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Bill Murphy: The 'strong dollar' policy was gold price suppression
Address by Bill Murphy, Chairman
Gold Anti-Trust Action Committee Inc.
GATA Goes to Washington -- Anybody Seen Our Gold?
Hyatt Regency Crystal City Hotel, Arlington, Virginia
Friday, April 18, 2008
GATA has been working for nine years to expose the manipulation of the gold market by a very cunning Gold Cartel, but one who is now on the ropes. Nonetheless, over a short period of time, they can make life very miserable for our gold/silver camp, as they did a few weeks ago with their orchestrated raid on both markets. Yet, what is so stunning, is that after all these years, the gold and investment world still doesn't get it, or "won't go there." The fact is the now heralded President's Working Group on Financial Markets met on a Monday in March and then gold was bombed for more than $100 an ounce.
Days before this takedown Treasury Secretary Paulson said, "The United States will do what it takes to calm markets," he meant it. So we got deja vu all over again. In May 2006, according to a U.S. senator, the U.S. government ordered the price of gold down after it reached $730 per ounce. That rear-guard action, as with the one of a few weeks ago, only stalled gold's inevitable advance to much higher prices. However, this constant market interference has kept the price of gold to at least half of what it would have been without the price suppression scheme. There are numerous benchmarks to make that claim, including inflation adjusted measures, gold's historic price relationship with oil, platinum, etc.
What is so astonishing to me, after all these years, is that almost no one outside of the GATA camp will come to terms with this market manipulation or even discuss it publicly in a civilized manner. The press will not even acknowledge GATA exists, despite hosting two world class gold conferences in Durban, South Africa and the Yukon's Dawson City. There was not even one financial press inquiry about GATA's $264,00 full page color ad in the Wall Street Journal.
It seems the GATA blackball began nine years when I was interviewed on CNBC by Ron Insana, for the first and last time. As soon as they heard what I had to say in GATA's behalf, that was it -- not only for CNBC, but the WSJ, the Washington Post, NY Times, Barron's, Fortune and Forbes magazine, and the rest of the US financial market press.
Early on, my colleague Chris Powell stated that it appeared we are dealing with an issue that is more sensitive than revealing the secrets about making a nuclear bomb. Perhaps so. For sure, the US financial market media is loathe to give any press time to an ad hoc group taking on the richest and most powerful people in the world. They have made a mockery of the notion we have a free US financial market press. We do not. We have a bought press.
This stifling of the gold truth has also made this conference, at the doorstep of the Fed and Treasury, a useful and timely one. Is using the term "stifling" an exaggeration? I think not.
Five months ago GATA (via Dr. Edwin Vieira, a Washington law firm, and the Freedom of Information Act) requested the US Treasury and Fed explain the true status of US gold reserves. Supposedly the US has 8300+ tonnes of unencumbered bullion in our vaults. If that is the case, it should have taken the Fed and Treasury about 5 minutes to respond to GATA's request, not 5 months, as is now the case. The fact is the Fed is withholding 137 pages from GATA, after making other redactions, is all you need to know how right we are. 137 pages+ we are not allowed to see to explain US gold reserves are all there and not encumbered in any way?
The Treasury remains silent.
There is so much I could get into after 9 years, and so little time, so I thought what might be most valuable today is to deal with what all this means; not only for those of you here who have come from all over the world, but for so many others in my country. And most importantly, to point out how YOU can benefit from knowing what the GATA camp knows.
That certainly was the case for those who came to our GATA African Gold Summit on May 10, 2001 when the price of gold had slumped to the $256 per ounce area. Reg Howe, James Turk and Frank Veneroso explained, utilizing three different methodologies, how the central banks (orchestrated by the US) were going through their available reserves to suppress the price -- as demand for physical gold was FAR greater than mine and scrap supply, as is still the case today. We knew this surreptitious flooding of central bank gold into the market was unsustainable -- that the price of gold would have to rise sharply to ration future demand.
This is just what happened. Our African conference marked the bottom of the 20 year gold bear market.
Fast forward 5 1/2 years later to our Yukon conference -- with the price of gold at $436 per ounce. Our highlight film of that conference is available at our GR 21 website. If you have not seen it, I strongly suggest you do so. At that conference numerous speakers explained what The Gold Cartel was doing and why they were going down to a defeat. Several speakers, including myself, predicted the price of gold was going to $3,000 to $5,000 per ounce -- which is no big deal when you think of it in inflation adjusted terms.
