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Fed’s “Not QE” Is Morphing into “QE4ever”
GATA’s Powell: Attacks on Gold & Silver Prices Are Losing Their Impact
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up Chris Powell of the Gold Anti-Trust Action Committee joins me and updates us on the recent developments in the gold and silver manipulation prosecutions and discusses how the price spoofing schemes by the bullion banks may be tied to trades by central banks working to keep a lid on prices.
Chris also explains why he thinks the “powers at be” are losing control of the price and how the recent positive price action in the metals markets suggests they have lost some of their influence in the markets. So be sure to stick around for a jam-packed interview with Chris Powell of GATA, coming up after this week’s market update.
Well, another week, another new and expanded repo market intervention by the Federal Reserve. On Thursday, the Federal Reserve Bank of New York intervened twice with fresh liquidity injections. Fed officials raised their offerings for overnight repos up from $75 billion to a staggering $120 billion.
This comes on top of the $60 billion per month in Treasury bill purchases that will extend well into next year and possibly beyond. Over the past month alone, the Fed's balance sheet has soared by $200 billion.
You might think numbers like these should be quite alarming to investors and to anyone who holds U.S. dollars. But the strange thing about these Fed interventions is that hardly anyone seems alarmed. There’s no sense of rising risk being priced into the stock market. And the mainstream media is barely even mentioning these massive transfers of paper wealth.
Perhaps after multiple rounds of Quantitative Easing over the past decade, this latest spate of money printing is just part of the new normal. But we remain concerned that something very abnormal could be unfolding.
At the very least, there is a persistent liquidity shortage in overnight lending markets. And Fed officials obviously feared that it could cause the banking system to freeze up and money market funds to fail.
We don’t yet have all the answers as to what’s really going on in the bowels of these institutional markets, but we will continue to question the line the Fed is putting out. When these repo market interventions were first announced, our research team here at Money Metals, as well as our recent guest experts on this podcast, immediately suspected a new Quantitative Easing program was beginning.
Now, despite the Fed chairman Jerome Powell’s repeated denials, it’s pretty apparent we were right. It is indeed QE, and we can only guess as to how much bigger it will get in the weeks to come. Fed money printing certainly does carry implications for higher rates of price inflation down the road in the real economy.
The inflationary effects of previous QEs were largely absorbed by capital markets and stunted by relative weakness in the economy. This time around the Fed’s balance sheet surge is starting with the stock market at extremely elevated levels and many conventional economic indicators coming in strong.
We wouldn’t be surprised if precious metals markets soon begin to reflect rising inflation risk.
This week gold and silver markets showed signs of moving toward an upside breakout. On Thursday, gold prices rallied above the $1,500 level while silver rallied up to its 50-day moving average.
As of this Friday recording, the metals are continuing the rally with gold prices now coming in at $1,512 an ounce, up $20 or 1.3% for the week. Silver shows a weekly gain of 67 cents or 3.8% to bring spot prices to $18.29 per ounce. Platinum is popping for a 5.1% gain this week to come in at $940. And finally, palladium is trading up 0.9% on the week and closing in on another new record at $1,777 per ounce.
Looking ahead to next week, metals investors will await the Fed’s decision on interest rates at its policy meeting. Fed policymakers appear likely to roll out another rate cut. It will come on top of all their other recent liquidity injections.
The risk for gold and silver markets is that Wall Street celebrates by pushing the stock market to a record high. If that happens, it could temporarily quell buying interest in the metals. But it won’t necessarily trigger any kind of big sell-off. A rising sea of liquidity does ultimately tend to lift all boats.
Precious metals markets have performed well overall this year on the heels of major multi-year breakouts. The consolidation phase over the past few weeks in no way undermines those breakouts or their longer-term bullish implications.
Looking ahead to next year, we can expect a very polarized and at times very nasty political campaign to begin moving markets once it’s clear who the Democrat nominee will be. Right now, the momentum within the radicalized Democrat voter base is behind Elizabeth Warren.
Given Warren’s plans to jack up taxes and break up large American companies, some on Wall Street fear a Warren victory would crash the stock market by 20% or more.
