Why The Globalists Need A War, And Soon

This article was originally published by Brandon Smith at Alt-Market.com

It is difficult to gauge and understand geopolitical and economic events without first comprehending the fact that much of what happens in the world is engineered to happen and with a specific encompassing goal in mind. If you subscribe to the theory that all is random “chaos” and outcomes are circumstantial or coincidental, then you will be lost in the dark on most things. If you think a globalist “conspiracy” would require “too much control” or foresight, I would point out that organized conspiracy by people in power is a matter of history, not of theory. If such cabals were prevalent in the past, it is rather foolish to dismiss the reality that they are prevalent today.

In my articles “The Economic End Game Explained” and “The Economic End Game Continues,” I outline considerable evidence supporting the following conclusion: International financiers and political puppets in Western AND Eastern countries share a deep rooted ideology called “globalism” or the “new world order.” This ideology demands total centralization of economy and government resulting in a single global fiscal authority, a single global monetary system and a one world ruling structure. Obviously, such a pursuit would take extensive time and planning. It is a long term project, with moments of accelerated change.

The globalists refer to the process of their intended change as the “global economic reset.” A reset of the world’s economic processes is not so far fetched as skeptics like to argue. When an organized group of ideologues maintains control over the currency production and interest rates of most nations on the planet, it would hardly be difficult to manipulate politicians, manipulate legislation or even scientifically conjure financial bubbles and collapses. By extension, it would also be simple to trigger international conflicts if needed.

But why would war be a necessary ingredient to globalization?

War is the ultimate distraction, the ultimate divider and, perhaps ironically, the ultimate consolidator. In the past century, war always seems to follow or coincide with economic crisis events that are later exposed as products of the banking elites and their aggressive monetary policies. And, in the aftermath of these wars, supranational institutions are often founded (like the League of Nations, the United Nations, the Bank for International Settlements and the International Monetary Fund) as “solutions” to preventing mass tragedies from ever happening again. War is a social steroid promoting mutation, usually in an unhealthy way.

In recent years the concept of “world war” has given way to a more insidious trend of constant and sporadic regional wars. In most cases these regional wars have helped to contribute to the steady downfall of the U.S. through accumulating national debts as well as international distrust or hatred. In fact, one might conclude that if we were to look at the macro-picture of the vast array of regional wars being perpetrated by the globalists we would see that all of them combined are amounting to a kind of world war in a different form.

That said, the globalists will need a new and far larger catalyst for their reset, and soon. Why? Because a sizable distraction is essential to the next phase of the ongoing collapse. A pervasive scapegoat is needed; one that can be blamed for almost any negative scenario. This draws public attention away from the globalists themselves as the culprits behind fiscal crisis, maybe so much so that it will take decades before the mainstream ever questions what actually happened, if they ever question anything at all.

The fear generated through an uncertain war also acts as a form of psychological alchemy, transmuting the collective public mindset to accept centralization they never would have accepted otherwise.

Here is the issue at hand — central banks are seeking a monetary reset more than anything else. A monetary reset demands massive debt, followed by massive stimulus, followed by fiscal tightening, then massive inflation, followed by currency implosion that opens the door to a replacement structure (most likely in the form of blockchain technology and cyrptocurrency). The credit crisis of 2008 conveniently provided at least two of these elements so far, vast debt and stimulus measures. Today, we are beginning to witness the fiscal tightening phase of this process.

As I have been warning since before the Fed taper of QE, the central bank trend will lead to a removal of stimulus support, facilitating a crushing blow to bonds and equities markets. Now, interestingly enough, the Bank for International Settlements is warning of the same thing as 2017 comes to a close. It should be noted that this is not the first time the BIS warned of an impending crash; they also predicted with keen timing the derivatives and credit crash back in 2007. This was, of course, too little too late for the masses to react in any positive way, though.

Their latest warning arrives on the heels of the December Federal Reserve meeting at which it is widely expected that the central bank will raise interest rates yet again while taking the next step towards reducing their balance sheet. Many mainstream and alternative economists doubted the taper of QE and doubted the hiking of interest rates. They were wrong. Just as the doubts over the Fed balance sheet reductions are wrong. The pullback in these measures will invariably strike bonds and equities in a negative way. Time is running out.

But, the banking elites have taken steps. For example, they have in place a perfect distraction in the form of the Trump Administration. With Trump loudly and proudly taking credit for the stock market bull run over the course of the past year, who do you think the public will blame when those same markets go south as the central bank pulls the rug out? Probably not the Fed or the establishment banks.

