Guest Post: The Big Reset, Part 2

Tyler Durden's picture

Submitted by Koos Jansen of In Gold We Trust

The Big Reset, Part 2

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.

When Did the War on Gold Start?

The first evidence of US meddling in the gold market can be found as early as 1925 when the Fed falsified information regarding the Bank of England’s possession of gold in order to influence interest rate levels. However, the war on gold only really took off in the 1960's when trust in the dollar started to fray. Geopolitical conflicts such as the building of the Berlin Wall, the Cuban Missile Crisis and the escalation of violence in Vietnam led to increasing military spending by the US, which in turn resulted in growing US budget deficits. A memorandum from 1961 entitled ‘US Foreign Exchange Operations: Needs and Methods’ described a detailed plan to manipulate the currency and gold markets via structural interventions in order to support the dollar and maintain the gold price at $ 35 per ounce. It was vital for the US to ‘manage’ the gold market; otherwise countries could exchange their surplus dollars for gold and then sell these ounces on the free gold market for a higher price.

How Was The Gold Price Managed In The 1960's?

During meetings of the central bank presidents at the BIS in 1961, it was agreed that a pool of $ 270 million in gold would be made available by the eight participating (western) countries. This so-called ‘London Gold Pool’ was focused on preventing the gold price from rising above $ 35 per ounce by selling official gold holdings from the central banks gold vaults. The idea was that if investors attempted to flee to the safe haven of gold, the London Gold Pool would dump gold onto the market in order to keep the gold price from rising. During the Cuban Missile Crisis in 1962, for instance, at least $ 60 million in gold was sold between 22 and 24 October. The IMF provided extra gold to be sold on the market when needed. In 2010, a number of previously secret US telex reports from 1968 were made public by Wikileaks. These messages describe what had to be done in order to keep the gold price under control. The aim was to convince investors that it was completely pointless to speculate on a rise in the price of gold. One of the reports mentions a propaganda campaign to convince the public that the central banks would remain ‘the masters of gold’. Despite these efforts, in March 1968, the London Gold Pool was disbanded because France would no longer cooperate. The London gold market remained closed for two weeks. In other gold markets around the world, gold immediately rose 25% in value. This can happen again when the COMEX will default.

More Evidence About This Manipulation?

From the transcript of a March 1978 Fed-meeting, we know that the manipulation of the gold price was a point of discussion at that time. During the meeting Fed Chairman Miller pointed out that it was not even necessary to sell gold in order to bring the price down. According to him, it was enough to bring out a statement that the Fed was intending to sell gold.

Because the US Treasury is not legally allowed to sell its gold reserves, the Fed decided in 1995 to examine whether it was possible to set up a special construction whereby so-called ‘gold swaps’ could bring in gold from the gold reserves of Western central banks. In this construction, the gold would be ‘swapped’ with the Fed, which would then be sold by Wall Street banks in order to keep prices down. Because of the ‘swap agreement’, the gold is officially only lent out, so Western central banks could keep it on their balance sheets as ‘gold receivables’. The Fed started to informing foreign central bankers that they expected that the gold price to decline further, and large quantities of central banks’ gold became be available to sell in the open market. Logistically this was an easy operation, since the New York Fed vaults had the largest collection of foreign gold holdings. Since the 1930's, many Western countries had chosen to store their gold safely in the US out of fears of a German or Soviet invasion.

Didn't The British Help As Well By Unloading Gold At The Bottom Of The Market? 

Between 1999 and 2002, the UK embarked on an aggressive selling of its gold reserves, when gold prices were at their lowest in 20 years. Prior to starting, the Chancellor of the Exchequer, Gordon Brown, announced that the UK would be selling more than half of its gold reserves in a series of auctions in order to diversify the assets of the UK’s reserves. The markets’ reaction was one of shock, because sales of gold reserves by governments had until then always taken place without any advance warning to investors. Brown was following the Fed’s strategy of inducing a fall in the gold price via an announcement of possible sales. Brown’s move was therefore not intended to receive the best price for its gold but rather to bring down the price of gold as low as possible. The UK eventually sold almost 400 tons of gold over 17 auctions in just three years, just as the gold market was bottoming out. Gordon Brown’s sale of the UK’s gold reserves probably came about following a request from the US. The US supported Brown ever since.

How Do They Manipulate Gold Nowadays?

