Behind Closed Doors


April 23, 2001 - This past December in "The Smoking Gun" I provided substantive proof that the Exchange Stabilization Fund was intervening in the gold market. From publicly available reports prepared by the Federal Reserve, I established that the weight of gold held as a component of the US Reserve Assets has been changing, and that these changes - some of which are of significant size - result from activity by the ESF. These Federal Reserve reports conclusively demonstrate that the ESF has been intervening in the gold market since at least 1996.

Though these Federal Reserve reports make clear that the ESF is involved in the gold market up to its 'earmarks', a lot of people remain skeptical. I don't know why that is. It is worth noting that many of the most obstinate skeptics who deny US government involvement in the gold market live overseas and have little, if any, experience or understanding of the way the US government really works. But even Americans find it difficult to accept that the US government intervenes in the gold market. Ironically though, they readily admit that the government intervenes in the debt markets, foreign currency markets, and according to a growing number of people, even in the US stock market. It is therefore most baffling that they do not concede the ESF's involvement in the gold market.

Maybe people are skeptical because they haven't bothered to take the time to read the Federal Reserve reports for themselves. Maybe it's because it's easier to accept the word of some government bureaucrat who denies ESF involvement in the gold market than it is to seek out and look for the truth. Maybe they don't want to believe that the US government is lying to them when Treasury official after Treasury official denies any involvement by the ESF in the gold market. I don't know. Or maybe it's because they think that government officials work for the American people - and not for vested interests - in their deliberative sessions behind closed doors. Wouldn't it be refreshing if we could peek-in behind those closed doors to see what really is being said?

The reality is that very little emerges from behind closed doors, and the minutes and transcripts of closed-door sessions that do make it into the public domain contain redactions that blank out the 'good parts' - the revealing statements. But what if someone forgot to redact one of those 'good parts'? Too fantastic to be true? Well, sit down, take a deep breath and carefully read what follows.

A few weeks ago Reg Howe contacted me and asked my view on something he had discovered. He wanted a second opinion on this discovery, just like I contacted him for a second opinion after I came across the Federal Reserve reports showing the ESF's gold related activity.

When I read what Reg showed me, I was stunned. But at the same time, it was clear to me what I was reading and what had happened. A transcript of the Federal Reserve Open Market Committee has been released for which somebody forgot to get his or her red pen out. Someone forgot to redact some very revealing words about the ESF and its activity with gold. Here's what was said.

www.federalreserve.gov - Transcripts [See the transcript from the January 31st 1995 meeting.]

MR. MATTINGLY. It's pretty clear that these ESF operations are authorized. I don't think there is a legal problem in terms of the authority. The [ESF] statute is very broadly worded in terms of words like "credit" - it has covered things like the gold swaps - and it confers broad authority. [Emphasis added]

Please read the above statement again, and maybe even a third and fourth time. This statement, which I can only assume was inadvertently not redacted by the FOMC Secretariat, confirms what we already know, but the US government has all along refused to admit - that the ESF is involved in the gold market. In fact, the authority of the ESF is so broad that "it has covered things like the gold swaps". In other words, the authority of the ESF is so broad it has even been used to authorize "gold swaps".

Before further exploring the above quote, some background information is necessary.

The proceedings of each FOMC meeting are taped. These tapes are then transcribed, and the Federal Reserve releases these transcripts after five years. Thus, the transcripts from the 1995 meetings were released earlier this year, and having now read through them, I can honestly say that they contain a treasure trove of material, even though there are many redactions. The important point is that these transcripts are not only informative, but they are an accurate record of what is going on behind closed doors. Here is what the Federal Reserve itself says about the FOMC transcripts:  www.federalreserve.gov

"Beginning with the 1994 meetings, the FOMC Secretariat produced the transcripts shortly after each meeting from an audio recording of the proceedings, lightly editing the speakers' original words, where necessary, to facilitate the reader's understanding. Meeting participants were then given an opportunity within the next several weeks to review the transcript for accuracy.

For the meetings preceding 1994, the transcripts were produced from the original, raw transcripts in the FOMC Secretariat's files. These records have also been lightly edited by the Secretariat to facilitate the reader's understanding. In addition, where one or more words were missed or garbled in the transcription, the notation "unintelligible" has been inserted. In some instances, words have been added in brackets to complete a speaker's apparent thought or to correct an obvious transcription error or misstatement.

