Five Questions on Gold for the House Banking Committee

by: Steven Hansen November 21, 2008 | about stocks: GLD    

Steven Hansen

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My son-in-law Tom is a gold bug and Gold Anti Trust Action Committee (GATA) supporter. He shared a 11/20/2008 email from Chris Powell, Secretary / Treasurer of GATA. Mr. Powell thought Congressman Ron Paul wasted an opportunity to get important questions answered by Fed Chairman Ben Bernanke last Tuesday during the Banking Committee Hearings. Mr. Powell listed the questions Congressman Paul should have asked.

Tom wanted to know what I thought. Below are the questions and my thoughts.

1) Are the Fed or the Treasury intervening or encouraging or subsidizing certain actions by others in the precious metals and general equities markets, just as the Fed and Treasury commonly intervene in the currency and bond markets?

I would not be surprised by any answer by Fed Chairman Bernanke to this question. But if you have a Plunge Protection Team (PPT), why in hell would you not be using it to try to bring order to the market? On the other hand, as the government seems unable to control the economy, they may have given up trying to control the market. The government and the Fed may just be hunkering down for the storm.

2) Does the U.S. government have any connection to the derivative positions in gold, silver, and interest rates built up at JP Morgan Chase (JPM) and other financial houses?

I can only guess based on the past disclosures - the derivatives were owned by the hedge funds. But this leads me to my one of my hot buttons. Why are the owners of large positions not identified to the market? This transparency would cut down on the manipulation of the market and begin to create an investable environment. This question #2 is very legitimate as we should make markets transparent so that the answer is obvious.

3) Why is the Federal Reserve refusing to disclose all its records involving the U.S. gold reserve?

This is a good question. Either cough up the data - or explain in Ronald Reagan type believable words why you will not release this information. Not releasing this information simply fuels distrust.

4) How often does the President's Working Group on Financial Markets meet? What does it do? Does it intervene in the stock market or encourage certain actions in the market by third parties? Does it keep records of its proceedings? Are those records available to the public? If not, why not?

I have been a believer since the 1990's that the USA is not well enough defended to fight an economic assault. I believe an economic assault can harm the average American much more than the war on terror ever could. The defense for an economic assault is the PPT, and for that reason I consider the meeting and actions of the PPT to be a national security issue. The general public does not have the right to know. However, the PPT needs to be more transparent in actions not relating to national security. I am not smart enough to know where or how to draw the line.

5) Do the Fed and the Treasury convey to certain financial houses information that is not simultaneously available to all other market participants? Exactly what private communications do Fed and Treasury officials have with financial houses? What is the necessity of that privacy? How does that privacy not confer a favoritism that is potentially very lucrative?

So much of the government’s actions are hidden from public view that this needs to be answered. Just do not expect the truth. Power corrupts, and absolute power corrupts absolutely.

GATA is not my idea of a non-biased source for investment advice or political commentary. In this case, every investor would benefit from hearing the answers.

Disclosure: Own physical gold.

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This article has 18 comments:

  •  
    Nov 21 07:54 AM
    Ron Paul is a Congressman, but "Senator Paul" has a nice ring to it.

    We need transparency from this government and from the private bank it kowtows to. See you when Hell freezes over.

    Who could trust the answers that would be given to such questions? I'd love to have the information, but I'm at the point where if a government official of any stripe told me 2+2=4, I'd want independent verification.
    Reply | Link to Comment
  •  
    Nov 21 08:56 AM
    These are great questions and really have nothing to do with gold but rather have everything to do with insider trading. That said, I think Ron Paul picks his battles carefully.

    We are all receiving a thorough and immediate education on how controlled our financial markets actually are. 'It's a big club and you're not in it.'

    Stop pretending there is transparency. Eventually the lies/corruption/manipu... back-fire and gold shines, but it takes a nuclear holocaust for that to happen. My point is this: to make money you need to follow the herd (be a lemming) or stay far far away and ahead (if possible) of the noise. Predicting what will happen is not easy, but it can be done if you believe your gut.

