GoldWindow

How Many Confessions Do You Need?

The following public comments and quotes are loosely compiled from www.gata.org and other sources believed to be reliable.  GATA is the Gold Antitrust Action Committee started by a former commodities trader, Bill Murphy, and a newspaper guy, Chris Powell.  They have amassed a large body of evidence at their website pretty clearly demonstrating (to me, at least) that somebody's fingers are on the gold price scale.  GATA has been producing evidence on gold price suppression since 1999 with little or no public recognition...because the major media, including newspapers, magazines, radio and TeeVee have flat out ignored them.  (Keep in mind, the major media have ignored gold and silver generally, precious metals mining company executives, gold mutual fund managers and gold investors of ALL kinds during the last 5 years...while the price of gold has moved from $255 an ounce to over $550 an ounce - a price movement colloquially known as a "bull market.")

I'm a recovering lawyer, and this is the outline of an argument.  When I was trying cases for a D.A.'s office years ago..., as long as the corpus delecti (elements) of the crime had been established, ONE confession was usually considered more than sufficient to convict.  Today, without having any fingerprints or direct documentary evidence about the gold's woefully sluggish price performance  over the last 10 years, I've sorted through and collated a mess of my saved GATA emails.  (If you'd like to be on their listserv, sign up at gata-subscribe@yahoogroups.com.)  I doubt if I could "prove" price fixing in a courtroom.  I doubt if anybody could without the abject confessions of the guys rigging prices every week on the Comex in New York.  But I do think GATA has collected an awful lot of highly self-incriminating comments made by guys who certainly should have known what they were talking about when they said these things.   I've written some of these down quickly without extensive checking...so don't hold me to exact punctuation, dates, etc.  But two final things here:  (1)  If you're going to invest in gold, you need to know what GATA knows, and (2) More than a few of these statements sound a lot like bragging:

July 24, 1993:  The usually turgid Alan Greenspan, before Congress in one of his bi-annual Humphrey-Hawkins testimonies, came right out and said:  "Central Banks stand ready to lease gold in increasing quantities should the price rise." ("Leasing" has several advantages for NY banks in a gold price suppression scheme, i.e., the boys in NY get to make more money off it than outright sales...)

Sometime after September 26, 1999 (the date of the first "Washington Agreement"  wherein 14 mostly European Central Banks agreed to LIMIT their gold sales, and the gold price roared upwards of $50 in two weeks.)  "The rise in the gold price threatened one or more finance houses and could have taken the rest down in their wake.  The British were very helpful in controlling the price, also the Americans."  by Mr. George, the Governor of the Bank of England.

Mid-2000:  Representatives from GATA visit Congressional leaders including the Speaker, Dennis Hastert, with graphs and charts of price movements in London and NY which are too opposite to each other to ignore...arguing that the price of gold is rigged.  They are told in so many words that gold is national security issue and is too potentially explosive to be looked into by Congress.

Early 2004 - the 2003 Annual Report of the Australian Central Bank:  "We hold gold primarily to support intervention (in the gold markets)."

June, 2004:  Oleg V. Mozhaiskov, Deputy Chairman of the Central Bank of Russia at a London Bullion Marketing Association (LBMA) meeting in London, citing GATA's work said, "The NY gold market is less than free."  London is a present delivery market, NY is a futures, paper market, which is pretty easy to control with leverage and lots of financial institution money at your disposal.

August 24, 2004:  John Embry, senior portfolio manager of the Sprott Mutual Fund group, a multi- billion dollar complex in Canada, produces and publishes a 60 page study of the "Gold Market, Not Free, Not Fair, available at their website www.sprott.com.  Research by James Turk and Frank Veneroso, as well as GATA are quoted to support Embry's belief that the gold price has been "managed" for political purposes.

March 3, 2005:  The Gulf Cooperation Council, a well respected middle eastern "think tank" issues a report, citing GATA's work and suggesting that middle eastern Central Banks should diversify into gold.  And these guys have apparently been doing exactly that.