The transition from open outcry (where traders stand in a trading pit and shout out orders) to electronic trading gave new opportunities to control financial markets. Wall Street veteran lawyer Jim Rickards presented a paper in 2006 in which he explained how ‘derivatives could be used to manipulate underlying physical markets such as oil, copper and gold’. In his bestseller entitled Currency Wars, he explains how the prohibition of derivatives regulation in the Commodity Futures Modernization Act (2000) had ‘opened the door to exponentially greater size and variety in these instruments that are now hidden off the balance sheets of the major banks, making them almost impossible to monitor’. These changes made it much easier to manipulate financial markets, especially because prices for metals such as gold and silver are set by trading future contracts on the global markets. Because up to 99% of these transactions are conducted on behalf of speculators who do not aim for physical delivery and are content with paper profits, markets can be manipulated by selling large amounts of contracts in gold, silver or other commodities (on paper). The $200 crash of the gold price April 12 and 15, 2013 is a perfect example of this strategy. The crash after silver reached $50 on May 1, 2011 is another textbook example.

For How Long Can This Paper-Gold Game Continue? 

As you have been reporting yourself we can witness several indications pointing towards great stress in the physical gold market. I would be very surprised when the current paper gold game can be continued for another two years. This system might even fall apart in 2014. A default in gold and/or silver futures on the COMEX is a real possibility. It happened to the potato market in 1976 when a potato-futures default happened on the NYMEX. An Idaho potato magnate went short potatoes in huge numbers, leaving a large amount of contracts unsettled at the expiration date, resulting in a large number of defaulted delivery contracts.  So it has happened before. In such a scenario futures contracts holders will be cash settled. So I expect the Comex will have to move to cash settlement rather than gold delivery at a certain point in the not too distant future. After such an event the price of gold will be set in Asian markets, like the Shanghai Gold Exchange. I expect gold to jump $1000 in a short period of time and silver prices could easily double overnight. That’s one of the reasons our Commodity Discovery Fund invests in undervalued precious metal companies with large gold/silver reserves. They all have huge up-side potential in the next few years when this scenario will play out.

 

In Gold We Trust

Synopsis of The Big Reset: Now five years after the near fatal collapse of world’s financial system we have to conclude central bankers and politicians have merely been buying time by trying to solve a credit crisis by creating even more debt. As a result worldwide central bank’s balance sheets expanded by $10 trillion. With this newly created money central banks have been buying up national bonds so long term interest rates and bond yields have collapsed. But ‘parking’ debt at national banks is no structural solution. The idea we can grow our way back out of this mountain of debt is a little naïve. In a recent working paper by the IMF titled ‘Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten’ the economist Reinhart and Rogoff point to this ‘denial problem’. According to them future economic growth will ‘not be sufficient to cope with the sheer magnitude of public and private debt overhangs. Rogoff and Reinhart conclude the size of the debt problems suggests that debt restructurings will be needed ‘far beyond anything discussed in public to this point.’ The endgame to the global financial crisis is likely to require restructuring of debt on a broad scale.

About the author: Willem Middelkoop (1962) is founder of the Commodity Discovery Fund and a bestselling Dutch author, who has been writing about the world’s financial system since the early 2000s. Between 2001 and 2008 he was a market commentator for RTL Television in the Netherlands and also appeared on CNBC. He predicted the credit crisis in his first bestseller in 2007.

Link Willem Middelkoop

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akak's picture

"Because gold is honest money, it is disliked by dishonest men."

-Ron Paul, The Case for Gold

Ranger_Will's picture

I owe my awakening and much more to that man. God Bless You Ron Paul!

Sparkey's picture

I've been around long enough to know "All Idols have feet of clay" so you havent really woken up yet, you've just changed one dealer for enoughter, who'd you believe in before? Do you still believe in them? really now,, with the same intensity you had when they were all smooth and shiny, particularly the feet? It,s hard to find credible idols with staying power these days Ranger_Will, stay flexible!

By trying to keep people from leaving, you guarantee, people will leave, people like to be lead, they hate to be pushed

Ranger_Will's picture

Thanks for the lesson in Post Modernism...? Not sure what your point is.

Professorlocknload's picture

Maybe the point is honest men like Ron Paul are disliked by dishonest ones?

 

H/T akak

DoChenRollingBearing's picture

If you do not own gold, then getting some is the best diversification in town, bar none.

Physical only!

