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If the law won't stop market rigging, what can we do?

Section: Daily Dispatches

5:45p ET Wednesday, October 17, 2012

Dear Friend of GATA and Gold:

GATA's friend and researcher R.M. writes today from Europe:

"If the U.S. judiciary deemed protection of the nation's currency or similar national interests (such as stable financial markets and oil prices) as justification not to prosecute a cartel's war against gold by federal authorities, foreign governments, and their agents, could anti-trust law ever be brought to bear against such activity in our lifetimes?

"What I'm asking essentially is: What is the Achilles' heel of gold market collusion that would provoke enforcement in a compromised judicial system?"

I have replied to R.M. as follows.

As I read the Gold Reserve Act of 1934 as amended, it authorizes the U.S. government to trade secretly not just in the gold market but in any market:

The Gold Reserve Act describes its objective as "an orderly system of exchange rates." Any administration almost certainly would construe that objective as an exemption from anti-trust law and I doubt that any court would have the nerve to disagree.


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This question came up more or less during the first lawsuit against gold market manipulation, the lawsuit brought by Reginald Howe with GATA's support in U.S. District Court in Boston in 2001 against the Bank for International Settlements, the U.S. Federal Reserve and Treasury Department, and various bullion banks. For the details of that lawsuit, see the entry for "Gold Price Fixing Case" at Howe's Internet site here:

There was only one public proceeding in that case, held in Boston on November 5, 2001, on the defendants' motion for dismissal via "summary judgment." "Summary judgment" is a determination by the court that even if everything in the plaintiff's complaint is true, there is no remedy at law and nothing for the court to do about it. I attended that hearing. While I had to sit in the back of the courtoorm and the acoustics were not good, I heard an assistant U.S. attorney assert that the government, without admitting that it was doing what Howe complained of, very much claimed the power to do it. See my report on the hearing as posted at GATA's old Internet site here:

The government lawyer's assertion in support of "summary judgment" against Howe was pretty much a confession and perhaps the great success of the lawsuit. The government lawyer's assertion outlined the whole scheme.

After all, the United States was essentially on a gold standard through 1968 and the collapse of the London Gold Pool and then through 1971 when President Nixon discontinued gold redemption of dollars held by foreign governments, and by definition a gold standard is government's rigging of the gold price. Nobody suggested back then that such market rigging was illegal. Howe argued that since the U.S. government had formally unfixed the gold price in 1971, free-market law had to be construed to have taken over.

Since the judge granted "summary judgment" to the defendants on a jurisdictional issue -- Howe's supposed lack of standing to sue in the first place, a dodge by the court -- the issue of authority for market rigging was never settled.

But the U.S. Treasury Department acknowledged to GATA in 2005 that it claims comprehensive market-rigging power under the Trading with the Enemy Act of 1917 and the International Emergency Economic Powers Act of 1977, under which, upon a proclamation of an emergency by the president, the Treasury Department would consider itself authorized to seize or freeze not just gold and silver and gold- and silver-related assets but and and all financial assets. See GATA's correspondence with the Treasury Department in the "Confiscation" section of our Internet site here:

Given the totalitarian scope of the U.S. government's claim to power, I long have believed that the way to defeat the government's market rigging is simply to expose it to enough participants in the rigged markets. That's why GATA sued the Federal Reserve for gold information in 2009 and beat the Fed in U.S. District Court for the District of Columbia last year, extracting some very compromising information:

And it's why we will bring another freedom-of-information lawsuit against the Fed, the U.S. Treasury Department, and the U.S. State Department as soon as our finances allow:

For people won't trade in markets they understand to be rigged. When people realize how and why the major gold markets are rigged and almost always have been rigged, they'll go outside those markets to get their gold -- taking delivery of their metal and moving it outside the banking system, as Jim Sinclair and others on our side long have urged. Such removal of gold from the banking system is exactly what caused the collapse of the London Gold Pool, a fully public operation, in March 1968 --

-- and such removal of gold from the banking system will be, I think, what collapses the current London Gold Pool, a largely surreptitious operation, which GATA board member Adrian Douglas has exposed so well:

I suspect that some Sunday evening before the Tokyo markets open there will be an announcement from a secret conference of central bankers -- maybe held at BIS headquarters in Basel, Switzerland, or in Frankfurt, Singapore, or Washington again (where the Washington Agreement on Gold was devised, even though the United States was not a signatory) -- about new currency exchange rates. These new exchange rates likely will include a price that the participating central banks henceforth will pay for gold -- a much higher price than today's.

Such an announcement will signify that the second London Gold Pool has failed just as the first did. The gold for market rigging will have run out and the central banks and their governments will offer a premium to recover it. Maybe their offer will be of the "godfather" sort, an offer people can't refuse, an offer accompanied by the threat of criminal prosecution of gold owners, or accompanied by a punitive "windfall profits" tax. Or maybe the central banks and their governments will just be good sports and admit that they finally lost another round in the gold game and start up a new one.

Whatever the central banks and their governments do, they won't be alerting us in advance -- just their agent bullion banks. But all will be revealed at last, and even the silly Jeff Christians and Jon Nadlers will see it, if they really don't already see it and are just doing their dirty jobs of disinformation.

Given the recent research by Sprott Asset Management's Eric Sprott and David Baker --

-- and GoldMoney's James Turk and Juan Castenada --

-- I think that we just might live to see the day. Then "ye shall know the truth, and the truth shall set you free," and it will be a great day indeed:

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

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