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Ask the Expert - Chris Powell (March 2013)

Ask the Expert - Chris Powell (March 2013)
By admin 6 years ago 2095 Views

n this exclusive interview, Chris Powell answers questions from our readers about the gold and silver market and his outlook on the economy.

Chris Powell is one of the founding members and secretary/treasurer of the Gold Anti-Trust Action Committee (GATA). Chris has also been a managing editor of the Journal Inquirer, a daily newspaper in Manchester, Connecticut since 1974. He writes a column about Connecticut issues that is published in a dozen other newspapers in the state and Rhode Island.

Listen to the interview here:

Ask The Expert - Chris Powell


SMN: Thank you listeners for joining us today on Ask the Expert. My name is Jessica Lau of Sprott Money News (SMN) and we are very excited to have the pleasure of speaking with Chris Powell this morning. Chris Powell is one of the founding members and secretary/treasurer of the Gold Antitrust Action Committee, GATA. Chris has also been a managing editor of the Journal Inquirer, a daily newspaper in Manchester, Connecticut, since 1974. He writes a column about Connecticut issues that are published in a dozen other newspapers in the state and Rhode Island. With this I’m pleased to welcome Chris Powell this morning. Hi, Chris.

Chris: Hi. Thanks for having me here.

SMN: Thank you for joining us today. Let’s jump right into it. What’s the current situation unfolding in Cyprus? How do you see this affecting precious metals? What about the long-term survival of the Euro and the Union?

Chris: In its place I prefer calling the precious metals the “monetary metals” because I think that really illustrates the issue that we’re in here. Gold and silver are forms of money and that’s why they are affected by all these financial issues such as what’s happening in Cyprus.

I think what has happened in Cyprus has been a very wonderful reminder to the world of the old Biblical story with Jesus when he was asked by people who were trying to trick him whether they should pay taxes. He took the Roman coin and held it up and asked whose image is on the coin. They said it was Caesar’s.

And he said, “Render unto Caesar the things that are Caesar’s and under God the things that are God’s.” The Cyprus business is a reminder that if you are going to use or handle or play with government issued money in the end government is going to tell you what it’s worth and maybe change the values on you overnight, change the rules of possession overnight and we’ve been warned and we should act accordingly.

We may think the money is ours but if any particular government is issuing it or controlling it they may take it away from us or they may tax it or change its value on us overnight. Money is not reliable when it is issued by a government.

SMN: The situation is really unfortunate but I think you’re right. Do you see the same situation happening in the US or even North America that is occurring in Cyprus and other banks as well?

Chris: I don’t think so. There’s a main difference here. Cyprus is dependent on the European Central bank and the European Union for its money, the Euro. By contrast the United States and Canada have their own currency which their own governments can issue without limit.

We may very well have devaluation of the currency here in the United States or even in Canada but we’ll never have any money shortage because governments here, unlike the government in Cyprus, can issue their own money without limit.

SMN: Keeping on the topic of currency, there is a surge in popularity with Bitcoin as an alternative currency or investment. What is your opinion on Bitcoin? Do you believe it is legitimate or a mere passing phase?

Chris: I’m intrigued by it, Jessica, but I think it’s got the problem of who’s standing behind it. Is it really an uncrackable computer program and if it gets counterfeited for example, who’s responsible for fixing it.

Can it be counterfeited? I suspect some national security agency could probably counterfeit it or at least start manipulating it by trading in Bitcoin futures as they manipulate the other commodity markets by building futures markets on top of them.

I’m basically libertarian about money and think being libertarian is the solution to the money problem and I think I’m in favor of letting various forms of money compete and letting the market choose among them. Government currency really can’t claim to be so much superior to the Bitcoin.

The figure is that the US dollar has lost something like 98% of its value in the 100 years since the Federal Reserve was created so who connected with the dollar has the right to criticize Bitcoin or anything else. Let them compete and see how they do.

SMN: Thank you. The next question is actually from Twitter. What do you expect to happen in the days or weeks right before the manipulation scheme blow up?

Chris: Nothing necessarily; at least nothing in public. I have always suspected the current era of price aggression will end in an overnight revaluation of monetary metals and devaluation of the major currencies. That’s how things have changed before. They happen overnight through international agreements.

I think we can look to history for a little indication; that is look to the London Gold Pool which is a public arrangement of gold price control that was undertaken by the United States and Great Britain and some of their allies in Western Europe throughout the 1960s. It was a public scheme of dishoarding of the gold reserves in the countries participating in the London Gold Pool.