***

akak!  Saludos de Costa Rica, manana salimos para hacer las pesca: pez vela, dorado, etc.  Lamento informarte que hace un poco de calor aqui en Quepos....

akak's picture

Disfruta el pescar DoChen, y buen suerte!

(Y buen provecho despues!)

GetZeeGold's picture

 

 

 

"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. . . . 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."
 
- Alan Greenspan, 1966

 

"Let me issue and control a nation's money and I care not who writes the laws." - Mayer Amschel Rothschild

 

ALL wars are bankers wars.

http://www.youtube.com/watch?v=5hfEBupAeo4

Chupacabra-322's picture

It just goes to show you that in America an organized crime cabal is put in charge. They are a self serving total economic waste. Somebody has overthrown certain aspects of your government and they are flaunting their power over people of the world. America has grown very soft against the criminal elite, helping them to traffic weapons to known terrorists. It looks like the White House has lost all moral discretion and merely goes along with the criminal terrorizing of other soverign nations.

It is like they are being black-mailed by the banker cabal. They will take your freedoms and impose a communist Chinese like model to allow control freaks to lord-it-over you. But with these corrupt evil globalist power structures what can you do. Big government want to go around the world murdering people — that is how the sickos get off. They think they are god with their power to murder people. A world of freedom and harmony scares the war-demons and psychopaths.

They are supporting causes they are supposed to defend against. The Empire becomes a Zombie Monster, following a negative agenda against man on Earth. The government is out of control, if it even exists. America is being divided and conquered from within, by the global demons.
They merely represent a power structure of a Step Pyamid Model of Aurthority / Monarch Reign Pyamid Model of Authority which ultimately benefits the NWO Globalite who own the Economic, Educational, Religious and Political Systems which Enslave man.

Their system is one of Debt Bondage and Enslavement. The highly educated intelligent & wealthy owners of the world banking, media, military & major corporations are in control of the world political & economic policies, so morally it doesn't really matter. They deceive, wage wars, killing and impoverish millions of the other 99% human populations, for the New World Order to satisfy their greed & arrogance, all in the name of democracy, freedom & war on terrorism. Does it sound delusional? Not if you are the so called? "God" chosen white western elephants.
There can be no secular solution to a criminal Government, until after there is a moral solution to an immoral society. "And yet the people keep looking to the criminal government and the endless revolving door of egoistic candidates as if it is they who are going to bring about a moral solution. And if, I, for example, dare to intimate that maybe, just maybe, it's up to us, as individuals and a people, to bring about a moral solution, I am tagged by some as blaming the people, not the evil overloads. And thus, we sow and we reap.

Keyser's picture

"The endgame to the global financial crisis is likely to require restructuring of debt on a broad scale."

And once again those of us that are fiscally responsible will take it in the ass while the banditos have their debts absolved and will probably get a bonus. Same as it always was. 

 

 

HardAssets's picture

Nothing particularly new in the interview, but its a good overall summary of conditions.

Notice how the 'reset' will require peoples pensions and savings to re-capitalisze the banks according to the author of the book ? 

Same ole, same ole - - - the people of the world are plundered by socio-path/psycho-path banksters, lawyers, politicians and various con men. They get mini-me socio-paths and the desperate to help them enslave the rest.

Read up on the psychology of socio-paths/pyscho-paths. They biologically/genetically lack any empathy for other human beings. They will do absolutely anything to get what they want. They often have surface 'charm'. These are the people who run the world.

Unfortunately today, they have control of weapons powerful enough to destroy the world.

DanDaley's picture

Greenspan quote is the quote of the day, but it should read:

 

-Alan Greenspan, 1966 (Before he was made to, or decided to, "get his mind right" as in learn to do what TPTB wanted him to do.)

Keyser's picture

Ahem:

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.

Alan Greenspan

hangemhigh77's picture

Burritos enchiladas tacos

Keyser's picture

After we cut off the heads of all commerical and central bankers.

Take a lesson from Vlad the Impaler. Put the heads on pikes and line Wall St with them. Let it be a message to those who would subvert the financial system for personal gain over public interest.

 

 

Bruce Flea's picture

I'm not sure he knows either.

 

 

Sparkey's picture

Wow!, 30 down arrows, at least I know someone reads this stuff!

