mv1001

How the Gold Game Could End

If you want to audit the Fed (which will include auditing the gold reserve), now is your chance: Tell your congressman to support HR1207, which just now went into committee.

Google "end the fed" to find out the particulars.

If you can write on this blog, you can write to your congressman and ask for his/her support of this bill.

And then, tell your friends and relatives to do the same.

On Apr 19 10:06 PM gatoralsoccer wrote:

> Until the World sees an unbiased, simultaneous, independently audited
> inventory of the gold hoard at Ft. Knox, West Point and the basement
> of the NY Fed, there can be no question that our faith in the honesty
> of our Government is one sided! Seems simple to allay our fears;
> DO the audit!!!

Gold Is Still a Good Choice

People who just can't figure out why gold (and silver) have "intrinsic" value make me laugh, especially when they fail to see that paper money, by their criteria, also has no intrinsic value.

But to really understand the intrinsic value of gold, try this simple experiment: Surprise your wife or girlfriend with a gift of a nice piece of gold jewelry, and watch her reaction. You will probably be very pleasantly rewarded with behavior that tends, under natural conditions, to propagate your DNA into the next generation. You may repeat this experiment as often as your funding allows, to collect a good statistical sample.

For a control experiment, try giving her jewelry made of, say, aluminum or copper or iron. Compare and contrast.

How the Gold Game Could End

"As far as you know, it could be one big scam. How is it they have a limitless inventory of it? It can't be worth that much if there is so much of it."

Oh.... you must be talking about paper money.

(Hehe ... sorry, I couldn't resist.)

How the Gold Game Could End

I think you want to be in the same position as the world's central banks: owning gold.

"Gold is money, and nothing else." -- J.P. Morgan

I'll take ol' J.P. at his word.

Did the ECB Save COMEX from Gold Default?

Avery,

I would point out to you, that a parallel fraud and manipulation has been and is going on in the securities markets. That the same type of fraud is going on in another segment of our financial markets, is evidence for the fraud in the gold and silver markets, especially when you realize that the same parties are committing the fraud in both markets.

I am referring to the "naked shorting" manipulations that are rampant in US stock trading, which are manifest as ongoing, never cleared fails to deliver shares, the net effect of which is to suppress the price of targeted securities by flooding the market with fake shares. This is the same mechanism used to manipulate and suppress the prices of gold and silver.

In the case of the securities fail-to-deliver fraud, the core institution in which the fraud is committed, is the Depository Trust and Clearing Corporation (DTCC). The DTCC is the private corporation (just like the Federal Reserve is a privately held cartel of banks) which clears more than 99% of all stock and bond trades placed in American financial markets. The shareholders of the DTCC are the same large banks which own the Fed. As with the Fed and the US Treasury's supposed gold reserve in Ft Knox, the books of the DTCC, which record the ownership positions of virtually all of the publicly traded corporations in the US, are never allowed to be audited by independent third parties.

See the Deep Capture blog: www.deepcapture.com

In all three cases (the backing of the US dollar by gold, the ownership of gold and silver bought on the futures exchanges, and the ownership of stocks and bonds bought on the stock exchanges), the promise to deliver the actual things bought and paid for, is broken when the seller defaults, and such defaults are allowed to continue by the regulatory authorities.

The seller defaults because he never actually possessed the thing he sold, and never actually intended to deliver it, intending to deliver instead, more paper promises to pay, perhaps at a later date.

That these systemic frauds have been allowed to continue and grow for decades, indicates that the market regulators who are charged with enforcing the rules which create and maintain our markets and which link our market activities to the real world of share certificates and physical commodities, have been bought and paid for ("captured") by the financial entities which are committing the fraud. This is entirely to be expected, given that the Fed and its owners have been given the power to literally make, in unlimited quantities, the very money that can be used to bribe those same elected and appointed officials. (The bribes are most often called "campaign contributions.")

The financial entities which are committing the fraud, and which apparently hold the real decision making power in US and European societies, are the same large banks which are receiving the trillions of dollars in bailouts and loan guarantees.

