“In 1992, Soros earned the epithet “the man who broke the Bank of England” by demanding the Bank to raise its interest rates or to float the currency (so that he could make more money). The Bank did neither. He retaliated by selling “short” more than $10 billion worth of pound sterling, forcing the Bank of England to depreciate the pound: Soros amassed an estimated US$ 1.1 billion in the process. Continue reading
Category Archives: Empire
Kingsford Capital And The Captured Media
Mark Mitchell at Deep Capture has some interesting details about the extensive influence of hedge-funds, specifically Kingsford Capital, on the reporting of stories in the financial press:
“Another focus of my investigation at CJR was the appalling bear raid on a collectibles company called Escala. Not only was Escala the victim of massive amounts of illegal naked short selling, but a hedge fund convinced the Spanish government that Escala’s parent company, based in Madrid, was fleecing investors in philatelic collectibles. Continue reading
The Machinery of Habit
A piece I wrote four years ago, The Burgh: Downsizing,” examines the nature of change and habit in relation to urban economies transformed by globalization and war.
“The boys come in and the beer flows. Ricardo tells us about training. Four-mile runs, 200 push-ups every morning, wall-climbing. “They break you, man,” he shakes his head. “They make you tough.
“I said I hoped so, considering where he was going. But Melanie, who studies the theology of the medieval anchoress Juliana of Norwich and sells papers on a corner in Oakland for the Socialist Worker, is more worried about his getting into what she calls killing mode. I ask her if a mode is the same as a habit. It takes time after all to form a habit. A mode on the other hand sounds like a gearshift on an Audi. And if you can shift into a gear, you can shift out. Maybe it’s really a question of what sort of habits. Learning, retraining, moving need effort. They don’t come easily. But war is a machinery that moves on its own and blood-lust, like a winter flu, might be easy to pick up and impossible to get rid of.
War and demolition come too easily to human nature. And take away too much. Anything worth pursuing, on the other hand, needs to be stalked through the years with the patience and vigilance of a hunter, cultivated through seasons of scarcity and remembered in times of forgetting. In our sophistication we laugh at those who buy dear and hold dearer. Who stay when they should have left. Bag holders. Fools. Who step into the river and expect the waters to stay the same. The immobilized in our mobile society. What is the value of an abandoned church, an obsolete mill, an aging worker? Flux, we shrug, is the only certainty. Change is the first law of nature.
“People talk about joining but they don’t,” says Ricardo, “I’m the only one who did.” He sounds proud.
“I ask him if he thinks good health insurance and tuition money are worth risking his life for. He laughs.
“Look — I ain’t gonna die. Most of the guys who teach me, they’ve been there. They got through. More chances I’d get shot in a ghetto. So some guy’s lost an arm…or a leg. So what? All this new technology now, reconstruction…they can make you another leg; it’s really no big deal.”At 26, you can think of that as a good trade. An amputation of the body or the mind is all it takes to keep up with change. Like those translucent lizards which shed their tails seasonally as they wait immobile and vigilant for flies on dusty window sills, we might grow new limbs just as good. New memories to replace old ones. Here in the hills, at the confluence of three rivers, we have learned not to resist the laws of nature.
“But perhaps we don’t live by nature alone. Perhaps, as Juliana of Norwich said, we also need mercy and grace.”
“The need to change and the machinery of habit that makes it difficult – a theme I find myself returning to , over and over, especially when I’m confronted with the depressing spectacle of people going back to the same propaganda, the same bogus assertions that caused this global catastrophe in the first place.
Going back, like dogs to vomit.
I’m sorry if that sounds ugly, but what’s happening now in DC is ugly….and very very dangerous.
Doug Valentine On The Empire of The Lie
Douglas Valentine, author of several masterful books on national security and the CIA, talks to Susan Mazur about Tim Weiner´s new book on the CIA (“Legacy of Ashes”), the nexus of finance and espionage, and the propaganda campaign that lets Americans think the CIA is a force for good.
Here´s a snippet:
“Most of what Weiner writes about the CIA is already known. It’s a history book with a bias, not an expose, at least not for the Vietnam generation. He doesn’t even really get into the current Bush administration. He gives us a predictable treatment of William Casey and the Contras, when there was an incredible revival of the CIA under Casey.”
