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DOUG CASEY says Gold Conspiracy Advocates are Trailer Park Hillbillies

By Jay Taylor        
Sep 30 2002


The following was published by Doug Casey and widely disseminated on the Internet this past week. Mr. Casey has irked your editor in the past with his arrogant dismissal of any and all conspiracies in this world and his contempt for people who happen not to have been born into wealth and privilege has has he. As is typical of Doug, in the missive that follows, he resorted to name calling to impugn the integrity and marginalize those who believe our government is engaged in trying to squash the price of gold in order to protect their legalized counterfeiting operation.

I'm not sure why it is so hard for Doug to understand and believe conspiracies happen. Conspiracies may be an alien to the world Doug lives in, but where on earth has he gotten the notion that it is so unusual for two or more people to clandestinely set in motion actions of armies of people for the benefit of the conspirators? For every great political movement or birth of any new dictator, there has always been a conspiracy. So why it is so easy for Doug to automatically dismiss all conspiracies? Why can't he understand the plausibility of the Exchange Stabalization Fund (the President & Treasury Secretary) and/or the Federal Reserve Chairman might secretly set in motion an unspoken policy that provides an incentive for a few gold bullion banks to drive the gold price lower? Why does he ignore all the evidence that this is happening? Does he think Greenspan and O'Neil tell us everything they are doing with respect to U.S. Policy and that these big boys have no secret agenda other than what they say on CNBC? If so, then why have they refused to answer Congressman Ron Paul's inquiries into the mysterious gold accounting by the ESF as revealed by James Turk?

Apparently Mr. Casey has never bothered reading exceptionally well documented books on the topic of the Fed as to how, why and by whom the Fed was created in the first place. I guess he has never read "The Creature from Jekyll Island" or James Perloff's "the Shadow of Power" or Kinsey, Crimes and Consequences." Most of these books are available either on the Internet or from Or perhaps Mr. Casey simply wishes to dwell in the world of science fiction and nano-particles, where one does not need to deal with the reality of a sinful and broken world - at least not yet.

In any event, here is what Doug Casey was quoted as saying this past week about the gold conspiracy and the gold markets in general:

"Most surprising to me is the price of gold itself. I'm not a believer in conspiracy theories, so it's hard for me to credit that "they" are holding the price the metal down. "They" (in the past it's been the Rothschilds, the Bilderbergers, the CFR, the BIS, among many others, possibly including space aliens) are usually an excuse created by the unsophisticated to explain what went wrong with some convoluted theory that didn't pan out. Certainly none of the theorists have ever met one of "them" in the flesh-nor are they likely to, if only because most seem to live in low rent one-bedroom flats and spend all their time on the Internet. But figures (which are notoriously unreliable) on the gold markets (which are highly opaque) do seem to show that there is a large short position in the metal.

"Frank Veneroso, who I consider a credible analyst, and whose research brought the gold short play into the public eye, has said that annual demand is around 4,000 tonnes, mine and scrap supply around 3,000 tonnes, official sales around 300 tonnes and that the difference of 700 tonnes is gold loans, mainly from central banks. The numbers vary, depending on who's crunching them, but the most accurate one is probably new mine production, which was 2,460 tonnes in 1999. It appears that there's been a deficit of use over production for more than a decade. It does make sense to me that central banks would have been loaning out the metal to bullion dealers for years (at relatively low interest rates) in order to get some current return on the seemingly dormant asset. The bullion dealers (mostly large international banks) would sell the gold into the forward market, capturing a premium. Better yet, the price of the metal was driven down by all the selling, so when it came time to deliver, they'd make even more. It's been, and will continue to be, a great strategy-as long as there's a bear market in gold.

"The last gold bull market crested in January 1980 at over $800, and it's been all downhill since then; at the same time, the world's economy and common stocks (until recently) have been in a truly historic bull market. Since all this has been going on for over 20 years now, a full generation, everyone believes it's going to go on forever. Even gold miners believe it and most of them have been shorting their production years into the future.

"The problem, however, is that all that gold which has been borrowed from vaults has been made into jewelry and such is owned by millions of individuals. If the lenders of the gold, the central banks, want it back, the bullion dealers and mining companies aren't going to be in a position to deliver. What appears to be developing, in other words, is a classic short squeeze, but one of gigantic proportions. The X-factor, however, is that central banks still have maybe 20% of all the gold in existence left in their vaults, and if things started getting dicey-say some New York bank getting in trouble because of its bullion dealing-they could sell a lot to deep its price down. But the short position is going to have to be covered at some point.

"I'm super-bullish on gold for lots of reasons (detailed in Crisis Investing and International Speculator) that are unrelated to the alleged short position. But it sounds credible to me, and it's just one more good reason the metal isn't just going through the roof, it's going to the moon. I just wish I knew the timing-but I sure wouldn't want to be short right now."

