[lbo-talk] Ponzi economy

[Michael Pugliese]

   Hakki a gold bug?

http://gjsag.pitas.com/
Ominous Parallels
by Kurt Richebacher (Sept 2002)

 An Internet Publication for Real Americans Wednesday October 1,2003 - 
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             From http://www.Nationalinvestor.com


Leaked Gold Report Reveals Trouble Ahead. . .

“CONSPIRACY THEORY” GAINS NEW CREDIBILITY

You didn’t hear about this on the national news, CNBC, or in your local 
newspaper. After all, most of these controlled/scripted sources of “news” 
are still trying to keep us all believing that all is well with the world, 
even as the stock market and economy show new cracks. For all its obvious 
faults, “the system”—i.e, the fractional reserve monetary system 
administered by the Federal Reserve—is still sound, according to these 
pundits. Thus, and in spite of the rally in gold and gold stocks in 2002, 
the press will usually go out of its way to dismiss gold as either a viable 
investment alternative or as having any relevance to today’s financial and 
monetary structure.

With this mindset, our press saw fit NOT to cover a news story that broke 
recently which should have made the front pages of at least every financial 
publication. It’s a story that has much more to do with the financial 
markets generally than one merely of interest to “gold bugs.” And it’s one 
which—if the warnings inherent in it ever come to pass—could lead to the 
insolvency of a number of major institutions, and devastate global 
financial markets.

 From time to time in my newsletter The National Investor 
(www.nationalinvestor.com), I have commented on the ongoing efforts of GATA 
(the Gold Antitrust Action Group—www.gata.org) to bring to the light of day 
their contention that gold prices have been artificially controlled by a 
cabal which includes our own Federal Reserve. In short, GATA has assembled 
considerable evidence that various financial institutions have made a 
bundle of money in recent years by betting on the decline in the gold 
price. This was done in a variety of ways; “short sales” of borrowed gold 
from central banks, hedging on the part of some major mining companies and 
the creation of complex derivative transactions among them (to understand 
the intricacies of this, I suggest you visit the above-referenced web 
sites.) Until recently, these bets paid off handsomely, as gold went from 
over $400 per ounce in January, 1996 to lows around $250 per ounce more 
recently.

The trouble now is that, with gold prices having bottomed and now starting 
to rise, many of these same institutions face potential disaster. It has 
been reported, for example, that the banking powerhouse J.P. Morgan, Chase 
and Company has over $40 billion of exposure to gold-related derivative 
contracts; these instruments could destroy Morgan’s overall financial 
health in the event the gold price were to spike considerably higher. Thus, 
to protect Morgan and certain other financial houses in the same boat to 
one extent or another, it has been claimed that the world’s central 
banks—led by the Fed—are now conspiring to keep the gold price from rising 
too much. Further, the way this effort is being conducted has opened up the 
entire financial system to a potential meltdown if the bankers fail in 
their suppression efforts.

Though GATA’s claims, if true (and I believe they are in this regard) paint 
the picture of impending danger for the financial markets equal to or 
greater than anything currently in the Establishment news, they have none 
the less received short shrift. For the most part, the group and its 
adherents are dismissed as “wackos” and “conspiracy theorists” who are 
simply trying to come up with excuses for the lousy investment performance 
of gold throughout much of the last two decades. Meanwhile, a financial 
time bomb with possible ramifications extending well beyond the gold market 
itself continues to tick.

However, the recent publication of a March, 2002 report obtained by GATA 
has given significant new credibility to the group’s claims. It has also 
made some people in the financial world extremely nervous.

It seems that well-regarded mutual fund manager John Embry of Royal Bank of 
Canada authored a report on the gold market for his peers at the bank early 
this Spring. In it, he offered his viewpoint that--among other things-- 
there has indeed been a “conspiracy” to suppress the gold price, the 
suppression has been engineered chiefly by the U.S. Federal Reserve, and 
that the Fed is scared to death that it could lose control and have tens of 
billions of dollars worth of gold-related derivatives to clean up one day. 
Somehow, this report made its way outside the four walls of RBC, and ended 
up in the hands of Bill Murphy at GATA. Needless to say, Murphy has spread 
Embry’s report far and wide. I would too, if I were him; after all, Embry 
is one of the most highly regarded money managers in North America. His 
firm is not some local coin shop where local militia members come to talk 
conspiracy over coffee all day long, nor is it the publisher of one of the 
many sales-oriented newsletters that hawk gold come Hell or high water. It 
is one of the biggest financial companies in Canada.

For their part, embarrassed (and quite angry) Royal Bank officials were 
quick to claim that Embry’s report does not represent the bank’s views. 
Instead, this was a report meant for other managers and big shots at RBC, 
and was not intended for public consumption, they say. Bottom line, the 
bank is hopping mad that, of all the people who got their hands on this, it 
was Bill Murphy. (NOTE: Murphy claims that this report also went to some of 
the “biggest and best” clients of the bank, one of whom forwarded it to 
him.)

Embry cannot be dismissed, however--and he is respected enough that this 
report is turning some heads as more people read it. As Matthew Ingram of 
Toronto’s Globe and Mail put it in one article on this crazy story, getting 
such a well-regarded money manager from a major bank to essentially agree 
with what GATA has been saying for a few years now is, “. . .a bit like the 
U.S. government admitting that yes, there was a top-level CIA plot to 
assassinate former president John F. Kennedy, and the whole lone-gunman 
theory was just a crock.”

THE REPORT

Following is a copy of Embry’s report, generously forwarded to me by 
Murphy:

RBC INVESTMENT MANAGEMENT, LTD.

Report on Gold

http://www.nationalinvestor.com/leaked_gold_report_reveals_troub.htm