Even mentioning gold on this site makes me nervous, since it brings forth all the gold bugs and other super-hard currency fans. Repeat after me: Japan created money supply like a drunken sailor for the better part of two decades and still barely prevented deflation. William Jennings Bryan’s “Cross of gold” speech came about because the gold standard in the latter 1800s produced the so-called “Long Depression” that hit farmers hard.
Even though this post is about not taking proper care of one’s gold, as in poor custody practices, we suspect some readers will use it as an excuse to talk up a gold standard. Please don’t. Read this instead:
Why a gold standard is a very bad idea
However, this little tale about the Bank of England playing cute with the gold of various nation states it’s supposed to have is awfully reminiscent of Bernie Madoff. One reason to be suspicious of Madoff was the return profile, which got whistleblower Harry Markopolos’ attention: his returns were way too steady as well as being impossible given the strategy Madoff claimed he was using. But the second that should have sent anyone remotely knowledgeable running for the hills was the lack of a credible custodian. A custodian is an independent party that holds your securities for you. It’s a high volume, low fee business dominated by big boys like the Bank of New York Mellon, JP Morgan, and State Street. By contrast, the Madoff trustee was a fledgling bank. From the New York Times:
Richard Abramowitz, an investor who lost money at the hands of Mr. Madoff, testified that it had been his impression that Westport National would take possession of his assets and verify their existence. “That’s what a custodian is,” said Mr. Abramowitz, a lawyer in Weston, Fla….
During testimony, bank officials demurred on several questions posed by the plaintiffs’ lawyers about the ill-fated Madoff accounts. When asked about how the bank maintained accurate records, Richard T. Cummings Jr., the former bank president, simply replied: “I can’t answer that question.”…
When the investors’ accounts were transferred to Westport, the bank did not confirm that there were assets in the accounts, and indeed, no assets existed, according to court documents.
Now back to the weird “Where’s my gold?” situation that some governments are facing vis-a-vis the Bank of England. And now having warned you not to discuss the gold standard overmuch, I have to bring it up. Back in its heyday, before the start of the Great War, governments would ship physical gold back and forth when required. That is why the gold standard broke down then: nations weren’t going to put gold on carriers when sea lanes were under attack. So one assumes that many countries held a lot of their own gold. I would welcome reader input as to when it became common to store national gold with what amounts to a custodian, here the Bank of England.
The other part I can’t fathom is why everyone was so trusting. One reason the custody system works so well is that investors here have the right to take physical delivery of securities, which is a meaningful if rarely used check on bad behavior. If I were a German official, I would have argued that Germany gold needed to be looked at regularly, better yet with officials with some other countries making their inspections along with me. You can see where being too accommodating has gotten the Germans.
Mind you, I don’t buy the notion that the gold is important for doing business with Russia. Gold is way too cumbersome. Russia is offering it as a faux friendly fallback: “If you are going to be silly about setting up accounts in our banks so you can deliver roubles, we’ll always take gold.” But the Russian gold option does give the Continentals another excuse for demanding their ingots back.
And do knowledgeable readers think that the UK is foot-dragging to get Brexit negotiating leverage? The problem is that Germany didn’t drive the EU even in Merkel days, and Scholz has less personal capital than she did.
By Jorge Vilches, former op-ed contributor for The Wall Street Journal – New York and other financial media, who has studied this topic in depth for the past 20 years. Originally published at The Saker
Brexitology focused keenly on UK fish but fully ignored the EU´s gigantic gold reserves supposedly still vaulted in custody at the Bank of England. Adding insult to injury, a UK-EU no-deal financial services crash-out divorce went by almost unnoticed… not only without the bang of the still postponed “financial equivalence” protocol… but also without a mere whimper from specialized media and Remainers. Now, the Ukraine crisis with its new payment requirements for the badly needed Russian oil & gas…overlapping with essential yet unfinished Brexit business…will necessarily evolve into a vicious NATO internal gold war. Paraphrasing James Carville spiced with some traditional British flavor, “It´s the bloody gold, stupid” [Refs.1+ 2]
Rule Britannia
As UK Prime Minister Boris Johnson would have it, the physical repatriation of the EU gold supposedly still vaulted in London would “mightily” affect the future of Europe with very deep, high-voltage political impact both sides of the English Channel. In this scenario No.10 Downing Street would easily negotiate the EU gold bullion availability only under specific Brexit conditions favorable to the UK. Actually, doing this could turn out to be absolutely necessary and should go far beyond the enormous intrinsic value of the EU gold supposedly still vaulted at the BoE. Let me explain.
