The Grand LBMA Exposé: A Collective-Mind Analysis

This writer will present the entire situation via a chronicle of all the news publications about the subject, providing dates sources and authors - where possible. Nearly all available information was researched from Internet sources. Most comments are verbatim from respective authors. Occasionally, this writer added comments of clarification and/or conclusions where the research leaves off.

Internet Commentary #36 -

Posted on the Internet October 9, 1997 by "ANOTHER"

"Gold is the only money the world has ever known" Sounds like a simple thought but it isn't.

"Money is whatever people say it is" Not true! "Currency is whatever a government says it is" True! "The LBMA problem" I can now make clear for all to see.

Background; to understand the following you must rethink your basic knowledge of money and investments. Get your aspirin ready. Some time ago gold not only was used as money but also circulated as currency. It had always been money and people had no use for a separate currency to represent "gold money" so they stamped the gold itself and used it as circulating currency. From the start, one thing most thinkers can't quite grasp is that "money does not have to circulate"! The first "world money", gold money that is, could stay locked up and still represent value and wealth. People had but to agree on who owned it in exchange for goods and services. You have all read the articles about how paper receipts for "gold money" were later circulated and became paper currency receipts, then paper currency, then just currency. The western world today, as we know it does not use money! They use "paper currency". To fully understand what that really means you must come to terms with this fact. "When you use paper currency you are placing a value using another persons concept of value" You are using a thought as a means of value! When an investment in stocks, bonds, bank accounts, CASH, businesses etc. is priced in US$ currency you are really holding the "intentions of providing value" locked away in the thoughts of another mind.

This type of human interaction works well for a time, as the last 100 years or so proves. But, it is highly unstable to say the least. It has it's own self-destruct code written inside each mind. One day (it has already started) a type of nuclear chain reaction will occur in the currency markets as people start "unvaluing" the thoughts of others. Little by little all debts owed will be marked down.

Now that we understand that concept let's move on: One of the great money troubles facing the western currency system today is that many third world people are starting to put a "mind value" on real money, gold. These people don't know the true value of gold money but they know it's worth a whole lot more than the world paper currency price now placed on it. And that brings us to the next problem; how can paper currency that represents "thoughts of a nation blowing in the wind" be used to value real money of ancient world class proportions, gold? It cannot! Any price you can think of will do, as in no price will work! How did we come to this unworkable mess? The best way to rework the publics mind about gold money was by changing the way it was viewed. "It's money of course but let's also call it a "commodity! Then we can place a "paper" value on it and denominate it in all forms of future contracts. It will lose it's true value as money in peoples minds and be priced in an unrealistic paper format." And here we are today! The banks must sell all the gold they have to keep the system together. And once it is all sold and the financial markets implode the nations will use "whatever force is necessary" to pull the gold back in! That action in and of itself would show the true value of gold money!

What of the LBMA mess?

Gold is cornered. Plain and simple. No complicated theories, no options problems. The commodity value of gold was forced so low in paper currency terms that all of the new mined gold, going out some 10 years is spoken for. Between the third world buying physical gold and the jewelry industry ( same people buying ) there is none left for the oil states! They do value oil in terms of gold, but not IN the paper currency price of gold! How much is gold worth in terms of oil value? Just stop supplying gold to them in ultra cheep US$ terms and you will find out by watching the currency price of oil! In any event, LBMA has traded so much paper/oil/gold that any rise in the currency price of gold will implode them. The CBs must become the full primary suppliers of gold or the system as we know it is done.

One last note: No form of paper wealth will survive the financial crush once the CBs stop selling! NOTHING!

Internet Commentary #37 -

Posted on the Internet October 12, 1997 by "JTF"

Spotted your post on T-Bonds. I also noted the drop in the dollar, and Donalds post about the foreign investors selling Treasuries. If I understand ANOTHER, the CB's could "sell" gold (I think the term is more accurately loan it) to an intermediary, who could buy dollars (or treasuries) thus pushing the dollar back up. I understand all but the last paragraph of your logic. The CB's response would be to loan the gold to keep the dollar up, as per ANOTHER.

If gold goes up, it is because the CB's have decided to let the dollar fall. I do agree with one point you made in your last paragraph --- "gold is not a credit instrument" The CB's have achieved the manipulation of the dollar without using the conventional methods of credit and interest manipulation. To me this is like a Corporation that has a secret set of books, one for the Auditors (i.e., the general public, or non-Fed members of our own government), and the "real" ones that hide many secrets. Doesn't it sound odd that Greenspan does not want full disclosure of derivative trading? Perhaps there are too many skeletons in the closet. Either way it makes life especially difficult for people like us, because after we think we know the rules, we find out there really aren't any, except possibly those of the LBMA, where private individuals, corporations, and central banks all trade in secret.

You ought to read Vronsky' post #6 on the LME and the Copper fiasco. If I remember correctly a single investor had cornered 1/10 of the copper market, and there was suspicion of some shady dealings at the LME that were "promptly stopped". Since the LBME and the LME are connected, apparently with similar structure -- the same dealings could be happening with gold. Perhaps some powerful intermediaries who were originally working with some Central Banks have struck out on their own, and are manipulating the price of gold -- up or down! ANOTHER did allude to this also! He did say that the process set up by the CB's had gotten out of hand, and so did Big Trader! The key question in all of this is - how much longer can the CB's maintain control of the price of gold -- or is it now in the hands of "others"?