Nonetheless, for the pre-1994 transcripts, errors undoubtedly remain. The raw transcripts were not fully edited for accuracy at the time they were prepared because they were intended only as an aid to the Secretariat in preparing meeting minutes. The edited pre-1994 transcripts have not been reviewed by present or past members of the Committee."

In other words, the 1995 transcripts are accurate. There are no disclaimers for them, like those made for the pre-1994 transcripts. Therefore, the above quote by Mr. Mattingly about the ESF and gold is accurate. And who is Mr. Mattingly? Virgil Mattingly is General Counsel of the Federal Reserve, its chief legal advisor.

That Mattingly's remark passed without comment by anyone in the FOMC meeting implies that everyone knew exactly what he was referring to. In other words, to explain ESF authority his example was purposefully chosen. It was one to which the Federal Reserve Governors could all relate because it was something they saw happen during their watch. In my imagination I can see them sitting around the big FOMC conference table nodding their heads in agreement when Mattingly used this example of the gold swaps to explain how broad the ESF's authority actually is.

Recognize too that though he is talking in the past tense, it doesn't necessarily mean the swaps had already happened. They may still be happening because he may be referring to the authority that approved the gold swaps and presumably the swap lines, but not necessarily the date of the actual swaps themselves.

So that this quote of Mattingly is not taken out of context, let me provide some background information. Also, I invite you to read the full 145-page transcript of this January 31st, 1995 FOMC meeting if you would like to confirm both the accuracy of the above quote and the background information I am about to provide. By reading the entire transcript you will also see how frequently material was redacted.

Mattingly's comments were made in a discussion by the FOMC on the rapidly deteriorating financial situation in Mexico. Crisis conditions had been prevailing since the Peso began tumbling the month before, i.e., December 1994. You will recall that the Clinton administration back then had proposed that Congress provide a $40 billion package of government guarantees to bailout those who had loaned money to Mexico, and that Congress had rejected this proposal. The administration was therefore scrambling to come up with a way to get the money they thought necessary to 'fix' the problem. Unable to tap the Treasury directly because of the rebuff by Congress, the administration turned to the ESF.

Because the Federal Reserve was to be part of the proposed bailout, the FOMC was reviewing what role the Federal Reserve would play in conjunction with the ESF. A proposal was on the table for the FOMC's consideration. A Mr. Fix-it who seems to be the go-between for the Treasury and the Fed was presenting the proposal. His name is Ted Truman. And he was responding to various FOMC members who were questioning whether the ESF had the legal authority to do what was being proposed. Hence, the Federal Reserve's legal counsel Virgil Mattingly responded, using the "gold swaps" as an example of just how broad the ESF's authority actually is.

To give you a flavor of the full discussion underway in the FOMC meeting, here's a sample of the transcript.

MR. MELZER. What ability do the Treasury or the ESF have to take us out of an obligation [i.e., repay the Federal Reserve] if funds are not appropriated by Congress? Do they have the ability just to say, we committed to this and we are going to pay the Fed off?

MR. TRUMAN. Yes, they could.

MR. MELZER. But if they can do that, why can't they just advance it themselves?

MR. TRUMAN. They could, but I think they feel that it would be useful to their objectives to have a lot of people - [apparently the rest of his comments are redacted]

The discussion then continues on this point, but touches upon the relationship between the ESF and the Treasury. These comments also establish that the ESF does not use "appropriated funds", meaning that the ESF is answerable only to the Secretary of the Treasury and the President. All actions of the ESF are beyond Congressional authority.

CHAIRMAN GREENSPAN. Could I just formally respond to Governor Lindsey? There is a question here of whether or not the amount the United States Treasury gives us has to be appropriated funds, which I think is really where our examination of the issue has to be. In examining the take-out, we ought to make certain that we talk to them with respect to the question of what happens if they do not get the appropriated funds.

MR. TRUMAN. Mr. Chairman, the Exchange Stabilization Fund does not have appropriated funds.

CHAIRMAN GREENSPAN. Are we going to be getting a take-out from the Exchange Stabilization Fund?

MR. TRUMAN. I think that is what is in the program.

CHAIRMAN GREENSPAN. Okay.

SPEAKER(?). That is not the same as the Treasury.

MR. TRUMAN. Even if we didn't, the precedent in the 196Os - I think there was a question then about whether the Treasury could engage in foreign exchange operations outside of the ESF - was the use of Roosa bonds in the 1960s. The Treasury floated Roosa bonds to obtain foreign currencies and used some of those currencies to take us out. That did not involve appropriated funds. That was treated as a debt-management operation.

