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Why central banks disagree with Gary North about gold

Section: Daily Dispatches

1p ET Friday, October 20, 2017

Dear Friend of GATA and Gold:

In his essay this week, "The Case Against Gold as a Central Bank Asset" --

-- the economic historian and libertarian financial writer Gary North argues that central banks should get rid of their gold reserves.

North writes: "What can the governments do with the gold? It's useless to them. They don't sell it. I wish they would sell all of it."

But of course central banks and governments do sell gold. They "lease" it too, insofar as they at least put gold credits into the marketplace. They buy and sell gold derivatives. They buy gold back when they can do so without spiking the price.

They do this to control the monetary metal and -- at least in the sphere of influence of the United States -- to try to drive it out of the world financial system. They aim to maintain the superiority of the U.S. dollar or the International Monetary Fund's Special Drawing Rights, a contrivance that long has been largely under the U.S. government's control.

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Central banks and governments own gold in part because, as Federal Reserve Chairman Alan Greenspan told Congress in 1999: "Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted."

Occasionally central banks, governments, and their officials or former officials admit their interest and objectives with gold in documents in their archives or memoirs. GATA has compiled and summarized many of these admissions here:

Few of these admissions are more candid than the one published in the 2003 annual report of the Reserve Bank of Australia -- --

and --

-- which says:

"Foreign currency reserve assets and gold are held primarily to support intervention in the foreign exchange market. In investing these assets, priority is therefore given to liquidity and security, in order to ensure that the assets are always available for their intended policy purposes."

These days the RBA is much more subtle about gold. The central bank's most recent annual report --

-- says instead:

"Australia's official reserve assets include foreign currency assets, gold, Special Drawing Rights (SDRs -- an international reserve asset created by the IMF) and Australia's reserve position in the IMF. At 30 June 2017 these assets totaled $84.1 billion. All components of official reserve assets are owned and managed by the Reserve Bank with the exception of Australia's reserve position in the IMF, which is an asset of the Australian government.

"Official reserve assets are held by the Reserve Bank to facilitate various policy operations, including in the foreign exchange market. ..."

Among the most smoking guns of official admissions that central banks and governments hold gold to facilitate their surreptitious rigging of the currency markets is the secret March 1999 report of the IMF's staff to the organization's board:

What can central banks and governments do with their gold?

They can control the currency markets with it -- that's what -- and by controlling the currency markets they control the value of all capital, labor, goods, and services in the world. That is, by controlling the currency markets by controlling gold, they control the world itself.

GATA doesn't like this any more than any libertarian does. But contrary to North's suggestion, it is no mystery. We could use his help in acknowledging and exposing it.

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

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