GATA Presents New Evidence Of The Fed's Gold Price Supression Scheme, Combing Through Oddly Unredacted FOMC Minutes

Tyler Durden's picture

GATA's Adrian Douglas has done a tremendous job of combing through dozens of hundred-plus page FOMC transcripts, and has compiled numerous quotes by assorted FOMC-related personnel, including former Chairman Greenspan, which provides yet another piece of evidence, demonstrating the persistence of the Fed's gold price suppression scheme. As Douglas puts it: "My thinking was that if an organization is so inept at covering up that
detailed transcripts were retained, then perhaps it is also inept at
completely redacting sensitive and incriminating information. What I
found is quite astounding and serves as documented evidence by the
Federal Reserve itself that it manipulates the gold market." We present the relevant quotes dug up by Douglas, whom we applaud for his effort, together with his very relevant commentary, which once again exposes the Fed's covert gold price suppression intentions.

In the March 21, 1978, FOMC meeting --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19780321meeting.p...

-- the following exchange took place.

* * *

CHAIRMAN MILLER. The Treasury has severe reservations about it.
Originally, two weeks ago, they were taking the position that they
would not be in favor of it -- that it raised too many problems for
them. Since then I think they have become a little more open-minded
about it. However, I think the first avenue is apt to be the sale of
gold. Sales of gold were under consideration and were deferred partly
because of the French elections, which are now over. So I think it's
likely that the Treasury will start a program of selling gold, which I
personally would favor. There are a lot of advantages in using gold
because at least then we don't end up with debt and the currency risks
that go with it. So I think that's an avenue that should be pursued.
There has been a discussion about the level of gold sales that are
possible -- what the market can absorb and that sort of thing. Henry
can correct me, but I believe the Treasury feels that they could sell
about 300,000 ounces a month.

MR. WALLICH. That would be a very moderate amount -- something like
less than 60 million. And bear in mind that unless they can develop a
means of selling the gold for foreign currency in a way that doesn't
cause holders of dollars to buy that foreign currency in order to buy
the gold, it could be completely counterproductive. Then there isn't
going to be much of a net effect. There is some because, after all, we
are importers of gold, which may reduce the imports of gold and may
make the trade balance look a little better. There is some portfolio
shift when there is gold in portfolios instead of dollars, so I
wouldn't say it's without effect, but there are lots of qualifications
on the possible success.

CHAIRMAN MILLER. The nice thing about this problem is that it's
surrounded by dilemmas! Everything you do has an adverse effect on
something else. Nothing is ideal. I might add that we live in a
situation where the market is very realistic, very factual. That's why
the possibility that gold would be sold caused the gold price to drop
by $5. You don't have to sell gold; you just have to breathe [that you
may] one day.

* * *

The last sentence by Chairman William Miller (Fed chairman in 1978
and 1979) telling the FOMC that the gold market can be manipulated by
propaganda is very significant. This would certainly make Joseph
Goebbels proud. This manipulative deception has been played out time
and time again since then. This is why official gold sales are always
announced in advance and the announcements are repeated many times, as
happened with the International Monetary Fund's gold sales.

At the FOMC meeting of July 9, 1980 --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19800709meeting.p...

-- the following discussion took place.

* * *

MR. BAUGHMAN. Is it considered a political no-no to sell gold in the current environment?

CHAIRMAN VOLCKER. Oh, I don't think so, necessarily. I don't think
it's a political problem in the sense that you may be suggesting. It's
a question of whether it's very useful or desirable at this stage. [If
we sold gold] we'd have to do it alone; I think that's pretty clear. It
isn't anything that's ruled out a-priori, but it's a practical matter
of whether it's a good idea.

MR. BAUGHMAN. Well, it's between selling assets and borrowing money. That seems to me the significant difference.

VICE CHAIRMAN SOLOMON. The psychology, Ernie, is that [selling gold]
seems to be much more effective if it's a component of an overall
package of forceful measures than if it is done by itself. In the
present climate it would look like a major act of weakness. And that
might spur some additional dollar selling unless we did it on an
enormously massive scale, not just the levels that we have before. On
the other hand, if the situation gets to a point where once again we
have to begin thinking carefully of a package, then along with some
monetary policy measures it would be appropriate and add to the
effectiveness -- this is my own personal feeling -- to do some
substantial gold selling. And in that situation I think the Congress
would understand that. We'd have less of a political problem also. So I
think both factors operate.

CHAIRMAN VOLCKER. I should say, in connection with the political
problem, that I don't think there are any great political constraints
so far as the thinking in the Administration is concerned. There are
politicians who would make a noise that would reflect upon the
credibility of the action. If we sell some gold and then immediately
get some congressional opposition, the market would say: "Well, they're
not going to sell very much because there's too much opposition." And,
therefore, it might not be very productive in terms of the impact we'd
want to achieve.

MR. BAUGHMAN. There would be some grassroots opposition to it. I can report that, but I don't have any impression. ...