[Ref. 3 thru 13]
NATO Gold in London
Russia´s new rubles or gold payment requirements for any of its goods or services will necessarily prompt a major gold war between the UK and the EU probably resulting in NATO´s first-ever internal head-on gloves-off confrontation. After WW2 the idea was to keep Europe´s gold bullion safely away from the former Soviet Union and Josef Stalin, just in case. So decades ago current EU member states deposited most of their gold in custody at the Bank of England (BoE) in London. Now, the UK will dare to weaponize the approval of EU gold repatriation requests and other gold-related issues as a very convincing bargaining tool for lots of still unfinished yet most important Brexit business. So,
(a) Whitehall could indefinetly delay the EU gold delivery unless Brexit pending issues are agreed in favor of the UK.
(b) Or, quite simply, the BoE would not ever return such EU gold supposedly kept in custody for the past decades because it has been partially or totally sold off or loaned out or compromised as explained below with former UK Prime Minister James Gordon Brown knowing about it all too well.
The Mother of European Conflicts
If history is any guide, hostilities will explode the instant the EU member states individually or collectively rightfully demand a yet-non-existant fully independent world-class functionally detailed audit of the EU gold supposedly still in ´custody´ at the BoE. This should take plenty of time and is the perfect excuse for delaying the whole process always under the exclusive perview of London, not Brussels. Or unmanageable problems would arise as soon as EU nations require immediate repatriation of at least some of such ´theoretical´ bullion, most probably all of them at the same time in view of circumstances. Then, either (1) some gold could possibly slowly be returned here and there (albeit with great delay ) but only under very vague London terms and changing the unfinished Brexit aftermath to levels yet unheard of, or (2) no gold would be returned as it has been sold off or compromised in different ways as explained hereinafter. And the UK better not decide to pay Russia even with a single gold coin as the EU would rightly wonder who owns it.
BoE Darkness
The London gold and silver markets have always been beyond “opaque” without any significant reporting of transactions or positions. No data has ever been offered either on commercial banks holding accounts at the BoE, or precise technical identification of gold custodies, let alone those belonging to EU members. As Venezuela knows all too well – and EU member states could be next — who may or may not be acknowledged as a valid claimee of anything vaulted in Threadneedle Street or whereabouts is an open subject left to the entire discretion of the Canary Wharf masters, not EU politicians. Same goes for the enormous unallocated gold and silver liabilities of the so-called ´bullion banks´… or any other pertinent data. [Refs. 14+15+16]
The (bad) German Experience
Very recently Germany had to wait 5 long years to forcefully and painfully repatriate only a portion of its gold from the BoE and never got back any of the gold bars originally deposited, which clearly explains the delay. [Ref.17+18]
So while the EU freezes to death and its economy stops dead in its tracks, the many pending questions include
(a) does the BoE still have all of the EU´s gold bullion… or has it been sold off or loaned out as many experts insist ?
(b) is the BoE willing and able to immediately return the EU gold it may still have left to legitimate owners, if any ?
(c) who are the legitimate owners of BoE-vaulted gold after decades of European reshuffling of political borders ?
(d) would the ECJ decide gold ownership… or the British Judiciary… or the BoE ? On what basis, exactly ?
(e) has the BoE lent, swapped, re-hypothecated, leased, leveraged or encumbered such bullion now lien with other many alleged legitimate claimees also standing in line with ´fractional un-allocated synthetic´ bullion custodies unfit-for-purpose per “Digital Derivative Pricing Schemes“ thru which no one can know who owns what where (if anything) ?
I kid you not.
