So many "Conspiracies". Conspiracies
to kill JFK, communist conspiracies, conspiracies to fix prices.
They've sent people to jail for conspiracies, John Gotti (sp?) can tell
you about that, he didn't pull the trigger on "Big Paulie" outside the
Sparks Steak House but he's doing the time because he conspired to have
that trigger pulled. For all the talk of conspiracies I've
never seen what the definition of a "Conspiracy" is; so I think
I'll start there as it will be useful to define my terms.
I have a copy of the 1924 edition of the
"New Dictionary of the English Language", I got it at the Salvation Army
book store for $.25. Ya I'm cheap. In it, it says that a conspiracy
1) a plot,
2) two or more persons engaged together
for an unlawful or evil purpose.
There may be more definitions in a newer
dictionary but for my purposes these two will do as I think they are descriptive
of what is going on in the financial markets today. Note that in
1924 an evil intent was all that it took to label two or more people as
conspirators and make their activities a "conspiracy". Back
in 1924 the issue of legality was not required, it also recognized that
acting with an "evil" intent was not necessary illegal. This
is wise if you ask me as what is considered "evil" really is a slippery
topic. Ask many liberals in our congress today what is an "evil"
person and they would tell you that people who make more money that most
and want a tax break is a sure sign of what one Democratic congressman
described as "Nazis with a power tie".
So I do agree that labels in this area
should be used with care if for no other reasons but for my own selfish,
personal, and possibly "evil" reasons. Also its obvious to me that
depending upon who one would ask, certain actions at certain levels of
society could either be prudent management of public affaires or
an evil conspiracy. In this paper I want to lay out my case of why
I think the gold market has been victim of an "evil conspiracy" as opposed
to being a beneficiary of the "prudent management of public affaires".
I'll let the legalities of this evil conspiracy to be discussed by lawyers
as my opinions are not legal. I also need to go into some political
theory and history to make my points, that point being that there is more
involved here than just a free market price for gold. I can not do
that unless there is historical context for what is going on, so I hope
the reader is patient with me.
It has been stated by various members of
this forum that to charge the actions of various people, organization,
or agencies activities in the gold markets as a "conspiracy" is some how
lazy, the easy way out in an attempt to explain what is happening to the
price of gold. Well that may or may not be true, but what amazes
me is how easily people in the first year of the third millennium discount
conspiracies altogether, they would have me believe that a conspiracy is
as rare a critter as a blue Maine lobster. Well that is not true,
Caesar was not assassinated by ten angry blue Maine lobsters!
I would say that the history of mankind reeks with conspiracy if looked
from the perspective of the average joe working the fields or earning his
daily bread in honorable commerce. Since man first planted a seed
with the expectation of it yielding a crop, there has been the state.
And since the state was invented there has been two kinds of people, people
who farm the earth and people who farm people.
I want to make a point here, that being
that the state has no interest in abiding by the same laws that they apply
to the people who they rule over. This is true with any big bureaucracy,
any one working in a Fortune 500 company or for a family business can see
it. The hourly wage workers must come in on time or get docked some
pay, however at a certain point in the organization, one can come in late,
be greeted by the CEO or Uncle Ed with a smile and no questions asked.
Machiavelli noted this in his famous volume "The Prince", that in fact
there are two sets of laws in society, one for State and one for every
one else. His reasoning for this is that the peace of the people
lays in the fact that they can appeal to the state for justice when wronged,
but in the hurly burly of international affaires, who can the state appeal
to if wronged by another state except by guile or force. I know that
this little snippet from Machiavelli may not apply to Uncle Ed's plumbing
supply store, my intent is to establishing the fact that within human society,
in either business or government or even in the family, there are degrees
of immunity or outright exemptions to the established rules in every organization.
There is nothing wrong with this. Just because big brother can come
and go as he pleases doesn't mean that little sister can. It does
makes a difference being in college or being in the eight grade.
However this can pose problems for people
who don't have the ability to rise to the top. People being people
when given an inch want a foot, this is especially so with gifted people
who typically become the privileged few, and in politics or finance this
will lead to injustices if not checked. This was recognized in the
American Constitution, that being the human urge for more. The desire
for more power, more privileges by ambitious people in public office needs
to be checked if the individual is to remain free. Hard to believe
it today but the American Constitution's intent was to limit the Federal
Government power and the scope of its authority. Read it, there is
not one limit on the people, we were to be born free and live with in the
context of the English Common Law. The American concept of "liberty"
was for the people, not the state. The Founding Fathers of The United
States would have answered Machiavelli's point on a dual legal system as
follows; that when dealing with foreign matters his point can be true,
but when the state is dealing with its own citizens it is absolutely necessary
that the law be binding upon it also or a tyranny will result. The
lessons of the English Civil War was very much present in the minds of
the founders of the United States. To be King or Lord Protector was
sweet, to be subject to the King or Lord Protector's decrees could be very
In the Federalist Papers ( I can't remember
which ) it was stated that where the state fears the people, liberty rules,
but where the people fear the state, tyranny rules. Ben Franklin
when coming out of the constitutional convention was asked what kind of
government did you give us, he replied "a republic, IF YOU CAN KEEP IT.