One of the delegates was Andrey Bykov, a top economic advisor to President Putin, who told me it was the finest conference he ever attended. Two days later, a quiet gold market erupted, breaking the $6 Price-Capping Rule in the process. The price went up $300 per ounce in the ensuing nine months before the US ordered the takedown, just like they did a few weeks ago.
The price of gold nearly doubled from our first conference to our second and more than doubled since Dawson City. The amount of time for the doublings was cut in half. Will this pattern continue, meaning we get $1900 gold in the next year and ½? I think so. I surely wouldn't bet against it.
The reasons are simple and will be discussed at this conference. The most important one is that The Gold Cartel is running out of available central bank gold to meet surging demand for physical gold. It is the opinion of the GATA camp that the central banks only have half the gold they say they have in their vaults -- not the commonly bandied about 30,000 tonne number, but less than 15,000 tonnes. A vast portion of what is left isn't going anywhere, so The Gold Cartel's scheme is hitting the wall. This is the main reason the rate of ascent in the price of gold is accelerating. The central banks are running out of ammo. What they have available for sale, compared to growing demand, is a fraction of what it was when they started their price suppression scheme. Surely it is a reason The Gold Cartel is begging the IMF to dump some of its gold.
No matter what others might say about GATA's claims, NO ONE has a better track record over the years predicting what the price of gold would do and why, starting at the bottom of the market. We have never wavered. You would think others might be more curious to know how GATA could get this move so right and most of the gold analysts on Planet Wall Street got it so wrong all this time. Heck, you only have to go back to Barrick and AngloGold's hedging below $300 to know how wrong most of them have been. Funny thing is, they still don't get it. At present, most of the mainstream pundits/analysts are neutral to bearish at these price levels.
The bottom line for me is that anyone who doesn't understand, or deal with, the gold price suppression scheme, doesn't understand the key to the gold market. Therefore, it is impossible for them to do any kind of effective gold market analysis. AND, they don't realize how this perverted scheme has led to the growing financial market crises in the US.
Cutting to that chase, the gold price suppression scheme was the cornerstone of Secretary Treasury Robert Rubin's "strong dollar" policy.
What else was this policy all about, outside of rhetoric? No one over the years has been able to explain this policy to me. Having a policy means doing something and we know what that doing was, and is.
Reg and James can do this more justice, but there is a historic relationship between the price of gold and interest rates -- called Gibson's Paradox, acknowledged by no less a Gold Cartel figure than former US Treasury Secretary, Lawrence Summers. By suppressing the gold price, the US wanted to keep US interest rates lower than they normally would be, keep the dollar stronger, and enhance our stock market -- real estate too.
Simply put, had the price of gold been allowed to trade freely, like oil, the price would already be double what it is today. US interest rates would have been much higher in years past. Thus, the Fed would not have been able to take our Fed Funds rate down to where it was, and is. Therefore, to some degree, a free gold price would have curtailed a fair amount of the US mortgage/housing fiasco and prevented much of the Moral Hazard issues of the day.
This notion is very easy to comprehend. What is the talk from those who live on what I call Planet Wall Street when the price of gold is soaring? It is about INFLATION, CRISIS, or DOLLAR COLLAPSE. None of it is positive for US interest rates, our economy, or financial market for those in the Planet Wall Street crowd. The suppression of the gold price suppresses that line of media chatter.
That is the essence of what you need to know about "the why" of the price suppression scheme. In my opinion it was the lynchpin operation leading to the systemic financial market crises of the day.
We all know how one bad habit can lead to yet another. The recently highly touted Working Group on Financial Markets, the Counterparty Risk Management Group, Exchange Stabilization Fund, and The Gold Cartel went from active management of the gold price to an ever present role in manipulating the stock market, and upping the heralded Moral Hazard problem even further.
This propping up of the stock market kicked into high gear after 9/11. I suspect those doing the constant stock market rigging initially used the national security issue as justification for their interference in the free market process. The problem is this now constant interference is gradually leading to the destruction of our free markets.
As the US real estate bubble grew, Americans were led to believe real estate prices would go up forever: that they could refinance their mortgages to raise cash and go on a spending binge, thereby enjoying a much enhanced lifestyle -- leading to, in many cases, a temporary feel good illusion. Many of us in the Planet GATA camp have a pretty good idea where that illusion is taking us: an escalating disaster.
What most Americans don't realize is that the US stock market is a bit of an illusion too. It just doesn't trade like a free market. Every time the market is about to fall apart, it miraculously turns around. Planet GATA stock market watchers know all too well about the Plunge Protection Team's patented last hour Hail Mary play -- in which the DOW rallies hundreds of points for no apparent reason.
