Gargantua's Manipulation of the Markets

Rabelais' 16th century satire, Gargantua and Pantagruel, was a comic tale of a very affable giant prince that traveled the world fighting wars, settling disputes, and helping friends. Sadly the modern world's Gargantua is not so affable, and its exploits are not comic at all. Our modern Gargantua is the powerful Big Government-Big Banking combine that rules us from Washington and New York. In the minds of its leaders, it is a benign power axis that has the duty to intervene into all the enterprises of human life to create order and stability for everyone. In the practical implementation of its goals, however, it becomes the opposite of anything benign. It wallows in corruption and cover-ups for its monopolistic policies. It is a ruthless array of professional power lusters that, once ensconced in Washington and New York, will stoop to the most venal of tactics to subvert the workings of the free-market, violate the rights of individuals, and circumvent the guidelines of the Constitution. It rules, not by law and legitimacy, but by bribery, propaganda, intimidation, manipulation, lies, and special privileges -- hardly what the Founding Fathers had in mind in 1787.

One of the tricks that today's Gargantua has in its bag is its practice of market manipulation through intervention, e.g., bailouts of failing corporations, wage and price controls, Fed interest rate hikes and reductions, the buying and selling of bonds, currencies, and other assets, etc. It uses these interventions to gain control over the workings of the marketplace, to aid and suppress favored factions, to expand credit, to allegedly create "stable growth," and bring about goals that it perceives to be in the economic interest of the nation. That such interests invariably result in large accumulations of power and wealth by Gargantua's leading members is, of course, never mentioned in its promotional puffery. This is the nature of modern Machiavellian government.

Everyone knows that Gargantua does this, and they cynically accept it as part of the modern era. But if Gargantua buys and sells bonds and currencies to "preserve market stability," then what is to keep it from also rationalizing the purchase and sale of other assets such as stocks on the NYSE, or gold on the Comex, to affect the outcome of market movement whenever such movement begins to look disruptive of Gargantua's policy promotions.

Most astute observors of today's stock market accept that government has what is called a "plunge protection team" (PPT) with the power to intervene into the market on any given day and purchase shares in huge enough volumes so as to put a floor under any sell-off. It is a secretive committee, the Working Group on Financial Markets formed in 1989 under the Reagan administration. It is comprised of senior members at firms such as Goldman Sachs, JP Morgan, Merrill Lynch, etc., along with representatives of the stock exchanges, and bureaucrats at the U.S. Treasury. It appears that this plunge protection team has also formed a relationship with some heavy hitters at Comex to manipulate the price of gold and silver.

As an example of how this PPT group operates, lets take a recent day on Wall Street (March 7th) in which rumors of the capture of bin Laden's sons were flying heavy. Richard Russell had this to say about the events of that day:

"Obviously I can't prove it, but I sense an all-out push to hold the Dow above the 7286 level, and at the same time even as the dollar sinks to new lows there seems to be a major manipulation to knock gold down.

"These moves have come at a critical time. They've come at a time when Bush is on an all-out campaign to try to convince the UN "partners" that he is on the right path, and that they should not block his way with a veto. The last thing Bush needs now is a plunging stock market and a surging gold price. I believe that today "someone" (the government?) has gone all-out to hold the stock market up and to knock the price of gold down." [Dow Theory Letters, March 7, 2003]

How the PPT Does What It Does

Here's a hypothetical assessment of how such manipulation could be brought about. It's early Friday morning in Washington D.C. around 7 AM. Some of the head boys in the PPT are pretty certain that they are going to have to intervene into the markets today and do some price shoring up, as well as some price suppressing. The UN Security Council is meeting, and some of the higher-ups at the Treasury Department have let it be known that they do not want any embarrassing market plunges today. Since the Dow looks especially vulnerable, and gold is threatening to break $360 (which would requireWashington's banker buddies in New York to incur some big short position losses), it is necessary to swing the PPT into action in a vigorous way.