 

GetZeeGold's picture

 

 

Some advice.....stay down.

post turtle saver's picture

let's have someone come on and tell you to stifle your opinions and stfu and see how you like it... this is fight club, not groupthink

GeezerGeek's picture

A few years back, Florida 'retired' its execution device, affectionately called "Old Sparkey". Considering your negative arrow balance, perhaps you might entertain the idea of retiring yourself.

Spanky's picture

Really?

Well hell, let's just get us some groupthink going and kill anyone who disagrees because... they disagree. To hell with why they disagree. Or their principles (and ours for that matter). Dissent from consensus cannot be tolerated and therefore cannot be allowed. Retire the blasphemer. Or send him to the Ministry of Truth for re-education. 

There, all better now?

All he said was the new boss might turn out to be the same as the old boss: That one ought think for themselves and eschew "idols" (i.e.: leaders). Just because you cheer for the leader he picked on doesn't negate the principle: Think for yourself.

But I guess the down-votes pretty much disprove that...

BoNeSxxx's picture

Well said.  I was thinking the same thing... there are many people to thank for spreading truth and most are good to a very specific point and then they go limp.

Alex Jones is a great example of this.  A hardcore 'truther' to some (and a meaningful dispensary of red pills to the masses).  Only by research and critical thinking does he (and many others like him) become revealed as a Limited Hangout with his own narrow agenda (ie he will point to the FED as the evil empire but the FED is an institution made up of actual people - people you will never hear him name).  Naming names is where the real risk is and it's a great litmus test for a Limited Hangout.

So the AJ fans will junk me and those who have seen that this Emperor has no clothes will lob me 'greenies'...

The important thing is always that one seek answers independently and critically.  There is no Messiah here or anywhere else.  Only fragments of truth which need to be carefully assembled and brought into our collective consciousness until the 100th monkey is aboard.  Until then, truth (much like happiness) is in the search for it.

Race Car Driver's picture

+ 1 for Truth and having to find it

These 'Truther' tards are the same folks who can't part with their precious big screen TeeVees.

Rafferty's picture

AJ is a huckster and never names the men behind the curtain.  But he has proven to be of great value by the simple fact of highlighting the utterly useless and tendentious nature of the MSM.  Be thankful for any little thing.

HardAssets's picture

So who are the names - - - - not the politicians. Not the ones we see on the 'news' (do you really think the ones at the top who pull the strings would allow themselves to be seen ?)

Not some vague group . . . . but who, exactly, runs the world ?

 

I remember listening to an interview by Catherine Austin Fitts, a sharp lady who had been high up in the US government. She said she hadn't been able to indentify the exact individuals at the top, only their high level functionaries.  I highly doubt anyone here could name names either.

AJ has woken up a lot of people to at least consider their view of the world. Yes, he tends to be a 'bull in the china shop'. He doesn't offer much in terms of real detailed solutions.He says as much himself - that his best role is to provide the red pill for exiting the Matrix. - - - - But people have to see the Matrix, before they can think about transforming it. Anyone who helps people to see,  is doing something worthwhile in my book.

 

post turtle saver's picture

don't worry Spanky, the goldbug crowd here will never get it... it's about energy, not gold...

US oil imports have dropped from 30% of oil used to 15% of oil used... that's equivalent to _all the oil used by Japan, which is the third largest economy in the world_... tell me that doesn't change the playing field... people are deluded if they're expecting any huge spike in gold prices in such an energy environment, especially since it's US domestic production driving the show

I'll say it again... the US is the largest energy producer in the world and US energy imports are decreasing... in particular, natural gas prices in the US are ridiculously low and will remain so for some time... the manufacturing backdraft into the US is going to be breathtaking over the next 20 years... it was already happening in 2008 and acceleration of this trend will continue... if you're hoarding gold and getting ready for the US dollar to collapse, get ready to get your ass handed to you

BoNeSxxx's picture

I don't know about that Tim... I think that which you posit is along a very singular dimension.  I could list 1,000 variables that would throw off your projection of glory for the the US manufacturing base.  To look at access to cheap energy alone is akin to saying that the Gobi Desert is ready for an Avocado plantation.  Energy alone is not enough. You need fertilizer, distribution, water, labor, etc...

The US has a long way to go before it is fertile ground for any appreciable manufacturing base.

There is the monetary policy (and a quadrillion in derivative exposure), high corporate taxation, a lack of clear international trade protection, a strong dollar kills exports, burdensome regulatory controls (ObummerCare, anyone), EEOC, IRS, DOJ, OSHA, SSA, EPA, etc...

