Central banking's secret market rigging, not its credibility, controls price expectations


10:30a ET Monday, May 28, 2018

Dear Friend of GATA and Gold:

Oh, for a chance to put critical questions to central bankers at forums where their refusal to reply responsively at least might embarrass them in front of an audience. (Of course that's why such forums are never held.)

That wish was prompted by an address given last week by the general manager of the Bank for International Settlements, Agustin Carstens, at a conference in Stockholm celebrating the 350th anniversary of Sveriges Riksbank, the Swedish central bank. The address is posted at the BIS' internet site here --


-- and at GATA's here:


The address was called to GATA's attention by our consultant on the BIS, Robert Lambourne, who reports regularly on the bank's largely surreptitious interventions in the gold market.

Carstens identified four historic trends in central banking that he said are likely to continue. The first trend, Carstens said, "is from metallic convertibility (as either goal or constraint) to fiat money."

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Carstens continued: "Historically, fiat money was at best a temporary war expedient and at worst a breach of trust. Today, institutional credibility grounds price expectations, not gold."

But if price expectations have become entirely matters of confidence in central banks and are no longer connected with gold, why has the Bank for International Settlements been trading gold and gold derivatives so frantically on behalf of its member central banks for the last two years?:


And how can the BIS and its member central banks maintain credibility when they refuse to acknowledge and explain their surreptitious activity in the gold market?:


"I close," Carstens told the conference in Stockholm, "on what I hope will be a trend rather than a cycle: central bank cooperation."

But in 2005 another BIS official -- William R. White, then the director of the bank's monetary and economic department -- spoke at a conference at BIS headquarters in Basle, Switzerland, and revealed the main objective of "central bank cooperation." White said it was simply market rigging. He described it as "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":


For as a high school graduate remarked at GATA's Washington conference in 2008 --


-- "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."

Carstens told the Riksbank celebration that he hopes that the trends he has identified in central banking are irreversible. But if they are, Orwell's awful prophecy from "1984" will be realized: "If you want a picture of the future, imagine a boot stamping on a human face -- forever."

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

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BISCarstensSpeech-05-25-2018.pdf147.84 KB