The Sham Cartel

A cartel is a group of horizontally connected entities having horizontal agreements to affect commercial prices. Cartels have been outlawed by anti-trust and unfair competition laws in the USA as being inherently evil in a free market economy that relies on fair competition and survival of fittest to maximize productivity for the over all increase in wealth and living standards of the citizenry. However, there are also common laws that indicate that the "king can do no wrong", and governments are typically immune to anti-trust laws. Governments can hide behind governmental immunity to perfect pricing schemes that would otherwise throw banksters and crooks in prison. Governments get a free pass, because they are really controlling prices for our own good.

We all understand OPEC, a cartel of a coalition of horizontally connected oil producing countries, who meet regularly, to set and fix, and reset and refix, production levels, so as to maintain stable oil prices, so as to neither shock the world into economic depressions nor provide motivations to eliminate oil as the world premiere energy source. As such, the production level floats up and down over time. OPEC is immune to US anti-trust and unfair competition laws. OPEC is a true cartel, operating for stated specific purposes. We all get that.

Now comes the Gold Cartel, lead by the ECBs to set a limit on the number of tones of gold that can be sold by member countries during a period of years. Hence, there is a horizontal agreement between horizontal entities to fix sell tonnage levels to affect price, which entities also enjoy governmental immunity that would otherwise be considered inherently evil and unlawful. In the laws of conspiracy, one need not actually do the deed, but only agree to the scheme to be carried out. Here, the WAG2 agreement is, by acronym, a Washington DC agreement, and apparently, Uncle Sam was in there pitching for the agreement, which has been carried out. As such, Uncle Sam must be considered a co-conspirator, but also subject to governmental immunity, even though not actually signing the agreement, which conspiracy to affect price becomes more obscure to the average Joe on main street USA. The Gold Cartel minimally includes the ECBs and Uncle Sam, to affect gold prices.

But what is the real nature of the Gold Cartel? Lets take an honest look at it. The terms are that the gold bullion selling must be limited to, NO MORE THAN, 500 tones sold a year. Now, when one sells gold what happens to the price of gold? Yeah, I know this is complex stuff, but bare with me. When you sell gold, the price of gold goes, hhhmmmm, DOWN!!! As such, on its face, the WAG2 is an agreement to prevent the price of gold from falling, that is, limit the down side price of gold. No other conclusion is possible. And this makes superficial sense as the ECBs have the largest collective hoard of gold bullion in the world, most notably, France, Italy, Germany, England, et al. Of course, selling has reduced their stocks over the term of the agreement.

So, the Gold Cartel is in the apparent business of controlling gold prices, so they wont GO DOWN, thereby, used to support the price of gold up, protecting the value of the golden hoards. This makes complete sense. Now lets look at how that gold selling has actually affected prices. It appears that the selling is concentrated and most active, when the price of gold goes up. The most striking example of this was the 40 ton smack down of the gold price in May 06 when gold was launching up in its second bull channel trend. That selling, to smack down a rising gold price, is completely contrary to the apparent plain-language purpose of the Cartel's WAG2 agreement. When prices are going up, don’t sell, but hold, if you want to retain value in your portfolio. Apparently, then, retaining value is not the real purpose behind the gold sales. Well, maybe the selling at high prices is to gain profits? British Exchequer Brown, selling tons of British gold at the bottom of the gold price, did not seem to be profit or wealth retention oriented sale, now was it? The selling of gold is matched to the rising price of gold, and hence, in fact, the WAG2 has been used, in effect, to suppress gold prices.

It was learn during the Nixon era, that price fixing causes more problems that it solves. Here, the suppression of prices have tanked gold exploration, resulting in short suppression, but long term shortages, that in the end, will rocket gold prices sky high. It is ridiculous to suppose that the selling of gold to suppress prices was to take advantage of long term sky high price hikes, when you have already sold your gold. Hence, the cartel is not functioning to create long term sky high gold prices.

On the face of it, it appears that the cartel WAG2 is used, contrary to the plain language expected use, not to support gold prices, but to suppress gold prices. If the sale of gold is not used to prevent a collapse in gold prices, is not used to retain wealth, is not used to capture profits, is not used to take advantage of long term sky high prices, what possibly can the WAG2 be used for, other than to suppress gold prices as indicated by the timing of the gold sales? None.

Here comes Uncle Sam's role, the effective obscure ringleader of the cartel, proudly having the "Washington" formal name on WAG2. Good old Uncle Sam is also the leader in fiat printing, the pervasive injector of fiat money into all foreigner's forex reserves, as the world's reserve currency. What motivation could there possibly be, to suppress gold prices, when that relic has been deemed publicly as irrelevant? The average Joe on main street understands inflation and gold, despite the government pronouncements of an irrelevant relic. The number of tons sold is actually timed to suppressed gold prices, which gives average Joe and others around the world, a comfortable feeling with the sound value of fiat while also having a tendency to calm markets, which are the stated public policies of the government, that is, to keep a strong fiat dollar.

When you look at the uses of WAG2 objectively, the Cartel does not sell gold using periodic adjustments to protect against both too low and too high gold prices, like OPEC and the oil price, but rather is used solely to suppress high gold prices consistent with the stated purpose of Uncle Sam, to maintain a strong dollar. When you look at the effective uses of the Cartel WAG2, the use has been to suppress the rate of increase in the gold price, which supports the fiat dollar, to Uncle Sam's delight, and well as supporting the fiat of the ECBs. The Cartel WAG2 is not an agreement to support gold prices, as indicated by its plain language terms to limit sales, but rather an agreement, as effectively used, to suppress gold prices, and as such, Uncle Sam's gold cartel, is a farcical Gold Cartel, the sham cartel.

Derrick