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How to start a parallel currency of real money
quot;Cry Havoc! and let slip the dogs of war!quot;
-- William Shakespeare, quot;Julius Caesar,quot;
Act III, Scene I.
By Adam Hamilton
December 22, 2000
Almost four centuries ago, the English bard William
Shakespeare penned this magnificent line in his play
quot;The Tragedy of Julius Caesar.quot; By all accounts, the
drama was very popular, and had widespread critical and
common acclaim soon after the ink on the pages had
The venue for Act 3, Scene 1 of the play, where this
essay's title is ripped from, was Rome, on the steps of
the Capitol, with the Senate sitting in session inside.
Julius Caesar himself was prepared to enter the
Capitol, but a soothsayer and Artemidorus tried to warn
Caesar about entering.
Caesar ignored their warnings, and walked into the
Senate. Once inside, powerful conspirators gathered
around their king, pretending to plead a case. Without
warning, they all drew sharp knives hidden in their
tunics and brutally stabbed Caesar to death.
One of the conspirators, Mark Antony, fled, but Brutus
convinced the other conspirators to let him live.
Brutus explained the reasons for assassinating Caesar
to the rest of the Senate and the Roman people. Antony
returned later and pretended to be an ally of the
murderous conspirators, but he secretly planned to
strike back with the help of Octavius Caesar.
When Antony was alone with the corpse of the murdered
Caesar, he was overcome with guilt for his dirty deed
and launched into a fantastic soliloquy. Very roughly
paraphrased, Anthony expounds:
quot;Oh forgive me, you bleeding piece of earth, for
cooperating with these butchers. You are the noblest
man who ever lived in all of history. Over your wounds
now I predict the future. And Caesar's ghost, roaming
about in search of revenge, with hate at his side still
hot from hell, will in these boundaries with a ruler's
voice cry Havoc! and let slip the dogs of war, so that
this terrible action will smell above the earth, with
rotting corpses begging to be buried.quot;
Antony now realized that the conspiracy to kill Caesar
was a terrible mistake, and that Rome and greater Italy
would reap the whirlwind because of the action of a
small group of powerful conspirators.
Like the mighty Caesar in Shakespeare's awesome
tragedy, a small group of men has banded together in
our modern age to assassinate another great leader. But
this new leader is not a king of men but the undisputed
ancient Caesar of the financial world. This Caesar has
been lusted after for six millennia of human history,
and has always been the ultimate standard of wealth,
trade, and money. The neo-conspirators have drawn up
Machiavellian plans to assassinate the legendary king
of assets himself, gold.
Gold is a powerful and formidable foe. It is the
primary financial asset that has intrinsic worth in its
own right, the asset that does not represent the mere
good faith and credit of another party. Every other
non-commodity paper asset is only as good as the people
backing it, the folks promising to meet the contractual
obligations outlined on the inherently worthless fiat
In our wacky modern world, the financial markets have
been besieged by a blizzard of paper. Throughout
virtually all human history, paper promises to pay were
backed at least in part by gold. For the last half
dozen years paper assets have made some people
fantastically rich. The seductive allure of controlling
the paper assets is that more can always be created
with a stroke of the pen.
The paper fiat quot;assetsquot; can be expanded ad infinitum,
creating truly vast personal paper wealth for the
entities controlling the paper. But there is a catch to
this massive Ponzi scheme. The paper game works only as
long as the general populace in the nations besieged
with the paper BELIEVES and has FAITH in the paper
assets. The moment that faith begins to wane, the gig
is up and the false wealth that the paper once seemed
to represent rapidly falls to its true value, zero.
The goal of the paper game for the paper hangers is to
rapidly create paper and convert it into REAL assets,
including gold, land, buildings, companies, etc.,
before the public's faith in the new paper is lost.
American investors have received a very painful first
hand lesson this year in the Nasdaq of what happens
when paper assets are divorced from reality and
historic cashflow valuations are scoffed at. The bust
after a bubble is always wicked, and the pain sustained
from that inevitable quot;correctionquot; gravely outweighs any
pleasure derived from riding the original bubble up to
Fiat currencies and bank credit are fundamentally no
different from blue-sky Nasdaq high-fliers. As long as
people have faith in the ability of governments and
banks to maintain the value of their fiat currency and
credit, the illusory stellar valuations stand. But if
faith is shaken in the true value of the paper, all
hell can break loose.
Since the dawn of commerce, the ultimate barometer of
confidence in paper contracts and promises to pay has
been gold. When gold rises in price relative to paper
currencies, it is in effect casting an ironclad and
unappealable veto on the false value of the currency.
