Why Do Governments Hate Gold? US Talks With Turkey Over Iran Gas For Gold Video

Unfortunately, the United States abandoned gold as its money. The process began in 1913 when bankers were able to get Congress to establish the Federal Reserve Bank.

The process continued when FDR issued a blatantly unconstitutional Executive Order confiscating most privately held gold in the United States.

The process continued when Richard Nixon abandoned any gold backing for the U.S. dollar in 1971. Since that time, we have been using pieces of paper with ink on them as money.

They have no intrinsic value, and they are very easy to create. Indeed, governments and central banks can create as many of them as they deem necessary.

A year or two ago, one of the Federal Reserve governors made a very illuminating comment. He said that the U.S. dollar is a “faith-based currency.” In short, it’s only as good as we think it is. If enough people begin to think that the dollar is just a worthless piece of paper with ink on it, we’ll have hell to pay!

The people who rule us are not completely stupid. In fact, they realize that gold remains money, no matter how hard they try to “demonitize” it. They call it a commodity, yet they keep it vaults. Hmmm… where’s the national corn depository? Do they also store wheat at Fort Knox?

Over the course of the last ten to twenty years, our government has engaged in a systematic campaign to keep the price of gold from going up too far or too fast.

The reason for this is quite simple. If the price of gold were to go up too far and too fast, people might start to wonder why.

They might even start to question the logic of cutting down trees, grinding them into pulp, making them into paper, putting ink on them, and calling them money (thanks to Kenneth Gerbino for that one!).

That is why the price of gold has been artificially suppressed and kept far below its free market price. That is also why gold is still underpriced, even though it has recently traded at more than $900 per ounce.

How has our government been able to suppress the price of gold? That’s the interesting part! It all gets back to the law of supply and demand. Whenever people want an item, but the item is in short supply, the price of that item tends to go up.

The opposite happens when supply outpaces demand. In reality, mining companies around the world have not been able to keep up with the worldwide demand for gold.

However, consider what would happen if a lot of gold was dumped into the world market from the vaults of central banks. It would make it seem as if gold was a plentiful substance, and the price of gold would tend to go down.

Here is how the gold price management scheme has worked. First, a government or central bank lends some of its gold reserves (you know, the property of its citizens?) to what is known as a bullion bank. JP Morgan Chase is an example of a bullion bank.

The excuse given is that this is a way for the central bank to earn some interest on what would otherwise be an unproductive asset. However, the gold lease interest rates are usually less than .5%. Talk about an absurdly low interest rate for being able to borrow a nation’s treasure!

After the bullion bank borrows the gold from the central bank or government, things get even stranger. The bullion banks SELL the gold into the market and pocket the cash.

That’s right! They are permitted to SELL property which they have “leased” from the central bank/government! Would you be allowed to sell an apartment which you had rented? Bullion banks have been allowed to do the equivalent of this.

The bullion bank takes the proceeds from the sale and invests it into something which will have a higher rate of return than the cost of leasing the gold. That would be pretty easy to do if one were paying less than .5% interest. It would mean huge, virtually risk free profits for the billion banks.

Central banks and governments would get what they wanted because the bullion bank sales would put a lot of gold into the market and thus create a seeming oversupply of gold. The gold price would go down, and fiat currencies would appear to be strong.

The only thing that could throw a monkey wrench into the scheme would be if the price of gold were to go up. In theory, when one leases something, one ultimately has to give it back.

A bullion bank would at some point have to go out into the market and cover its position by purchasing gold to be returned to the central bank or government from whom the gold had been leased. However, if the gold had been leased when gold cost $300 per ounce, and if the gold price had gone up to $900 per ounce, the bullion bank would be facing huge losses.

This is basically what has happened. There is speculation that some bullion banks might be so far “underwater” with their gold leases that they will be allowed to “pay back” the central banks and governments with fiat currency rather than having to go out and buy gold to cover their positions.

Former Fed Chairman Alan Greenspan admitted that such practices go on. On July 24, 1998, he testified before Congress that “Central banks stand ready to lease gold in increasing quantities should the price rise.”

Central banks have also tried to manage the gold price by making direct sales of gold into the world market. The most outrageous instance of this occurred when then Chancellor of the Exchequer Gordon Brown ordered the Bank of England to sell about 400 tonnes of Britain’s gold reserves in 1999.

This was done at a time when the price of gold was already at a generational low. The sale was announced in advance and this resulted in the price of gold going down by about ten percent. Gold was selling for under $300 per ounce at that time. It now sells for over $900 per ounce.

Looks as if Mr. Brown really did Great Britain a favor! His economic brilliance has been rewarded. He’s now the Prime Minister!

Other governments like Switzerland have also sold significant amounts of gold into the market in order to manage the gold price. In 1999, a total of 15 central banks reached an agreement known as the Washington Agreement in order to coordinate gold sales. They agreed to enter into a “concerted programme” of gold sales, not to exceed about 400 tonnes per year.

In June, 2005, William R White, of the Bank For International Settlements (known as the “central bank of all central banks”) gave a speech. In that speech he stated that central banks collaborate “…to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.”

When concerned citizens began to ask questions about the U.S. government’s involvement in leasing and selling our gold reserves, they were branded as kooks and conspiracy buffs. However, with each passing year, more and more evidence has emerged which has corroborated the fact that the Department of the Treasury and the Federal Reserve Bank have leased, swapped, and sold our national gold reserves.

Some very informed analysts have raised concerns that the U.S. may not have all the gold reserves it claims to have. Respected analysts Frank Veneroso, Reg Howe, and James Turk have all given convincing arguments suggesting that the western central banks may now only have about half the gold bullion they claim to have in reserve.

Indeed, during the past few years, it appears that central banks and governments around the world have begun to lose their ability to suppress the gold price to the extent they were able to do so during the 1990s and early part of this century. If they no longer have as much gold to dump into the market, it would make sense that the price of gold would have gone up so much during the last three to four years. During that time, we have been deluged with fiat money creation as never before in our history.

Excessive money printing and money creation is “rocket fuel” for the price of gold and many other tangible assets. This writer believes that the central banks and governments are now unable to stop gold from rising in price. They are merely trying to manage the price as it goes higher.

  I believe that the price of gold would be much higher had not the central banks and western governments distorted the price by their leasing and sales schemes. Quite frankly, one has only to take a look at the price of platinum to see where the gold price might be if the price had not been suppressed. Interestly enough, gold and platinum used to sell at about the same price. However, platinum now sells for betwen $1,600 and $1,700 per ounce. Central banks and governments apparently fear platinum much less than they fear gold!

The good news for investors is that the gold genie is now out of the bottle. The gold price is now headed much higher.

Eventually, the price might even begin to reflect the true value of gold as a monetary metal. Given the continued amount of money being created by governments and central banks, gold will increasingly serve as the proverbial canary in the coal mine.

It will warn citizens that the value of their fiat currency is being stolen from them by the intentional policies of their governments. Gold warns people that they must take action to protect themselves.

Gold is a very underpriced substance. We are still able to buy it a price which is the result of years and years of price suppression. This situation will not last much longer. Please protect yourself!

If Gold Is Not Money, Why Do Governments Hate It?