Internet Commentary #38 -

Posted on the Internet October 12, 1997 by "ANOTHER"

Thoughts!

How DO they do it?

It's more complicated than this but here is a close explanation. In the beginning the CBs didn't sell their own gold. They (through third party) found someone else who had bullion. That "party" sold to a broker who sold forward for a mine or speculator or government). In the end the 3rd party had the backing from the broker that he had backing from the CB to supply physical if needed to put out a fire. The CB held a very private note from the broker as insurance and was paid a small fee. This process mobilized free standing bullion outside the government stockpiles. The world currency gold price was kept down as large existing physical stockpiles were replaced by notes of future delivery from the merchant banks (and anyone else who wanted to play).

This whole game was not lost on some very large buyers WHO WANTED GOLD BUT DIDN'T WANT IT'S MOVEMENT TO BE SEEN! Why not move a little closer to the action by offering cash directly to the broker/bank (to be lent out) in return for a future gold note that was indirectly backed by the CBs. That "paper gold" was just like gold in the bank. The CBs liked it because none had to move gold and it took BIG buying power off the market that would have gunned the price! It also worked well as a vehicle to cycle oil wealth for gold as a complete paper deal. Are you with me?

Well a funny thing happened right after the Gulf war ended. What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people (Middle-East) started to exchange their existing paper gold for the real stuff. From that time, early 1997 LBMA was running full speed just to stay in one spot! In other words paper volume had to increase to the physical volume on a worldwide scale, and that was going to be one hell of a jump. It could not be hidden from the news any longer. This was not far from the time that "Big Trader" said that "if gold drops below $370 the world would see trading volume like never before seen". The rest is history. Now the CBs will have to sell 1/3 to 1/2 of their gold just to cover what's out there. To use the Queens English "it ain't gonna happen dude"!

Everything is now upside down and reversed. The more the CBs sell outright the more the price will rise. It's not a bearish sign anymore. They will now sell to keep the price rising slowly.

What of those T-bonds and the US$?

Internet Commentary #39 -

Posted on the Internet October 12, 1997 by "JTF"

LBMA, gold, oil, US$, US Treasuries -

Another interesting post from ANOTHER. Will be digesting it. Looks like "when" may be sooner than I thought. We should all remember that the LBMA has been around for a long time, and therefore also the gold loan business. The gold associated derivative trading is new, and would only affect post 1987, I would guess. This new method of controlling gold/oil/US dollar/US treasury prices is what is critical to our understanding what is happening. Sure feels like we are slowly peeling layers of mystery away from the truth.

Internet Commentary #40 -

Posted on the Internet October 12, 1997 by "JTF"

My assessment is the following: The Central banks began the gold market manipulation by offering private gold to brokers. Since they could use their own real gold as "insurance", they did not need to sell their own gold. As the paper gold (the derivative gold?) became popular, all the trading of US$/oil/US treasuries became based on the paper gold method. Eventually "Big Trader" or some other individual stepped in and started pushing down the "paper" price of gold. Other traders, possibly those selling oil decided that they wanted to go back on the gold standard, and wanted real gold. Now however, the paper trading volume was so high that the Central Banks could not possibly maintain control of the markets, let alone supply enough real gold to cover all demands. If we are now talking about the CB selling of 1/3 to 1/2 of their gold, the public will find out, with catastrophic consequences, regardless of how "worthless" that gold they were told is. Looks like the choice between the proverbial rock and the hard place! Is there really any gold in Fort Knox?

Internet Commentary #41 -

Posted on the Internet October 15, 1997 by "Cmax"

@Food for thought

ANOTHER has made various comments as to the relation between oil and gold, due to the Arab's (well-founded) distrust of U.S. paper, and that they demand certain percentages of their payment in gold.

In light of Middle-East tensions, an interesting undercurrent has been developing during the last year and a half in regards to the U.S.'s energy allies: The U.S. NOW obtains the majority of it's oil from Venezuela. Venezuela does not desire gold for their oil purchases, and are extremely U.S. friendly. Venezuela has recently discovered oil reserves that now total more oil than Iran and Iraq combined. So persons looking for an oil or gold squeeze due to petroleum, should really factor this into the equation.

ANOTHER: A personal thanks for your posts; you have put (perception of) rationality back into a market that I have seen as a total contradiction, and cost me many lost nights of sleep. Please continue posting, and don't pay attention to the knuckleheads that are attracted by the anonymity of the Internet.