Like a fainting canary in a coal mine, when gold
signals that the true value of a currency is much
lower, people grow nervous and fear becoming trapped in
the noxious pocket of explosive methane gas and
stampede for the exit shafts to the salvation of the
Since the enormous growth of fiat currencies and credit
we witness today is without precedent, the paper
hangers are worried. They realize that they have gone
too far, created many orders of magnitude too much
worthless paper. They are in so deep that they have
formed a conspiracy to put a bullet through the golden
canary in the fiat coal mine. At all costs gold must
not be allowed to rise in price, because it would
create a crisis in confidence in the inherently
worthless paper and it would shatter the shaky houses
of cards built on nothing but hot air and promises.
Many gold insiders, analysts, and public and private
investors who follow the gold markets have sensed that
something was not kosher since the mid-'90s. Gold was
not trading the way it should in light of supply and
demand and geopolitical fundamentals. Tens of thousands
of hours of research were devoted to isolating the
problem with gold, illuminating the ancient yellow
metal from innumerable perspectives. Using the
principle of Occam's Razor, researchers investigated
and gradually sliced away all possible explanations for
the anomalous behavior of gold. Once the pile of slices
covered the floor and the razor was sheathed, the only
possibility left to explain gold's odd behavior was
that an unholy alliance of central banks and bullion
banks had colluded and decided that it was in their
mutual interest to suppress the price of gold.
The motives of the central banks and bullion banks were
different, but their strategic and tactical objectives
were exactly the same.
The central banks were largely saddled with the
problems of managing fiat currencies in socialist
welfare states. Since the Bretton Woods international
currency quot;gold standardquot; imploded in 1971, politicians
had no checks and balances on currency creation. They
soon found they could create enough fiat money so that
they could have BOTH guns and butter, and that ALL the
needs of their constituents could be met in the near-
term. Without the stern discipline of gold, the central
banks were forced to print ever-increasing amounts of
fiat currency, creating massive currency inflation.
But the central banks were paradoxically also called to
be guardians of the value of the very currency they
were rapidly printing for the socialist politicians.
The value of EVERY currency is ultimately measured only
by gold. When the outstanding currency increases at a
rate faster than the gold reserves of the nation that
quot;backsquot; it, the currency falls in value and becomes
worth less and less gold per currency unit. If gold
rose in price, the central banks and governments would
be forced to admit they had squandered the public trust
and had created far too much fiat currency,
eviscerating its value and wiping out the lifelong
savings of their hard-working citizens.
The central banks knew there was only one temporary
fix, and that was to attempt to place an artificial
price ceiling on gold. If gold was held under water by
non-free-market forces, no one would know how
aggressively national currencies had been inflated. The
central banks could not outright sell their respective
citizens' national treasures of gold, however, as that
would have caused popular outrage. The central banks
decided instead to quot;leasequot; gold. By leasing gold, they
were able to supply official gold into the free market
to artificially increase the supply, driving down the
With the convenient accounting fiction of leasing, the
central banks maintained the gold as an asset on their
publicly reported books, yet that very gold would
ultimately still be sold in the open market by the
bullion banks leasing it for the same end result. The
central banks had bought themselves a few years time
while they struggled to figure out how to solve the
mess in which irresponsible and reckless fiat currency
growth had landed them.
The clients for the central bank leasing campaign were
the large politically connected money-center bullion
banks. They salivated at the chance for cheap capital
to finance other speculation plans, and the central
banks provided that source of practically free capital.
The bullion banks had borrowed incredible amounts of
physical gold in the early 1990s, and immediately sold
the gold in the open market. The proceeds of the gold
sales were used to finance investments in other
markets, most notably U.S. equity markets. This
practice became known as the gold carry trade.
Since the lease rates on gold were so low, usually
under 2 percent a year, the gold carry trade was
fantastically lucrative for the bullion banks. They
salivated at the cheap capital, and borrowed and sold
more and more gold. Soon a problem arose. The banks had
borrowed so much gold that there was no way they could
go into the open market to buy back physical gold to
repay the central banks from which they had borrowed
the gold. The gold market was so thin, and the fresh-
mined gold supply was so small relative to the short
positions, that the banks faced colossal losses or even
bankruptcy if the gold price rose and they were forced
to cover their shorts at any price.
They had to do whatever they could to cap the price of
gold to protect their own hides.
As these nefarious plans to destroy the world gold
market slowly become known, the gold shorts have grown
more nervous. They have waged an effective war of
damage control, carefully crafting and spinning a yarn
that the gold conspiracy theory was nonsense and the
besieged gold investors discussing it were nuts.