    Thank god for the internet because its crippling the insider trading and lies we are witnessing on a daily basis.
    Reply | Link to Comment
  •  
    Nov 21 09:11 AM
    If Gold was allowed to back the US Dollar, Obama wuld outlaw its ownership. I too can not believe Gold is not worth $1000s of value per ounce. I'd love transparance too to end manipulation, but don't want Uncle Obama to know what I own.
    Reply | Link to Comment
  •  
    Nov 21 09:24 AM
    Trying to get a member of House Ways & Means Commitity to answer those same question only got me a phone reponce that it was nothing I should be worried about! The man listen to my many questions about JP Morgan & GS or other Banking intities & why the CFTC would respond to a Congressman from CA., but would not make the effort to do the same to the many that sent letters of concerns to them! The Gold & Silver markets have been raped to the tune of Billions by these Banks, & its if our own Goverment could care less! It makes you wonder who side Congress is on,the Wall Street illumunia or the People who voted them in? IMOP ,GATA has a better track record of posting the Truth than all of the MSM combined!It would be great to see every document,email & all of the computers that GS & JP Morgan have Siezed by a 3 party & disected & all transactions over the past 10 yrs gone over & expose the truth & maybe where Trillions went to!But I know that will never happen!
    Reply | Link to Comment
  •  
    Nov 21 09:40 AM
    I'll say it again - It's a big club and you're not in it. If you're working on wall street you're a lot closer to being in the big club. But you're also part of the reason our hegemony is about to fade. Rome fell because their currency debased. The same is happening as you read this - thank you Paulson, Goldman Sachs, Wall Street.

    I have high hopes for this next administration, but we need to stop pretending that we will be saved. It just isn't going to happen.
    Reply | Link to Comment
  •  
    Nov 21 10:08 AM
    Rome fell due to a debased currency. That is a good one. LOL.

    The Roman currency debasement was an effect caused by declining tax revenues when the Roman economic model failed.

    You guys are a hoot.
    Reply | Link to Comment
  •  
    Nov 21 10:14 AM
    "I consider the meeting and actions of the PPT to be a national security issue. The general public does not have the right to know."


    "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

    The Founding Fathers must be spinning in their graves.
    Reply | Link to Comment
  •  
    Nov 21 10:56 AM
    ...gold is nothing more than a form of currency -- supply goes up and purchasing power goes down...mining it, melting it, pulling fillings -- whatever increases supply decreases demand...same for silver, copper, lead, molybdenum, iron, toothpicks, what have you...goldbugs live in some sort of fantasy world where they believe in a creature called "intrinsic value"...but imagine if there were nothing on this island but gold and everyone was starving...if you had a cellar full of food, would you trade it for all that gold?...also, what more do you want to know about the reserves:

    www.fms.treas.gov/gold...
    Reply | Link to Comment
  •  
    Nov 21 11:21 AM
    Gold is much more than just another form of currency. It is a form of currency that cannot be defaulted on by any government. It is not an obligation and requires no legal tender laws to support its use. However irrational, gold's value has been recognized worldwide for thousands of years.


    On Nov 21 10:56 AM raytayzmd wrote:

    > ...gold is nothing more than a form of currency -- supply goes up
    > and purchasing power goes down...mining it, melting it, pulling fillings
    > -- whatever increases supply decreases demand...same for silver,
    > copper, lead, molybdenum, iron, toothpicks, what have you...goldbugs
    > live in some sort of fantasy world where they believe in a creature
    > called "intrinsic value"...but imagine if there were nothing on this
    > island but gold and everyone was starving...if you had a cellar full
    > of food, would you trade it for all that gold?...also, what more
    > do you want to know about the reserves:
    >
    > www.fms.treas.gov/gold...
    Reply | Link to Comment
  •  
    Nov 21 11:30 AM
    Ron Paul knew he wouldn't receive a straight answer, and he didn't. You can watch the exchange on YouTube. I admire Dr. Paul for even trying.

    Gold bugs are a hoot, but look at gold going up today and watch it save its holders during the coming hyperinflation. However you view gold--as an asset class, as currency, as a mere metal--whatever--it's going up.