The above passage confirms what we already know, but many people refuse to admit. The ESF is a slush fund beyond Congressional oversight. It can be used to 'get around' most anything (i.e., it can skirt normal governmental procedures). No wonder so many people want to do away with the ESF. There is no room for it in our democratic process. It is not subject to the normal checks-and-balances so carefully crafted by the Founding Fathers that have proven over time to be so essential for control within the federal government. The ESF is the antithesis of the American foundation of representative government because it subjects a free people to an unconstitutional governmental force. Still not convinced? Here are some more excerpts:

MR. LINDSEY. My second question has to do with our credibility. I don't know what questions to ask, and I hope you will help me out in that regard. I have this document in front of me, which includes a page entitled "What is the Exchange Stabilization Fund?" The document came from Treasury International Affairs. I gather it was written by them. I have written enough of these to know what you do, and that is to tell your point of view. Paragraph 3, not to mention the dots indicating an omission in paragraph 2, got me a little nervous. Paragraph 3 says these holdings in the ESF are used to enter into swap arrangements with foreign governments, to finance exchange market intervention, to provide short-term bridge finance, etc., and all these things are great. So, basically paragraph 3 is establishing that this is not unprecedented. My question would be: Do we do all these nice things if it's not in support of the dollar? Is this unprecedented with regard to the fact that we are supporting another currency?

MR. TRUMAN. The language before the dots is--

MR. LINDSEY. I am talking about the third paragraph. I will go to the second paragraph in a second. I'm sorry. I am running a little out of order. It is saying the ESF has done all these things.

MR. TRUMAN. The legislation governing the objectives of the ESF was changed, I think for the most part in the mid- to late-1970s. The changes included the language that the government of the United States and the International Monetary Fund have the obligation to promote orderly exchange rate arrangements leading to a stable system of exchange rates. That was interpreted to include making loans to Bolivia in helping it maintain a system of stable exchange rates.

MR. LINDSEY. So that has happened before?

MR. TRUMAN. Yes. They have made loans to or financial arrangements with at least 31 countries around the world over the last 50 years.

MR. LINDSEY. I think we all will be asked questions about this. Can you read this paper and tell me that there is not something missing that I should know about, meaning that this is not only the truth but the whole truth? MR. TRUMAN. I can only say that Treasury lawyers have looked into the question of whether these operations are legal under this broad authorization of what they can do and what the purpose is--

MR. MATTINGLY. If I can help out?

MR. LINDSEY. Yes.

MR. MATTINGLY. It's pretty clear that these ESF operations are authorized. I don't think there is a legal problem in terms of the authority. The statute is very broadly worded in terms of words like "credit - it has covered things like the gold swaps - and it confers broad authority. Counsel at the White House called the Treasury's General Counsel today and asked "Are you sure?" And the Treasury's General Counsel said "I am sure." Everyone is satisfied that a legal issue is not involved, if that helps. [Emphasis added]

MR. LINDSEY. Is there anything missing on this page?

MR. MATTINGLY. No, there is not. If you look at the last paragraph, for example, that is part of the statute.

MR. LINDSEY. About notifying Congress in writing in advance?

MR. MATTINGLY. The statute says that with the permission of the President they can make loans.

There you have it. The ESF doesn't have to notify Congress about anything in advance. It is under the sole authority of the Secretary of the Treasury and the President, and they can do "gold swaps" without any Congressional approval, which brings up an important point I made in "The Smoking Gun".

I had noted a curious pattern in the correspondence emanating from the Treasury Department. The Secretary of the Treasury never answered any questioning letters concerning the ESF, even if they were written directly to him. Rather, one of his assistants invariably responded. I therefore wondered whether the Treasury Department chain of command was being relied upon just like President Nixon had tried to rely upon the White House chain of command in an attempt to avoid being sucked into the vortex of a growing Watergate scandal. I even asked in "The Smoking Gun": "Did Secretary Summer's knowledge of the goings-on in the secretive ESF explain why his underlings, and not him, were writing the letters denying US government involvement within the Gold market?" The above excerpts from the FOMC transcript clearly establish that my question needs answering.

It is becoming increasingly clear as more and more evidence emerges that the Secretary of the Treasury does not answer questions concerning the ESF because he, but not his underlings, know to what extent the ESF is engaged in gold related activity. His underlings can say that the ESF is not involved in the gold market because as far as they know, what they say is true. However, we now have sufficient evidence proving that the ESF is indeed involved in the gold market. Therefore, the Secretary of the Treasury does not respond to letters asking questions about the ESF and its activity in the gold market. He can't answer them truthfully without 'spilling the beans'. He obviously knows everything about what really is going on within the ESF, in contrast to his underlings. Or at least most underlings because it appears that one of them is in there up to his elbows washing ESF laundry. His name is Ted Truman.

