Bill Murphy interviewed December 19

By Kevin Michael Grace

Q: How do you explain gold’s big decline this month?

A: I think it’s actually getting a lot of coverage, Kevin. It’s official sector selling from the BIS [Bank for International Settlements] and the Fed and some European banks. There was much talk about leasing with the lease rates going negative. People said, “We’ll pay you to borrow gold and sell it into the market place, and you can have free money, and in the meantime, we’re going to bomb the gold price.” The bombing and selling happened during Asian and European markets trading hours when there’s nobody around, which if you’re maximizing a profit, or trying to maximize a sale price, you don’t do it when nobody is around and sell thousands of contracts and have the price collapse in minutes. This is probably as orchestrated as we’ve seen it over the last 13 years of GATA following it.

Q: I find lease rates going negative more than a little astounding. How you can supposedly buy a service that not only costs you nothing, you actually get paid for it?

A: It is astounding, you’re correct. It’s just one of these things we follow; we see time and time again that certain things happen proving what GATA’s been saying for 13 years. It’s just staring at you in the face. It’s one thing after another. It’s the way they attack at certain times of the day, a lot of times that’s when they get to work in London, that’s what I call Plan A. Plan B is they tackle after the PM fix, when the physical market pricing is over. Like today: $1,598 was the fix, boom, $1,588 low. Sometimes they’ll do Plan C when COMEX trading is over, there are lesser volumes than normally, and they’ll attack then just to take the price down. It’s very sinister. This is what Andrew Maguire explained. He gave GATA information to put before the CFTC March 25, 2010. They signal certain things they’ll do in the market, where JPMorgan will signal to other traders to take some kind of market action. The other traders know that means a raid is coming, so they all get ready to jump on the train on the short side. Subtle things they do where they won’t get caught by wiretapping, by emails or things like this. Getting back to your first question about what happened, so we think anyway.

Q: Peter Brimelow wrote in his column that UBS said, “Larger moves were also likely taking place behind the scenes, judging from the considerable market chatter about official liquidation.” Do you find it significant that an institution like UBS would come out and say this openly?

A: There were rumours last week about some German-related company, German-bank related, that first came out and said who was doing the selling, and then they came back and denied it. Which of course is ridiculous. Yes, it’s good from our standpoint. It’s good to see. We get a kick out of it in a way because we’ve seen it for so long, and it’s been going on for so long. Why they would come out and say something like that now, you got me.

Q: When you buy an ounce of physical gold, you know what you’re getting. When you buy paper gold, how is it possible for a price to be determined on a substance about which we don’t know how much actually exists?

A: You could say that about any futures market, couldn’t you? In a sense, it’s a price discovery mechanism, really. How much the exact supply is, that’s a different subject. Futures markets are where the buyers and sellers come and determine what the price is worth, supposedly in a free market.

Q: When you think about leverage and of leasing, doesn’t this suggest that there is much less physical gold in existence than is supposed?

A: It’s a tough one to answer. What GATA’s comfortable talking about is that the central banks have about half of the gold they say they have in their vaults. The rest has either been sold through swap deals or leased out and is gone, and they can’t get it back. We recognized back at the turn of the century that there was a huge supply-demand deficit, and they were trying to keep the price down with these various hedge operations. They were leasing $300 gold for free money back then, but they would borrow it when interest rates were much higher. It was such a good deal to make money, so they would want to keep the price down. As part of the gold price suppression scheme, they were leasing all this gold from central banks and getting other central banks to sell 400 tons to 500 tons a year, keeping the price down. That’s the ammunition used to keep the price down and manage retreat year after year. When they can get gold, like they just did, from the official sector and bomb the price, everyone starts to run to the hills. Buyers pull back, and then we go through the thing on the upside again.

Q: What is the new source of gold used for shorting, given the sales by central banks in recent years?

A: A lot of the central banks have turned buyers. Not a lot, but a number of them have. The European banks have stopped selling; that’s why they needed this leased gold to hit the market. They’re going to have to give the gold back I would think; at some point they’ll have to become buyers. If they started selling $100, $150 ago, they’ve got free money, or they’re being paid to do this. It’s a good deal for them, if they can cover their positions in time.

