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Gold is boomeranging on George, Greenspan, and the other central bankers

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  • cxpowell
    By Sean Corrigan http://www.capital-insight.com sean@capitalinsight.co.uk Wednesday, August 27, 2003 Though vehemently denied by all and sundry in officialdom,
    Message 1 of 1 , Aug 27, 2003
      By Sean Corrigan
      Wednesday, August 27, 2003

      Though vehemently denied by all and sundry in officialdom,
      there are many in financial markets who will tell you that the
      decision taken suddenly in 1999 by Culpability Brown, with
      the endorsement of Sir Eddie the Unready George to dump
      roughly 400 tonnes of Britain's precious reserves of gold at
      what was then a 20-year (and is now a 24-year) low of just
      under £157/oz, was not some rational act of "portfolio
      management" but rather a deliberate attempt to cap prices
      until enough metal could be transferred to bullion banks --
      and their central bank backers -- holding wildly overstretched
      short positions.

      As Reg Howe of www.GoldenSextant.com put it in his legal
      complaint against the Bank for International Settlements for
      this very act of price fixing, a case never defeated but only
      dismissed on the technicality that Howe was not the party
      who had been damaged by any such operation and so was
      not eligible to file the suit:

      "Edward A. J. George, governor of the Bank of England and
      a director of the BIS, to Nicholas J. Morrell, Chief Executive of
      Lonmin Plc: 'We looked into the abyss if the gold price rose
      further. A further rise would have taken down one or several
      trading houses, which might have taken down all the rest in
      their wake. Therefore, at any price, at any cost, the central
      banks had to quell the gold price, manage it. It was very
      difficult to get the gold price under control but we have now
      succeeded. The U.S. Fed was very active in getting the gold
      price down. So was the U.K.'"

      In an infamous remark made the year before this alleged
      exchange -- and ironically just before Long-Term Capital
      Management nearly blew up the whole of Wall Street --
      Fed Chairman Alan Greenspan also assured his listeners
      tha no harm could eventuate from the swelling numbers of
      unregulated derivatives in existence and that neither could
      "private counterparties restrict supplies of gold … where
      central banks stand ready to lease gold in increasing
      quantities should the price rise."

      Moreover, in February of this year Antonio Fazio, head
      of the Banc d'Italia, told a London audience: "In a system
      that rests basically on fiduciary money, the principles of
      free trade and comparative advantage typical of trade in
      manufactures have sometimes been extended
      unquestioningly to movements of financial capital."

      Which, in English, means it's all very well opening borders
      to trade, but not to unlimited quantities of hot paper money
      all chasing the latest vogue.

      "Reflection on the mistakes made and the need to limit
      and rectify the adverse effects on the stability of
      intermediaries, to protect savings and to restore conditions
      for a recovery in output, have prompted the monetary
      authorities of the industrial countries to establish more
      extensive and closer cooperation among themselves and
      with the developing countries," Fazio continued.
      A particularly bold assertion of the truth of widespread
      collusion, you will perforce agree -- and who was the driving
      force behind this, do you think?

      "The governor of the Bank of England, Sir Edward George,
      plays a leading role in this new phase of international monetary
      cooperation that we could say began with the meeting of the
      Group of Seven leading industrial countries in Toronto in
      February 1995, shortly after the Mexican crisis erupted."

      It should be noted that the rescue of those caught in this
      so-called Tequila Crisis is increasingly recognized as
      being the event that induced financial market participants
      -- knowing this "monetary co-operation" could be relied
      upon to bail them out from any penalties of their future
      excesses -- to unleash the mania which was to become the
      Bubble upon us.

      In fact, so wondrously successful has this heroic co-operation
      been that it has seen most of Asia, Russia, Poland, Turkey,
      and Latin America blow up since, together with most of the
      developed world's media, telecom, technology, and power
      industries, while stripping the heart out of pensions and
      insurance companies everywhere and fostering a near-global
      property and consumer credit boom of dangerous proportions.

      Not a bad legacy for the now-retired Sir Eddy and his
      can't-be-shifted-with-a stick-of-dynamite buddy "Sir" Alan

      But what is the point of all these ruminations and why
      bring all this up now?

      Well, it's just that today saw the sterling price of gold hit
      £236.50/oz -- some 50 percent above the lowest price the
      Bank of England achieved in its crash sales programme
      and nearly 30 percent above the average price of roughly
      £184/oz achieved in the course of the 17 auctions
      subsequently held.

      That means that Brown and George between them managed
      to sell a decent chink of Britain's patrimony for a cool £660
      million less than it would have fetched today -- enough for,
      say 30,000-odd teachers' annual salaries, or around
      nine-tenths of a Millennium Dome!

      By printing money themselves, and by alternately inveigling
      and turning a blind eye to the financial big guns' drive to
      distort prices and to force capital where it has no business
      going, the central bankers can keep the plates spinning for
      what seems like a very long time indeed, but, eventually,
      gravity wins -- and they fall.

      Mister Market may be bound, gagged, and chained to a
      radiator for long years at a stretch, but eventually he comes
      stumbling out into the sunlight, turning his captors' dreams
      to dust.

      Gold -- and silver and platinum too, if today's price action is
      any guide -- may be about to show up the hollowness of the
      bankers' schemes and to reveal finally the vast scope of the
      hitherto partly hidden inflation they have engineered into the

      And if that happens, be under no illusions: It will dramatically
      change the outlook for us all.

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