And that´s precisely what I´d say about exposes that appear in establishment outlets, even if they seem to be literary and anti-establishment (Vanity Fair, New York Times, even, perhaps Rolling Stone, although much less so). They are less about exposing as about controlling the terms of the discourse, that is, the boundaries within which discussion can take place.
Another insight from Valentine:
“Angleton thought William Colby might be a mole. Angleton exposed the divisions within the CIA after 1966, the Colby vs. Helms factions. He also represented the literary sensibility the CIA once had, where finding secrets was like teasing the meaning out of a poem. Now we have sledgehammer spies.”
(Colby, by the way, died in a ‘boating accident’ in Maryland, on the day that a prosecutor got permission to set up a grand jury to probe the death of Frank Olson, who was involved in chemical warfare research and had been one of the subjects of the CIA´s mind control experiments. The CIA claimed Olson jumped to his death from a hotel window, although his injuries, according to the autopsy, could as well have been inflicted by a blunt instrument. I should note that at the time of his death in 1996 Colby´s name was being used on the letter head of Strategic Investments, a publication of Agora Inc. (co-owned by my co-author), according to several reports, although I can´t confirm to my satisfaction the exact status of that association. Several unconfirmed reports also link Colby to knowledge about the death (or killing, according to some) of White House deputy counsel, Vincent Foster, a preoccupation at the time, of Agora co-founder James Davidson)
More from Douglas Valentine:
“The CIA gets oodles of money from the arms business. Most of their income comes from criminal activity.
The Russian Mafia operates with a sort of impunity. And so does the Israeli Mafia. And one of the reasons they have this sort of impunity is that they’re sharing their profits with the CIA.
And I think a lot of CIA money is capital investments. They’re like movie producers. They want to overthrow the Iraqi government, they go to companies like Halliburton and others who are going to profit from the overthrow of Iraq. And like the executive producers of some movie, they get them to ante-up some cash. Telling them, don’t worry about it, the government contracts you get in return will cover your investment. Plus they have the old boy network – which now is so far flung.
Suzan Mazur: Plus some of the military contractors are organized crime and have had contracts since the 50s.
Doug Valentine: Exactly. Which bring us back to Barry Seal (Iran-Contra). Because in 1972, Barry Seal was to fly some arms and some explosives into Mexico. What the Brooklyn Drug Task Force found out is that this guy named Murray Kessler, who was involved with the Gambino family in Brooklyn, had an arms manufacturing company in New Jersey where the guns and the bombs came from.
Suzan Mazur: And some of these arms merchants also had security clearance during the McNamara and Clifford years of heading the Defense Department. They make weapons for the US government and some for whoever they feel like.
Doug Valentine: From my perspective, the spy industry and especially the arms industry, is the foundation on which the American empire is built. The United States has a military budget of I think $300 billion dollars and the CIA budget is like $50 billion – that’s a year. Together that’s bigger than the gross national product of any country in the world. And in the meantime we’re worried about 20 guys in Al-Qaeda.
[Lila: This statement is inaccurate, as both GDP and GNP in most developed countries were near or over a trillion in 2007. See current figures here. I think the author might have been misquoted on this and might have meant “many countries,” for example, in the developing world. However, projections for 2010 place US military spending in excess of 1 trillion, if all military-related expenditures are included).
Continuing with the interview:
“Suzan Mazur: Which exploits of the agency do you consider the most diabolical – aside from the fact that one of its founding fathers molested two of his own children – and a reason why the CIA should have been dismantled years ago?
Doug Valentine: Your readers don’t want to know that answer. The most dastardly thing that the CIA has done is to wage this campaign of psychological warfare against the American people. Where the American people don’t see the CIA for a bunch of basically American KGB agents who are conducting criminal activities around the world. There’s a movie called The Usual Suspects with a much feared criminal named Keyser Soze. And Keyser is talking to a cop and he says the greatest trick that the Devil ever pulled was convincing the world that he doesn’t exist.
