Thank Heaven For Gold Manipulators

Courtesy of Antal E Fekete @ Professor Fekete.com and as ever, he has a point:

This rejoinder was prompted by the Daily Bell interview with Bill Murphy of GATA (March 30, 2014).

I shall accept, for the sake of argument, Murphy’s premise that the dollar price of gold is heavily manipulated by the U.S. government in order to keep it in check. But while Murphy thinks that it is a great curse I shall argue, tongue in cheek, that it is a blessing in disguise. The difference between Murphy’s thinking and mine is the difference in financial survival strategies in the face of the U.S. government’s deliberate policy of destroying the dollar and, along with it, the savings and pension rights of people, to say nothing about destroying the world economy.

Apparently Murphy believes that there is only one reasonable investment strategy in gold, namely, buy and hold in the hope of huge capital gains. However, this strategy turns people into sitting ducks for the manipulators. They engineer violent changes in the dollar price of gold. They squeeze holders. They make them buy high and sell low. In a sense, people fall victim to their own faulty understanding of gold. True understanding makes a distinction between the price and the value of gold. The latter is constant (to the extent there are constants in human affairs); the former is the reciprocal of the wobbly value of the irredeemable dollar. When the dollar is down and falling, the gold price is up and rising, and conversely. The mistake most gold bugs make is that they identify the value of gold with its price. No wonder they fall victim to the manipulators’ tactics and consequently get separated from their gold, sometimes with severe losses. No wonder they consider manipulation a curse, even a criminal activity, and try to use legal means to stop it. That’s what GATA is about. Needless to say, this effort is an exercise in futility. It makes manipulation more pervasive, not less. The manipulators are emboldened by the success of their own tactics. Gold bugs get frustrated. Continue reading

BONDS MAY BE DEFYING DIRE FORECASTS

BUT THEY ARE NOT DEFYING LOGIC

(Part One)
Antal E Fekete
New Austrian School of Economics

Courtesy of Professor Fekete.com:

The title of Sy Harding’s article (Gold Eagle, January 31) says it all: “Bonds Defy Dire Forecasts”. But as I have been saying for years, bonds have not been defying logic, Greenspan’s cliché “conundrum” notwithstanding. The behavior of the bond market has been consistent with Keynesianism. By his compassionate phrase “euthanasia of the rentier” Keynes meant the reduction of the rate of interest, to zero if need be, as part of the official monetary policy to deprive the coupon- clipping class of its “unearned” income. Perhaps it is not a waste of time to repeat my argument why, in following Keynes’ recipe, the Fed is acting contrary to purpose. While wanting to induce inflation, it induces deflation.

The main tenet of Keynesianism is that the government has the power to manipulate interest rates as it pleases, in order to keep unemployment in check. Keynes argued that the free market economy was unstable as it was open to the swings of irrational investor optimism or pessimism that would result in unpredictable and wild fluctuation of output, employment and prices. Wise politicians guided by brilliant economists − such as, first and foremost, himself − had to have the power “to prime the pump” (read: to pump up the money supply) as well as the power to “fine-tune” (read: to suppress) the rate of interest. They had to have these powers to induce the right amount of spending needed to put people to work, to entice entrepreneurs with ‘teaser interest rates’ to go ahead with projects they would otherwise hesitate to undertake. Above all, politicians had to have the power to unbalance the budget in order to be able to help themselves to unlimited funds to spend on public works, in case private enterprise still failed to come through with the money.

However, Keynes completely ignored the constraints of finance, including the elementary fact that ex nihilo nihil fit (nothing comes from nothing). In particular, he ignored the fact that there is obstruction to suppressing the rate of interest (namely, the rising of the bond price beyond all bounds) and, likewise, there is obstruction to suppressing the bond price (namely, the rising of the rate of interest beyond all bounds). Thus, then, while Keynes was hell-bent on impounding the “unearned” interest income of the “parasitic” rentiers with his left hand, he would inadvertently grant unprecedented capital gains to them in the form of exorbitant bond price with his right. Continue reading

THE MANIPULATORS WILL LOSE THEIR #GOLD WAR: GATA’S BILL MURPHY

Courtesy of Inteligencia Financier Global:

Bill Murphy
The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.

Thanks Bill for accepting this interview.

