The secrets of central banking

Do gold manipulation deniers really know the secrets of central banking?

Submitted by cpowell on Mon, 2012-11-26 22:49. Section: Daily Dispatches

5:56p ET Monday, November 26, 2012

Dear Friend of GATA and Gold:

A couple of common assertions that are frequently made to dismiss complaints of manipulation of the gold market have come up again in recent days and may deserve rebuttal.

First, interviewed in part about gold market manipulation last week by Max Keiser on Russia Today's "The Keiser Report," Charteris Treasury Portfolio Managers CEO Ian Williams remarked, "We've always worked on the theory that the market is bigger than any one particular player":

http://www.gata.org/node/11959

This claim that the market is bigger than anyone and always wins in the end may often be true. But exactly when is the end, and is there not a question of justice in the intervening time?

And is the market always bigger than any one particular player? Would such an assertion always be true even when one particular player has the power to create infinite amounts of the world's reserve currency? Would it always be true not only when one particular player has such power but also when players allied with it have the power to create infinite amounts of the currencies of their own countries?

Would such a claim always be true when, in addition to the money-creation powers of the reserve currency-issuing player and its allies, those players were also the dominant participants in a particular market, as central banks are the dominant participants in the gold market?

Might not the power of infinite money creation tend to create a force bigger than any market?

Second, in his latest gold market commentary, financial letter writer Clive Maund says: "The long-term chart for gold also makes clear that all the talk about it being manipulated and suppressed is arrant nonsense. With it having risen from about $250 at its low at the start of the bull market to its latest peak around $1,900 last year, it doesn't look like the manipulators have had much success, does it? The fact of the matter is this: If currencies get debased, and they are being debased at an ever-increasing rate, then gold, which is real money, is going to go up to compensate":

http://www.clivemaund.com/gmu.php?art_id=68&date=2012-11-25

And yet the enduring disparagement about gold is that, despite its steady rise over the last decade, it has not kept up even closely with standard measures of inflation and money creation. Gold's disparagers and deniers of market manipulation never seem to pose the obvious question. That is: Why has gold, almost alone among commodities, lagged behind?

Since central banks are the biggest participants in the gold market and since they impose greater secrecy on their gold trading than their governments impose on their nuclear weapons, and since, within living memory, central banks rigged the gold market in the open, having perceived their great interest in doing so --

http://en.wikipedia.org/wiki/London_Gold_Pool

-- might that interest continue today and might its pursuit be facilitated by secrecy? Might gold's price be substantially higher in a free and transparent market, in a world where the absolute power of central banking had at least to operate entirely in the open?

And if it is acknowledged, as it generally seems to be, that the world long has been operating with a fractional-reserve gold banking system -- that there are many more claims to gold than can be covered by actual metal -- might there be still another powerful interest to restrain the gold price, the interest of the big financial houses dealing in gold?

Might gold's ascent actually be a controlled retreat by the issuers of currencies that compete with gold?

In any case, those who maintain that there is no manipulation of the monetary metals markets should remember that they are, in effect, purporting to prove a negative. Maybe it can be done, but it is hard. And can it be done in this case without knowing exactly what central banks and their agents are doing in the markets? Have those who deny gold market manipulation ever tried asking a central bank about its market interventions? Are the deniers aware of the secrecy on which central banks insist, and has this secrecy ever prompted the deniers to get a little curious?

Having gotten quite curious -- curious enough even to bring lawsuits -- GATA has obtained over the years grudging admissions from the Federal Reserve, Bank of England, Bank for International Settlements, and German Bundesbank that they are secretly active in the gold market and that they will be damned if they let the world know exactly how and why they are active. If Williams, Maund, and others who contend that the gold market is completely free of surreptitious controls are so confident in their assertions because they have been made privvy to the great secrets of central banking, it would be awful nice of them to let us know.

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