Trump has also in an odd way created the perfect rationale for the Fed as they increase interest rates and end the cheap money that has been feeding stocks for so long. With the passage of Trump’s tax “reform” plan, the fed can now argue that interest rates MUST be raised in order to create incentives for treasury investment and to pay for Trump’s intended public works programs and military expansion goals. Meaning, the fed can claim it is not culpable for any negative effects from removing cheap capital from the table because Trump’s actions demanded it.

I would also point out that in most cases in history the Fed has lowered interest rates immediately following tax cuts and reforms. They did this after Reagan’s tax reforms in 1981 and in 1986, as well as after George W. Bush’s tax reforms in 2001. Juxtapose that with 2018, as the Fed intends to continue RAISING interest rates in the wake of Trump’s tax reforms. Meaning, they are taking the opposite action from what they have often done in the past.  Something to think about…

Trump’s tax plan itself is primarily a distraction from the real problem. First, when comparing tax brackets from this past year to the intended tax brackets for next year under the Trump reforms, there is almost no change whatsoever for the average American. The only major reductions in taxes are, no surprise, in the form of corporate tax cuts; reducing the corporate tax ceiling from 35 percent to 20 percent. This is trickle-down economics at best, and not a solution to a single problem facing the public and the country in terms of the flailing economy.

Second, why are we talking about income tax “reform” when we should be talking about abolishing the income tax and the Federal Reserve altogether? Whatever happened to that dialogue? It has disappeared down the memory hole.

Trump’s tax plan will do nothing to slow or undo the current economic crisis because the crisis stems directly from central banking monetary policies and interest rate manipulations. Tax reform is far too little far too late, and stands as nothing more than meager bone thrown to conservatives to keep them quiet for a while. This is what Trump’s tax reform does do very well, though — it rallies conservatives around Trump, regardless of whether it actually helps them or not. Much like Obama’s universal health care bill, which has proven to be a continued disaster in practice, but was rather successful at the time of its passage in rallying the liberal base. Trump is certainly going to need a base of public support if he is going to initiate a major war campaign.

North Korea continues to be the most likely powder keg for the next distraction event. Two months of quiet led people with short attention spans to dismiss the notion, and perhaps some of them will double down and continue their denials, but it is growing more difficult to ignore by the day. I would argue that North Korea is the most viable option simply because almost no one expects a war with the isolated nation to happen. The level of complacency despite all the signals to the contrary is palpable.

The U.S. has staged three aircraft carrier groups in the region for the first time in a decade. Major combat exercises are underway, designated Vigilant Ace 18, specifically designed to simulate an invasion of North Korea with over 230 aircraft and 12,000 American troops participating. North Korea has warned of “nuclear war” as a consequence.

North Korea may have the ability to follow through, at least on a limited scale, as they have recently test launched what appears to be a huge leap in missile technology — an ICBM capable of carrying multiple warheads and striking the Eastern seaboard of the U.S. How the North Koreans came to possess this technology so quickly is a question everyone should be asking.

In response, the war rhetoric has been amplified. White House National Security Adviser H.R. McMaster has stated that North Korea is the greatest immediate threat to the U.S., saying that the potential for war “is increasing every day.” Warmonger and enemy of the Constitution, Lindsay Graham, has stated that the families of U.S. military personnel should be moved out of South Korea for their own safety, and that “We’re getting close to military conflict.”

So how close is close? I maintain that war with North Korea is likely by the second quarter of 2018. I also maintain the globalists will continue the strategy of multiple regional conflicts and global economic warfare rather than a one-off global nuclear mess that would wipe out trillions of dollars and decades of effort put into infrastructure and surveillance grids.

This would be advantageous to the globalists if they plan to continue interest rate hikes and stimulus removal by central banks around the world. It would help hide the effects of balance sheet reductions on stocks and it could expedite the fall of the dollar as the world reserve as Eastern and European nations apply alternatives like the IMF’s SDR basket system in response to the massive debt brought on by a military quagmire for the U.S.  In other words, catastrophic fiscal developments that were already going to happen anyway due to central bank sabotage will be entirely blamed on geopolitical crisis rather than the true culprits.

Finally, will the East step in militarily to prevent a conflict in North Korea? No. China has already stated that if North Korea attacks first, then they will not obstruct regime change by the U.S.