Q: Could the paper market in gold and the physical market in bullion become completely divergent?

A: There’s a lot who think that’s going to be the case where all of a sudden you get into a crisis where there will be certain premiums paid by people wanting the physical gold who won’t trust other vehicles. After what happened with MF Global, it’s quite scary. The exchange keeps saying they’ve never had a default. The CME makes a big deal out of this, saying things are safe, and that was just proved to be bogus. Now people are going to get 72% maybe of what they had in there [MF Global], that’s a default. It’s scary to want to do business with these people. The whole integrity of the futures market is now in question.

Q: I find it curious there’s no indication Jon Corzine is under criminal investigation.

A: None. I think it’s an absolute outrage.

Q: You know that movie It’s a Wonderful Life, where the bank examiner is coming, and they’re short a few thousand dollars. Jimmy Stewart says, “Do you realize what this means? It means bankruptcy and scandal and prison!” Jon Corzine doesn’t seem all that worried.

A: That’s right. It’s just not believable that you can run an operation like that. He said he didn’t direct anybody to do anything illegal, or move money, whatever were his exact words. It’s just ridiculous. The buck stops with him. You just can’t have money disappear. There are entries and journals or things that can be spotted. You’re not going to have underlings in a corporation make decisions like that. They’d be scared half to death; they wouldn’t do anything unless they had to do it or were told to do it. I don’t understand why there isn’t more of a commotion about him and why there aren’t more names. Not just him, but other names too.

Q: How long can this manipulation last? We read about the tremendous amount of gold that’s been bought in China and India, and gold that ends up in private hands can’t be used to guy the system, right?

A: That’s exactly right, and that’s why the price keeps going up every year. It’s the main factor that other people that don’t look at things from a GATA perspective don’t get. The central banks used to have 32,000 tons of gold. We don’t think they have 13,000 tons or 14,000 tons now, that’s probably what they’re down to. Certain countries can’t sell; it takes an Act of Congress for the US to sell. That’s why we think some of the US gold has been swapped and sold, because it doesn’t say you can’t swap our gold and sell someone else’s gold, it says you need an Act of Congress to sell our gold. We don’t think the central banks have the gold they say anymore, and that’s the mechanism that keeps the price from being much higher now than where it would be. That’s why the Russians have followed us since 2004, and they’re reserves are way up. We spotted the Chinese buying five years before anybody else did. They’re encouraging their citizens to buy gold. They know what’s coming with all the money printing in Europe and the US. I think this negative lease rate shows the cupboard is getting bare, and they’re a little desperate to keep the price of gold from exploding, so they use a different tactic to get other people to help them.

Q: I’ve seen the suggestion that the US government is accumulating gold and is looking to bring the price down now so that it can accumulate more gold with a view eventually to a re-evaluation of the US dollar. Do you think there’s anything in this?

A: I don’t buy it for a second at all. In the first place, we don’t have half the gold we say we have. It’s supposed to be 8,133.5 tons. I don’t think we have half of that in our vaults; the rest of it has been swapped out or is gone. Why should the Federal Reserve and the Treasury be so secret about US gold and won’t give GATA a lot of information from the Freedom of Information Act? What’s so secret about gold that’s just sitting there? You’re not going to have all these secrets about something that’s just sitting there. Why not have it audited?

Q: What do you think is the ultimate purpose of this gold manipulation?

A: It’s probably multifaceted. They don’t like gold competing with the dollar. There was a paper written by Larry Summers when he was in Harvard, “Gibson’s Paradox and the Gold Standard,” on the relationship between gold and interest rates. They want to keep the price of gold down because what happens every time the price of gold is soaring? What do you hear from the average pundit—there’s too much inflation; it’s a crisis; it’s the dollar falling apart. This is bad for Wall Street and bad for Washington. Gold is seen as an inflation barometer and a barometer of financial health. When gold is taking off it’s an easy thing for the media to point to. What they’re doing is called a managed retreat; it only goes up so much per year. We have a 2% rule; it goes up 2%, then stops cold. It happens all the time, but no other commodity market trades like that. None.

Q: Do you think there’s a way out of the American debt crisis except through inflation?

