Monday, January 23, 2012

Auditing The Fed's Gold (Or Lack Thereof)

Gary North has published a MUST READ article on gold leasing by central banks- namely the US fed.  The piece is an absolute must read for anyone wishing to have any sort of understanding of the manipulation of gold and silver by the cartel.  For those needing a review, we also discussed the topic in depth here.


If the FED is fully audited, it is likely that the audit will reveal that the gold is encumbered. Foreign central banks have leased their gold. This is a phrase for "sold the gold," since the people who borrowed it at 1% per annum then sold it for money and bought government bonds paying 5% or more.
They cannot sell these bonds at face value; the bonds have fallen in value. They cannot afford to buy gold in the open market to return the gold to the central banks. The price is already far above what they sold it for.
The central banks dare not demand a return of this gold. The gold is still on their books. The IOUs they received from the borrowers are counted as being as good as gold. The voters do not know that the gold is missing.
In December 2004, an obscure committee with the International Monetary Fund submitted a report on swaps and gold leasing. With respect to accounting for gold leasing, the report admitted that there are no standards. "The statistical implications of gold swaps and gold loans/ deposits are complex and have not been fully worked through. Work is still being undertaken by the Committee to address the implications." What implications? One of them is the issue of double counting.

In particular, gold may be double counted with either a gold swap or gold loan/deposit if the party acquiring the gold were to on-sell it outright, because both the original owner and the outright purchaser would report ownership of the gold. In addition, there is the difficulty of having monetary gold being used in these transactions for purposes other than for reserve assets, and how (de)monetization would apply if the gold is sold for industrial purposes. Moreover, there is a proposal to treat (some) nonmonetary gold as a financial asset, rather than a commodity, and the outcome of that discussion may have further implications on the treatment of gold swaps and gold loans/deposits. Finally, how the "fee" for gold swaps and gold loans/deposits should be treated has yet to be resolved. All these matters are being considered by the Committee and a report will be taken to the AEG in due course.
Nothing has changed.
The Federal Reserve has always denied that it has leased the gold, meaning the government's gold. But the FED is involved in all kinds of swaps with foreign central banks.Read more from Gary North