This flies in the face of those that believe in the false east/west paradigm. China has left the door wide open to potential conflict. If the globalists want a war in North Korea, they will create a war in North Korea, and the Chinese have publicly admitted they will step out of the way to let it happen. A false flag is probable. More provocations leading to a violent response by North Korea would also be rather easy to produce. So far, North Korea remains the best existing shock and awe event to hide a globally disintegrating economic situation. Would the globalists pass up an opportunity like this? There is no reason for them to do so.

Special Note: Moriarty’s speech on the “inevitability of war” is a rather accurate portrayal in my opinion of the globalist mindset – rationalizing the artificial engineering of conflicts because “human nature” dictates that such events will “happen anyway”, so why shouldn’t they benefit? Of course, if human nature was a reliable ally of the power brokers, then they would not need to engineer these crises in the first place. Such is the insane circular logic of organized psychopaths.

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You can contact Brandon Smith at: brandon@alt-market.com

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Heading Towards Collapse: How Central Banks Destroy Global Stability

The Bank for International Settlements (BIS)

(The Real Agenda News) From 2000 until today, central banks have done more to destroy global financial stability than at any other time in history.

Different from what is commonly believed, central banks do not exist to bring about stability of any kind, but to control and monopolise financial and monetary policy that keeps them in control of economies worldwide.

All bubbles and financial crises have arisen from central bank manipulation of markets and unnecessary interventions.

Central banks are out there to protect the interests of their owners, and that means if they need to cause a global collapse, they will do just that to achieve their goals. In fact, they’ve done so for over a century.

Economic and financial crises do not know limits. They can emerge in poor regions of the world as well as in heavily industrialised nations, where speculation with financial products is let loose and sometimes unleashed by the bankers themselves.

In many occasions, crises are blamed on world instability due to famine, poverty and social unrest, but banks always forget to mention that they are the source of such crises.

Of all banks out there, the Bank of International Settlements is at the head of all pre-planned crises. This entity is sort of the equivalent of the Bilderberg Group of all banks, it is the Central Bank of all central banks.

It is the place where monetary policy is dictated to the central banks of all countries around the world that adopted their model of control.

It is, therefore, laughable that the BIS warns that new bubbles are on the way and that emerging nations might be the victims of their international policies this time.

Before we enter into BIS’s latest warning, let’s get something obvious out of the way: Global economic and financial crises are engineered to transfer power and money from many hands to few and to justify the “rescue” of financial institutions that are deemed “too big to fail”.

Recently, the coordinator of the central banks warned of the risks that can trigger a new crisis, when the world has not yet recovered from the previous crisis they created.

These dangers are more likely to affect emerging countries such as China and Brazil, and not so much those that already suffered a large housing bubble, such as Spain, United Kingdom or the United States.

The Bank for International Settlements (BIS) analyzes four types of medium-term risks: a possible upturn in inflation, financial tensions, consumption and investment weakened by high debt levels and what it calls “Protectionism”, a detectable trend in political changes like the exit of the United Kingdom from the EU and the victory of Donald Trump in the United States.

It is not a surprise that globalists and globalist institutions to warn about nationalism or protectionism as both movements directly threaten their supremacy and control of financial and monetary policies. What would BIS be without the legitimacy provided by its members?

In this regard, the general director of the BIS, Jaime Caruana, stated in a speech that “non-tariff barriers, such as regulation or subsidies, have quadrupled since the end of 2010.”

One of the most interesting aspects of a report that was released by the BIS is the warning about some signs of financial warming, especially in emerging countries, reminiscent of those that preceded the Great Financial Crisis, for which the BIS has already coined its own acronym GFC .

“In these countries, an already long-lasting credit expansion, usually accompanied by real estate price increases, indicates the growth of risks,” said Claudio Borio, head of the BIS’s Monetary and Economic Department.

The body responsible for coordinating the world’s central banks notes that large financial risks do not target the advanced economies that were at the center of the great crisis of 2008, such as the US, UK and Spain, which suffered a collapse of Its real estate sector.

In these countries, debt reduction processes involving cuts in social programs and large transfers of money from the middle class to the rich class are taking place; and these cycles of financial manipulation have just begun.

There, the main focus of concern in the medium term are the problems to fix the imbalances of financial sectors, especially in the euro area.

On the contrary, “the classic signs of a cycle of financial risks appear in several countries that got rid of the GCF. This group brings together several emerging economies as well as some of the advanced ones, especially those large exporters of goods.

“In all of them, interest rates have been very low or even negative, inflation has been low, or even have been driven to deflation, despite strong economic growth,” the report says.

The BIS welcomes the fact that low interest rates have contributed to lower debt levels. As many other policies established by BIS and its offspring central banks all over the western world, low interests rates are an artificial way to prevent the inevitable collapse of the economies due to the manipulation and abuse that banks carry out without any supervision.

