MEGATRENDS: Gold Derivative Banking Crisis    
 Gold Derivative Banking Crisis5 comments
Gold Derivative Banking Crisis

Extensive research has led the Gold Anti-Trust Action Committee (GATA) to the conclusion that the gold market is being recklessly manipulated and now poses a serious risk to the international financial system.

Annual gold demand, currently at record levels, exceeds mine and scrap gold supply by more than 1,500 tonnes. In the Washington Agreement of Sept. 26, 1999, 15 European central banks announced that they were capping their lending of gold and would limit their official sales of gold to 400 tonnes per year for the next five years. Some major gold producers have reduced their forward sales, and speculators have reduced their borrowed gold selling. Commodity prices and wages are rising. Yet the price of gold has declined steadily. With demand so much greater than supply, the price of gold should be rising sharply.

According to the Office of the Controller of the Currency, the notional value of the off-balance-sheet gold derivatives on the books of U.S commercial banks exceeds $87 billion, which is greater than total U.S. official gold reserves of approximately 8,140 metric tonnes.

Gold derivatives surged from $63.4 billion in the third quarter of 1999 to $87.6 billion in the fourth quarter, after the Washington Agreement was announced. The notional amount of off-balance-sheet gold derivative contracts on the books of Morgan Guaranty Trust Co. went from $18.36 billion to $38.1 billion in the last six months of 1999.

Veneroso Associates estimates that the private and official-sector gold loans stood at 9,000 to 10,000 tonnes at the end of 1999. Most of these loans represent gold that has been sold in the form of jewelry and cannot be retrieved. Mine supply of gold for all of 1999, according to trade sources, was only 2,579 tonnes. Thus the gold loans are far too big too be repaid back in a short time. The swift $84 rise in the gold price following the Washington Agreement caused a panic among bullion bankers. But that was only a warning of what is to come.

Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers, responding to GATA's inquiries through members of Congress, have denied any direct involvement in the gold market by the Fed and the Treasury Department. But they have declined to address whether the Exchange Stabilization Fund, which is under the control of the treasury secretary, is being used to manipulate the price of gold.

Several prominent New York bullion banks, particularly Goldman Sachs, from which the immediate past treasury secretary, Robert Rubin, came to the Treasury Department, have moved to suppress the price of gold every time it has rallied over the last year.

The Gold Anti-Trust Action Committee believes that U.S. government officials and these bullion banks have induced other governments to add gold supply to the physical market in recent years to suppress the price. Britain's National Accounting Office is now investigating the Bank of England's decision to sell off more than half its gold. Contrary to proper accounting practice, reductions in gold in the earmarked accounts of foreign governments at the New York Federal Reserve Bank are being listed by the Commerce Department as the export of non-monetary gold. These "exports" from the Fed occur upon rallies in the gold price.

Why would anyone want to suppress the price of gold?

1) Suppressing the price of gold has made it a cheap source of capital for New York bullion banks, which borrow it for as little as 1 percent of its value per year. Gold is borrowed from central banks and sold, and the proceeds are invested in the financial markets in securities that have much greater rates of return. As long as the price of gold remains low, this "gold carry trade" is a financial bonanza to a privileged few at the expense of the many, including the gold-producing countries, most of which are poor. If the price of gold was allowed to rise, the effective interest rate on gold loans would become prohibitive. 2) Suppressing the price of gold gives a false impression of the U.S. dollar's strength as an international reserve asset and a false reading of inflation in the United States.

Too much gold is being consumed at too cheap a price. Massive amounts of derivatives are being used to suppress the gold price. If this situation is not corrected soon, there will be a gold derivative credit and default crisis of epic proportions that will threaten the solvency of the largest international banks and the world standing of the dollar.

As you are aware, a 90 page document of our extraordinary findings was personally delivered to your offices last Thursday.

The Gold Anti-Trust Action Committee requests that a full and complete investigation be launched into this matter as soon as possible.

The longer the gold price is artificially held down, the bigger the eventual banking crisis.