Doug is Bullish on Gold. So do his Conspiracy Views Matter?

It would be tempting to let Mr. Casey's ranting and raving about gold conspiracy buffoons rest simply because he is bullish on gold as are most of us trailer park hillbillies. If nothing mattered more in life than our own personal wealth accumulation, we might easily overlook Doug's views. But for those of us who think freedom matter, we believe Thomas Jefferson was right when he said, "the price of liberty is eternal vigilance." In fact, your editor believes the rigging of the gold price was in fact a major reason why the dollar has been so overvalued and why the enormous global economic dislocations Stephen Roach talks about frequently these days is posing such a great threat to the global economy. And it should not be too much of a stretch to make the connection between a global economic decline and a decline of personal liberties.

And, we think knowing whether or not our government or the Exchange Stabalization Fund is involved in rigging the gold price is very important because their willingness to go to this extent simply suggests they no longer understand and respect the connection between free markets and freedom overall. To the extent our policy makers lack that understanding, then the future is not very bright for those of us who would like to see America emphasize the rights of individuals rather than the power of a collectivist dictatorial society.

The Pro-Conspiracy Views Expressed on Korelin/Hartfield

I was asked to discuss the case for conspiracy on the Korelin/Hartfield report this Saturday afternoon. (As noted at the start of this message and every weekly message, you can listen to this program at Simply follow the directions set out above.) Some of the major points that quickly came to mind, I discussed on the show. Following is a list of those points as well as some I did not have a chance to make, which I believe provide very strong circumstantial evidence if not "smoking gun" evidence that the gold markets have been and are continuing to be fooled with so as to continue creating a false sense of security in the U.S. dollar.

1. Frank Veneroso's work from 1997through 1999. Mr. Veneroso, a Harvard graduate, high priced consultant to the World bank and various foreign central banks, undertook a fundamental study of the gold markets. His findings which were based on the most detailed fundamental analysis of supply and demand dynamics in the world so far as the gold markets are concerned, suggested to Frank that if the gold markets were free of central bank influence, the equilibrium price of gold - without any increase for gold as a monetary holding - should be in the neighborhood of $600 per ounce. In addition to the detailed supply and demand numbers, Veneroso's model factored in elasticity of demand and supply characteristics over short and longer periods of time.

2. Veneroso's work revealed that central banks were, through outright sales and gold loans, dishording far more gold than they were publicly admitting. That meant that far less gold was in the coffers of the central banks than the central bankers claimed. Talk about Enron like accounting!

3. In 1999 Bill Murphy, who had been an assistant to Frank Veneroso, formed the Gold Anti Trust Action Committee (GATA), a civil rights organization, to shed light on what he believed was most certainly an illegal market manipulation.

4. GATA pointed out a host of statistically significant trading patterns including but not limited to lower market closes in New York 94% of the time over a number of years.

5. GATA pointed out that after gold would tend to move higher with major economic or political events, an apparent intervention always with the same major banks involved, consistently drove the price of gold lower time after time after time. Interestingly, it was always the same two or three bullion banks that traders spoke of as killing gold rallies.

6. Governments have always hated gold and have acted to suppress it. Why should the current government all of a suddent choose to be even handed with respect to gold. The answer is that with enormous amonts of fiat dollars created out of thin air to save Mexicao, Asia, LTCM, Russia and other problems, the executive branch of the U.S. government and the Fed are in head over heels. And the American government is no different than any others. For example:

  • 1930's - illegal to own gold and was punishable by a $10,000 fine and 10 years in prision.
  • 1960's/70's sold gold outright - backfired as gold went from $35 to $850.
  • CURRENTLY - Knowing that a transparent policy would only serve to drive the price of gold higher, America's elite have chosen to keep their anti-gold activities this time secret. A constant refusal to answer congressional questions leaves little doubt that the Treasurer is either hiding something now or wants the right to do so in the future.

7. 1998-99 Bank of England Pre-Announced gold sales causing it to get the lowest price possible. The motive for this apparently stupid move was to allow corporate interests to cover their gold shorts at the lowest possible cost. And you thought Crony capitalism didn't happen in "advanced" countries like England and the U.S.?

8. By spending a great deal of time investigating government accounting on the Internet, James Turk unveiled a reclassification of gold at West Point to "custodial gold" that coincided with exactly the same movement of gold out of Germany at exactly the same time. This provided powerful circumstantial evidence that gold held in the U.S. at Westpoint was swapped to the Geramns who then sold gold in Germany, thus driving the price of gold lower. Soon after James made his accounting discoveries public, the U.S. Treasury department changed its description of "custodial gold" to "deep storage" gold. Although the U.S. Treasury was asked frequently about this, they have yet to come clean on what this was all about. In fact, Treasury Secretary O'Neill has repeatedly stonewalled even attempts by Congressman Ron Paul to get an answer as to what the Treasury was up to on this issue.