    As for increasing gold supply, yes, somewhat, but not as rapidly as the population increases. Year over year the production of gold is down, as against an increasing population. Also we have increases in gold uptake worldwide. Further, you need to have enough of something for it to be a valid currency. Gold meets a lot of parameters for a valid currency--you'll find a list somewhere out there in cyberland. Who doesn't like gold when they see it in any form?

    At some point gold will stabilize and become just another asset class. Right now, it's the place to be with everything else going to hell in a handbasket. (They lowered Chinese workers in a handbasket into a pit to set off dynamite charges in building railroads in the Old West.)
    Reply | Link to Comment
  •  
    Nov 21 12:21 PM
    Posters ALWAYS provide more fuel for the article (fire). Here is no exception.

    Hell no, I wouldn't give up my cellar full of food for gold, on the surface,but there are circumstances where I would. Its all about CHOICES,folks.

    Those of you who haven't EXPERIENCED a financial DEBACLE just have to live through THIS one. When you look back on it, you will see whether or not you made the RIGHT choices. It's a learning curve you must master.

    I have. I lost EVERYTHING in 2000-1. I trusted my broker, and was IGNORANT about my finances. I learned quickly the error of my ways, and did several months of intense reasearch and reading history. I came to the conclusion that OWNING PHYSICAL GOLD AND SILVER will keep me from experiencing another financial debacle. Not owning PAPER.

    So far, I see many of my friends, spending sleepless nights worrying about what is happening to their nest eggs. What I tell them is that its NOT TOO LATE,but it will be TOO LATE VERY SOON!

    BUY IT WHERE YOU CAN FIND IT--GOLD and SILVER! Then sit back and wait (a short while)!

    May God have mercy on us all!
    Reply | Link to Comment
  •  
    Nov 21 12:23 PM
    ".if you had a cellar full of food, would you trade it for all that gold?"

    if I had a farm full of food, I would certainly trade it for some gold. An acre of land can produce thousands of pounds of berries. That's more than anyone can eat. What's a farmer to do? Sell it! Right now you barter for dollars. If the dollar gets creamed, you barter for gold/silver or you just barter by trading. It's obvious you would prefer to just barter with no money. I suggest you talk to someone who's lived through hyperinflation. I know 2 people who have. 1 from Bulgaria and another from Argentina. While it's great that you stocked up on food, it wouldn't hurt you to have some real precious metals in your pocket. The world does not end when your currency collapses. In fact, a black market forms for foreign currencies and the currency that has survived for 5000 years, gold.
    Reply | Link to Comment
  •  
    Nov 21 01:32 PM
    And their economic model failed...why? Because they became morally bankrupt first -- sexually decadent and concerned only about their hedonistic lifestyle. Hence the usage of slave labor to do the real work. And when the empire was unable to continue expanding, the sources of slave labor dried up. Sounds kinda like us, doncha think? Our "slave labor expansion" is the move by corporations to go offshore for production; our moral decadence is just as striking -- witness the "tolerant" homosexuals and their refusal to acknowledge that the people have spoken re. Prop 8. Look at our disregard for human life in regards to abortion -- "choice"? No. We've eliminated a sizable chunk of future workers, homeowners, taxpayers, entrepreneurs, scientists...now we pay the piper, just like Rome. They had abortion too, though their methods were more primitive. We have become a selfish, entitlement-minded people. This whole thing bottoms when we wake up to our moral decrepitude and each individually take action to reverse our personal courses in areas we have gone astray. Sounds harsh, but its time America faces the truth. If we want freedom and prosperity, we need to relearn self-control and virtue.


    On Nov 21 10:08 AM bricki wrote:

    > Rome fell due to a debased currency. That is a good one. LOL.
    >
    > The Roman currency debasement was an effect caused by declining tax
    > revenues when the Roman economic model failed.
    >
    > You guys are a hoot.
    >
    Reply | Link to Comment
  •  
    Nov 21 03:14 PM
    Right on target is "theoakman"!
    Reply | Link to Comment
  •  
    Nov 21 04:25 PM
    Why is it always food versus gold? We need both. I have some extra, stored food but I like fresh food. As long as I can buy some with my currency of whatever form, why won't I? What about a person with a few million dollars? Should she put all that into food? No. Why won't she put some of her money into gold and silver?
    Reply | Link to Comment
  •  
    Nov 21 07:24 PM
    Great Article, Steve,

    I wish that Ron Paul had talked less and made Ben squirm more the other day. I agree with Mr. Powell. Understand, I'm not bashing Ron, but he kind of let Bernanke off the hook.