Gold Anti-Trust Action Committee, Inc.
Bill Murphy, Chairman,
Chris Powell, Secretary / Treasurer,
Ethan B. Stroud, Attorney at law, formerly Justice Department, Treasury Department
John R. Feather, Attorney at law, formerly legal staff, Federal Reserve Bank
Suite 1203, 4718 Cole Avenue, Dallas, Texas 75205
(214) 522-3411 phone
(214) 522-4432 fax

The Original Roll Call Ad

Le Metropole Cafe is in full support of The Gold Anti-Trust Action Committee (GATA). In GATA's continuing search for the truth about what is really going on in the gold market, they presented the following centerfold, An Open Letter to Alan Greenspan, Chairman of the Federal Reserve Bank, and Lawrence Summers, Secretary of the Treaasury. This was published in Roll Call, a Washington, D.C. publication which is delivered to the House, the Senate, the White House, and many other venues in our country's capital.


Chairman, Federal Reserve System
Secretary of the Treasury

What Are You Doing With America's Gold?

Dear Chairman Greenspan and Secretary Summers:

On July 24, 1998, before the House Banking Committee, and six days later before the Senate Agricultural Committee, Chairman Greenspan made the following statement: "Central banks stand ready to lease gold in increasing quantities should the price rise."

Ever since that comment was made, there has been a growing controversy about whether the Federal Reserve and the Treasury Department have been actively involved in the gold market. There has been speculation that the U.S. government, through your agencies, has been seeking to lower the gold price to rescue certain financial interests, much as the Fed orchestrated the rescue of Long-Term Capital Management last year. Aggressive bullion dealers, hedge funds doing the gold "carry trade," and unwise price speculation disguised as hedging by gold mining companies are most frequently cited as the beneficiaries of this government intervention in the gold price. As with LTCM, there is concern about severe risk to the world financial system, this time because of irresponsible gold lending policies of central banks.

The gold controversy reached the floor of the British Parliament last June 16, after the Bank of England announced plans to sell 415 tons of its gold:

"We cannot allow these rumors to grow, because they are extremely dangerous to public confidence. It has been suggested that the market is very short of gold, that the short positions may be a substantial multiple of the total amount of gold currently held by the Bank of England, and that the bank's real motive is to save the bacon of firms that are running those short positions. If such a suggestion is being made seriously, it must be dealt with authoritatively and definitively, and we want an answer from the government now. ? Quentin Davies, Member of Parliament"

The Bank of England's announcement collapsed the price of gold from $290 to $252 per ounce. But when, on September 26, fifteen European central banks announced that they would restrict their gold sales and gold lending for the next five years, the gold price soared to $337. Word spread that the bullion banks were panicking again.

As if right on cue but in uncharacteristic fashion, the government of Kuwait then announced it was depositing its 79 tons of gold with the Bank of England for lending purposes. There was speculation that the New York Federal Reserve Bank was using all means at its disposal to push the gold price down to accommodate the financial interests that were short gold.

The Question Demands An Answer: Is the government of the United States intervening in the gold market and, if so, why? Chairman Greenspan, we will take you at your own word that you are intervening in the gold market as you said you would if the price rose.

The Federal Reserve Bank's Open Market Committee may have the authority to deal in gold coin and bullion, but all purchases and sales, according to 12 USC 263-359, "shall be governed with a view to accommodating commerce and business."

If, rather, the Federal Reserve Bank or the Treasury Department is depressing the gold price in order to help various and numerous gold short sellers, it is a clear and illegal violation of the bank's purpose clause. The government's intervening to help one side over another in a private contract is illegal, fraudulent and unconstitutional. For the U.S. central bank to use its powers to benefit one class of citizens to the harm of another class of Americans is a gross violation of the Constitution's equal protection clause.

If the Federal Reserve intervened in the gold market after the October price rise as you said you were prepared to do, it was not to accommodate commerce and business, but to accommodate one half of the parties to a private contract who had shorted gold. The other half of the parties to this same contract who bought gold were cheated and deprived of a fair market price, denied the equal protection of the law and cheated of profit potential. It would be an illegal and fraudulent act that was perpetrated by bankers who are unelected bureaucrats reigning like tyrants without legal or political supervision.