CHAIRMAN VOLCKER. Perhaps I spoke a little misleadingly because that
kind of opposition, I think, does reflect on the credibility of the
action. It raises questions about whether it could be sustained and
what the [total] amount would be and whether it's really an accepted
technique or not, even though in some sense I think it's not a
political deal for the Administration except in terms of appraising
that reaction. I can't quite see the Congress opposing it in a formal
sense but there would be a lot of noise by these limited groups. We
have to ratify these transactions.

MR. SCHULTZ. So moved.

* * *

What is noteworthy is the comment by Vice Chairman Solomon when he
says selling gold "seems to be much more effective if it's a component
of an overall package of forceful measures than if it is done by
itself. In the present climate it would look like a major act of
weakness. And that might spur some additional dollar selling unless we
did it on an enormously massive scale, not just the levels that we have
before."

This is without a doubt a proposal to undertake gold market
manipulation, and what's more it is proposed to be on an "an enormously
massive scale." This is not a discussion about selling gold based on a
motivation to maximize the profit from such sales. Furthermore, the
vice chairman admits to previous gold market intervention when he
recommends increased selling of gold that is "not just the levels that
we have before."

What is shocking is the apparent cavalier approach to breaking the
law. Volcker says, "I should say, in connection with the political
problem, that I don't think there are any great political constraints
so far as the thinking in the Administration is concerned. There are
politicians who would make a noise that would reflect upon the
credibility of the action. If we sell some gold and then immediately
get some congressional opposition. ..."

Note that the proposal implies that gold sales would occur without the congressional approval required by law.

The "strong dollar policy" was concocted by Treasury Secretary
Robert Rubin in 1995. However, the mechanism by which such a policy
could be implemented in a supposedly free market was never explained.
GATA has long maintained that the policy involved the suppression of
the gold price. In December 1994 the following exchange took place at
the FOMC meeting --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19941220meeting.p...

* * *

CHAIRMAN GREENSPAN. President Jordan.

MR. JORDAN. I think the main part of our problem right now is
inflation psychology. It certainly reflects the lack of a nominal
anchor. It suggests that it would be helpful to have a politically
supported mandate to attain and maintain a stable value of the dollar.
If somehow we could achieve the conditions of a true gold standard --
without gold but the steady purchasing power of money in the minds of
people -- over time it would make some of these short-term things that
we go through a lot easier to deal with."

* * *

Well, how about that? Achieving the conditions of a true gold
standard without gold? Does that sound like a confidence trick? The
last sentence of the FOMC minutes above here has been redacted. It
would be extremely interesting to know the full extent of the
discussion.

In response to a question posed by U.S. Rep. Ron Paul in testimony
before Congress in 2005, Fed Chairman Greenspan confirmed that this
financial wizardry has actually been implemented:

http://www.lewrockwell.com/paul/paul267.html

* * *

MR. GREENSPAN: So that the question is: Would there be any
advantage, at this particular stage, in going back to the gold
standard? And the answer is: I don't think so, because we're acting as
though we were there. Would it have been a question at least open in
1981, as you put it? And the answer is yes. Remember, the gold price
was $800 an ounce. We were dealing with extraordinary imbalances,
interest rates were up sharply, the system looked to be highly unstable
-- and we needed to do something.

Now, we did something. The United States. ... Paul Volcker, as you
may recall, in 1979 came into office and put a very severe clamp on the
expansion of credit, and that led to a long sequence of events here,
which we are benefiting from up to this date. So I think central
banking, I believe, has learned the dangers of fiat money, and I think,
as a consequence of that, we've behaved as though there are, indeed,
real reserves underneath the system.

* * *

The last sentence is exactly what Mr. Jordan was pondering in the
FOMC meeting of December 1994: How to have a gold standard without
using gold. Greenspan says the Fed "behaved as though there are,
indeed, real reserves underneath the system."

I think it is safe to say there is some financial wizardry that is
apparent by implication. One either has real reserves or one doesn't.
To behave as if there are when there are not is a confidence trick
doomed to fail at some stage.

In the FOMC meeting of Dec 22, 1992, the Fed governors reveled in
the fact that accounting errors in gold shipments could improve the
U.S. balance of trade numbers --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19921222meeting.p...

* * *

CHAIRMAN GREENSPAN. Did I hear you correctly when you said that the
gold exports in October appear to have come from the coffers of the
Federal Reserve Bank of New York? Has anyone looked lately?

MR. TRUMAN. Well, I didn't want to tell too many secrets in this temple!

VICE CHAIRMAN CORRIGAN. Obviously, we knew what happened to the gold, but I don't think we knew what it did to exports.

MR. TRUMAN. What happens in the Census data is that the Federal
Reserve Bank of New York is treated as a foreign country. [Laughter]
And when a real foreign country takes some of the gold out of New York
and ships it abroad, it counts first as imports and then as exports.
However, the import side is not picked up in the Census data. So there
you get the export side of it.

MR. LAWARE. Great accounting!

MR. BOEHNE. Great confidence building!

MR. TRUMAN. That's because you haven't been filling out your import documents!

MR. ANGELL. Let me run this by again. You mean a country owns gold
and has it stored in the Federal Reserve Bank of New York and if they
ship it out, that's an export?

