<<I'm not a lawyer, but I'll play one on the thread. >>
thoughts?
An Unlikely Conspiracy; An Entirely Likely Swindle
I'm sympathetic to the intent behind the Gata lawsuit, but I don't think it has a snowball's chance. In fact, I expect it will be dismissed out-of-hand by the court, and I wouldn't be surprised if the lawyer bringing it gets a reprimand for filing a frivolous suit. I can hear the judges chuckling up the sleeves of their ample robes as they compare it to lawsuits alleging the Queen of England still owns the US, or that sovereign individuals in the US don't have to pay income tax under the law.
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Doug Casey
ASPEN, Colorado - I've recently been taken to task for not taking seriously a lawsuit filed on Dec 7, 2000 by one Reginald Howe in the US District court of Massachusetts against Alan Greenspan, the US Secretary of the Treasury, the Bank for International Settlements and a bunch of large international commercial banks. The suit alleges a conspiracy to manipulate (read: depress) the price of gold, as well as violations of the Sherman Antitrust act, various SEC regs and various common law claims.
The lawsuit has been financed and promoted by a group called GATA (the Gold Anti-Trust Action Committee), of which I presume many readers who are interested in gold may have heard.
The complaint recounts some history of gold, and explains how certain mining firms and gold dealing banks sell the metal into the futures market for a premium to the spot price. It explains how central banks lend their gold to commercial banks to collect (generally) about 2% in interest, and how commercial banks capture the difference between that and the prevailing interest rate in dollars. It recounts that new production of gold is 2,500 tonnes, but consumption is 4,000, and that this deficit is filled with borrowed gold, constituting a giant short position. And it (reasonably) alleges that short position can really never be covered at anywhere near current prices. I agree.
But then it jumps to the conclusion that just because some people have an interest in seeing the gold price stay stable (otherwise they might get caught short in a runaway gold bull market, partially of their own making), that those people are conspiring to depress the price of gold. Another part of the complaint goes on to decry the BIS attempt to force its private shareholders (accounting for 72,648 shares, or 13.73% of the outstanding) to tender their shares for US$9,280 per, when a recent fairness opinion set their asset value at over twice that much. (Reviewing lawsuits is not my favorite form of recreation, but you can do so at www.gata.org.)
What do I make of it? Well, I don't hold myself out as a legal maven, but my conclusion is that all this suit proves is that anybody can sue anyone about absolutely anything.
I'm sympathetic to the intent behind this suit, of course. But I don't think it's got a snowball's chance. In fact, I expect it will be dismissed out-of-hand by the court, and I wouldn't be surprised if the lawyer bringing it gets a reprimand for filing a frivolous suit. I can hear the judges chuckling up the sleeves of their ample robes as they compare it to lawsuits alleging the Queen of England still owns the US, or that sovereign individuals in the US don't have to pay income tax under the law.
The lawsuit has four main counts. As per their Count 1, price fixing, it makes sense to me that there's a huge uncovered short position in the gold market. But it doesn't make sense to me that the powerful people and institutions named would collude to keep the gold price down, however much that might be to their advantage. Rather, in the real world, the guys that could get hurt most would be trying to cover before the other guys do, recognizing you can't control a market forever; these aren't plowboys who just fell off a turnip truck.
Of course it would be in their interest if the price of gold stayed down. But that doesn't mean that such powerful people would trust each other enough to collude to do it. The best thing they could hope to do, if they're colluding, would be to manipulate a controlled rise in the price of the metal so that production increases gradually covered the deficit, and bailed them out with minimal drama (and losses) over time.
The idea of the Fed Chairman, the Treasury Secretary and a roomful of bankers sitting down at a table to collude wouldn't even make a good movie, because it's so incredible. At least to me.
But, still, is somebody manipulating gold? Well, it's clearly in the interest of all governments and central banks for the price to stay low just because it gives the appearance that all's right with the financial and economic worlds. It's one thing for the stock market to be weak. But if gold takes off at the same time, that could cause people to push the panic button for real. So maybe governments are manipulating the price of gold; that's the type of thing they've always done. In fact, that's what most people think they ought to do. But if they are, what do you think the chances are of a government court saying they shouldn't? I'd say slim and none. And Slim's out of town.
Entirely apart from that, we have the same situation in the silver and uranium markets, to name two more that are chronically depressed in price, but with longstanding supply shortfalls. These things happen. Right now practically every commodity in the world, from orange juice to vanadium to soybeans, is at near historic lows in real terms.
Probably all part of an even bigger conspiracy, some might say. If I were the judge I'd throw it out of court as a grandstanding effort of a bunch of sore losers and conspiracy wankers, despite my dislike of central bankers, and my sympathy for gold.
Their Count 2, Securities Fraud, primarily centers around the BIS shares. Of course the public shareholders are being screwed. But it happens all the time; that's what management buyouts are usually all about. And in this case, where "the public interest" surrounding an international Non Governmental Organization like the BIS is concerned, no US court is likely to want to claim jurisdiction.
I'd like to see the BIS wound up, and its capital distributed. And frankly, I wouldn't mind if its officers and directors were shot at dawn. But that doesn't mean I'm particularly sympathetic to its shareholders. They bought into a corrupt and destructive quasi-governmental institution, controlled by central bankers where all the other shareholders are central banks. You swim with sharks, you can expect to get bit. Tough luck.
The lawsuit has a bunch of miscellaneous Constitutional and Common Law violations thrown in for good measure in Counts 3 and 4. But the US Constitution is a dead letter, except for certain of its aspects in which the Supreme Court has taken an interest. And gold ain't one of them. Common Law has, unfortunately, been superceded in all meaningful ways by statute law in the US. Which actually leads me to what I think is a rather distasteful aspect of the suit, namely its respectful reference to US securities and antitrust laws, two areas of legislation in need of abolition. Every suit filed referencing them, however, serves only to legitimize them. But I recognize that's perhaps just a personal bete noir of mine.
Don't get me wrong. I'm happy to see folks do this kind of thing, if only because it must distract the enemy to some degree, even if mostly by amusing him. And maybe there's a chance in a hundred that a lower court will entertain part of it, before it's thrown out on appeal. So I wish these folks well. I mainly think it's just a waste of time. And regrettably, it adds to the reputation of goldbugs as windmill tilters and conspiracy buffs.
The International Speculator
International Speculator Doug Caseyhas been seeking and finding incredible opportunities around the world for 25 years. For more information on how you can take advantage of profitable opportunities unearthed by Casey in his speculative travels please see his report: Nobody Notices the Good News... Until It's Too Late.
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