Let Slip the Dogs of War
Adam Hamilton December 22, 2000 4721 Words
“Cry ‘HAVOC’ and let slip the dogs of war!” - William Shakespeare, Julius Caesar, Act III, Scene I, ca 1608.
Almost four centuries ago, the infamous English bard William Shakespeare penned this magnificent line in his play The Tragedy of Julius Caesar. By all accounts, the drama was very popular, and had widespread critical and common acclaim soon after the ink on the pages had dried.
The venue for Act 3 Scene 1 of the play, where this essay’s title is ripped from, was Rome, on the steps of the Capitol, with the Senate sitting in session inside. Julius Caesar himself was prepared to enter the Capitol, but a soothsayer and Artemidorus tried to warn Caesar about entering. Caesar ignored their warnings, and walked into the Senate. Once inside, powerful conspirators gathered around their king pretending to plead a case. Without warning, they all drew sharp knives hidden in their tunics and brutally stabbed Caesar to death. One of the conspirators, Mark Antony, fled, but Brutus convinced the other conspirators to let him live. Brutus explained the reasons for assassinating Caesar to the rest of the Senate and the Roman people. Antony finally returned later and pretended to still be an ally of the murderous conspirators, but he secretly planned to strike back with the help of Octavius Caesar.
When Antony was alone with the corpse of the murdered Julius Caesar, he was overcome with guilt for his dirty deed and launched into a fantastic soliloquy. Very roughly paraphrased, Anthony expounds:
“Oh forgive me, you bleeding piece of earth, for cooperating with these butchers. You are the noblest man who ever lived in all of history. Over your wounds now I predict the future… And Caesar’s ghost, roaming about in search of revenge, with hate at his side still hot from hell, will in these boundaries with a ruler’s voice cry ‘HAVOC’ and let slip the dogs of war, so that this terrible action will smell above the earth, with rotting corpses, begging to be buried.”
Antony now realized that the conspiracy to kill Caesar was a terrible, terrible mistake, and that Rome and greater Italy would reap the whirlwind because of the action of a small group of powerful conspirators.
Like the mighty Julius Caesar in Shakespeare’s awesome tragedy, a small group of men have banded together in our modern age to assassinate another great leader. This new “leader”, however, is not a king of men but the undisputed ancient Caesar of the financial world. This Caesar has been lusted after for six millennia of human history, and has always been the ultimate standard of wealth, trade, and money. The neo-conspirators have drawn up Machiavellian plans to viciously assassinate the legendary king of assets itself, gold.
Gold is a powerful and formidable foe. It is the primary financial asset that has intrinsic worth in its own right, that does not represent the mere good faith and credit of another party. Every other non-commodity paper asset is only as good as the people backing it, the folks promising to meet the contractual obligations outlined on the inherently worthless fiat paper.
In our wacky modern world, the financial markets have been besieged by a blizzard of paper. Throughout virtually all of human history, paper promises to pay were backed at least in part by gold. For the last half dozen years, paper assets have made some people fantastically rich. The seductive allure of controlling the paper assets is that more can always be created with a stroke of the pen. The paper fiat “assets” can be expanded ad infinitum, creating truly vast personal paper wealth for the entities controlling the paper. There is a catch to this massive Ponzi scheme, however. The paper game only works as long as the general populace in the nations besieged with the paper BELIEVES and has FAITH in the paper assets. The moment that faith begins to wane, the gig is up and the false “wealth” that the paper once seemed to represent rapidly sublimates to its true value, zero.
The goal of the paper game for the paper hangers is to rapidly create paper and convert it into REAL assets, including gold, land, buildings, companies, etc before the public faith in the new paper is lost. American investors have received a very painful first hand lesson this year in the NASDAQ of what happens when paper assets are totally divorced from reality and historic cashflow valuations are scoffed at. The bust after a bubble is always wicked, and the pain sustained from that inevitable “correction” gravely outweighs any pleasure derived from riding the original bubble up to the heavens.
Fiat currencies and bank credit are fundamentally no different from blue-sky NASDAQ high-fliers. As long as people have faith in the ability of governments and banks to maintain the value of their issued fiat currency and credit, the illusory stellar valuations stand. But, if faith is shaken in the true value of the paper, all hell can break loose.
Since the dawn of commerce, the ultimate barometer of confidence in paper contracts and promises to pay has been gold. When gold rises in price relative to paper currencies, it is in effect casting an ironclad and unappealable veto on the false value of the currency. Like a fainting canary in a coal mine, when gold signals that the true value of a currency is much lower, people grow very nervous and fear becoming trapped in the noxious pocket of explosive methane gas and stampede for the exit shafts to the salvation of the sunlight.
