"For those who have at times struggled to understand the difference between COMEX inventory categories ‘registered gold’ and ‘eligible gold’, now your head can spin even more, since the CME’s COMEX has just introduced a new category – ‘pledged gold’. This pledged category was first noticed on the infamous COMEX warehouse late last week by Nick Laird of fame, with the pledged gold column intriguing populated with an entry next to the New York vault of bullion bank, HSBC. What did this pledged column entry mean, we wondered, and where did it come from? After some digging on the CME website, the answer was revealed. Pledged is a new gold inventory category representing COMEX gold warrants which have been deposited with CME Clearing as performance bond collateral, in other words margin collateral. CME as follows: 'Performance Bonds, also known as margins, are deposits held at CME Clearing to ensure that clearing members can meet their obligations to their customers and to CME Clearing.' COMEX registered gold stocks (those which are available for delivery) are currently only about 34 tonnes, a tiny foundation underpinning for a giant inverted paper pyramid. At the same time, COMEX gold futures contracts trade the equivalent of 27 million ounces per day (equivalent to 260,000 tonnes of gold per year) – more gold than has been mined in history, and over 86 times annual gold mining supply. While the amount of pledged gold listed on the is still relatively tiny, covering 100 oz of gold held at HSBC’s vault under the HSBC Tower at 1 West 39th Street, SC 2 Level, in Manhattan, that could well change. It will therefore be well worth watching these COMEX reports in future to see if this Pledged gold category snowballs. And if it does snowball, [it's starting, see today's report - Jesse] it will be even more important to remember that any COMEX gold warrants which are deposited as performance bond collateral with CME Clearing will move out of the Registered gold category, since the holder 'may not use these warrants to satisfy their delivery obligations.'" Ronan Manly, New COMEX Pledged Gold – Shrinking the Pool of Registered Inventory "At the end of the day, perhaps, the equity side of the U.S. external balance sheet should be understood not by thinking of the U.S. as a giant and very successful private equity fund that borrows to buy equity—but rather as one giant corporate tax dodge for U.S. based multinationals… If you think I am exaggerating, I would encourage you to take a look at the IRS data on the location of U.S. corporate profits—and the location of the taxes that American firms pay abroad. U.S. firms are earning big profits in jurisdictions where they don’t pay tax, and small profits in jurisdictions where they do…and in the process, reducing their U.S. tax bill as well. That’s real exorbitant privilege." Brad Setser, US External Balance Sheet: Big Borrower and Giant Corporate Tax Dodge
'Performance Bonds, also known as margins, are deposits held at CME Clearing to ensure that clearing members can meet their obligations to their customers and to CME Clearing.'
