As any student of Austrian Economics will recognise, this title (at least the part in italics) is NOT original. It is the title of a collection of essays penned by the greatest economist of the twentieth (and arguably any other) century, Ludwig von Mises. These essays were written between the years 1923 and 1931 and drew on work that Mises had done earlier, notably in his first major work - The Theory Of Money And Credit.
That book was published (in German) in 1912, two years before the outbreak of WWI and a year before the US Central Bank - The Federal Reserve - was (Unconstitutionally) established. Tragically, it was not translated into English until the 1940s. By that time, the interventionist damage, culminating with the theories of John Maynard Keynes, had already been done.
Please note the use of the word "interventionist" in the above paragraph. Although modern (post Keynes) economic theories - with the honourable exception of the Austrian School - differ on many points of detail, they all take for granted the starting point that government intervention is "beneficial" to the economy. Whereas Austrian and Classical economic theory puts government in the role of a "referee", modern economic theory STARTS from the premise that in the economic as in the political sphere, the proper role of government is that of a RULER.
This intervention comes in the form of permissions - you MUST do this; prohibitions - you must NOT do this; and regulations - you MUST function ONLY in the way we direct. To a secondary extent, government gains the means to enforce these permissions, prohibitions, and regulations through the collection of taxes. But to a PRIMARY extent - an extent which has expanded in the US ever since the establishment of the Fed in 1913 - they gain the means through their ABSOLUTE control of what the nation uses as MONEY.
How do they do this? To quote the title to Mises' collection of essays, through "the manipulation of money and credit". But as a pre-requisite for the manipulation of either money or credit, the government must first gain control of the money. The process by which this process was "accomplished" in the US is illustrated by means of successive issuances of US paper money on our A History Of U.S. Paper Money page. The story of how Gold was first separated and then completely removed from any connection with US money - and everybody else's money too - is told on our The Early Gold Wars page.
A famous quote attributed to one of the early members of the Rothschild family goes like this (the quote may not be exact, we are reproducing it from memory): "Give me control of a nation's money and I care not who makes its laws." This is true, as far as it goes. But what must always be kept foremost in mind is the simple fact that while "laws" (in this context - permissions, prohibitions, and regulations) can be made by any body of people, in order to ENFORCE the laws, it is NECESSARY to control what the nation uses as money. As this control extends, the body of new "laws" proliferates. And at the point where the control is all encompassing, the potential to pass - and enforce - these "laws" has no further limits. If you doubt this, have a look at the potential power of the President of the United States as illustrated by his power to issue "executive orders". Further, examine the progressive trampling of the US Constitution which has taken place ever since 1913 and which has been all but completed by the latest Administration.
The foundation on which the power of the US government or any other modern government rests is their continuing ability to decree what is used as money, to demand the "acceptance" of that money, and to control the amount of the money which is in circulation.
With these three powers intact, the rest is window dressing. The Romans called it "bread and circuses". Over the past century plus, the equivalent has been the "welfare - warfare" state, of which the US is the latest example.
For quite a few years now, there has been an increasing discussion on government manipulation of financial markets. This is a bit like getting all hot and bothered about who gets to sit where at a poker game while ignoring the gent who is stacking the deck in full view of all the players. Governments control what is used as money. They control interest rates. They control the amount and the frequency of any new issuance of "liquidity". They regulate all aspects of economic activity. They control, through licensing and regulation, who gets to play in the game and who doesn't. They set all the trading rules. All this is well known yet seldom reflected on.
The famed "business cycle", supposedly an inherent "flaw" of capitalism or the market economy, is entirely the result of government intervention. Any economy will "boom" - for a while - if interest rates are artificially lowered and new government-issued "supplies" of the medium of exchange (the money) are continually injected into the system. Any economy will "bust" when the inexorable economic distortions created by the "boom" expand to the point where they can no longer be controlled.
Does government "manipulate" markets? Of course they do. How could it be otherwise? They manipulate - and completely control - MONEY!
Over the past week, there has been a great deal of interest and commentary over an article called "Not Free, Not Fair: The Long-Term Manipulation Of The Gold Price" - (PDF file - 71 pages - 730Kb). We have downloaded and read the report. It is balanced, comprehensive, and well presented. The conclusions it draws from the evidence amassed are eminently reasonable and almost certainly correct, as are its descriptions of the manipulative practices used.
Government has been "manipulating" Gold prices for as long as such a concept as a "Gold price" has existed. In a rational economic and financial world, in a world where Gold IS money and therefore the common denominator in all prices, there is no such thing as a "Gold price", every economic good and service is priced in terms of Gold. Only when paper is substituted for Gold as the circulating medium of exchange does the concept of a "Gold price" arise. And when gold is forcibly removed, by government edict, from ANY connection with the circulating medium of exchange, the "Gold price" takes on an important role - for government that is.
To enhance and then preserve their political power, government progressively takes over what is used as money. Having done so, they inherently gain and use the power to manipulate ALL financial markets. This connection having been established, no government intent on retaining power will sit idly by and allow it to be challenged. Ultimately ,the only thing that can challenge it is a rejection of the government-controlled medium of exchange. A rising Gold "price"- in terms of Government-issued and controlled "money") is a potential challenge. A booming Gold "price" is a REAL challenge.
We do not think that there is much doubt in the mind of any regular reader of these commentaries that governments "manipulate the Gold price". We have covered on many occasions the various methods they use to accomplish this. But what we want to reinforce here is WHY they manipulate the Gold "price". When THAT question enters public debate, as it did for a while in the 1970s, it will require more than an expose on financial "deck stacking", it will require a debate on fundamental political and economic principles.
Don't hold your breath waiting for such a debate to come up in the Presidential debates or in any of the oceans of learned "analysis" which will accompany the election campaign. And don't think you can stop government manipulation of any "market", including the Gold "market", by exposing their means. What has to be exposed, again and Again and AGAIN, is their ENDS. "They hate us for our 'freedom'", prattles Present Bush. Yep, Americans, like the rest of us, are indeed free - to do exactly as we're told.
Fundamentally, that will only change when indivduals regain control of their own lives by regaining control of what they accept in exchange for the fruit of their labours. That's what money is. Whenever people have been truly free to choose, they have chosen Gold to fulfill that VITAL role. The closer that day comes again, the more desperate and blatent become government manipulations of the Gold "price". If they want to continue to rule, and they do, they have no choice.