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The War on Gold Intensifies

January 12, 2000

Look out, gold bugs! The attack upon the precious metal is going to escalate. Your metal mettle will be tested.

The United States will soon be dumping its gold reserves on the market, signaling, in all likelihood, a massive desertion of gold by any governments which still have significant amounts of the stuff. We learned this from U.S. Treasury Secretary Lawrence Summers, who said on Saturday, January 8, "I categorically deny assertions that U.S. gold reserves were being sold off or that there is any plan to sell them off." A word to the wise!

Summers is a politician, and being a member of the Clinton administration, is a politician in the worst sense of the word, which is saying something. Politicians lie, and when money is involved, they lie automatically and easily; the truth being whatever is expedient at the moment. Precious metals are never expedient!

In the late 40s, there were rumors that the British pound was going to be devalued. Sir Stafford Cripps was Chancellor of the Exchequer, and he pooh-poohed the idea. Between January 26, 1948, and September 6, 1949, Cripps made a series of nine statements about the allegation. He said, "A reported plan to devalue the pound is complete nonsense," and "there will be no devaluation of the pound sterling," and "devaluation is neither advisable nor even possible, " and "no one need fear devaluation of our currency in any circumstances." The pound was devalued on September 18, 1949. As Chancellor of the Exchequer, Cripps could hardly have been taken by surprise by the devaluation. No, he lied, because the truth is simply not compatible with governmental policies about money, and especially, gold.

Another example: the International Monetary Fund has begun to sell gold to raise cash for debt relief for poor nations. Of course, it is very probably the policies of those who direct the IMF which have resulted in so much Third-world poverty; but in any event, the idea that a agency sponsored by powerful banks, such as the IMF, needs to "raise cash" by selling gold is so laughable that one marvels at the moxie of the IMF spokesmen who make that claim. The world's bankers create money with the stroke of the pen, or, nowadays, the touch of a keypad, and the idea that they could somehow experience a shortage of it, requiring them to sell gold, is untenable.

Moreover, the gold sold by the IMF to its creditors is sold at a price of $48/ounce. The lucky purchasers then resell it for the going rate, about $285/ounce.

Well, if the IMF justifies this charade as a means of raising funds, why doesn't it just put the gold on the market for $285, and eliminate the middle man? I don't know, but the thought has crossed my mind that perhaps the IMF has cronies it wishes to reward, or governments it wants to, in effect, buy. Its official reason for the strange arrangement is that it does not want to depress the world market price for gold, because some of the very countries it is trying to help are gold producers.

Think about that! A country which produces one of the most widely used and desirable metals, sought by nations and individuals for thousands of years, is poor, because it doesn't have sufficient bits of brightly printed paper chits! There is nothing new about insanity, of course, but has it ever been endemic before now? Is a nation with valuable natural resources going to grovel before one with bits of paper? Besides, won't the sale of gold for $285 by the lucky nations which bought it for $48 be as likely to depress the price as if the IMF sold it directly for $285?

So when U.S. Treasury Secretary Summers insists that the U.S. has no plans to sell its gold reserves, take care! The sale is inevitable. A result will be a further lowering of the price of gold (in terms of imaginary money, of course), which may convince some people that it is not worth holding. If they dump gold as well, the price will be further depressed, and the link between money and gold further attenuated.

Where is the gold going? Unlike modern money, which is created when loaned, and annihilated when repaid, gold is here to stay. Does gold dumping by governments serve the purpose, among others, of making it available cheap to the cognoscenti? Do those in the know suspect a massive collapse of confidence in fiat, thus inclining them to purchase the yellow metal privately, while deriding it in public?

And it's not just gold about which governments lie. On July 3, 1965, Congress heard from President Johnson about the developing shortage of silver coins. Mr. Johnson declared that "Silver is becoming too scarce for continued large-scale use in coins." What he meant, of course, was that his government wanted to pay its debts cheaply, with "dollars," being whatever the government decided, instead of with the wealth that had been promised. Describing the nickel-clad copper coin intended to replace the quarter, he said, "It is our intention that the new coinage circulate side by side with our existing coinage." Shades of Gresham! The President declared that "--prompt action on a new coinage will help us protect the silver coinage by freeing our silver reserves for redemption of silver certificates at $1.29 per ounce." Silver certificates became non-redeemable within a few years of that promise. Nothing was said, of course, about the law imposing the death penalty upon any treasury official found guilty of debasing the coinage!

One can speculate about such things, but one thing is clear: the attitude of governments toward gold, or silver, is one of implacable hostility, and any public statements coming from such a government will, inevitably, be self-serving, not to mention confusing and idiotic.

Dr. Paul Hein

The King James Bible mentions gold 417 times. Not once does it mention a paper currency.
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