GATA's work to expose the gold price suppression scheme

In 1998, as he began www.LeMetropoleCafe.com , his Internet site of financial commentary, Bill Murphy noticed that the gold market wasn't trading as normal markets do. Eventually he sensed collusion among market participants to suppress the gold price and wrote about it repeatedly.

Following Murphy's commentary with great interest, a newspaper editor in Connecticut, Chris Powell, noted that collusion to control prices is against U.S. anti-trust law and suggested that gold partisans and gold market participants mobilize against it, and so GATA was formed and incorporated in early 1999. Murphy is chairman, and Powell is secretary/treasurer. GATA is recognized by the U.S. Internal Revenue Service as a tax-exempt charitable, educational, and civil rights organization. It has received contributions from mining industry sources as well as hundreds of individuals with an investment or philosophical interest in gold.

GATA has advocated litigation against collusion to suppress the gold price, and, indeed, has helped bring such litigation in U.S. District Court in Boston, with its consultant Reginald H. Howe. But GATA has discovered that the gold-price suppression scheme involves not only big bullion trading banks but also governments and particularly the U.S. government.

Indeed, GATA has discovered that the gold-price suppression scheme was actually put down on paper, in public, by Harvard Professor Lawrence Summers, just before he went into the Clinton Treasury Department, eventually becoming treasury secretary. (He's now president of Harvard.)

Summers co-wrote an essay for an academic journal examining the inverse relationship between the gold price and interest rates, and more or less concluded that government could keep interest rates low by suppressing the gold price. While there is no electronic copy of Summers' essay, you can read about it here:

http://groups.yahoo.com/group/gata/message/850

The mechanisms by which the gold price is being suppressed are, first, "leasing" of gold by central banks, wherein government gold reserves are sold into the market through intermediaries; and, second, the sale of gold futures, options, and other derivatives by bullion banks that, GATA believes, have assurance from governments that, if they ever have to produce actual gold to cover their positions, it will be made available to them cheaply from official sources.

Gold leasing is a matter of public record among the European central banks and some others. The United States, which reports the biggest gold reserves in the world, has always denied participating in gold leasing. But GATA have information that comes close to proving such involvement, undertaken through the secretive and unaccountable Exchange Stabilization Fund of the Treasury Department. Surreptitiously issuing claims against U.S. gold reserves, the ESF and the Federal Reserve Board have put those reserves at risk and their true ownership is now in question.

One big piece of evidence of the surreptitious use of U.S. gold reserves to suppress the gold price is a statement by the Federal Reserve's general counsel, Virgil Mattingly, recorded in the minutes of the Federal Open Market Committee meeting of January 31, 1995, which you can read about here:

http://groups.yahoo.com/group/gata/message/733

Evidence of an auditing sort can be found in some essays by GATA James Turk, editor of the Freemarket Gold and Money Report, which you can read here:

http://groups.yahoo.com/group/gata/message/837

http://groups.yahoo.com/group/gata/message/955

For a broad perspective on the legal implications of all this, you can read the full complaint in the GATA-supported lawsuit, Howe vs. Bank for International Settlements, et al., here:

http://www.goldensextant.com/BIS-PFcase.html#anchor35871

The lawsuit notes that the market in gold derivatives is tightly concentrated and overwhelmingly dominated by the J.P. Morgan/Chase investment bank. Of course the House of Morgan has a long and intimate relationship with the U.S. government. This concentration in the market for gold derivatives is in itself, GATA thinks, close to proof that the gold market is manipulated and not trading freely. This view is increasingly held by gold market observers.

A report on the one hearing held so far in the GATA lawsuit can be read here:

http://groups.yahoo.com/group/gata/message/912

What are the purposes of the gold price suppression scheme?

We believe there are several:

1) To keep interest rates down by deceiving the bond markets about the rate of inflation, inflation historically being gauged in large part by the price of gold. You may remember the famous comments about the bond market that were attributed to President Clinton not long after he took office. He was frustrated with having to take the advice of his economic advisers that the approval of the bond market was crucial to his administration's political success. Clinton said he resented having to make his administration one of "Eisenhower Republicans." GATA thinks that the gold price suppression scheme -- the massive deception of the bond market -- was Clinton's revenge.

2) To strengthen the U.S. dollar in relation to other curencies; to suppress commodity prices generally, since commodity prices take their cues from the gold price; and, by extension, to raise living standards in the United States by expropriating the developing world, which makes its living largely from producing commodities.

3) To enrich through inside information about U.S. government policy the Wall Street investment houses that have helped implement the gold price suppression scheme and that long have staffed the Treasury Department and Federal Reserve.

But the results of the gold price suppression scheme have been far greater than all this. The results include the devastation of the economies of the developing world, and particularly sub-Sarahan Africa, and the vast misallocation of capital throughout the world in the last decade. That is, with the bond market deceived about inflation, the dollar, and the strength of the U.S. economy, most economic decisions around the world for the last decade have been based on horribly mistaken premises. The U.S. stock market bubble, now bursting, is evidence of this.

There's a lot more detail to be had here, but this is a start. All GATA's dispatches to its supporters, wherein GATA's evidence and commentary are laid out, are available here:

http://groups.yahoo.com/group/gata/messages

GATA believes that the most important work to be done now is to compel the U.S. government to admit and explain its intervention in the gold market -- its secret underwriting of the gold leasing done by central banks around the world and its putting U.S. gold reserves at risk. This is, after all, PUBLIC policy undertaken with PUBLIC resources, and there can be no justification for surreptitious government intervention in a supposedly capitalist economy in a democracy. Everyone should have equal access to information about such policy.

GATA believes that the gold price suppression policy will end when it is exposed, because it can't stand the light of day and because no investors will take the other side of any trade they come to realize is fixed.

Please contact us for more information.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
7 Villa Louisa Road
Manchester, CT 06043-7541 -- USA

E-mail: [email protected]