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What was the 'strong-dollar policy' except gold leasing and price suppression?

By: Chris Powell, Secretary/Treasurer, GATA

 -- Published: Wednesday, 18 January 2017 | Print  | Disqus 

Dear Friend of GATA and Gold:

Financial news organizations tonight are full of reports about the imminent demise of the U.S. government's longstanding "strong-dollar policy," what with President-elect Trump having declared in an interview with The Wall Street Journal that the dollar is "too strong."

The Journal's headline is "Trump Comments Signal Shift in Approach to U.S. Dollar":

http://www.wsj.com/articles/trump-comments-signal-shift-in-approach-to-u...

The headline in the Financial Times is "Trump Team Shifts Further from Strong-Dollar Policy":

https://www.ft.com/content/50376d50-dcaa-11e6-9d7c-be108f1c1dce

CNBC says "Trump Just Signaled the Death of Clinton-Era Strong-Dollar Policy":

http://www.cnbc.com/2017/01/17/trump-just-signaled-death-of-clinton-era-...

And Marketwatch's headline is "Trump Is Waving Adios to the Longstanding 'Strong-Dollar Policy'":

http://www.marketwatch.com/story/trump-is-waving-adios-to-the-longstandi...

But as always, even now no news organization seems to be explaining exactly how the "strong-dollar policy" was implemented. The policy prevailed through periods of war and peace as well as periods of U.S. government budget restraint and wretched excess.

So what did the U.S. government actually do to keep the dollar strong?

GATA long has maintained that the "strong-dollar policy" was mainly gold price suppression, implemented largely through the gold carry trade devised by President Clinton's treasury secretary, former Goldman Sachs Chairman Robert Rubin, an enterprise in which Western central banks "leased" gold to investment banks at negligible interest rates and encouraged them to sell the metal and invest the proceeds in U.S. government bonds paying closer to 5 percent. The investment banks thereby collected a spread that was risk-free as long as they had the assurance that, as Federal Reserve Chairman Alan Greenspan told Congress in July 1998, "central banks stand ready to lease gold in increasing quantities should the price rise":

https://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm

Gold leasing gave the U.S. government a strong dollar, strong government bond prices, and low interest rates even as the government's debt began to explode under Presidents Bush and Obama. For inflation was safely concealed behind a gold price that was suppressed by artificial and imaginary supply.

So if the U.S. government wants a weaker dollar, it probably needs only to curtail gold leases and swaps and take some central bank feet off the gold market, feet that seem to have been stomping on gold pretty hard lately, given the explosion of gold swapping through the Bank for International Settlements over the last year:

http://www.gata.org/node/17099

This easing of gold price suppression probably can be done without prompting any suspicion from mainstream Western financial news organizations, which are either brain-dead or as compliant as news organizations in totalitarian countries. Tonight only Marketwatch seems to have come across a hint of what the "strong-dollar policy" was really about. Of the Rubin years at Treasury, Marketwatch writes:

"The Clinton administration's tune soon changed once Rubin replaced [Lloyd] Bentsen. Rubin drove home the shift by faithfully repeating that a strong dollar was in America's interest. Some well-timed intervention that burned the fingers of dollar bears also helped."

"Intervention"? There's a big story there, but what mainstream financial news organization will ever dare to tell it?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

* * *

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 22 and 23, 2017
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
https://cambridgehouse.com/event/54/vancouver-resource-investment-confer...

Dollar Vigilante Internationalization and Investment Summit
Friday, February 24, 2017
Resort Mundo Imperial
Acapulco, Mexico
http://tdvinvestmentsummit.com

Mining Investment Asia
Tuesday-Friday, March 28-31, 2017
Marina Bay Sands, Singapore
http://www.mininginvestmentasia.com/

Mines and Money Asia
Wednesday-Friday, April 5-7, 2017
Hong Kong Convention and Exhibition Centre
http://asia.minesandmoney.com/

* * *

Help keep GATA going:

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

 


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 -- Published: Wednesday, 18 January 2017 | E-Mail  | Print  | Source: GoldSeek.com

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