The economic situation is so bad today that central banks refuse to raise interest rates because of the catastrophic results such increase would have.

Such increase will take place only when the bankers have the pieces of the puzzle in place to collapse the global economy again.

Other risk factors are the growth of the foreign exchange market and high levels of indebtedness; and the fact that in many countries the expansion has been made thanks to the decrease in consumption, something that the BIS considers a symptom of instability.

In its report, BIS did not miss the opportunity to scare the population by saying that a reversal in globalisation would have an even more devastating result.

The opposite is true. Globalization and the concentration of power and money is the reason why financial instability reigns supreme today.

The body headed by Jaime Caruana acknowledges that it does not yet have all the data to evaluate its potential effects.

“Just as no one advocates a technological involution, turning back on globalization would be extremely detrimental to living standards,” Caruana said in his speech. One would not expect to hear anything different from a globalist puppet.

The trio of evils that the BIS referred to last year, however, are continuing: an unusual mix of low productivity growth, high debt and little or no room for economic policies to drive growth.

The three evils are a result of central bank policies and decisions not of the move to deglobalize economies. Does anyone remember of any global financial and economic calamity when countries negotiated in a bilateral or trilateral fashion?

I did not think so.

New Gold Pool at the BIS Switzerland: A Who's Who of Central Bankers

This is an extract and summary from "New Gold Pool at the BIS Basle, Switzerland: Part 1" which was first published on the BullionStar.com website in mid-May. 

Part 2 of the series titled "New Gold Pool at the BIS Basle: Part 2 – Pool vs Gold for Oil" is also posted now on the BullionStar.com website.

“In the Governor’s absence I attended the meeting in Zijlstra’s room in the BIS on the afternoon of Monday, 10th December to continue discussions about a possible gold pool. Emminger, de la Geniere, de Strycker, Leutwiler, Larre and Pohl were present.”     13 December 1979 – Kit McMahon to Gordon Richardson, Bank of England

A central bank Gold Pool which many people will be familiar with operated in the gold market between November 1961 and March 1968. That Gold Pool was known as the London Gold Pool.

This article is not about the 1961-1968 London Gold Pool. This article is about collusive central bank discussions relating to an entirely different and more recent central bank Gold Pool arrangement. 

More than 11 years after the London Gold Pool had been abandoned, the very same central banks convened in late 1979 and early 1980 for a series of collusive central bank discussions aimed at reaching agreement on joint central bank action to subdue and manipulate downwards the free market gold price.

These new discussions took place at the headquarters of the Bank for International Settlements (BIS) in Basle, Switzerland, in the actual office of the President of the BIS, and were attended by a handful of the world"s most powerful central bankers. These discussions also took place in an era of soaring free market gold prices, in the midst of the run-up in the gold price to US$850 in January 1980.

Central to illustrating how the most powerful central bankers in the world colluded to attempt to establish a new Gold Pool are a number of internal documents from the Bank of England which provide a detailed blueprint on the evolution of these collusive discussions at the BIS, as well as providing detailed insights into the thinking of the senior Bank of England executives involved in the meetings. These internal correspondence documents from 1979 and 1980 can be thought of as the equivalent of internal emails in the era before corporate email systems.

Above all, these collusive BIS meetings show intent. Intent by a group of the world"s most powerful central banks to manipulate a free market gold price so as to distort free market gold pricing signals. Therefore, these documents are timeless in that regard. The documents also illustrate the concern that a rising gold price in the free market creates for senior central bankers, and importantly, also shows that these same central bankers have no qualms, at least from a legal or moral perspective, of intervening to manipulate a gold price when they see it as a threat to their fiat currency monetary system.

Since many names of high level central bankers crop up in the discussions and documents, to provide context, it is helpful to provide some short background summaries on who these people were and what roles they occupied. It is also helpful to provide some brief context on gold price movements during the period under discussion.

Bank for International Settlements (BIS) Headquarters, Basle, Switzerland

The Gold Price Run-up during 1979 and 1980

When the London Gold Pool collapsed in mid-March 1968, a two-tier gold market took its place, with the private market gold price breaking higher, while central banks continued to trade gold with the Federal Reserve Bank of New York (FRBNY) and US Treasury at the official price of US$ 35 per ounce. However, in August 1971, Nixon closed this FRBNY / Treasury ‘Gold Window’ by ending the convertibility of US dollar liabilities into gold that had up to then still been an option for foreign central banks and foreign governments. This was the birth of the free-floating gold price.