Since the enormous growth of fiat currencies and credit we witness today is absolutely without precedent in human history, the paper hangers are worried. They realize that they have gone too far, created many orders of magnitude too much worthless paper. They are in so deep that they have formed a conspiracy to put a bullet through the golden canary in the fiat coal mine. Gold must not, at all costs, be allowed to rise in price because it would create a crisis in confidence in the inherently worthless paper and it would shatter the shaky houses of cards built on nothing but hot air and promises.
Many gold insiders, analysts, and public and private investors who follow the gold markets had sensed something was not kosher since the mid-90s. Gold was not trading the way it should in light of supply and demand and geopolitical fundamentals. Tens of thousands of hours of research were logged to try and isolate the problem with gold, illuminating the ancient yellow metal from innumerable perspectives. Using the principle of Occam’s Razor, researchers investigated and gradually sliced away all possible explanations for the anomalous behavior of gold. Once the pile of slices covered the floor and the razor was sheathed, the only possibility left to explain gold’s odd behavior was that an unholy alliance of central banks and bullion banks had colluded and decided it was in their mutual interest to suppress the price of gold.
The motives of the central banks and bullion banks were different, but their strategic and tactical objectives were exactly the same.
The central banks were largely saddled with the problems of managing fiat currencies in socialist welfare states. Since the Bretton Woods international currency “gold-standard” imploded in 1971, politicians had no checks and balances on currency creation. They soon found they could create enough fiat money so that they could have BOTH guns and butter, and that ALL the needs of their constituents could be met in the near-term. Without the stern discipline of gold, the central banks were forced to print ever-increasing amounts of fiat currency, creating massive currency inflation.
The central banks, however, were paradoxically also called to be guardians of the value of the very currency they were rapidly printing for the socialist politicians. The value of EVERY currency in the world is ultimately only measured by gold. When the outstanding currency increases at a rate faster than the gold reserves of the nation that “backs” it, the currency falls in value and becomes worth less and less gold per currency unit. If gold rose in price, the central banks and governments would be forced to admit they had squandered the public trust and had created far too much fiat currency, eviscerating its value and wiping out the lifelong savings of their hard-working citizens.
The central banks knew there was only one temporary fix, and that was to attempt to place an artificial price ceiling on gold. If gold was held under water by non-free market forces, no one would know how aggressively national currencies had been inflated. The central banks could not outright sell their respective citizens’ national treasures of gold, however, as that would have caused popular outrage. The central banks decided to instead “lease” gold. By leasing gold, they were able to supply official gold into the free market to artificially increase the supply, driving down the price. With the convenient accounting fiction of leasing, the central banks maintained the gold as an asset on their publicly reported books, yet that very gold would ultimately still be sold in the open market by the bullion banks leasing it for the same end result. The central banks had bought themselves a few years time while they struggled to figure out how to solve the mess in which irresponsible and reckless fiat currency growth had landed them.
The clients for the central bank leasing campaign were the large politically connected money-center bullion banks. They salivated at the chance for cheap capital to finance other speculation plans, and the central banks provided that source of practically free capital. The bullion banks had borrowed incredible amounts of physical gold in the early 1990s, and immediately sold the gold in the open market. The proceeds of the gold sales were used to finance investments into other markets, most notably the US equity markets. This practice became known as the gold carry trade.
Since the lease rates on gold were so low, usually under two percent a year, the gold carry trade was fantastically lucrative for the bullion banks. They salivated at the cheap capital, and borrowed and sold more and more gold. Soon, a problem arose. The banks had borrowed, they were short, so much gold that there was no way they could go into the open market to buy back physical gold to repay the central banks from which they had originally borrowed the gold. The gold market was so thin, and the fresh-mined gold supply was so small relative to the size of the short positions, that the banks faced colossal losses or even bankruptcy if the gold price rose and they were forced to cover their shorts at any price. They had to do whatever they could to cap the price of gold to protect their own hides.
As general awareness of these nefarious plans to destroy the world gold market slowly become more widely known, the gold shorts have grown more and more nervous. They have waged an effective war of damage control, carefully crafting and spinning a yarn that the gold conspiracy theory was nonsense, and the besieged gold investors that were discussing it were nuts.
