Gold lives! — An interview with Bill Murphy

By Kevin Michael Grace

Bill Murphy, Chairman of the Gold Anti-Trust Action Committee, was interviewed May 18.

Q: What do you make of the recent gyrations in the gold price?

A: It’s fascinating because as of [Wednesday], the entire investment world had said that gold was no longer a safe haven, Dennis Gartman and everyone else. It’s ludicrous. The price of gold was orchestrated down, first after February 29, and then about two-and-a-half weeks ago when the insiders knew what the problem was at JPMorgan. Then they got everyone and their mother to sell and short, and everyone was giving up the ship. And Thursday was one of the most stunning days I’ve ever seen; it was up 3% at one point. Everyone was just stunned, the stock market was in the tank; the dollar was higher; other markets were lower. Something dramatically changed or kicked in. Then, [Friday], with another 1% [gain], but the gold cartel was back with their 1%-rule. Normally, they try to calm down excitement, but Thursday gold was back on the radar screen again, with everyone talking about it. I think it’s exhilarating. Yesterday, the open interest on Comex, the common view was thinking it was short covered, but was it was a stunning increase of 16,000 contracts with no buying. This is a really big-league development. I think this bodes extremely well for gold

Q: What is current play in gold manipulation?

A: What they want is gold and silver off the investment radar screen when they go in for massive stimulation, quantitative easy, money printing, whatever you want to call it, in Europe and the United States. The situation is dire and getting worse; there’s no solution in sight. The economic numbers here in the US are stinko, and the real bugaboo is what’s going with the fair-haired boy JPMorgan. Until last week, it had been the most highly regarded bank and confidence builder in the US financial system, and now it is under siege. The Justice Department, after a lousy trade, is now going into investigative mode. There is much more here than meets the eye. As you know, GATA has been all over JPMorgan for market manipulation for years. But jeepers, the loss is $2 billion last week, and now all of sudden is being reported as $5 and even Jamie Dimon, the CEO, didn’t know this last week? Horse manure! Who knows where this could lead? Morgan has a $70-trillion derivative book. It could go nuclear.

Q: JPMorgan is President Obama’s bank.

A: JPMorgan is the Fed’s bank. GATA has highlighted this for years. As many of your readers may know, we sued the Fed. We’ve also gone after Morgan for the manipulation of the silver market. We’ve presented email at the CFTC hearing over two years ago, in which Andrew Maguire, who worked for the CFTC for three to four months, and said exactly what Morgan was going to do in advance, and they did it. How they signalled to their allied traders what to do; it’s a scandal of epic proportions. I keep going back to CFTC, which has been investigating this for almost four years, and they do nothing. [JPMorgan] has said they’re hedged with the silver position. You mean like they’re economic hedge which just blew up and which was no hedge at all? So we’re going to try and put pressure on the CFTC, because if they don’t do something, it blows up, and then it’s their butts on the line.

Q: Jamie Dimon has said that his firm is not engaged in speculation.

A: Well, the facts belie that. They made $18 billion, so a $2-billion loss in and of itself was nothing. The fact that this was known a couple of weeks ahead of time by the insiders, and now it’s gone from $2 billion to $5 billion, that’s the big deal. Blythe Masters, one of their top people, came out on April 5 saying that the trades were not “directional”; that’s just crap, and now they’re paying the price for it. It’ll be interesting to see what happens because, with the derivatives exposure and the counterparty risk, this is uncharted territory.

Q: The JPMorgan scandal follows the recent scandal at MF Global. When you take them together, what do they suggest about the security of investors’ funds?

A: What it suggests is that the whole thing could blow up. The MF Global thing is almost beyond comprehension. And Morgan was involved in that too, which makes this worse and which maybe why the Justice Department is getting involved. You can’t have $1.2 billion disappear and not know within 10 minutes who did what, and here we are these many months later, and no one’s been charged with anything. The CME is a joke; they pride themselves on never having a customer default, and yet all these farmers and ranchers and other investors have lost all their money. Then we find out about $200 million of MF Global money going to JP Morgan, and now we have this latest scandal. It goes back to what GATA’s has been saying all along about these people. Goldman Sachs is no longer involved in the gold market; they were the ringleader up until three years ago. My nickname for them is Hannibal Lector, but the whole crew is Hannibal Lector at this point.

