GOLDEN FLEECED
by Rob Kirby
KirbyAnalytics.com
June 19, 2007

Over the past couple of weeks the gold market has been buffeted by VERY public announcements on the part of two countries [Spain and Switzerland] and their sales of gold bullion.

In the case of Spain, Spanish Finance Minister Pedro Solbes said,

"What we aim to do is to sell gold, an unprofitable asset, to reinvest in bonds, which are more profitable," a Solbes spokeswoman quoted the minister as saying in answer to a question about the gold sales in a Senate hearing.

"The objective of our reserves is to maximize their profitability." 

Funny thing though, with the price of gold having risen steadily since making generational lows of U.S. 286 bucks back in 1999 – anyone who has owned gold has profited. In fact, sovereign gold sales [or dumps, perhaps?] have INSTEAD tended to only have the following short-term effect on gold prices and hence returns:

So ask yourself, in a world where Central Banks around the world are expanding fiat money supplies at double-digit growth rates – is this picture [disposing of real stuff at reduced prices for ever-depreciating currency] consistent with maximization of profits? 

In the case of Switzerland, just last week the Swiss National Bank pre-announced their intentions to sell 250 tonnes of gold [one fifth of their alleged holdings] between now and September 2009.

The Swiss announcement led to such disparaging [mainstream] gold-price-negative headlines as,

            Swiss sales dash hopes of gold recovery

By Ambrose Evans-Pritchard

Last Updated: 3:14am BST 15/06/2007

Almost makes one believe that someone – somewhere – has it in for the price of gold, eh?

When one stops to consider the sage words of precious metals expert Jason Hommel – this becomes more than abundantly clear:

            Swiss gold sales of 250 tonnes are worth $5 billion.

Swiss gold sales pale in size in comparison to the Bank of China's $1200 billion of reserves. China hopes to diversify 5% of that into gold, which is $60 billion. Where is China going to get $60 billion worth of gold, or about 2871 tonnes? 

This remains the unanswered question in the gold market.

So who could possibly have it in for the price of a strategic commodity like gold and why? A bit of sleuthing turns up a few clues.

Does This Look Like Profit Maximization? 

The article linked here - details, from an insider’s perspective, exactly what led to the collapse of the Soviet Union. I have dealt with this topic before in an essay titled, Moscow On The Hudson, where I detailed exactly how declining oil and gold revenue in the 1980’s was DIRECTLY responsible for the collapse of the former Soviet Empire.

Author Yegor Gaidar [director of the Institute for Economies in Transition in Moscow. Between 1991 and 1994, he was acting prime minister of Russia, minister of economy, and first deputy prime minister] wrote a book detailing what really did happen.

As I’ve explained to you, the former Soviet system was dependant on limited trade [specifically grain] with the WEST to feed its population. As Gaidar recounts,

“In 1963, Nikita Khrushchev sent a letter to the leaders of the Socialist bloc, informing them that the Soviet Union would no longer be able to supply them with grain. That year, the Soviet state bought 12 million tons of grain--and spent one third of the country's gold reserves to do so. Khrushchev commented: "Soviet power cannot tolerate any more the shame that we had to endure."

Gaidar then goes on to tell the story of oil and how EXPENSIVE oil of the 1970’s led to military adventurism on the part of the Soviets. As Soviet oil production “ramped up” – the inevitable ‘production peaks’ meant that increasingly larger amounts of capital had to be invested back into oil producing infrastructure to maintain output levels.

But then oil prices sewered. Gold too.

Interestingly, Gaidar equates the 1980’s plunge of oil prices to the economic death and subsequent break-up of the Soviet Union. BUT – I would suggest that he mistakenly attributes this happening solely to events and decisions made in Saudi Arabia circa 1985. 

Low oil prices were as important to the dismantling of the former Soviet Empire THEN as low gold prices are to the maintenance of “faith based” Global U.S. Dollar Hegemony NOW.

Familiar Fleece Jobs, The Song Remains The Same

Just last week, I spent an evening [Monday, June 11] at a ‘private’ mining-finance-related function in Toronto with a private merchant-banker associate. The function we attended featured the Rt. Hon. Jean Chrétien [former Prime Minister of Canada – 1993 to 2003] as speaker. After our meal he delivered a keynote address and then took questions from the audience.

Most of the questions were focused on world events.

My merchant banker friend asked the former P.M. what his views were on the likelihood of the "Amero" becoming a reality. He was somewhat evasive in answering this question with the gist of his response being that "IT" would require much study and consideration before it could ever be considered seriously.

A case-study which some would argue is going on RIGHT NOW – behind our collective backs!

Then I asked Mr. Chrétien about the dis-hoarding of Canada’s 600+ tons of sovereign gold. 

While acknowledging that the dis-hoarding of Canada’s gold began in the Conservative regime before him – I asked him if, in retrospect, he felt that the continued sale of better than 300 tons of Canada’s sovereign gold under his leadership was "a good or prudent thing to do" - and would he act differently if he had the chance to do it all over again?

Rt. Hon. Jean Chrétien

Mr. Chrétien’s response to me [if not verbatim – very close to these exact words], 

"that was almost 15 years ago and I can not remember this thing, so I do not want to comment on that".

Amazing eh? The Swiss have news releases and “TRUMPET” future intentions to sell 250 tonnes of gold – but Canada’s former leader cannot even REMEMBER real sales of 300+ tonnes?

Hmmmmmmmmm?

The guy is a former Minister of Finance, Minister of Justice and Attorney General, Minister of National Revenue, Minister of Industry Trade and Commerce – AND Prime Minister for a little more than 10 years in which Canada disposed of more than 300 tons of sovereign gold – and he claims he doesn’t remember?

And did I mention, my dog ate my homework?

Although you had to be there to appreciate the inflection in his voice when he answered my question – it was MORE than apparent he DID NOT LIKE THE QUESTION.

We Beat Them At Their Own Game

We now know [or should know] that the Soviet System was really defeated – IRONICALLY – by good ole fashioned CENTRAL PLANNING [rigging of prices of oil and gold] by the world’s biggest proponents of FREE TRADE – the U.S. and Britain along with the COMPLETE pitching of Canada’s Sovereign Gold Stocks. 

The deceptive rigging of markets carries on to this day. Maintenance of an inherently unstable, global, faith-based fiat empire demands this. Anyone who dares to see through and report on this thinly veiled sham for what it truly is – they’re challenged with “foggy memories” on the part of officialdom and intellectual ghetto-ization by academia and the mainstream press. All the lurid details of these “high-financial-crimes-against-humanity” are heavily embargoed by officialdom in the name of National Security and maintenance of U.S. Dollar Hegemony.

This is all perpetuated with the noble assistance of an indentured – disgrace-to-their-profession breed of sham, aiding-and-abetting economists.

With an older and wiser Mr. Putin now holding a hand flush with “energy aces” – me wonders if he might be intending to give us capitalists a lesson in our own ‘sheep-shearing’ game.

© 2007 Rob Kirby
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Rob Kirby
Kirby Analytics
Toronto, Ontario, Canada
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