It is the existence of this systemic, ongoing fraud and corruption, at the very heart of our markets, and the total capture of our political system by the perpetrators, which has me convinced that we are headed for total collapse of our currency and our financial system. That is why holding physical gold and silver, with the expectation that these metals will need to be used to buy the necessities of life, is no longer an outlandish position to take.


On Apr 02 12:45 PM Avery Goodman wrote:

> Kohalakid,
>
> Thank you. You may be correct. Technically speaking, Deutsche Bank
> is probably not acting as a "registered leveraged transactions merchant"
> per se, with respect to these particular transactions. It seems
> to me that you have hit on the reason that CFTC has managed to look
> the other way. But, "nab" them the authorities should, nonetheless.
>
>
> The fact that they may not be covered under this explicit rule, requiring
> 90% cover, does not diminish, but, rather, amplifies the need to
> do vault audits. The potential for wrongdoing is far greater if
> the majority of the big dealers on COMEX are not covered by the rule.
> No wonder silver has been selling in backwardation for so long.
> Many people justifiably do not trust the futures markets, and must
> want their silver immediately.
>
> This makes me more concerned, not less. It is further circumstantial
> evidence that most of the alleged "gold" and "silver", supposedly
> "bought" and "sold" on futures markets "for delivery" may not actually
> exist. Dealers who allow short selling, without gold to back thousands
> of contracts, not only court financial disaster for themselves and
> their customers, but, also, commit fraud upon the market. Selling
> naked short positions is fraud upon the market because the specifications
> of the COMEX gold contract specifically state that the seller and
> the exchange warrant "delivery" of physical metal. If there is
> really no gold to deliver and the seller is really depending solely
> upon the transient politics of a central bank, he commits fraud upon
> the long buyer.
>
> 17 CFR § 31.3 states, in pertinent part that:
>
> "...it shall be unlawful for any person...directly or indirectly...(c)
> To engage in any act, practice, or course of business which operates
> or would operate as a fraud or deceit upon any person...in connection
> with (1) ...a transaction for the purchase, sale or delivery of silver
> bullion, gold bullion, bulk silver coins, bulk gold coins...pursuant
> to a standardized contract commonly known to the trade as a margin
> account, margin contract, leverage account, or leverage contract..."

Poor Treasury Auction Results Rattle Investors

"This would give the truth that none of these entities or anyone else can manage a National [or World] economy effectively for any sustained time."

Hayek called this "The Fatal Conceit," the theme and title of his book dedicated to "socialists of all parties."

Too bad his writings are out of fashion amongst the power elite.

U.S. Debt Default, Dollar Collapse Altogether Likely

User 261133 writes:

"In the real world unlike other metalls gold has no use or value."

The utility of gold is as money. "Gold is money, and nothing else." --JP Morgan.

Gold is still money: That is why central banks, like our (privately held, BTW) Federal Reserve, still hoard it.

Gold is not money for the masses anymore, because the owners of the world's central banks convinced their respective governments to assign their gold hoards to the banks as collateral for issuing paper currency. Such issuance has been abused to the point that confidence is being lost in the value of that paper.

"Nobody needs it it is nothing else but a CDO in yellow."

The common people do need it, as a store of value that can't be corrupted by politicians and bankers, and as a way to limit abusive money printing by the well connected financial elite. The bailouts you see are those elites paying themselves first with money they are printing up, all at the expense of the common people.

Gold is not "a CDO in yellow." CDOs (Collateralized Debt Obligations) are promises to pay which can be defaulted on by the promiser. That is in fact the root of our problems in this crisis.

Gold, on the other hand, has no such "counterparty risk" of default. When someone puts a piece of gold (or silver) in your hand, you know you have well and truly been paid. The metal will not default on its promise to pay.

Thus it has been for thousands of years. Our modern delusion that pieces of paper are literally equal to gold and silver, is of a part with the other delusions that are falling away, such as the "value" of mortgages, real estate, Enron accounting, Social Security, and on and on. As lies multiply, trust in promises to pay, written on paper, evaporates like dry ice on a warm summer day.

Our current crisis will not see the beginning of its end, until trust is restored in payment transactions. This trust will only be restored, when gold and silver are once again the media of exchange, freely circulating amongst the people.

