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New York Fed official celebrates a century of market rigging

Section: Documentation

2:32p ET Thursday, January 20, 2018

Dear Friend of GATA and Gold:

Last month an official of the Federal Reserve Bank of New York celebrated a century of cooperation by central banks in secret interventions in the markets. His address was posted on the internet sites of the New York Fed and the Bank for International Settlements, but mainstream financial news organizations have yet to take note of it.

The official, Simon M. Potter, executive vice president of what the New York Fed calls its Markets Group, spoke December 20 at the bank's "Commemoration of the Centennial of the Federal Reserve's U.S. Dollar Account Services to the Global Official Sector":

Central banks, Potter said, often prefer and sometimes require their foreign exchange reserve managers to use the account services of other central banks.

... Dispatch continues below ...


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"This is especially true," Potter explained -- with GATA's emphasis added below -- "for liquidity tranches of reserve portfolios where safety and accessibility are critical for the execution of core central banking functions, including foreign-exchange reserve management, foreign-exchange intervention, time-sensitive official payments, macro-prudential policy, lender-of-last-resort responsibilities, and other central bank operations that may require the use of foreign assets and currencies." ...

Do the "assets and currencies" used in those interventions ever include gold? A PowerPoint presentation made by the Bank for International Settlements in 2008 said they do:

"For the world's major central banks, the maintenance of operational links through reciprocal account relationships is integral to their ability to engage in global financial stability operations. Having accounts, settlement instructions, tested and secure lines of communication, and business processes already in place at the time of or leading up to a crisis enhances major central banks' ability to respond to crises efficiently and flexibly.

"There are numerous historical examples, both known and unknown to the public, of these account relationships being used to support the stability of the global financial system, perhaps best exemplified historically by the Bretton Woods network of central bank swap lines.

"More recently, in nearly every major international incident over the past 20 years that has prompted a coordinated response by the world's major central banks -- be it coordinated foreign-exchange interventions by the major central banks in the wake of the 2011 Fukushima disaster, the swap lines established during the 2008 financial crisis, or swap lines in the wake of 9/11 -- the reciprocal accounts among major central banks formed the backbone for the actual or potential execution of stabilization policies. Without these accounts, coordinated central bank action in pursuit of financial stability objectives would be either severely handicapped or entail high risks in terms of the safety, confidentiality, and reliability of these operations."

Ah, yes, the heroism of central bankers intervening in markets in cases "both known and unknown to the public." How romantic -- and how profitable!

After all, were those interventions, while unknown to the public, known to certain parties associated with central banks, parties facilitating or helping to implement those interventions? Were those intermediaries able to trade on their knowledge of those central bank interventions? Why were some of those interventions never made public?

All this might be a good subject for financial journalism, if there still was such a thing.

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

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