One of Warren’s signature campaign promises is to impose a “wealth tax.” It would introduce a dangerous new concept into the tax code – namely that the government gets to tax not just capital gains on investments, but also the market value of investments and other household assets taken together.
A wealth tax would force you to account for the value of all your assets – from your financial accounts to your home, your car, your personal possessions, and your gold coins.
Under current law, gold and silver coins generate no tax liabilities or reporting requirements until they are sold. Under a wealth tax, gold coins and other tangible assets in your possession could get an annual scalping by the government.
Regardless of whether such a proposal ever gets enshrined into law, and regardless of who wins next year’s election, the government will be looking for new ways to raise revenues as budget deficits expand. One way to hedge against a Warren wealth tax or a Biden capital gains tax hike is by moving assets into a tax-sheltered IRA.
The government can’t tax IRA assets, including IRA-eligible physical precious metals products, until you take distributions. And with a Roth IRA, you may be able to avoid taxes completely – even as tax risks and inflation risks rise.
In other news, there have been some more big changes in the retail precious metals industry.
Some of Money Metals’ well-known and/or younger competitors have run into some issues and officially changed hands in recent months, and they just announced a major reshuffle of their operations – fulfillment here, payment processing there, and customer service even somewhere else. Yikes!
Meanwhile, Money Metals Exchange has remained closely held by my family since its inception in 2010. We remain as stable as a rock, and we continue to build out new services and customer benefits with a laser-like focus – working obsessively to live up to our title as America’s best precious metals dealer.
All of Money Metals' operations remain under one roof – customer service, fulfillment, depository, accounting, and our corporate offices.
It's about security, efficiency, and absolute accountability to our customers and their needs.
Our monthly savings program now boasts more participants than ever...
...our depository and its fully integrated systems make buying, storing, and selling precious metals a more secure and seamless process...
...our audited depository earned the coveted UL Class 3 security rating, has been thoroughly vetted and approved by retirement trustee companies to hold customers' precious metals IRA assets, and offers the lowest storage fees for non-IRAs and IRAs alike...
...and we can now even offer low-interest cash loans of $25,000 or more to those who have significant precious metals holdings at Money Metals Depository.
Money Metals continues to add services and value because we absolutely do not take any of this success for granted. As an owner in our business, and on behalf of all of our dedicated employees, I want to say once again that we appreciate your ongoing business, trust, and support.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in Chris Powell, Secretary-Treasurer at the Gold Anti-Trust Action Committee, also known as GATA. Chris is a long time journalist and hard money advocate, and through his tireless efforts at GATA, he is working to expose the manipulation of the gold and silver markets. Through GATA's work over the years, some important revelations have come to light which quite honestly should concern everyone.
It's great to have him back on with us. Chris, thanks for the time again today, and welcome.
Chris Powell: Oh, thanks as always for your interest, Mike.
Mike Gleason: Well, Chris, we think some people owe you and GATA an apology. You have been making the case for manipulation of gold and silver prices since GATA was formed in 1999, but lots of people dismissed everything you had to say. We now have incontrovertible proof of multiple banks and multiple traders running a decade-long scheme to “spoof” prices.
There are guilty pleas and piles of evidence exposing a scheme which involved thousands of bogus trades. We know senior people were training more junior employees on how to rig prices. The Department of Justice is going to prosecute using RICO laws because attorneys there can see this is organized crime. But somehow, it doesn't look like the apologies will be coming anytime soon.
The same people who openly mocked the idea of price rigging a year or two ago now want us to believe that this sort of cheating is really just par for the course in any market. Bankers will be bankers – we should just expect they will occasionally cheat a little. They want everyone to know these markets are free and fair for the most part. At this point, I think it's safe to assume that no amount of evidence could persuade them otherwise.
Why do you think people still refuse to acknowledge just how crooked these markets are? Wouldn't most of these manipulation skeptics be better off if the markets were actually free and fair?
Chris Powell: Well, many people in the markets, Mike, and many people in the mainstream financial news media are dependent on ignoring this stuff. If people begin to realize that the markets are so heavily rigged, they're not going to participate in them as much, and certainly, they're not going to pay as much attention to the traditional market analysis that we're provided with people trying to compare chart patterns and drawing lines and waves and everything like that.