Gold: Recycling Threatens Demand-Supply Equation

bocaj21 says: "For long-term investors, gold is one poor investment, one that history has well-established is a lost economic opportunity."

Price data show otherwise. If you had simply bought gold in 2000 and held, your average rate of return (in USD) as of the end of 2008 is 16.8% per annum. This beats most other investment vehicles. See James Turk's commentary at: goldmoney.com/en/comme...

Markets move in cycles. Capital rotates through stocks, real estate, and precious metals in sequence. When investing for the long term, you need to be aware of which cycle is in the bull phase. Gold and the precious metals are rising now. When they have topped out, sell and move to stocks or real estate.

Gold and Silver: Backwardation and Manipulation

James W:

Article 1, section 10 requires the states to allow only gold and silver coin as legal tender.

Article 1, section 8 grants to Congress the power to define money:
"The Congress shall have the power - To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures"

Congress has the sole power to define money, and the states can only accept gold and silver coin as legal tender. And, it is specifically prohibited that the states "emit bills of credit" (paper money) to be used as legal tender.

Taken together, it is clear that only gold and silver coin may be used as money in the united States, and that Congress has the sole power to define the weight and measure of the gold and silver coins. In other words, no paper money, and the States may not individually create their own coinage.

It wouldn't make sense if Congress could create paper money, with the States not allowed its use it as legal tender.

Why the States? Because, the US was conceived as a union of sovereign states, and State law (not Federal law) was where contract law was to be defined. (Contracts being the essence of economic transactions.) Up till the adoption of the Constitution, the individual Colonies (and later, States) did indeed "emit bills of credit", which, like all paper money, suffered devaluation as more was printed. The authors of the Constitution wanted to avoid the problems of hyperinflation (google "not worth a Continental") and also wanted to have a uniform currency across the union.

There's nothing in the Constitution that lets Congress transfer its power to "coin money" to a private bank, and charge interest on the money so created. But, that's the situation we're in today. And, the Constitution is written so that powers not specifically granted to Congress are not retained by Congress, that is, the Constitution says what Congress may do, and if a power is not specifically allowed, it is by default prohibited. So, the fact that Congress was not granted the power to transfer its money-making power to another entity, means that it cannot, unless of course the Constitution is amended to allow such transfer of this power.

Yet, Congress went ahead and created the Federal Reserve anyway, and Wilson signed it into law.

Own Gold? Time to Fold

Hi Alan:

I have seen a chart, from the St. Louis Fed, showing the money supply (which they call the 'monetary base') increasing from $0.85T to $1.5T, beginning last August. This would imply almost a doubling of the amount of dollars in existence, which I think will lead to a doubling in the price level once this money gets out into the economy.

I think you are right, in that the government is essentially paying off everyone's debts, by taking them on itself. It is assuming non-performing loans in exchange for Treasury securities. Of course, it is not paying off *everyone's* debts, it is paying off the debts of certain institutions and people, and not the debts of others. What are the criteria to get this preferred treatment? Who knows?

But Treasury securities and dollars are just two forms of the same thing: US money. The inflation will come when people want to sell their T-bills and bonds to buy stuff, flooding the world markets with US currency.

As far as gold goes, in comparison with other things, including most currencies, it has been going up in value, as you point out in your article. (You say that gold has gone down less than other things.) Today it takes fewer ounces of gold to buy a barrel of oil, a ton of zinc, a house, a car, the Dow Jones average,...and on and on, with the only exceptions to this being the US dollar and the Japanese yen. But I think the dollar will also begin to fall in relation to gold, once the money being created by the US government begins to make its way into the marketplace. I don't know about the yen.

I don't doubt that the long term (multi decade) trend of rising gold price relative to the dollar will continue, but there surely will be corrections, which is what we're in now. When will this correction end? When the economy recovers and banks and others holding US Treasury securities decide to sell them to use the proceeds to buy stuff. When will that be? Your guess is probably better than mine. Market timing is really tough.

Thanks for the good article.


On Dec 08 09:19 AM Alan Brochstein wrote:

> To all of you who think that the Fed is "printing money", I ask you
> to "show me the money". The money supply numbers don't show it,
> so where can I find it? The government is running up debt and transferring
> wealth from the taxpayer to creditors (debtholders).