    I would have preferred it if he asked your questions.
    Reply | Link to Comment
  •  
    Nov 22 01:00 AM
    Man, I get so sick and tired of this useless, worn out argument against gold by people who post it as though they've expounded something worthy of a Nobel prize. Who the heck cares if you have gold on an island where your only concern is survival...so since one wouldn't need it in that situation, I guess that means gold is useless everywhere, yes? Why would you need ANY currency on that island?...so then, I guess all currencies are also useless, yes? And if this island is say only a half-mile across, a car would also be useless there...so I guess that means that all cars are useless, right??...sheesh.

    BUT...now let's use some brain energy beyond 5th grade level. Let's suppose I and tayzerbrain are shipwrecked and land on this desert island. I happen to have managed to hang on to the 50 gold coins I brot with me, and raytay managed to save a portfolio of US Treasuries, some corporate bonds and $30K in $100 Fedl Reserve Notes (aka, 100-dollar bills). We explore the island...he wants to split up since his disgust for a goldbug prevents his being able to tolerate my company. He goes to one side of the island and I to the other. We soon find out there is water, but no fruit or veggies. We make spears and learn to catch fish, but no fruit or veggies...we can feel scurvy and all sorts of other deficiency states coming on.

    One day a few weeks later comes a group of 3 outrigger canoes carrying natives from a nearby island. We notice gold chains and earrings on the leader. We talk with them and learn that they have plenty of fruit and grow veggies on an island about 10 miles away. Dr Razmatayz offers them $10,000 cash and another $10,000 in Treasury notes for a canoe full of fruits and veggies. The leader bites the paper and spits it out. His bodyguard raises a spear to skewer this white boy who'd dare insult his leader with pieces of worthless paper.

    But I, not wanting a stinking corpse on this rather small island (though I thot for a moment of the possibility of a corpse perhaps attracting some vulture-like creatures that I could catch and cook...but let the thot go), stepped up and showed them a gold coin I was holding in my hand. Their eyes lit up. I handed one to the leader's bodyguard, who looked at it, bit it, and handed it to his leader. His leader smiled at me and nodded. I found he spoke a little Portuguese and I learned that every once in a while an ocean-going vessel stopped at his island. I offered to give him 4 more gold coins if he would take me to his island and that I could show him where to find more if he would promise to give me food and shelter until a ship came to rescue me. (I had already hidden the gold coins at various places on the island and had made a secret map to remind myself where they were hidden.) Once again the leader nodded and smiled and said..."done, I accept deal (in portuguese, of course)." The leader then pointed at the forlorn and frightened tayzdudeguy and his bodyguard once again raised his spear as though to finish him off. But once again I stepped in and offered that he was a very talented toilet cleaner, and could be put to useful service on their island. He was bound a gagged and put into one of the canoes, and we headed off for the other island.

    So you can see from this adventure...better gold than paper. I hope you are duly warned Herr Dr TayzerRayzer...it could save your life some day!!! '-) jt




    On Nov 21 10:56 AM raytayzmd wrote:

    > ...gold is nothing more than a form of currency -- supply goes up
    > and purchasing power goes down...mining it, melting it, pulling fillings
    > -- whatever increases supply decreases demand...same for silver,
    > copper, lead, molybdenum, iron, toothpicks, what have you...goldbugs
    > live in some sort of fantasy world where they believe in a creature
    > called "intrinsic value"...but imagine if there were nothing on this
    > island but gold and everyone was starving...if you had a cellar full
    > of food, would you trade it for all that gold?...also, what more
    > do you want to know about the reserves:
    >
    > www.fms.treas.gov/gold...
    Reply | Link to Comment
  •  
    Nov 23 10:52 AM
    JT

    You hit it right on the head !
    Reply | Link to Comment
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