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Gold: Why the Bankers Need the Miners

Articles & Blogs - Gold Commentary

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To those readers hoping/expecting to see Part II of “The Great Debate” when they stopped by our site today, I'm sorry to keep you in suspense. Once I had mapped-out what I wanted to say in that analysis, I realized that my explanation of certain aspects of the gold market would be better appreciated if I provided readers with some additional context.

There are many interesting and complicated facets to the gold market, and few are as intriguing or paradoxical as the love/hate relationship between bankers and gold miners. I got into some aspects of this marriage of strange bedfellows, anecdotally, in a recent commentary (“Goldman Sachs and Gold”), but there is still much more to be said.

In January of 1961 (a mere ten days after I was born), President Dwight Eisenhower gave one of the most famous speeches in American history – in his farewell address. Specifically, the speech was historic and remarkable because of one short passage, from which I take this excerpt:

We must guard against the acquisition of unwarranted influence, whether sought or unsought by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals.

With nearly fifty years of hindsight to guide us, several observations can be made about those famous words. First, Eisenhower's warning was not so much “prophesy” as it was a description of what he saw already taking place around him.

The Vietnam War was already underway, even though few Americans realized it at that time (officially, the conflict is described as lasting from 1959-1975). The alliance of the military “machinery” in the U.S. government with large and powerful industrialists had already been cemented...and I'm sure readers are thinking: what the heck does this have to do with bankers and gold-miners?

In fact, by the very term “military industrial complex”, it is clear that Eisenhower was completely oblivious to the most malevolent force in this new alliance: the bankers. As writers such as Darryl Schoon continually remind us, using constant wars as a tool to drain the wealth of entire economies, and enslave people with debt was nothing “new” to the bankers, even back in 1961. They had already had more than two centuries of “practice” in hollowing-out the economy of the British Empire. With that economy sucked-dry, it was now time to do the same to the United States.

There were no real “industrialists” when the bankers began their campaign of plunder from inside the British Empire. Thus, it is not a “military industrial complex” which is the true horror we must fear, but a military financial complex.

Like Grima Wormtongue, from Tolkein's classic “The Lord of the Rings”, it was the bankers who were constantly “whispering into the ears” of Kings. However, unlike Wormtongue, the bankers did not use their words to try to soothe British Kings into a stupor, but rather goad them to war over and over and over.

Even three centuries ago, the bankers already knew that nothing created a need for as much “capital” (i.e. debt) as wars, and it is through the creation of debt (and the 'magic' of compound interest) that bankers have been plundering the wealth of societies since the Bible first warned us of “the money-changers”.

Indeed, it is a shame that we abandoned that Biblical name for bankers, since it is far more descriptive and instructive – for that is exactly what bankers do. They “change” your money (i.e. gold and silver) into their own paper, which they ruthlessly and relentlessly dilute, until it becomes nearly worthless – and then they start the process all over again (usually in a different country).

It is this insidious process of stealing-by-stealth which explains the bankers' love/hate relationship with gold. As the personifications of greed, the bankers covet gold (and silver) as the only, true money; and they will always strive to at least control all of the gold and silver in a society, even if they don't have official title to it (yet).

At the same time, they understand better than all others that gold is also their enemy, the “foe” who ultimately “exposes” the bankers' theft – but generally only after they have already stolen most of a society's wealth. Gold has been referred to as an economic “barometer” of inflation. This is a misnomer, as it reflects a fundamental misunderstanding of the true nature of “inflation”. Gold is actually a “warning siren”, which tells us how much (and how fast) the bankers are stealing from us – or, at least, it's supposed to.

As I have explained on many occasions in the past, gold is the true, ultimate “store of value” (or preserver of wealth). An ounce of gold is what is: immutable. When the “price” of gold rises (i.e. its exchange rate versus paper), it is not the gold which becomes “more valuable” (since that is impossible) but the paper which is becoming less valuable.

Gold is the “smoking gun” which provides conclusive evidence of the bankers' theft of our wealth. Thus, if the bankers can “suppress the price of gold” (i.e. conceal how fast their paper is losing value), then the bankers can continue stealing much more (and for a much longer time) than if the price of gold is allowed to rise freely in markets – and expose their stealing at a much earlier stage.

In the last century, which we can think of as the Modern Era of Banker-theft, the bankers of our time have demonstrated themselves to be the greediest and most-rapacious in history, thus it is not simply natural but inevitable that they would become obsessed with suppressing the price of gold – in their quest to steal more than any generation of bankers in history.

Their original “tool” to accomplish this (the only one they needed at the time) was the national hoards of gold, which belonged to the citizens of these nations, but had been surreptitiously “appropriated” (i.e. stolen) by the private bankers who own and operate Western “central banks”. These bankers never “owned” our gold, but they have been permitted to squander most of it.

As I have also pointed out on a number of occasions, greed is perhaps the most short-sighted of all emotions. After achieving their most-coveted fantasy in 1971 – the total, global abolition of a “gold standard” - suppressing the price of gold became a full-time occupation for the bankers, because its price was no longer fixed, relative to their own paper. In just a couple of decades (which must have seemed like the “blink of an eye” to the bankers) they had burned through most of the gold (i.e. wealth) which had been accumulated over a span of centuries by these nations.

They needed more gold. Enter the miners.

