10:57p ET Wednesday, April 7, 2010

Writing today at The Daily Caller, Jim Rickards, senior managing director of market intelligence for the consulting and research firm Omnis Inc. in McLean, Virginia, and former general counsel for the Long-Term Capital Management hedge fund, suggests that solvency could be restored to the U.S. government and strength to the U.S dollar if gold was revalued to the neighborhood of $5,500 per ounce. The alternative, Rickards writes, may be only the hyperinflating away of unpayable U.S. debts.

Of course Rickards' suggestion presumes 1) that the U.S. government really still has all the gold it claims to have and that there are no foreign encumbrances on it; and 2) that the U.S. government has the ability to control the gold price.

The former presumption is increasingly in doubt, what with the Federal Reserve acknowledging that it has secret gold swap agreements with foreign banks and insisting that these agreements remain concealed from the American people, to whom the gold is supposed to belong:

http://www.gata.org/node/8192

The latter presumption -- about the ability of the U.S. government to control the gold price -- is denied in many respectable quarters even as GATA has been complaining for 11 years that gold price control in fact long has been the first if largely surreptitious objective of U.S. government economic and foreign policy:

http://www.gata.org/node/8052

At its collapse in 1998 LTCM was suspected of being uncoverably short 300 or so tonnes of gold, and the risk of the gold price spike that might result from the firm's default on that gold was seen as another reason for the takeover of the firm that was frantically arranged by the Federal Reserve Bank of New York. Having been LTCM's counsel during the takeover, Rickards may know a lot more about gold than he's telling, which is why what he says about gold on business television programs and in written commentaries should be watched closely, and why his candid memoirs might make a best-seller -- or get him run over by the truck taking the latest load of shredded Federal Reserve records to the McLean dump.

Rickards' commentary is headlined "Debt Denial" and you can find it at The Daily Caller here:

http://dailycaller.com/2010/04/07/debt-denial/