A Gold Conspiracy ? Time to Stop Laughing

In the September 8, 1999 issue of our newsletter we interviewed Bill Murphy. Bill believed as do we, that Central Banks in conjunction with the U.S. Treasury have been intervening to keep the price of gold low. Those of you who may not be familiar with this story should read our interview with Bill Murphy, which is posted at www.miningstocks.com. After doing that, you should visit www.GATA.org and click on the button at the upper left hand corner labeled GDBC report. By so doing, you will be able to download a 119 page document titled, "Gold Derivative Banking Crisis". This document was circulated to the members of both the Senate and House banking committees as well as to the Speaker of the House of Representatives.

On Wednesday May 10th, GATA represented by Chris Powell, Reginald Howe, Frank Veneroso, a State Senator and Bill Murphy, met with the Speaker of the House of Representatives, Dennis Hastert for the purpose of GATA outlining their case for gold manipulation. The meeting with the Speaker was scheduled to last just 15 minutes. But sensing that GATA might have something very significant to contribute, Mr. Hastert prolonged the meeting for a full 45 minutes.

Next, GATA met with Alabama Congressman Bachus, who is a senior member of the House Banking Committee. Mr. Bachus left the floor of the house to attend this hastily arranged meeting and met for a full hour with GATA. He said he was aware of GATA's position and would look into its contentions. At the end of the meeting, which lasted one full hour, Mr. Bachus suggested that they might meet again in the future.

Following the meeting with Mr. Bachus, the GATA delegation met with Dr. John Silvia, Chief Economist of the Senate Banking Committee. Dr. Silvia had apparently studied the "Gold Derivative Banking Crisis" document very thoroughly before the meeting had begun.

On May 30, GATA received a call from the staff director of the Senate Subcommittee on Technology, Terrorism and Government Information, which falls under the Select Committee on Intelligence. They wanted to know all GATA could tell them about evidence concerning the gold market manipulation and all written documents sent to the Fed and Treasury and for all responses to GATA from the Fed and Treasury.

Why have these high powered politicians suddenly shown so much interest in GATA's views? Why has the Select Committee on Intelligence suddenly become interested in what GATA has to say?

Simply put, the Central Banks have lent a huge amount of gold to the gold bullion banks and based on GATA's numbers, it appears as though much of this gold cannot possibly be paid back for two reasons. First, the gold lent to the bullion banks has mostly been sold and is now somewhere in places like Indian and China in the form of jewelry, no longer owned by the bullion banks. Secondly, there is simply not enough gold produced annually in the mines to meet existing demands by consumers, not to mention the need to repay gold loans to central banks. In fact according to GATA , the short fall of gold production to meet current demands is something like 1,500 tons per year. The amount of gold out in gold loans is several times that amount.

When push comes to shove and these bullion banks are required to repay gold to the central banks, the need to cover these short positions could trigger a sudden explosion in the price of gold far in excess of the old highs of $850. It is this potential reality that no doubt has caught the attention of some of the major politicians in Washington and in fact makes this apparently irresponsible action of the Treasury department and various central banks the cause of a national security problem. So far, every time the gold price has begun to rise above longer term downtrends, Central banks have dishorded long held supplies of gold to suppress the gold price, just as Alan Greenspan promised Congress they would do in two separate speeches in 1998. But if the numbers derived by Veneroso and Howe are correct, that game may be very near its end because there may simply not be too much more gold left from which the central banks can draw down.

In its document to Congress, GATA warned Congressional members that "Too much gold is being consumed at too cheap a price. Massive amounts of derivatives are being used to suppress the gold price. If this situation is not corrected soon, there will be a gold derivative credit and default crisis of epic proportions that will threaten the solvency of the largest international banks and the world standing of the dollar". In other words, when the price of gold begins to rise, confidence in the dollar and world markets could be shattered.

While Alan Greenspan diddles with a 1/4% point interest rate hike here and a 1/2% interest rate hike there, in an attempt to keep our bloated monetary system from exploding, counter forces more powerful that the Fed Chairman, may be at work. In my recent interview with Congressman Ron Paul, he suggested that forces far more powerful that any Central Bank are at work. Congressman Paul said he believes the gold price may well be manipulated much as was in the late 1960's and early 1970's. Yet he has remained fairly laid back about this conspiracy issue because he believes in the end the markets will self correct. That could very well be true. However, from a political point of view, it is understandable why some other members of Congress may want very much to know about this potential problem before a surprise attack on the dollar torpedoes their re-election plans. They may wish to position blame for monetary and economic instability where it properly belongs, namely on an irresponsible and unsound monetary system that has been in place for many years and especially during the last 30 years. Some members of Congress may also wish to see this golden pin prick the bubble on President Clinton's time rather than during the next President's watch.

WHY IS THIS TOPIC NOT IN THE NEWS?

Bill Murphy at GATA has done everything within his power to bring his gold conspiracy theory to the attention of the public. But for the most part, the establishment media has shut him out. An interesting story involving the Dallas Morning News reporter helps explain why GATA has had such a tough time getting the establishment to listen to its story. When a reporter from the Dallas Morning news contacted a staff member for Congressman Bachus to confirm the meeting GATA had with various Congressional members, the significance of this meeting was downplayed as being nothing more than a simple courtesy call between Congressman Bachus and GATA. Yet, Congressman Bachus not only left the floor of the House to meet with GATA for a whole hour, but he also had six staff members present at that time. Some courtesy call! But the effect of this staff member downplaying the significance of the meeting was to cause the Dallas Morning Star to delay and nearly trash its coverage of GATA. Only persistence on Bill Murphy's part succeeded in finally getting the paper to do a story on GATA.

I believe it is time for the establishment press to stop laughing at GATA and its efforts to gain answers to some very serious questions that may have great financial if not national security implications. GATA has presented very significant evidence of foul play in the gold markets by central banks and gold bullion banks that could well trigger a catastrophic monetary and economic crisis.

If you are serious about all of this, again let me encourage you to visit www.GATA.org. Download and read "Gold Derivative Banking Crisis" which is the same very detailed and thorough information as that put into the hands of Dennis Hastert and other members of Congress.

The implications for investors is obvious. Retain only minimal exposure in general to the stock market. Be sure to hold a long position in the form of gold bullion and gold shares and also retain a major portion of your portfolio in high quality treasury instruments denominated in multiple currencies.

DON'T STORE GOLD IN BANKS!

One more thing you may want to consider. If banks find it difficult to cover their gold short positions, I think the words of Reginald Howe may provide good advice. I would recommend you read "Gold: Can't Bank with it; Can't Bank Without It"! This is available at www.goldensextant.com. Reginald concludes this article with the following comment: "An old saying, long forgotten, is about to take on new life: 'There is no rush like a gold rush, and no run like a bank run'. In these circumstances, the safest gold is not in bank storage of any variety. It rests in more imaginative places: the snake pit, the closet with the black widow spiders, or buried in the backyard near the Doberman's bones and well-within range of the leash."