-Maybe most of people in the gold world know about you and GATA. Nevertheless, for those who don’t know: Who is Bill Murphy? Where do you come from a financial point of view and what did motivate you to found the Gold Anti- Trust Action Committee (GATA)?

Hello Memo.

Thanks so much for your interest in what GATA has to say. I have a Wall Street background and worked for Shearson Hayden Stone and Drexel Burnham Lambert in Manhattan in the late 1970’s and early 80’s. At one point I became a limit position trader in the copper market after forming my own company, so I am very versed in how the futures market works in the US. In 1998 I realized the Internet was going to be a big deal and opened up http://www.LeMetropoleCafe.com as a subscription website which would focus on the gold/silver markets, as well as provide coverage of the US and world economies. Soon after opening up for business, the famed hedge fund Long Term Capital Management blew up. They were known to be short hundreds of tonnes of gold and that would have to be covered. However, it was clear that bullion banks such as Goldman Sachs, JP Morgan, and Deutsche Bank were capping the price around $300 in a collusive manner. My future colleague Chris Powell had anti-trust experience via his newspaper business. He suggested we try and stop it, so GATA was formed.

-In our last interview, Hugo Salinas Price told us that only a blind or a Harvard economist with a doctorate would not see the gold market is being manipulated. Do you agree? As I understand it, one of the main purposes of GATA is to communicate this fact to as many people as possible, and end this manipulation, but, Bill, isn´t it a lost war? Aren’t the manipulators “too strong to be stopped”?

Yes, Hugo is right on the money. It could not be more obvious. So much so that James McShirley, a speaker at GATA’s London conference in 2011, has written in advance at times what the gold will do on a given day. From a bigger picture someone only need to appreciate what the price of gold did last year compared to the DOW on the same quantitative easing news. The DOW went up 3,000 points and the gold price went down $600. That would have made no sense to anyone ahead of time. Gold went lower as it did because “The Gold Cartel” forced the price down with massive raids in the derivatives paper market, often when few traders were around. Continue reading

The Vampire Squid Strikes Again: The Mega Banks’ Most Devious Scam Yet

Well who would of thought it, Goldman Sachs and JP Morgan involved in nefarious commodity deals, forcing prices up for the very people who bailed them out. So many expletives to choose from, courtesy of Matt Taibi @ Rollingstone:

Call it the loophole that destroyed the world. It’s 1999, the tail end of the Clinton years. While the rest of America obsesses over Monica Lewinsky, Columbine and Mark McGwire’s biceps, Congress is feverishly crafting what could yet prove to be one of the most transformative laws in the history of our economy – a law that would make possible a broader concentration of financial and industrial power than we’ve seen in more than a century.

But the crazy thing is, nobody at the time quite knew it. Most observers on the Hill thought the Financial Services Modernization Act of 1999 – also known as the Gramm-Leach-Bliley Act – was just the latest and boldest in a long line of deregulatory handouts to Wall Street that had begun in the Reagan years.

Wall Street had spent much of that era arguing that America’s banks needed to become bigger and badder, in order to compete globally with the German and Japanese-style financial giants, which were supposedly about to swallow up all the world’s banking business. So through legislative lackeys like red-faced Republican deregulatory enthusiast Phil Gramm, bank lobbyists were pushing a new law designed to wipe out 60-plus years of bedrock financial regulation. The key was repealing – or “modifying,” as bill proponents put it – the famed Glass-Steagall Act separating bankers and brokers, which had been passed in 1933 to prevent conflicts of interest within the finance sector that had led to the Great Depression. Now, commercial banks would be allowed to merge with investment banks and insurance companies, creating financial megafirms potentially far more powerful than had ever existed in America.

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All of this was big enough news in itself. But it would take half a generation – till now, basically – to understand the most explosive part of the bill, which additionally legalized new forms of monopoly, allowing banks to merge with heavy industry. A tiny provision in the bill also permitted commercial banks to delve into any activity that is “complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.”

Complementary to a financial activity. What the hell did that mean? Continue reading

The Big Reset, Part 2

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold [is] an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs; upon virtue of the victims. Watch for the day when it becomes marked; Account overdrawn.”