June, 2005:  The BIS, the Bank for International Settlements (the Central Bank of Central Banks in Basel, Switzerland) issues a report of its 4th annual conference and includes a speech by William R. White, an officer, who in his speech entitled,  "The Past and Future of Central Bank Cooperation" said,  "The intermediate objectives of CB cooperation are:...(P)rovision of international credits, and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." 

WELL...if you're creating boatloads of funny money called fiat currency, influencing the price of gold would always be "useful."  And what exactly was the "Strong Dollar Policy" under President Clinton, if not a stepping on the price of gold?  Did you see anybody raise interest rates in the 1990's to strengthen the dollar, like Volcker did?  And speaking of the dollar strengthener hisself...

Late 2005:  Jay Taylor, a newsletter writer, publishes an interview with Paul Volcker, the highly respected former head of the FED from 1979 until 1987 who did strengthen the dollar by jacking interest rates up to the moon.  In the interview, Volcker said, "It was probably a mistake to allow gold to rise so high."  I.e., in retrospect, he thought they should have stopped it.  No doubt in his mind here, that with options and futures that had been "invented" back in the 1980's, they could have.  He's undoubtedly aware of these financial products...because he wrote an editorial back in May of 2005 in the Washington Post saying they were dangerous.

February 6, 2006:  A subsidiary of a large (and one of the few) investment banks in France, Credit Agricole issues a report partially entitled "...Gold, Let the Hoarding Begin."  The report went on to cite GATA again and the extraordinary supply/demand imbalances in gold mining around the world.  (Begin Hoarding is not the sort of language bankers ordinarily use in thoughtful reports on commodity markets..., but this is France, the gold understanding country where Charles DeGaulle busted up the LAST international attempt to suppress gold back in the 1960s...the infamous "London Gold Pool.")

February 16, 2006:  Congressman Ron Paul of Texas, makes a long speech on the floor of the House
talking about the "End of Dollar Hegemony," and the value of gold.  He's been the only Congress person over the last decade to try and corner Alan Greenspan over his profligate debt creation ways.  (And remember, kids, Sir Alan was knighted by the Queen of England, and was awarded the Enron Distinguished Service Prize back in the late 1990's...isn't this what they call kicking somebody upstairs...the Peter Principle at work.)

April 2006:  Registered Representative magazine, the free magazine sent to over 90% of the nation's stockbrokers, actually runs a 2 page article noticing that there are rumors about the price of gold being suppressed.  They seemed to be saying, "You guys in the business of selling securities need to know this...; since price suppression schemes ALWAYS blow up sooner or later, don't get caught with your clients' money short in gold..."

An even dozen comments by authoritative voices about gold being stomped.  Enough for ya?

As I hinted at above, if these are brags, I can predict that pride will probably goeth before the proverbial fall of the bad guys.

My syllogism/argument concludes as follows:  Gold is valuable and the price has actually been suppressed below where it should be in a free market.  Therefore, since the big boys can't do it forever...gold will be even moooooore valuable down the road.  Got Gold?

Goldfingerer

WHY GOLD?

 

                                                   

WHY GOLD

(From "Terror-Proof Your Mind and Money")

"Facts do not cease to exist because they are ignored."

—Aldous Huxley

                                                   

Hetty Green, a successful investor on Wall Street in the early 20^th century, said, "Investing is about buying cheap and selling dear." Gold qualifies for investment consideration today because it is actually, comparatively "cheap" in 2006;  because it remains scarce and tough to find and produce;  and because financial history suggests that because of numerous, unsustainable financial trends operating today, it will become very "dear" in the next few years.

You've probably been told "gold is some sort of barbarous relic" for most of your adult life…but TRY and keep an open mind when you read the following and subsequent posts. New information will be difficult for most people. (As the "marketing guys" have shown, once someone's mind is made up, it takes dynamite or a chaotic and painful crisis to get them to change it.)

