Mystery around BIS gold swaps impugns them as market rigging
Submitted by cpowell on Wed, 2010-07-07 15:30. Section: Daily Dispatches11:45a ET Wednesday, July 7, 2010
Dear Friend of GATA and Gold:
What can be made of this week's reports that the Bank for International Settlements has undertaken gold swaps with central banks, giving them dollars for their pawned gold?
A few things have to be considered.
First, the BIS apparently has been engaged in surreptitious manipulation of the gold market for a long time.
GATA has often publicized the acknowledgement made by BIS official William S. White in a speech to central bankers and friends at a BIS conference in Basel, Switzerland, in June 2005. Among the five objectives of central bank cooperation, White said, was "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." You can find White's speech here:
The profile of the BIS published in November 1983 by Harper's magazine and written by Edward J. Epstein, who seems to have had unprecedented access to bank officials, described the bank as frequently intervening in the gold market surreptitiously:
And of course the BIS was the lead defendant in GATA consultant Reg Howe's gold market manipulation lawsuit in U.S. District Court in Boston in 2000:
So the BIS' gold dealings cannot be assumed to be innocent.
Second, while news reports describe the BIS gold swaps as a means for central banks to "raise cash," central banks are able to create money out of nothing; they don't have to sell or lend anything to create money, or at least not to create their own money. They might have to sell or lend something to obtain the currency of some other nation. For example, other nations might have to sell or lend gold to obtain U.S. dollars.
But, third, the U.S. Federal Reserve lately has made all sorts of currency swap arrangements with other central banks so that they all can have plenty of dollars to use for market intervention. Other central banks have been able to obtain plenty of dollars just by creating more of their own currency and exchanging it with the Fed. In effect all the major Western central banks now are able to create dollars at will.
So why did any central bank have to lend or pawn its gold to get dollars?
Was there some agreement among central banks, or some insistence by the United States, that more gold had to be put into the market to defend currencies, government bonds, and low interest rates, to augment the quiet gold sales recently undertaken in London every month by the International Monetary Fund? The IMF too is supposedly selling gold to "raise cash," even as it is part of the central banking system that can "raise cash" just by creating it. Have the Western central banks more or less re-established the price-suppressing London Gold Pool of the 1960s, only this time surreptitiously?
Given the BIS' traditional interest in "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," the BIS-arranged gold swaps must be suspected as part of a scheme to manipulate the gold market.
In any case why is the mystery, the lack of official explanation, of these transactions accepted as the natural order of things?
Why has the news of these transactions been entirely a matter of one particular market analyst's deciphering a footnote in the back of a BIS report published a week ago?
Why did the BIS and the central banks involved in the transactions make no announcement?
Why aren't financial news organizations demanding candid answers from the BIS and its associated central banks about what's really going on here?
Why, instead, are financial news organizations relying on mere speculation from private market observers?
Of course there was no announcement or candid explanation from the BIS and the central banks because what they do is indeed most likely market manipulation and cannot bear scrutiny.
And there is no effective inquiry from financial news organizations, no going to the source, because they're lazy, ignorant, scared, or simply bought by the financial institutions they report about.
An example of such timid reporting, from today's Wall Street Journal, is appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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