MR. TRUMAN. And in the balance of payments accounts it also counts as an import, so it washes out.

CHAIRMAN GREENSPAN. The Federal Reserve Bank's basement is a foreign
country. When they move it out of the basement into the United States,
it's an import. Then, when they ship it out again, it's an export.

MR. ANGELL. That makes sense!

MR. TRUMAN. And sometimes when they sell the gold, it might be sold
into the United States, so it should count as an import. It doesn't
necessarily always show up as an export.

MR. BOEHNE. That really clarifies it!

MR. KELLEY. Does it have to get out of your vault at all in order to be considered an import and an export?

VICE CHAIRMAN CORRIGAN. Well, I'm not even going to try to answer
that. In this particular case I know what happened, so I think. ...

* * *

The most intriguing part of this discussion is the question by
Kelley: "Does it have to get out of your vault at all in order to be
considered an import and an export?"

While there is no explanation of the thinking behind Kelley's
question (it was probably redacted), it is reasonable to extrapolate
the inference that "ledger entries" for gold movements could be made to
the import or export accounts without any gold having been physically
moved.

At the May 18, 1993, FOMC meeting there was much discussion how gold
influences public attitudes toward inflation. There were discussions
about interfering in the gold market to change the public's expectation
of inflation, and such postulated interference was even regarded as
amusing by the FOMC --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19930518meeting.p...

* * *

MR. ANGELL. Here's what I think would happen. I don't think we
should increase interest rates by 300 basis points, but, if we did, I'm
quite certain the price of gold would immediately begin a [sharp],
quick [drop]. It would happen so fast you'd just have to go and watch
it on the screen. If we made a 100-basis-point increase in the Fed
funds rate, the price of gold surely would turn back down unless the
situation is worse than I anticipate. If we made a 50-basis-point
increase in the Fed funds rate, I don't know what would happen to the
price of gold, but I'd sure like to find out! [Laughter]... People can
talk about gold's price being due to what the Chinese are buying;
that's the silliest nonsense that ever was. The price of gold is
largely determined by what people who do not have trust in fiat money
system want to use for an escape out of any currency, and they want to
gain security through owning gold. Now if annual gold production and
consumption amount to 2 percent of the world's stock, a change of 10
percent in the amount produced or consumed is not going to change the
price very much. But attitudes about inflation will change it."

* * *

Later in the same meeting Greenspan pursued this line of thinking:

* * *

ALAN GREENSPAN: I have one other issue I'd like to throw on the
table. I hesitate to do it, but let me tell you some of the issues that
are involved here. If we are dealing with psychology, then the
thermometers one uses to measure it have an effect. I was raising the
question on the side with Governor Mullins of what would happen if the
Treasury sold a little gold in this market. There's an interesting
question here because if the gold price broke in that context, the
thermometer would not be just a measuring tool. It would basically
affect the underlying psychology. Now we don't have the legal right to
sell gold but I'm just frankly curious about what people's views are on
situations of this nature because something unusual is involved in
policy here. We're not just going through the standard policy where the
money supply is expanding, the economy is expanding, and the Fed
tightens. This is a wholly different thing. Anyway, I'm most curious to
get your views in these various respects, so please don't be afraid to
throw things out on the table.

* * *

Greenspan proposed that if the gold price could be significantly
depressed, then the public's inflation expectations could be radically
altered.

In an FOMC meeting in January 1995 Virgil Mattingly, the Fed's general counsel, said the following --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p...

* * *

MR. MATTINGLY. It's pretty clear that these ESF [Exchange
Stabilization Fund] operations are authorized. I don't think there is a
legal problem in terms of the authority. The statute is very broadly
worded in terms of words like "credit" -- it has covered things like
the gold swaps -- and it confers broad authority. Counsel at the White
House called the Treasury's general counsel today and asked, "Are you
sure?" And the Treasury's general counsel said, "I am sure." Everyone
is satisfied that a legal issue is not involved, if that helps.

* * *

This comment suggests that the U.S. gold stock has been mobilized in
the market. When GATA urged U.S. Sen. Jim Bunning to pursue this matter
with Greenspan, Mattingly responded (http://www.gata.org/node/1181):

"These inquiries focus primarily on a statement attributed to me
that appears on Page 69 of the published transcript of the January
31-February 1, 1995, FOMC meeting to the effect that the Exchange
Stabilization Fund (ESF) has engaged in 'gold swaps.' Given the passage
of time, some six years, I have no clear recollection of exactly what I
said that day but I can confirm that I have no knowledge of any 'gold
swaps' by either the Federal Reserve or the ESF. I believe that my
remarks, which were intended as a general description of the authority
possessed by the secretary of the treasury to utilize the ESF, were
transcribed inaccurately or otherwise became garbled."

That doesn't pass the smell test. Mattingly's comments "were
transcribed inaccurately or otherwise became garbled"? This is the same
organization that lied to Congress for 17 years about the existence of
any transcripts or recordings of the FOMC meetings. So do we believe
him?