9. The Treasury Continues to Stonewall their gold market activities. The Exchange Stabalization Fund which is comprised of the President & Treasurer, have complete power to sell all of the U.S. gold tomorrow if they wish to do so without and permission of Congress. Not only do they not have to gain permission, but they are not accountable to anyone, including the people of the United States through Congress. How outrageous to think that two men are given the dictatorial power to completely debase our currency over night without anyone except the President & Treasury Secretary being aware. CONGRESSMAN RON PAUL has "proposed a bill known as the "Monetary reform and accountability Act" All this bill would do is require the Treasury Secretary to advise Congress when it does anything with gold. Although the Treasury Secretary says he Treasury has not sold or transacted gold for many years, he still refuses to support this proposal for transparency for the Aemrican People. Why? WE suspect it is because in fact the ESF has been engaged in transactions to drive the price of gold down and thus by default the dollar up.

10. Lawrence Summer's wrote a paper on the topic of "Gibson's Paradox" while at Harvard during the late 1980's. Before Summers went to work under Robert Rubin, he had co-authored this paper that demonstrated that if governments were to be successful in engaging in monetary bailouts, they would have to cap the gold price. Otherwise the currency would fall and interest rates would rise, thus rendering bailouts unsuccessful. Mr. Summers brought this knowledge with him to his job in Washington and quickly put it to work when the Clinton Administration began a series of national and corporate bailouts, beginning with the Mexican crisis in 1994. Interestingly enough, it was during 1994 that some very strange statistical occurrences began to appear in New York gold trading, like a lower close in New York over 90% of the time over a protracted multi-year period of time. Also, from 1994 onward, gold almost always behaved in a manner not at all typical of the yellow metal during times of crisis. It may also not be a coincidence that Alan Greenspan and the head of the New York Fed also became actively involved in the BIS, perhaps in order to influence that organization's gold market behavior.

11. The Decision in Reginald Howe's Lawsuit. The Judge in Reginald Howe's anti-gold price fixing lawsuit against the major gold bullion banks, the Fed, the BIS and the Treasury, found an out by reviewing precedent in the law. Apparently it is no longer true that every man is equal under the law in the U.S. If you are a small investor and a larger one that would have suffered greater harm refuses to launch a lawsuit, then you as the smaller investor do not have "standing." The rational is that if the bigger investor who was presumably hurt more does not sue, then a smaller investor has no right to legal recourse. The judge in effect left open the door for a larger mining company to take up the lawsuit against the defendants in Reggie's case. We think the fact that the judge did not throw the case out for lack of merit, suggests that in fact the judge found a great deal of merit in Reginald Howe's charges.

So Who are Doug Casey's "Low Life Conspiracy Nuts?"

I think it is interesting that Mr. Casey paid a compliment to Frank Veneroso as the man who allowed the public to see that based on its fundamentals gold should be headed for the moon. I heard the highly regarded, Harvard educated, former World Bank consultant and consultant to various central banks say at a CMRE meeting in New York in 2000 that he believed the gold price was manipulated. Doug is apparently unwittingly paying homage to one of those "low life, stupid conspiracy nuts" in the person of Frank Veneroso who provided the framework upon which GATA was born. But how Frank Veneroso could ever be described as a "low rent, one-bedroom flat" kind of a guy is beyond me.

Likewise for another Harvard graduate, namely Reginald Howe. This corporate trial lawyer, displayed some of the greatest intestinal fortitude and brilliance in court that has ever been seen when he stood up against 16 of the most powerful lawyers printing press money can buy before Judge Lindsey in that Boston Federal court. I am so proud to say I know Reginald Howe because Reginald stood up for truth and justice against all odds and he won! He won against a court in which all the odds were stacked against him. The judge not only failed to throw the case out on its merits but also provided reason in his decision to suggest he knew Reginald Howe in fact had a meritorious case. Once again, how is it that this highly educated trial lawyer can be described by Doug Casey, as a stupid low life conspiracy nut?

I think it is time for Mr. Casey and others like those we watch every day on CNBC, who suggest that "our government has never given us a single reason to doubt their truthfulness" to openly debate Bill Murphy, Reginald Howe, James Turk and other pro-conspiracy advocates. If the conspiracy notion is, as Doug Casey says, not "an excuse created by the unsophisticated to explain what went wrong with some convoluted theory that didn't pan out," then these low life misfits and their theories could easily be exposed and the gold conspiracy theories laid to rest. In fact, wouldn't it help the anti-conspiracy people to expose the stupidity and fallacies of the pro-conspiracy folks? I can tell you this much. Bill Murphy at GATA has been pleading with people like the CPM group, or the World Gold Council or Goldfields for such a public confrontation. And in fact, would it not be better for everyone concerned if these issues could be discussed in as large a public forum as possible so that objective truth could be exposed rather than the name calling and marginalization defense of the anti-conspiracy proponents?



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