Gold Cartel Destroying Dev. Countries Economies
A Gold Cartel Aims at Destroying the Economies of Developing Countries
Economic Factors or "International Conspiracy" Behind the Depressed Price of Gold?
Translation from Al-Hayat, London, Friday, July 19, 2002
Al-Hayat is arguably the leading Arabic language newspaper in the world
There is a storm in the money markets caused by the distribution of a report prepared by John Embry, a senior analyst with the Royal Bank of Canada, the largest bank in Canada.
The storm, which spread rapidly south to the United States and as far as China, stemmed from the fact that Embry, in his report, supported the basic assumptions that have been promoted by a group known as GATA, short for the Gold Anti-Trust Action Committee. In essence, GATA has been promoting the notion that there is an international conspiracy to suppress the price of gold through dumping it in large quantities on world markets, and that this conspiracy is managed by a number of central and commercial banks.
Although GATA, which was founded by Bill Murphy, has a large following, it has been depicted by its opponents as a marginal group promoting conspiracy theories -- until Embry's report, that is. For as soon as the report, which was made public by Murphy, came to light, the Royal Bank of Canada claimed that it was only an internal working document, and not the official position of the bank.
However, Murphy was quick to point out publicly that the report was published on the official stationery of one of the bank's subsidiaries and was distributed to a number of its select clients.
Embry himself declined to comment.
So what's happening in the world of gold?
Gold has soared by 20 percent since January this year, while the shares of some gold companies have more than doubled. Gold, which until recently had been ruled out by many as a hedge against inflation and political uncertainty, is roaring right back. Is this the result of natural economic trends at play, or is there a much more sinister and darker side about to be exposed, as some maintain?
Among those of the second opinion is Murphy, chairman of GATA. This is a group of financial advisers and gold market participants who have waged a three-year legal battle to prove that the unusually low gold prices since 1995 were not the result of market forces but instead the product of price rigging that included governments and big commercial banks. Al-Hayat had this interview with Murphy.
Al-Hayat: Give us an idea about GATA and its lawsuit: Whom is it against, and why?
Murphy: GATA was established to expose the manipulation of the gold market by a gold cartel consisting of Goldman Sachs, J.P. Morgan Chase, Deutsche Bank, the Bank for International Settlements, and the U.S. Treasury Department and the Federal Reserve Bank of the United States. It appears that the manipulation of the gold price began in earnest under the guidance of then-U.S. Treasury Secretary Robert Rubin, who came to that position from Goldman Sachs.
The GATA-type lawsuit was brought against them in federal court in Boston by GATA supporter Reg Howe, a former trial lawyer in Boston. Much of the evidence used in his case was uncovered by the "GATA army." Judge Reginald Lindsay dismissed the lawsuit, stating that, in his opinion, Howe did not have legal standing to continue with the suit. The stated that if a gold company brought the suit, it might be a different story. At no time in his legal opinion did Judge Lindsay disparage Howe or dispute his claims. Howe and GATA may have lost in court, but we won in the court of public opinion.
Al-Hayat: What are the purposes of the gold price suppression scheme?
Murphy: We believe there are several:
1) To keep interest rates down by deceiving the bond markets about the rate of inflation, inflation historically being gauged in large part by the price of gold. You may remember the famous comments about the bond market that were attributed to President Clinton not long after he took office. He was frustrated with having to take the advice of his economic advisers that the approval of the bond market was crucial to his administration's political success. Clinton said he resented having to make his administration one of "Eisenhower Republicans." GATA thinks that the gold price suppression scheme -- the massive deception of the bond market -- was Clinton's revenge.
2) To strengthen the U.S. dollar in relation to other curencies.
3) To suppress commodity prices generally, since commodity prices take their cues from the gold price.
4) By extension, to raise living standards in the United States by expropriating the developing world, which makes its living largely from producing and exporting commodities.
5) To enrich through inside information about U.S. government policy the Wall Street investment houses that have helped implement the gold price suppression scheme and that long have staffed the Treasury Department and Federal Reserve.
But the results of the gold price suppression scheme have been far greater than all this. The results include the devastation of the economies of the developing world, particularly sub-Sarahan Africa, and the vast misallocation of capital throughout the world in the last decade. That is, with the bond market deceived about inflation, the dollar, and the strength of the U.S. economy, most economic decisions around the world for the last decade have been based on horribly mistaken premises. The U.S. stock market bubble, now bursting, is evidence of this.
Al-Hayat: Are you saying then that the recent increase in the price of gold could be partly attributed to this lawsuit?
Murphy: GATA has been collecting evidence of the manipulation of the gold price for 3 1/2 years. No one in the gold industry has ever challenged that evidence. We know that the GATA story is spreading throughout the investment world, and that is accelerating investment demand for gold. The gold price did shoot up right after the judge issued his ruling. It also shot up when Howe and I gave presentations at the GATA African Gold Summit in Durban, South Africa, on May 10, 2001, and after we spoke at the Association of Mining Analysts seminar in London on May 23 this year. Five sub-Saharan gold producing countries attended our summit to expose the gold fraud to Africans, as did the South African Reserve Bank, the leading South African gold producers, the National Union of Mineworkers, Cosatu (South Africa's largest trade union), the South African Ministry of Mines, the South African Chamber of Commerce, and the press, including the South African Broadcasting Co.