By the end of 1974, the US dollar gold price had soared to $187 per troy ounce. Following this, the next 3 years saw the gold price first trade down to near $100 during August 1976 before resuming its uptrend. Year-end gold prices over this period were in the $135 - $165 range. In 1978, the price again broke to a record high and finished the year at $226 per ounce. See chart below.

Gold Price January 1971 to January 1980. Source: BullionStar charts

But it was in 1979 that the US dollar gold price really took off, setting record after record, a bit like the records that are being set by cryptocurrencies right now.

In July 1979, the $300 level was breached for the first time. During October 1979, the gold price then took out $400 for the first time. During December 1979, the gold price hit $500. While these late 1979 price increases were in themselves phenomenal, what then occurred in January 1980 was even more striking, for in the space of a few weeks, the price rocketed up first through $600, then $700, and then through the $800 level before peaking in late January 1980 at a then record of $850 per ounce. See chart below.

Gold Price January 1979 to June 1980. Source: BullionStar Charts 

The mid-1970s saw a flurry of official gold sales to the market which although strategically designed in part to subdue the gold price, in practice didn’t achieve that goal over the medium term. Between June 1976 and May 1980, the International Monetary Fund sold 25 million ounces (777 tonnes) of gold in 45 public auctions. Between May 1978 and November 1979, the US Treasury sold 8.05 million ounces of high grade gold (99.5% fine) and 7.75 million ounces of low grade gold (90% fine) in 23 auctions to the private market. That’s just over 15 million ounces (466 tonnes) of gold in total auctioned by the Treasury. The last US Treasury auctions were on 16 October 1979 when 750,000 ounces of low grade coin bars were auctioned, and then on 1 November 1979 when the Treasury implemented a variable sales quantity approach and auctioned 1,250,000 ounces of low grade coin bars. On 15 January 1980, the US Treasury Secretary announced an official end of US gold sales.

As the 1980 annual report of the bank for International Settlements noted when reviewing the 1979 gold market:

“The further increase in [gold] supplies was overshadowed by the dramatic rise in the demand for gold which, in the space of little over a year, caused the London market price to increase more than fourfold to a peak of $850 per ounce in January 1980.”

“In addition to its sheer magnitude, last year’s [1979] gold price rise had three other remarkable features: firstly,  it took place against all major currencies, including those whose value had increased most during the 1970s. Secondly, it took place at a time of generally rising interest rates in the industrialised world, one effect of which was to increase the cost of holding gold. Thirdly, it took place at a time when, by and large, the dollar was strengthening in the exchange markets.”

It is against this background of surging  gold prices, pre-existing gold auctions, turmoil in currency markets, slow growth and high inflation, that the first of the collusive Gold Pool discussions took place between September 1979 and January 1980 at the BIS.

A Who"s Who of Central Banksters

The following document is the 4th main document in the Bank of England series of documents. all of which can be seen in "New Gold Pool at the BIS Basle, Switzerland: Part 1".

This document, displayed in blue text below, is a briefing letter from Bank of England executive director Kit McMahon to the Bank of England"s Governor Gordon Richardson, written on 13 December 1979, referring to the Gold Pool discussion meeting which took place in the office of the BIS President Jelle Dijlstra on Monday 10 December 1979. This is probably the most important documented featured in Part 1 of the two part article series, since it provides an in-depth insight into one of the collusive Gold Pool discussion meetings which the most powerful central bank governors of the time attended discussing the creation of a syndicate to manipulate down the free market price of gold.

Christopher McMahon, known as ‘Kit’ McMahon, was an executive director at the Bank of England from 1970 to 1980, before becoming Deputy Governor of the Bank of England on 1 March 1980. Prior to McMahon’s promotion, Jasper Hollom was Deputy Governor of the Bank of England. Kit McMahon’s full name is Christopher William McMahon, hence he signed his his internal Bank of England memos and correspondence with the initials ‘CWM’. McMahon left the Bank of England in 1986 to take up the role of Chief Executive and Deputy Chairman of Midland Bank. In 1987, McMahon was also made Chairman of Midland Bank. McMahon left Midland in 1991. Since 1974, Midland Bank had also owned Samuel Montagu, one of the five traditional bullion firms of the London Gold Market. HSBC acquired full ownership of Midland in 1992 after acquiring a 15% stake in 1987 when McMahon was Chairman and Chief Executive of Midland. See profiles of McMahon here and here.