From the FOMC transcripts it is quite apparent that Ted Truman has a special role. Though recorded in the attendee list in the FOMC transcripts under the featureless title of "economist", his role is anything but ordinary. The transcripts reveal that he clearly speaks for the Treasury Department in FOMC meetings, and is very knowledgeable about the ESF. The insight displayed by him in the FOMC minutes makes it clear that he is not just fully informed about the ESF and its operations, but that he probably is also intimately involved in ESF decision making. Consequently, the following excerpt is particularly intriguing.

MR. PARRY. What is the size of the ESF?

MR. TRUMAN. The usable funds in the ESF today, counting the foreign exchange as usable, amount to roughly $25 billion.

MR. PARRY. Can you say how it is broken down?

MR. TRUMAN. About $5 billion is invested in Treasury securities and the balance is roughly equally divided between marks and yen. I think they have slightly more yen than marks.

MR.PARRY. Thank you.

MR.BOEHNE. Is any of it obligated in any way beyond what we are talking about with Mexico?

MR. TRUMAN. It is obligated only in the sense that they have one other swap arrangement with the Bundesbank.

Wouldn't it be interesting to know what this swap arrangement with the Bundesbank entailed? What is the nature of this swap? Is it a Dollar/Deutschemark swap facility? Or is something else being swapped, like gold perhaps?

Gold being swapped with the Bundesbank? It's an outrageous thought. Or is it? I have already established that the ESF is very much involved with gold. The only thing I haven't established is with whom the ESF has those gold swaps that Virgil Mattingly was talking about.

Let's put one and one together here to see if we can come up with an answer. According to Virgil Mattingly, the ESF has authorized gold swaps, presumably in the recent past (circa 1995). According to Ted Truman, the only outstanding swap facility of the ESF (circa 1995) other than the one established for Mexico is their facility with the Bundesbank. Ergo, the ESF has a gold swap facility with the Bundesbank.

It's an interesting proposition, and one that fits well with another newly discovered fact. Some very interesting sleuthing by Mike Bolser, who has been assisting Reg Howe in his lawsuit against the BIS, has revealed that the Treasury has made a small but very significant accounting change. Mike noticed that the Treasury Department has changed the designation of nearly 1700 tonnes of inventoried gold at the US Mint's facility in West Point, New York (approximately 21% of the total US Gold Reserve) from "Gold Bullion Reserve" to "Custodial Gold".

The August 2000 Status Report on US Treasury Owned Gold stored at West Point has a designation of "Gold Bullion Reserve". (See: http://207.87.26.43/gold/00-08.html). But the September 2000 and subsequent status reports inexplicably designate this same gold that is stored at the US Mint in West Point as "Custodial Gold". (See: http://207.87.26.43/gold/00-09.html).

This change was made without explanation, so rather than let the matter remain unexplained, Mike diligently contacted the Treasury asking what seemingly are two uncomplicated questions. Would the Treasury please explain why they made this change, and what does this change in designation mean with respect to the ownership status of the gold at West Point?

They are simple questions, but perhaps they touch too close to a nerve. Not surprisingly, the Treasury so far has not responded to Mike. I have some views on what Mike discovered, and why the Treasury is so quiet about it. I think this change in asset classification is related to the ESF gold swaps. Here's my thinking.

The change Mike spotted possibly occurred as a result of accountants looking at the financial statements of the US Mint being prepared for its annual report ending fiscal year 2000. Note that the previous director of the Mint (Phillip Diehl) resigned in early 2000, so this was the first annual report signed by the new director (Jay Johnson). If there is one thing that government bureaucrats do well, they take great pains to call things by their right name. To do otherwise would put their job in jeopardy if something under their responsibility came under Congressional scrutiny, and it was subsequently determined that the name assigned to something was incorrect or misleading.

Therefore, this change in the descriptive label for nearly 1,700 tonnes of gold at West Point from "Gold Bullion Reserve" to "Custodial Gold" was purposeful. It happened for a reason. This conclusion is all the more plausible because the Treasury did not change the classification from "Gold Bullion Reserve" to "Custodial Gold" to describe the gold stored in Fort Knox or at the US Mint in Denver. Maybe new US Mint director Johnson saw something he didn't like. What could that have been?

