10 Questions with Mr. Bill Murphy of GATA About Gold Price Manipulation

(Q) The market manipulation that Andrew Maguire detailed to you...how long would you estimate that it has been going on?

(Bill) About 15 years.... from my testimony at the CFTC hearings on precious metals on March 25. The Gold Anti-Trust Action Committee (GATA) was formed in January 1999 to expose and oppose the manipulation and suppression of the price of gold. What we have learned over the past 11 years is of great importance in regard to this hearing on position limits in the precious metals futures markets. Our efforts to expose manipulation in the gold market parallel those of Harry Markopolos to expose the Madoff Ponzi scheme to the Securities and Exchange Commission.

Initially we thought that the manipulation of the gold market was undertaken as a coordinated profit scheme by certain bullion banks, like JPMorgan, Chase Bank, and Goldman Sachs, and that it violated federal and state anti-trust laws. But we soon discerned that the bullion banks were working closely with the U.S. Treasury Department and Federal Reserve in a gold cartel, part of a broad scheme of manipulation of the currency, precious metals, and bond markets.

As an executive at Goldman Sachs in London, Robert Rubin developed an idea to borrow gold from central banks at minimal interest rates (around 1 percent), sell the bullion for cash, and use the cash to fund Goldman Sachs' operations. Rubin was confident that central banks would control the gold price with ever-more leasing or outright sales of their gold reserves and that consequently the borrowed gold could be bought back without difficulty. This was the beginning of the gold carry trade.

When Rubin became U.S. treasury secretary, he made it government policy to surreptitiously operate an identical gold carry trade but on a much larger scale.

This became the principal mechanism of what was called the "strong-dollar policy." Subsequent treasury secretaries have repeated a commitment to a "strong dollar," suggesting that they were continuing to feed official gold into the market more or less clandestinely to support the dollar and suppress interest rates and precious metals prices.

Lawrence Summers, who followed Rubin as treasury secretary, was an expert in gold's influence on financial markets. Previously, as a professor at Harvard University, Summers co-authored an academic study titled "Gibson's Paradox and the Gold Standard," which concluded that in a freemarket gold prices move inversely to real interest rates, and, conversely, if gold prices are "fixed," then interest rates can be maintained at lower levels than would be the case in a free market.

Federal Reserve Chairman Alan Greenspan understood Summers' research when he remarked at a 1993 meeting of the Federal Open Market Committee:

"I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market. There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology."

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Understanding that the manipulation of the price of gold is profoundly important to all markets and the American public, on January 31, 2008, GATA placed a $264,000 full-page color advertisement in The Wall Street Journal. GATA's ad warned, "This manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world."

What GATA warned against has come to pass. http://www.gata.org/node/wallstreetjournal

(Q) When you show this information to other metals experts, what do other traders and financial professional say about this type of fraudulent trading activity?

(Bill) [In the past] There is nothing but silence. I was interviewed by Ron Insanna of CNBC in February of 1999. The TV and financial market press have blackballed GATA ever since. They won't even mention our name. After we dropped Andrew Maguire's whistleblower commentary at the CFTC hearing, and gave the emails to THREE Reuters reporters, NONE of them mentioned what GATA had to say. There is no free press in America when you take on the most powerful and richest for all.

(Q) Who is hurt by keeping the price low?

(Bill) The American public who has been deceived and is living beyond its means. And, of course, the poor people in southern Africa which should have been going through a boom period the past decade. How shameful it has been for President Clinton and President Bush to say how much they care about the plight of South Africans. The gold price suppression scheme has done more to harm their poor than any gratuitous aid we sent their way.

(Q) What action should the CFTC and other regulatory bodies now take to stop this illegal activity and prevent it from happening in the future?

(Bill) They should get behind what JP Morgan Chase and HSBC claim as to be hedge positions and ask for specific evidence that their monstrous positions are really hedged and that they are not encumbered to other paper positions. They should be sworn under oath so that if it is proved they are lying, they go to jail.

(Q) What happens next? What would GATA like to see as the next event in this chain of activity?

(Bill) We would like the gold price suppression scheme to be exposed around the world, let the free market go to work, and have those culpable for this hideous fraud be punished. The Enron fraudsters went to jail and what they did pails compared to the gold fraudsters.

(Q) Do you think that when Thomas Jefferson was writing the Constitution of the United States he expressly wanted any Bank or government agency to have this much power over the world?

(Bill) It is exactly what he warned against!

(Q) When Mr. Christian, during the CFTC hearing said that Comex contracts could just be settled by cash, isn't that in reality and legal terms a default in delivery? Were you shocked to hear him make such a statement in such a casual manner?

(Bill) Yes, Adrian Douglas (on our Board of Directors, an international oil consultant and as smart as they come) and I almost fell off our chairs.

(Q) Before the March CFTC hearing, did anyone in your organization, GATA, even contemplate that the market was trading 100 times more in paper contract than there is actual metal in a vault? Aren't regular commercial banks like Bank of America required to keep more cash on hand than this ration? Don't they keep 3-5% in cash on hand, while the Comex is trading with just 1% metal on hand?

(Bill) Great question! Yes, Adrian has been jumping up and down about this issue for some time. Adrian has been saying it was 50 to 1. When Jeff Christian, of the CMP group and one of our most vocal critics, said it was 100 to 1 at the CFTC hearing, we both almost fell off our chairs again. Christian said that Adrian was too conservative. The funny thing is that Christian, who was speaking by satellite feed, didn't realize that when he was referring to the prior speaker (Adrian) that he was a GATA guy. It was a CATASTROPHIC blunder by Christian, who has been completely discredited based on his testimony, part of which was challenged by CFTC Chairman Gary Gensler. All of what I say is on the record.

(Q) Ok, so last weekend, the Average Joe American and his wife drove their SUV to Costco for cheap shrimp, had lunch at Applebees and on the way home stopped at Wal-Mart charging it all to their VISA card (28% per year interest)...they have no idea what you are talking about with "this gold price thing"! Basically, if I try to talk to them about it, they feel it does not effect their daily life. Give me two BIG reasons why Joe American and his family should drop what they is doing and make this their business.

Because, IMO, their standard of living is going to do down about a third and they should start making preparations for what is coming, rather than be surprised like they have been the past couple of years. GATA has been right about the direction of the gold price for the last decade, while most of Wall Street has been wrong. Their price predictions can all be checked out on the public record. They are still BEARISH, for the most part. At GATA's historic Gold Rush 21 conference in the Yukon, I stated (with gold at $436 per ounce) that it would take a $3,000 to $5,000 price of gold to clear the market in the years ahead. GATA made the same comment in our WSJ ad. THEY SHOULD BUY ALL THE GOLD AND SILVER they care comfortable with NOW!

(Q) Your job and Adrian's job at GATA, they are not million dollar a year salaries....why is GATA a passionate subject for you? Why do you do this?

(Bill) Why do people climb mountains? Because they are there. This is what Chris Powell, my brilliant Treasurer/Secretary colleague, Adrian, and I do. Not for nothing, once this story is fully reflected in the financial mainstream press all over the world, I believe it will eventually change the world. It won't be pretty at first, but it will lead us all to a better place.