On December 7, 2000, fittingly Pearl Harbor Day, this propaganda illusion was shattered. The gold suppression game was suddenly rent naked and exposed to the harsh sunlight of international scrutiny. A shot was fired across the bow of the bullion and central banks actively working to suppress global gold prices. This shot was no trivial small arms fire, but a GPS-guided terrain following W-80 thermonuclear warhead equipped Tomahawk cruise missile. The long-feared day of reckoning had arrived.
Reginald Howe, a former trial lawyer with one of the top law firms in Boston, a gold market analyst, and the proprietor of the internationally acclaimed and followed www.GoldenSextant.com website, filed a lawsuit in the United States District Court in Boston. Mr. Howe, like so many other gold investors in the last half dozen years, was personally financially damaged by the covert gold suppression actions of the small group of conspirators trying to assassinate gold in the mold of the Roman conspiracy about which Shakespeare waxed so eloquent.
The Defendants in Mr. Howe’s lawsuit look like THE Who’s Who list in elite international finance.
The Bank of International Settlements is the first defendant named on the lawsuit. The BIS is based in Basle, Switzerland, and is commonly known as the “central banks’ central bank”. Like most banks in the world, the BIS is owned by its shareholders. The lion’s share of the BIS is owned by other central banks, but some shares were sold to private citizens due to unique circumstances that existed surrounding the creation of the BIS.
The BIS recently commissioned a study by JP Morgan to determine the net asset value of its shares, and Morgan determined each share of the BIS was worth US$19,099. In September, the BIS sent a notice to its private shareholders in the United States and Europe saying that it was forcing them to surrender their shares to the BIS, and that they would be paid 16,000 Swiss francs per share (about US$9280 at the time). Needless to say, the private shareholders are NOT happy about receiving less than half of what their BIS shares are worth. Even more provocatively, the BIS issued shares in 1999 to other banks for around US$13,119, indicating the BIS is well aware that its shares are worth far more than the unacceptable amount it wants to pay private shareholders for confiscating their shares.
Unfortunately for the BIS, Mr. Howe is one of the American shareholders whose shares the BIS wishes to unilaterally seize without proper compensation. They picked the wrong guy to defraud!
The next two defendants are two American citizens who are apparently illegally sitting on the Board of Directors of the BIS without the required approval of the United States Congress, the US President, or the US Secretary of State. When the BIS was formed amongst the isolationist atmosphere of the United States in 1929-1930, the Secretary of State expressly forbid the United States Federal Reserve from both direct or indirect participation in the BIS. These Americans who are allegedly exceeding their Constitutional and legal authority are the Chairman of the Board of Governors of the Federal Reserve Alan Greenspan and the President of the New York Federal Reserve Bank (the same place where gigantic amounts of foreign gold is stored) William McDonough.
Next, Mr. Howe’s lawsuit names five bullion banks which are believed to be heavily involved in the gold suppression scheme. They are JP Morgan, Chase Manhattan, Citigroup, Goldman Sachs, and Deutsche Bank. Each of these banks (except Goldman Sachs which is not a commercial bank) is required by law to report its gold derivatives positions to the United States Comptroller of the Currency (OCC).
Heavy involvement in the gold market for Morgan and Chase is evidenced by the OCC reporting from these banks. At the end of 1999, Morgan had capital of $12b, but was reporting gold derivatives with a total notional value of $38b! Chase’s notional gold derivative position ballooned massively in 2000, almost doubling to $35b in the six months ending in June. The heavy involvement of these banks in the gold market is simply indisputable.
As of June 30, 2000, Morgan, Chase, and Citibank had a combined notional value of gold derivatives that was the equivalent of an unbelievable 8,146 tonnes of gold at $280 per ounce, more than the official gold reserves of the United States of America! As of December 31, 1999, Deutsche Bank had notional derivatives equal to roughly 5,000 tonnes of gold, 1,500 tonnes more than the official reserves of Germany!
The magnitude of exposure to gold by these banks is hard to put in proper perspective, as it is leviathan. In the entire history of the world, an estimated 120,000 tonnes of gold have been mined. 32,000 of these tonnes are claimed by central banks, although it is unclear how much of this gold they have leased out to the bullion banks since the leased gold is still reported as an asset by the central banks. Annual freshly mined gold supply is running approximately 2,500 tonnes a year, and global demand is estimated to be around 4,000 tonnes per year. Morgan, Chase, Citibank, and Deutsche Bank have a reported derivatives gold exposure equal to least five years of the entire planet’s gold production! Why on earth would four banks have this kind of exposure to gold after a twenty-year bear market while gold investment demand is rising? Mr. Howe aims to find out.