On December 7, 2000, fittingly Pearl Harbor Day, this
propaganda illusion was shattered. The gold suppression
game was suddenly rent naked and exposed to the harsh
sunlight of international scrutiny. A shot was fired
across the bow of the bullion and central banks working
to suppress gold prices.
This shot was no trivial small arms fire, but a GPS-
guided terrain following W-80 thermonuclear warhead-
equipped Tomahawk cruise missile. The long-feared day
of reckoning had arrived.
Reginald Howe, a former trial lawyer with one of the
top law firms in Boston, a gold market analyst, and the
proprietor of the internationally acclaimed and
followed www.GoldenSextant.com Internet site, filed a
lawsuit in U.S. District Court in Boston. Like so many
other gold investors in the last half dozen years, Howe
had been financially damaged by the covert gold
suppression actions of the small group of conspirators
trying to assassinate gold in the mold of the Roman
conspiracy about which Shakespeare waxed so eloquent.
The defendants in Howe's lawsuit look like the who's
who list of international finance.
The Bank of International Settlements is the first
defendant. The BIS is based in Basle, Switzerland, and
is known as the quot;central banks' central bank.quot; Like
most banks in the world, the BIS is owned by its
shareholders. Most shares of the BIS are owned by other
central banks, but some shares were sold to private
citizens because of unique circumstances that existed
surrounding the creation of the BIS.
The BIS recently commissioned a study by J.P. Morgan amp;
Co. to determine the net asset value of its shares, and
Morgan determined each share of the BIS was worth
$19,099. In September the BIS sent a notice to its
private shareholders in the United States and Europe
saying that it was planning to force them to surrender
their shares to the BIS, and that they would be paid
16,000 Swiss francs per share (about $9,280 at the
Needless to say, the private shareholders are NOT happy
about receiving less than half of what their BIS shares
Even more provocatively, the BIS issued shares in 1999
to other banks for around $13,119 each, indicating that
the BIS is well aware that its shares are worth far
more than the unacceptable amount it wants to pay
private shareholders for confiscating their shares.
Unfortunately for the BIS, Howe is one of the American
shareholders whose shares the BIS wishes to seize
without proper compensation. The BIS picked the wrong
guy to defraud
The next two defendants are two American citizens who
are apparently illegally sitting on the Board of
Directors of the BIS without the required approval of
Congress, the president, or secretary of state. When
the BIS was formed amid the isolationist atmosphere of
the United States in 1929-1930, the secretary of state
expressly forbade the Federal Reserve from direct or
indirect participation in the BIS. These Americans who
are allegedly exceeding their constitutional and legal
authority are the chairman of the Board of Governors of
the Federal Reserve, Alan Greenspan, and the president
of the New York Federal Reserve Bank -- the same place
where gigantic amounts of foreign gold are stored --
Next, Howe's lawsuit names five bullion banks believed
to be heavily involved in the gold suppression scheme.
They are J.P. Morgan, Chase Manhattan, Citigroup,
Goldman Sachs, and Deutsche Bank. Each of these banks
(except Goldman Sachs, which is not a commercial bank)
is required by law to report its gold derivatives
positions to the U.S. comptroller of the currency.
Heavy involvement in the gold market for Morgan and
Chase is evidenced by the OCC reporting from these
banks. At the end of 1999 Morgan had capital of $12
billion but was reporting gold derivatives with a total
notional value of $38 billion! Chase's notional gold
derivative position ballooned massively in 2000, almost
doubling to $35 billion in the six months ending in
June. The heavy involvement of these banks in the gold
market is simply indisputable.
As of June 30, 2000, Morgan, Chase, and Citibank had a
combined notional value of gold derivatives that was
the equivalent of an unbelievable 8,146 tonnes of gold
at $280 per ounce, more than the official gold reserves
of the United States. As of Dec. 31, 1999, Deutsche
Bank had notional derivatives equal to roughly 5,000
tonnes of gold, 1,500 tonnes more than the official
reserves of Germany.
The magnitude of exposure to gold by these banks is
hard to put in proper perspective, as it is leviathan.
In all history an estimated 120,000 tonnes of gold have
been mined. About 32,000 of these tonnes are claimed by
central banks, though it is unclear how much of this
gold they have leased to the bullion banks, since the
leased gold is still reported as an asset by the
central banks. Annual freshly mined gold supply is
running approximately 2,500 tonnes a year, and global
demand is estimated to be around 4,000 tonnes per year.
