Three revolutions, part II

— The following is the second half of an edited speech by veteran gold banker Ferdinand Lips, chairman of Switzerland’s Top-Gold, and author of Gold Wars: The Battle Against Sound Money As Seen from a Swiss Perspective. The speech was presented by Jean-Pierre Schumacher, Lips’ partner at Top-Gold, during the Gold Anti-Trust Action Committee’s Gold Rush 21 conference on Aug. 8 in Dawson City, Yukon.

If the world returned to the gold standard, that would be the best-case scenario for mankind. Everyone would benefit. The United States could become a greater economic power, but perhaps gold-rich Asia would benefit most. The world economy could finally achieve its full potential, with employment for all, including the young. And, hopefully, world peace would follow.

The question remains: How can the gold standard be achieved? By three revolutions: the Gold Anti-Trust Action Committee (GATA) revolution; the education revolution; and the mining revolution.

The GATA revolution

We Europeans admire the work of GATA. For seven years, GATA, under the leadership of Bill Murphy and Chris Powell, has been fighting for a free gold market.

Mr. Murphy often informs us about how honest people every day are robbed by arrogant governments, bureaucrats, useless central banks, and an all-powerful banking system.

It is a crime to manipulate markets, depress the prices of people’s assets, destroy the economies of nations (primarily those in Africa), and drive hundreds of millions of people into poverty. GATA, therefore, deserves our full support.

GATA has rightly criticized the mining industry for not protesting against the obvious manipulation of the gold market. Gold miners are oblivious to what is happening to their product, shareholders and themselves. The mining industry consists mostly of technical people and they often don’t understand how the manipulation of commodities exchanges is affecting them. Either that or their eyes are closed.

If you know how much effort is required to get a few grams of gold out of the ground, then you know that this sort of manipulation is a crime. Mining people must support GATA, it’s in their best interest.

The job of defending the gold industry once belonged to the World Gold Council (WGC) but they have failed and the WGC is no longer the friend of gold mining. Rather, it serves the interests of its biggest sponsors, which also happen to be the biggest gold hedgers.

All gold and silver mines should voluntarily provide GATA with an annual contribution, not based on ounces produced but what they deem to be right. All investors, but primarily those with interests in gold and silver mines, must subscribe to GATA’s dispatches. Each day they will receive high-class, honest information. GATA is the only organization that is fighting for miners and investors, fighting for their rights — and their money.

GATA and Mr. Murphy’s Internet site, LeMetropoleCafe.com, should be launched on a broader basis and become a structured business. The benefits would be enormous, not just for a few stock-market gains but for the global economy, countries, mines, shareholders, and workers.

GATA is needed because the gold cabal should not be allowed to endlessly steal our money. The GATA must grow and become a powerful organization to combat this effort.

It reminds me of a movement in Switzerland. In 1291, thirty men from the Swiss mountains assembled in a meadow near Lake Lucerne in an attempt to find freedom. At that time, Europe was ruled by kings, princes and other nobles with little regard for the common man. The commoner had to pay taxes, fight and often die on the battlefields for the glory of kings and the feudal system.

Determined not to bow to any oppressor, these men went to war, and in three decisive battles defeated the army of the Hapsburg Empire.

Other cantons joined the original three, and Switzerland, a country without significant natural resources, now has the highest per capita income in the world, and remains the only direct democracy.

If we want to change the monetary “non-system,” then we must inform people about sound monetary principles. For a century, people have been convinced that gold is finished and that paper money will rule.

If we look at history, we know that fiat monetary systems end. One need only look at the American Continental system (a paper-money method used to finance the American Revolutionary War by forthcoming tax revenue) and the John Law experiment (a failed 2-year paper money system in 18th century France) to know that paper monetary systems finish poorly.

But the current paper-money experiment is even worse. For the first time, all the global currencies are backed by nothing.

Currencies of nations are in a state of confusion. Synthetic currencies are springing up such as the Special Drawing Right, the euro, and so on.

How could this mountain of irredeemable money come into existence? Because there is no gold standard. People are not informed about what money is or about what sound money means. The lessons of history are forgotten.

We need to create a worldwide monetary institute that organizes conferences and teaches people about sound monetary principles using a systematic approach. An organization such as the Foundation for the Advancement of Monetary Education (FAME, www.Fame.org) could play an enormous role in this endeavour.

Such a monetary institution could start in Switzerland and spread to Canada, Singapore, Dubai, Japan, China, South Africa, and Argentina. In a few years, millions of people would know about sound money principles, and thus want to return to the gold standard.

This would in turn increase demand for gold, and the free market would determine the gold price, despite the best efforts of manipulators to do otherwise.

Thanks to the Internet, the message would spread rapidly.

But who would undertake this? Who has enough enthusiasm to create such an institute? It cannot be me, I am 74. But there should be plenty of candidates. Of note, we must abolish the restrictions placed by the International Monetary Fund (IMF) in its articles of agreement that prohibit member countries from linking their currencies to gold. Either this, or member countries must quit the IMF.

The mining revolution

As a representative of the gold-mining industry, I want to say it is in a big squeeze and in big trouble. In fact, it’s a miracle that it still exists.

Thirty years ago, gold mining companies paid dividends to their shareholders because gold in the ground was a wasting asset. Today, they rarely pay any substantial dividends. Why? Because the low price of gold prohibits them from doing so.

We need a healthy mining industry; it’s good for the world economy.

The price of gold should be 50 per cent higher. The mines, the shareholders, and the workers would prosper. But it is not only the low price of gold that is hurting gold mining. Huge fluctuations in global currencies, increasing energy and labour costs are also having an effect. And, while commodity prices are also increasing, in many cases gold grades are declining.

Gold mining needs a higher gold price. I have been active in the industry in South Africa and Canada for about a decade and never have I seen an industry that does so little to market its product.

What’s more, the South African government just watches as its mining industry is criminally destroyed. And the South African unions actually believe that the mining companies are doing a bad job. (If you think about it, they are doing a bad job.)

Shareholders of mining companies should hold management accountable for selling gold at US$300 per oz. or less, thereby squandering precious assets.

Most mining executives are engineers and do not know that the price of gold is being managed.

Mining companies should simply withhold ten per cent of gold production from the market. That amounts to roughly 200 tonnes per year, or about ha
lf of what the central banks are selling annually under the Washington Agreement.

If the central banks are allowed to suppress the price of gold, then mining has the right to fight back. Two hundred tonnes of withheld production would help immediately.

In his essay Can Gold Producers Survive By Promoting Jewelry?, Larry Parks of FAME wrote: “To revive the fortunes of the gold producers, it is necessary and sufficient to restore gold as the choice of free markets and free people all over the world as money that: doesn’t depreciate at home or abroad; is as steady as the stars and as faithful as the tides. Or, as the American Federation of Labor put it at the turn of the last century: ‘Gold is the standard of every great civilization.'”