Notice the very clever inference -- "I can confirm that I have no
knowledge of any 'gold swaps' by either the Federal Reserve or the
ESF." He doesn't specify what type of "knowledge" he is talking about.
Is it knowledge that any swaps were ever made or is it knowledge of the
details of swap arrangements that were made? In any case Mattingly is
professing not to know; he is not denying that any swaps have occurred.

The following discussion took place at the July 1991 meeting of the FOMC --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19910703meeting.p...

* * *

ALAN GREENSPAN: Why have commodity prices failed to decline as much
as they ordinarily would during recession periods? Now, it also looks
as if commodity prices are not spiking upward in a recovery like they
ordinarily would. So we have a different picture in commodity prices
than I've seen in a recession and, frankly, I'm very puzzled by it. At
the same time that commodity prices do not show the extent of the
recovery, I think it's somewhat strange that gold prices failed to move
down. Given central banks' reduced willingness to own gold, or given
what I see as a reluctance in the foreign central banks and others to
hold as large gold stocks, given countries in southeast Asia who have
changed their attitudes [toward gold], and given the Soviet Union
[sales], I don't understand why gold prices do not come down. It
suggests to me that there may be some what we call 'crazies' out there
who believe that gold is a good [inflation hedge]. And I guess I think
that [inflation concern] is in the long bond.

* * *

Greenspan thus labels as "crazies" those investors who want to
protect their wealth against the promiscuous money creation of his
Federal Reserve. In 1966 Greenspan wrote an essay titled "Gold and
Economic Freedom" in which he recognized the unique properties of gold
as an inflation hedge --

http://www.321gold.com/fed/greenspan/1966.html

"In the absence of the gold standard, there is no way to protect
savings from confiscation through inflation. There is no safe store of
value. If there were, the government would have to make its holding
illegal, as was done in the case of gold. If everyone decided, for
example, to convert all his bank deposits to silver or copper or any
other good, and thereafter declined to accept checks as payment for
goods, bank deposits would lose their purchasing power and
government-created bank credit would be worthless as a claim on goods.
The financial policy of the welfare state requires that there be no way
for the owners of wealth to protect themselves.

"This is the shabby secret of the welfare statists' tirades against
gold. Deficit spending is simply a scheme for the confiscation of
wealth. Gold stands in the way of this insidious process. It stands as
a protector of property rights. If one grasps this, one has no
difficulty in understanding the statists' antagonism toward the gold
standard."

And clearly once Greenspan had sold his soul to the devil and become a "statist" himself, he joined the antagonists of gold.

The following is a very enlightening discussion at the July 1995 FOMC meeting --

http://www.federalreserve.gov/monetarypolicy/files/FOMC19950706meeting.p...

* * *

CHAIRMAN GREENSPAN. I think I've got it! [Laughter] You are telling
me that the SDR [Special Drawing Rights] certificate comes out of the
Treasury and we cancel the Treasury obligation and it is wholly an
asset swap so that the debt to the public of the U.S. Treasury goes
down by that amount. Is that what happens? That solves President
Jordan's problem too! [Laughter]

MR. JORDAN. Can I follow up on that? The same thing happened when we
changed the price of an ounce of gold from $35 to $38 and then to
$42.22. The Treasury got a windfall of about $1 billion to $1.2 billion
in both of those so-called devaluations. So an issue on this is: What
was the dollar price of SDRs that we monetized? You say I have an asset
on my balance sheet and I don't know what the value of it is.

CHAIRMAN GREENSPAN. It's about $42.

MR. TRUMAN. It's $42.22; it's equivalent to the official price of gold.

MR. JORDAN. We do this at the official U.S. Treasury price of gold?

CHAIRMAN GREENSPAN. Do you mean that we can lower the debt to the
public by moving the price of gold up to the market price? That could
cut the debt back by a not insignificant amount!

MR. JORDAN. I have been trying not to mention that publicly for fear that someone might want to do it.

CHAIRMAN GREENSPAN. It's probably too late; we just mentioned it.

MR. JORDAN. It will become known five years from now!

MR. LINDSEY. Five years from now it will be read in the transcript for this meeting.

MR. BLINDER. By which time it already will have been done.

* * *

This exchange is extremely significant because it recognizes that
external debt of the United States eventually will have to be balanced
with the amount of gold claimed to be held by the Treasury.
Interestingly enough the Fed doesn't want this information to be known,
as this would essentially devalue the dollar overnight and give instant
hyperinflation. But as Greenspan points out, it would inflate away the
debt.

The five-year delay in releasing information to the public is
clearly viewed by the Fed as a way to disadvantage the public. When the
Fed and Treasury are forced by market conditions to balance the U.S.
government's debt with its gold holdings, the dollar will be massively
devalued and gold will be multiples of its current price. This would
certainly make it advantageous to be one of the "crazies," as Greenspan
affectionately calls gold investors.

I think the true crazies will be shown to be those people who have
drunk the Kool-Aid to believe that a currency can maintain its
purchasing power when the central bank confesses to employing a
confidence trick -- that it is "behaving" as if there were real
reserves underneath its currency system.

What can be concluded from these insights into the deliberations of the FOMC?

-- On several occasions the Fed discussed targeting gold prices with its policies.