That is, Morgan, Chase, Citibank, and Deutsche Bank
have a reported derivatives gold exposure equal to
least five years of the entire planet's gold
production. Why would four banks have this kind of
exposure to gold after a 20-year bear market while gold
investment demand is rising? Howe aims to find out.
Goldman Sachs is also named as a defendant for its deep
involvement in both over-the-counter gold derivatives
and heavy selling of physical gold on commodities
exchanges to cap any fledgling gold rally. Goldman also
designed and built the disastrous hedge book for Ghana
miner Ashanti Gold, which reduced the company to near-
bankruptcy after a major gold rally. Aren't gold
companies supposed to BENEFIT from rising gold prices?
Finally, Clinton administration Treasury Secretary
Larry Summers is named as a defendant. By virtue of his
office, Summers controls the secretive slush fund of
the United States, the Exchange Stabilization Fund. The
ESF is the vehicle through which elements of the U.S.
government are believed to be trading gold to
manipulate a free market, in violation of U.S. law and
principle. The ESF is only accountable to the
secretary of the treasury and the president.
This month James Turk, in a phenomenal essay aptly
entitled quot;The Smoking Gun,quot; outlined his research
showing that the ESF has been trading in gold, contrary
to denials by high U.S. government officials. This
essay is highly recommended and extremely important
reading, and is available at www.Gold-Eagle.com and
www.egroups.com/group/gata. Since the ESF is Summers'
responsibility, he is named in Howe's lawsuit.
Members of Congress have made many attempts to get a
statement from Summers on gold market intervention by
the ESF, but Summers himself has never spoken out about
the issue. When the Treasury Department receives a
request for clarification on ESF activities, a lower-
level bureaucrat always replies, but Summers is
conspicuously silent. If there is no illegal activity
by the ESF, why not make a public statement and clear
The list of the defendants is extraordinary, and there
is no doubt that these people and organizations know
what has really happened in the gold market since 1994.
Howe's lawsuit is not based on obscure technical laws,
but on the hulking aircraft carriers of the U.S. legal
world. These important laws include the Sherman Anti-
Trust Act, the Securities Exchange Act of 1934, the
Constitution, and common law about fraud.
After the American Civil War, the U.S. economy changed
from a primarily rural and agrarian economy to an
industrialized and urban one. Many large industrial
trusts formed soon after, and through interlocking
directorates, trust ownership, and personal
relationships, the owners of these trusts gained
immense power. Soon they had monopolies over many basic
commodity industries including oil and gas, sugar,
cotton, and whiskey.
Tto meet this grave threat to free markets, Congress
enacted the Sherman Act in 1890. It has often been
called the quot;Magna Carta of free enterprise,quot; as it made
restraints of trade and monopolistic acts illegal.
Section 1 of the Sherman Act forbids horizontal price
fixing, which occurs when competitors in the same line
of business agree to set the price of goods they
control. It is defined by the law as raising,
depressing, fixing, pegging, or stabilizing the price
of a commodity or service.
Ring any bells, gold investors? Although the burden of
proof is on the plaintiff, price fixing is a violation
of the Sherman Act. No defenses or justifications of
any kind can prevent this rule from applying.
Horizontal price fixing is ALWAYS illegal.
Howe's lawsuit alleges that all the defendants engaged
in illegal horizontal price fixing of gold in violation
of the Sherman Act. The lawsuit states that high public
officials participated in the horizontal price-fixing
scheme for six reasons, which are outlined in Paragraph
82 of the complaint. These include preventing the price
of gold from rising to signal a warning of U.S.
inflation, affecting the international standing of the
U.S. dollar, calling further attention to unprecedented
U.S. trade deficits, and causing political
embarrassment to the Clinton administration and its
claims of economic success.
The Securities Exchange Act of 1934 is also a pillar of
American law that covers most kinds of securities
fraud. Section 10(b) and Rule 10b-5 are important
components of the act. Section 10(b) prohibits the use
of manipulative and deceptive devices in contravention
of rules and regulations prescribed by the SEC. Rule
10b-5 was adopted to clarify Section 10(b). It states
that it is unlawful for any person to indirectly or
directly, by use of any means or instruments: to employ
any scheme to defraud, to make any untrue statement or
omit a material fact that misleads, or to engage in any
act that operates a fraud or deceit on any person in
connection with the purchase or sale of any security.
All transfers of securities, even if not publicly
traded (although the BIS privately held shares ARE
publicly traded), are subject to this rule. The U.S.
Supreme Court has held that only intentional conduct
violates rule 10b-5.
Howe's lawsuit alleges that the BIS, Greenspan,
McDonough, and J.P. Morgan amp; Co. have violated the
Securities Exchange Act of 1934 in regard to the
proposed freeze-out of private shareholders of the BIS.