Al-Hayat: What are the other major factors contributing to the increase in the price of gold?
Murphy: Low interest rates make gold a very compelling investment. Gold producers are buying back their forward sales, or hedges. There are concerns about terrorism and Middle East tensions, and concerns that the dollar will decline. There is a huge supply/demand deficit. Mine supply is 2,500 tonnes per year and going down. Annual demand exceeds supply by about 1,700 tonnes per year. The central banks have lent or swapped out 13,000 to 15,000 tonnes of their gold. This gold is actually sold and the banks cannot get it back. In essence, they have trapped themselves.
Al-Hayat: Do you keep tabs on the movement of gold in the Middle East and the Arab world in particular? Where does the Middle East stand in its gold holdings? Is this good or bad for those Middle Eastern countries?
Murphy: Back in my futures industry days, I dealt with a good number of Arabs, including a distinguished Kuwaiti, Talib Al Nakib, who lived in Geneva, Switzerland. These days I only hear things here and there about Arab gold buying. I do know that it has been aggressive this year. A bullion dealer friend of mine had his best day ever a few weeks ago, selling 6 tonnes of gold to an Arab group.
Al-Hayat: Some are calling for a repricing of gold and using it as the actual basis for money. How feasible is this?
Murphy: In time gold will be used more and more as money. Already the Moslems in Malaysia have the dinar and the Russians have the chevronet as gold coin money.
Al-Hayat: What in your opinion should the actual price of gold be?
Murphy: My price target for gold is $800 to $1,000 per ounce. Gold should explode when it takes out $330 and go ballistic when it takes out $355 or so. There is going to be a gold derivative banking crisis because of the reckless gold suppression activities over the years at certain bullion banks. Gold will melt up as Enron melted down. Some of the same banks are involved with both scandals, like Citibank and J.P. Morgan Chase.
Al-Hayat: Lebanon, whose currency was 100- percent backed by gold before its civil war, has been under tremendous pressure to sell or lend its gold. Given Lebanon's debt and devaluation of the currency -- 1 U.S. dollar equaled 2.75 Lebanese pounds before the war, while 1 U.S. dollar equals 1,500 Lebanese pounds now -- there is talk now about using this gold as a security for an upcoming Eurobond issue. What is your best advice for Lebanon on this matter?
Murphy: The Russians, Chinese, Arabs, savvy hedge funds, and the Japanese public have been buying up cheap gold while the foolish Western central bankers have been dumping it, in some cases to perpetuate the gold fraud. The British chancellor of the exchequer is already being vilified for dumping half of Britain's gold at average price of $280. His decision has cost Britain big-time already. Lebanon should not make that mistake. Lebanon's gold should not be lent out either. Lebanon might not be able to get it back.
Al-Hayat: Dubai is promoting itself as the city of gold. What do you think of that idea? Will it succeed?
Murphy: Yes, it will. Arabs have always loved to trade gold. Throughout the centuries this has been so. The dollar is going to lose its luster in the years to come. Gold will regain its luster.
Al-Hayat: If the price of gold goes as high up as you predict, with the value of the U.S. dollar plummeting, what kind of impact will that have on U.S. foreign policy in general, and on its Middle East policy in particular?
Murphy: The Bush and Clinton administrations have been very foolish. They have opened up our country to the possibility of financial blackmail by foreign powers because of their gold-rigging activities. I met with two of President Bush's boyhood friends in Austin, Texas, at the Texas Capitol. One of them, a state senator, sent that message along with other GATA findings to the president on his private fax the next day. The president's friends believed GATA to be correct and did not want him to be blind-sided. His economic adviser, Lawrence Lindsay, sent me a letter the same day after receiving the fax. GATA wants to help America, not hurt it.
A GATA delegation met with the sSpeaker of the U.S. House of Representatives Dennis Hastert, on May 10, 2000. We gave him our Gold Derivative Banking Crisis report and strongly suggested that he do what he could to end the gold price rigging.
Sub-saharan Africa is going to be very upset when the gold price soars and the gold price rigging is discovered. Gold should have been well above $600 per ounce these past years. The Economist called Africa "the hopeless continent." If not for the gold fraud, Africa could have been the "natural resource boom continent." There would have been money freed up to begin to deal with Africa's terrible disease problems, etc.
Al-Hayat: Should that happen, what do you estimate the impact will be on the economies of Saudi Arabia, Egypt, Iraq, Israel, Syria, and Lebanon?
Murphy: Hard to say. The U.S. stock market is in deep trouble. The market could go into crash mode at any time. That cannot be good for any other nation's economy.