Taylor on Gold

On Monday of this past week, my good friend James Turk, editor of "The Freemarket Gold & Money Report" revealed more compelling evidence that the U.S. government has been swapping its own gold to other nations. This action undertaken starting in 1998, freed those nations to dump gold physically held in their vaults and thereby suppress or cap the international gold price. As long term subscribers are aware, the suppression of the gold price was a major cornerstone of the Clinton strong dollar policy. That strong dollar policy which, on the basis of trade resulted in a grossly overvalued dollar is to this day continuing to fuel enormous global economic dislocations that threaten to bring down the global economy. The end of this nonsense, one must think is near.

Dishonest Reporting of Gold Loans and Gold Swaps

The Clinton administration was apparently intent on obscure or hiding their gold manipulation activities from the view of the public. Why? Because previous efforts to trash the gold price, which were not hidden, by various past Presidents, always failed. And we know that Harvard President and former Treasury Secretary Lawrence Summers co-authored a paper back in 1988 in which he acknowledged the need to suppress the gold price when engaging in monetary bailouts. At that time, Summers noted that if a monetary bailout were to take place, unless the gold price were capped, the currency would decline (vis-à-vis the price of gold) which would then lead to rising interest rates. A declining dollar coupled with rising interest rates would retard or eliminate the effectiveness of the bail out.

So in 1994 and 1995 when Alan Greenspan's tight monetary policy of the first few years of the 1990's began to pinch and squeeze the global monetary system, thus causing Mexico to face a financial collapse followed by Asia, Russia, Long Term Capital Management, etc., once the Clinton Administration chose the bail out route, it knew it had to cap the gold price if its bails were to succeed. So rig the gold markets they did starting in 1994. The facts in support of this contention are before Judge Lindsay who presides over a Boston Federal Court. You can read these documents at either www.gata.org. or at www.goldensextant.com.

Last April James Turk reported very strong evidence that the U.S. had handed over title of 1,700 tonnes of gold stored at the depository in West Point to the Germans in exchange for the proceeds of gold sold by the Germans into the global markets. In other words, in effect, the Germans swapped their gold for ours and we sold their gold into the markets. This took place sometime in 1998.

(Incidentally, Congressman Ron Paul questioned Treasury Secretary O'Neil about James Turk's evidence at which point O'Neil promised to get back to Congressman Paul with an answer. Congressman Paul related this to me personally in a conversation I had with him early in 2001 and he said he would certainly go public with the response when he heard back from the Secretary. To the best of my knowledge Dr. Paul has not yet received a response form the Treasury Secretary.)

Turk's prior work provided powerful circumstantial evidence that this swap transaction between Germany and the U.S. took place, despite repeated denials from the government although the Secretary of the Treasury who is the only member of the Treasury who is obligated to have knowledge of this transaction.

This past Monday James published more evidence in support of his earlier revelations. Essentially what he and another GATA supporter, Andrew Hepburn uncovered was a conflict in the way certain government accounts report gold holdings. Consolidated financial GAAP reporting mandated by Congress for the purpose of proving consolidated Federal government financials were based on GAAP, which is a more honest way to account for gold transactions that the manner in which our Treasury reports its finances.

NOT SO HONEST TREASURY ACCOUNTING

Clearly, the Treasury is attempting to keep Americans in the dark about what it is doing with the gold that is supposed to provide support to our national balance sheet and to provide a foundation for our currency. Here are two examples of dishonest accounting applied by the Treasury which are not in accordance with GAAP accounting methods.

Clearly, the Treasury is attempting to keep Americans in the dark about what it is doing with the gold that is supposed to provide support to our national balance sheet and to provide a foundation for our currency. Here are two examples of dishonest accounting applied by the Treasury which are not in accordance with GAAP accounting methods.

GOLD LOANS FROM THE U.S. TREASURY

The U.S. Treasury lends gold to say Goldman Sachs (or some other crony capitalist bank friend of the elected officials whom they own) at a sweetheart rate of interest, most typically around 1% or lower. Goldman Sachs then immediately sells the gold into the global markets or its client does the same thing after borrowing the gold from Goldman Sachs. At that point, Goldman Sachs applies the proceeds of the gold sale to the purchase of U.S. Treasuries at say 5% or 6%. That's pretty attractive business, assuming you know with certainty that government will protect you by keeping the price of gold suppressed so that you can buy it at an even lower price when you have to go out into the market to purchase it so you can return it to the Treasury. In case you are wondering how Goldman knew they would not have to worry about a rising gold price, non other than Alan Greenspan promised them that when in 1998 he stated, "central banks stand ready to lease gold in increasing quantities, should the price rise."

GAAP accounting would require the lease of gold to be reported as such and rightfully so because gold leased out is a riskier asset than gold sitting in the vault because of the risk of the borrower defaulting on its gold repayment. But the Treasury reports gold leased as gold held in its vaults. That's bad news. It would be like a bank reporting money lent out as cash in its vault. What a distortion of reality. Yet that's how the Treasury reports lease transactions because it does not want the world to know how unsafe its balance sheet really is. Since nothing of substance underlies our currency except growing mountains of debt, CONfidence rather than gold is the foundation of the strong dollar. Take away gold and let the people know there is no longer any gold to support the dollar and CONficence disappears. So our Treasury lies or cons us. So it lies! (Incidently my 16 year old son told me his high school government teacher is innocently informing his classes that the dollar is still backed by gold)

GOLD SWAPS

Treasury accounting also lies with respect to the handling of gold swaps. In this case, it misrepresents gold that is owned by other countries as gold it actually owns. Possession may be 90% of the law so in effect, America could no doubt confiscate gold that is actually owned by Germany and stored at West Point. But is that what our country is supposed to be about? What would that do for global trade?