THE GOVERNOR of the Bank of England - Gordon Richardson. Richardson was Governor of the Bank of England for 10 years from 1973 to 1983, and a non-executive director of the Bank of England between 1967 and 1973. He was chairman of J. Henry Schroder Wagg from 1962 to 1972, and chairman of Schroders from 1966 to 1973. Richardson was also a director of Saudi International Bank in London. Saudi International Bank was formerly known as Al Bank Al Saudi Al Alami when it was incorporated in London in 1975, and is now known as Gulf International Bank UK Limited.

The following countries were represented at this 10 December meeting: UK, Switzerland, West Germany, France, Netherlands, Belgium.

The following central banks were represented at the meeting:

• Zijlstra – BIS and Netherlands central bank


• McMahon – Bank of England


• Emminger – Deutsche Bundesbank


• Pohl – Deutsche Bundesbank


• de la Geniere – Banque de France


• de Strycker – Belgian central bank


• Leutwiler – Swiss National Bank


• Larre – Bank for International Settlements

Zijlstra refers to Dr. Jelle Zijlstra, Chairman and President of the Bank for International Settlements (BIS) from 1967 to December 1981. Zijlstra was also simultaneously President of the Dutch central bank, De Nederlandsche Bank (DNB) from 1967 until the end of 1981. Notably, Zijlstra was also Dutch Prime Minister for a short period during 1966-67.

Emminger refers to Otmar Emminger, President of the Deutsche Bundesbank from 1 June 1977 to 31 December 1979. Emminger was one of the principal architects of the IMF’s synthetic Special Drawing Right (SDR) in 1969 which was designed to be a competitor of and replacement for gold.

Pohl refers to Karl Otto Pohl, President of the Deutsche Bundesbank from 1980 to 1991, and vice-President of the Bundesbank between June 1977 to December 1979. Note that Emminger retired in December 1979, with Karl Otto Pohl taking his place.

Leutwiler refers to Fritz Leutwiler, Chairman of the Swiss National Bank (Switzerland’s central bank) from May 1974 to December 1984. Leutwiler was also a member of the board of the BIS from 1974 to 1984, and served as President of the BIS  between January 1982 and December 1984, as well as Chairman of the Board of the BIS from January 1982 to December 1984.

De la Geniere refers to Renaud de La Genière, Governor of the Banque de France from 1979 to 1984.

De Stryker refers to Cecil de Strycker, Governor of the National Bank of Belgium from February 1975 to the end of February 1982. At that time, De Stryker was also president of the European Monetary Cooperation Fund and then president of the Committee of Governors of the Central Banks of the Member States of the European Economic Community.

In the meeting document, the name Larre refers to René Larre, General Manager of the BIS. Larre was BIS General Manager from May 1971 to February 1981.

SECRET

[From McMahon]

To: The Governors               Copies to : Mr Payton, Mr Balfour, Mr Sangster , Mr Byatt  only

GOLD POOL

In the Governor’s absence I attended the meeting in Zijlstra’s room in the BIS on the afternoon of Monday, 10thDecember to continue discussions about a possible gold pool. Emminger, de la Geniere, de Strycker, Leutwiler, Larre and Pohl were present.

Larre began by outlining a way in which a possible gold pool might be handled. The BIS could undertake all the operations on behalf of a group of central banks on the basis of rather general criteria which would be reviewed monthly.  The criteria would take into account not merely the developments of the price of gold but the affect any such developments appeared to be having on the dollar.   Thus they would envisage selling only when gold was relatively strong and the dollar relatively weak and buying only in the reverse circumstances.   They thought that they at least might start with a sum of around 20 tons (equals around $300 million at present prices).   They could take running profits of losses on their books for a considerable period and though participating central banks would have to envisage the possibility of an ultimate loss or gain in gold, in practice all that might be involved would be a loss or gain in dollars.    On this point both Zijlstra and Leutwiler emphasised that they were already liable to suffer substantial losses on their dollar reserves and would not be worried by the potential losses that they might they might sustain on this scheme.

In answer to a question from me, Zijlstra confirmed that the US realised that if any gold pool were developed, the European central banks would intend to buy back in due course any gold they sold. He said they were unhappy that the Europeans were not prepared to sell gold outright but they accepted it.    Larre pointed out in parenthesis that Tony Solomon was probably the only American now or in the recent past that would be prepared to accept such a line. He knew that Wallich and probably Volcker was against the whole idea.

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Zijlstra and Leutwiler said they were both strongly in favour of going ahead on the basis Larre had suggested.   They then asked what the other thought.

