Sunday, February 23, 2014

All the gold there is in Fort Knox

There’s a lot of chatter on the financial blogs about people’s declining confidence in the US Dollar (USD) as an international currency. For the past sixty years or so the US Dollar has been the world’s “reserve currency” – that is, the currency in which most international trade contracts are settled.

Now, in the face of the US Government’s reckless inflation of its money supply (creating credit out of thin air), some nations and multinational companies are beginning to look at what other currencies might be suitable. The Chinese, Russian and European currencies are the chief candidates.

Gold is also under consideration, because the total quantity of gold in the world is limited and not easily augmented – in stark contrast to paper currencies. Contracts can be priced in terms of gold whenever the contracting parties agree on its value. That value is not easily discernable these days, because there is no free market in gold. The market is manipulated daily, with unidentified buyers buying for no money down, and sellers selling gold they don’t own. The fraudsters are in charge.

For decades, gold certificates (certificates representing named quantities of pure gold) have been traded on the world’s major commodity exchanges; but those certificates’ claim to be backed by actual physical quantities of gold are often false. It has been a shell-game. Despite all the supposed concern about money-laundering, tax-dodging, terrorist financing and the like, the major world trading corporations and banks have fiddled their books with the full approval of the world’s major governments.

The world’s largest inventory of gold bullion is in Fort Knox, Kentucky – at least in theory. However, there has been no independent audit of the inventory since 1953, or even inspection! The US government flat refuses to allow such an audit, and everybody knows how unreliable unaudited figures are. Most objective critics believe that the advertised quantity and quality of gold in Fort Knox are false.

Actually, there may be no gold there at all. The former inventory may have been leased or sold to carefully selected banks that are owned and/or managed by political cronies; or it may have been replaced or adulterated by cheaper metals.

Remember: there has been no independent check at all for sixty years. None. Remember too that the US government has long been in the hands of arguably the most corrupt lobbyists, administrators and politicians the US has ever seen. Those carefully selected banks may have sold or leased every bar of it to lesser banks and brokers, and corrupt companies and individuals. All the favoured banks would have sold or lent it to their clients, including quoted investment funds.

Sometimes the sales will have been of physical bullion, sometimes of certificates (“paper gold”). Sometimes the banks will have sold certificates for the same bars of gold several times over. Each gold bar in Fort Knox used to be individually numbered and allocated to the relevant specific owner. Not any more.

When, last year, the government of Germany wanted to withdraw its specific numbered and allocated gold bars (about two per cent of the total amount claimed to be held in all US depositories), the most that could be cobbled together by the USA was a bare tenth of the requested amount, with the rest promised in seven years’ time. Dear God! And, all the bars that were grudgingly given back were unnumbered (generic), probably melted down from ingots hastily recovered from the banks, or stolen from Libya by the NATO invaders.

The fate of the gold bars may have been the same as the fate of the multi-trillion-dollars’ worth of bonds, contracts, insurance policies, etc, that were cut and bundled over and over again without audit or accountability until nobody could tell who owned what. That worldwide “derivatives market” may never be unravelled.

 America’s gold inventory may never be accounted for, either. Whoever does physically hold the gold bars (whether legally or illegally may never be proved) will one day be in a position to set its price.