GSR interviews BILL MURPHY
Most financial journalism and most academic teaching maintain that gold is at best a quaint antique. I’m here to argue that gold not only remains money but may again be the best and most important money — to argue that, even more than this, gold is in fact the secret knowledge of the financial universe.
Gold already is so important that Western central banks — particularly the U.S. Treasury and its Exchange Stabilization Fund, the Federal Reserve, and allied central banks — rig the gold market every day, even hour by hour, to control and usually suppress gold’s price.
Why do Western central banks rig the gold market?
It’s because gold is a powerful competitive international currency that, if allowed to function in a free market, will determine the value of other currencies, the level of interest rates, and the value of government bonds. Gold’s performance is usually the opposite of the performance of government currencies and bonds. Hence central banks fight gold to defend their currencies and bonds.
The problem is that central bank tactics in this fight affect more than gold; they affect markets generally and eventually destroy markets generally. This destruction of markets now has a name, a name used even by former members of the Federal Reserve Board. That name is “financial repression.”
There is much academic literature confirming gold’s influence on currencies, interest rates, and government bonds throughout history. Prominent in this literature is the study written by Harvard economics professor Lawrence Summers and University of Michigan economics professor Robert Barsky and published in August 1985 by the National Bureau of Economic Research, a study titled “Gibson’s Paradox and the Gold Standard.” As with all the documents I’ll cite today, the Summers and Barsky study is posted at my organization’s Internet site, GATA.org:
Summers went on to become deputy treasury secretary and then treasury secretary of the United States and president of Harvard University and recently almost became chairman of the Federal Reserve Board, so his study of gold’s influence on currencies, interest rates, and bond prices may be good authority. The Summers and Barsky study implied that governments could achieve their ideal of low interest rates and strong government bond prices by getting control of the price of gold.
As it turns out, controlling the currency markets generally long has been the most efficient mechanism of imperialism. There is much history of this as well.