Today´s “paper gold” derivative transactions constitute a genuine pure-bred Ponzi scheme exceeding many-fold the real gold bullion theoretically behind them, probably with a 100 to 1 ratio or higher as London´s Square Mile knows all too well. Of course, the ECB, the IMF and the BIS would also claim it actually is “their” gold no ?
British economist Peter Warburton was 100% correct when he described that Westerncentral banks were using derivatives to control commodity prices and protect government currencies against the public’s recognition of currency devaluation. Warburton’s essay “The Debasement of World Currency: It Is Inflation But Not as We Know It” is posted at https://www.gata.org/node/8303
But however it unfolds, the “continental gold” now possibly still vaulted in London will necessarily trigger an internal NATO existential conflict in no uncertain terms (and desperation) in absence of the much-needed audit parameters and still missing gold bar serial numbers records affecting ownership and status claimed by more than one (supposedly legitimate) recipient, plus gold bullion quality and purity data, overdue custody costs, transportation & insurance, etc.
In passing, when push gets to shove (and it will, trust me) per their ´special relationship´ the US Federal Reserve would side with the BoE because it finds itself in exactly the same situation regarding the physical bullion they should still be theoretically vaulting for third parties, sovereigns included. In synchronized lockstep with Anglo-Saxon exceptionalism, the Fed´s gold custodies have never been audited either — as they should have – and the specialized commentariat worldwide is convinced that such bullion is not fully available either. Furthermore, the US would welcome any new additional problems for the EU as that was the whole idea behind provoking Russia into this unnecessary war.
__________
(#1) http://www.gata.org/node/13310 (#2)https://www.counterpunch.org/2015/11/25/too-big-for-fed-have-central-banks-lost-control/ (#3) https://www.goldmoney.com/research/goldmoney-insights/the-destruction-of-the-euro?gmrefcode=gata
(#4) https://www.rt.com/business/507178-global-debt-record-high-pandemic/ (#5) http://www.gata.org/node/20642
(#6) http://plata.com.mx/enUS/More/403?idioma=2 (#7) http://www.gata.org/node/4279
(#8) https://www.goldmoney.com/research/goldmoney-insights/will-covid-19-lead-to-a-gold-standard
(#9) https://www.goldmoney.com/research/goldmoney-insights/the-psychology-of-money?gmrefcode=gata
(#10) https://www.goldmoney.com/research/goldmoney-insights/the-destructive-force-and-failure-of-qe?gmrefcode=gata
(#11) https://www.goldmoney.com/research/goldmoney-insights/will-covid-19-lead-to-a-gold-standard
(#12) https://www.goldmoney.com/research/goldmoney-insights/anatomy-of-a-fiat-currency-collapse
(#13) https://www.wsj.com/articles/mountain-of-small-loans-looms-over-europes-pandemic-hit-banks-11611147480?mod=mhp
(#14) https://www.bullionstar.com/blogs/ronan-manly/london-gold-vaults-bait-and-switch-lbma-prepares-bigger-changes/
(#15) http://www.gata.org/node/19734
(#16) https://www.goldmoney.com/research/goldmoney-insights/prospects-for-the-uk-and-the-pound?gmrefcode=gata
(#17) https://www.bullionstar.com/blogs/ronan-manly/european-central-bank-gold-reserves-held-across-5-locations-no-physical-audits-will-not-disclose-gold-bar-list/
(#18) https://www.bullionstar.com/blogs/koos-jansen/guest-post-47-years-after-1968-bundesbank-still-fails-to-deliver-a-gold-bar-number-list/ (#19) https://www.goldmoney.com/research/goldmoney-insights/the-looming-derivative-crisis?gmrefcode=gata
(#20) https://www.bullionstar.com/blogs/ronan-manly/amid-london-gold-turmoil-hsbc-taps-bank-of-england-for-gld-gold-bars/
(#21) http://www.gata.org/node/19735 (#22) https://blogs.wsj.com/moneybeat/2014/09/18/if-scotland-splits-what-happens-to-the-gold/ (#22)https://www.goldmoney.com/research/goldmoney-insights/hyperinflation-is-here
(#23) https://www.thectsnews.com/wp-content/uploads/2020/11/open-letter-to-RBA.pdf
(#24) https://reaction.life/why-is-the-euro-and-the-eu-allowed-to-cost-almost-anything/
(#25) http://gata.org/node/2092
62 comments
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As a non-expert in this, I’m astonished that any country would put its gold reserves in the vaults of another country. Especially one with Londons reputation.