( my emphasis added ). And what did they talk about so long
ago, in that stifling hot, humid room in Philadelphia for weeks on end?
In a nut shell, all the different ways the little guy has been screwed
by the big and powerful during the course of human history and how they
could stop it from happening to the people in the new country they were
inventing: The United States of America. By today's standards there
is a strong case for calling the US Constitution the product of the combined
minds of hard core, paranoid, conspiracy theorists. They were so
sure the government they were creating would come into the control of
"ambitious" people who would make life unbearable for all but the connected
few. There are books on the constitutional deliberations, they
are well worth the time and effort to read, and in them all the fear of
being oppressed by powerful, privileged people who might gain control over
a Big Federal Government is the major theme of what they talked about.
Their watch word for future Americans was "Eternal Vigilance". Eternal
Vigilance from what? Well speaking for myself that is the essence
of what the issue of what GATA should be all about.
In one of the Sherlock Holmes novels, Doctor
Watson is amazed at how Holmes knew the owner of the house was the murderer;
"how did you know Holmes". Sherlock answers " the dog didn't bark".
Watson is confused "the dog didn't bark"? Holmes a bit exasperated by his
friends inability to see the thing says to Watson "but the dog should have"!
Allow me a little literary
liberty to make my point.
In one of the Sherlock Holmes novels
Doctor Watson is amazed at how Holmes knew the precious metals markets
were manipulated; "how did you know Holmes". Sherlock answers
"the prices kept falling". Watson is confused "the prices kept falling"?
Holmes a bit exasperated by his friends inability to see the thing says
to Watson "but the prices should have risen"!
So why does Sherlock look so smart while
Watson came up short? Well Sherlock knew that supply and demand are
not theory or learned opinions, they are laws, they apply all the time
in every situation when commodities are allowed to be bought and sold in
a free market. For prices to appear to defy the laws of supply and
demand are by definitions, manipulated prices. Watson knew this too,
and in an examination he would have gotten this question correct but could
not apply the facts it to the situation at hand. By the way, there
are many more Watsons than Sherlocks in the world, sad but true.
Now if your still one of those who is of
the mind that gold and silver prices reflect the reality of a free market
after years of demand larger than new supply, and with productions deficits
to demand by significant amounts, well then my last shot at converting
you is to look at how the Bank of England (BOE) has been selling its gold,
if nothing else this should at least give you pause for thought.
Do you think it normal for any central bank to sell gold and not allow
the price to be set by the highest bidder? Look at the way the BOE
has handled its gold sale, it is my understanding that they do not accept
highest but the lowest bid and that sets the price for every ounce of the
25 ton consignment of British gold sold at each auction. Now its
more complicated than that and due to space concerns I'm not going to explain
the process in detail but in each auction there are parties willing to
pay, for example, $310 an ounce for lets say 15 tons. Yet as the
bids are screened, if the last gold bar goes for $275 an ounce the BOE
then prices the entire consignment of 25 tons of gold at $275 an
ounce and it will refuse to take more than the $275 an ounce from people
who were willing to pay $315 for 15 tons of it. What am I to
make of that? Any bum on the street could get a better price for
the English people than what the BOE is getting them for that gold.
Yet incredibly from people who would have us believe that they are experts
in the gold industry there are no protests or even a single serious question
of why have an auction were the highest price is refused.
I hear a dog NOT barking!
But then that is just me an admitted
"conspiracy nut". You just know that these "gold experts" would never
shout conspiracy as gold is sold too cheap with the whole world watching.
Well I'm no "gold expert" so this weird auction force me to be judgmental,
and I can only think of two possibilities to explain it, One possibility
is that somehow all of these people can somehow control such vast amounts
of gold and who boast of such outstanding academic achievements are so
stupid that they are incapable of running a proper auction.
The second is that the English people are being denied the best price
their gold could fetch at auction due to an evil conspiracy with the BOE
as a co-conspirator to drive the price of gold down. Is it possible for
there to be a third explanation? If you can think of it don't keep it a
secret. I doubt if Christies in London would even allow such
an auction to occur at their establishment, like I said my opinion is not
legal but I think the possibility of exposing themselves to a legal action
could result from such an auction at their establishment. And why
not, what owner wants to sell to complete strangers a Picasso or rare Persian
carpet at any price but at the best bid which is the highest offered price.