In the 1990's the bankers began a campaign to enslave the world's largest gold-miners. They quietly approached these companies and pointed to the weak and falling price of gold. They let the miners know they had a “choice”. They could continue to sell their gold as they mined it, and remain “vulnerable” to the spot-price for gold (which, of course, the bankers controlled completely); or, they could let the bankers design “hedges” for them – to forward-sell vast quantities of gold – in which case the bankers assured the miners that their survival would be guaranteed.

With the price of gold steadily being pushed below the cost of production for more and more miners, it was a clear choice between extinction and enslavement. And once the bankers had secured their coveted hedges, in a very short time they had gained control of tens of millions of ounces of gold – which they could now also dump onto the market, to suppress the price. As existing miners increased their reserves, and new large mines came into existence, these too were “conscripted” into the bankers' hedging contracts.

It's important to note that these hedges served two enormously important purposes for the bankers. Not only did they provide them with vast amounts of additional “gold” to dump onto the market (even before it was dug out of the ground), but they also represented a secure, guaranteed revenue stream for the miners. Those revenue streams, in turn, could be used to fund drilling for new reserves, and construct new mines. Thus, a scheme of massive gold-hedging produced (for the bankers) the optimal combination of the maximum level of gold production, given the minimum price.

This is a dynamic which all gold-bugs must understand. Nothing makes the bankers happier than seeing rising gold production (i.e. increased supply). The more gold that is mined (to offset the bankers spiraling mountains of paper), the easier it is to hide their paper-dilution and wealth-stealing. However, the bankers need for gold miners goes much deeper than this.

Just as rising gold production helps the bankers conceal their nefarious deeds, falling gold production makes it much more difficult to hide their stealing – because a more-constricted gold supply amplifies the rate at which banker-paper loses value versus gold. This is why allowing the price of gold to fall even further (thus wiping-out the miners) would be a nightmare for the bankers. While the bankers don't want to see gold miners “thriving” (since that implies a more realistic price for gold), keeping these gold miners relatively healthy is important to the bankers, since the gold miners have become unwitting and unwilling “junior partners” in the bankers' schemes.

It is in this context which we must view the “sales agreements” by Western central banks with respect to their gold reserves. These are a series of five-year agreements which set limits on the amount of gold which these central banks will sell, over the period governed by each agreement. The official line which the central banks have used in “explaining” these agreements is that they are “protecting” the participants in the gold sector (i.e. miners, investors, and end-users) by not allowing the gold market to “collapse” - as the central banks rid themselves of that useless, “barbarous relic” which was cluttering up their vaults.

As is generally the case with bankers, the truth is virtually the exact opposite. Knowing that the price of gold was being suppressed at only a tiny fraction of its real value (since they are knowing participants in the scheme), the bankers know that there is strong, permanent upward pressure on the price of gold. And while the quantities of bullion being dumped onto the market by the bankers were capable of pushing the price even lower (over the very short term), each dollar lower that the price of gold moved significantly amplified that upward pressure – and the bankers had already seen (back in 1980) just how fast and how high the price of gold could move should it experience any explosive break-out.

To more clearly illustrate the magnitude of that break-out, John Williams of now estimates that using real numbers for inflation (i.e. real dollars), the price of gold would have to rise to over $7,500/oz just to equal the 1980-high. Put another way, that is how far the U.S. dollar would have to fall before it had reached its true, current value versus gold (and that value continues to fall each day).

Thus, the central bank sales agreements are intended simply to make the bankers manipulation-scheme more stable, by regulating the rate of bullion-dumping – and supplying as much (or as little) gold as was necessary to keep gold at a price which was close to optimal for the hedging contracts which they had created for the miners.

The bankers began their gold-market schemes by dumping the bullion sitting in central bank vaults onto the market to suppress the price. They were then forced to start selling gold ore still in the ground onto the market, and call that “gold”.

Now the bankers have been reduced to selling paper onto the market, and calling that “gold”. The end of the bankers' scheming is near, and with it, the final “liberation” of the world's largest gold miners.

Comments (1)Add Comment
written by limf, May 21, 2010
what a black swan.
Jim Puplava did not do a deserving job for the gold bull, he did wrote rogue wave.
Jeffrey Christian declare “in all of my years of involvement in the gold market, I have never seen any evidence of any efforts to manipulate or suppress the price of gold”.
This we all know is a false statement.

what a joke.
Good manipulation vs. Bad manipulation vs no manipulation. If there is, its good for the manipulator and bad for the rest of us, there is no other way about it. or there is no management(Fed n Bull ion Banker), therefore we are going to keep it a secret, it worked best.

ha ha,
what goes around comes around.
Just create a rumor about Central Banks selling gold, and the price will go down. but it came back to UK selling their gold for bottom dollar. Its not golden but its certainly Brown, let's say Golden Brown Buttom. Sarry wrong spelling.
What a bargain for Gold Bull!

what in the gold bull should do?
the ratio must not be use. (100:1)
never come close in weight, annual gold produced is now less than 2500 tonnes, but the paper market volume in paper US$ is with so many zeros never actually come close. We believe in real gold. Paper is paper and gold is gold.

i want my oz.
That is WHY the price is meaningless.
The official gold price per oz is less than US$50.
We hear only the seller and not the BUYER.

Christian Moto
All we can say goes. there is no no suppression and we are all gold bulls. Tungsten is gold bar and sorry I miss poke. Yes, I am a gold bull, since 950 is higher than 50.

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