The Constitution of the United States is the supreme
law of the land and needs no introduction. Howe alleges
that the BIS, Greenspan, McDonough, and Summers have
violated laws pertaining to the U.S. monetary system.
The lawsuit alleges that the Federal Reserve has
implemented monetary policy that violates the
Constitution and laws of the United States.
Finally, a charge of common law fraud and breach of
fiduciary duty applies to the BIS, Greenspan,
McDonough, and Morgan. The BIS, although it knew the
value of its shares, sought to defraud its private
shareholders by compensating them at a level far below
the true net asset value of their shares. This is
fraudulent and a breach of the fiduciary duty any
organization owes to its owners.
Howe is demanding a trial by jury for all these issues,
and the dirty laundry of the anti-gold forces will be
laid bare at trial for the whole world to see.
Overall, the lawsuit is fascinating and may prove to be
one of the most important financial documents in modern
U.S. history. I have read the lawsuit in its entirety
several times, and each time I learn more and my
understanding deepens of what has transpired in the
gold market in the last six years. The lawsuit is well-
written and really easy to read, and is not laden with
confusing legal jargon. I strongly recommend that every
investor in gold and lover of free markets take an hour
or two and read this historic document as soon as
possible. It is extraordinary!
In this once-in-a-lifetime chance to slay a dragon that
has irreparably damaged so many innocent mine workers,
nations, and gold investors, a tremendous amount of
help is needed. There are several ways YOU can help,
stand up and be counted, and fight with our champion,
Reginald Howe, in his quest for free markets and
liberation of the besieged gold market. It will be a
monumental and difficult battle, but free markets are a
cause worth fighting for.
First, Howe and his backers at the Gold Anti-Trust
Action Committee (GATA) need money to finance the legal
fight. The defendants have virtually unlimited finances
and can hire more lawyers than were used in the Florida
election recount. Even small contributions quickly add
up. If 25,000 people sent a mere $25 each to GATA, it
would provide $625,000 of ammunition for Howe's legal
Please visit www.gata.org/how_to_help.html for
information on how to make a contribution. Imagine how
much pride you will feel when your grandchildren are
bouncing on your knee and you tell them that YOU helped
finance the great gold war of 2001 that helped liberate
Second, if you own shares in gold mining companies,
turn up the heat on management to support GATA.
Remember that management works FOR you, the
shareholders. Management inevitably thinks it can do
its own thing and ignore the gold market situation, but
it is wrong. Hammer YOUR employees, the managers. Tell
them that you demand that they immediately investigate
GATA's claims thoroughly and support GATA. If they
refuse, demand that they return to you the detailed
reasons for their refusal in writing, signed, and sent
via registered mail for future legal reference.
Tell them that you, their bosses, will not tolerate
inaction while your share price dwindles into oblivion.
Let them know that there are legions of gold
shareholder lawsuits waiting in the wings when it
becomes more widely known that Howe was right and the
conspiracy really exists and the mining managers failed
If the public relations people provide unsatisfactory
answers, bypass them and get in touch with top
management, either by yourself or through your
attorney. Let the gold company managers know that the
company's OWNERS will give no quarter to those who are
too weak to make a stand.
A comment by Samuel Adams in 1776 is applicable to gold
mining company managers in this situation:
quot;If ye love wealth better than liberty, the tranquility
of servitude better than the animating contest of
freedom, go home from us in peace. We ask not your
counsels, nor your arms. Crouch down and lick the hands
which feed you. May your chains set lightly upon you,
and may posterity forget that you were our countrymen.quot;
As a gold investor, you have watched unrealized and
realized losses compound for far too long. Do not let
YOUR managers ignore the obvious. The time to put an
end to this abhorrent situation is here and now. Make
Finally, general knowledge of the lawsuit is very
important. Write to the news media and your elected
representatives, tell your professional colleagues, and
spread the word as far and wide as you can. Tell your
speculating and investing friends that there is a
king's feast to be had in the gold markets by running
the gold shorts. The ultimate profits will be of
Shakespeare would have given anything to experience the
Age of the Internet, and we can leverage the incredible
gifts of communication with which we have been blessed
to alert the world to what is transpiring in the gold
Few things cause more fear in the black hearts of
conspirators than that chance that their dark deeds
will be exposed in the bright and unforgiving sunlight
Dear friends of gold, our time is now. Gold is ready to
burst from its shackles, and we will help it along. It
is high time for the conspirators to reap the whirlwind
they have sown.
Cry Havoc! and let slip the dogs of war!