Gold price suppression is public record and public policy, not ‘conspiracy theory’

Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
International Precious Metals and Commodities Show
Olympia Park, Munich, Germany
Saturday, November 7, 2009

Thank you for coming to listen to me today. Please forgive my inability to speak German. I’ll be discussing many documents, some of them fairly complicated, but don’t worry if you miss something about them. They’ll be posted at GATA’s Internet site with these remarks.

On Friday, September 25, Jim Rickards, director of market intelligence for the Omnis consulting firm in McLean, Virginia., was interviewed on the cable television network CNBC in the United States. Talking about the currency markets, 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 price of government bonds. And that’s why central banks long have tried to suppress the price of gold. Gold is the ticket out of the central banking 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.

Of course what Jim Rickards said about gold was no surprise to my organization, the Gold Anti-Trust Action Committee. To the contrary, what Rickards said has been our premise for most of our 10 years, and we have documented it extensively. Rickards’ assertion was spectacular simply because he was allowed to make it in the mainstream financial news media and was allowed to keep talking. While the gold price suppression scheme is a hard fact of history, it is seldom mentioned in polite company in the financial world. I have been asked to talk about it here. I am grateful for this invitation and I will try to be polite.

How have central banks tried to suppress the price of gold?

The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971.

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 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 and Great Britain attempted to hold the price at $35 in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement came to be known as the London Gold Pool.

As monetary inflation rose sharply, the London Gold Pool was overwhelmed by 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.

For since 1971 the gold price suppression scheme has been undertaken largely surreptitiously, seldom acknowledged officially. But sometimes ithas been acknowledged officially, and with a little detective work, more about it 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, and publicize their most interesting answers, or their most interesting refusals to answer. I’d like to review some of the public record with you.

The gold price suppression scheme became 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/monetarypolicy/files/FOMC19950201meeting.p…

The gold price suppression scheme 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, supposedly the greatest among the central bankers, contradicted the usual central bank explanation for leasing gold — which was supposedly to earn a little interest on a dead asset — and admitted that gold leasing is all about suppressing the price. Greenspan’s admission is still posted at the Fed’s Internet site:

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

Incidentally, while we gold bugs 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 today. For with that testimony Greenspan persuaded Congress not to regulate the sort of financial derivatives that lately have devastated the world financial system.

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