I think I made a strong case that the gold market is manipulated.
If I'm wrong how? And don't go tossing no rare blue Maine lobsters
at us evil conspiracy nuts unless you can answer the questions posed to
you from above, because then you'll be the lazy one taking the easy way
So the next item to discus about what I
think is an undeniable manipulation in the precious metals markets is;
is it a result of an "evil" conspiracy, or the prudent management
of the public's affaires. If your of the "prudent management
of public's affaires" school of thought I insist you make your own
points as I'm a boy scout at Camp Evil Conspiracy.
As I used my $.25 1924 dictionary to define
"conspiracy" I think it wise to do the same with "evil", and remember being
"evil" is not the same as being illegal.
1) morally bad, wicked
8) moral depravity
Well most of these definitions are "5)
worthless" for my discussion so I'll pick the one I think best fits what
I'm trying to say, and that one is "1)" morally bad, wicked.
I think school yard bullies are morally
bad and wicked, the reason for me saying so is that bullies refuse to accept
any risk as they go about what one would think a risky business, fighting.
Bullies manage their risks by the careful selection of their victims, they
select targets that don't have much of a chance to effectively fight back.
They also pick the place and time of the fight so that the victim is alone
and the bully has his friends with him. Hence the bully experiences
all of the pleasure of the encounter while the victim is exposed to all
of the risks. That is the point of being a bully; there is no risk
to it, only satisfaction. I ask the reader now if you also agree
that being a school yard bully is a morally bad, and wicked, which is to
say an evil way to treat people? Well no matter what you think,
I can form my own opinions and I say that this is evil, and that the bully
and his friends are conspirators and by definition, they guilty of an "evil"
conspiracy against the victim. Like I said earlier evil conspiracies
are not necessary illegal but they are conspiracies none the less.
Now can I apply this to the gold markets? I think I can and thus
prove a "conspiracy" in the depressed prices of gold.
I brought up the issue of the avoidance
of risk as a key point in my discussion of what an "evil" conspiracy could
be. I would say that an "evil" conspiracy would be one where a group
of people manipulate a risky financial situation to where they have a total
lock on a profitable out come but lay off all of the risk to a third party
who is not even aware that he is being exposed to a particular financial
risk. That anyone could work hard all of their lives, playing
it by the rules to raise a family and only wanting some sense of security,
could lose all their material possessions due to no fault of their own
but to the irresponsible actions of greedy people can only be described
Is there anyone that would argue this point
and offer a counterpoint that this is somehow acceptable or if in fact
this were to happen it would not be an evil conspiracy?
Now how could such a thing be accomplished,
the shifting risk to one group and the profits to another. I could
do it to a small town lets say, with a check book if I could somehow get
the town to accept my paper as readily as a Federal Reserve Note.
Everyday the town goes to work; farmers are producing food, merchants are
bring goods into their stores and all I see is mine for the having, all
I have to do is write a check. Remember in this example my signature
is money. With enough checks and a twenty five cent ball point pen
I can have my fill of the best the town has to offer and still afford to
be very generous to the city counsel and chief of police. Gee,
I'd be what the major would call "a leading citizen".
Life is good, at least for me it is.
You see after a little visit from me to a store, the store owner deposits
my check, which for this example is as good as a Federal Reserve Note,
in his bank which dilutes the town's wage earners dollars purchasing power.
More money in circulation, with fewer goods for them to buy as I got the
best of it over at my house. Bless them all, the wage earners are all working
more for less and no one blames me, its the store owners that are raising
the prices, right?
Now there are those reading this who recognize
that I'm describing how the US money supply works. Well not exactly.
How it really works is that Alan Greenspan is the guy who writes the bogus
checks that has no funds to back them and no he doesn't buy wine, women
and song with it, he buys US Bonds and all the stuff you see published
in Barron's each week in their "Federal Reserve Data Bank". He became
the Chairman of the Fed in around Aug 1987 since that time his hand has
written checks for 305 billion or so for US Bonds. They don't keep
it a secret, its been reported in Barron's since the 1920. How do
I know? I spend a lot of time in libraries putting numbers into my
Now when does he do this? Well the
key is the Fed Funds interest rate, it is a manipulated interest rate,
but still, the law of supply and demand can not be avoided even by
the Fed. My description of the following is imperfect but very adequate
for the purpose of this discussion. The Fed states a target Fed Funds
Rate, and the Fed Funds rate oscillates around it. So lets say Alan Greenspan
pegs Fed Funds at 6.5%, the Fed will then monitor the interbank system
where the banks will put up their spare cash up for sale to other banks.