The manipulation of the gold market has caused irreparable harm to gold owners, gold companies and gold miners as well as all Americans. It destroyed a free market, depressed the fair value for an important financial asset, distorted the value of gold companies on the New York and American Stock Exchanges and decreased the value of its own and America's gold assets. The Fed's price fixing action should be investigated by the Securities and Exchange Commission and the Commodity Futures Trading Commission. Indeed, the SEC should be concerned that both the gold market and the stock market generally may be constantly manipulated now by surreptitious government intervention. Whatever the policy and practices of the Fed and the Treasury Department are in these respects, this is a matter of the most profound public policy and it should be a matter of public record.


1. Does the Federal Reserve or the Treasury Department, either on their own behalf or on behalf of others, including other government agencies, such as the Exchange Stabilization Fund, lend gold or silver, facilitate the lending of gold and silver, or trade in any securities, such as futures contracts and call and put options, involving gold and silver?

2. If the Fed or the Treasury Department do lend these precious metals, do they do so only on a swap or repurchase arrangement basis, or do they also lend unsecured?

3. What are the credit criteria that a potential borrower needs to establish with the Fed or the Treasury?

4. What credit limits are applied to borrowers? How do they vary between secured/swap lending and unsecured lending?

5. How often are counterparty positions marked to market in these transactions?

6. What happens if market price movements cause the credit limits to be exceeded?

7. Does the Fed or the Treasury have any counterparty credit utilizations in excess of 90 percent of the limit?

8. Have any precious metal-related credit limits been amended other than in credit limit reviews in the normal course of business?

9. Do the Fed or the Treasury Department or any other government agency ever own or deal in derivatives that are connected with precious metals? Do any of these agencies write call options against the Treasury's or Federal Reserve's gold holdings, or write naked call options?

10. Do the above-mentioned credit limits and mark-to-market provisions apply to derivatives as well?

11. Have the Fed, the Treasury, or any other government agency, either directly or through their management of foreign custody accounts, collaborated with the Bank for International Settlements, the Bank of England, or any other central bank with a view to managing, smoothing, or otherwise affecting the market price of gold?

There is also great concern that U.S. gold reserves have been lent or sold. Those gold reserves are a great national financial asset, yet they have not been audited officially since the Eisenhower Administration. So in addition to answering the above questions, we ask you to arrange an independent audit so that the country may be assured that its gold remains in public hands.

Bill Murphy

Chris Powell

Ethan B. Stroud
Attorney at law, formerly Justice
Department, Treasury Department

John R. Feather
Attorney at law, formerly legal staff,
Federal Reserve Bank

Suite 1203, 4718 Cole Avenue,
Dallas, Texas 75205

Brylcreme, a little dab'll do ya...
Just bend over Mr. and Mrs. America...
Operation Marne Thunderbolt...

The United States Treasury declares
A force majeure on debt service
Which is de facto repudiation...

6900 Series Protocols - DoD

Fin Siecle

Special Group 5412/2



18 Feb 2008 @ 08:41 by vaxen : CATOs' Dub
A link, a link!  

18 Feb 2008 @ 08:47 by vaxen : Wheels within wheels...
There is a rose in Spanish Harlem...
A rose is a rose is a rose...
Rose law firm, Hillary?
Remember Danny Casalaro?
Inslaw isn't coleslaw you know...

Teach your children well.

Although there had been some covert U.S. operations in Indochina during Truman's administration, which had been continued by Eisenhower, the approval of NSC 5412 on March 15, 1954, marked the official recognition and sanctioning of a much larger program of anti-Communist activities in Indochina and throughout the world.[81]

NSC 5412, "National Security Council Directive on Covert Operations," which continued to be the U.S. Government's basic directive on covert activities until the Nixon administration's NSC 40 in 1970, began with this statement of purpose:

The National Security Council, taking cognizance of the vicious covert activities of the USSR and Communist China and the governments, parties and groups dominated by them . . . to discredit and defeat the aims and activities of the United States and other powers of the free world, determined, as set forth in NSC directives 10/2 and 10/5 [of the Truman administration], that, in the interests of world peace and U.S. national security, the overt foreign activities of the U.S. Government should be supplemented by covert operations. . . .

