By Patrick A. Heller – Liberty Coin Service
Commentary on Precious Metals Prepared for CoinWeek.com
Over the past ten years, the Feds have admitted to almost every kind of market rigging including stock prices and interest rates on Treasury debt. It has also openly subsidized and bailed out banks, Fannie Mae and Freddie Mac, the housing industry, and automotive companies.
The government has openly manipulated commodity market prices such as oil (by using part of the Strategic Petroleum Reserve). By postponing the Keystone oil pipeline, the president has thrown a huge financial benefit to Warren Buffett, his richest political supporter. Oil that would have been carried by the pipeline will now have to be carried mostly by railroad cars of companies owned by Buffett’s Berkshire Hathaway.
Even though the federal government will admit that it has intervened and manipulated in almost every market niche, officials are still trying to claim that it has kept hands off of the gold market.
In 2007, the Gold Anti-Trust Action Committee, Inc. (GATA) sued the US Treasury and the Federal Reserve under the Freedom of Information Act seeking information on the US governments gold swap arrangements and activities going back to about 1990. These efforts were unsuccessful. Shortly after Barack Obama became US president, GATA renewed the effort. Then Federal Reserve Board Governor Kevin M. Warsh rejected GATA’s request under exemptions from disclosure that were almost an open admission that such arrangements and activities had occurred. Upon judicial appeal, the Federal Reserve was ordered to release one document in February 2011, which disclosed the existence of a secret 1997 G-10 meeting at which US officials discussed gold swap arrangements.
Paul Volcker served as the US Treasury Undersecretary for International Monetary Affairs from 1969 to 1974 and as chairman of the Federal Reserve from 1979 to 1987. He is currently an economic advisor to President Obama. In his published memoirs, Volker discussed the 1973 revaluation of the US dollar, expressing his opinion that it was a mistake the US government had not intervened at the time to prevent a steep rise in the price of gold.
Recently, Lars Schall, a German freelance journalist, became curious why Volcker had never been questioned about this particular statement contained in his memoirs. Through persistent efforts, Schall was able to send his questions to Volker. On January 26, Schall received Volcker’s reply, which was sent by Volcker’s wife in her capacity as his professional assistant.
The second paragraph of Volcker’s letter states, “The U.S. has not, to the best of my knowledge, intervened in the gold market for more than 40 years.”
Upon seeing the information in Volcker’s letter, writer Rob Kirby quickly discovered that the statement was a lie. Official United Nations documents posted on the UN website name Volcker as the “fiscal agent” for the U.S. Treasury in matters related to gold swaps with the Bank of England executed in 1981, during the time when Volcker was chair of the Federal Reserve.
Kirby published his column on with this information on January 31 at http://news.goldseek.com/GoldSeek/1328037291.php. Apparently, within hours of the appearance of this whistle-blowing article, “someone” at the United Nations disabled the link to the 1981 document. However, before the document coincidentally disappeared, GATA had copied it and posted it on the GATA website at http://www.gata.org/files/GoldSwapTreatyUSUK-UN.pdf.
On February 1, Jonathan Bier in Britain asked the United Nations why the link had been broken. The UN employee had no explanation, but did provide another link to the document on the UN’s website of http://treaties.un.org/doc/Publication/UNTS/Volume%201267/volume-1267-I-20864-English.pdf.
As I write this column, that alternate link is still viable. However, by the time you read these words, it may be disabled as well.
It is highly unlikely that this sequence of denials and suppression of evidence was a coincidence. You may ask why the US government would have an incentive to engage in such public deception over intervening in the gold market, given the openness at which it intervenes in so many other financial markets.
The answer is pretty basic. The price of gold is effectively a report card on the US dollar, the US government, and the US economy. The higher the price of gold gets, the worse the US looks. If the US government looks to be in dire straits, investors are going to demand higher interest rates on Treasury debt. Foreigners will become more aggressive at repatriating $4 trillion of US currency which right now serve as an interest-free loan to the US government.
As more information is revealed confirming surreptitious US government suppression of gold’s price, there will be even more incentive for investors and central banks around the world to dump their dollars and acquire other safe haven assets—like gold.
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.
Hello paranoia! I didn’t know coinweek had a comedy section.
Gold swaps by central banks are nothing new, and they are not evidence of gold price manipulation. Also, the Fed has always set short-term interest rates. That is neither new, nor nefarious. Most of the other Fed actions mentioned were taken in the context of the 2008-present crisis such as taking actions that help lower long-term rates as well. Long-term rates are in theory set by the market, but in an economic crisis the Fed can do things to keep those rates down, such as through quantitative easing measures.
Oh yeah, the Fed is pure as the wind driven snow. Since you bring up the term “Quantitative Easing” in your post, why don’t you explain the term? Give us an idea of how it is that the Fed can “purchase” an unlimited supply of U.S. Treasuries. Then compare and contrast the Fed’s “Monetary Policy” with counterfeiting?
Counterfeiters at least have to invest in a printer , paper and ink, all the fed has to do is click a mouse and add a few ZEROS to a bank’s account. Digital/virtual dollars says it all, don’t you think?
silv…and gold bug……you both seem to be missing the point here….Our Gov’t and those who “RUN” things are certainly in control of perpetuating the paper currency frauds and deception that FRN’s are actually money or a place to store ones “credits” to spend later…..If you both believe that the paper dollar fraud doesn’t exist, I’ll say a little prayer for you tonight….or at least for your families, cause your being naïve as heck and will be taking a bath financially if you are all in, with the paper currency, as a store of your assets/wealth. Bank on that reality !
meanwhile, the rest of us will live out our full lives using FRNs that are easily accepted worldwide as money to purchase everything we need in life.