Whether it's up or down, central banks are manipulating markets in secret
Submitted by cpowell on Thu, 2012-08-09 04:52. Section: Daily Dispatches
1:10a ET Thursday, August 9, 2012
Dear Friend of GATA and Gold:
Izabella Kaminska, the brilliant financial writer and researcher at FT Alphaville, has gone from suggesting, last September, that central banks were suppressing the price of gold by stuffing leased metal into the market --
-- to suggesting, this month and last, that central banks now may be supporting the gold price as a mechanism of currency devaluation or at least reflation:
It's not such a wild idea. GATA people and other students of the gold market whose work GATA has brought to your attention, like the Scottish economist Peter Millar --
-- and geopolitical analyst James G. Rickards --
-- have speculated on the necessity of an upward revaluation of gold to avoid either a deflationary collapse of Western economies or a hyperinflationary collapse of Western currencies.
The financial newsletter writer Stewart Thompson has asserted the same thing for at least three years and recently has claimed that central banks have already gotten behind an upward move in the gold price --
-- though such a policy has been hard to find in the gold price chart over the last year and a half.
Central bank or government intervention to raise the gold price is as much a matter of history as central bank or government intervention to suppress the gold price is. Kaminska's most recent commentary, cited above, notes the U.S. government's confiscation of gold coin in 1933 at the official price of $20.67 per ounce and gold's revaluation six months later to $35 per ounce, a 69 percent devaluation of the dollar. The gold price was held at $35 per ounce for 35 years, the last eight of them through the frankly suppressive and market-defeating mechanism of the London Gold Pool:
Of course central banks don't confide their gold policies to anyone except the investment banks that happily implement those policies as masking agents, gaining the ability to profit through insider trading, and GATA has had to sue the Federal Reserve a couple of times to try to discern its gold policy --
-- just as we recently brought freedom-of-information actions against not only the Fed but also the U.S. Treasury and State departments:
But there's a problem with Kaminska's musing that only central banks are propping up the gold price these days. Yes, some central banks, mostly Eastern ones, are buying gold, but there is no indication of gold buying by any major Western central bank. Indeed, to the contrary, there is a long history over the last couple of decades of Western central bank gold sales, leases, and swaps that can be interpreted only as mechanisms for underwriting the "paper gold" market -- that is, to use the euphemism for gold price suppression, for providing "liquidity" to the gold market. To support its price, Western central banks would not have to come close to buying gold. They could just stop supplying "liquidity" to the "paper gold" market.
Now maybe Western central banks are slowly withdrawing support from the "paper gold" market, but it sure didn't look that way when someone sold immense amounts of "paper gold" simultaneous with the devaluation of the Swiss franc last September, apparently meaning to prevent the metal from ascending to the role of ultimate "safe haven" currency.
That is, the decades of Western central bank gold price suppression, right up to the attack on gold amid the Swiss franc's devaluation last September, are almost certainly still exerting a far more suppressive effect on the gold price than any supposed recent support being lent to gold by Western central banks.
But regardless of whether Western central banks have turned to supporting the gold price to devalue currencies and reduce the burden of unpayable government and private-sector debt, those who believe that those central banks are suppressing the gold price and those who believe that central banks are supporting it should be able to agree that central banks are manipulating the gold market largely surreptitiously, which has been the essence of GATA's complaint since the organization's founding in 1999. It is simply taken for granted -- not just by most gold market analysts but even by the supposed journalists in the mainstream financial news media -- that central bank policy formulation and even central bank policy itself are not to be questioned directly.
How absurd and tragic that these supposed journalists, when compelled, usually resentfully, to report about gold, seek interviews with investment house analysts and newsletter writers but never, ever with the primary sources, central banks themselves. That the central banks wouldn't say anything -- that they have to be sued for such basic information -- is no excuse, for such unaccountability itself then becomes the story.
Of course it's not just journalism that is at fault; it is also entire political systems. Elected agencies of government may decide every trivial question but the valuation of all currency, capital, labor, goods, and services in the world is left to be determined in secret by a few dozen people, as if this is the natural order of things.
It is not. It is the destruction of democracy.
Powerful as central banks are, the basis of their power is only this refusal to question, to undertake the most ordinary journalism. The only thing that sustains them is the failure of journalism -- the failure of The Wall Street Journal, the Financial Times, The New York Times, the London Telegraph, the Associated Press, Reuters, Bloomberg News, and so forth -- to demand of them:
Exactly what are you doing in the markets, and why?
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
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