Sunday, August 14, 2016

Gold price rigging is as old as gold itself

January 31, 2013 by · Leave a Comment 


4:51p ET Thursday, January 31, 2013

Dear Friend of GATA and Gold:

Writing today for Forbes, the economist, fund manager, and author Nathan Lewis proves that Harry Truman was right about gold as well as everything else insofar as “the only thing new in the world is the history you don’t know.”

In an essay headlined “The 10-Minute Gold Standard: It’s Much Easier than You Think” –


– Lewis quotes the classical economists David Ricardo and John Stuart Mill to argue that, theoretically, at least, a gold standard for currency can be maintained very simply without convertibility or any gold reserves at all if issuance of the currency is tightly controlled.

Quoting Ricardo from 1817: “It will be seen that it is not necessary that the paper money should be payable in specie to secure its value; it is only necessary that its quantity should be regulated according to the value of the metal which is declared to be the standard.”

And quoting Mill from 1848: “If, therefore, the issue of inconvertible paper were subjected to strict rules, one rule being that whenever bullion rose above the Mint price, the issues should he contracted until the market price of bullion and the Mint price were again in accordance, such a currency would not be subject to any of the evils usually deemed inherent in an inconvertible paper.”

But elaborating way back then, 165 years ago, Mill foresaw Western central banking’s gold price suppression scheme, which is almost as old as gold money itself. He warned against “the possibility of fraudulent tampering with the price of bullion for the sake of acting on the currency; in the manner of the fictitious sales of corn, to influence the averages, so much and so justly complained of while the Corn Laws were in force.”

“Fictitious sales” — maybe like shorting of gold backstopped by central banks?

Lewis quotes Mill’s conclusion: “There is therefore a great preponderance of reasons in favour of a convertible in preference to even the best-regulated inconvertible currency. The temptation to over-issue, in certain financial emergencies, is so strong that nothing is admissible which can tend, in however slight a degree, to weaken the barriers that restrain it.”

Or as a high school graduate remarked at GATA’s Washington conference in 2008 (http://www.gata.org/node/6242):

“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.”

While GATA is proud of the work it has done over the last 14 years in documenting and publicizing the modern gold price suppression scheme of the Western central banks –


– essentially we have done no more than prove a largely forgotten tautology, prove that the sun rises in the east, even if our work has been made more difficult by the craven disinformation of some of the gold industry’s own supposed analysts and the determined irrelevance of the gold industry’s own supposed representative, the World Gold Council.

Other than perhaps the memoir of the late Swiss gold banker Ferdinand Lips, “Gold Wars: The Battle Against Sound Money as Seen from a Swiss Perspective,” published in 2001 shortly after GATA began its work –


– there doesn’t seem to be any formal monetary history examining central banking’s war against gold, grateful as we may be for the chronology of the modern gold war assembled by the publisher of The Privateer newsletter, the Australian William Buckler:


It’s not as if some leading economists don’t know about gold’s centrality in the world financial system. As a professor of economics at Harvard University before becoming deputy U.S. Treasury secretary and then secretary, Lawrence Summers wrote an academic study about it in 1988 but then, once in office, seems never again to have mentioned gold in public, lest attention be called to the surreptitious market intervention in which his administration was so heavily involved:


For this gold stuff, as that high school graduate remarked five years ago, having tripped over it by accident, undeservingly, is the secret knowledge of the universe, more powerful and more sensitive to governments than nuclear weapons, and thus, in the defense of liberty, it requires urgent democratizing and archiving where it might not be quite so forgotten again.

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

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