gold - breaking free.

  1. 217 Posts.

    By Sean Corrigan
    [email protected]
    Wednesday, August 27, 2003

    Though vehemently denied by all and sundry in officialdom,
    there are many in financial markets who will tell you that the
    decision taken suddenly in 1999 by Culpability Brown, with
    the endorsement of Sir Eddie the Unready George to dump
    roughly 400 tonnes of Britain's precious reserves of gold at
    what was then a 20-year (and is now a 24-year) low of just
    under £157/oz, was not some rational act of "portfolio
    management" but rather a deliberate attempt to cap prices
    until enough metal could be transferred to bullion banks --
    and their central bank backers -- holding wildly overstretched
    short positions.

    As Reg Howe of put it in his legal
    complaint against the Bank for International Settlements for
    this very act of price fixing, a case never defeated but only
    dismissed on the technicality that Howe was not the party
    who had been damaged by any such operation and so was
    not eligible to file the suit:

    "Edward A. J. George, governor of the Bank of England and
    a director of the BIS, to Nicholas J. Morrell, Chief Executive of
    Lonmin Plc: 'We looked into the abyss if the gold price rose
    further. A further rise would have taken down one or several
    trading houses, which might have taken down all the rest in
    their wake. Therefore, at any price, at any cost, the central
    banks had to quell the gold price, manage it. It was very
    difficult to get the gold price under control but we have now
    succeeded. The U.S. Fed was very active in getting the gold
    price down. So was the U.K.'"

    In an infamous remark made the year before this alleged
    exchange -- and ironically just before Long-Term Capital
    Management nearly blew up the whole of Wall Street --
    Fed Chairman Alan Greenspan also assured his listeners
    tha no harm could eventuate from the swelling numbers of
    unregulated derivatives in existence and that neither could
    "private counterparties restrict supplies of gold . where
    central banks stand ready to lease gold in increasing
    quantities should the price rise."

    Moreover, in February of this year Antonio Fazio, head
    of the Banc d'Italia, told a London audience: "In a system
    that rests basically on fiduciary money, the principles of
    free trade and comparative advantage typical of trade in
    manufactures have sometimes been extended
    unquestioningly to movements of financial capital."

    Which, in English, means it's all very well opening borders
    to trade, but not to unlimited quantities of hot paper money
    all chasing the latest vogue.

    "Reflection on the mistakes made and the need to limit
    and rectify the adverse effects on the stability of
    intermediaries, to protect savings and to restore conditions
    for a recovery in output, have prompted the monetary
    authorities of the industrial countries to establish more
    extensive and closer cooperation among themselves and
    with the developing countries," Fazio continued.

    A particularly bold assertion of the truth of widespread
    collusion, you will perforce agree -- and who was the driving
    force behind this, do you think?

    "The governor of the Bank of England, Sir Edward George,
    plays a leading role in this new phase of international monetary
    cooperation that we could say began with the meeting of the
    Group of Seven leading industrial countries in Toronto in
    February 1995, shortly after the Mexican crisis erupted."

    It should be noted that the rescue of those caught in this
    so-called Tequila Crisis is increasingly recognized as
    being the event that induced financial market participants
    -- knowing this "monetary co-operation" could be relied
    upon to bail them out from any penalties of their future
    excesses -- to unleash the mania which was to become the
    Bubble upon us.

    In fact, so wondrously successful has this heroic co-operation
    been that it has seen most of Asia, Russia, Poland, Turkey,
    and Latin America blow up since, together with most of the
    developed world's media, telecom, technology, and power
    industries, while stripping the heart out of pensions and
    insurance companies everywhere and fostering a near-global
    property and consumer credit boom of dangerous proportions.

    Not a bad legacy for the now-retired Sir Eddy and his
    can't-be-shifted-with-a stick-of-dynamite buddy "Sir" Alan

    But what is the point of all these ruminations and why
    bring all this up now?

    Well, it's just that today saw the sterling price of gold hit
    £236.50/oz -- some 50 percent above the lowest price the
    Bank of England achieved in its crash sales programme
    and nearly 30 percent above the average price of roughly
    £184/oz achieved in the course of the 17 auctions
    subsequently held.

    That means that Brown and George between them managed
    to sell a decent chink of Britain's patrimony for a cool £660
    million less than it would have fetched today -- enough for,
    say 30,000-odd teachers' annual salaries, or around
    nine-tenths of a Millennium Dome!

    By printing money themselves, and by alternately inveigling
    and turning a blind eye to the financial big guns' drive to
    distort prices and to force capital where it has no business
    going, the central bankers can keep the plates spinning for
    what seems like a very long time indeed, but, eventually,
    gravity wins -- and they fall.

    Mister Market may be bound, gagged, and chained to a
    radiator for long years at a stretch, but eventually he comes
    stumbling out into the sunlight, turning his captors' dreams
    to dust.

    Gold -- and silver and platinum too, if today's price action is
    any guide -- may be about to show up the hollowness of the
    bankers' schemes and to reveal finally the vast scope of the
    hitherto partly hidden inflation they have engineered into the

    And if that happens, be under no illusions: It will dramatically
    change the outlook for us all.

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