And this is what people like Weiner are doing with books about the CIA that don’t explain it for what it really is. They’re part of a propaganda machine that’s making the American people see the CIA in mythological terms as good guys, crusaders, as Lawrence of Arabia – when, in fact, they’re criminals. They’re part of THE GRAND LIE.”
My Comment
The piece is long and, for an intelligence aficionado, packed with illuminating detail. Among other things, Valentine touches on James Jesus Angleton, the most compelling of the spy masters (since he was chief of counter intelligence, I should call him chief spy hunter), the extensive role of private intelligence (which I touched on in my Abu Ghraib book), as well as the manipulation of Wikipedia, which Valentine regards as considerably influenced by the CIA. This confirms my own long-standing observations about Wikipedia. On crucial topics, it stays within the bounds of debate allowed by Western establishment interests and is very far from being an objective or quasi-scholarly affair. (I use the term Western because despite a substantial component of foreigners, the predominant interests served are the interests of the state and the military-industrial and financial industries), the most influential and powerful of which are Western. I do not use the terms capitalist, because I see the establishment as essentially a technocrat or money-managing class, working against capital formation in many respects.
And a final word, from the lips of Bill Colby himself:
“The CIA owns everyone of any significance in the major media.” [Researching the sources of this phrase, I find several sites like this claiming that it is “fake” and to be found unsourced only in a 2000 book by David McGowan, from whence it’s been repeated endlessly on the web. I’ll check up on this but for now am leaving the quote up.]
Was this tongue-in-cheek, or meant to be taken literally? You decide..
Secy of IMF – Siddharth Tiwari
On November 21 an Indian was named Secretary of the IMF, according to Press Trust of India:
“With a proven track record in managing complex work programmes, Indian economist Siddharth Tiwari has been named as the Secretary of the IMF by its Managing Director Dominique Strauss-Kahn.
Tiwari, currently Director of the Office of Budget and Planning, is set to assume the position, which was held by Shailendra Anjaria before his retirement from the IMF earlier this year.
“Mr Tiwari has the experience and skills” to promote consensus building, which is a critical goal of the IMF Board and Management, Strauss-Kahn said in a statement.”
IMF Sells Gold to India (Updated)
Update 2 (Nov 3): The only other explanation I can think of is that the Indian government is privy to information indicating that the demise of the dollar is much closer at hand than is being given out..
Update 1:
OK. As you know, I’ve found this Indian purchase a bit puzzling. I have a bunch of questions:
*Why didn’t the Indian government make a big purchase earlier this year, at $900, rather than now, at the top?
*What, if any, is the connection between this and the Fisk report a few weeks ago about the Gulf Arabs moving out of the dollar, which a lot of people found odd, despite the reputation of the reporter? The report bumped up the price of gold.
Now, here’s Chuck Butler of Everbank, via The Daily Reckoning:
“I told you yesterday that I thought it would be a “wash” for the dollar and the gold price… But that was before I learned that the Reserve Bank of India paid for their $6.7 billion dollars worth of gold with… SDRs.”
(Note:Reuters reports that the sale was in dollars – which would be dollar negative).
What does this mean? That, over the whole past 15 -20 years of “globalization” while the US Govt. inflated its money and sold its treasuries and fake derivatives all over the world in return for real work and real savings, who were the buyers?
Countries like India, where large parts of the middle-class stored its savings in dollars. Now those dollars are seen as so unsound that the IMF (which is the new locus of Anglo-European global domination) won’t accept them for payment of gold.
That means the Indian government has to give up its SDRs (Special Drawing Rights) in exchange.
Now the resurgent IMF is where the globalists are exerting their power and not in the G20 (which was supposed to augment the power of developing nations when it was established in 1999).
As I blogged earlier, the Financial Stability Board is the new regulatory agency that will coordinate with the IMF, but it includes the G20 and also Spain and the European Commission and is headed by ex-Goldmanite, Mario Draghi and it’s housed at the Bank for International Settlements in Basel. So that is a double hit to any representation India will have in the forum.
India sold gold at the bottom in the 1990s; and is now buying it at the top nearly 20 years later – thus selling part of the gains of these past years. At least, so it seems to me. To me this smacks of neocolonialism.