A: No. None of the politicians want to do anything that needs to be done to rein in spending, and we’re broke. If you just look at the numbers, it’s staggering how much we’re indebted. God forbid when interest rates go up. Right now we’re not paying any money on it. What happens when interest rates go back to normal?

Q: It seems to me that interest rates are going to remain effectively zero forever.

A: It would seem that that’s going to create an awful lot of imbalance. There’s got to be a quid pro quo there, don’t you think?

Q: I was taught that capitalism meant people saving money and this money being loaned out at interest to business. Now the idea is that people don’t need to save money; in fact, saving money is bad. The government will create all the money business needs.

A: You’ve just given a major reason for people to own gold and silver. There has to be a quid pro quofor something like this occurring for this long. It’s got to mean there are other things that are suffering besides the income of senior citizens, who are getting buried by this. They’ve got no interest rates, so they can’t get interest income. With inflation, the cost of things goes up every year.

Q: Could you talk a little bit about the increasing prominence of GATA in 2011?

A: We sued the Fed, and we got a cheque on one count; the judge ruled in our favour. The rest the judge wanted to keep secret. We did prove our case to some degree in what we were able to learn about their operations. We had this major conference in London in early August at the Savoy Hotel. We had sold out: about 400 people. We had incredible speakers; many of them said it was one of the finest conferences they’ve ever been at. We put a lot of effort into it. Jim Sinclair was there, Eric Sprott, John Embry, James Turk. All kinds of people, don’t want to leave anybody out, but they’re as good as it gets when it comes to the gold and silver world. Money managers from all over Europe. We were very impressed that there were a number of younger people there, which has not been seen at that many gold conferences.

Q: For quite a long time your organization was regarded like the flat earthers or people who believe in phrenology or the Ptolemaic system. It’s become a lot more mainstream this year, hasn’t it?

A: That’s the reason we attracted the people we did to our conference, people who are willing to pay attention to what’s going on here. It’s very important to us not to just know the market but to understand what’s happened and why. As I said earlier about this managed retreat, what’s going to happen to the price of silver and the JPMorgan short position. This year we got close to 50 bucks in silver, we were talking about this a year or two ago, and we got it. If we’re right, silver has been traumatized here last spring by JPMorgan and friends and stuff and took it down from $50 to low $30 and it’s still traumatized by other attacks, but eventually they’re going to run out, and it’s going to go back up. If you know what we know, it’s very helpful for the big picture. Most important, we have our stuff documented for 13 years; it’s not like we’re just throwing something against the wall. We’re taking on the richest, most powerful people in the world, and they don’t like it. Other people that are in the mainstream investment world, even the gold world, they’re pathetic. They never say a word; they just go on and on as if nothing is happening. But from our standpoint, it’s the most important part of the gold and silver markets. We can explain what just happened and why.

Q: In October, I reviewed the Brad Meltzer’s Decoded episode on Fort Knox. One of his investigators, Christine McKinley, was frightened by the implications of there being no gold there. She said that even if it were true, we shouldn’t be told. Do you think many people take the same position with regard to gold manipulation?

A: I think the people in power do. We think it’s better to get to the truth. Yes, it would be a disaster now, and the dollar would just crater, but to suppress this knowledge now means that it would be even more damaging later. This is why things are going so wrong in this country—everything is managed, whether it’s the plunge protection team in the stock market, the bond markets manipulated down to these levels, probably even information flow out of the government.

Q: What will be the price of gold July 1, 2012?

A: I would say, just a guess, I think we’ll take out $2,000. Or at least make new highs above $1,900.

Q: What does GATA have planned for next year?

A: These conferences take a lot out of you. Right now we’re still getting our DVD out. We hope to be selling it next year. We’re going to the Cambridge House conference in Vancouver in January, and the New Orleans investment conference. We seem to have a conference every three years, and so much goes into them, we’re going to rest on our laurels for a while on this one.

Bill Murphy is the co-founder and Chairman of the Gold Anti-Trust Action Committee. A Cornell graduate, he played wide receiver for the Boston Patriots and then trained on Wall Street with Merrill Lynch. He worked for Shearson Hayden Stone and then Drexel Burnham before founding his own brokerage firm. He is the Patron of Le Metropole Café, a website for gold investors, which offers a two-week free introductory membership.