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Why The Swiss "Save Our Gold" Referendum Will Probably Fail

The "Save Our Gold" referendum, scheduled for a vote on November 30th, in my opinion, is one of the most important votes since 1914. If passed, the referendum will require the National Bank of Switzerland to maintain a 20% gold backing for the Swiss franc.

The referendum merely reestablishes a very loose connection between the paper currency and a object of great worth and limited supply (ie: gold). It does not require a return to a strict gold specie standard. So, why is it so important? Certainly not because 1,800 tons of prospective gold buying will automatically cause the gold price to soar.

I have no doubt that those who manipulate the price of gold have access to national gold reserves, particularly the gold that has been placed into "safekeeping" with the Federal Reserve and the Bank of England. The purchase of 1,800 tons, over 5 years, by the Swiss National Bank, won't makes things easier for them, but those who manipulate markets are an accomplished group of fakers. There is more than enough gold in non-allocated accounts, at the Bank of England, for example, to easily absorb the buying of 1,800 extra tons. Remember, the US gold reserve at Fort Knox, in all probability, still has plenty of gold bars (at least on paper) upon which they can place so-called "location swap" liens, in return for more readily accessible English-held gold.

I suspect that the price of gold will move upward, in the aftermath of the Swiss referendum, whether the vote is "yes" or "no", but merely because it will be over. The reason is that the referendum represents an existential threat to the statist narrative. It also scares the daylights out of the bank executives who have allied themselves with statist-politicians. The fear arises out of the fact that the gold standard and the welfare state are entirely incompatible.

The welfare state must be able to tax people covertly. It does this though inflation and then lies about the level of the inflation. The average hard-working individual will not tolerate a vast increase in the overt tax burden. However, what he doesn't know, he won't oppose. Neither Americans nor citizens of the rest of the world have much understanding of how their governments use irredeemable paper/electronic money to impose taxation by (preferably slow) devaluation.

The freedom to print money, ad infinitum, also facilitates easy manipulation of stock, bond and commodity markets, high profits for the banks that front-run government sponsored manipulations. This is because central bankers can supply money, in unlimited quantities, in so-called "repo" and "discount window loans" that are endlessly renewable and utilized to push asset prices up and down.

Passage of the Swiss referendum will not end the welfare state game, mostly because it does not impose a strict and true gold specie standard. It will, however, be a very good start, and the strong possibility that other nations will follow the Swiss lead is what scares the statists and market manipulators. It is not because gold prices are going to shoot to the moon. Gold, itself, is a very small part of the equation. The key to gold's value is not that it is a pretty yellow metal. It is simply that it is an element in very finite supply that costs work to extract from the ground. A strictly observed limit on the printing of money is critical to preventing the corruption that arises out of allowing a small cabal of bankers to control the issuance of the common currency.

If the statists are low on gold, or hesitant to risk getting hanged when the general population finds that they have been pissing away the supposedly sancrosanct gold reserves, they may choose to use high volatility instead of overt pound-downs to encourage a "no" vote. Imagine what would happen if they allowed the price of gold on the paper market to rise back to $1,400? The perma-bull gold promoters would claim gold "hit bottom" and can never go down again. Then, suddenly, a few days before the vote on the referendum, the gold cartel pummels the price down by $200 per ounce or so.

The average Swiss citizen is no smarter than the average American. This type of volatility would discredit gold in its claimed role as the base of monetary systems. The undecideds would vote "no" and the Swiss referendum will fail, even though all of us know it should succeed, I am sorry to say that I believe the referendum will fail.

Gold, as a traded commodity, is not a threat to the statists. Its return to reserve currency status most certainly is. They are going to do anything and everything to stop the Swiss referendum from passing. All that being said, once the existential threat passes, the price of gold and related precious metals will, once again, become merely a secondary consideration for them.

I hope I am wrong, but the gold manipulators can induce heavy volatility in paper markets while ending up liable to deliver relatively little physical gold. They must merely play their cards right, not keeping the price too low for too long. The silver lining, is that after they win the referendum with the desired "no" vote, and some post-election obligatory theatrics are mounted, the price of gold will begin to go up.