And now, it becomes easier to understand why the center-liberal establishment media is interested in co-opting the anger against Goldman and channeling it into various subplots of the financial crisis (naked short selling, the bail-outs etc.etc).
I see this as an elaborate feint to divert world attention from the reprise of Anglo American and European colonization over the last two decades – accomplished, with a “black” president in charge.
Here’s a piece on IMF sales of gold in 1999. http://www.independent.co.uk/news/business/imf-sells-gold-to-hep-debt-of-poorest-nations-1090154.html
Notice how similar the language is – they’re doing it to increase funding to the poorest countries, etc. etc.
In the news, Bloomberg reports:
“The International Monetary Fund sold 200 metric tons of gold to the Reserve Bank of India for about $6.7 billion, its first such sale in nine years.
The transaction, equivalent to 8 percent of global annual mine production, involved daily sales from Oct. 19-30 at market prices and is in the process of being settled, the IMF said in a statement yesterday. The average price to India, the biggest consumer, was about $1,045 an ounce, an IMF official said on a conference call. Gold for immediate delivery gained 0.2 percent.”
My Comment:
Interesting. The Indian government doesn’t buy gold at the bottom (2000) but now, when it’s at all time highs (shades of the British government selling gold at the bottom).
Now, the Indian central bank is reputed to be very savvy, as are Indian gold buyers. Most commentators expect gold to consolidate, if not correct, before pushing on. It would make sense for the Indian government to wait and buy it on dips.
This is a good move for the IMF. But for the Indian government, which managed to steer the banking system past the whirlpool of unwinding derivatives, I wonder if this move is astute.
Look at the peculiar facts, as reported in the New York TimesWall Street Journal)
“In the last one year, China has increased its gold holdings, by weight, by 75.69%, Russia by 18.78%, the Philippines by 18.50% and Mexico by 108.91%.
Compared with this, India’s central bank did not add anything to its gold reserves in the last one year, according to Bloomberg data.
(Lila: Why not? Why buy gold at record prices when the government was unwilling to buy when it was trading much lower, only this year?)
In fact, the share of gold in India’s total reserves has dwindled over the decade.
In March 1994, the share of gold in the total reserves of the country was 20.86%; by the end of June 2009, gold constituted only 3.7% of the total reserves.”
Even the IMF expressed surprise, as Breitbart.com notes:
“A senior IMF official said that the IMF was “lucky” in selling the 200 tonnes to India for roughly 1,045 dollars an ounce, compared with 850 dollars an ounce in April 2008.”
(Lila: In other words, over the whole period of globalization, India sold it’s gold and bought US treasury…dollars…just what the US government was desperate to get rid off, so it wouldn’t drive inflation at home…)
Again, India sold gold cheap and bought it back at its height. Does that sound like savvy behavior from a country renowned for well trained economists and smart gold buyers?
A former governor of the Indian central bank (Reserve Bank of India), Bimal Jalan, said it was to help the IMF meet its funding needs for loans to the poorest countries, for which it had looked to India and China.
As an aside, in an earlier post, I speculated that the report (by Robert Fisk, a very respected source) about Gulf Arabs moving out of the petrodollar – which was promptly denied – might have been a rumor circulated to bump up the price of gold to help IMF gold sales….maybe, I wasn’t so far off, after all.
I went back to an earlier post this year, in February, which quotes from a list in Richard Russell’s letter:
Note: The list looks inaccurate. I’ll go back and find why Russell’s numbers are so different from the World Gold Council figures below them). (Note: Russell is referring to tonnes of gold; the WGC figures are for dollar amounts. So the discrepancies we refer to at in the percentages).
The US has 8,135 tonnes….64.4% of reserves
Germany — 3,412… …64.4% of reserves
IMF — 3,217… … …(1)
France — 2,508… … …58.7%
Italy — 2,451… … …61.9%
Switzerland — 1,040… …23.8%
Japan — 765.2… …1.9% …(a potential gold-buyer)
China — 600.0… …0.9% …(should be a big buyer)*
A reader notes that this number is too low. I assume it’s a number from before China started buying off market. Compare with list below.