As inflation greatly increased in the 1960s largely because of United States’ participation in the Vietnam War and the increase in social problems, the gold off take in the London Gold Pool greatly increased as the market realized the gold was undervalued and the price was being suppressed too much. The London Gold Pool drained the US gold reserve in the last couple of years before its collapse in 1968 and the gold reserve from something like 25,000 tons to the current 8100 tons.

The gold off take got so bad in the last months of the London Gold Pool that the United States was flying emergency Air Force cargo shipments of gold over to the Bank of England in London because the Bank of England was financing the British gold reserve to finny the market and really running the British reserve down to almost nothing advancing credit to the United States.

There were hundreds of tons being taken off every week to the London Gold Pool and there were emergency government meetings here in the United States and over in London as the off take became so great. I think finally the United States realized at this rate it had only a few more weeks of gold reserves left and the United States government asked the British government to close the London Gold Pool and close the London gold market.

That was done in March 1968 simply because the metal used to suppress the price in the market ran out. The London Gold Pool ended overnight. The price was $35 one day and the next day there was no market at all.

The private market built up after that at a substantially higher price. I suspect something like that will happen again and it very well may involve an official revaluing of gold upward by central banks around the world, a much higher price that the central banks may attempt to defend by a few decades of market intervention.

SMN: Interesting. We shall see what’s going to happen. How credible do you find CFTC’s investigation? Will something credible come out of it or do you suspect the real news will come out ex-post facto?

Chris: The US Commodity Trading Futures Commission has been supposedly investigating the silver markets for four and a half years. There’s been no report and I suspect it’s because the CFTC has finally recognized that the silver price repression scheme, like the gold price repression scheme is essentially a US government operation with JP Morgan-Chase as its broker.

If that’s the case then the CFTC certainly can’t say anything about it because it would jeopardize a national policy. For a hint about this we can look to history. Back in 1965 when President Johnson signed the coinage act removing silver from all US coinage he issued a signing statement which is posted on the Internet site of the University of California, Santa Barbara. It’s been picked up and got its own internet site.

The President warned investors to stay away from silver, not to invest in the monetary metal in anticipation the price would go up because the US government was removing the coinage because the price had already gone up. The President warned investors that the US government would dishoard from its strategic silver stockpile to prevent the price of silver from going up.

Supposedly the US government has exhausted its strategic silver stockpile. I don’t know exactly what the US government is doing in the silver market though I suspect the US government is very much involved in the silver market selling futures and options and other derivatives perhaps through the Bank for International Settlements in Basel, Switzerland.

But we do know from President Johnson’s statement in 1965 that the United States government has a very powerful interest in the price of silver because silver is potentially a competitive currency. In 1965 the US government as the price of silver was getting away from it, warned the markets that the US government would intervene in the silver market to keep the price down and that people should stay away from investing in silver.

I don’t think that interest in controlling the price of a monetary metal has changed in the least in all the decades since then.

SMN: Speaking of manipulation, what do you think can stop JP Morgan and the rest of the other players from continuing to manipulate the market indefinitely?

Chris: One thing we could stop and I think would simply be some serious financial journalism. If the markets were reported on seriously and central banks were questioned seriously with specifics about their interventions in the gold and possibly the silver markets those interventions would be tremendously impaired.

I think the biggest advantage that these interventions and manipulations have is that the financial news media simply will not ask any questions about them. Any exposure about them would destroy their usefulness. People would realize that these are not markets at all, they’re simply rigged.

But what can an individual who’s not part of the financial news media do? Well, buyers simply have to take real metal, have to buy real metal, not paper claims on metal. As Jim Sinclair and others have said you’ve got to take your metal outside the banking system. That’s what buyers can do in their small way; if you’re going to buy monetary metal you’ve got to buy metal and you’ve got to get it out of the hands of the people who claim to be selling it.

It’s a small thing that individuals can do. The financial news media could do the big thing of questioning central banks about their market interventions and reporting the refusal of central banks to provide certain information. That’s really something that GATA is working on.

SMN: Ted Butler has been trying to prove the silver market has been manipulated for 25 years but has failed to convince the powers that be. That’s not the fault in the paper price against huge physical demand show that JP Morgan et al. can hold the price down as long as they wish and if so what point is there in private investors being in the market?

Chris: Again, this is an issue for buyers themselves to decide. I don’t know you can really blame the US government or Morgan Chase for pursuing their own interest here. It’s a great business. The gold and silver business is a business where you can purport to sell something but never have to deliver it.

I’d love to have a product like that; if I were selling hats or something I could tell people, “You can buy that hat on the shelf over there. Just give me your money but there’s just one little detail here: you can’t take it with you. You buy the hat and I will keep it.”