Q: If we’re going to have zero interest rates forever, how are the banks supposed to make money without speculation?

A: There are better experts on this than me, but I would say because of the true inflation rate in the United States seniors and others living on interest income, which they were previously able to do, are getting squeezed now, and it’s creating a big problem.

Q: The IMF is supposedly a big buyer of gold lately. Do you think it’s possible that the IMF and sovereign nations have been depressing gold so they can buy it cheap?

A: No, the IMF rumour has been disavowed, but the central banks are buying, and the big money players are buying it at the dips down from $1,630, $1,635. The open interest went way up in a stunning reversal. The gold cartel is still doing their thing, playing the price suppression scheme because gold is such a small market compared with the bond market, the real-estate market, the investment market, the deal-making market, and they’re going to be on this until it blows up.

Q: Reuters has continued to report that the reason for the fall of gold from $1900 and especially over the last couple of months is explained by the situation in Greece and by the Eurozone — instability in Europe is supposedly bad news for gold. What do you think of that argument?

A: Horse manure. Price action makes market commentary. The gold cartel knows just what it’s doing: how to elicit commentary, how to affect other traders. If you were Rip Van Winkle, and you woke up to all this instability and things falling apart, you’d expect to see gold exploding. But the cartel had trained the markets to think in a certain way — at least until Thursday. That’s what they do. They’ve been doing it forever in what GATA calls a managed retreat. Gold is up 12 years in a row. That’s a big deal, and it’s getting ready at some point — none of us knows exactly when — to go into explosive mode. Europe is falling apart, America is falling apart; and California has a $16-billion shortfall; we’re broke. With elections coming up, the government is ready to fire the money guns, and there’s no telling what the prices of gold and silver could do in the upside in the months ahead. What happened on Thursday could be a game changer.

Q: It’s been reported that a “disorderly” exit of Greece from the Eurozone will cost $1 trillion. This means more quantitative easing in Europe, right?

A: Absolutely. What else could happen? Things are falling apart, and that the reason gold and silver have been taken down in the last couple of months is because the cartel wants precious metals off the radar screen and wants to hide what they’re really doing. What if gold is at $1,900, and they announce QE3? Gold goes to $2,200, and all the talk would be negative. So they bring down gold, so that its nowheresville compared to where it was a few months ago.

Q: The Fed’s April meeting suggests another round of quantitative easing in America. If QE3 is announced, how high will gold go?

A: I think it would go ballistic, because the gold cartel has done its thing, but Thursday proved there’s a new buying mood. We’ve been reporting for weeks now about the major-league buying on the way down, taking advantage of what the gold cartel put in motion. Its wasn’t just them, we had specs, funds going short, hedge-fund sales. It’s set up for something dramatic, because you don’t need to be Einstein to see what is going on here. The situation in Europe and the United States is dire. And Morgan could be blowing up — again, $70 trillion in derivatives, and it turns out they don’t know what they are. That’s no hedge, first of all, and second Jamie Dimon said he doesn’t understand [the $2-billion to $5-billion loss]. Well, what if he doesn’t really understand his whole derivative book? And when you look at the counterparties, you could have a chain reaction going on beyond the scenes in the derivatives world. Where would that lead? It could be horrific. I know one thing; something stinks far more than is being talked about at JPMorgan.

Q: It would take the loss of only a very small fraction of their derivatives books to wipe out the equity of all the major banks.

A: That’s correct, and that is the real scary thing. And I think that’s the real fear behind the scenes. The Dow’s going down every day now, despite the plunge protection team trying to keep it up. In one week, the loss at JPMorgan went from $2 billion to $5 billion, and if you keep going at that rate for a few weeks…

Q: After 2008, we heard all this talk that the toxic debt was going to have to be isolated and retired, and yet nothing has been done. And there is no indication that anything will be done. I find this somewhat extraordinary.