Russia — 495. 9… …2.2% …(is a buyer)
Taiwan — 422.2… …3.6% …(should be a buyer)
India — 357.7… …3.0% …(should be a buyer)
UK — 310.3… … …14.5% …(sold most of its gold at the low price)
Saudi Arabia — 143.0… …11.4% (should buy gold)
South Africa — 124.4… …9.0%
Australia — 79.8… … …6.3%
So there you have it. Among countries, Italy, France, Germany, and the US have the most gold. Switzerland has a third of what they have. The UK, South Africa, Australia, and Saudi Arabia are next with about 1/5th – 1/10th as much. Russia and Japan have only a small percent in gold. China and India have even less. What do most Asians have? Debt (treasuries and dollars) from the US. Neo-colonialism anyone?
Correction:
CNBC has the following completely different list of top gold holding countries compiled by tradermark via Seeking Alpha, posted October 13, 2009.
(Note: Data is based on the World Gold Council’s September 2009 report and is converted to US short tons at a rate of 1 T = 1.102311 US tons. All monetary estimates are calculated at the rate of 1oz gold = $1042 US).
United States $298.4 N/A
Germany $125.0 69.2%
International Monetary Fund $118.0 N/A
Italy $89.9 66.6%
France $89.7 70.6%
China $38.7 1.9%
Switzerland $38.2 29.1%
Japan $28.1 2.3%
Netherlands $22.5 59.6%
Russia $20.9 4.3%
European Central Bank $18.4 18.8%
Taiwan $15.5 3.9%
Portugal $14.0 90.9%
India $13.1 4.0%
Venezuela $13.1 36.1%
Ron Paul: Fractional Banking Finances War…
*”Paul makes it clear that the Fed isn’t the whole problem. It’s just one part of a system that first went wrong with the introduction of fractional reserve banking centuries ago (banks used to be warehouses, storing depositors’ money for a fee), followed by the spread of European central banks (really just scams to allow a few elite bankers and politicians to expand their own power at the expense of everyone else) and then, finally, the introduction of fiat currency, which freed governments to expand spending and borrowing without regard to, well, anything. The problem, in short, is the whole of modern banking and finance.
*The middle part of the book features transcripts of Congressman Paul grilling Fed chairmen Greenspan and Bernanke. Some of these transcripts date back to the early Reagan era, which means that for going on three decades Paul has been fighting this fight, and slamming into the same brick wall. The Chairmen feel no need to explain themselves to a lowly congressman, and respond with a mixture of lies and obfuscation that apparently fooled most of Washington. The generally-respectful Paul even refers to Greenspan as “pathetic” after one especially dishonest piece of testimony. Less charitable readers will, by the end of this section, want to take a congressional microphone and beat Greenspan and Bernanke senseless.
*Fractional reserve banking and fiat currency make war easier. Back when a ruler needed actual gold to field an army, invading a neighbor required some serious forethought. But once a dictator (or the world’s policeman) could just print a few billion pieces of paper and order some new tanks, “defending the national interest” got a whole lot easier. Hence the bloodbath of the 20th century, and perhaps the mess of the coming decade.
*Paul knows all the major sound money/Austrian economics classics, and he cites them liberally. The “recommended reading” list contains a year’s worth of serious research.
*Though he continues to fight, he’s not optimistic about averting the coming train wreck, which he refers to as the “BIG ONE”.
Obama Heads UN Security Council..
“Barack Obama will cement the new co-operative relationship between the US and the United Nations this month when he becomes the first American president to chair its 15-member Security Council.
The topic for the summit-level session of the council on September 24 is nuclear non-proliferation and nuclear disarmament – one of several global challenges that the US now wants to see addressed at a multinational level.
“The council has a very important role to play in preventing the spread and use of nuclear weapons, and it’s the world’s principal body for dealing with global security cooperation,” Susan Rice, US envoy to the UN, said last week.
Her remarks were the latest by the Obama administration to emphasise a shift from the strategy of the previous Bush administration, sometimes criticised by its UN partners for seeking to use the world body principally to endorse its own unilateral policies. The US currently holds the month-long rotating presidency of the Security Council…”
More at the Financial Times.