It has misused foreign gold in the past – in 1804 during one of the many financial crunches of the time, stolen Spanish Dollars were overstepped with the Kings Head (George III) and issued as currency. This led to a ditty at the time:
I’ve no idea how much this is impacted by Brexit, but I would guess that if the UK played hardball with its gold reserves, this would inevitably lead to close to war level retaliation, such as completely excluding UK banks from the EU or even asset confiscation.
So far as I’m aware, the only historical precedent for this is in post-war situations where private assets have been seized to make up for a countries inability to pay up in gold – this happened to Japan after 1945 when the assets of Japanese individuals and companies in China and Korea were seized to pay war compensation.
Let’s not talk about countries. If you bought gold and said gold is not in your own possession, then there’s always going to be some counterparty risk. I am not a gold bug, but I did buy some gold .. just in case. The bank that I dealt with tried their mightiest to get me to take “Gold Certificates” in lieu of the real thing, and I said no. I took possession right away.
Yes, theft can be an issue, but say I were to put my gold in a safe deposit box, the later can be opened by authorities, etc, so no guarantees.
There are some services out there that are offering gold purchasing/custodial service using segregated accounts, but I am too chicken to try them.
I recall hearing about a company in New Zealand some time ago that offered to sell people actual gold. One guy did so but insisted on taking it with him instead of a certificate which they got dirty about. And why yes, that company did collapse with people’s money when it was revealed that they did not have the gold that they claimed that they had.
Let’s not even talk about gold. Apply the same logic to digital currencies, whether virtual or part of a cashless economy.
I heard of a famous hedge guy who put millions of dollars worth of gold under his sister’s house. He doesn’t seem to have much faith in paper gold.
Exactly, whether you’re talking gold ingot, dollar bills, or digital ledger(demain) you need to be able to TRUST others to act appropriately.
Hauling around gold gets cumbersome in a complex commercial economy (theft), but so does using fiat currency if you can’t TRUST its value (easier theft), and digital currencies without TRUST leads to massive theft (or loss).
Since TRUST is essential to a complex world economy, where does that leave the US after stealing $500B from the Russians (for the world to see)?
BINGO!
In US, I was told that the contents of a high street bank (WF, BofA etc) security box can be deemed assets of the bank, similar to your current account balance legally being a lien. Also subject to seizure:
http://losaltosvault.com/safer.asp
In my family the women just buy lots of gold jewelry. Gone on trips to Dubai with my mum where she went to sell some so she could pay our school fees. Not sure if it helps but we’ve never dealt with banks when it comes to holding gold.
Very interesting piece indeed. In the last paragraph, the author raises the point that popped into my mind right from the first:
> the Fed´s gold custodies have never been audited either — as they should have …
This issue has come up from time to time for decades, with greater or lesser hysteria — ‘Fort Knox is really empty!’ — but after a certain amount of hand waving by the ‘custodians’ all concerns are dismissed as CT.
Back to Vilches’ main point: how could the Brits possibly refuse to return gold to its rightful owner, if push came to shove? Maybe if we were back in the 18th or 19th century but I don’t think that nowadays they would have the cojones for something like that. Nowadays it’s only the Americans who would try something so brazen (cf. ‘frozen’ foreign assets).
Which would be worse? – not returning the gold or admitting you don’t even have it anymore?
They would essentially be the same thing. One cannot return something one does not have possession of. The real point here is that the original “owners” do not have it, whether the “storage depository” has it or not.
Secondly, the “storage depository” would be legally obligated to procure the “precious” from somewhere or other when tasked with returning it to the original possessor. This could lead to all sorts of “unpleasant unforseen(?) consequences,” such as global price discovery.
I for one have no gold; I never had sufficient “discretionary funds” to purchase any. Buying and selling gold seems to be a One Percent activity.
