The following article is by Alasdair Macleod via The Cobden Centre. It covers an important topic that is often discussed, but rarely questioned why? Why does the rigging matter and what are the implications? I have included some of the top comments from ZeroHedge as well.
In a radio interview recently I was asked a question to which I could not easily give a satisfactory reply: if the gold market is rigged, why does it matter?
I have no problem delivering a comprehensive answer based on a sound aprioristic analysis of how rigging markets distorts the basis of economic calculation and why a properly functioning gold market is central to all other financial prices. The difficulty is in answering the question in terms the listeners understand, bearing in mind I was told to assume they have very little comprehension of finance or economics.
I did not as they say, want to go there. But it behoves those of us who argue the economics of sound money to try to make the answer as intelligible as possible without sounding like a committed capitalist and a conspiracy theorist to boot, so here goes.
Manipulating the price of gold ultimately destabilises the financial system because it is the highest form of money. This is why nearly all central banks retain a holding. The fact we don’t use it as money in our daily business does not invalidate its status. Rather, gold is subject to Gresham’s Law, which famously states bad money drives out the good. We would rather pay for things in government-issue paper currency and hang on to gold for a rainy day.
As money, it is on the other side of all asset prices. In other words stocks, bonds and property prices can be expected to rise measured in gold when the gold price falls and vice-versa. This relationship is often muddled by other factors, the most obvious one being changing levels of confidence in paper currencies against which gold is normally priced. However, with bond yields today at record lows and equities at record highs this relationship is apparent today.
Another way to describe this relationship is in terms of risk. Banks which dominate asset markets become complacent about risk because they are greedy for profit. This leads to banks competing with one another until they end up ignoring risk entirely. It happened very obviously with the American banking crisis six years ago until house prices suddenly collapsed, threatening to take the whole financial system down. In common with all financial bubbles everyone ignored risk. History provides many other examples.
Therefore, gold is unlike other assets because a rising gold price reflects an increasing perception of general financial risk, ensuring downward pressure on other financial asset prices. So while the big banks are making easy money ignoring risks in equity and bond markets, they will not want their party spoiled by warning signs from a rising gold price.
This is a long way from proof that the gold market is manipulated. But the big banks, and we must include central banks which are obviously keen to maintain financial confidence, have the motive and the means. And if they have these they can be expected to take the opportunity.
So why does it matter if the gold price is rigged? A freely-determined gold price is central to ensuring that reality and not financial bubbles guides us in our financial and economic activities. Suppressing the gold price is rather like turning off a fire alarm because you can’t stand the noise.
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Gibson’s Paradox shows, based on centuries of data, that rising gold prices cause rising interest rates.
Rigging gold allows artificially low interest rate policy which is what has happened for a couple of decades now.
It is the central issue to the current landscape of bubbles everywhere and $200 trillion in global credit market debt.
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One doesn’t need “proof” of the manipulation of the gold and silver prices anymore than one needs proof that the sky is blue on a clear day. One can see it if their eyes are open.
Take away the Rothschild’s power of “price setting” and let the free markets decide its true worth (in inflating dollars). That day is coming.
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IF GOLD Is Such A Bad Asset, Why Can’t The GERMANS Get Their Demanded PHYSICAL GOLD Back ???
Where Is It Now?
Who Owns It?
WHY Do They Own It?
And More Importantly, WHY Did The GERMAN Politicos Shut Up About It, Whats The BIG Secret ???
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Traditionally, rising interest rates and a rising gold price are the harbingers of too much govt debt and mismanagement. The financial system is far too unstable now to ever allow these two manipulations to be ceased. The system will be catastrophically collapsed and reset before rates and gold rise. Just ask Volker “my biggest mistake was letting the gold price rise” and Greenspan “central banks stand ready to lease gold in ever increasing quantities”.
Golds price is suppressed by illiquid hour dumping of futures contracts,; interest rates are suppressed with bullion banks taking the variable side of rate swaps in a derivative market worth trillions.
There are no more markets, only interventions -Chris Powell, GATA
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We will soon find if Harvey Organ is correct in his prediction of a huge move by December. He thinks the Sept. 22 opening of the Shanghai Gold exchange will be the start of a more true price discovery for gold, and silver is in a much stronger place than gold. He thinks the markets are so constrained of physical that there will be defaults by December.
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The only reason there hasn’t been hyperinflation yet is due to the fact that most of that 15t the Fed created ex-nihilo is parked in reserves and has yet to make it’s way out of the banks and into the real economy. When that happens, there’ll be hell to pay (for those who aren’t prepared).
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Race To The Bottom…
I guess my only answer to your angst-filled query (and I feel the same way sometimes) is that I am a firm believer in the Laws of Nature ALWAYS winning out against whatever unnatural feat or idea man contrives. Debt-based fractional-reserve currency is simply a lie when it comes to economic laws and cannot work forever. As long as there are suckers and nations willing to pay the interest for the usurers, this rotten system can operate (albeit unjustly).
Perhaps I am overly optimistic or even naive, but I do think that a tipping point in all this is coming soon… especially because the issuing-world-currency nation (U.S.) is quickly losing its status of invincibility in the eyes of the world.
Let the greedy grasshoppers who believe that “PMs are an investment joke” have their day. When the snow and ice come and they’re kicked out of their McMansions and onto the Poor Farm by the banksters… maybe they’ll get the point. Until then, stay the course of prudence with your true wealth.
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Because the power to rig gold and print money is absolute (if not ultimate) financial power.
Now take your choice:
The FED has the power to control the PM Markets and print fiat. China and Russia want that power. That’s WHY the day is coming.
The FED can control the PM markets. The day is coming when greater events will make the FED unable to control those markets. That’s WHY the day is coming.
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