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Today Zero Hedge posts a couple of items suggesting that central banks are intervening surreptitiously in the markets even more lately to avert deflation or that they should intervene more — items suggesting an end to gold price and commodity price suppression as central bank policy.
The first item is from an anonymous commodity trader who can see no other explanation for the recent rally in commodities:
Such speculation is plausible since, as Eric Scott Husander, the founder of the market data firm Nanex in Winnetka, Illinois, disclosed in 2014, CME Group, operator of the major futures markets in the United States, has been offering volume trading discounts to governments and central banks for secretly trading all major futures contracts on CME Group exchanges and counts governments and central banks among its customers:
The second item at Zero Hedge reports a paper by an analyst for bond house Pacific Investment Management Co., Harley Bassman, advocating that the Federal Reserve should start buying gold to stimulate the economy by devaluing the dollar, as the U.S. government undertook devaluation against gold in 1934:
Bassman’s paper is posted in the clear at PIMCO’s Internet site here:
Such thoughts evoke the paper published in 2012 by the American economists and fund managers Paul Brodsky and Lee Quaintance speculating that central banks were surreptitiously redistributing the world’s gold reserves and aimed, upon the scheme’s completion, to revalue the monetary metal substantially upward to reliquefy themselves, a paper GATA often has called to your attention:
Indeed, the idea of an upward gold revaluation to avert debt deflation was also broached in a 2006 paper by the Scottish economist R. Peter W. Millar, called to your attention by GATA the following year —
— and even by a former member of the Federal Reserve Board, Lyle Gramley, during an interview with Business News Network in Canada in 2008. Though BNN seems to have removed the video of the interview, your secretary/treasurer transcribed the relevant passage when he called it to your attention here:
For several reasons your secretary/treasurer long has been inclined to believe that gold price suppression would be followed by an official gold revaluation.
First, of course, as Millar noted in 2006 and as Bassman notes now, official gold revaluations have happened before.
Second, because official market intervention to suppress prices always causes shortages eventually, that being the lesson of the collapse of the London Gold Pool in March 1968:
And third, because central banks and governments could not survive any steady erosion of their currencies in favor of gold; their currencies would become vulnerable to quick collapse. As a result central banks and governments would have to get in front of the inevitable and make it seem like their doing and thereby preserve the impression that they remain in control.
So if the stars are aligned for an official revaluation of gold, will this nullify GATA’s work?
Not at all.
For as much as GATA’s research long has implied a huge and uncoverable short position in gold underwritten by central banks and thus a much higher price for the monetary metal, and as much as GATA may be placed in the camp of “gold bugs” and gold investors, GATA’s objectives have not really been a higher gold price.
Rather, GATA’s objectives have been free and transparent markets in the monetary metals and commodities; limited, accountable, and democratic government; fair dealing among the nations; and an end to imperialism, whose primary mechanism in recent decades has been currency market rigging, just as it was the primary mechanism of Nazi Germany’s exploitation of occupied Europe during World War II:
It will gain the world little if gold’s upward revaluation merely begins another, more sustainable round of gold and commodity price suppression and the undermining of free and transparent markets and democracy by central banks and governments, free and transparent markets and democracy being the great engines of human progress and liberty.
That’s why the questions GATA raises are likely to remain compelling, though we may despair of their ever getting posed by mainstream financial news organizations and market analysts:
— Are central banks trading the gold and commodity markets surreptitiously, directly or through intermediaries, or not? (Of course they are, and GATA has summarized much of the documentation of this trading here —
— though it can never be addressed by people who suppose themselves respectable.)
— If central banks are trading the gold and commodity markets surreptitiously, directly or through intermediaries, is it just for fun — for example, to see which central bank’s trading desk can make the most money by cheating the most investors — or is it for policy purposes?
— If central banks are trading the gold and commodity markets surreptitiously, directly or through intermediaries, is this trading for the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?
— If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy and democracy again?
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About Chris Powell:
Mr. Powell has been managing editor of the Journal Inquirer, a daily newspaper in Manchester, Connecticut, since 1974. He serves as the secretary/treasurer and a director of the Gold Anti-Trust Action Committee (GATA). Mr. Powell publishes GATA “dispatches” on stories relevant to the precious metals community: click here to access them and the GATA website. For additional information about precious metals, financial markets and the economy a 2 week free trial to GATA chairman Bill Murphy’s subscription service is available by clicking here.