Submitted by Tyler Durden: Lately various media outlets have been swamped
with stories and allegations of precious metal manipulation ranging
from the arcane, to the bizarre to the outright ridiculous. At issue is
not that these claims of price fraud are unfounded - they very well
may be completely true - but without a notarized facsimile of an actual trade ticket signed
by Brian Sack, or his replacement Simon Potter, or any of the BIS
traders confirming they are indeed selling gold on behalf of the Fed,
BOE, ECB, SNB or BOJ simply to keep the price of the metal down, what
such constant factless accusations (and no, sorry, a chart
showing that the price of gold may go up or go down sharply indicates
merely that and nothing about the underlying factors for such a move) do
is to habituate the broader public to the real issues surrounding
precious metal, and other asset class, manipulation. So instead of
searching for circumstantial evidence which one can easily find
everywhere, we decided to go straight to the source. To do that we go
back to a post we wrote back in September of 2009, based on an internal
previously confidential Fed document, which conveniently enough
explains everything vis-a-vis gold manipulation and leaves nothing to
speculation or misinterpretation. 
Zero Hedge presents the smoking gun
that may provide responses to all the various open questions regarding
the Fed's Modus Operandi in the gold arena which answer the core question - motive -
courtesy of a declassified memorandum, written by none other than the
then Fed Chairman, and addressed to the president of the United
States.
From Zero Hedge, September 27, 2009.
Exclusive Smoking Gun: The Fed On Gold Manipulation
Zero Hedge has recently presented several declassified documents from the pre-1971 "Nixon Shock" days, that endorse the case for gold as a major historical factor in US monetary and foreign policy, as demonstrated by State Department and CIA disclosure.
Gold's special status in policy and administrative decision-making was
a direct factor in Nixon's choice to abolish the gold reserve at a
time of an exploding budget deficit.
Yet what about the days after 1971, and specifically, how did that
critical "behind the scenes" organization, the Federal Reserve, perceive
and manipulate gold in the post Bretton-Woods world? Was gold, freed
from its shackles to the dollar, once again merely a symbolic
representation for money?
Zero Hedge presents the smoking gun that may provide responses to all
the various open questions, courtesy of a declassified memorandum,
written by none other than the then Fed Chairman, addressed to the
president of the United States.
On June 3, 1975, Fed Chairman Arthur Burns, sent a "Memorandum For The President"
to Gerald Ford, which among others CC:ed Secretary of State Henry
Kissinger and future Fed Chairman Alan Greenspan, discussing gold, and
specifically its fair value, a topic whose prominence, despite former
president Nixon's actions, had only managed to grow in the four short
years since the abandonment of the gold standard in 1971. In a nutshell
Burns' entire argument revolves around the equivalency of gold and
money, and furthermore points out that if the Fed does not control this
core relationship, it would "easily frustrate our efforts to control world liquidity" but also "dangerously prejudge the shape of the future monetary system."
Furthermore, the memo goes on to highlight the extensive level of gold
price manipulation by central banks even after the gold standard has
been formally abolished. The problem with accounting for gold at fair
market value: the risk of massive liquidity creation, which in those
long-gone days of 1975 "could result in the addition of up to $150
billion to the nominal value of countries' reserves." One only wonders
what would happen today if gold was allowed to attain its fair price
status. And the threat, according to Burns: "liquidity creation of such
extraordinary magnitude would seriously endanger, perhaps even frustrate,
out efforts and those of other prudent nations to get inflation under
reasonable control." Aside from the gratuitous observation that even 34
years ago it was painfully obvious how "massive" liquidity could and
would result in runaway inflation and the Fed actually cared about this
potential danger, what highlights the hypocrisy of the Fed is that when
it comes to drowning the world in excess pieces of paper, only the
United States should have the right to do so.
Another notable observation is that despite a muted antagonism
between the Fed and the US Treasury persisting for decades, the fuse is
and always has been short, and the conflict can promptly hit a
crescendo, with the Fed ultimately always getting the upper hand. In the
case of the Burns memo, the Fed's position was diametrically opposed
to what the Treasury proposed was the proper approach. The result: full
on assault by the Federal Reserve over the Treasury's credibility and
even then, more than three decades ago, a veiled threat by the Fed
involving escalating problems if the recommendation of the Treasury was
picked over that of the Fed. "Severe
criticism on the part of prominent and influential financiers would
inevitably follow if the Treasury's present position prevailed." It is not surprising that the Fed's modus operandi has not changed one bit since 1975: it is our way or virtually assured destruction/embarrassment way.
Additionally, a curious tangent of the Burns memo is the fact that
gold was explicitly used as an engine to enact political doctrine: "If
the United States took a stand on the gold question that failed to
satisfy the French in current international negotiations, would there be
adverse economic or political consequences? I doubt it... If
we do ever accede to French views on gold, we should at least use our
bargaining leverage to achieve some major political advantage."
And while gold as a policy mechanism was unable to satisfy its role
this time, one wonders on how many subsequent occasions was global
democracy trampled over in order to placate the US Federal Reserve:
"I have consulted Henry Kissinger as to whether there is some political quid pro quo we might want to extract from the French in exchange for acceding to some part or all of their desired position on gold. But Henry tells me there is none at this time."
At some point governments of advanced nations will say "enough" to
the covert domination of their controlling bodies by the Federal
Reserve, which through manipulation of its gold and money interests,
effectively has control over not just the French, but every government
which has a monetary basis to its respective economy and a relationship
to the US "reserve" currency... Which means virtually every country in
the world. The backlash, if and when it occurs, will be memorable.
Lastly, the memo presents a useful snapshot into the
cloak-and-dagger, and highly nebulous world of Central Bank negotiations
and gold price manipulation:
"I have a secret understanding in writing with the Bundesbank that Germany will not buy gold, either from the market or from another government, at a price above the official price."
So to all conspiracy theorists claiming that gold is being
manipulated on a daily basis by the Federal Reserve: when it occurs over
and over, and is so well documented, it is no longer a theory, it is
merely sad. And the fact that the US government goes to great lengths to
hide the illicit dealings of the Federal Reserve, which through its
monetary tentacles, has prima facie control over not just US
policy but also over sovereign governments, is an unprecedented failure
in the checks and balances system that the founding fathers had planned
when they created the United States of America. Yet saddest is that
the United States no longer pursues strategic goals that are in the
best interest of the majority of its citizens, but merely manipulates
other, less powerful nations into a servile existence that only
provides gain to a very limited subset of the American financial
oligarchy. It is time for the Fed's unprecedented control over affairs,
both global and domestic, to end.
Full memo from Arthur Burns presented, compliments of Geoffrey Batt who collaborated in the creation of this post.
As a post-script to all those complaining about gold, silver and other
PM price suppression, here is one simple question: can one buy more gold
at $1,600 or at $16,000? This is not a trick question.
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