For the purposes of this column I’m going to start with an assumption - not just any assumption, but a crucially important assumption; probably the only assumption that matters.
The assumption is that the prices of precious metals ARE rigged (or - pick your verb: “manipulated,” “managed,” “controlled” and/or “suppressed.”)
Furthermore, my assumption is that the entities manipulating the prices of gold and silver include (any or all of the following): The U.S. Fed, other central banks and the too big to fail bullion banks, most conspicuously JP Morgan Chase.
If the precious metal prices are indeed manipulated, what does this mean to those of us have a strong interest - or a strong strong belief - in owning precious metals?
Or: Cutting directly to the chase, why should those of us who believe in owning precious metals have any realistic expectation that our investments in gold and silver will appreciate in price by any significant degree ... assuming (again) that these prices are controlled not by free market forces but by “the powers that be” specified above?
The sad answer, I believe, is that (in the short and medium term) we should not believe prices will be allowed to rise by any significant degree.
This said, I do firmly believe that at some point the “status quo” circumstances that make manipulation a fact of life will change and that prices will likely sky-rocket.
My assumption, however, is that TPTB do not want precious metal prices to rise. Or if prices do rise (read: are allowed to rise), they will not rise by any great degree or in a rapid, sustained and eye-opening manner.
This, I’d argue, is a trillion-dollar assumption. It’s the only assumption that matters.
Most, I think, would agree with this statement: Precious metal prices are either being manipulated or they are not. Logic tells us these are the only two possibilities.
Those of us who think prices are being suppressed or manipulated must (logically) ask another question. How likely is it that those who are manipulating prices will suddenly stop (either voluntarily or involuntarily)?
My answer is “not very likely at all.”
If one assumes that prices are being manipulated, you also have to assume there is a reason(s) for such actions, a “motive” if you will.
The reason most often cited is that gold (and silver) are considered a grave threat to the financial and economic “status quo.” Specifically, gold and silver are viewed as a great threat (probably THE greatest threat) to the U.S. fiat-dollar-based economy.
The fear is that if gold and silver “go hyperbolic,” the masses will flee the U.S. dollar as an investment vehicle. Chaos and economic catastrophe could very well ensue. This cannot be allowed to happen, thus the strategy to “suppress” precious metal prices by any means necessary.
A second reason is that some player(s) are profiting by cornering the precious metals markets. Knowing they can control the price today, tomorrow or next month, these players can execute trades that take advantage of this fact.
In my view, the first reason is the most important.
If there is indeed a virulent fear of precious metals getting out of control, common sense dictates that this “worst case scenario” (for TPTB) not be allowed to happen.
Since I’m writing an “assumption” column, I’m going to make yet another assumption.
Most will acknowledge we live in a nation whose government includes a giant “intelligence” bureaucracy. I’ve read (as I’m sure you have too) of the war games (or “threat games”) members of this community sometimes stage to justify their existence.
One of my assumptions is that some members of this community have run economic scenarios through specially-designed software programs. Economic “experts” have probably been employed and/or consulted and asked the question: What is the greatest threat to the American standard of living and our “national security?”
The dollar losing its status as the reserve currency of the world has (I’m betting) been identified as one of the greatest threats to a “status quo” that’s been pretty good to America these past several decades.
And the easiest way to preclude a massive loss of confidence in the U.S. dollar is to make sure that there is not a sudden and major macro-move to gold and silver as an alternative store of value. Thus a continuing and on-going strategy of managing precious metal prices.
I’m betting that the day a new president is inaugurated, higher-ups in the intelligence world (and/or at the Fed or U.S. Treasury) outline this “threat” for the new administration.
It’s of course possible that a president or Fed Chairman and/or Treasury Secretary could listen to such a briefing, hear the case for the suppression of gold prices and promptly reject it and presumably even stop it.
However, in such a scenario, such leaders would have to take a giant risk - the risk being that (left to the free market) prices of gold and silver would not soar.
Because if these prices did/do soar, everything that matters to the future of a president’s administration would very likely change dramatically. Interest rates might skyrocket; inflation might sky-rocket to an extent it could not be denied or ignored away; unemployment might surge.
Most importantly, absent gold and silver price suppression, the expenditures of the U.S. government might have to be cut in ways they have never been cut. The reach of government (including the military) would have to be dramatically curtailed.