That’s really what gold and silver investors do with bullion banks. They pay for what they think they’re buying but they never take delivery so the metal is resold to any number of people perhaps according to the statistics of the London bullion market the same ounce of gold may be sold 100 times to 100 different people and people just don’t have the sense to take delivery of their metal.

The other day the Reserve Bank of India actually issued regulations to authorize gold exchange traded funds in India not to hold gold but rather to lend it into the market. Now why anyone in India or anywhere else would want to invest in gold or silver, the monetary metals, to hedge themselves against currency devaluation would buy a piece of paper, a claim in an exchange traded fund that admittedly did not have the gold it was supposed to have, is absolutely beyond me.

But this is really what goes on in the gold and silver investment world. Most gold and silver investors just flush their money down the toilet by buying these illusory paper claims to metal of which they never take delivery.

This issue is really up to buyers; if you want to buy metal and take it out of the banking system, prevent it from being sold to many people at the same time that may be a good idea. But if you just want to buy a paper claim to metal that doesn’t exist and may not be available to you when you really need it you might as well flush your money down the toilet.

SMN: It is said that the physical market will eventually overwhelm the paper market. Why if the price is set in the paper for the physical?

Chris: The price is set in the paper market every day until it’s not. We have the example of the London Gold Pool: one day the metal simply ran out and there was a new price. I don’t know when the metal will run out. I’m not permitted to know; no one is permitted to know exactly how much gold central banks have.

The official figures are almost certainly disinformation. I can give you some examples on that. Specifically most of the banks will not allow anyone to know how much gold they have swapped with each other or how much gold they’ve released into the market because, according to an International Monetary Fund report from March 1999, this information on gold swaps and leases is considered too market sensitive and its disclosure would interfere with central bank interventions in the currency market which are done surreptitiously.

It’s really a political decision; it’s an inventory decision for the central banks. They may look very strong on a particular day and overnight the situation changes because the metal ran out. They will not be calling you or me a few days before to say that the policy is going to change in a few days when the metal runs out. It will happen overnight. That’s what has happened before and gold investors get very despairing right now that they’ve been cheated for so long.

On the other hand, you have to take a longer view on this business. When GATA got started back in January of 1999 the gold price was at $260 an ounce and today it’s just about $1600 an ounce in something more than 13 years and that’s a huge gain.

Somehow we’re always depressed and we always think we’re getting beaten up. We’re certainly getting cheated by the surreptitious intervention of the currency markets by central banks but in fact we’re winning; we’re just winning more slowly than we’d like.

SMN: Next question is about copper. Copper prices have dropped rather dramatically in the past six weeks and by about 20% since 2011. One might predict a drop in copper production in reaction. What effect on gold production could be anticipated because of this should copper price stay in the range of $3.25 to $3.50.

Chris: Copper is very often associated with gold and mining. A lot of copper mines produce gold as a by product. With copper production decreasing gold production is likely to decrease as well.

On the other hand, I don’t think mine production has a major influence on the gold price in the short or even medium terms because there is so much gold above ground in inventory that is available to the market on any particular day if the price is right. Mine production doesn’t really matter much. I think typically there’s only a 2% increase in the total gold supply in any particular year coming from mine production.

Most of the gold that has been mind throughout history is believed to be above ground, hoarded and available to the market. Mine production is such a small proportion of that every year that its influence on price is really marginal.

Determinants of the gold price are really much more widely disseminated than that. The determinants of the gold price are first primarily how much gold central banks are willing to dishoard. How much gold futures contracts and options they’re willing to sell. How much money they’re willing to put at risk in the futures market to control the price.

Mine production? I don’t think it’s anything for anybody to worry about if you’re following the monetary metals.

SMN: Now for the first time investor what is the best way to own gold?

Chris: I’m not an investment advisor. I’m willing to tell people what I do myself from the observations I made about the markets over the years. My general advice to people is to get as much real gold and silver as they can and then find a safe planet to keep it on and when they find such a planet would they please call me.

I don’t want to be too flip but this is a very problematical sector. Money is very sensitive to government. I mentioned the story about Jesus in the Bible and the Roman coin and rendering unto Caesar.

Governments are incredibly sensitive about gold because they know it is natural money. They have tried throughout history to control the price and to feed a market in gold because it impairs their own power if the gold market is free.

In the United States back in ’33 and ’34, we had an attempt by the government at gold confiscation. As governments become more desperate and tyrannical they could try to put controls on gold just as they’re putting controls on their own money.

I don’t know what government’s going to do when they’re desperate as their power is jeopardized as they continue to overreach, as the welfare state begins to crumble under its own weight. Governments may get desperate.

