By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
Some who read my columns object to my statements that a growing number of analysts, investment and hedge fund managers, precious metals commentators, and others in related financial markets have come to the conclusion that the gold and silver market prices are being suppressed by the US government, its trading partners, and allies.
There is no single “expert” whose pronouncement is taken as the last word on the subject. Instead, there is a constant trickle of such financial observers and writers who reach this conclusion. In my own research, I am not coming across anyone who says that they formerly thought that gold and silver prices were manipulated but now no longer think so. That’s right, the trend is for people who used to assert that there was no proof of manipulation to now agree that price suppression is taking place.
The best place to go to review a “scorecard” of experts who have come to the conclusion that gold and silver prices are rigged is to review the “Daily Dispatches” section of the Gold Anti-Trust Action Committee (available at www.gata.org). To give you a sample of some of the information you will find there, let me review some of the information posted within the past few days.
Perhaps the most interesting is a 6-page report prepared by South Carolina State Treasurer Curtis M. Loftis, Jr. following a request from the state legislature about the advisability of investing in gold and silver. You can access this report at http://www.treasurer.sc.gov/Documents/Proviso%2089%20145.pdf. In the discussion of gold and silver as an investment, the second paragraph states: “Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, The London Bullion Market Association, JP Morgan Chase, and HSBC Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artificial price suppression.”
Further down, the report reads: “Along with chronic delivery delays, some investors have received delivery of bars not matching their contract in serial number and weight. Because of these problems, there are concerns that COMEX may not have the gold inventory to back its existing warehouse receipts.”
At http://futuremoneytrends.com/index.php/category-table/157-charles-biderman-interview- you can read Charles Biderman’s (from Trim Tabs Investment Research) conclusion that investors and pension funds have been exiting US equities and hedge funds since 2007 and that the US government has been forced to actively manipulate the US stock markets to keep them from crashing.
Or you can go to http://www.chrismartenson.com/blog/charles-biderman-problem-rigged-markets/73098 where analyst Chris Martinson states: “The issues before us as investors are as daunting today as they can possibly be, and my position has been that today we are all speculators, not investors, because we have been placed in the uncomfortable position of trying to guess what the central banks are going to do next. Also weighing on investors today is the fact that our official data is what I call fuzzy. That is, it is often statistically massaged to make things look a little bit rosier than they otherwise might.”
Even Stanford Economics Professor John Taylor wrote about financial repression at http://online.wsj.com/article/SB10001424052702303816504577307403971824094.html.
Then Jim Grant, writer of Grant’s Interest Rate Observer and former columnist for Forbes, gave a scathing interview of Federal Reserve market manipulation at http://video.cnbc.com/gallery/?video=3000080414.
Perhaps most impressive is that these are not even all the reports from just the last week that are all posted at www.gata.org!
You don’t have to take my word that more people are acknowledging the US government’s actions at suppressing gold and silver prices along with manipulations in other financial markets. Read the source documents or watch the recorded interviews for yourself. Then just try to find any expert who formerly stated that gold and silver and other markets were manipulated but now no longer thinks that way.
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, Thank you for another informative article. My question for you is this: What’s the average investor in physical to do? I’m not alone in wondering, I’m sure, how does this information help me in the short term. I know the OBJECT of the suppression is to keep people in Dollars and out of physical, but the nauseating ups and downs and back-of-my-mind fear that I’m about to LOSE my shirt is enough to make me throw in the towel some days. In other words, their tactics are taking a toll on my sanity! Some days it’s hard to resist the temptation to sell and put my Dollars back in the bank to collect that “safe” .5% interest.
LOGIC tells me you, and I and all the others who know governments can’t keep spending forever without debasing their currency are RIGHT, but my stomach and nerves are frayed to the breaking point. Other than WAIT for the inevitable, what’s the average investor to do??? I try to ignore the daily price, but it’s VERY HARD TO DO!
Dear Paul,
What you are experiencing is the same dilemma tormenting lots of people. This is also part of the price suppression strategy. The trading partners of the US government know the stop-loss sell order points for their other customers, such as investment houses and major investors. If they can get prices to go just below those levels, such holders will sell out and magnify the impact of the price decline.
I don’t know enough about markets to make short-term investment decisions. So I focus on the long term. It may help you if you realize that just before a major price move that moarkets are likely to be more volatile, as we are now experiencing. It is always possible that gold and silver prices could drop sharply, 10-25%, but the way the market is staking up leads me to expect the big move to be upward.
Another lesson I have learned is that it seems like all profitable moves tend to take a longer than originally anticipated. So, failure to achieve any short term goal doesn’t necessarily mean that the analysis was wrong in extent, just aht it was wrong on timing. In 1981 I expected the next major rare coin market boom to hit in 1986. That it didn’t happen until 1989 did not make my concept wrong, just the time frame.