Well, if we're really just looking at holograms because people behind the scenes are rigging the markets, people, they're going to lose faith in a lot of businesses and a lot of analysts. And I certainly understand why people are very reluctant to acknowledge this stuff. If they acknowledge it, they're basically admitting that everything they've been telling people for years has been a lie or at least erroneous.
But we're, of course, enjoying the Justice Department's description of the JP Morgan Chase metals desk as a criminal organization, and we're enjoying all the indictments of the traders at these big investment banks. But we're the first to admit that we've been going after bigger game for a long time.
As reprehensible as this market rigging by the investment banks is, we've been concentrating on the market rigging by governments and central banks, and I think the indictments we've had so far are probably just a distant reflection of the rigging by the governments and central banks. I think that some of this rigging that has resulted in indictments and convictions is possibly front-running of government trades that have been undertaken by the investment banks fronting for central banks and governments.
But it's not the big stuff we're after. We're after exposing the interventions of governments and central banks, particularly in the gold and silver markets. But with all this repo stuff going on, there's no telling if there's any end to their rigging.
Mike Gleason: Taking a step back here for people that may be somewhat new to this issue of this idea of manipulation of the gold and silver markets, give us a brief synopsis of why it is that you believe governments would have an incentive to rig gold and silver prices, suppress the prices. Talk about that if you would.
Chris Powell: Well, gold and silver are traditionally currencies. They're the oldest currencies on the planet, and they compete with government currencies. They also have a powerful impact on the valuation of government currencies; on the price of government bonds; on interest rates; on the price of all other financial assets since financial assets all compete against each other for public investment.
Now, governments for many years have had an interest, and admitted their interest, in controlling the prices of the monetary metals. That's what the gold standard was about. It was governments setting the gold price. Now, back when the government had a gold standard, gold was far more independent in its pricing because the public could pretty much control the gold price by deciding how much it thought government currencies were worth.
That was really before the surreptitious intervention in the markets came about. We've collected a lot of admissions by central bankers and government officials, things in government archives, memoirs written by central bankers, documents that are on the internet sites of governments showing that the gold price suppression is longstanding Western central bank policy. That's all compiled in our documentation archive at the GATA internet site.
This is policy. This is not a conspiracy theory. We have admissions from various central bankers. Probably the best known one is Alan Greenspan who testified to Congress in 1998 that the purpose of gold leasing by central banks was to keep the gold price down when it was rising. The archives are full of this stuff, and we seldom get challenged on it because it's just so overwhelming.
Mike Gleason: Alan Greenspan is an interesting case study. I don't know that you'd call him a whistleblower necessarily, but he's getting advanced in his years, and he's starting to reveal some of the secrets of the central banks. There's a guy who seemed to be somewhat of an advocate for gold before he became the Fed chairman, and then now, after he's been removed from that role or taken a step back from that role and nearing retirement now, it seems like he's sort of back to being a somewhat of an advocate for gold. It's kind of an interesting telltale. Too bad he couldn't have had any of those convictions while he was actually in power.
Precious metals mining companies that have long been a disappointment to us when it comes to this effort to reform these markets. When prices are rigged artificially lower, it hurts their bottom line, but with one or two exceptions, the miners have had almost nothing to say on the subject.
Now that banks have been caught running this scheme, we wonder if the miners will finally take some action. They have to be among the biggest victims of these crimes. What do you think? Are they going to step up now and demand some serious reforms? Are you seeing any movement there? Because I know we've talked with you in the past about this, and you've always expressed a lot of disappointment about the lack of an uproar among the mining executive community. Any change there?
Chris Powell: I've not seen any substantial reaction from the gold and silver miners to the convictions and indictments of the investment bank people for spoofing the monetary metals markets. And I understand it, Mike. The problem is the mining companies are afraid. They're afraid of their governments. They're afraid of their banks.
Mining is very probably the most capital intensive industry in the world. It takes hundreds of millions of dollars, sometimes billions of dollars, to discover and put a mine into production. And in doing that, mining companies are totally at the mercy of governments for first, their mining patents, then their environmental regulations and their royalty requirements to governments.