Rand, Atlas Shrugged ,1957

Part 2 of the Big Reset, courtesy of @Koosjansen & In Gold We Trust:

This is part two of a Q&A with Willem Middelkoop about his new book The Big Reset. In his book a chapter on the ‘War on Gold’ takes a prominent position. Willem has been writing about the manipulation of the gold price since 2002 based on information collected by GATA since the late 1990’s. So part two of our interview will focus on this topic.

The War On Gold

Why does the US fight gold?

The US wants its dollar system to prevail for as long as possible. It therefore has every interest in preventing a ‘rush out of dollars into gold’. By selling (paper) gold, bankers have been trying in the last few decades to keep the price of gold under control. This war on gold has been going on for almost one hundred years, but it gained traction in the 1960’s with the forming of the London Gold Pool. Just like the London Gold Pool failed in 1969, the current manipulation scheme of gold (and silver prices) cannot be maintained for much longer.

What is the essence of the war on gold?

The survival of our current financial system depends on people preferring fiat money over gold. After the dollar was taken of the gold standard in 1971, bankers have tried to demonetize gold. One of the arguments they use to deter investors from buying gold and silver is that these metals do not deliver a direct return such as interest or dividends. But interest and dividend are payments to compensate for counterparty risk – the risk that your counterparty is unable to live up to its obligations. Gold doesn’t carry that risk. The war on gold is, in essence, an endeavor to support the dollar. But this is certainly not the only reason. According to a number of studies, the level of the gold price and the general public’s expectations of inflation are highly correlated. Central bankers work hard to influence inflation expectations. A 1988 study by Summers and Barsky confirmed that the price of gold and interest rates are highly correlated, as well with a lower gold price leading to lower interest rates.

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Continue reading

“Demand Physical Gold” As One Day Paper Price Manipulation Will End “Catastrophically”

That is right folks, all the research from over 10 years of GATA, the ravings of the tinfoil hat wearing alternative media and the FACT that the price of gold in fiat currency is FIXED twice a day, there is something wrong with the gold market. Courtesy of the FT’s Neil Collins: “Learn from Buba and demand delivery for true price of gold: One day the ties that bind the actual and the traded commodity will snap:

A year ago the Bundesbank announced that it intended to repatriate 700 tons of Germany’s gold from Paris and New York. Although a couple of jumbo jets could have managed the transatlantic removal, it made security sense to ship the load in smaller consignments. Just how small, and over how long, has only just become apparent.

Last month Jens Weidmann, Bundesbank president, admitted that just 37 tons had arrived in Frankfurt. The original timescale, to complete the transfer by 2020, was leisurely enough, but at this rate it would take 20 years for a simple operation. Well, perhaps not so simple. While he awaits delivery, Herr Weidmann is welcome to come and look through the bars in the Federal Reserve’s vaults, but the question is: whose bars are they?

In the “armchair farmer” fraud you are told: “Look, this is your pig, in the sty.” It works until everyone wants physical delivery of their pig, which is why Buba’s move last year caused such a stir. After all nobody knows whether there are really 260m ounces of gold in Fort Knox, because the US government won’t let auditors inside.

The delivery problem for the Fed is a different breed of pig. The gold market is far more than exchanging paper money for precious metal. Indeed the metal seems something of a sideshow. In June last year the average volume of gold cleared in London hit 29m ounces per day. The world’s mines are producing 90m ounces per year. The traded volume was many times the cleared volume. Continue reading

Chase Isn’t the Only Bank in Trouble

Courtesy of Matt Taibi at Rolling Stone:

I’ve been away for weeks now on a non-financial assignment (we have something unusual coming out in Rolling Stone in a few weeks) so I’ve fallen behind on some crazy developments on Wall Street. There are multiple scandals blowing up right now, including a whole set of ominous legal cases that could result in punishments so extreme that they might significantly alter the long-term future of the financial services sector.

As one friend of mine put it, “Whatever those morons put aside for settlements, they’d better double it.”

Firstly, there’s a huge mess involving possible manipulation of the world currency markets. This scandal is already drawing comparisons to the last biggest-financial-scandal-in-history (the Financial Times wondered about a “repeat Libor scandal”), the manipulation of interest rates via the gaming of the London Interbank Offered Rate, or Libor. The foreign exchange or FX market is the largest financial market in the world, with a daily trading volume of nearly $5 trillion. Continue reading