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What if nobody cares about market rigging? Do you?

Section: Daily Dispatches

4:21p ET Tuesday, January 1, 2019

Dear Friend of GATA and Gold:

When GATA got started in January 1999 we figured that the rigging we saw in the gold and silver markets was the work of the big investment banks that heavily traded the monetary metals on the futures exchanges. Our idea was to gather evidence of their collusion and then sue them for triple damages under the Sherman Act, the Clayton Act, and the anti-trust laws of the 50 states.

Before long we realized that the U.S. government and allied governments were heavily involved in this rigging, just they had rigged the gold market in the era of the gold standard and the London Gold Pool of the 1960s, and that these governments likely were using the investment banks as brokers for manipulative interventions. So then we aimed to sue these governments as well and we hired a major anti-trust law firm to research the prospect.

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The advice from our lawyers was not encouraging. If the U.S. government was the main instigator of the market rigging, the lawyers said, it probably was legal under the Gold Reserve Act of 1934, which created the U.S. Treasury Department's Exchange Stabilization Fund and authorized it to trade not just gold but anything deemed by the treasury secretary to bear on the stability of the dollar. The act authorized the fund to do such trading in secret, making it reportable only to the president.

Nevertheless, in 2000 our consultant Reginald Howe, a lawyer with a degree from Harvard, thought he saw an opportunity to get the gold manipulation issue into court. Howe happened to own shares of the Bank for International Settlements, which was moving to expropriate those of its shares that were not already owned by governments. Howe knew that the BIS owned a lot of gold and figured that, because of the gold price suppression policy of Western governments, the price being offered by the bank to acquire the privately held shares grossly undervalued them.

Howe also figured that the Gold Reserve Act's authorization for the U.S. government to trade in gold was not necessarily also authorization for the government to manipulate markets in violation of anti-trust principles.

So with GATA's endorsement and support, Howe sued the BIS, the Treasury Department, the Federal Reserve, and five big investment banks in U.S. District Court in Boston, accusing them of rigging the gold market and thereby devaluing his shares of the BIS:

A single hearing was held in the case -- on November 5, 2001. Your secretary/treasurer attended and reported about it in detail, finding the hearing most notable for eliciting an assertion from an assistant U.S. attorney that the U.S. government claims authority, under the Gold Reserve Act, to trade gold in a way affecting its price -- that is, claims the power to rig the gold market:

Of course this was just what our anti-trust law firm had cautioned us about.

The judge evaded the Howe lawsuit's big issues and dismissed the case on a jurisdictional technicality. (An international arbitration later concluded that Howe was right, that the BIS was paying too little for the shares it was recalling.) But no one in authority had denied the main accusation of Howe's lawsuit, and, indeed, to the contrary, the lawsuit had compelled the U.S. government to claim, in public, the power and right to rig the gold market.

That was a huge accomplishment. But it required GATA to change tactics from trying to get anti-trust law enforced in court to simple exposure of what the U.S. government and its allies were doing.

As a result GATA began researching the longstanding and continuing policy of gold-market rigging by governments, compiling confirmations from government archives and similar sources and admissions by central bankers themselves, which now are summarized here --

-- and detailed here:

Fittingly, the BIS continues to supply a monthly statement of account that, when compared to the previous month's statement, discloses the bank's constant if largely surreptitious intervention in the gold market on behalf of its member central banks, an inadvertently helpful monthly contribution to GATA's documentation file.

Once GATA amassed so much documentation, we thought that surely mainstream financial news organizations would have to address it. Strangely, it seemed, they were not eager to do so -- maybe because they did not understand how gold is a determinant of currency values, interest rates, and government bond prices. So in January 2008 we published a full-page, full-color advertisement in The Wall Street Journal, having gathered $264,000 to pay for it:

The ad had been your secretary/treasurer's idea -- and it proved to be a disaster. The ad may have been noticed -- at least it has been viewed more than 372,000 times at GATA's internet site -- but it drew no response at all, not even from the Journal itself, not even an invitation to the newspaper's ad department Christmas party that year.

Of course we should have known better. That $264,000 was but a tiny fraction of what JPMorganChase and the other gold-trading investment banks representing the U.S. government spend on advertising every year in the Journal and other mainstream financial news organizations. Then there is the government's own opposition to raising the gold issue. Some mainstream news organizations will challenge the government on smaller matters, but gold-market rigging -- the primary mechanism of rigging the currency and bond markets -- seems to be considered the most sensitive issue of national security.

Now and then GATA does get attention from mainstream news organizations, and we seem to have been largely responsible for alerting certain governments to the gold suppression scheme, particularly Russia's and China's --

-- which for years have been acquiring gold in large amounts, apparently in anticipation of big changes in the world financial system:

Other market participants may be acting quietly on GATA's findings.

But lately we can't entirely dismiss a disturbing thought: What if we got our wish and the major mainstream financial news organizations, from the Financial Times to Bloomberg News to The Economist, acknowledged prominently that central banks constantly intervene in the gold market to control the monetary metal's price and protect their own currencies and bonds, primarily through derivatives trading, thereby effectively rigging all markets ... and nobody cared, because everybody had been corrupted by the rigging?

What if free and transparent markets, limited and accountable government, and fair dealing among peoples and nations are just cliches from a bygone era?

Anyone can understand the demoralization of the monetary metals industry in recent years. But that demoralization would be unimportant compared to demoralization about free and transparent markets and limited and accountable government, values that are the prerequisites of human progress. No mere lawsuits and courts can preserve those values; they will survive only if they live in the hearts of enough people.

If those values do live there, exposure will work eventually, and GATA believes it is on the verge of compelling government to make its most incriminating admissions yet -- or its most incriminating refusals to answer.

We mean to press on nevertheless, but we can't do it well without financial support. So if you have not yet helped us, please consider doing it now:

Even a $5 contribution will be more than GATA has received from Newmont Mining or Barrick Gold, companies that do nothing to fend off the great enemies of their investors. GATA will always do what it can, which has been and will remain far more than it ever was thought able to do.

We see dimly in the present what is small and what is great,
Slow of faith how weak an arm may turn the iron helm of fate.

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

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