Sunday, February 5, 2012

Q&A With The Doc: Why Does the Cartel Bother Suppressing Precious Metals?

Rojelio writes: 

Hi Doc, I just found your site. I am confused as to why the banking cartel suppresses gold & silver prices. I just learned what a short position is and that they've been shorting the market. However, it is not clear to me why play this game. They have all the money, why don't they just buy up all the physical and carry on with ruling the world?

Rojelio-  suppressing precious metals is all about manipulating interest rates in US Treasury bonds artificially low and supporting the US dollar.  This should help explain in better detail.


Rojelio then writes back:

Thank you for the feedback. Just one point of clarification if you don't mind:
"...a gold carry trade- leasing gold out to the primary dealers at 1% interest.  The primary dealers turned around and dumped the gold onto the market, raising cash,...."
Leasing out gold - leased by whom, the Fed?
Primary dealers - like JP Morgan? Do the leasees receive physical or paper?
Dump onto the market? - Dump paper onto the market?
At which step in the process does the paper supply multiply over the physical?
As discussed in more depth in the above article, Robert Rubin's strong dollar policy in the 1990's basically consisted of the treasury leasing gold bullion at a low set yield of around 1% to primary dealers (think Goldman, JPM, etc),  who turned around and dumped the gold on the market, (we're talking physical gold dumped onto the market, not paper) and used the proceeds to purchase t-bonds at 5-6% yields.  Free money (4-5% risk-free spread) for the primary dealers- and the treasury received a massive false demand for treasury bonds, while keeping its gold bullion on its books as technically according to the books the gold was merely leased, and still an asset of the treasury.  Fancy accounting alchemy, and a big Win-win for all crooks involved.  The gold bear market ended around 1999 when the treasury ran out of these gold inventories used to support the dollar and the treasury market- gold has been in a massive bull market ever since.  The cartel has been staging a managed retreat ever since using the massive leverage of paper contracts.
Hope this helps.