The point here is that these market managers have upped the Moral Hazard ante with their antics. They have taken away the "fear scenario" pertaining to our markets -- why worry, investors think, since "the market always comes back." Thus, the Orwellians in New York and Washington have lulled to sleep the average investor about the downside risk of the markets and potential capital loss. Just as gold is a key financial market barometer, so is the DOW. How many times have we heard the past months how well the DOW was acting despite horrendous economic news? The market managers in New York and Washington know the negative impact a reeling DOW would have on the sentiment and psyche of the average American. Thus, the PPT manages the DOW to manage "expectations."
So they prop the DOW up to foster the notion that everything is fine. For years I have compared this to a Stepfordville, or Matrix, way of thinking/operating. The problem is we are not talking about the movies here. It is our well being and status of our future existence.
It is a main reason we are having this conference in Washington -- to expose the manipulation of the gold market, managing of other financial markets, and also to focus on the distortion of US economic stats, which has led us further and further away from our true underlying economic reality.
This is not the first time GATA has come to Washington to expose the truth. It is ironic that GATA is seen as anti-establishment because we have gone the establishment route to make our findings known in Washington.
-- In addition to our Wall Street Journal ad, we have taken out full-page ads in Washington's Roll Call.
-- Met with U.S. Rep. James Saxton, vice chairman of the House Joint Economic Committee.
-- House Speaker Denny Hastert.
-- The vice-chairman of the sub-Committee on Domestic and International Monetary Policy, U.S. Rep. Spencer Bachus of Alabama.
-- Gone to Austin, Texas, the state capital to meet with two of President's Bush's boyhood friends from Midland, Texas. One, Tom Craddick, is the speaker of the Texas House. He sent a two-page executive summary of GATA's findings to President's Bush's private fax, the day after I met him. I received a postmarked letter that same day from the President's economic advisor at the time, Larry Lindsay.
-- The GATA Army has sent thousands of letters to various Congressman over the years. One prompted Kentucky Sen. Jim Bunning, the Hall of Fame baseball pitcher, to query Fed Chairman Greenspan to clarify legal counsel Virgil Mattingly's use of the term "gold swaps," which GATA found in prior Fed minutes.
Mattingly replied: "I have no knowledge of any 'gold swaps' by either the Federal Reserve or the ESF. I believe that my remarks, which were intended as a general description of the authority possessed by the secretary of the Treasury to utilize the ESF, were transcribed inaccurately or otherwise became garbled."
Fed minutes garbled? RIGHT!
So, here we are again -- back in Washington -- going the establishment route again and in the American way.
And this conference could not have come at a more opportune time. GATA has long pointed to Goldman Sachs and JP Morgan as The Gold Cartel's hit men -- with Goldman acting for the Treasury and Morgan for the Fed. To appreciate how incestuous these relationships are, we only need go the instantaneous JP Morgan/Fed bailout of Bear Stearns. It is universally accepted that this swift, precedent setting deal was arranged to prevent a systemic US financial market collapse.
But, by doing so, the aptly named Working Group on Financial Markets upped the Moral Hazard/Greenspan put ante once again. Out of nowhere the Bear Stearns shareholders were mostly wiped out -- in part due to the consequences of the market rigging, Market Hazard issue, perhaps a FIRST of many other unintended consequences of the US market manipulation. As our free market process is further interfered with, one day it might lead to 25 Bear Stearns, kicking in one after another -- perhaps due to a derivatives neutron bomb going off. Chaos could reign. The average American won't know what hit him, as life savings go down the drain.
More on that later in the conference.
We are also here to better understand how to profit from the mess the market managers created. In my opinion the best way to do that is to build a conviction the GATA camp knows what we are talking about. This is just what occurred after our other two conferences.
Fortunes have been made and there are more fortunes to come. The price of gold has gone up 3 to 4 times since our first conference. Silver went up around 5 times. If a number in our camp are correct, those prices will go up 3 to 5 times again from present levels. There is a great deal of money on the table here -- money that most on Planet Wall Street don't want you to know anything about. Because of them, the investing public is totally clueless about the gold/silver investment opportunities that have been, and are, clear as can be.
I hope you enjoy this conference as much as I have enjoyed the other two, and that this one will be just as meaningful for you. My GATA experience has been the most fulfilling of my life, as my GATA journey has been a Triple Ph.D. learning experience about the gold market, as well as to how our US financial system is really operating. This new found knowledge is very empowering and I am extremely grateful for this fascinating education.
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