I'd like to think you are correct (and in 1950 you may have been).  Today?  Not so much.  Too many headwinds to overcome before the US has a real economy and a lot of bankers to hang before we get there.

post turtle saver's picture

try to buy a BMW SUV that isn't made in the US... no such animal, they're all made in the US and will be for some time... German factories cannot compete because their energy costs are too high... this is just one example of many, expect mfg to come back to US in great measure... the logistics cannot be denied, cheapest energy, largest market, why pay money on overseas shipping costs... makes no sense to do so

edit: the US is now, and will continue to be, the largest manufacturer on the planet... you can bank on it... watch what happens in China over the next four years and you will see

eclectic syncretist's picture

Maybe some goldbug will stake a claim to the (golden colored) sun and then charge you 10X everyone else for it's emanations.

post turtle saver's picture

your little pile of gold won't make you a king... quit being a magpie and spend your money on something useful

akak's picture

So trying to maintain the value of one's savings against the corrupt and immoral depredations of government and its cronyistic banking system equates in your mind to hoping to see oneself as "a king"?  That is one quantum leap of (il)logic.

post turtle saver's picture

save your breath, akak... you know damn well what I was addressing... the mind set in this particular goldbug's little world that the end of the dollar will mean gold holders are instantly The Kings Of The World and oh look how the worm has turned now lick my shoe for crumbs maggots etc

too bad that will never, ever happen

Spanky's picture

I'll spend my money, or not, as I damn well please.

post turtle saver's picture

well shine on you crazy diamond lol

Race Car Driver's picture

Ron Paul is just a disinfo truth shepard anyhow. His supposed enlightened followers couldn't think their way out of a carboard box ... and so that's where they remain.

OC Sure's picture

Gotta like a man who names his son Rand.

nmewn's picture

Damned straight.

Its a lot like naming him Sue, he knows he'll grow up to be one tough SOB, made so by the people who oppose him.

Christie found out, ain't life funny that way ;-)

Offthebeach's picture

Jeasus Christy that fat swine. The media did a John McCain on him and he never once lifted his beady eyes out of their slop filled flattery trough were his snout was buried.

It is beautiful to watch him being hoof dragged into the media abattoir. Oh the squeals! How he twists and his strong stumpy legs kick, but still Hillary's metrosexuals, lesbians, pinkie ring unionists, a hack scribes each like a army of little leftists pull as much as they can to a indictment day, not too soon, the timing is important.

New Jersey Republican, pro gun control, under indictment? Fat chance fat boy.

He shoud'a known.
Leave the gun and the governor, take the canolies.

YuShun's picture

Rand, like Ike, is a nickname; the actual names
are Randal and Dwight.

Tall Tom's picture

That is why I downvoted your first post...and upvoted this one.

OC Sure's picture

Thanks. The first was a hasty quip. No offense intended.

Kinskian's picture

He couldn't very well name him Rosenbaum.

Jam Akin's picture

Volker wouldn't have worked very well either.

BigJim's picture

"What's your name, son?"

"Volker Paul."

"Volker, Paul? You mean Paul Volker?"

"Yes, Paul, Volker, as in in Volker Paul."

"Volker, Paul? You mean Paul Volker?"

"Yes, Paul, Volker, as in in Volker Paul."

rinse, repeat....

Al Gorerhythm's picture

After his denouncement of his father in favour of that Ken Doll, Mittens, I'll bet he's rueing the day he didn't name him Asswipe.

Tall Tom's picture

Anyone that will turn on his own father cannot be trusted.

Keyser's picture

"I owe my awakening and much more to that man. God Bless You Ron Paul!"

I once had a rather interesting convo with a Frenchman of some means in Bangkok a few years ago on the topic of Ron Paul and his position to end the Fed. The only point he could make was that monetary control in the hands of politicians would be suicide. My contention was how could they do any worse than the current central banking system, other than eliminating a few billion in annual proceeds to the money changers, considering the Fed has taken us from bubble to bubble and devalued the USD by 98% in their 100 year history. He dismissed the entire concept of ending the Fed as ludicrous and that Ron Paul was a fool. My only thought was that when madness abounds, common sense cannot prevail. If I had a business manager that fucked things up as badly as the Fed, they would get the boot. 

 

OC Sure's picture

"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