Goldman Sachs is also named as a defendant for its known deep involvement in both over-the-counter gold derivatives and heavy selling of physical gold on commodities exchanges to cap any fledgling gold rally that threatens to break out. Goldman also designed and built the disastrous hedge book for Ghana miner Ashanti Gold, which reduced the company to near bankruptcy after a major gold RALLY. Aren’t gold companies supposed to BENEFIT from rising gold prices?
Finally, Clinton’s Treasury Secretary Larry Summers is named as a defendant. Mr. Summers, by virtue of his office, controls the secretive slush fund of the United States of America, the Exchange Stabilization Fund. The ESF is the vehicle through which elements of the US government are believed to be trading gold in an attempt to manipulate a free market, in violation of US law and principle. The ESF is only accountable to the US Secretary of the Treasury and the President of the United States.
James Turk, in a phenomenal essay aptly entitled “The Smoking Gun”, outlined his research that showed that the ESF was trading in gold, contrary to denials by high ranking US government officials. This essay is highly recommended and extremely important reading, and is available at www.Gold-Eagle.com. Since the ESF is Mr. Summers’ responsibility, he is named in Mr. Howe’s lawsuit.
United States Congressmen have made numerous attempts to get a statement from Mr. Summers on gold market intervention by the ESF, but Mr. Summers himself has never spoken out about the issue. When the Department of the Treasury receives a request for clarification on ESF activities, a lower-level bureaucrat always replies, but Mr. Summers is conspicuously silent. If there is no illegal ESF activity, why not make a public statement and clear the air about the ESF?
The list of the defendants is quite extraordinary, and there is no doubt that these men and organizations know what has really happened in the gold market since 1994.
Mr. Howe’s lawsuit is not based on obscure technical laws, but on the hulking aircraft carriers of the US legal world. These important laws include the Sherman Anti-Trust Act, the Securities Exchange Act of 1934, the Constitution of the United States of America, and common law fraud.
After the American Civil War, the US economy changed from a primarily rural and agrarian based economy to an industrialized and urban one. Many large industrial trusts formed soon after, and through interlocking directorates, trust ownership, and personal relationships, the owners of these trusts gained immense power. Soon, they came to a point where they had monopolies over many basic commodity industries including oil and gas, sugar, cotton, and whiskey.
In order to meet this grave threat to free markets, the US Congress enacted the Sherman Act in 1890. It has often been called the “Magna Carta of free enterprise”, as it made restraints of trade and monopolistic acts illegal. Section 1 of the Sherman Act forbade horizontal price fixing. Horizontal price fixing occurs when competitors in the same line of business agree to set the price of goods they control. It is defined by the law as raising, depressing, fixing, pegging, or stabilizing the price of a commodity or service. Ring any bells, gold investors? Although the burden of proof is on the plaintiff, price fixing is a per se violation of the Sherman Act. No defenses or justifications of any kind can prevent the per se rule from applying. Horizontal price fixing is ALWAYS highly illegal, under all circumstances.
Mr. Howe’s lawsuit alleges that all the defendants engaged in illegal horizontal price fixing of gold in violation of the Sherman Act. The lawsuit states that high public officials participated in the horizontal price fixing scheme for six reasons, which are outlined in paragraph 82 of the document. These include preventing the price of gold from rising to signal a warning of US inflation, affecting the international standing of the US dollar, calling further attention to unprecedented US trade deficits, and causing political embarrassment to the Clinton administration and its claims of economic success.
The Securities Exchange Act of 1934 is also a monolithic pillar of American law that covers most kinds of securities fraud. Section 10(b) and Rule 10b-5 are some of the most important components of the entire act. Section 10(b) prohibits the use of manipulative and deceptive devices in contravention of rules and regulations prescribed by the SEC. Rule 10b-5 was adopted to clarify Section 10(b). It states that it is unlawful for any person to indirectly or directly, by use of any means or instruments: to employ any scheme to defraud, to make any untrue statement or omit a material fact that misleads, or to engage in any act that operates a fraud or deceit on any person in connection with the purchase or sale of any security. All transfers of securities, even if not publicly traded (although the BIS privately held shares ARE publicly traded), are subject to this rule. The US Supreme Court has held that only intentional conduct violates rule 10b-5.
Mr. Howe’s lawsuit alleges that the BIS, Mr. Greenspan, Mr. McDonough, and Morgan have violated the Securities Exchange Act of 1934 in regards to the proposed BIS freeze-out of private shareholders.