And since the industry is so capital-intensive, most mining companies are very dependent on the very biggest banks. And the very biggest banks, of course, are very directly government agents in the markets. Most of them are primary dealers and U.S. treasury securities and have very intimate relations with the U.S. government, which certainly does not want the monetary metals prices rising uncontrollably and displacing government currencies in the financial system.
The mining companies are terribly vulnerable to governments. They're terribly vulnerable to the investment banks, which are central bank agents. And I understand why they do not want to support GATA, and they don't want to endorse our complaints about the rigging of the markets: because they just figure the governments and their own bankers will come down on them and impair their business. But I would still suggest to them, do you want to die on your feet, or do you want to die on your knees? Because this industry is in a very strange position right now.
I think the objective of central banking and governments is to keep the monetary metals prices at pretty much subsistence level. They don't want the monetary metals miners to go out of business. They need a supply constantly coming into the market, but they don't want the price to be so attractive that people start investing in monetary metals as international reserve currencies and moving out of government currencies. The governments have got the miners at subsistence levels, and I don't think they are very eagerly going to let the miners become substantially profitable in an attractive industry for investment, at least not until the government and central bank rigging is exposed.
Mike Gleason: Well-stated there, and certainly, you've got to really commend a guy like Keith Neumeyer, First Majestic Silver. I know there's maybe one or two others who are kind of sticking their neck out there. You just sort of laid out a very good case as to why a lot of these guys don't do that.
They have a lot to lose. They're beholden to the banks that that loan them money for their projects and, of course, the government who approves their environmental cases and so forth. It's kind of an interesting and difficult situation.
Chris Powell: Neumeyer has been very courageous, and he has put himself at risk. Eric Sprott is another. There are not too many like them. There's a few others, but there's not too many like them.
Mike Gleason: Agreed. Has GATA ever been called to testify, to provide any evidence in any of these criminal cases that are underway? Do you have a sense of whether prosecutors are on the right track?
Chris Powell: We've provided information to some of the lawyers involved in the class action lawsuits against the investment banks for rigging the monetary metals markets. I don't think we've had any contact with prosecutors though.
All the documentation we have amassed and publicized is out in the open on the documentation page of our internet site. That's accessible to everybody. I don't know if prosecutors have ever looked at it. I know that the Russian government has been aware of GATA's work since at least 2004 because a Russian central banker in 2004 gave a speech to the London Bullion Market association meeting in Moscow that summer, and the only words of English he spoke were "Gold Anti-Trust Action Committee," which was pretty interesting to us because to the best of our knowledge, we'd never had any contact with anybody in Russia.
But it turned out the bank of Russia was watching us very closely. We know from the WikiLeaks cables from the U.S. Embassy in Beijing to the State Department in Washington that the Chinese government is very aware of gold price suppression by Western central banks because it's often been written about in the government-controlled news organizations in China.
And the U.S. Embassy in Beijing translated a bunch of those reports and cabled them back to the State Department in Washington. And then when WikiLeaks got a hold of them some years ago, it was revealed that China knows all about the Western gold price suppression scheme and has reported it and complained about it in government publications in China.
The Chinese government knows all about gold price suppression by the Western central banks, and the U.S. government knows that China knows all about it because of the WikiLeaks cables of the translations that came from Beijing to the State Department. So, we know that gold price suppression is widely understood on an official basis around the world.
Mike Gleason: Well, as we begin to wrap up here, Chris, summarize the state of the state, if you will, with respect to the likelihood of the metals market manipulation coming to an end one day or at least the progress that's being made on that front. Where are we here, and what are the prospects of finally achieving these free and fair markets that we all want so badly? And are you feeling any better about the possibility of seeing that one day now compared to, say, where you felt two to three years ago?
Chris Powell: Well, I have to admit being surprised that they've been able to pull it off for at least the 20 years that GATA's been in business. It's been very obvious to us what's been going on. I think we've had the dispositive documentation in hand for at least 17 or 18 of our 20 years.