I hope this helps.
Patrick, Thank you for your reply. I am in for the long haul and even with a 25% hit, I’d still be in positive territory. I know I neither makes nor lose money until I sell. I just get quesy second guessing myself on days like today. The din of “everything is alright” being shouted at you 24/7 by media analysts and government officials tends to wear on ones nerves! I really keep trying to find POSITIVE NEWS to indicate THEY may be right, but I haven’t been able to. Any examination beyond a superficial glance at the statistics they tout leads logically to the opposite conclusion. In other words, nothing is as it first appears.
I can see where those on the other side say people are rooting for economic collapse, but that’s not accurate. More like you know what’s coming and you’d just like to get it over with so you can begin to rebuild. The longer they prolong the game, the worse the resultant disaster will be.
I appreciate your columns. There are many half-baked sources of information out there, but everything you discuss can be verified by multiple other sources including the originating entities–governmental and otherwise. You just have to do a lot of sifting through the chaff.
Thank you again. I look forward to your next column.
@Paul E,
If you believe, as Mr. Heller does, that your government is h*ll bent on hurting you financially, then do as Mr. Heller suggests. If you beleive that, then no other path makes sense.
I, however, work for a state government, for a state legislature, to be exact. And while states have next to no role in monetary matters, I do interact regularly with national government types, and I have reached two conclusions. 1) While they may be wrong on policy, no one in government is TRYING to hurt you, financially or otherwise, and 2) if they WERE trying to hurt you, they largely aren’t competent enough to carry it off.
Bellman, you misunderstand my thoughts. The intent of the government is NOT to hurt me financially. Their intent IS to attempt to preserve the status quo and maintain stability. BUT, your second assertion that they largely aren’t competent enough to carry it off it TRUE. And the net result is “collateral damage”–anybody who is a SAVER is getting ground into the dust. I’d much prefer to simply keep my money in the bank and forget about it. Sadly, I can’t–not without RISK of having its value debased. So, I look for alternate means of preservation. I’m not looking to MAKE money, merely to PRESERVE that which I have saved. Am I making a mistake? Maybe. But I KNOW that trusting in the government to get it right would be an even bigger mistake. For my entire life, the value of the Dollar has consistantly decreased and, as far as I can discern, the pace of degradation has INCREASED in the last decade.
In the meantime, there’s nothing to do but sit back and ride this roller coaster and remain nauseated–and try NOT to second guess my own logical conclusions.
NO, it’s not a conspiracy to steal my money by evil bankers and the FED. That’s just a “side-effect” of Keynsian economics!
Paul,
Where you are correct is that there is, and has been for some considerable time, not just in this administration, a coordinated fiscal and monetary policy designed to make garden-variety “saving” a bad deal. No accident, no collateral damage – it is intentional. The type of “saving” that people want to do – put a chunk away at no to low risk – is not helping the macroeconomy. It’s contractive to GDP. When we are at or near full employment, that can be tolerated or even encouraged, but not now. The economy needs people with money to put aside to HARDCORE invest it in productive enterprises, businesses, industry, not low risk yield bearers.
Most people with a few bucks to put aside note that people used to be able to get a decent return with almost no risk. Yes. That was essentially full employment. The facts are totally different. THIS economy need its “savers” to be in more risky investments, so it structures rates to make that happen.
Hard money economies existed for millenia based on two essential truths, 1) they grew very slowly and had frequent recessions, and 2) people were okay with letting the very poor and sick and disabled essentially starve.
In your earlier post, your implication was that government was NOT out to hurt individuals. Now you say they ARE out to hurt savers. So which is it? I don’t think you KNOW!
Frankly, I’m pretty sure I’m wasting my time with you, but for the benefit of others, I feel it necessary to expose the problems with your arguments.
Firstly, I didn’t realize that one of the legitimate purposes of government was to compel its citizens to risk their money! Who knew? (that’s sarcasm, if you can’t tell). Seriously, your theory that money saved in a bank is “idle” and NOT an investment is wrong (and if the FED and the President are operating under that mistaken theory, it would explain a lot!). Here’s how things are supposed to be working: Not having sufficient capital to actually invest in business, equities, etc, I PUT MONEY IN THE BANK. The bank, using MY money (which I’ve “loaned” to them for some interest paid to me) and the money of other depositors, INVESTS that money into other areas of the economy by making loans–big and small. By collecting interest on THAT money, they pay their depositors. Money circulates in the economy.