The popularity of gold and silver, at their core, are reactions among some investors to the mind-boggling levels of debt being created by the federal government. In effect, silver and gold investors are simply betting that government’s status-quo deficit spending will at some point result in disaster.
A vote “for” precious metals is a vote “against” the competence of our government and the currency our government mandates we use.
A president (or Fed chairman or chairman of a mega bank that benefits from its cozy relationship with policy makers) who effectively outlawed the rigging of gold markets would be one bold fellow.
Politicians - one assumes - want to be popular. One way they protect their popularity is by continuing all of the payments voters have become accustomed to. Indeed dependent upon.
Would such a politician and/or other leaders of the “status quo” risk their positions by telling the masses “no,” you can’t have this anymore (welfare, social security, pensions, subsidies, military bases and weapons plants in your Congressional district)?
If you are profiting (either financially or in stature) from the status quo, would you dramatically change the way the game is being played?
If you are a politician like Ron Paul, who by some miracle got elected, you might. But for every other politician likely to ascend to the highest levels, probably not.
Instead you would be much more likely to “kick the can down the road” a little longer (hopefully until you are safely and richly retired).
Suppressing precious metal prices is one (proven) way of kicking this can down the road.
The government (and those intelligence folks I mentioned) no doubt recognizes that there are some things they can do that will preserve the status quo. They might not be able to enact Policy A or Program B that results in a hiring frenzy in the private sector, but they KNOW they can manipulate gold and silver prices.
They know (from past experience) that they can execute a series of trades that not only lowers the price of precious metals but reinforces the negative “sentiment” their previous price “raids” helped create.
To paraphrase Donald Rumsfeld, this is a “known known.”
We might not be able to accomplish A, B or C, but we can dang sure keep the lid on precious metal prices, the thinking probably goes. If these prices start to get out of control, we can - in a matter of minutes - rein them back in.
The “unknown” they think they know is what would happen if they stopped suppressing the price of precious metals.
When it comes to the “To Manipulate or Not Manipulate” question, “we don’t need to go there” is almost certainly the consensus answer to this question (to those who actually matter).
It’s best to not to find out what would happen if the price manipulation scheme was ever called off.
So what’s going to happen to the price of precious metals in the future?
They might, in fact, go up, perhaps even way up. But if this happens it will be after TPTB have done everything they could to prevent this from happening.
To think otherwise is to think that the most powerful people in this country have suddenly changed their viewpoint and have become completely ambivalent about precious metals prices.
“Let the market decide. No skin off our back. Won’t effect us one way or another. Or if prices do soar, well that’s perfectly alright with us.”
I don’t know about you, but I find it hard to believe such a change in outlook would ever/will ever occur.
The people who I assume have been manipulating the price of precious metals will keep on doing everything they can to prevent precious metal prices from “taking off.”
Of course, I think the manipulation efforts will ultimately fail. Government central planning almost always fails and almost always produces the opposite result of that which was intended.
I’ll leave for another day my thoughts on why or how (and when) I think the manipulation will fail.
For now, though, I feel very confident predicting that the manipulators will manipulate as long as they can. Or until they can’t.
This is quite depressing to many of us. The “powers that be” have proven they can pull this off time and time again. They are either getting rich or - in their rationalization - saving the world from economic calamity. Or both.
Why would anyone expect them to change strategies now?
It’s possible, I guess, that JP Morgan might decide that they can get really rich by cornering the right side of the precious metals market and by “letting” prices soar.
Then again, if the bank’s gold portfolio soars, the bank’s dollar-backed investments would likely tank. That is, protecting the dollar is probably more important to them than booking any profits on precious metals.
Plus, my assumption is that JP Morgan is not calling the shots all by itself.
Who has more power than JP Morgan? The U.S. government. And our bankrupt government likes paper, not gold. In fact, our government probably despises gold. And fears (even more than another attack from Al-Quadea) that one day millions of Americans will wake up and start buying the stuff in mass.
Anyway, that’s my assumption and I’m sticking to it. This is also why I think manipulation is here to stay.
Bill Rice, Jr. is managing editor of The Montgomery (AL) Indpendent. He can be reached via e-mal at: bill@montgomeryindependent.com
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