THE GOLDEN SEXTANT
This site takes its name from its proprietor's 1992 essay of the same name.
The Golden Sextant won the first Bank Lips AG International Currency Prize.
The subtitle of this site is MPEG - Money, Politics, Economics and Gold.
Its raison d'ˆtre is to carry on the fight for sound, constitutional money.
Latest MPEG Commentary
6/11/2000 - Central Banks vs. Gold: Winning Battles but Losing the War?
Copyright 1999, 2000 - Reginald H. Howe
All rights reserved. Any republication without permission prohibited.
MPEG COMMENTARY - Page 12
June 11, 2000. Central Banks vs. Gold: Winning Battles but Losing the War?
goldensextant.com
Reginald H. Howe
www.GoldenSextant.com
row@ix.netcom.com
June 11, 2000
Central Banks vs. Gold: Winning Battles but Losing the War?
Many in the gold community, including myself.....
Suspicious Gold Activities of Deutsche Bank.....
Continued Rapid Growth of Gold Derivatives.....
From the BIS: Pulled Punches and Indications of Strain.....
Tightening Availability of Official Gold.....
My friend Elwood has very kindly updated his prior chart showing.....
From Manipulation to Loss of Control.....
As the first major paper currency with no history of prior.....
...as a result of the Washington Agreement
...the gold price rallied far more sharply
than almost anyone expected.....
So far, the only apparent strategy
for dealing with this desperately
short gold market is to throw ever
larger amounts of gold derivatives at it.
Since these derivatives are coming
in huge volumes from the largest
and best-connected American and
German bullion banks, all under
the direct supervisory jurisdiction
of the Fed or the Bundesbank,
it is very hard to believe that
this explosion in paper gold does not
have some type of official imprimatur.
... it is even more difficult to think
that this approach can lead to anything
but a very bad end.
Nor does it appear coincidental under
the circumstances that the banks writing
these gold derivatives are based in the
two countries -- the U.S. and Germany --
having the largest official gold reserves.
... if there is significant physical gold
backing this deluge of paper, it resides
in an implicit promise of access to these
countries' gold reserves. But neither country
has yet done anything to prepare its citizens
for the possibility that their national gold
reserves may be called upon to bail out
the bullion banks, many of whom got into trouble
initially by trying to profit from inside knowledge
of official efforts to manipulate gold prices.
... when the European central banks announced
the Washington Agreement, they were quite unprepared
for either the strength of the ensuing gold price rally
or the magnitude of the short gold position that it revealed.
Probably they had in mind only short positions
obvious from looking at their own books.....
... they may have failed to appreciate,
or at least not fully, was the extent
to which the bullion banks had taken
advantage of their knowledge or perception
of a rigged market to write gold derivatives
for their own profit.
Too late, the signatories to the Washington Agreement
may have realized that some of their own gold loans
were in jeopardy of default, and that in allowing
the bullion banks to operate without either effective
regulation or appropriate reporting geared specifically
to gold banking, they had made a grievous error.
... setting out to con the gold market,
the central bankers ... ended up conning themselves.
In the process, the ECB and EA central banks may also
have unintentionally stymied effective use of their
gold reserves to support the euro.....
... One solution for the ECB would be to sell dollars,
which it has in abundance, not for euros, which it can
create almost at will, but for gold.
... announcing ... that gold rather than the U.S. dollar
is the ultimate benchmark for the euro, the ECB would
likely strengthen the euro's foreign exchange value
and win popular plaudits in Europe for the new currency.
But it would also risk setting off an even stronger rally
in gold than did the Washington Agreement.
... danger of that rally ... as the chief barrier
to effective mobilization of the EA's gold,
... including quite possibly complete collapse
of the dollar-based international payments system
jury-rigged on the ashes of Bretton Woods
out of unlimited fiat money and floating exchange rates.
Gold was a hard master.
But no master may turn out to be far worse.
Central bankers no more lack for money or brains than Bill Gates.
Nor do their considerable resources confer any greater exemption
from basic laws of the market place and human nature.
If GATA's Bill Murphy putting out the truth about the gold market
on the internet does not start the central bankers sweating,
perhaps Ed Murphy will. He is the American engineer who coined
in the twentieth century the principle known as Murphy's Law,
given milder but more eloquent form two centuries earlier
by the Scottish poet Robert Burns
in To a Mouse (On Turning Her Up in Her Nest with the Plough):
The best laid schemes o' mice an' men
Gang aft a-gley
, An' lea'e us nought but grief an' pain
For promis'd joy
(off topic)
<<Dougie, you need to find a better analogy than comparing
a windshield to the global monetary system. Ron Reece>>
ok Ron, and if you happened to be taking a walk in the park
about 300 years ago and saw Isaac Newton looking at a apple
in one hand while feeling the bump on the top of his head
with his other hand, you would have advised him as follows.
"You need to find a better analogy than comparing an apple
to the global and universal observation called gravity
so that a measured unit of force to describe the rate of change
of velocity of a moving object can be identified." |