This struck me as a curious turn of phrase:
“As UK Prime Minister Boris Johnson would have it, the physical repatriation of the EU gold supposedly still vaulted in London would “mightily” affect the future of Europe …” (emphasis added).
In other words it seems to be suggested that Johnson hasn’t actually said this, but that if he were to say something of the kind, this is what he would say. It’s a curious argument. I must say I’m not aware of any actual moves by the UK in this sense, and I’m not sure that Johnson actually wants another confrontation with EU nations (the NATO point is irrelevant). Given the UK’s history of being a hopeless negotiator in Brexit, and given that it’s effectively lost on all of the main issues already, it’s hard to see why it should try to exploit this situation, and even whether it would know how to do so effectively.
Thank you, David.
I am not aware of Johnson or the Bank of England hinting or doing anything like that, especially with regard to Brexit.
The Bank has been dragging its feet over Germany’s gold for years. France repatriated its gold from London at the same time as it did from the US.
Further to Brown and the telegraphed sale of the UK’s gold and investment of the proceeds into US Treasuries, this is called Brown’s Bottom in the City and was suggested by his organ grinder, Ed Balls, after City firms, including Pimco, where Balls’ brother Andrew still works, got on the wrong side of the trade and were losing money. Russia, India and Bangladesh bought much of the stock.
The Swiss similar to the Brits, also sold off the majority of what was in their vaults, albeit @ around $400 a few years after the UK fire sale, not the absolute bottom of the market, such as Brown’s gambit-but close.
Old guy here, but when did this become a NATO problem?. Did I miss the memo, but I thought NATO-note the spelling- was a military organisation, not a political or financial one.
Is this what Dylan meant when he sang: ‘the times they are a’changin’?
Securing gold reserves of allies against a Soviet invasion could be seen as part of a defense pact. I wonder what the actual agreement is that governs the storage and movement of the gold?
Harking back to events like the Soviet Government’s “safe keeping” of the Spanish gold reserves in 1936, and the recent London based “safekeeping” of the gold reserves of Venezuela, I would essay to state that the operational ethos of “hard” currency movement and storage is: “Might makes right.”
>>>”Might makes right.”
Isn’t that what the robber with the gun says?
Followed immediately by: “Masters of War”.
Brussels (political NATO) and Mons (military NATO) are an hour apart via the E19.
i hope that I’m still alive when this question is resolved one way or another. Younger me would have said, of course the Bank of England would never do something stupid as use someone else’s gold held in trust for financial engineering.
Now, with much insanity leeching into reality and the ruling class, who knows?
Just about every scam in terms of Au I remember involved a private company holding #79 for the public, it was almost expected that they would make off with your goods, as it happened so often.
Anytime I see a story along those lines, be it private or a government holding all that glitters for you, its always a ‘Danger! Will Robinson!’ moment.
Look at Germany, they can produce cars from scratch and ship them over here or anywhere within a short time, but it took years for them to get what was already a finished product sitting in a vault in somebody else’s country, how queer was that?
My favorite was this caper 40 years ago, and when the authorities busted the operation, they found wood blocks spray painted gold in the vault, which caused much mirth on the coin & bullion dealer teletype (kind of similar to the internet-it started in the early 60’s and I was active on it in the 80’s-you’d do all sorts of trades ‘online’) and almost as soon as the scam was revealed, wags on the teletype were offering buy/sell spreads on gold painted 2 x 4’s, ha ha.
https://en.wikipedia.org/wiki/International_Gold_Bullion_Exchange
It’s obvious that the whole governmental storage thing is really scammy and there’s a tiny amount therein compared to that owed-but who cares really, what would the revelation accomplish aside from verifying what everybody has long suspected?
From the cheap seats I have to say my interest is whether Russia knew they were setting the cat among the pigeons by adding the gold option to their rouble demand or was it a just a lucky additional benefit to their strategy of empowering and protecting their bank and bank assets?
Either way it is yet another surprisingly illuminating result of misunderstanding the position of the West during the plan to kneecap Russia. If this ill though out foreign policy debacle wasn’t going to be so deadly for people of Europe, Britain and the US, I might almost be looking forward to the revelations that taking on China might bring.