By looking at the "cost of money" that being the going interest rate for
a bank lending to another bank, the Fed will or will not take action.
If the Fed Funds rate goes above the Fed Funds target rate the Fed will
buy US bonds from a primary bond dealer, who will deposit this new "money"
in a bank who will then add the new funds to the interbank system there
by adding supply to satisfy the demand for debt at the Fed Funds rate.
By the way primary bond dealers and the big NY banks are really one and
the same, they are also the bullion banks, its all so convenient. Any problems
so far with what I'm saying? This week's Barron's (02 Oct 2000) it
reported that the Fed bought 2.14 billion in US Bonds. That meant
that if the Fed Funds targeted interest rate was to be maintained, Alan
Greenspan had to write a check for 2.14 billion to add the required "liquidity"
to the banking system. OK so what is wrong with this? The same
thing that was wrong with someone buying everything in sight in a small
town with a endless check book with no funds behind it. People
who don't do anything to add to a nations wealth get rich and the people
who give value to the money being created by producing something of value
to buy get hurt. No banker every gets into any kind of trouble for
this but I still think this is evil if not illegal.
The banking system is like one of the old
cowboys movies with the gun fights where no one ever ran out of bullets
and you could tell who was going to get it and who wont even get a scratch
from all the flying lead. The banking system has access to the unlimited
credit of the Federal Reserve at the Fed Funds Rate and if your a
big NY bank, the system never says no to you as your one of the share holders
of the Federal Reserve. Yes the Federal Reserve is a quasi private
bank, it is NOT a US Government agency. And its not possible to have
a free market when people like you and me are limited in our bidding by
how much money we can earn, which is the honest way, are forced to compete
with a money machine with unlimited access to credit (money) from the Federal
Reserve! Do you notice how your working more and getting less?
Also with all of this "money" at their
finger tips the big banks have since the creation of the Fed lent money
to such worth credit risks Latin American countries in the 20's, 60-70's,
80-90's, the Leverage Buy Out mania of the 80's all of which have come
to grief to either investors or the tax payers. I suspect that the
"Dot.Com" boom and now bust would not have been possible with out the assistance
and cooperation of the Federal Reserve and the banking system with the
Internet company's IPO underwriters. Guess who they were? Ross
Perot, in 1992 when he was running for office, was talking about the "December
Surprise". Well I'm working on rumor here but supposedly the" December
Surprise" was that a big New York Bank was insolvent, broke, bankrupt.
That is why Alan Greenspan lowered Fed Funds to near 3% for a few years
creating the dollar carry trade where all the banks that had a hang over
from the old LBO days with their bridge loans or what ever else ailed them,
could "reliquify" in the US Treasury debt markets on the spread between
the Fed Funds rate and the long bonds. As the average American does
not have access to money at the Fed Funds Rate we were not invited to this
party. That retired people were being squeezed by these low interest
rates meant nothing to these privilege people who only see money as a game
to be played to win.
That is what I have against the big banks,
they take these big risky positions where they might make a killing.
If it works out they keep the profits, if it goes against them, no matter
how bad it gets, they are bailed out at the expense of someone else.
And what do they have to offer us in return for us being forced fed their
waste? Bad paper money if you ask me. And I see what they are
doing as an "evil" conspiracy as in the course of their daily business
are taking enormously foolish risks that could very well destroy the world
of billions of people. Their malign fingers touch every continent,
no nation escapes their services. They would not do this except that
the system provides them with the mean to do this and then protects them
when things go wrong. I'm not going to mince words here the whole
world is flipping a coin with these guys and its heads they win, tails
Look at the stock market, the derivative
markets, the mortgage markets and yes the gold market. These are all their
monstrous bubbles. It's not a if but when will these bubbles will
pop, and when they do my friends we shall all be expected pay the bill
for a dinner we were never invited to. The investment bank's traders
call it "ripping someone's face off". Real cute. I expect
a depression bigger than what we had in the 30's. With low interest
rates on savings who has much money in a bank? The "roaring" stock
market that everyone is in, when it collapses people will be impoverished.
It disturbs me that in all to many cases these same banks even have
a claim to the shirts on most peoples backs, what is to happen if a wave
of massive unemployment falls upon the land?
I'll bet you fist full of what will soon
be worth a lot less Federal Reserve Notes that you'll see the US Government
come along to bail them out yet one more time. They'll let
the working man get along as best he can as the politicians will do what
is necessary to "save" the banking system. Well I for one am all
for letting the banks get a full cup and then some of what they intend
to served up to the rest of us. That needs to be addressed
right now by organizations like GATA. Thank you Bill Murphy and company
for the courage to stand up to these bullies!