A: It is extraordinary. You’re so right. Even the attempts by so-called conservative Republicans to cut the increases in our spending and out debt are met with the shrillest reaction. We’re broke. I’ve been writing for years that the standard of living of living in the United States has to go down 35% before we can start to rectify things. Instead of two TVs, one TV, instead of two vacations, one vacation; you go out twice a week, you’ve got to go out once a week now. But people don’t want to hear this. The public has been hoodwinked by our politicians and Wall Street about what they’re entitled to. These so-called entitlements are just not there. It’s been about kick the can for a long time, but the can’s hit the wall, and it’s got nowhere to go.

Q: The received wisdom is that the US dollar is still the world’s safe haven. But I recently saw an article point out that this was the situation in 2008 — the dollar was riding high, just before the price of gold took off. Do you think the era of the US dollar as safe haven might be coming to an end?

A: You might suspect this is the case. The focus is on Europe now, but it won’t be long before the focus is on the US. Look at California. The riots in Greece will become riots in the United States when things are dealt with here. The fate of the dollar is worrying because it’s the world’s reserve currency and stands for so much. Of course this is where GATA started, with Robert Rubin when he was Treasury Secretary. He came from Goldman Sachs, where they were borrowing gold for cheap. He made the suppression of the gold price the linchpin of the strong-dollar policy. Even today, Paul Volcker says one of his biggest mistakes was not manipulating and controlling the gold price. Which they’re still doing, but they’re running out of central bank gold supply to do it. The demand is overpowering them. A few years ago, European central banks were selling four or five hundred tons a year, and now they’re buying, but what they have to suppress the price is running out. And this is what’s going to lead to the price explosion. In terms of the dollar, this is going to affect it, because like it or not the soaring gold price is going to reflect on the lousy fundamentals of the US dollar.

Q: If there is nothing that can be done about gold suppression, why should we care about it?

A: Because it’s the most important thing you can know about the gold market! When you get corrections like [Thursday's] with everyone else coming up with all this poppycock about why gold was doing what it was doing [falling in price], we said this was an orchestrated raid by the gold cartel that drew in all sorts of other people. If you know this, then you understand, and you don’t panic. You buy the dips instead of panicking. Unless someone can understand what the gold cartel does, then it’s not worth listening to them about the gold market. As far as doing something about it, GATA’s been on the case for 13 years. I think that behind the scenes, there’s a great awareness. I know that the Chinese know what we know. I’ve had three conference calls with a Chinese investment corporation. The Russian central bank has talked about GATA, and one of their top economists, Andrey Bykov, has come to two of our conferences, and they’ve been big buyers all this time. They know what GATA knows, and this is the most important thing you can know because due to the supply-demand situation the gold cartel is losing its ability to meet a deficit between supply and demand. They’re going to hit the wall, and then gold goes berserk. If you don’t need to know anything else, you need to know what GATA knows. It’s been this way for 12 years, and gold’s gone up every one of them.

Q: What will be the price of gold on the Fourth of July?

A: I go back to what I said at our Gold Rush 21 conference in Dawson City, Yukon in August 2005. The price of gold was $436, and I said it would go to $3,000 to $5,000, to clear the market, and everybody kind of rolled their eyes. Right now that seems a conservative number. I’m sure we’re going there. As for the Fourth of July, I think it’ll be much higher than it is today.

Bill Murphy is the co-founder and Chairman of the Gold Anti-Trust Action Committee. A graduate of Cornell, he played wide receiver for the Boston Patriots and then trained on Wall Street with Merrill Lynch. He worked for Shearson Hayden Stone and 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. Bill Murphy, Chris Powell and Ed Steer of GATA will be present at the World Resource Investment Conference at the Vancouver Convention Centre East, Sunday to Monday, June 3 and 4 and will host a reception, Monday, June 4, at the Lions Pub, 888 West Cordova Street from 5.30 to 7.30 pm.

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