The Constitution of the United States is the supreme law of the land and needs no introduction. Mr. Howe alleges that the BIS, Mr. Greenspan, Mr. McDonough, and Mr. Summers have violated constitutional laws pertaining to the US monetary system. The lawsuit alleges that the US Federal Reserve has conducted monetary policy that violates the Constitution and laws of the United States.
Finally, a charge of common law fraud and breach of fiduciary duty applies to the BIS, Mr. Greenspan, Mr. McDonough, and Morgan. The BIS, although it knew the value of its shares, sought to defraud its private shareholders by compensating them far below the true net asset value of their shares. This is fraudulent and a breach of the fiduciary duty that any organization owes to its owners.
Mr. Howe is demanding a trial by jury for all these issues, and the dirty laundry of the anti-gold forces will be laid bare in trial for the whole world to see.
Overall, the lawsuit is wholly fascinating and may prove to be one of the most important financial documents in modern United States history. I have read the lawsuit in its entirety several times, and each time I learn more and my understanding deepens of what has transpired in the gold market in the last six years. The lawsuit is extremely well written and really easy to read, and is not laden down with confusing legal jargon. I STRONGLY recommend every investor in gold and lover of free markets take an hour or two and read this historic document as soon as possible. It is extraordinary!
The document is available on the web at www.GATA.org and other websites.
In this once in a lifetime chance to slay a conspiracy dragon that has irreparably damaged so many innocent mine workers, nations, and gold investors, a tremendous amount of help is needed. There are several ways that YOU can help, stand up and be counted, and fight with our champion Reginald Howe in his quest for free markets and liberation of the besieged gold market. There is no doubt it will be a monumental and difficult battle, but free markets are a cause truly worth fighting for.
First, Mr. Howe and his backers at the Gold Anti-Trust Action Committee (GATA) need money to finance the legal fight. As is obvious from the defendant roster, these defendants have virtually unlimited finances and can hire more lawyers than a Florida election recount. Contributions are extremely important, as they will enable Mr. Howe and his team to fight this legendary battle for gold investors and free markets. Even small contributions quickly add up! If 25,000 people send a mere $25 to GATA, it would provide $625,000 of ammunition for Mr. Howe’s legal campaign. Please visit www.gata.org/how_to_help.html for information on how to make a contribution. Imagine how much pride you will feel when your grandchildren are bouncing on your knee and you tell them that YOU helped finance the great gold war of 2001 that helped liberate gold from its oppressive shackles!
Second, if you own shares in the myriad of gold mining companies around the world, turn up the heat on management to support GATA. It is absolutely critical to remember that management works FOR you, the shareholders. Management inevitably thinks they can do their own thing and ignore the gold market situation, but they are wrong. Hammer YOUR employees, the managers. Forcibly tell them that you demand that they immediately investigate GATA’s claims thoroughly and support GATA. If they refuse, demand that they return to you the detailed reasons for their refusal in writing, signed, and sent via registered mail for future legal reference. Tell them that you, their bosses, will not tolerate inaction while your share price dwindles into oblivion. Let them know that there are legions of gold shareholder lawsuits waiting in the wings when there becomes widespread knowledge that Mr. Howe was right and the conspiracy really exists and the mining managers failed to act. If the public relations people provide unsatisfactory answers, bypass them and get in touch with top management, either by yourself or through your attorney. Let the gold mine management know that the gold mine OWNERS will give no quarter to those who are too weak to make a stand. An incredible Samuel Adams’ quote is metaphorically applicable to the gold mine managers in this situation:
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace. We ask not your counsels nor your arms. Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that you were our countrymen." - Samuel Adams, American Patriot, 1776
As a gold investor, you have watched unrealized and realized losses compound for far too long. Do not let YOUR managers ignore the obvious. The time to put an end to this abhorrent situation is here and now. Make yourself heard!
Finally, general knowledge of the lawsuit is very important. Write the media, write your elected representatives, tell your professional colleagues, and spread the word as far and wide as you can. Tell your speculating and investing friends that there is a king’s feast to be had in the gold markets by running the gold shorts. The ultimate profits will be of legendary magnitude!
William Shakespeare would have given anything to experience the Age of the Internet, and we can leverage the incredible gifts of communication with which we have been blessed to rapidly alert the entire world to what is transpiring in the gold market.
Few things cause more fear in the black hearts of conspirators than their dark deeds being exposed in the bright and unforgiving sunlight of TRUTH.
Dear friends of gold, our time is now! Gold is ready to burst from its shackles, and we will help it along. It is high time for the conspirators to reap the whirlwind that they have sown.
Cry HAVOC and let slip the dogs of war!
Adam Hamilton, CPA December 22, 2000