Does it really work that way today given the FED policy? I can’t say. But what I DO KNOW, is that a policy of low rates near zero makes putting your money in a bank a losing proposition. AND, when I and others like me take that money OUT OF THE BANK and convert it into HARD MONEY, that money IS removed from circulation and just SITS wherever it is stored. It doesn’t buy, it doesn’t invest, it doesn’t do ANYTHING except maintain its value (which, given inflation, makes it a BETTER “investment” than saving dollars). So, if the purpose of low interest rate policy is to force money into the “macro-economy”, as you state, then it’s a dismal failure!!!
Secondly, while a hard money economy may have frequent recessions, have those been ameliorated by the fiat money system? NO. They may be farther apart now, but I could make a real case that when they happen, they are far more serious and destructive than ever. Is that a good thing? I THINK NOT.
Your third point about hard economies being based on letting the poor, sick, elderly, children, disabled, (insert different category of “victim” here), die in the streets is not worth responding to (as it is an INFAMOUS FALSEHOOD spouted off frequently by anti-capitalists). The statement DOES reveal a great deal about YOUR character however. If YOU believe such a thing to be true, then you are ill-informed and/or have been deceived. If you DO NOT, then I needn’t say more as you have revealed your true thoughts.
In short, your entire argument is specious and wrong, and I cannot even accept your basic premise that it is even a valid purpose of government to plan or control the economy. A free market system and central planning are mutually exclusive ideas. And the idea that government should be in the business of compelling its citizens to “invest in the macro-economy” or get financially anihilated by low interest rates and rising inflation is as abhorrent to me as a hard money economy is to people who desire to spend other people’s money to assuage their guilt feelings about those less fortunate.
YOU may earnestly believe a hard money system is unworkable. I KNOW that a system that continually engages in deficit spending and constantly increasing debt ALWAYS ENDS IN DISASTER–for EVERYONE (including YOU!). See, I’m looking out for you and trying to save your bacon! Capitalism and a free market is the ONLY system where everyone who wants to benefit CAN and nobody is thrown under the bus for the benefit of “the greater good.”
So, as far as this discussion relates to Mr. Heller’s original article, I’m sticking with hard money for as long as it takes the government to actually balance a budget and start PAYING OFF DEBT. And, yes, V. Kurt, that is money that is NOT in the economy. It might be a nauseating ride, but MY judgement says its the best way to protect MYSELF from BAD and/or incompetent government policy.
In essence, Paul, what I’m saying is that money’s historical role as a “store of value” has now forever been repealed, when the economy needs a shot of recapitalization instead.
Paul,
The reason my argument is correct and yours and Heller’s is wrong is that the “government” is not the Fed and the Fed is not the “government”. The Fed is a mostly (no, not fully) independent central bank whose members are appointed by governmental officers, because there’s no one else to do it.
It has three roles – 1) keep the money supply growing so that economic growth doesn’t strangle from lack of liquidity, 2) keep the money supply from growing TOO FAST so that inflation takes hold, and 3) (and this one makes our central back unique) PROMOTE FULL EMPLOYMENT.
Your theory of banking (take deposits, aggregate them, lend them out, make a living off the spread) essentially died years ago. Banks do not do that any more. They keep almost no loans in their own portfolios; they sell them on the secondary market, both in whole and carved up into derivatives. Banks don’t make loans, they merely ‘service’ them. The old banking model couldn’t make 7-figure incomes for enough suits. Local depositors do NOT create lendable funds any more. They merely finance overhead.
If and when you buy or bought silver or gold at 2010-2012 prices, you have not “invested” a dime. You speculated in commodities. And we know 95% or more of amateur commodity speculators lose money. If you were buying silver at less that $5 or gold at under $300 several yearsa ago, THAT was arguably investing. No bullion purchase made in the last few years makes you anything but a sheep waiting to be shorn.
And for your further education, Paul, the government (the real one) has had a widely acknowledged legitimate interest and role in “managing” the economy through fiscal policy (taxing and spending) since the post-World War II era, and the Federal Reserve has has a nearly universally accepted role in “managing” the economy for even longer through monetary policy (money and interest rates). It was only the ascendancy of the Roger Ailes media empire, and its program of mainstreaming the John Birch Society’s agenda, that has caused a new group of people to reject the long-held agreements and adopt a form of economic fundamentalism.
Bottom line, Paul E: free markets basically do not exist, outside of a few exceptions, and haven’t for a very very long time. They are a mythology being sold by the first ever ideologues with a brazen enough agenda that gives them the chutzpah to sell the nonsense that the wealthy should pay less and the poor should pay more. If you’ve bought in, I pity you. Roger Alies must be so happy to have gotten you.