42 Years of Fractional Reserve Alchemy - Craig Hemke
January 4, 2017
It has now been 42 years since The Global Bankers successfully alchemized gold through the advent of futures trading so we begin the new year by looking back at how we got into this position in the first place.
To that end, let's start 2017 by going back to 1974.
Over the past few years, you've often heard me reference the HISTORY and FACT of gold price suppression and manipulation. Whenever it comes up in an interview or presentation, it often goes like this:
- After Bretton Woods, the US tried to go it alone in managing the price of gold to $35/ounce. By the late 1950s, this caused a mini-crisis when US gold reserves fell by a third as countries around the world exchanged their dollars for gold. There were hearings on Capitol Hill and decisions were made to change the way that $35 gold would be managed.
- This led to the formation of The London Gold Pool in 1961. No longer would the US go it alone in providing physical metal at the $35/ounce price. Seven other countries were recruited to the effort in order to lessen the burden and drawdown of US reserves. This effort to manage the $35 price worked for nearly seven years until global gold demand finally overwhelmed the Gold Pool and the effort collapsed in 1968.
- The US was suddenly on its own again and demand for gold in exchange for dollars soon grew to such an extreme that President Nixon was forced to cancel the dollar's convertibility into gold on August 15, 1971. This is the "closing of the gold window" that you've heard so much about.
A new movement to allow private gold ownership in the US soon began...recall that FDR had outlawed private gold ownership in 1933...and on January 1, 1975, US citizens were finally allowed to once again own and hold physical gold.
But something very important happened the day before, on December 31, 1974. On that date, the Commodity Exchange Inc., also known as The Comex, began trading gold futures contracts and, as you'll see below, it was through these gold derivative contracts that the global bankers and governments finally perfected alchemy...a pursuit which had foiled and baffled scientists for centuries.
You may recall that a few years back, Wikileaks unveiled a whole assortment of previously-classified US government cables and transmissions. Wikileaks documented them all together and posted them to their website under the category of "Public Library of US Diplomacy". From the site, please read through this cable from December 10, 1974:
The entire document lays bare the intention behind the manufacture of gold derivatives to replace physical metal. However, in case you missed it, here's the key paragraph:
And there you have it. Laid bare for all to see. The "Dealers' expectations" of 1974 are manifest in 2017. The futures market is "of significant proportion" and physical trading is "miniscule by comparison". Price suppression, manipulation and volatility has "negated long-term hoarding" of gold by US citizens and very few even consider gold as money at all with the vast majority seeing it only as a commodity or a "hedge".
However, the fraud of the Banker's alchemy will one day come to an end as confidence in fiat currency collapses and physical demand for real money overwhelms this fractional reserve system. Will/can this occur in 2017? It's certainly possible as negative interest rates and currency devaluations lead to all sorts of unexpected consequences. But the timing hardly matters when the end result is a foregone conclusion. No system built upon a foundation of deceit and fraud can stand the test of time and the Banker's fractional reserve alchemy is no different. It will one day collapse. Of that you can be certain.
(A major h/t to James Henry Anderson for reposting the Wikileak page to Twitter on January 1.)
Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.
The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.