The article states after world war II, and that I think is correct. During the Spanish civil war, the Spanish Republican government sent most of its gold to Moscow and Paris, so that they could use it to buy supplies for the war. During the German invasion of Norway, Norway sent its gold first to London and then onwards west.
I think in essence the point of gold abroad is to continue financing a government when the governments own currency is collapsing as their economy is collapsing, all due to invasion or civil war. The gold is therefore placed in friendly vaults, friendly to the government that is. It is also placed to the west of the country doing the placing, as the invasion is expected from the east. Finland has gold in Stockholm (and London, Switzerland and US), but Sweden doesn’t have gold in Helsinki. I wouldn’t be surprised if Germany has gold in Paris, I would be surprised if France has much gold in Berlin.
It definitely began earlier.
See here at Bank of International Settlement history for movements between central bank
gold accounts at BoE. https://www.bis.org/about/history_1foundation.htm
See also the restitution of the Baltic Stares gold which BoE took safe custody of pre WW2 and then sold after the Soviet invasion.
I may be confusing it with the operations of the commercial London gold market but my memory us that a lot of gold standard settlements were done pre 1914 by moving gold around in the BoE vaults (or, less effort fully, registers) rather than international physical delivery.
There was physical delivery in some famous cases, e.g. Roosevelt demanding Britain ship its gold in early WW2, along with its external assets and its inventions (klystrons etc), to pay for pre LendLease war materiel.
I’m partial to WW2 flicks, here’s some bait to chew on, Hollywood.
The story of the Norwegian all that glitters barely beating the Nazis to the coast and then onto a ship bound for the UK would have made a good movie…
https://en.wikipedia.org/wiki/Flight_of_the_Norwegian_National_Treasury
Thank you very much for your expansion of this subject and your insight. Your experience in financial matters and steady hand is the reason I and so many others return here again and again. It will be interesting to read the responses.
Look, whatever the ownership details of all that gold, can we agree that nobody really knows what is in the vaults of the Bank of England? And if we are going to be honest, can we also agree that we don’t even know what is in Fort Knox either? I have not forgotten how during the Clinton regime that somebody ordered several hundred thousand 400 oz. bars of tungsten. Yeah, and I know that Treasury Secretary/former Goldman Sachs banker Steven Mnuchin & Senate Majority Leader Mitch McConnell paid a visit there in 2017 and said that ‘Yep, it’s all there’ but I remain unconvinced.
After reading this post, I started to drift off into ga-ga land and imagined a remake of the 1964 film “Goldfinger.” There is a dramatic fight between Agent 007 James Bond and Oddjob with his still-rimmed bowler hat in the vaults of Fort Knox or even in the vaults of the Bank of England while a nuclear bomb is ticking away. Oddjob spins his hat at James Bond to decapitate him but misses and instead it slices through several bars of gold on a pallet but which reveal them to be only gold-plated tungsten bars. A shocked James Bond looks at Oddjob. A stunned Oddjob looks back at James Bond who says ‘Well, this is awkward.’
Thank you, Rev.
Don’t forget that Mnuchin’s missus came for the ride.
I hope you join me for some brandy.
As long as it’s a thirty year old fine, indifferently blended, with an overdose of bon bois.
Thank you, Ian.
When I did a tour of the NY Fed many years ago, we got to see the vaults (more like jail cells with bars for walls) where various foreign countries kept gold. I have no idea if the tour still goes down to that room, nor can I remember if the amounts involved were significant (i.e. dozens of gold bars or hundreds or thousands), but I like the idea of random tour takers being agents for the various nations and doing quick counts to make sure the gold hasn’t disappeared.
Sorry, but unless you get to drill a hole in one of those bars, you don’t really know what you are looking at-
https://news.coinupdate.com/largest-private-refinery-discovers-gold-plated-tungsten-bar-0171/
Swabbing it with aqua regia will tell you right away!