I am a little more encouraged over the last five or six months or so because there's an obvious firmness, I think, to the gold and silver markets now. The interventional smash downs of the monetary metals prices are not having the effect they used to have. The central banks used to be able to knock down the gold price by 20, 30, 40, 50 dollars for months at a time.
And they haven't been able to do that lately. I think it's because the central banking cartel has split up on the gold front. We know a whole bunch of central banks have been buying gold lately. The central banks have switched in the last several years from net sellers to net buyers. There's, I think, a lot of circumstantial evidence that China and Russia particularly are buying gold heavily in London.
So, I'm encouraged. I suspect we may be in a situation similar to the last months of the London Gold Pool back in 1967 and 1968, similar insofar as back then, the central bank gold cartel was dividing. There was division among the participants in the London Gold Pool.
France wasn't playing along anymore. France started exchanging dollars for gold, and ordinary investment houses began to realize that the gold reserves at the participating banks were being run down and probably could not hold out much longer. I think we're very likely in a similar situation now because central banks are now net buyers instead of net sellers, and they're not telling us everything they're buying.
I'm sure China has bought far more than it's reporting. I'm hopeful about going on living for a few more years, but I can't guarantee that anybody of my age is going to see the end of gold price suppression. I suspect we will have a day, perhaps not too distant, when the central banks have an international currency revaluation and revalue gold substantially upwards to re-liquify themselves after the redistribution of gold reserves around the world. And I think they may begin another half century of gold price control at a much more sustainable level, a much higher price.
Mike Gleason: You do have to be encouraged, just focusing on one thing that you said there, about how they are not getting the result that they used to be able to get when it comes to dragging down the price that they once did. So, they may be losing a little bit of control, and obviously, the whole game is sort of held up by confidence.
Maybe you've got nations that are going to start to scramble if they do see the end of fiat or the beginning of the end; that maybe there's a mad dash into physical gold, and at that point, all bets are off. Maybe they won't worry about colluding anymore and just fend for themselves.
Chris Powell: There's so much central bank clamor now for devaluation of all the currencies, and there's so much resentment of the weaponization of the dollar. All this is practically screaming for gold and silver, so I am hopeful, Mike.
Mike Gleason: Well, excellent stuff, Chris. We'll leave it there. We certainly appreciate the time and your insights as always. Now, before we let you go though, please tell our listeners how they can get more information and learn more and follow GATA, and then also how they can get involved and maybe even donate to GATA so your organization can continue to fight this important fight.
Chris Powell: Well, thanks, Mike. Our internet site is gata.org. We are a tax-exempt educational and civil rights organization recognized as tax-exempt by the U.S. Internal Revenue Service. We're a 501(c)(3) organization under the U.S. Internal Revenue Code.
Contributions to us are federally tax-exempt in the United States. There's a mechanism on our internet site for accepting donations. I'm grateful for anything. Anybody who wants to send us a dollar will be sending us more than we've ever gotten from Newmont Mining or Barrick Gold or some of those big guys.
Even the hedge fund managers around the world who are outspoken in favor of gold, they don't want to have anything to do with us because I think they're afraid that we'll put them in even more trouble with the government. We also have a mailing list. We try to put out several dispatches a day on subjects of interest to gold investors and people who aspire to free markets.
You can enroll for our dispatches on our mailing list on our homepage at gata.org. There's no charge for that. We just want to get our word out, and we're very grateful to anybody who wants to help us.
Mike Gleason: I'm on that list. I get those dispatches regularly, and it's excellent stuff and a great way to stay up on this issue in particular and others as well related to gold and silver.
Well, we appreciate you coming on and spending time with us, Chris. Look forward to catching up with you again down the road, and I hope you enjoy your weekend. Take care, my friend.
Chris Powell: Thank you, Mike.
Mike Gleason: Thanks again to Chris Powell at the Gold Anti-Trust Action Committee. Again, check out gata.org for more information. They publish a lot of great content there at GATA, and we highly recommend everyone check that out. You can also make a tax-deductible donation there on the GATA site as well. Again, gata.org is where you can do all that.
Well, that will do it for this week. Be sure to check back next week for our next Friday for our next weekly Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange, thanks for listening, and have a great weekend everybody.