-- The Fed admits that propaganda is effective against gold
investors, insofar as just mentioning the possibility of selling gold
can drive down the gold price.

-- The Fed at least contemplated interfering in the gold market, and
on a massive scale. The Fed admits that the U.S. government has sold
gold with the intention of reducing gold's price.

-- The record shows that the Fed opined that the statutes of the
Exchange Stabilization Fund have legitimized "the gold swaps." Despite
claims that this statement has been inaccurately transcribed or
garbled, recent information suggests otherwise. In response to GATA's
request to the Fed last year under the Freedom of Information Act for
access to Fed documents about gold swaps, Fed Governor Kevin M. Warsh
confirmed that the Fed does indeed have gold swap agreements with
foreign banks:

http://www.gata.org/node/7819

-- The Fed does not want it to be known that the external debt of
the United States could be substantially reduced by revaluing official
gold at the market price, lest someone wants to do that. This is an
admission that the official U.S. price of gold of $42.22 per ounce is a
matter of smoke and mirrors. The ability of the Fed and Treasury to
create money is linked to the only liquid collateral they have, gold.
The gold price that is required to make the value of U.S. gold equal to
the dollars issued is multiples of the current price, and is heavily
dependent on how much unencumbered gold the Treasury still holds.

-- The Fed expressed the utility of having the virtues of a gold
standard without using gold itself. Greenspan later confirmed that the
Fed was behaving as if it was on a gold standard, as if there were
"real reserves" underneath the system. This supports GATA's claims that
the gold price has been suppressed by an increase in the supply of
"paper gold" -- gold that investors believe they have bought and own
but is really no more than a certificate saying they own the gold. This
is the case with the London Bullion Market Association's unallocated
gold accounts, unbacked exchange-trade funds, pool accounts, and gold
derivatives.

The demand for real physical gold bullion is surging in the face of
an impending daisy-chain of sovereign debt defaults. This threatens to
expose the confidence trick -- that much more gold has been sold than
exists. I have explained this in a previous essay, "The Tiny Market
that is the World's Biggest":

http://www.gata.org/node/8248

The Federal Reserve can "behave" as if there are real reserves under
the U.S. dollar, but there are none. A study of the heavily redacted
and edited minutes of the Federal Open Market Committee reveal a
penchant for targeting and manipulating gold prices, and deceiving
Congress and the public.

The words of Alan Greenspan from "Gold and Economic Freedom" could not be more relevant:

"This is the shabby secret of the welfare statists' tirades against
gold. Deficit spending is simply a scheme for the confiscation of
wealth. Gold stands in the way of this insidious process. It stands as
a protector of property rights. If one grasps this, one has no
difficulty in understanding the statists' antagonism toward the gold
standard."

Like clowns at a rodeo, there are too many academics creating a
distraction discussing whether we will have deflation or inflation. We
are now in an era of unprecedented deficit spending -- which means that
confiscation of wealth will also be unprecedented. One of the most
prolific money creators of all time has told us what to do to prevent
it: Buy gold. But buy real physical gold, not a gold receivable.

-----

Adrian Douglas is publisher of the Market Force Analysis letter (www.marketforceanalysis.com) and a member of GATA's Board of Directors.

 

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SWRichmond's picture

Sitting here drinking so please bear with me: http://www.slyfoxbeer.com/index.php/front/beer_incubus

CHAIRMAN GREENSPAN. The Federal Reserve Bank's basement is a foreign country. When they move it out of the basement into the United States, it's an import. Then, when they ship it out again, it's an export.

MR. KELLEY. Does it have to get out of your vault at all in order to be considered an import and an export?

Obviously, the gold is considered too valuable to be frequently moved, let alone put at risk on a ship to move it internationally.  These guys seem to preferentially move it via accounting.  I want to believe it's allocated and not some damned pool account, ya know?  I'm fairly confident that these central banksters are anal about accounting, and that is one reason why they don't want an audit: the paper trail would be totally revealing.

The banksters obviously understand the importance and value of gold, and the importance and need for a currency's perceived value coming from its' being backed by....something.  This is also revealed by all the anti-gold rhetoric that constantly flows from official quarters.  It makes sense, then, to take Marc Faber's (paraphrased) advice to heart: become your own central bank by buying some physical gold regularly.

 

Anonymous's picture

Instead of selling gold, the Fed should have been BUYING !

After the US$ collapsed in a couple of years, the US will have only a minor position in the IMF due to lack of reasonable gold reserves.

Russia, India, China are loeading up, everybody else is at least holding on to its reserves.

The US leaders are glueless and without any vision for their country. This stupidity must be stopped, they are looting their own country and should be jailed for counterfiting & treason.

END THE FED.

END THE SEC.

They are all are incompetent morons.

WilliamShatner's picture

I'm still supicious about all these "sell your old gold" commercials on TV.

Wouldn't surprise me in the least bit if the buying party at the end of the line is the US Treasury and/or Federal Reserve.

Hansel's picture

I've pondered the same thing.  I envision it as a CIA operation when I don my tinfoil hat.  I think it falls in the same league as Operation Mockingbird.