Thus, some of PPT's senior members at JPM and Goldman are notified to begin heavy buying of S&P futures if the market weakens today and looks like it may start crashing. JPM and Goldman both check to make sure adequate funds have been wired from their special PPT offshore accounts to cover "market stablization activities." They then alert their agents to be prepared to buy S&P futures and sell Gold futures heavy.

Since both the equities and gold markets are especially threatening this day, and the PPT does not want to take any chances of them blowing past its buy and sell efforts, its senior members decide to help strengthen their MONETARY intervention with some PSYCHOLOGICAL pressure. They decide that "mood enhancement" is also needed to turn around the heavy pessimism of the investing public today.

Such mood enhancement is decided to be carried off by the floating of a sensational rumor, something that will inject a jolt of confidence into traders and stampede the equity shorts to cover and the gold longs to dump. This will accomplish two things. Number one it will bolster JPM's and Goldman's manipulation trades making them that much more effective while requiring less money. And number two, it will provide a reason for the sudden turnaround, which will diminish any suspicion about blatant intervention by all the cynics and conspiracy theorists.

Seeing that one of al-Qaeda's top operatives, Khalid Shaikh Mohammed, has just been captured in Pakistan, it is decided that the rumor plant will be that two of bin Laden's sons have also been captured. This will be positively electrifying to the market, because it will imply that the apprehension of bin Laden himself is close at hand, and that al-Qaeda is just about finished.

To initiate the plan, PPT authorities call a low level CIA contact in Pakistan. They tell him to plant the rumor that U.S. forces have just arrested two of bin Laden's sons in a fierce gun battle near the Afghanistan border. The CIA contact is instructed to pick a local village politician to relay the information to, someone he knows will spread it. Baluchistan Home Minister Nawab Sanaullah Zahri immediately comes to the CIA contact's mind. Zahri is well respected among his peers, but not overly sophisticated in the ways of the U.S. Government. So he readily believes the CIA contact when he phones him with the false report about the capture of bin Laden's sons. Being human, Zahri is eager to spread such startling news right away. Being a public official, he seeks to publicize it and notifies several reporters in the area. Being human, the reporters accept the rumor as "confirmed" because it came from a "public official" with CIA connections. They then rush it onto the international wire services.

The frenzy begins as the news hits New York City about 11 AM and proceeds to make the rounds. CNBC quickly picks it up, and being human, they run with it over the air. Flashing "Alert" graphics appear on their telecast, and gushing talking heads spell out the wondrous news to millions of investors throughout the world. The report streaks throughout the trading floor in the way electricity lights up a city after a blackout. The story is reported and enhanced repeatedly. "President Bush to soon make an announcement about the capture!" flashes on one of CNBC's bulletin bands. Fear pulverizes the shorts, and they stampede to cover. Longs rush in to catch the train before it leaves the station. Equities rally big time, while over at Comex just the opposite is happening. PPT's banker buddies have shorted gold substantially and the price of all delivery months tank over $10.00 in 30 minutes. The threatened move past $360 is defeated. Long closeouts descend into the pits like balloons coming down at a political convention.

After the dust settles at days end, a different picture evolves, however. A Los Angeles Times story reports on the wondrous news, "Although the latest report came out of Pakistan, Major Gen. Rashid Qureshi, a presidential spokesman, accused anonymous U.S. sources in Washington of feeding, in some cases, what he called false information to reporters."

In an interview on Friday Qureshi states, "I don't know how these reports based on Washington sources are claiming that there have been arrests in Baluchistan. I have checked up with the intelligence agencies, and there is absolutely nothing. I don't say that sources in Washngton are liars, but they are certainly not telling the truth." [Reprinted in The Dallas Morning News, March 8, 2003, p. 18A]

The Lunacy of Market Manipulation

Just another day for the PPT and life on Wall Street. The Big Dow Casino bills itself as the free- market at work for America, but the saavy ones know better. It's rigged, and the rigging gets more and more blatant as each month goes by in this most devastating of bear markets. What will happen to the stock exchanges, however, if such manipulation continues? Will they not cease to exist as a genuine "trading floor?" How can it be trading if there is no danger of the price ever falling too far?