My Comment:
Did I read that right? The way to shift away from the Bush administration’s tendency to use the UN to endorse its own unilateral policies is to put Obama at the head of the UN Security Council??
Am I missing something here? How does this represent a shift away? Isn’t it more like coming out of the closet on it?
India’s Man at the IMF: Arvind Virmani
The global crisis has had the effect of making over the IMF and giving it renewed power.
Until recently, the Fund had lost its international reputation for what was seen as mishandling of the debt crises in Argentina, Asia, and Russia in the 1990s.
Now, however, with a universal cry of “do something” going up, it’s the IMF to the rescue. The Fund has had its monies tripled, and is at the center of a new global regulatory regime, ostensibly working with the G20 (the Group of Twenty, a forum that includes the twenty countries with the greatest GDPs).
The idea is that the G20, which has room for countries like Argentina, Brazil, China, India, and Indonesia, among others, will be more inclusive than forums limited to the developed nations. To check if this is actually the case, I’ve been looking at the structure and organization of the IMF and its affiliated groups, and will be posting what I find as I go along.
Exhibit A is India’s representative to the IMF. That’s Arvind Virmani, Chief Economic Advisor in the Ministry of Finance. Virmani, according to this article in the Indian Express, was educated at Harvard (PhD in Economics), was the Principal Adviser to the Planning Commission, and was also a contender for Vice President of the Reserve Bank of India. Before joining the government, he was a Senior Economist at the World Bank research department.
It’s always the case. The people who end up representing countries like India are all trained in the elite schools in the West, where the faculties are drawn from the US government, as well as the very corporations and international institutions that the representatives will interact with, and often be responsible for monitoring or regulating.
How independent can they be? And even if they’re personally ethical people, how easy will it be for them to even think outside the parameters set by the institutions in which they’ve trained and operated all their lives? Not easy at all. In fact, impossible.
Let’s see if we can trace some of the connections:
Virmani is an alum of Harvard.
It so happens that Larry Summers, current head economic adviser of President Obama, was the 27th President of Harvard (2001-2006).
Summers is said to have been behind Harvard’s investment in interest rate swaps that eventually lost the university over a billion dollars.
Before that, Summers was Chief Economist of the World Bank (1991-1993) – where Virmani worked before 1987- and then Undersecretary and Deputy Secretary of the US Treasury, before becoming Secretary in 1999..
Summers’ long-time mentor is Robert Rubin, whom he succeeded at Treasury Secretary.
In the 1990s Summers was a leading advocate of the Washington consensus–the proposition that free financial markets, “free” trade and fiscal discipline would bring prosperity to the world.
I put “free” in quotes because what it really amounted to was managed trade, manipulated by the US government with carrots and sticks of sorts…from nuclear weaponry to aid to penalties to sabre rattling
While Summers was pushing the Washington Consensus, his mentor Robert Rubin, a former Goldman co-chair, was US Treasury Secretary, where he was instrumental in blocking legislation to regulative the derivative market.
Rubin also pushed through the repeal of the 1933 Glass-Steagall Act (keeping apart merchant banking and commercial banking), which enabled the consolidation of the banking industry.
Then, Rubin became the director of Citigroup, one of the banks whose consolidation was made possible by that repeal. Citi shareholders have filed a lawsuit against Citi executives including Rubin charging that they sold shares at inflated prices, hiding the risks. Shareholders are said to have suffered losses over 70% since Rubin joined Citi.
Meanwhile, Rubin also has a Harvard connection, being a member of the executive governing board of the university, a position he landed a year after getting an honorary doctorate from Harvard.
Importantly, Virmani also shares his Harvard ties with current World Bank president, Robert Zoellick. Zoellick is also an alum of Goldman Sachs, a former US State and Treasury official, a Presidential assistant and US Trade Representative, and a double graduate of Harvard (JD and MPP).
Finally, the IMF position is known to be a sinecure for retiring Indian government economists, who can earn some hard currency for their retirement.
Question: Even if Virmani were scrupulously honest himself (and he might be), how easy would it be for him to be able to stand up to policies carrying the imprimatur of some one like Rubin or Summers or Zoellick? Not easy at all. In fact, impossible…
China’s Gold Rush..
