By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
Last Sunday, a new study was released. Titled “Dr. Zijlstra’s Final Settlement: Gold as the Monetary Cosmos’ Sun,” it was written by Dutch economist Jaco Schipper who writes at www.MarketUpdate.nl.
Jelle Zijlstra served as the Dutch Minister of Economic Affairs from 1952 to 1959. He was the Finance Minister from 1958-1963. He served as Senator from 1963-1966. In 1966 he became Prime Minister and again served as Finance Minister. He resigned both positions in 1967 to become head of the Dutch central bank, a position he held until the beginning of 1982. Perhaps most significant, Zijlstra also served as Chairman of the Board and as President of the Bank for International Settlements from July 1967 until January 1982.
Zijlstra wrote two memoirs. The first, titled “Dr. Zijlstra” discussed his time as a central banker. He recounted a story on page 191 where US Assistant Treasurer Paul Volcker and a member of the Federal Reserve Board flew to meet with him in July 1971. The Dutch central bank had converted $600 million in US currency into gold thus far that year, and the Americans were trying to persuade him to cease such activity.
During the meeting, Volcker told Zijlstra, “You are rocking the boat.” To this, Zijlstra replied, “If the boat is rocking because we present $250 million for conversion into gold or something that can be considered an equal asset, then the boat has already perished.” The Dutch then redeemed this final tranche of US currency.
President Nixon terminated further currency for gold redemptions less than a month later.
Zijlstra’s second memoir was titled “Per Slot Van Rekening” which can be roughly translated as “The Final Settlement.” It goes into further detail about his activities as a central banker and how the US government worked with other central banks to suppress gold prices.
On page 222 the author specifically attributes the creation of Special Drawing Rights as an attempt to manage international monetary systems because the price of gold was too low. The most important point of the memoir is that Zijlstra considered gold to be the only currency that was suitable as the center of the “monetary cosmos.”
Now that the US government’s attempts to suppress gold prices have been further confirmed—this time by someone with global inside information, those who continue to claim this is not true have even less of a leg to stand on.
The ramifications of both of these developments are almost certain to support higher gold and silver prices in the coming weeks.
Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles). His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.
Patrick,
You have once again missed the ENTIRETY of the point Dr. Zijlstra was making. The context of the narrative is 1971, the time of the final collapse of the utterly stupid and ill-advised Bretton Woods protocol. Of bloody course the U.S. government was trying to suppress the value of gold – gold that was still being “sold” to foreign governments at the artificially set price of $35 per ounce. Remember, U.S. citizens were not allowed by law to own bullion, but any government overseas holding dollars was allowed to “steal” it at $35 an ounce. Any U.S. government that WASN’T trying to “suppress” the price of gold to near $35 should have been impeached, if not shot.
That was then. This is now.
By the way, Patrick, you are on video from Orlando FUN predicting silver at over $60 an ounce by the end of this month. Care to go for “2 ounces under $60”?
Patrick , i didn’t get your last words.
what ramifications of both of what developments can support the high price. why?
can you explain more clear , thanks
Dear Kurt,
Thank you for your comments. However, I think you entirely missed the main point of the article, perhaps because I did not explicitly state it. The fact of the US government’s involvement in manipulating gold prices during the days of the London Gold Pool in the late 1960s after after the Pool collpsed was previously documented with the release of some declassified US documents a few years ago. So, Zijlstra’s confirmation was not a new revelation. The problem is that the US government has consistently denied having manipulated the market, even in the face of mounting documentation of that lie.
As for my predictions in late 2011 and early 2012 that gold would surpass $2,000 and silver $60.00 by the end of May 2012, I will comment further after May 31. I have a long track record of owning up to the accuracy or inaccuracy of my short- and long-term predictions. I have several times been off on the specific forecasts as to timing, but have seen the forecasts realized shortly after the specified deadline of my predction. Right now there seems little possibility that these targets will be reached. If they do not, then it is time to review the market developments that kept that from occuring. Look for a further discussion in four weeks.
Let me guess the answer in advance, then. Somebody “suppressed” the market price, right? Patrick, it all depends what you have as a definition of “suppress”, doesn’t it? If you define that as meaning that there are powerful traders in the financial mega-bank category that hold vast long positions and then trade them just when “monetary hawks” like you think the underlying fundamentals point upward, then yes, there is suppression. Or maybe they write naked undercovered short positions, like most of us can’t. Either way, they are a key feature of the market. And while I might not like it, and you OBVIOUSLY don’t like it, they basically ARE the 800-pound gorillas in metals markets, and physical delivery buyers like us (more you than me, brother), are the pawns who move nothing, but get the wrath of EVERYTHING.
The one year trend is now fully “bear”. I predicted it TO THE WEEK (ask David Lisot) last year.
If you want to gain a “flavor” for what moves the silver market in particular, go to http://www.kitcosilver.com and check at what time in the nearly 24-hour worldwide trading day signifcant moves nearly always occur. The New York Menchantile Exchange (NYMEX) portion of the day is where 90%+ of the time, the “rubber meets the road”. The other markets – Hong Kong, Sydney, the online NY Globex hours, even London – VERY rarely reverse trends set by the NYMEX. Apparently, whoever is moving (manipulating?) the silver market does business in New York from 8:15AM to 1:30PM. That is where 800-pound gorillas are found. THEY ARE THE SILVER MARKET. Physical delivery silver bullion buyers (and that includes buyers of $1000 bags) are little more than roadkill waiting to happen.
Patrick,
I appreciate the difficult position that you are in concerning gold as someone who makes money from the sales of bullion but referring to manipulation of the gold market for every situation is simply not holding up in this market. Also, oversimplying the world’s economic model for the sake of generating fear and sales is wrong. Gold (as of May 25) has a bottom holding range of $1,550 to $1,600. as the dollar has strengthen (due to being the world’s currency), gold has dropped. Also, turmoil in southern Europe and a slowdown in China’s economy has people fleeing to US paper currency. Finally, cost of mining gold in Africa has stablized in the $1,100’s. Never bet against America as we have problems but not nearly like that of other nation’s and people still flock to American dollars despite your clearly erroneous predictions in an effort to sell bullion.