Emminger said that he had put this proposition to his Central Bank Council who were unanimously against it.   His hands were therefore at present totally tied.

De Strycker said he was extremely doubtful about the scheme.   He thought it was neither desirable nor necessary and carried considerable dangers.   De la Geniere was also negative stressing the great political dangers for him of selling any French gold in this indirect way.

Leutwiler then suggested that they should do it the other way round:   wait until the gold price went below 400 and then start the operation by buying.   When the BIS had bought, say, 20 tons they would have a masse de manoeuvre which they could then sell.   La Geniere said that this might be easier for him and he would consider the possibility of doing something along these lines. Emminger also said, though without much confidence, that it was possible that if the operation were to start along these lines and if it appeared to be going well, it might be possible to persuade the Central Bank Council to join in.

Leutwiler and Zijlstra then said that although they did not think a very large group was necessary to undertake the operation it probably had to be bigger than Two:    specifically they really needed either the French of the Germans.    Zijlstra said that although he had formal powers to do this he did not wish to do it without carrying his Government with him.    The Government was still doubtful and would probably need to know that a number of other countries were going along with it.

At various points during the meeting there was a discussion about publicity for the operation and at an early point Zijlstra said that publicity was both inevitable and desirable if the operation was to have a maximum effect.    He brushed aside my suggestion that while the publicity for any selling operations would be helpful, that attached to the later (or on the revised scheme, earlier) buying could be rather inflammatory.   However, if the scheme were to be 

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simply a BIS one, publicity would not necessarily, or perhaps desirably, arise.   This point was not really addressed in the discussion.

I made a number of sceptical points about the failure of commodity stabilisation schemes of all kinds in the past and the dangers of getting drawn in gradually to bigger and bigger commitments. Leutwiler said that there was no danger because the losses would be small.   I said that I envisaged political dangers.    If it got known that the central banks were involving themselves in the price of gold, however much they said it was only a smoothing rather than a stabilising operation, they would find themselves on a tiger. If the price of gold went on rising they would either have to increase their efforts or add to the upward pressure o gold by pulling out.

None of this carried any weight with anybody except perhaps de Strycker.   In any case I was not asked for any commitment from us.   There was, in fact, no discussion of whether or how contributions to the scheme would be based, but presumably it would be in relation to gold holdings so that they would not expect much from us.

The meeting ended with Leutwiler saying he would approach the Canadians  and Japanese to see how they felt about the idea while Zijlstra would talk to the Italians.   All would then think further about it and revert in January.

I must say I remain personally extremely sceptical about the desirability and efficacy of any scheme along the lines so far suggested.

CWM

13th December 1979

The original pages of this meeting briefing written by McMahon can be seen here: Page 1,  Page 2 and Page 3. The links may take a little while to load first time clicked.

The following key points are notable from McMahon’s briefing of the 10 December Gold Pool discussions meeting. Zijlstra and Leutwiler acted as the 2 main advocates of the proposed Gold Pool arrangement. This is important to remember because Zijlstra was the President of the BIS at that time and Leutwiler became President of the BIS at the beginning of 1982 taking over from Zijlstra. So the heads of the BIS in the early 1980s were both firm advocates of the need for a new Gold Pool. Zijlstra and Leutwiler probably also represented the two most independent central banks present at the discussions, namey the Dutch and Swiss central banks.

The market mechanics of the proposals discussed in the meeting are also classic collusive Gold Pool tactics to torpedo the gold price by “selling only when gold was relatively strong and the dollar relatively weak and buying only in the reverse circumstances.” 

The discussion also made it clear that the preferred approach would be to operate as both a selling syndicate and a buying consortium as “European central banks would intend to buy back in due course any gold they sold.” It was even suggested that the buying could occur first so as to create an inventory of physical gold with which to use to fund the selling interventions, i.e “wait until the gold price went below 400 and then start the operation by buying. When the BIS had bought, say, 20 tons they would have a masse de manoeuvre which they could then sell.”

Given that René Larre, the BIS General Manager, began the meeting shows that he was meeting coordinator in his capacity as BIS General Manager. It is also very interesting that McMahon states that “the BIS could undertake all the operations on behalf of a group of central banks” that could  be “reviewed monthly”, which underlines the fact that overall, this could be viewed as a BIS led scheme, controlled and operated out of Basle.

A BIS scheme would also allow the Gold Pool to operate in secrecy, out of public view. In the words of McMahon “if the scheme were to be simply a BIS one, publicity would not necessarily, or perhaps desirably, arise“.

