Central Bank Liquidates 99% of its Gold
If you ask most politicians — or even central bankers — about the role of gold in society and investing in gold, most will downplay it and say it’s a thing of the past. They believe in central planning, and gold has no role to play there.
This was all summed up well by Alan Greenspan in 1966. He wrote:
“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-fair and that each implies and requires the other.”
This was a very different side of Greenspan than what we saw of him as Fed chair, when he was moving stock markets with just a few words and attempting to centrally plan the largest economy in the history of the world.
Even though central planners tend to despise gold, they still have an understanding of its importance. As many central banks have increased purchases of gold, we are arriving at something of a realization that it plays an important role in the global economy.
Even though there are no longer any major currencies backed by gold, central banks still hold gold, most likely as a way to maintain some confidence in their respective currencies. Just as some individuals hold gold as an insurance policy, central bankers do the same so that the public doesn’t lose confidence in their money.
According to statistics showing the amount of gold held by the various countries of the world, the U.S. has over 8,000 tonnes, more than double the next closest, which is Germany.
Of course, these are the reported amounts — we don’t actually know what exists in the vaults. We are taking a few people’s word for it, as there is no full audit done to account for all of the gold.
Back in February, the official report on gold holdings showed Ukraine had 42.3 tonnes of gold, which made up about 8% of its total reserves. The gold reserves had been built up steadily over previous years.
Just the other day, Zero Hedge ran an article citing an alleged incident that took place shortly after the president of Ukraine was overthrown earlier this year. According to the article, there was a mysterious operation where it is alleged that large amounts of gold in Ukraine were loaded onto a plane and flown out.
Since the newly installed government is backed by the U.S. government, it is not much of a stretch to think that the U.S. government played a role in this. It is not hard to imagine that this gold was headed for the U.S.
Zero Hedge also reported that the head of the Ukraine Central Bank admitted there was almost no gold left in the vaults there and that the remaining amount makes up just 1% of the total reserves.
It is possible that the gold could have been flown out due to fears of security because of the war and chaos there. But it is just as likely that there is something more to it.
U.S. Government Doesn’t Want Any Competition
I really have no idea if this is just a coincidence or if there is something to it, but I have seen it mentioned more than once that countries and leaders who consider using gold in global trade end up being bombed or overthrown by the U.S. government. Iraq and Libya are mentioned most often.
Please don’t take this as any kind of a defense of the regimes from Iraq or Libya. They were run by thug dictators, but they were also less chaotic under those dictators than they are now.
It is hard to say what caused what. Did the leaders of these countries seek to use gold as a form of money because the U.S. was threatening them? Or did the U.S. go after them because they were going to use gold and thus threatened the dominance of the dollar as the world reserve currency?
One of the craziest things I’ve heard recently is that ISIS, the enemy du jour, is planning to use gold coins it is issuing. This must be one organized group. I don’t think ISIS members are turning into free market economists, but it still sends an interesting message.
Gold is a way around U.S. control and dominance. It is still recognized throughout the world as valuable and is even acting as a form of money again in some circumstances. It would not be surprising to see the Russians using gold more and more, as the sanctions prohibit some of their trading abilities.
They can’t use the U.S. dollar, and the Russian currency is not respected enough. Gold, however, is respected.
Germany Gives Up
We have to wonder if all of this ties into Germany.
In early 2013, the Bundesbank (the German central bank), under pressure from inside the country, requested that its gold be repatriated from foreign central banks, which included the Fed. It seemed like a logical request for Germany to hold its own gold.
Then, earlier this year, German leaders suddenly reversed course. They said they didn’t want the gold back after all and that they were assured the German gold is safe and sound in the vaults of the U.S.
Were German officials told to back off in their request? Was there bribery involved? We know the NSA has spied on German leaders, so we don’t know what secrets they hold. And why wouldn’t the Fed just return the gold to Germany as requested?
The most obvious explanation is that U.S. officials did not want to return the gold, possibly because they didn’t have enough in possession to return.
For those in the gold camp, we have read speculation in the past that the Fed has leased out the country’s gold. It certainly doesn’t help suspicions when we see things such as Germany’s quick reversal in its request for repatriation.
Another question that then arises is whether the U.S. was obtaining Ukraine’s gold in order to cover its major shortfall. While 42 tonnes of gold isn’t a lot compared to what the Fed supposedly possesses, it would be a lot if it didn’t have anything left.
Did the Fed buy this gold from Ukraine, or did it just take possession as a trade-off for military support?
Investing in Gold
We can’t really know what is going on because most everything is secret. But there is definitely something happening, and gold is still playing a role in global monetary affairs.
We can’t control what the central banks are doing with the gold, whether it involves buying, selling, or switching hands. But just as central banks hold gold to maintain an element of confidence, you should, too. It should give you confidence that you can protect yourself from central banks and their issuing of massive amounts of fiat currency.
The Swiss are getting ready to vote for a partial gold backing of their currency, but even there, it doesn’t look likely to get implemented. So unless you are planning to join the ISIS economy, you are pretty much stuck using a fiat currency in your day-to-day transactions.
The good news is that you can protect at least some of your savings by owning gold. And it doesn’t matter to you in the long run what Ukraine, the U.S., or any other central bank does with their gold.
Until next time,
Geoffrey Pike for Wealth Daily
By Geoffrey Pike | Friday, November 21st, 2014 – Link to the original article; http://email.angelnexus.com/hostedemail/email.htm?CID=23671596972&ch=6B8B66714A722FEB39508191437B8115&h=3afb03b3881f168acf1724d8435b3e96&ei=soCgKNAdN