This is the lunacy of Gargantua's philosophy of politics and economics. All risk has to be rooted out of life. All disruptions, all vicissitudes. Rigidity, security, and placid order have to prevail. The voting public has to be protected like patients in a mental ward from the consequences of their choices.

This kind of Big Government-Big Bank manipulation is just one more step toward total control of the economy that is the guiding creed of all statist mentalities and New World Order types. Freedom is scary to these people. It is messy, it results in loss of profits for the inefficient, and it requires constant competitiveness. So any and all MANIPULATIONS are totally justifiable in the minds of these power brokers. It is their duty for the preservation of stability (which really means preservation of monopolies and privileges). If freedom suffers, so be it. If our once free-market has to become a form of fascist corporatism, then such is life. We just won't call it fascism, and the people will still believe they are free, because we will teach them Orwell's motto in the schools that "Slavery is Freedom, Ignorance is Strength, and War is Peace." We'll get them young enough, and they'll grow up believing that a free-market is their enemy, that they need Gargantua to look after them by taxing, regimenting, and MANIPULATING the various interactions of the market.

Gargantua is powerful indeed. It has the capacity to move millions of people and billions of dollars instantly through subterfuge and lies. It can reach around the world to a Pakistani village to launch fabrications to implement its MANIPULATIONS, its CORRUPTIONS, its PRIVILEGES. Gargantua does all this to shore up the economic house of cards that it has built and is now desperately trying to defend.

But not for long. Gargantua's house of cards cannot last, because it is built upon sophistry and illusion. It is built upon the curse of collectivism -- that dream of a world where everything is controlled by authoritarian combines of powerful bureaucrats and elitist financiers, where individuals are are nothing but X's and O's on the econometric graphs of academic ideologues, where freedom is slavery taught upside down to verdant youth in schools of government propaganda. This curse that drives Gargantua has never built a country or a civilization that possesses vibrancy and innovation. It builds only misery and decadence, rigidity and tyranny. It cannot last, for there are too many contrarians among the human race that rise up to fight.

The Battle that Lies Ahead

There is no better example of the type of warrior mentality that rises up to fight Gargantua than our own Jim Sinclair. Listen to what he wrote to the Big Government-Big Banking cartel on March 7th:

"The reverse head and shoulders will rebuild and complete and bury [you]. By the way it was me you ran into at the low today. Now you have gotten my competitive spirits up. In the last go around I bought 22,000 long from you. This time it may have to be orders of magnitude greater than that.

"But hear me, JPM, ML, SB & GS, I am going to bury you at your own game. You cannot scare me because I am better at this than you are. Money means nothing whatsoever to me. It is the game that counts, so now the opposition to your fraudulent derivatives has taken on a new life - mine. Get ready to see $400 at your back."

This is the kind of attitude that we contrarians in the gold community must assume in our fight against Gargantua -- this plant the flag, take a stand, attack attitude of the Jim Sinclairs of humanity. This man has the courage of a young lion, and he's in his seventies. We need to learn from the likes of him. There are others that we need to emulate also -- the Ted Butlers and Bill Murphys and Reginald Howes, who spent years in the wilderness with nothing but the courage of their own convictions to drive them on until a following could be built to take on Gargantua. These are the stars that we need to hitch our wagons to.

The battle is by no means won. In fact, it is just beginning. Gargantua has prodigious sums of money in its till, thousands of media lackeys at its beck and call, and hordes of voting sheep who will accept its propaganda of slavery and paper money. But we have a far more valuable asset on our side that is denied to Gargantua. We possess the truth! If we will combine this powerful asset with passion and perseverance, we just might one day have a free country and a sound money system again. What a glorious future that would be.