As mentioned, the above is just an extract from much more detailed article titled “New Gold Pool at the BIS Basle, Switzerland: Part 1”. That article provides a full background to the above, including:

• There were an entire set of central banker discussions from September to December 1979, that led up to the meeting profile above.

• At the IMF annual conference in Belgrade in early October 1979, the US monetary authority delegation in the form of Paul Volcker, William Miller, Tony Solomon, and Henry Wallich approached Fritz Leutwiler, Chairman of the Swiss National Bank, and discussed a proposal to launch a joint central bank gold selling operation.

• During the discussions at the BIS, Zijlstra, who was BIS President until the end of 1981, and Leutwiler, who became BIS President in January 1982, were both strongly in favour of launching a new joint central bank gold pool to manipulate the gold price.

• The oil-producing cartel OPEC was at that time, “increasingly concerned that gold was outpacing oil”, but Al Quraishi, Governor of the Saudi Arabian Monetary Authority (SAMA) had made an assurance that the Saudi’s “would not rock the boat” and buy gold on the market if a new gold pool was activated. However, Al Quraishi and SAMA were still eager to “diversify” the reinvestment of the Saudi oil revenues into gold.

• The Bank of England recorded market intelligence in October 1979 that the “USA was planning to sell 10 million ounces of gold in four separate unannounced operations” before the end of 1979 so as to “placate the Saudi Arabians.“

• The Bank of England’s foreign exchange and gold specialist at that time, John Sangster, thought that there was “a need to break the psychology of ‘the market can only go one way and that is up’.” 

• Sangster’s view was also that there was “no question of any permanent stabilisation of the gold price, merely at a critical time holding it within a target area”, an operation he called a “smoothing operation”.

• The first meeting to discuss a new collusive gold pool took place in the BIS office of Zijlstra on Monday 12 November 1979, whose invitees (in addition to Jelle Zijlstra) were Gordon Richardson, Governor of the Bank of England, Cecil de Strycker, Governor of the National Bank of Belgium, Fritz Leutwiler, Chairman of the Swiss National Bank, Bernard Clappier, Governor of the Banque de France, and Otmar Emminger, President of the Bundesbank.

Following this 10 December meeting, the governors returned to their respective banks and recessed for Christmas and New Year, returning to Basle in early January 1980 where the next Gold Pool meeting took place on 7 January 1980, in a historic month in which the gold price rocket from $515 to $850 in a matter of weeks.

Conclusion

Did these discussions lead to the formation of a new Gold Pool operated out of the BIS in Basle? That is for you to decide. As well as reading "New Gold Pool at the BIS Basle, Switzerland: Part 1", we encourage you to read "New Gold Pool at the BIS Basle: Part 2 – Pool vs Gold for Oil".

Part 2 takes up where Part 1 left off, and begins by looking at developments in the BIS Gold Pool discussions during January 1980, a month in which the US dollar gold price rocketed more than 60% during a three-week period to reach a then record of $850 per ounce. Part 2 then looks at how the discussions involving these central banks evolved over the remainder of 1980 and 1981 as key high level central bankers continued to call for intervention into the gold market. Part 2 also looks at evidence that central bankers party to the discussions began advocating gold for oil exchanges between the West and the Saudi Arabia, exchanges which would provide real wealth (gold) to the Arabs in exchange for oil flowing to the West, while simultaneously keeping a lid on the gold price.

In their own words:

"If any operation were ever contemplated, it would have to be geared at some concept of the developing real price of gold and not attempt to hold any particular nominal level. It would almost certainly not be a pool with any significant potentail for recovery of gold sold. Rather it would enable OPEC to acquire some modicum of the chief inflation-proof asset without an excessive rise in the price." 

“This is not to advocate gold for oil directly; the price haggling would be too acrimonious. Market intermediation should allow the G10 to move with the price while attempting to control its pace as well as break off the experiment when possible or necessary.”     - John Sangster to Gordon Richardson, Anthony Loenhis & Kit McMahon, Bank of England, 17 September 1980

“I feel that it is necessary for us, within the Group of Ten and Switzerland, to consider ways to regulate the price of gold, admittedly within fairly broad limits”      - Jelle Zjilstra, BIS Chairman and President and Dutch central bank President, 27 September 1981

“First, there is the meeting on the Gold Pool, then, after lunch, the same faces show up at the G-10″      - Bundesbank President Karl Otto Pohl to journalist Edward Jay Epstein, in a conversation at the Bundesbank in 1983

An extract from Part 2 will also appear on Zerohedge in the near future.