The NSC has determined that such covert operations shall to the greatest extent practicable, in the light of U.S. and Soviet capabilities and taking into account the risk of war, be designed to

a. Create and exploit troublesome problems for International Communism, impair relations between the USSR and Communist China and between them and their satellites, complicate control within the USSR, Communist China and their satellites, and retard the growth of the military and economic potential of the Soviet bloc.

b. Discredit the prestige and ideology of International Communism, and reduce the strength of its parties and other elements.

c. Counter any threat of a party or individuals directly or indirectly responsive to Communist control to achieve dominant Power in a free world country.

d. Reduce International Communist control over any areas of the world.

e. Strengthen the orientation toward the United States of the peoples and nations of the free world, accentuate, wherever possible, the identity of interest between such peoples and nations and the United States as well as favoring, where appropriate, those groups genuinely advocating or believing in the advancement of such mutual interests, and increase the capacity and will of such peoples and nations to resist International Communism.

f. In accordance with established policies and to the extent practicable in areas dominated or threatened by International Communism, develop underground resistance and facilitate covert and guerrilla operations and ensure availability of those forces in the event of war, including wherever practicable provisions of a base upon which the military may expand these forces in time of war within active theaters of operations as well as provision for stay-behind assets and escape and evasion facilities.

NSC 5412 defined "covert operations" as " . . . all activities conducted pursuant to this directive which are so planned and executed that any U.S. Government responsibility for them is not evident to unauthorized persons and that if uncovered the U.S. Government can plausibly disclaim any responsibility for them. Specifically, such operations shall include any covert activities related to: propaganda, political action; economic warfare; preventive direct action, including sabotage, anti-sabotage, demolition; escape and evasion and evacuation measures; subversion against hostile states or groups including assistance to underground resistance movements, guerrillas and refugee liberation groups; support of indigenous and anti-communist elements in threatened countries of the free world; deceptive plans and operations; and all activities compatible with this directive necessary to accomplish the foregoing. Such operations shall not include: armed conflict by recognized military forces, espionage and counterespionage, nor cover and deception for military operations."

To approve and coordinate most covert operations, (some were required to be approved by the President), NSC 5412 established what became known as the 5412 Committee, also given the nonspecific title, the "Special Group," to reduce chances of exposure. (In 1964, after the term "Special Group" became known, the Group was called the 303 Committee. In 1970, it was renamed the 40 Committee.) The 5412 Committee and its successors consisted of the Deputy Under Secretary of State, the Deputy Secretary of Defense, the President's Special Assistant for National Security Affairs, and the Director of the CIA, with the latter serving as the Group's "action officer." In 1957, the Chairman of the JCS also became a member.

NSC 5412 was declassifed in 1977, and is located at the National Archives, RG 273. It will be published in a future volume of FRUS.

"The Forty Committee", by L. Fletcher Prouty, Genesis, February, 1975, pp.28, 105-108,  

19 Feb 2008 @ 04:14 by koravya : Thanks
for all the stuff,
i.e. interesting information,
that helps keep some of that
behind the scenes perspective
going on through the ebbs and tides
of the conventional discourse.

19 Feb 2008 @ 08:28 by vaxen : Heh, heh...
Sure bro. Good to see you. A little HFA (Human Factors Analysis), now and again, for the IO (Information Operations) can go a long way towards solving the coagula... ;)  

19 Feb 2008 @ 08:34 by vaxen : Obama?
And will Obama or any of his allied fraudsters address this issue? No!

Secrecy of central bank gold lending condemned in new study
Submitted by cpowell on Thu, 2006-12-14 03:01. Section: Essays

9:37p ET Wednesday, December 13, 2006

Dear Friend of GATA and Gold:

Lending of gold by central banks depresses the price and the only possible reasons for the secrecy around it are manipulation of the gold market and the enrichment, through inside information, of the financial houses to which central banks lend their gold, a study by New Orleans coin and bullion dealer Blanchard & Co. has found.


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