Internet Commentary #42 -

Posted on the Internet October 15, 1997 by "Zardoz"

Oil and Gold....a golden marriage -

Cmax and ANOTHER...your comments regarding the connection between gold and oil are intriguing. ANOTHER (re: Red Baron's reference to your comments on LBMA part 5) ...I would like you to share more of your insights on evidence connecting Mid-East oil and Mid-East payment for oil in terms of gold, as funneled through South Africa and through the LBMA in London (through the Rothschild house and others). I too note the curious situation in Alberta, Canada where billions have been committed to expanding the HUGE reserves of oilsands (reserves which rival the Saudi oil pool and exceed anything in Venezuela) by companies like Shell (Royal Dutch Shell being largely controlled by Rothschilds) and Imperial Oil (Exxon parent in the U.S. controlled mainly by Rockefellers) and others. I have estimated that at current production Alberta's oilsands would produce synthetic and bitumen crude oil for more than 3,000 years. This investment is curious since world oil prices are still in a stable trading band between $19-25 per barrel and oilsands production costs are somewhere between $9-12 per barrel (compared with Saudi oil costs of roughly $2 per barrel).

Question: why are these companies investing now in future oilsands (as in the case of Venezuela)? I asked noted international journalist Gwynne Dyer (noted Canadian war correspondent during the Gulf War and commentator on global oil production) this question last week in person. He suggested that the billions committed to Alberta's oilsands development is mainly for security reasons. Security? Could the big oil companies (the biggest controlled by the Rothschilds and Rockefellers) be concerned about security of supply in the Middle East? Quite likely given the inherent instability in Saudi Arabia with rising Islamic youth movement. Also, a comment Dyer made in a previous newspaper article is more important...that is, that global oil production may peak as early as 2005 and that is assuming constant consumption by China and India (demand is certain to rise) ....This would then suggest that if a production peak does emerge that there should be enormous pressure of the price of oil rise yet the future markets ( which are not that future oriented..maybe 6 months out) don't seem to pay any attention to such supply analysis (like ignoring the predictions of the Club of Rome) ....Point being that if ANOTHER is right, there may be a deliberate effort to keep the price of oil in a sustainable price range by placating the Arabs by making payments in gold (through CB gold sales) ....of course a rise in the price of oil would cause inflationary pressures in the U.S., Japan and Europe (ala the 1970s oil situation) which would effectively cause the Fed to raise interest rates and burst the stock market bubble.

One thing I know is certain..the Roths and Rocks long for stability...for in that situation they thrive and benefit...they ultimately seek peace and avoid chaos....thus we may be seeing a veiled attempt to create an illusion of stability despite the enormous pressures which would lead to instability.....El Nino and calamities of nature alone are reminders that instability is not always easily controlled through human or secular power.

Internet Commentary #43 -

Posted on the Internet October 15, 1997 by "Zardoz"

Oil and Gold -

ANOTHER...if you are out there, I would like to pursue your thought in Red Baron's post (LBMA - 5) re: gold and oil. I would like to understand how gold may be being used a medium of exchange for Middle East oil as I believe you implied. If as you suggest oil is really trading at $19US+XXX units of gold from CB liquidations and sale to the Arabs then this would suggest that oil prices are being artificially depressed. But why? Could it be that the Fed and other CB are afraid that rising oil prices would result in inflation and thus the need to raise interest rates and burst the euphoric stock bubble? And could it be that the Royal Dutch Shells and Exxons know of the coming global oil production peaking as early as 2005 (even without factoring in increased demand in China and India) thus suggesting a price push in oil prices (although future markets don't seem to suggest the threat of a production peak), thus causing inflation (ala 1973-74)?

If you or others have any insights into this connection between gold and oil, it would help many of us at Kitco at least attempt to cling to the coattails of the bigger fish.

Internet Commentary #44 -

Posted on the Internet October 15, 1997 by "JTF"

...gold sales for oil? -

Zardoz: re your last post about gold sales to hold the price of Oil down a la ANOTHER. Several days ago I did a back-of-the-envelope calculation of how much gold would have to be given annually to the oil producers if 1/3 of the oil price was subsidised by gold sales. I then determined whether annual reported CB sales could account for this. It was nowhere nearly enough! Either some Central Banks are lying about how much gold they are selling, or we have been misinformed. I suspect the truth is that only a few oil producing countries demand gold from their weaker customers, and not any of the G7. We now have another question for ANOTHER.

Zardoz -- why don't you check my calculations? I just determined the world production of oil in barrels, multiplied by the price of oil and divided by 1/3 (the cost to be purchased in gold) I then determined for the same year the total dollar value of all official Central Bank sales.

Internet Commentary #45 -

Posted on the Internet October 15, 1997 by "JTF"

@LBMA - How much gold sales for 1/3 world Oil prodcution?) -

First: Total oil production in dollars: 65 million barrels/day (1997) (65*10**6) * 265 * 22$/oz = $378 billion/year

1/3 of this is = 126 billion dollars worth of Oil to be purchased with gold each year.

Second: Total world gold production available from all sources in 1994: 86 million oz * 380/oz = $32 billion

Third: Total IMF Central bank gold holdings in 1995: 905 million oz * 380/oz = $340 billion

The entire IMF gold supply would be exhausted in three years if 1/3 of all the Oil sold in the world was bought with gold. Did I make a mistake in my math, or have all of the IMF countries sold their gold? Highly unlikely! I think we have "another" question for ANOTHER.

 

THE RED BARON

(October 20, 1997)

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(Part - 8 coming in a few days)