It is way beyond the scope of this weekly hotline to begin to tell you everything James Turk told his subscribers this week. Instead, what I would highly recommend is that you subscribe to James excellent letter. Contact Mr. Turk via www.fgmr.com or write to: Freemarket Gold & Money Report, P.O> Box 5002, North Conway, N.H. 03860.

GOLD SWAPS BEGAN AFTER WASHINGTON AGREEMENT

Thanks to James Turk's work, and that of other GATA supporters, it seems that gold swapping by the U.S. was a desperate attempt to suppress the gold price starting immediately after the Washington Agreement in the fall of 1998. As you will recall that agreement, which was to limit the amount of gold that European central banks would sell, triggered a sudden and violent rise in the price of gold to above $300. This not only threatened to cause the dollar to plunge, but also meant that some of our government's crony capitalist friends at places like Goldman Sachs, J.P. Morgan, Chase, Citibank, etc. were going to lose huge amounts of money. In fact, if the price of gold were to rise upward toward the $600+ price that Frank Veneroso has suggested as a real equilibrium price, the losses would be staggering! So, based on the work of Turk and others, it has seemed rather likely that the Clinton swapped 1,700 tonnes of U.S. gold in exchange for U.S. ownership of German gold which we then sold on to the market, thus trashing the gold price. The gold held handed over to the Germans was stored at West Point.

But not even the Federal Government has an unlimited amount of gold. To the contrary, with huge amounts of gold being dishorded year after year from central banks to cover a short fall from the mines that is now over 1,500 tonnes per year, we must now be getting extremely close to the end game for this unscrupulous activity by America's ruling elite.

One thing that is seldom addressed is the question of who is buying all this gold that is being sold. Most recently, it seems some of the nations who have been buying gold are the Japanese, Chinese, Russians, Indians and other Asians. With increasing financial and global upheaval, demand for gold is rising rapidly, even or perhaps especially as we enter the Kondratieff winter. When confidence in a currency is lost, as it is during the debt repudiation phase of the Kondratieff cycle that gold performs at its best. It is indeed unfortunate that the "live for today and damn the future" philosophy of President Clinton could not be contained to a simple sex scandal, but instead was applied to debasement of our currency which now threatens the global economy and our democratic republic.

When our current global paper monetary system collapses, who will in the best shape to recover? It will be those countries who have built their national balance sheets on the solid rock of gold, an asset money and not the United States which has all but eliminated gold from its balance sheet. Russia is on the right track. It is encouraging its citizens to sell dollars and buy gold coins as official currency. Japan is reportedly now beginning to buy huge amounts of gold as their economy disintegrates. Indians have been big buyers as have virtually all Asian countries. And China has reportedly been trading in some of their dollars for Euros as they wisely seek to diversify out of our grossly overvalued dollar. That makes even more sense once you realize that the Euro has as a base a much more solid foundation. It has more than 15% gold backing compared to the U.S. dollar which has less than a 1% backing - even if you buy the Treasury's lie that all the gold its says is in its vaults is in fact in its vaults.

Eat Drink & Be Merry, For Tomorrow you Die

Americans have chosen to live for today and have foolishly disregarded the future. And while certain major multi-national corporate interests have used our fiat currency system to line their pockets with dollar claims against wealth crated by others, it is hard to see how all but a very select handful of Americans will be better off as a result of this grand immorality when the house of cards collapses. The picture of an America in total bankruptcy is one that is dreadful to contemplate. But suffice it to say that Americans who own gold should be in a better financial condition to weather the storm than those who have put their faith in paper money.

WHY DID FRANK VENEROSO STOP PUBLISHING?

Last week, I talked to the CEO of a Canadian junior gold mining firm that is on our list. This CEO is very close to Frank Veneroso. In fact they have a working business relationship.

The CEO told me that Frank quit publishing his gold newsletter as a result of some pressure from people in high places. They told him that they would start following him around and watching his every move.

This morning I sent Bill Murphy, who used to work with Frank, an email to ask him about whether this is true. Here was Bill's response to me.

"That is correct. Also he was afraid he might be killed. Great country we got."   Bill

Whereupon, I sent Bill another email to ask if this could be related to my subscribers in this week's hotline message. Bill said the following:

"Fine with me. I have mentioned it. I called him (Frank Veneroso) over Christmas. He said he had friends over and would call back. He never did call back. He says our phones are tapped."   Bill

Last week I talked about an imposture group that is very much plugged into the American mainstream that is using the name "Blanchard" to talk what few gold bugs remain on the planet from buying gold. Now we hear that Frank Veneroso, a giant of an intellect who's work helped lead to the creation of GATA and the lawsuit now before Judge Lindsay in Boston, is being muzzled by the establishment.

For those of you who don't know Frank, he is a high priced Harvard educated consultant who has worked on behalf of various central banks and major corporations in America. He is highly regarded. He knows the price of gold is being rigged and he has said so publicly. One instant comes to mind when he confirmed statements made by Bill Murphy at and CMRE meeting in New York. At one point, a very hostile gentlemen who said he had friends at a major investment bank, stood up from his table and expressed great hostility toward Frank for implying wrong doing on the part of his friends. When Frank Veneroso talks, important people listen. I guess that is why Frank had to be shut up?

Do you see why I think the establishment is getting desperate? Do you see why I think that the price of gold may finally be ready to explode to levels far higher than all but the most ardent gold bugs can envision?