The gold market rigging story could be called 'The Bigger Short'

By: Chris Powell, Secretary/Treasurer, GATA

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-- Published: Monday, 29 February 2016 | E-Mail | Print

Dear Friend of GATA and Gold:

Yesterday your secretary/treasurer went to a movie theater to see "The Big Short" (seemingly the first time he has been to the movies since going to "Babe the Pig" 20 years ago, for reasons you can probably figure out). "The Big Short" is an excellent movie, despite its constant gratuitous vulgarity and the unattractiveness of the nominal heroes.

You may know the movie's outline: A few unorthodox money managers discover that the residential mortgage bond business has become a colossal fraud because investment banks have packaged good mortgages with bad ones and the regulatory agencies are looking the other way. The unorthodox money managers persuade some investment banks to create financial contracts for shorting their own mortgage bonds. Then they wait for the housing bubble to pop so they can collect stratospheric profits.

Except that it takes the seemingly inevitable takes a lot longer than it should. Even when mortgage defaults rise sharply, the market value of the bond shorts doesn't rise. Someone seems to be interfering with the market, so the shorts try to persuade the bond-rating agencies and mainstream financial news organizations to do their jobs, and of course they won't.

The similarities to GATA's experience are obvious, perhaps most obvious in the scene in the movie scene where two of the unorthodox fund managers visit the headquarters of The Wall Street Journal at 1211 Avenue of the Americas in New York to pitch the story to a former college classmate who has become a reporter for the newspaper. The reporter declines to pursue the story, explaining that by doing so he would be putting himself, his family, and his job at risk to chase what he calls a mere "hunch."

On May 3, 2011, your secretary/treasurer spent 45 minutes at 1211 Avenue of the Americas at an appointment with a Wall Street Journal reporter, delivering the major documents confirming the policy of gold price suppression that long has been followed by Western central banks and explaining what that policy meant. Three years earlier, on January 31, 2008, on the eve of the world financial crisis, GATA had spent $264,000 on a full-page advertisement in the newspaper warning that "surreptitious market manipulation by government is leading the world to disaster." But nothing came of the ad or the appointment with the reporter. To this day The Wall Street Journal has refused to touch the story.

And while the Journal's reporter did not confide in your secretary/treasurer that the gold price suppression story is too sensitive to pursue, on December 5, 2014, your secretary/treasurer had a similar appointment in London with a financial reporter for a major British news organization who was sympathetic but who volunteered that any reporter for a mainstream news organization who pursued the gold market rigging story probably would be fired instantly. This reporter thought he might be able to address the issue in a book someday.

Of course all this is simply the way of the world, the way it always has been and always will be, though at least what "The Big Short" depicts was documented by the 2010 award-winning, best-selling history written by Michael Lewis.

The same circumstances explain the failure to shut down Bernard Madoff's investment fund Ponzi scheme until it had defrauded investors of billions. Madoff was exposed by another fund manager, Harry Markopolos, who titled his 2010 book on the scandal "No One Would Listen" since he repeatedly had supplied the U.S. Securities and Exchange Commission with the documentation of Madoff's fraud and the agency didn't take it seriously. Madoff was stopped only when, years later, his sons reported him to the Federal Bureau of Investigation.

Your secretary/treasurer recounts this simply to identify on the record some of the mainstream news organizations to which GATA has provided the documentation of the largely surreptitious rigging of the gold market by central banks, documentation that is both summarized and detailed here:

http://www.gata.org/node/14839

Some of these news organizations received GATA's documentation as The Wall Street Journal did, in face-to-face meetings with your secretary/treasurer. Others received it by e-mail and confirmed its receipt. Some journalists for these news organizations have had substantial correspondence with your secretary/treasurer over the years, so they know the score. But they too have done nothing to pursue the story.

Besides The Wall Street Journal, these news organizations include The New York Times, the Washington Post, the Financial Times, the Associated Press, Reuters, Bloomberg News, Dow Jones Newswires, the Toronto Globe and Mail, the National Post in Toronto, the London Times, the London Telegraph, and CBS News.

This is not to say that GATA never has gotten any attention from mainstream news organizations. Of course just the other day GATA Chairman Bill Murphy was interviewed by CNBC Asia, as your secretary/treasurer was interviewed by CNBC Europe a year ago. (As with all major news organizations in North America, CNBC in New York remains out of the question for us.) In April your secretary/treasurer hopes to be speaking at financial conferences in Hong Kong and Singapore, cities that sometimes have been more receptive to GATA's work.

We are in this for as long as our strength holds out, which of course may not be long enough to see it through to success. Indeed, the philosopher William James suggested a century ago that it was unusual for anyone challenging a large organization acting wrongfully to live to see his success, though the right tends to prevail eventually.

"I am against bigness and greatness in all their forms," James wrote, "and with the invisible molecular moral forces that work from individual to individual, stealing in through the crannies of the world like so many soft rootlets, or like the capillary oozing of water, and yet rending the hardest monuments of man's pride, if you give them time. The bigger the unit you deal with, the hollower, the more brutal, the more mendacious is the life displayed. So I am against all big organizations as such, national ones first and foremost; against all big successes and big results; and in favor of the eternal forces of truth that always work in the individual and immediately unsuccessful way, underdogs always, till history comes, after they are long dead, and puts them on top."

But of course we would like to live long enough to see the restoration of free and transparent markets for the monetary metals and everything else, as well as the restoration of limited, accountable, and democratic government. And while these are the Valley Forge days for those who believe in such things and GATA has not asked for help lately, we would especially welcome it now, most of all from those who have not helped before:

http://www.gata.org/node/16

Anyone who donates even $5 will have donated more than Newmont Mining has donated, the monetary metals mining industry generally being too scared to defend itself.

In any case there may be another pretty good book and movie in the gold market rigging story. Since it involves the creation by central banks of a vast imaginary supply of gold for price suppression and since this fraud jeopardizes not just one market but all markets, it could be called "The Bigger Short."

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org