An understanding of gold has been eliminated from America over the last 75 years. Our great grandfathers knew more about gold than most of us do today. I mean, high schools don't teach much of anything about personal finance or investing. College econ courses ignore money almost entirely. And only about 27% of the adult population over age 18 actually graduated from college, and not all college graduates or attendees even took an econ class while they were there. Newspapers and magazines have mocked gold and anything related to "sound money." They mostly want you to spend money on their advertisers' products. TeeVee in America has the same spending bias and has done nothing to provide a balanced view of real money. So, your first baby step in understanding anything about gold is just to ignore all the spin and the lousy programming you've received about gold up until now.

People in Europe, China, Japan, Africa, India Russia, South America, and Australia, etc. don't need to read this. You've had centuries of your governments screwing with the money and have mostly learned these lessons. Your folklore embodies these lessons, your geezers retell these messages, and your people are buying gold today because of that understanding. America hasn't had a real money crisis requiring an understanding of gold since our Civil War over 140 years ago…and we have very short memories anyway.  So let's start with some real basics about gold and why this stuff is important.

GOLD IS "MONEY"

So, what is money? Business people and even pointy-headed economics professors say money is: (1) a "medium of exchange" AND (2) a "store of value." In this instance, the eggheaded econ guys actually got it right. Money has to be two things. For example, in the old world of barter, I make spears, you make baskets. If I need a basket, and you need a spear, we trade even up, and we've created a marketplace. But tomorrow, I don't need another basket, and you don't need a another spear. HOWEVER, if I trade one of my homemade spears for this stuff called "money," I can use this very negotiable, everybody-wants-this-money-stuff for something else that I want later, like food or women. (Don't look at me funny, guys. Monkey scientists recently introduced money to a bunch of lab chimps…and the female chimps began accepting these money tokens in return for sex.  Who says dumb animals are dumb?) And notice, the medium of exchange substance must HOLD its value in order to be tradable in the future for something else. If the money substance turns into pigeon poop in 6 weeks…it ain't money. So, to move past barter, I must get (1) a tradable something that everybody wants and (2) something that lasts.  That's the money "concept."

Traders have used many different tangible substances over the centuries to represent the money concept. Native Americans used crops such as wheat and corn, and also strings of shells which they called wampum. Other cultures have used animals, cotton, fish, and even slaves as money. By fits and starts, weighable amounts of metals - gold (as well as silver and some copper and nickel) - became the most workable monies of various eras.  By 500 B.C., traders in Turkey were using gold slug coins with stamped pictures of Turkish politicians on them as money. These coins were of standard weights which made their use in trade easier. Do you notice the weighable, recognizable and standardized properties of gold here? I'm arguing here that the following 7 properties make gold a money…a tangible representation of the two-handed money concept:

 

1. Gold (and silver metal by inference) does not react with oxygen, therefore it doesn’t rot or rust. If treasure hunters dig up a Spanish galleon that's been underwater for 400 years, the gold coins and jewelry aboard will be unaffected. (They've shown these treasure troves being brought up on deck on fortune hunter TeeVee shows and the gold is indeed pretty much unaffected. It's only slightly tarnished. Silver darkens much more as a reaction to oxygen, as owners of silver candlesticks can attest.) The iron cannonballs and the wood that were underwater for 400 years have oxidized and they've indeed become pigeon poop. Money needs to be sturdy and durable. Gold and silver metals ain't called precious for nothing. They're the hardiest metals on the planet.

2. Gold is alloyable. Gold is malleable and can be mixed with other metals like copper to become less soft as coins rustling around in a pocket. You can make higher percentage (.9999) or lower percentage gold in coins, or 9 to 24 karats in the vocabulary of the jewelry business. You can't add alloys to diamonds or rubies… or to vegetables or animals. 

3. Gold is divisible. Gold retains its virtues even as it's chopped or sliced or diced. You can make lighter or heavier gold coins by weight. Diamonds and rubies and gemstones can't be divided easily, and when they are, they become less valuable because they’re smaller. The same is obviously true for animals and vegetables. And who cares if you can divide a barrel of oil.

4. Gold is recognizable. The color, luster, and density/heaviness and relative softness of gold are properties unique among metals. Gold is easily assayable and can be worked with at relatively low furnace temperatures. People could weigh gold; and they could measure its purity. They learned to trust those easily recognizable and testable qualities.

