Fearing run on dollar, Goldman's collapse, did Paulson not rig markets?

By Adrian Douglas
Sunday, January 31, 2010

Today's Financial Times story dispatched by GATA, "Paulson Feared Run on Dollar and Collapse of Goldman Sachs" (http://www.gata.org/node/8290), was very enlightening.

Former Treasury Secretary Hank Paulson says he feared a run on the dollar during the financial turmoil in the fall of 2008. But at that time we were told that the dollar was going up because of investments seeking "safe haven" and "a flight to quality."

At GATA we all knew it made no sense for the currency of a country that was at the center of a credit crisis to be rising in value. This just doesn't happen. Look at Greece or Iceland. People run away from countries in debt crises, not toward them.

We know that U.S. Treasury debt and the dollar made totally counterintuitive moves because someone made that happen.

We know that JPMorgan Chase and HSBC sold 10 percent of the world's annual gold production and 25 percent of annual silver production in one month.

We know from market analyst Don Coxe that the government took down commodities. (See http://www.gata.org/node/6574.)

We know there were at least half a trillion dollars of currency swaps.

So when Paulson feared a run on the dollar, can we believe that he sat back and did nothing? And can we believe that, as he did nothing about it, a miracle happened -- that gold fell 25 percent and the dollar rose by an almost equal amount and Treasuries rallied?

I think the only reasonable conclusion is that if Paulson feared a run on the dollar, he surely did something to prevent it. That is, he was responsible for ordering manipulation of markets such that they behaved in a totally counterintuitive way.

I hate to buy Paulson's book and make him any richer but it may be worthwhile to read it closely for a tacit or otherwise admission of manipulation of the gold market.

Paulson is either the luckiest Treasury secretary in history or he is a manipulator of the highest order. Given that he was previously CEO of Goldman Sachs, I think he wouldn't even know how to keep his hands off the markets.

Paulson also told the FT that he feared that Goldman Sachs would collapse. Considering that he held $200 million in Goldman Sachs shares, I wonder if anyone is going to look at what his real motives were for saving the country with wall-to-wall market manipulation.

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

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