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In his otherwise spectacularly obtuse
commentary the other day about the clamor to audit Germany's gold reserve --
http://www.gata.org/node/11868
-- CNBC Senior Editor John Carney stumbled
onto a point often made by GATA about the unreliability of central bank
claims about gold vaulting. In reference to the foreign gold vaulted at the
Federal Reserve Bank of New York, Carney wrote:
"The compartments do not have labels
reading 'Germany's gold' and so on. They are instead numbered, and only a few
people at the Fed know what numbers correspond to which country. The Fed says
it does this to protect the privacy of the depositors. But this also makes
actual inspection less reliable. There's no way for Germany to know that the
gold it is being shown is Germany's, as opposed to some other depositor's. In
an extreme case -- which I have no reason to believe is true -- miscreants at
the Fed could just show everyone who came to visit the same pile of
gold."
Of course mere "miscreants" at the
Fed are hardly the problem; the problem is policy throughout Western
central banking that, in support of the gold price suppression scheme,
facilitates the double-counting (or multiple-counting) of gold reserves.
For example, the International Monetary Fund
long has allowed central bank members to count leased gold as if it is still
in the vault of the bank leasing it. Thus multiple claims develop to the same
gold and the world's gold supply is perceived to be larger than it really is,
suppressing the gold price.
The same thing happens with the major gold and
silver exchange-traded funds when their shares are allowed to be borrowed and
shorted -- multiple claims develop to the same gold. There is much suspicion
about the major gold and silver ETFs, GLD and SLV, because of the grotesque conflicts
of interest on which they operate, the custodian of GLD's gold being HSBC,
the world's biggest gold shorter, and the custodian of SLV's silver, JPMorganChase & Co., being the world's biggest silver
shorter.
The London Bullion Market Association runs a
fractional-reserve gold banking system in which claims are issued against
gold that is not in the possession of the issuer of the claim. This too
increases the perception of the world's gold supply and suppresses the price.
The great disparagement about gold in recent
years has been that even with its strong price appreciation it has not kept
up with inflation over the longer term. The most likely explanation for
gold's failure to keep up with inflation is the creation by bullion banks,
backstopped by central banks, of a vast imaginary supply, "paper
gold." The fear of paper gold is behind the growing belief in Germany
that the country should repatriate its gold reserve.
As central banks are the issuers of currencies
that compete with the natural currencies, gold and silver, they have a
powerful interest in controlling and weakening their competitors. As the
issuers of claims to monetary metal they don't possess, bullion banks have an
identical interest.
GATA long has documented secret transactions
in gold by central banks and their refusal to answer specific questions about
their custody of national gold reserves:
http://www.gata.org/taxonomy/term/21
So the scenario raised but disbelieved by
CNBC's Carney wherein a stash of gold might stand in for multiple stashes is
hardly farfetched. That is almost certainly why the major gold and silver
ETFs were created -- to corner the investing public's gold and silver so it
might be applied in emergencies, against their investors' interest, for price
control. Evidence of this cornering was produced inadvertently last year when
HSBC invited CNBC's Bob Pisani to visit the secret
GLD gold vault and, when he arrived, presented him with a GLD gold bar to
display for his audience -- only for the bar later to be identified as being
registered to a different ETF. One gold stash was standing in for another
stash:
http://www.gata.org/node/10368
http://www.gata.org/node/10372
http://www.gata.org/node/10427
No one seriously doubts that there is some
gold in the basement vaults of the New York Fed. But merely inspecting it
would not prove anything. The serious questions here are about ownership
title -- questions that can be answered only by a full disclosure of
central bank gold records. How much gold is there and how many
ownership claims are there to it?
If central banks are merely vaulting their
gold and not using it to manipulate markets, if there are no secret schemes
being undertaken with official gold, there should be no problem with
disclosing these records.
But of course, as was demonstrated by GATA's
recent lawsuit against the Federal Reserve for access to its gold records,
particularly records involving gold swaps --
http://www.gata.org/node/9917
-- and by GATA's recent questioning of other
central banks about their gold reserves --
http://www.gata.org/node/11862
-- this examination
of title to gold is exactly where central banks become most secretive. Thus
this is also where serious financial journalism about gold would start, if
any was ever permitted and undertaken.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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