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Washington Agreement is another gold rig, former Fed and Treasury official admits

Section: Documentation

12:12p ET Tuesday, January 1, 2013

Dear Friend of GATA and Gold:

Coordination of European central bank gold sales under the Washington Agreement on Gold, an agreement made in 1999 and updated in 2004 and 2009, is "the modern counterpart" of the London Gold Pool of the 1960s, which controlled gold prices until it collapsed in March 1968, a former Federal Reserve and U.S. Treasury Department official told an international investment conference a month ago.

The former official, Edwin M. Truman, went on to describe an enduring system of daily communication among Western central banks in which they share "confidential information" that includes "the size, currency, and nature of their foreign exchange market operations."

Thirteen years ago as assistant treasury secretary for international affairs, Truman denied in a letter to GATA that the Treasury Department was involved in manipulation of the gold market. But he did not volunteer any awareness of gold market manipulation from other sources.

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Ironically, in his presentation to last month's investment conference, sponsored by the Bank for International Settlements and the World Bank and held in Washington --

-- Truman, now a senior fellow at the Peterson Institute for International Economics, urged greater transparency for central banks and sovereign wealth funds and seemed to argue that they should not resist devaluation of the U.S. dollar. Truman cited the work of two colleagues at the Peterson institute who last week published a report blaming the U.S. trade deficit on currency manipulation by foreign central banks and advocating dollar devaluation:

Of gold market rigging in the 1960s and today, Truman said: "Participants, a subset of the G-10 countries, cooperated in feeding gold into the London gold market to help keep the price close to $35 an ounce. The modern counterpart of the gold pool is the agreement among the central banks of some of these same countries to limit their market sales of gold. But that agreement, which currently runs through 2014, does not extend beyond a small group of countries."

A detailed description of the London Gold Pool is posted at Wikipedia here:

The European Central Bank's most recent statement about the coordination of central bank gold sales is posted here:

Of secret coordination of Western central bank currency market interventions, Truman noted "the establishment at the BIS in 1962 of the Gold and Foreign Exchange Committee of the G-10 central banks," adding, "At regular monthly meetings, participants exchanged views on conditions in gold and foreign exchange markets as well as their own operations. These discussions involved extensive sharing of confidential information. Later on these same central banks began regularly to participate in daily telephone calls in which they discussed, and exchanged information on, financial market developments including the size, currency, and nature of their foreign exchange market operations."

But Truman's presentation to the BIS-World Bank conference seems to have been mainly a lament that the United States is losing control of the world financial system as huge dollar foreign exchange reserves are held opaquely by foreign central banks and sovereign wealth funds and the U.S. government can't keep track of them and know where they may be used to strike next. He says more cooperation with international "public-sector investment policies" is needed and warns that "the alternative to increased cooperation on public-sector investment policies is a currency war."

Of course given his biography --

-- the greatest blow for transparency in the currency markets might be struck simply by strapping Truman himself onto a witness stand somewhere and putting him under oath. Wikipedia quotes New York Times columnist and Nobel Prize-winning economist Paul Krugman as having described Truman as "the George Smiley of international economics" --

-- George Smiley being the British intelligence officer of the John LeCarre spy novels. Ever since Truman manifested himself during a GATA delegation's visit to U.S. House Speaker Dennis Hastert and other members of Congress in Washington in May 2000, GATA Chairman Bill Murphy has been describing Truman as a Central Intelligence Agency asset.

Truman's presentation to the BIS-World Bank conference, acknowledging that gold market rigging continues through the Washington Agreement on Gold, is posted at GATA's Internet site here:

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

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