the jig in Wash­ington is up. The music has stopped on the players of ‘musical chairs’. Those who have no gold in hand are out of luck. They won’t get it now through the reg­ular chan­nels. If they want it, they will have to go to the black market.”


If Fekete is cor­rect, and he has seldom been wrong, then the trap is snap­ping shut on who will own the gold in 2009. Free-market sup­plies of gold are drying up, but the price is being kept low as global insti­tu­tions sop up what­ever crumbs are left.

Sev­eral very serious impli­ca­tions can be drawn:

  • The mas­sive amounts of gold leased to bul­lion banks will ulti­mately be seized by these same banks as col­lat­eral against worth­less paper loans made to the Cen­tral Banks.
  • Cen­tral Banks (including the Fed­eral Reserve) could well be left to dis­in­te­grate in order to give way to a single global cen­tral bank con­trolled and fueled by the bul­lion banks who have monopoly con­trol over the world’s gold.
  • These super­banks are all closely tied to the goals and mem­ber­ship of the Tri­lat­eral Com­mis­sion, whose mem­bers have method­i­cally car­ried out a mon­e­tary policy designed to bring about this eventuality.
  • For all prac­tical intent, indi­vid­uals will be frozen out of the gold market at any price.

Indeed, a global total­i­tarian state may be closer than we think; as the globalist’s golden rule states, “He who has the gold, makes the rules.”

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What is Globalization?

It is the col­lective effect of pur­poseful and amoral manip­u­la­tion that seeks to cen­tralize eco­nomic, polit­ical, tech­no­log­ical and soci­etal forces in order to accrue max­imum profit and polit­ical power to global banks, global cor­po­ra­tions and the elit­ists who run them. It is rapidly moving toward an full and final imple­men­ta­tion of Technocracy.

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What is the Tri­lat­eral Commission?

Founded in 1973 by David Rock­e­feller and Zbig­niew Brzezinski, the Com­mis­sion set out to create a “New Inter­na­tional Eco­nomic Order”, namely, Tech­noc­racy. The orig­inal mem­ber­ship con­sisted of elit­ists (bankers, politi­cians, aca­d­e­mics, indus­tri­al­ists) from Japan, North America and Europe. Col­lec­tively, they have dom­i­nated and con­trolled trade and eco­nomic policy in their respec­tive coun­tries since at least 1974.

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What is Technocracy?

Tech­noc­racy is a move­ment started in the 1930’s by engi­neers, sci­en­tists and tech­ni­cians that pro­posed the replace­ment of cap­i­talism with an energy-based economy. Orig­i­nally envi­sioned for North America only, it is now being applied on a global basis. Authors Aldous Huxley and George Orwell believed that Tech­noc­racy would result in a Sci­en­tific Dic­ta­tor­ship, as reflected in their books, “Brave New World” and “1984″.

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What is Smart Grid?

Smart Grid is the national and global imple­men­ta­tion of dig­ital and Wi-fi enabled power meters that enable com­mu­ni­ca­tion between the appli­ances in your home or busi­ness, with the power provider. This pro­vides con­trol over your appli­ances and your usage of elec­tricity, gas and water.

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Who is M. King Hubbert?

Hub­bert was a geo-physicist who co-founded Tech­noc­racy, Inc. in 1932 and authored its Tech­noc­racy Study Course. In 1954, he became the cre­ator of the “Peak Oil Theory”, or “Hubbert’s Peak” which the­o­rized that the world was rapidly run­ning out of carbon-based fuels. Hub­bert is widely con­sid­ered as a “founding father” of the global warming and green movements.

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Who is R. Buck­min­ster Fuller?

A pio­neer in global eco­log­ical theory, Fuller (1895 – 1984) was the first to sug­gest the devel­op­ment of a Global Energy Grid that is today known as the Global Smart Grid. Fuller is widely con­sid­ered to be a “founding father” of the global green move­ment, including global warming, Sus­tain­able Devel­op­ment, Agenda 21, etc.

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Is the Venus Project like Technocracy?

The Venus Project, founded by Jacque Fresco, is a utopian, modern-day iter­a­tion of Tech­noc­racy. Like Tech­noc­racy, it scraps cap­i­talism and pro­poses that “a resource-based economy all of the world’s resources are held as the common her­itage of all of Earth’s people, thus even­tu­ally out­growing the need for the arti­fi­cial bound­aries that sep­a­rate people.” The appli­ca­tion of tech­nology is the answer to all of the world’s prob­lems, including war, famine and poverty.

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