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What happens when…
…central banks don’t trust other central banks? I think I have a pretty good idea what happens, I’m quite confident that we will soon find out. Germany’s central bank is being required by their auditors to audit their Gold reserves held in London, Paris and New York. There is also fear by Germans that since their Gold has NEVER been audited that “tungsten” may have have weaseled its way into the vaults.
This flap is just now starting to brew as just this morning the AP is reporting that “German Gold held by The Bank of England has dropped below 500 tons.” The story can be read here courtesy of GATA:
FLASH: German gold report reveals secret sales that likely were part of swaps
This very situation HAD to finally come to a head from a mathematic standpoint. Since at least 1996, global supply of roughly 2,500 tons per annum has not kept pace with demand which at a minimum has been 4,000 tons per year and quite likely much much higher. Do the math yourself and even be quite generous with the amount of “scrap” Gold that you use to “plug the gap” with, central banks have BURNED THROUGH at least 15-20,000 tons. This is half to 2/3rd’s of central bank reserves at a minimum, the “jig” so to speak is just about up.
So here we have the German bank being “pushed” to an audit of foreign held Gold and they are “requesting” that New York send 50 tons per year for 3 years back to Germany. …And why is it that they don’t just say “send us 150 tons now”? Would this piddling amount upset the apple cart? It has also been said that a “suitable room” to inspect the Gold cannot be found. Do they believe that anyone buys this argument?
This could morph very quickly from one central bank not trusting another, to citizens not trusting their own central bank. I might add, as well they should! We in the U.S. have not had a Gold audit since the Eisenhower administration and now it turns out that Germany has not had a physical audit… ever…? What is the argument (I know, it is said that an audit of US Gold would be “too costly”)? “Don’t worry the Gold is all there”? That’s right, why worry, these central banks who passed around $16 trillion of “secret Fed loans” back in 2009 would never fudge anything nor would any of the well respected global financial institutions who have been repeatedly caught with their hands in the cookie jar and in clients wallets?
Back in 2001, Gold with coin melt “fingerprints” began turning up around the world for a very short period of time, it then stopped abruptly. James Turk did a piece after this occurrence showing that the Germans had swapped their NY Fed Gold (1,700 tons) for the West Point “coin melt” Gold and suggested that this was how the U.S. got around being forced to use coin melt to quell the market price. I mention this because I would like to take you back even further in time, to 1990-91. Back then, Gold started to turn up with the stamp of the Russian Czar on it. When I first heard about this, I immediately thought, “The USSR is scraping the bottom of the barrel and will shortly cease to exist.” I was correct, they in fact had run out of “hard currency” and collapsed shortly thereafter. What is going on now is not about just one country, it is about the entire global financial system because the Dollar is used by everyone and are reserves for all central banks.
Lots and lots of questions, very few answers and the ones we do get, a 3rd grader could see through immediately. The macro problem now is that the entire system is based on trust or in other words “confidence.” It is bad enough when the population asks questions (they can be portrayed as lone lunatics off in the distance) but when central banks start asking questions (or are forced to), “pay no attention to the man behind the curtain” just doesn’t pass muster. This is the sort of stuff that financial panics and or wars are bred from. It will be worth keeping a very close eye out to see what other questions are asked, how quickly they come and how absurd the answers are. “Empty vaults and empty promises” are very close to becoming well known to all!
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2012-10-24 16:41:22
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