why do the worlds central banks manipulate the price of gold?
There is a social theory called reflexivity which refers to the circular relationship between cause and effect. A reflexive relationship is bidirectional where both the cause and the effect affect one another in a situation that renders both functions causes and effects.
The principle of reflexivity was first introduced by the sociologist William Thomas as the Thomas theorem, but more importantly it was later popularized and applied to the financial markets by George Soros. Soros restated the social theory of reflexivity eloquently and simply, as follows:
“markets influence events they anticipate” – George Soros
This theorem has become a basic tenet of modern central banking. The idea is that manipulation of the psychology of market participants affects the markets themselves. Therefore, if you artificially suppress the price of gold, you reduce inflationary expectations and reduce inflation itself…so the theory goes.
This same idea is applied to other markets as well. In 2010 the Federal Reserve is printing money…monetizing debt; selling debt and then buying it themselves. This has the effect of reducing long term interest rates to levels lower than they would otherwise be, leading market participants to believe that the currency is sound when it isn’t. “How can we be printing too much money if interest rates are low and the price of gold is not soaring?”. The answer is of course, they are manipulating both markets. When combined with government data showing a rate of inflation substantially lower than the real increase in the cost of living, this presents a plausible explanation to a casual observer.
You could further distill this entire idea down to lying in order to achieve a policy objective. The worlds central banks routinely manipulate markets, from the equity markets to the interest rate markets to the currency markets to the physical markets in order to influence investor psychology and achieve policy goals.
The US government is also complicit in the effort by distorting, manipulating and fudging important economic data. All of this is done under the guise of “free markets”, when the reality is that the worlds central banks are at this point engaged in a massive fraud, and endeavor to cover it up by covertly manipulating the markets using high leverage derivatives and what amounts to an infinite fiat bank account.
From the time when currencies were de linked from gold, central banks have enjoyed the freedom to print as much money as they wish, subject only to inflationary concerns (a loss of purchasing power). In other words, the freedom to print money is limited only by indicators and attitudes about inflation, which then feed inflation itself. The money has no actual value, it is redeemable only for more notes which can be printed in unlimited quantity subject only to inflationary concerns. In other words, in a perfect world, (according to the central banks) they would be unrestrained by any inflationary effects of unlimited money printing; they could simply print as much as they want. This is why manipulation of the gold market is critical to the con. If the price of gold were soaring at the same time they were trying to convince the markets that the currency was sound and inflation was low, that story line wouldn’t make any sense. How often have we all heard the commentary “gold is going down so there must not be any inflation?”
It is noteworthy that since the creation of the Federal Reserve in 1913, the US dollar has lost 95% of it’s value. So while in the short term manipulation of the markets may seem like a reasonable approach, the policies of market manipulation have clearly failed in the longer term.
The complicit corporate media are also involved in the fraud through advanced propaganda techniques which portray anyone who favors gold over notes to be somewhat unstable. The term “gold bug” is used with a carefully crafted negative connotation. FED shills who may be employed at prestigious universities are called out to dismiss the notion that the central banks could possibly not be telling the truth in spite of the fact that all of the established players have been caught lying over and over again. The current head of the US Treasury, supposedly a credible figure…a former head of the NY Federal Reserve, got caught cheating on his taxes which didn’t slow down his nomination for the position by the people’s representatives at all. He could have shown up to the hearings with a head in a basket and it wouldn’t have mattered. So this corporate media festival of lies attempts to portray criminals as godlike figures and maligns anyone who might not trust their “money” to be sound. The FED’s fiat money is debt. Fiat money is debt and the two terms are interchangeable.
I will leave you with this, which supports what I have said above.
Exclusive: The Bank Of England Engaged In Flagrant Gold Manipulation In The Interwar Period Via The New York Fed; Does History Repeat Itself?
by Tyler Durden
An article written by University of Tennessee professor John R Garrett, “Monetary Policy and Expectations: Market-Control Techniques and the Bank of England, 1925-1931”, which describes in exquisite detail the gold falsification measures undertaken by the Bank of England in the interwar period in order to impact interest rates in a favorable direction, performed with the full criminal complicity of the Federal Reserve Bank of New York, may mean paranoid “gold bugs” could soon be forever absolved of their “tin hat” wearing status as outright gold, and other data, manipulation by a major central bank is now proven beyond doubt. The implications regarding the possibility of comparable deceitful and treasonous acts by modern central bankers are staggering.
more at ZeroHedge
For extra credit, I have this.
TrimTabs and the Plunge Protection Team
Wednesday, January 06, 2010
We haven’t heard too much about the Plunge Protection Team lately, that is, until the folks at TrimTabs talked to the folks at Marketwatch yesterday and this report was filed: The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market.
and finally we have Mr Alan Greenspan who by authoring this back in 1966 has clearly established himself today as the king of fraud.
Gold and Economic Freedom
by Alan Greenspan
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
more at 321gold
“The last duty of a central banker is to tell the public the truth” – former US Federal Reserve Chairman Alan Blinder (PBS’s Nightly Business Report, 1994)
“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.” – Eddie George, then Governor of the Bank of England and a director of the BIS
In Deception and Abuse at the Fed, Robert Auerbach, a former banking committee investigator, recounts major instances of Fed mismanagement and abuse of power that were exposed by Rep. Gonzalez, including:
* Blocking Congress and the public from holding powerful Fed officials accountable by falsely declaring–for 17 years–it had no transcripts of its meetings;
* Manipulating the stock and bond markets in 1994 under cover of a preemptive strike against inflation;
* Allowing 5.5 billion to be sent to Saddam Hussein from a small Atlanta branch of a foreign bank–the result of faulty bank examination practices by the Fed;
* Stonewalling Congressional investigations and misleading the Washington Post about the 6,300 found on the Watergate burglars.
King World News Interviews Metals Trader Andrew Maguire
A London trader walks the CFTC through a silver manipulation in advance
BOMBSHELL – Whistle Blower Comes Forward With Solid Proof The Price Of Gold And Silver Is Being Manipulated By Major Financial Institutions