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

Hephasteus's picture

It's definitely fed and central bank. I pissed one of them off big time.

swamp's picture

They leased the gold to suppress the price to save their fiat scheme but privately, my bet is that these dogs bought gold, and sold OUR gold, belonging to We The People, from Fort Knox, then stuffed it with tungsten.

Last I heard, these dogs recently refused to return Germany's gold. 

Anonymous's picture

we are so screwed.

doublethink's picture

 

So How Do We Fight Back?

 

If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.   --Alan Greenspan

 

Anonymous's picture

+1

Get your money out from the bank and buy gold bullion.

My point, and done already !

wake the roach's picture

If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.

 

That brings up an excellent argument against pm's. There is not enough supply to provide even the US population with enough physical to become trusted as a claim on goods and as we all know, trust means everything.

When the collapse comes 95%+ of the population are not going to have any exposure to pm's and when there credit cards no longer work they will be more interested in eating than protecting their monitary wealth so how can anyone conclude that in the future, gold will have an equal or greater purchasing power than it does today relative to dollars?

Lets say all value or trust in dollars has failed so golds value no longer has any relative value. If the vast majority of people own no pm's and have no price history, how is the 3% of the gold owning population going to convince the layman that an ounce of gold would have once bought 20000 roast chickens so 10 chickens for an ounce is a good deal?

Gold works under the same old rules in a game of who's the greater fool. Considering that 95% of people wont see any  real value in precious metals, who's gonna pick up the demand?

swamp's picture

Expand your horizons and think globally.

Second, ever try carrying around a bushel of wheat?

wake the roach's picture

Think globally? Ok how about this... 5 950 000 000 people probably wont own gold compared to 50 000 000 who do... Is that global enough for you.

How are all those billions of people that now have ZERO purchasing power going to inflate your golds value...

So I guess that you your pinning all your hopes on the world  heading back to horse and buggy days of a gold standard?

Please, let me know how that works out for you ok?

Oh, and why would I be trying to trade a bushel of wheat? I can assure you that if I had a bushel of wheat, I would probably "invest" it by baking bread or by feeding it to my cattle, chickens or whatever and guess what, I wouldn't trade you one lousy lice ridden chicken for all your pretty  gold.

Anonymous's picture

You are absolutely right, WTR. So many people on ZH don't seem to grasp this.

faustian bargain's picture

Grasp what? That gold will always be desirable as a store of purchasing power? I will stand by that concept, especially when the price manipulation (i.e. the dollar) loses effectiveness, which it will.

i.knoknot's picture

i'm not a hard-core gold-bug... only slightly afflicted, to take this as you may:

if 5 billion people were lose their (fiat based) purchasing power... (deflationary), what the hell currency/investment are they going to trust going forward? paper?

ask any weimar experienced german if they *like* paper money.

keeping the dialog useful, you may be right about the immediate effect of "nobody wants or can afford your gold...", but as things recover, the urge not to be burnt again may strengthen the argument for gold. until we all forget again and trust paper money again... heh...

Attitude_Check's picture

The answer is VERRRRY simple -- even for you to understand.  The price of Gold increases suffciently, that very little is needed for the "average person" world-wide, say 1 gram.  Since a troy oz is approx 31 grams, and using 6Billion people for the world population, that would require approx. 192 B g's.  Arcording to Wikipedia that is just 1/24 th the total ammount of Gold world-wide.  If instead you assume that the world goes back to some kind of Gold standard, assume $55T world-wide GDP, and a money velocity of 2, then Gold price would need to be approx $12,000/toz to cover the worlds GDP's using all of the Worlds Gold.  This would be approx $400/g.

I'm not saying I predict this to occur any time soon -- or even ever.  The the simple fact is, if the price of Gold rises enough then the problem is solved.

The answer to your question is the 5 950 000 000 people become much poorer, and the folks who have the gold will buy the assets of the people who presently own them, and begin paying workers in g's of gold.  This kick-starts a gold-based economy.  It's really not hard to figure out.

It would be HUGELY disruptive to the World economy however -- but I'm not sure any more disruptive then the present world-wide economic trajectory sadly.

 

 

SilverIsKing's picture

Maybe, just maybe, the government will give people the opportunity to turn their FRNs in for new dollars that are backed by gold.  Of course the rate of exchange might be such that for every $50 in FRN, you would get one new dollar.  Gold at $1,000/oz currently might be worth $50,000/oz in new dollars.

In this scenario, wouldn't it be wise to hold some physical?

wake the roach's picture

Maybe, just maybe, the government will give people the opportunity to turn their FRNs in for new dollars that are backed by gold.  Of course the rate of exchange might be such that for every $50 in FRN, you would get one new dollar.  Gold at $1,000/oz currently might be worth $50,000/oz in new dollars.

 

Yes your right, but that requires the ridiculous assumption that we're heading back to a gold standard. Also, you do realise that you just made the critical argument for why you should sell your gold...

Tell me, why would governments and central banks be selling gold for $1000+ ounce now only to exchange it down the road for whatever equivalent purchasing power in "new dollars"? Yeah, Soros and Faber have the right connections to do that but good luck for average Joe.