My local coin shop uses a hand held XRF analyzer made by Thermo Fisher Scientific to analyze precious metal products. A blank bracketed image comes up. If one is analyzing a coin that should be .9999 silver, a mark will appear within the brackets to indicate the coin’s silver content is genuine. This avoids the problem of tungsten or lead gold bars. Here’s a link.
https://www.thermofisher.com/us/en/home/industrial/spectroscopy-elemental-isotope-analysis/portable-analysis-material-id/portable-metal-manufacturing-inspection-recycling-solutions/portable-precious-metals-jewelry-analysis.html
For what it’s worth, gold plated tungsten bars and coins had never been an issue in the marketplace that I can remember, say before 2005.
And then those crafty Chinese figured out how to make it so, and a market was born.
There was never any gold around these parts, but a fair number of mom & pop tungsten mines opened up after Pearl Harbor and shut down right after Nagasaki.
They still do the public tours (well they paused during covid but are opening again soon) and sometimes involve lifting a single gold ingot.
Who knows if the display account, lit up like a shiny golden holiday window display, is the only real bullion, but the bulk of the gold is shrouded in darkness. Ingots get shuffled about we’re told but not sure of any chemical audit.
Gold is softer than Tungsten.
I once toured a Gold Mine in ZA, where they showed on weeks production of Gold. 1 Bar, weighing many pounds, and Impossible to lift from the floor with my human hands, due to its weight and shape.
I understand, tho’, that tungsten is magnetic, albeit weakly, whereas gold is not so testing an ingot for a magnetic response should be a way of ungilding the lilly.
So, Goldfinger turns out to be an allegorical explanation of something that had already occurred in reality?
And hear we are, decades later finding out that the heist wasn’t thwarted, it was successful.
This is delightful information. Thank you, Yves. “The Importance of Custody” – ha. Appearing to be earnest is possibly the compulsion for all those excellent British manners. Not that they aren’t in cahoots with us. The comment at the end about pushing the EU off a cliff economically is another truth waiting to be told. Fun-nee. This is spectacular satire for a world gone brain-dead: “Has the Bank of England lent, swapped, re-hypothecated, leased, leveraged or encumbered such bullion now lien with other many-alleged legitimate claims also standing in line with ‘fractional un-allocated synthetic’ bullion custodies unfit for purpose per “digital derivative pricing schemes” through which no one can know who owns what where (if anything)”… and… “I kid you not.” Makes the whole idea of fiat look pretty good by comparison.
Paper Gold is wonderful,it’s probably been around since paper was invented.
Heck,it’s almost as old as the “Shell Game”.
As far as whether the physical gold is where it is supposed to be…
if you can’t trust a Banker,who can you trust?
/
One of the more interesting things to come out of the Soviet woodwork was 1922 $100 gold certificate banknotes which were about 50% larger than current currency and nicknamed ‘horseblankets’.
In 1992-94 i’d guess that maybe 500-700 of them turned up in the marketplace in the US all of the sudden in nice average circulated condition. The reason they used to be called ‘C Notes’ is the big ‘C’ on the reverse.
https://commons.wikimedia.org/wiki/File:US-$100-GC-1922-Fr-1215.jpg
Almost as good as “paper water” out here in the west.
Unless you have the ability to assay metal, you pretty much prefer a gold certificate as a transaction instrument. Should I trust my US gold eagles? I’ve never weighed them, let alone tested the content.
You can but clever looking gold-plated 1 oz eagles made out of tungsten for a few hundred bucks on Alibaba…
https://www.alibaba.com/product-detail/American-Eagle-Tungsten-One-Ounce-Gold_60190880628.html?spm=a2700.galleryofferlist.normal_offer.d_title.23292e18z2MDGo
Let’s talk about countries and governments. At one time, in democracies, the people were intimately bound with the governements they elected. However, as those democracies have become so insulated from the will of their peoples, they no longer represent the interests of their people. A case can be made that they never really did, today’s case may be only a matter of degree, not a difference. However, I think it would be useful to instead of speaking of the actions of “governemnts,” which removes agency from the actual actors within those governments, speak to the individuals responsible for the so called actions of the governments they …rule. The whole notion of governments, I think, needs to be reassessed, but crimes are committed by individuals. The responsible individuals should be held accountable.