They got desperate in Cyprus the other day; they tried to confiscate or tax bank deposits. They got away with it. It’s possible they may try to confiscate gold. I don’t expect it’s terribly likely but I did have some email with the US Treasury Department some years ago as I tried to determine what the US government’s position on confiscation was.

They didn’t want to answer me but finally at the intervention of my Congressman they were compelled to answer me and I had a fairly candid reply from the Assistant Secretary. This correspondence is published in the confiscation section of GATA’s internet site.

The Assistant Secretary wrote to me that the Treasury Department’s position on confiscation was as follows: under the Trading with the Enemy Act of 1917 and the Emergency Economic Powers Act of something like 1979 the Treasury Department claims the power upon the proclamation of an emergency by the President of the United States to seize or freeze any gold or silver related asset held by any American.

But the Assistant Secretary continued that I shouldn’t get too paranoid about it because under the same two statutes upon a proclamation of emergency by the President the Treasury Departments claims the power to seize or freeze anything. This is simply a matter of just how tyrannical the government wants to get.

The conclusion I drew from this correspondence is that not only is it advisable to hold real metal and to hold it outside the banking system or to hold claims on real metal with people that you trust with funds that you are sure have real metal and keep it outside the banking system not only it is imperative to hold real metal directly or through the most trusted intermediaries, it’s probably to diversify the geography of your holdings so you’re not entirely vulnerable to any one government’s excesses.

Diversification in geography is a good idea. It’s entirely possible that the nominally free and democratic countries will be more tyrannical about money than the nominally totalitarian countries like Russia and China.

SMN: Interesting. Thank you for sharing that information with us. I’m sure a lot of our readers are interested in knowing that. Actually to help with this problem you said to own physical real metal and be able to store it in a geographical location that is safe which is why is Sprott Money is here. We actually offer gold and silver bullion as well as recently we launched a Canadian storage program for all of our customers because there’s such a great demand for it. Everyone’s asking to store their precious metals in Canada instead of the States.

Chris: I think a lot of Americans are interested in holding some of their metal outside of the country and Canada is the free country next door so that’s always of interest to Americans who want to invest in the monetary metals but want to get it a little beyond the read of any excesses of the US government.

SMN: What is your price target for gold and silver for 2013?

Chris: I really hate to make price predictions, Jess. The gold price is going to be a political issue. I don’t know how governments are going to react to events. I don’t know whether investors are going to wise up.

If every gold investor in the world decided tomorrow that he was only going to buy real metal and take delivery and get it out of the banking system then I think the gold price suppression scheme would be over. GATA is working on trying to awaken investors to that but I don’t know if we’ll ever have enough success.

If investors ever awoke to the counterfeiting of gold, the issuance of it, the amounts of imaginary gold or if governments ran out of the metal they need to suppress the price with then the price could explode overnight. This is a political issue; it’s not mathematics, it’s not physics.

I’m not a political scientist anymore than I’m an investment advisor. I’m really just an ordinary newspaper editor who probably best off when you’re putting specific questions to original sources which is what the financial press on this planet fails to do.

I know from the answers I have been refused and the documentation my organization has collecte4d that there is enormous racket and deception going on in the monetary metals markets. Gold is the secret knowledge of the financial universe and GATA is working very hard to share that.

When that secret is out and when investors realize that perhaps 75% or 80% of the gold they think they own doesn’t even exist then the price may be substantially higher than it is today.

SMN: That’s a fair take on it. For your last question now, can you tell readers about any upcoming conferences or speaking engagements you’re going to?

Chris: Oh, sure. I just got back from the Mines and Money conference in Hong Kong. The next conference in which GATA will participate will be the Cambridge House World Resource Conference in Vancouver at the end of May. I don’t think we’ve posted anything about that yet, it’s a little early but anybody could go to the Cambridge House Internet site and find the information about the Vancouver conference there.

It’s always a great conference and Vancouver of course is really the center of the mining and mining exploration industry. Vancouver is just about my favorite city in the world. Beautiful place year round; I’d encourage anybody to come to Vancouver.

If they got tired of listening to the speakers they could just go outside and walk around, look at the beautiful city and the mountains and the harbor. I don’t think the Vancouver conference could ever be a disappointment to anybody who just could always go out and just be in Vancouver.

SMN: Absolutely. I was there last year and it was great. Thank you very much for being here with us today, Chris. Your information has been really helpful and insightful and I’m sure a lot of readers will be very happy with this interview.

Chris: I’m always glad to run my mouth about this issue and thanks for your interest. You know where to find me if you need anything.

SMN: Okay. Thank you very much.

Chris: Okay, take care.

SMN: You too. Have a great weekend.

Chris: Bye, bye.


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