We are not going back to a gold standard. Todays dollars are backed by something despite what people believe and that is energy, mainly oil. Energy consumption that is not appropriately priced given its finite nature.

Tomorrows currencys will be backed by energy too, only this time its value will be determined by its carbon emissions and not by how much it costs to dig or pump out of the ground, there is a big difference I assure you!!!

What do you think global emissions trading is?

SilverIsKing's picture

So then this is what we do.  I buy gold.  You don't.  I wish you luck.  You wish me luck.

Good luck.

wake the roach's picture

So then this is what we do.  I buy gold.  You don't.  I wish you luck.  You wish me luck.

Good luck.

 

No, I would put it this way...

You trust the government but believe that they, and the central banks are complete idiots therefore you buy gold.

I don't trust the government and believe that they, and the central banks have an endgame therefore I don't buy gold.

Yes, to each his own... good luck ;-)

faustian bargain's picture

I am fairly confident their endgame depends on those 95% of people you claim are not interested in precious metals, not the 5% who are.

i.knoknot's picture

indeed.

but i also fear they'll simply divide and conquer...

take out the first 95% of the sheeple, then with their batteries freshly-charged... they shoot for the remaining 4.9 percent.

timing is everything...

SWRichmond's picture

wake,

I've seen this discussion play out many times before, even participated in it a few times myself.  One side ('A') is essentially betting on the staying power of central banking as an institution, and the obvious dishonesty and corruption that goes along with it.  Another side ('B') is betting that the system is so rife with dishonesty and corruption that it can no longer sustain itself, and so will be forced to evolve into something less dishonest.  One more side ('C') dispassionately reads a lot of history, sees that fiat currencies all fail, almost always in 100 years or less, and recognizes that gold is the time-proven means for moving wealth from one fiat regime to the next.

Side 'A' is composed of finance professionals, the wealthy, B schoolers, and their government sycophants, all of whom are completely (in)vested in the current status quo, and whom therefor have great vested interest in maintaining it.  Side 'B' is composed of that small contingent of awakened upper middle and middle class who see the target that's been painted on their foreheads by Side 'A'.  Side 'C' is detached intellectuals and financial professionals who think outside the box.

Yes, this is a setup for a class war; you have chosen your side, and we have chosen ours.  You have money to pay troops, and we have the force multiplier of being everywhere and nowhere, and also being the energy that makes your lifestyle possible.  If enough of us were able to wake up enough more, all we would have to do is take all of our money out of your banking system and stay home from work for a few weeks.  No shooting would be necessary.  We have seen the incredible dishonesty and corruption that is central banking, and we ain't standing for it anymore.

 

nuinut's picture

Oil is/has been cheap in FRNs because those FRNs have been exchangable for gold at a cheap rate.

Oil is very, very important. And so is gold. The Saudis have essentially been exchanging their oil for gold for many decades. Nixons ending of convertability of $ for gold in 71 sparked the oil and gold price events of the 70s, as the Arabs were not happy to be exchanging their oil for green paper, and so the back room deal to hold down the US$ price for gold was born.

I agree, we are not going back to a gold standard.

We will move to a new era, where physical gold is marked to market, and held as a wealth reserve. Fiat currency will remain as our transactional medium, but gold will reassume its role as the wealth asset. It will soon be clear to even the slowest of us that fiat never has and never will perform the store of wealth function.

I suggest anyone interested in these thoughts check out these very interesting posts, among many others, posted at http://fofoa.blogspot.com/

Hell, there are freaking heaps more, and they are all worthwhile.

You make a good case, Roach, but if you don't understand these concepts, you are not seeing the larger gold situation.

PaperWillBurn's picture

Worthwhile is an understatement. They are all a MUST read

faustian bargain's picture

no no no, obviously you don't get it: ya cain't eat gold, hyuk hyuk. People ain't interested in being able tuh "buy" stuff, they jist want tuh eat some chickins.

[/sarcasm]

wake the roach's picture

I'm only using chickens as an example of something to compare value too once a currency is worth zero but you know that...

So what you got against chickens and hillbillys anyway? Did they touch you in secret places faustian bargain?

No, your just pissed off because your scared that the ZH minority group may actually have valid arguments, thus revert to sarcasm, typical of a schoolyard bullys... 

So tell me smart ass, whats the purchasing power of gold relative to, um... nothing at all???

Or whats the "true value" of this mystical gold that cannot be printed therefore is real money that I keep hearing so much about?

So ok, not in chickens but oh lets say, ummm. I-pods or even banjo's?

How many I-pods or banjo's can I "buy" per ounce  of Au at its real God given cosmic value???

 

 

faustian bargain's picture

I dunno, I don't have any ipods or banjos to sell you, so you can't have them from me at any price.

The purchasing power of anything is zero when compared to nothing at all. But then you'd have to be living in an uninhabited vacuum.

I'm not sure where you get this idea that gold has to have some mystical intrinsic cosmic "value". I never said that, I don't think anyone else here has said it either. It's just desirable as a thing to save and trade for stuff, therefore it has whatever value the market will bear.

I'm betting the market will go one way, you seem to be betting it will go another.