Instead of commodifying humans we should humanize commodities. That would be a good peg of value. How do we do that? (A new “unrecognized” economy.) Imo, a good technical step in that direction is digital money – digital central bank money that is. (Not crypto – crypto is the exact opposite.) CBDC can be flexible enough to adjust in a timely manner for all sorts of scarcity – which is our future. So it’s the very definition of insane to keep throwing more money at a vanishing resource. Instead we need to be flexible, to adjust our consumption patterns, ration equally and innovate. We need an economy that can do that. And a government that stops demanding profits for special interests at the expense of the planet. The value of “things” is a human construct, but people themselves are not particularly valued. All of which for me is a big disconnect. So in terms of “economies” and “governments” we’ve got everything backwards. Maybe.
Interestingly about the gold standard, yes it’s deflationary as all get out as a base for currency, but it does stop persistent trade deficits. A persistent deficit would result in gold being repatriated out of the country to settle the debt, the money base reduces, and interest rates go up.
If the US had still been on a gold standard, it never could have run a trade (current account) deficit for more than 30 years.
Thinking out loud here:
This whole conversation was started by Russia stating two things
1. Russia will sell gas to “unfriendly countries” for either rubles or gold.
2. Russia temporarily tied the ruble to gold at 5000 rubles per gram, around $1700 to the oz compared to the market price of $1950 until June 30.
If Russia manipulates the price of gold in rubles in July so as to give a discount on gas for payment in physical gold rather than rubles might this create a run on central banks for the physical gold they don’t have. A central bank panic?
Any thoughts?
Reminiscent of Pharaohs repatriating gold and precious stones from departed ancestors, priests in the night, inside job … say it ain’t so …
I was reading recently about Germany’s efforts to repatriate. When they tried to get their gold from New York back in 2013, they were initially told it was going to take 7 years. I was suspicious about Germany confirming that all the serial numbers matched and there was no funny business (Why go out the way to say that?) They only got something like half of their gold back (supposedly that’s all they asked for).
Russia has done more than just require payment in gold. Their VAT tax on gold purchases by consumers has been discontinued resulting in increased citizen interest in owning gold. In addition, Russian banks will purchase gold at a specified rate said to be around US $1940/oz, as well as requiring payment for resources including oil in gold or rubles. This is an attempt to put Russia on a pseudo gold standard. Will it work? We will see. Here is a link to an article discussing these matters. The author, unknown to me, states he was asked to write this article by none other than RT. May need to copy and paste.
https://goldseek.com/article/russian-ruble-relaunched-linked-gold-and-commodities-rtcom-q-and
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Russia is not requiring payment in gold.
add this to the list of bad gold ideas.
germany is making the same mistake they did in 1930. here is the economic lunacy of free trade economics that opened the door to hitler: to restore economic equilibrium by a balanced budget, high interest rates and remaining on the gold standard — no emergency deficit spending. And the economy continued to slide
http://fsmitha.com/h2/ch16.htm
Too bad the “Bank of International Settlements” who oversee bank reserve adequacy, do NOTHING about commodity custodial arrangements! Like gold had no value!
No, the BIS does not do bank supervision. That is done by the nation that regulates the lead bank.
The BIS has set various standards, like Basel II, but different countries implemented them at different speeds. The adoption by most European countries of Basel II led directly to the derivatives/CDO bonus gaming that we described at length in ECONNED.
Yes and the wing nuts did come to the bird feeder … how do you un-rust people Yves …
Governments in democracies worked for betterment of the nation. Now they work for betterment or sustaining of the economy. The difference between the two is much more than semantic.
I hate to nitpick with this very interesting article, but I read the two sources (refs 17 and 18) for this rather astonishing claim, and I can’t find supporting details/evidence. It sounds like what’s happening is that the CBs are refusing to provide the serial numbers and unique identifying details that would allow third parties or informed citizens to credibly believe the claims being made about how much gold is actually held in CB reserves. Of course, it all sounds very shady — Vilches is persuasive on that point — and suggests CB-level malfeasance. But that’s not quite what he is arguing here about an actual switcheroo of German gold. I.e., if the serial numbers and unique identifying details are not being disclosed, then how can anybody say that Germany “never got back any of the gold bars originally deposited”? Am I missing something, or failing to connect certain dots?