I've already put one-and-one together to establish that the ESF has "gold swaps" with the Bundesbank. It therefore does not require much conjecture to add one supposition to the equation by concluding that the gold in West Point has been swapped with gold owned by the Bundesbank, thereby necessitating its reclassification from "Gold Bullion Reserve" to "Custodial Gold". Here's what I think has happened.

The Treasury Department wanted to make gold available to some bullion banks. This statement is based on my basic premise that several of the big banks have gold books that are hopelessly imbalanced. By having borrowed short and loaned long, these banks have in their quest for profits imprudently fallen into the alluring but usually fatal banker's deathtrap - a mismatched loan book. But what's worse for these banks, it is even more difficult and treacherous to try extricating themselves from this particular deathtrap because they haven't mismatched their loan book of dollars, which we all know can be created by the Federal Reserve 'out of thin air' if dollars are needed to bailout banks from a deathtrap predicament. Instead, these banks have mismatched their gold book. And no one - not even the Federal Reserve - can create gold out of thin air.

So given this reality about the nature of gold, the Treasury had to turn elsewhere to find the gold necessary (1) to keep these banks from defaulting on their bullion obligations arising from their mismatched gold books in an environment where metal had become increasingly difficult to come by and/or (2) to keep the gold price low so that the likelihood of default by the banks would be lessened, even though metal would remain tight because fabrication year after year was exceeding newly mined supply. Rather than accept the bitter pill that certain banks were about to default on their bullion obligations, the Treasury looked for alternatives and found one - they put their hand into the till, until recently known as the Gold Bullion Reserve at West Point. They swapped this gold with the Bundesbank. I'll explain how they did it, but let's first consider the practical aspects of this transaction.

In all likelihood, these particular bullion banks needed gold in Europe where their obligations were originally established. There is very little gold lending in New York. It is a practical problem to ship the gold out of West Point without raising the alarm of government auditors. It is costly too. Also, it is likely that some of the gold in West Point is coin-melt from the 1933 gold confiscation. Even if it could be smuggled out of the West Point vault into the market without raising suspicions, the alarm bells would go off at the refiner and soon thereafter in the market because everyone knows that only the US government has coin-melt bars. The appearance of coin-melt bars in the market would immediately raise suspicions that the US Gold Reserve was being dishoarded, an outcome that the Treasury would obviously take steps to avoid in concocting its scheme because the US Gold Reserve cannot be depleted without Congressional approval. Therefore, one is faced with the practical considerations of overcoming these hurdles, but the answer is relatively simple.

The Treasury has gold in West Point. The Bundesbank has gold in Europe. The Treasury cannot directly do a deal with the Bundesbank because unlike the ESF, the Treasury is subject to Congressional oversight. So instead the Secretary of the Treasury and the President decide to use the ESF to set up a swap line for gold with the Bundesbank.

By so doing, the gold in the Bundesbank's vault in Europe becomes ESF gold, to do with as they please - i.e., the ESF lends this metal to bailout certain bullion banks. And the Bundesbank now owns the gold in West Point, which as a result was purposefully re-classified from Gold Bullion Reserve to Custodial Gold because the Treasury no longer owns this gold, having swapped it out through the ESF in exchange for gold in Europe owned by the Bundesbank. Case closed. The mystery of the abnormally low gold price is solved. The ESF did it.

The abnormally low gold price is the result of the mounting irrefutable evidence that the ESF is deeply involved in the gold market, and I do mean deep. They are involved in some 1,700 tonnes worth because that is the weight of gold stored in West Point, which was probably being swapped at the rate of a few hundred tonnes per year from circa 1995 through 2000. There are two other tidbits that I would like to share with you that add even more validity to this supposition.

First, a couple of months ago I was analyzing the 1998 and 1999 balance sheets of the ESF. Being an ex-banker, I know a little bit about accounting, including where to find the big holes through which the proverbial truck can be driven. And suffice it to say, I found one of those, which could suggest that in these two years 975 tonnes of gold came into the market from the ESF. Interestingly, after reaching this conclusion, I wanted to test it. So I called a top gold market expert whose supply/demand analyses are second to none, and who believes that gold from the US reserves has been coming into the market for several years.