I'm not going to lay out all the reasons PM's make great currencies here, since that info is readily available on the web.

But barter is good, too. Maybe I'll trade me some eggs for one-a them i-pads, so I can read up on Keynes on the interweb.

faustian bargain's picture

Actually I'm not betting very much on gold. I don't have much to bet, so I'm sorta screwed either way. *shrug*

Anonymous's picture

We're on a rock in outer space brother( no offense roach) we're all screwed. on a long enough timeline...

Attitude_Check's picture

I think FRNs are YUMMY -- pass the ketchup please.  I especially like the $100 bills, they are SOOO much yummier and more filling!

Anonymous's picture

Buy PHYSICAL GOLD BULLION. NOW.

Anonymous's picture

Frontrunning China and buying gold right now is actually just what I like to do. I could imagine they dont see this fast spike in the price coming and will be forced to speed up their own aquisition program.

India has no own gold production and will do what it can to get hold on the remaining IMF gold.

There is no way to stop the price rise now due to the shortage of sufficient & available quantities for central banks.

Its funny to see how governments in many countries are asleep, while the wide public wakes up and protects their private assets and wealth in bullion.

Its the chance of a life time !

h4rdware's picture

That dialog reads like something out of a Lewis Carroll book. I was fully expecting one of them to start making up puzzles or talking in reverse, or solving interest rates by pulling gold bars out of each others asses.

Somebody mark them and their fantasy world zero before this gets out of control.

MsCreant's picture

 

That dialog reads like something out of a Lewis Carroll book. I was fully expecting one of them to start making up puzzles or talking in reverse

You made me laugh!!! Greenspan looks like a cartoon character, no doubt.

Nathan Smith's picture

Greenspan looks like a cartoon character, no doubt.

 

Indeed the Maestro is Mr. Magoo.....too bad I can't post a pic.

goldfreak's picture

Take advantage of Cartel attacks to buy.

Anonymous's picture

The possible switch to hyperinflation is not a economic one but a currency event. The total loss of confidence in the US will be the trigger. And this can happen very fast, in hours or a just day.

What that particular trigger will be is yet unknown, but there are too many pending disasters awaiting that it must accepted as a given now. It will happen in the not too distant future.

Does anybody believe the US have a any good standing in the wolds eye ?

Buy your gold bullion now. Not soon or later, but right now.

Thank me later.

Hansel's picture

This is a majorly awesome gold article.  I just came here after finding this article on GATA to post in the comments, and then email tips@zerohedge... but there it sat as the top story.  :)

Bob's picture

Adrian Douglas has just catapaulted into the role of Jack's smirking revenge . . .

What a weekend this has been!  Now we find out if there's any redemption to be found in this empty charade of a "financial system."  

Time for the Fed to go down.

assumptionblindness's picture

So this is what it feels like to be the fly on a wall.  Great stuff!

THE DORK OF CORK's picture

Greenspan seems to lose his talent for speaking in riddles when he attends FOMC meetings

What would the dynamic duo make of this little puzzle I wonder

 

http://www.youtube.com/watch?v=Pp_9FEWgmFA

Hansel's picture

From Alan's 2007 60 Minutes interview:  http://www.cbsnews.com/stories/2007/09/13/60minutes/main3257567_page5.sh...

"... in public Greenspan was inscrutable whenever Congress asked about interest rates. He resorted to an indecipherable, Delphic dialect known as "Fed-speak."

"I would engage in some form of syntax destruction, which sounded as though I were…answering the question, but, in fact, had not," Greenspan admits, with a chuckle.

At one hearing, Greenspan said, "Modest pre-emptive actions can obviate the need of more drastic actions at a later date, and that could destabilize the economy."

"Very profound," Greenspan says, after listing to his testimony.

Greenspan personally worked on these "profound" comments.

"But what would often happen is you'd get two newspapers with opposing headlines, coming out of the same hearing," Stahl remarks.

"I succeeded. I succeeded," Greenspan says."

 

THE DORK OF CORK's picture

The most powerful statist in the history of America was a virulent anti-statist - you could not make this stuff up - the internal contradictions of Greenspan and indeed many Americans on the role of the state is at the root of this crisis.

Whatever your politics to believe in promoting people to a role of authority which they have a ideological belief in destroying is madness squared or even cubed.

At least historians will be glad of the paper trail that the esteemed chairman left but they will have to work overtime to find something relevant amongst all those FRNs that will clog the system.

Mr Lennon Hendrix's picture

Stahl wore a phat gold chain every interview.  RESPECT!

CombustibleAssets's picture

"

I guess I should warn you, if something I've said seems to be particularly clear, you've probably misunderstood what I've said. " - Alan Greenspan

Anonymous's picture

Reading a lot of the commenters here I will invest in aluminum foil companies heavy.

faustian bargain's picture

that won't do you much good because it's got to be tin.

Anonymous's picture

You and me both. Gold might go up at some point but it ain't gonna be caused by this "earth-shaking" news. And even if it does go up over time, the bugs will never know when to get off the bandwagon...i guarantee that 95% of those who ride it up will ride it all the way back down again.