An exchange on gold's future, and GATA's

Monday, January 5, 2009

Dear GATA:

I am wondering if the words of Commodity Futures Trading Commission member Bart Chilton, distributed by GATA on January 4 (http://www.gata.org/node/7056), are a sign of movement due to our efforts, or whether they just more good intentions and high ideals with no practical effect. I think the man may mean well, but that and 50 cents will get you on the bus.

Perhaps you could tell me the following. As supporters of GATA, what exactly will be our goals now? Will it be enough just to get the government to stop coaxing major banks to use the futures markets to "manage" the price of gold and silver? Must they also admit to criminal liability in ignoring the Sherman Anti-trust Act in their market interventions? Or will it be enough simply to end the massive naked shorting of gold by the banks? I wonder what we can reasonably expect the U.S. government to do to address our complaints.

As silver market analyst and manipulation opponent Ted Butler recently suggested, I complained to the CFTC. The only commissioner who replied to me was Chilton. But high ideals are one thing and action is quite another. I am quite alarmed that Gary Gensler has been nominated to the chairmanship of the CFTC because of his work as undersecretary of the Treasury under Clinton. Gensler must have had a role in previous interventions in the gold market and so might have incentive to prevent their disclosure.

Another concern of mine is the advisory role being given by President-elect Obama to former Treasury Secretary Lawrence Summers. We are well aware that his work regarding "Gibson's Paradox" served as the theoretical basis for suppressing gold and supporting the dollar. How can we expect any progress when key figures in the new administration have their own records to protect?

This reminds me of when the Bush administration was installing at the Treasury Department the same undersecretariat from the Rubin/Summers regime. While the gold price rise was inevitable because of dehedging by miners, the government's old playbook was still in effect.

Your other January 4 dispatch, referring to the Barrick/Blanchard lawsuit (http://www.gata.org/node/7055), has a point well taken. Barrick's defense was that the company was acting as the agent of the U.S. government. Who could make up such a claim? The history reads like a bad situation comedy.

Please tell me. Should I expect that the only way for all this misbehavior to end is with a disastrous price explosion that takes down banking interests that have cooperated with the Rubin/Summers scheme?

If so, tell me this: If the Federal Reserve can print an unlimited amount of cash to fund all sorts of bailouts, why can they not print all the money those banks need to maintain control over the gold price on the Comex indefinitely? Does the flight from the Comex of some investors mean that people don't trust the price there? In spite of all that has happened, which is really quite unbelievable, won't people just go back to business as usual? It seems that this is how folks tend to operate.

What is the reform we are after?

I see many earnest people with hugely relevant good intentions, some even in high positions.

I have followed GATA's excellent work since close to the organization's founding. Could you please enlighten me with your vision of where all this is all going?

What do you see as our next move and how can I get involved? Is there anything someone like me can do to press this issue?

-- Mark

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Dear Mark:

Thanks for your thoughtful note.

GATA's goals and charter remain what they've always been: to expose and do whatever we can to end the manipulation of the gold market and related markets. Of course it would make some of us very happy if the people involved in the manipulation had to go to jail for a while, but we don't expect that, since anti-trust law violations are civil, not criminal.

I'm not sure what to make of Chilton's essay. I don't think it said anything new. It well may have been only posturing. But the guy seems sincere so far and unlike nearly everybody else in authority he is hearing us out and talking to us, so I'm very grateful and willing to give him a little time.

Yes, the appointments of Gensler and Summers are disappointing, even if people like them had to be expected. At the national level Wall Street runs both political parties.

But if governments ever get out of the gold market, the price will rise to unimaginable levels. That's why governments are in the gold market -- to prevent that.

The money-printing facility does give central banks enormous control over the gold price. I believe that bullion banks are effectively reimbursed by central banks all their losses in shorting gold. But some real gold does have to be produced to keep the suppression scheme going, and thus the perpetrators of the scheme are not omnipotent. The physical market can end it. Any government with a large dollar surplus can end it by selling Treasuries and buying gold.

My hunch long has been that the scheme will be ended all at once by an international central bank currency agreement -- something sudden, as all currency agreements are. Gold would be revalued upward to spur production, slow the drain on central bank gold reserves, and devalue sovereign and private debt, averting the catastrophic debt deflation that seems to be developing.

The essential reform might be a worldwide treaty keeping governments out of the gold market. We're not likely to live long enough to see that much honesty and goodness on this planet. But any government that wanted a free market in gold could bust the price suppression simply by buying physical in substantial amounts at strategic moments. Eventually Russia, China, and even the European Union may do this to get out from under U.S. dollar imperialism. Or maybe the retail market will do it as ordinary investors take the gold away in tens of thousands of little pieces. This seems to be happening already to some extent. GATA wants to keep encouraging it, just as Jim Sinclair does.

Further, there are at least four lawsuits that, with sufficient funding, GATA could bring to hasten the end of gold and silver price suppression:

1) Against the CFTC for failing to enforce its anti-concentration rules in the gold and silver markets.

2) Against the Fed for refusing to disclose documents on the U.S. gold reserve.

3) Against the Treasury for refusing to disclose documents on the U.S. gold reserve.

4) Against the U.S. Mint for disregarding the law requiring it to mint as many gold and silver coins as are necessary to meet demand.

But such legal actions would cost perhaps $100,000 just to initiate, and with the money we have right now GATA will be lucky to sustain its ordinary operations through March. Our recent solicitations of some big people in the mining industry have been especially disappointing, producing nothing at all. Of course nearly everybody in the gold sector is hurting financially, and the failure of the World Gold Council just to be a world gold council, its failure to spend even a little of its +$60 million annual budget on combatting the price suppression, takes most of the mining industry out of the picture and ensures that the suppression will continue longer than it has to.

Unlike the World Gold Council, GATA strives to liberate gold and we are usually doing something in that direction. That most precious metals investors now seem to have heard of the price suppression scheme and understand the extraordinary potential of investing in the metals is largely GATA's doing. As always, how much more we do will be largely a matter of how much support we get.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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