From Adrian Ash at Bullion Vault, via goldseek:
“The International Monetary Fund confirmed on Friday that it will sell 403 tonnes from its hoard to finance development projects in poorer countries, offering gold to central banks before considering steady, pre-announced open-market sales.
“China has no need at all to Buy Gold from the international markets,” counters Lila Lu, chief precious metals trader at Minsheng Bank Corp. in Beijing, speaking to Reuters.
“Because China is a large gold producer, it can source gold directly from its domestic makers, most of which are state-run enterprises.”
Off-market purchases direct from domestic Gold Mining firms enabled South Africa – then the world’s No.1 producer – to double its gold reserves during the late 1960s.
“Why should we use US Dollars to Buy Gold?” Lu added today. “We can use Yuan instead to purchase gold from domestic producers.”
Early Tuesday the state-owned China Investment Corp. announced taking a 15% stake in Singapore-listed commodities trading house Noble Group at a cost of $850 million.
Physical gold demand from private Chinese households rose 9% in the first half of this year, trade marketing-group the World Gold Council said today, announcing an “unprecedented” sales push across rural China.”
My Comment
There are several terribly important things going on in the capital markets and in international politics.
I’ll start with what most investors are probably watching anxiously – the teetering of the dollar at the lower end of the long term band of support (76-80), below which it plunged only a year ago. After showing some strength yesterday, the dollar is down again and gold is back up strongly over 1010. The reason seems to be the whispering in the markets that China will be buying IMF gold to supplement what are said to be meager reserves.
Rumors like these could be seen as a threat by the Chinese, for they expose China’s weakness in relation to other countries, especially those that possess better gold reserves. I suspect the comments by Lu are intended to diffuse that threat.
Another reason for dollar weakness is that the relative strengths of currencies are on the table at the G20 meeting, which is scheduled to take place in Thursday in Pittburgh, Pennsylvania and trade deficits are going to be considered – which is likely to be dollar negative.
The IMF sales are pretty interesting, although it’s hard to tell exactly what’s involved. It seems the gold will be sold to central banks (which ones?) and the proceeds will go to supplement and improve the financing now available to low-income countries (how?).
Question: Why should these professed good intentions be taken at face value, given all we know about the IMF?
At present, the IMF also allocates SDRs (or Special Drawing Rights) to each member country based on its contribution to the IMF (this is supposed to be a way to improve members’ liquidity in the international markets).
The SDR’s are based on a basket of currencies – currently, the US dollar, the euro, the sterling, and the yen – that can be traded for other currencies or used directly.
The IMF will use the gold sale proceeds to invest in other things. The interest from those investments will then benefit low-income countries. At least, that’s what I took away from my reading.
It all sounds suspiciously convoluted and opaque. My fear is that this is all an elaborate charade to leave some countries/institutions holding the “paper” bag, while real value is siphoned off by other countries/institutions.
I’ll leave you to decide who the winners and the losers will be….
Meanwhile, this is only my suspicion. I’ll need to go and do some more digging. But I’m putting my suspicions out here to fuel some leg work in the blogosphere.
Here’s a link to some relevant information on gold market manipulation at the website of the Gold Anti-Trust Action Committee (GATA), the leading activist group on gold price manipulation.
Especially read through the events surrounding the sale of Britain’s gold by then Chancellor of the Exchequer, Gordon Brown. Unlike other countries, UK gold sales are under the authority of the politicians. Brown sold British gold at a price lower than the market price at the time. The timing was extremely suspicious and followed on Robert Rubin’s unsuccessful attempts to get the IMF to sell its gold. The ostensible reason was to “help poor countries” – the same reason being given now. But the actual reason was a simpler one and one I’ve discussed a number of times. It was to keep the gold price low to support the dollar, disguise the rate of monetary debasement, and pump up the stock market. That in turn helped the derivative market, which Rubin and Greenspan had also helped to keep out of regulation. This was in the late 1990s….
Now, a decade later, the IMF hasn’t been weakened by the revelations of its sins. Instead, it’s been strengthened. And now, again, the IMF is selling gold – and again, the excuse is “helping the poor.”