Without telling him about my analysis of the ESF balance sheet, I asked him how much gold he thought came out of the Treasury/ESF in 1998 and 1999 in total. His response was 1,000 tonnes, a mere 25 tonnes difference from what I deduced from the ESF financial statements. When I told him this, that we had both reached the same conclusion from different sources, he chuckled but was not in the least bit surprised, being so convinced that the Treasury/ESF has been a major source of metal for years. I have thoroughly reviewed his supply/demand numbers since 1994 and have determined that as much as 2,000 tonnes of gold from the US reserve may have entered the market in order to make the gold price as low as it is, which leads me to the second tidbit that I would like to share with you. It is just as intriguing.

This same individual told me several months ago about some astonishing intelligence he had learned from a source in Europe. He told me that the Bundesbank's gold vault was empty, which seemed so preposterous that I found it hard to believe. He also admitted that this news startled him when he learned about it, and that he did not have an adequate explanation for it. He knew that the Bundesbank was an active lender of gold, but he had a difficult time accepting the possibility that all 3,400 tonnes that it owned had been loaned. Yet he was confident that his source had provided him with accurate information.

We now know what has happened. The Bundesbank has loaned 1,700 tonnes, one-half of its 3,400 tonnes reserve; the other 1,700 tonnes were swapped for gold in the US reserves, requiring the change in the West Point vault from Gold Bullion Reserve to Custodial Gold. In other words, the Bundesbank's vault is empty because one-half of their gold is stored in West Point not Europe, and the other half has been loaned out.

Despite the irrefutable proof that the ESF is involved in the gold market, two questions remain unanswered. First, what's the ESF's motive? Unfortunately, we just don't know for certain.

Many, including me, claim that it is to use gold to provide the liquidity needed to bailout some big banks that have imprudently grown their gold books by recklessly expanding credit and mismatching their asset/liability maturities. These banks are the ones with the unusual - some say abnormal - derivative activities that are named as co-defendants in Reg Howe's suit against the BIS. That this list includes Germany's largest bank may explain why the Bundesbank would agree to participate in this gold swap scheme. It was bailing out one of its own.

Others claim the ESF aims to manipulate the gold price to make inflation numbers look better than they really are by keeping the gold price artificially low. And there are some who argue that the US government, acting at the behest and under the instructions of the big banks, aim to destroy their combined arch enemy - gold, regardless of the fact that the gold mining industry would be destroyed along with it.

This last theory is not outlandish. It has currency because gold is the world's only free-market money. In contrast to national currencies, all of which circulate only because of government fiat, Gold's value derives from everyone who understands that it has usefulness as money. And governments and banks don't like the fact that while they can manipulate gold for a time - and as have we have seen in recent years, even a long time - they cannot in the end control the price of gold anymore than they can control the price of a Picasso painting. The value of a Picasso is determined by the free-market, and so too is gold. In short, you and I give gold its value - not the central banks, not the US government or any other government, either acting alone or together. But the US government either has not yet learned - or refuses to admit - this reality that its power to control gold is limited, which is an inexplicable conclusion unless you accept the notion that governments have short memories and need to relearn what logic says they should have learned from experience.

If logic prevailed, the US government would have learned from its ill-fated attempt in the 1960's to keep the price of gold abnormally cheap at $35 per ounce that the market determines gold's value. But instead, the US government is about to learn that it cannot keep a manipulated 'floating-rate' gold price from rising any more than it was able to keep the manipulated 'fixed-rate' gold price from rising thirty years ago. The free-market rate of exchange between dollars and gold will prevail, eventually repeating today what happened in the 1970's after the artificially low $35 rate was no longer tenable - the gold price will skyrocket higher. It is well worthwhile keeping in mind that the gold price rose nearly three-fold in the eighteen months after the fixed-rate price was abandoned in August 1971.

Then there is the second unanswered question. To what extent is today's exceptionally low gold price the responsibility of certain bullion banks, which have cheapened gold by extending gold credit to such an extreme, and the ESF, by perpetuating this scheme? This question too does not have an answer, at least not yet. But as the truth about the ESF's involvement in the gold market continues to emerge and become more widely known, the price of gold is destined to rise to a more normal level, just like it did after August 1971. The high price that gold eventually achieves will indicate how badly certain bullion banks and the ESF have damaged gold mining companies and the gold industry.

In conclusion, while we don't know whether any of these motives for manipulating the gold price that I ascribed to the US government are accurate, one point is clear and cannot be denied. The US government cannot claim that the ESF is not involved with gold. We now have the irrefutable proof that establishes beyond any reasonable doubt that the ESF is indeed involved in the gold market. We know this for a fact because of our peek behind closed doors.

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