5. Gold is portable. Portability is a highly desirable quality in a money if you're trading on the road, or fleeing from a natural disaster or from a bad government. Those giant stone money things in the South Pacific didn't work very well on a dugout canoe. Gold is a "bearer instrument" which is both good and bad. People could carry gold around, but then Robin Hood could come and take it away. Gold does have some problems as a money, and one of them is it isn't always convenient…but more on that later.

6. Gold is ductile and can be stretched as a wire or flattened into very thin sheets and still hold all of it's physical properties. One ounce of gold can be pounded into almost 100 square feet of gold leaf, which can then cover a roof or a a piece of furniture to show how rich the state or church or the person displaying it is. In other words, gold money can be displayed and can act as a demonstration of the owner's wealth. Why do you think Saint Peter's Basilica in Rome, Saint Paul's Church in London, along with the California and Colorado (and even Connecticut) State Capital buildings all have gold on their roofs. You've seen pictures of these buildings and been impressed, haven't you? (And then there's the gold tip of the New York Life building in New York that they now show in their TeeVee commercials. They're advertising how rich they are, and how they'll have the dough to pay you off on your life insurance.) Gold has been displayed for literally thousands of years, over 100 generations of our ancestors…it's part of our DNA now to recognize it as valuable. Displayed gold that is displayed on a roof or a piece of furniture or as jewelry is a way of showing others the money.

7. And finally, gold and silver have a high unit value. Precious metals are scarce in the earth's crust, but have been mined for centuries in over 80 countries. Scarcity means a little bit of gold goes a long way.  With wide dispersal around the world, many peoples have discovered and used gold. Scarcity and difficulty of extraction mean that gold has a high unit value per ounce. Computer bits are not scarce and they never will be.

As a money, scarcity is efficient. Do the math here:  if gold is selling for anything over $533 an ounce, and there are 15 troy ounces in a pound, that means that gold is selling for at least 15 times $533 or $8,000 a pound! Hello? What else do you know of that is selling for a little over half of what it sold for in 1980, and still sells for over $8000 a pound? (This may be why people say something is worth its weight in… gold.) (On the other hand, platinum with an even higher unit value is too scarce and very difficult to work with, and was never used much as a money.

Just to make sure I'm getting this gold-is-money fact situation across, let's compare gold money to paper "money." Paper is NOT scarce. It's being counterfeited by a couple of foreign governments, and on neighborhood copy machines today, and the FEDs are creating it by the truck full. Congress has been raising the national debt limit and shoveling the stuff out of the printing presses for the last 90 years. The new FED guy is threatening to drop dollars from helicopters if we run short. And finally, if you destroy part of a paper dollar, your bank will replace it with another one! No problemo. Does paper "money" sound like something that's scarce and will hold its value?

And please notice that when Uncle Sam's Mint creates zillions of brand new paper dollars…those acts of creation make each of the dollars already in your pocket worth LESS. That's the meaning of inflation - less purchasing power. You can't do that with gold. It's scarce because they ain't finding and producing that much of it each year. Remember, dollars are a currency, not a money.

Ok, I'll try and wrap this up with some summary words to try and overcome the last of your intellectual inertia here. In conclusion, there are physical and chemical properties that made gold a really, really excellent and useful money - the classic medium of exchange AND a store of value.

Post script: this little essay of less than 2000 words took you perhaps 10 minutes - at the most - to read. Doesn't it seem a trifle ODD that nobody from the educational or financial world has managed to mention these 7 little facts about gold as money to you during your entire life? Eh?

The world had a "Gold Standard" for over 200 years. It kept prices steady and produced terrific growth and trade among the world's economies up until 1914 (the beginning of World War I). The Gold Standard meant that anyone could exchange their paper currency for real gold money or visa versa at any bank…and that exchangeability added convenience to the heavy-to-carry-around gold problem. That Gold Standard was pretty much killed in the 1930's, and "they" tell you gold is only a "commodity" now.

My question is, if gold worked so well as a money, and kept people and governments and banks so honest, what happened? Instead of asking why about gold…we should be asking, Why is gold NOT a money today?

To be continued…

March 23, 2006

Goldfingerer

Social Security for Whom?

The argument that GW Bush is running around the country stumping to help the youth of America retire comfortably is nice and all that, but it doesn't wash.  G-Fingerer suspects that the long standing connection between the Bush family and Wall Street going back to the 1920's is the real reason for offering to "privatize" the social security accounts of my fellow Americans. 

With billions flowing into Wall Street coffers from new SS pass-through accounts, George the 2nd will be delivering to his real "Base."  And if funny money created by the FED runs into funny SS accounts handled by New York, why wouldn't that inflate the currency beyond all recognition?  If this plan passes, it will destroy the currency even faster.  Buy gold.  If it doesn't pass, the death of the dollar by a thousand paper cuts will be slower, but just as lethal.  Buy gold.

Statement of Alleged Principles

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Who, what, where, when, how...and above all why do a gold blog?
This blog is about the topic of monetary metals - gold and silver, which used to be money.  I'm from California.  We stumbled over some giant gold discoveries 150 years ago, and it's part of our character...so why not talk about this stuff and bring people up to date?

Most people don't really know much about the activity of "managing their money."  I seem to know quite a bit.  I was raised in a family that had some. I remember being interested in money generally from about the age of 9.  Money stewardship was a topic that came up at dinner.  My family hired a financial planner during my late teens and the planner sat the kids down and we "discussed" this stuff over a nice lunch on the veranda. Get the picture?   

How about you?  Did you get an education in handling money?  Don't you think that it's slightly odd that the entire subject of money is ignored in school?  And ignored in the richest civilization in probably all of recorded history?

I've also been trained by some of Wall Street's best, and by more than 500 of the best books written on the subject. At one time I was a reviewer of financial books for a newspaper. I've been investing in the stock market  since 1957, starting with my paper route money. 

I've been teaching investing since I went to work for Dean Witter in June of 1982.  I've managed more than $150 million dollars of customers' money as a trust company portfolio manager.   Yes, I am a Certified Financial Planner(R).  During the last 5 years, I've spent a lot of time studying gold and silver investing.  I've gone to gold "Shows" around the country.  I've read all the books on the subject.  Most of them were published in the 1970's, but a couple of recent ones. I've hunted down other websites and absorbed what they had to say.  And I've listened to the drivel that comes out of Manhattan that passes for analysis on the subject of precious metals investing... and I figure I can't do any worse.

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Wall Street - the industry that allegedly sells you investment performance - doesn't teach.  Turns out they don't offer much performance either.  Stock brokering and managing a mutual fund are not really about managing money for you...they're about making money for the broker and the fund company. Did Wall Street analyists get you out at the top in the first quarter of 2000?  Thought not.  Did you notice the big brokers paid over $1.3 billion dollars to settle Eliot Spitzer's charges that Wall Street analysts were really just recommending the offerings of the Investment banking side of the house? Did you hear of any of the big Wall Street firms losing money in the bear market of 2000-2003?  They made money during the bear, you didn't.  And they've been dead wrong on gold and silver the last 5 years too. 

You'll get out of managing money pretty much what you put into it.   So, to make money there's a trade off:  you have to study.  You have to do your homework.  There's no point having an investment "strategy" until you have an understanding of markets and how they work.  Hopefully, I can provide information and intelligence on precious metals so you can understand and make some decisions that will make you some money.

John Maynard Keynes, the left-leaning British economist, has said, "A rational investment policy in an irrational world is suicide."  I disagree.  It is indeed a relatively irrational world, but we need all the rationality we can get.  (Keynes hated gold, but he's so quotable...)  And contrary to popular opinion, rationality can produce a few bucks along the way, just ask Warren Buffett. 

Suze Orman has said, "Truth creates money.  Lying destroys it."  This is a web site with some rational information and an attempt to tell the truth about gold and silver... so people can watch their money be destroyed with UNDERSTANDING! (Sorry...:-) 

All of the ranting here may amount to zilch, but at least I'll feel better for having said it. 

Goldfingerer