The Planetary Metals, Gold. Part 1.
“It’s MY MONEY!!”
This isn’t about gold as such, it’s a post about how people make money with it. There has long been a conspiracy theory that the bullion vaults of Fort Knox have little more in them than air, dust and a few hungry spiders. As ever, conspiracy theories emerge when facts are few and far between, or the reality is a little too absurd to comprehend. I guess this post covers an area where both are true. After all, the last audit on the US government’s gold reserves was in the mid fifties. Which is not something to inspire confidence in the evidence, is it? Few corporations can get away with that kind of auditing – but then, that’s why we have off–shore banking. Where it’s allowed, that is.
The other aspect is the sums of money involved: the US government has some 1800 tons of gold. Now that is quite a lot of gold, and quite a sum of money, considering that gold costs around $1200 an ounce. Well cover–ups – and offshoring – usually focus on areas where lots of money is concerned. Hoarding gold is perhaps the one metaphor for our modern times: we stash the stuff away and say ‘It’s mine’.
So what’s the problem with the audit? None at all, on the face of it: as long as you trust the things the American government say. If you happen to believe them, that’s fine. My experience of Americans is that they don’t have what one might call ‘a solid record’ when it comes to dealing in matters that require a degree of transparency and openness. My last post explored some of the reasons that lead to this, namely, selfishness – a selfishness that leads directly to an inability to express themselves. Such an inability also implies that they aren’t likely to be examining their own actions too carefully either. Or those of others. Self–examination is what I look for in anyone I meet: and you will know it because they will ‘examine’ you and will do it by asking questions. Real, meaningful ones, not just “how was your day,” expecting the answer “oh, fine.” This capacity shows that the person has a level of awareness that can help them deal with the negative side of themselves – and in examining it, deal with it.
Because the Americans can’t.
Partly because they are unable to deal with reality means that they can dream up ideas that allow the situation – what we might call a ‘perceived reality’, or possibly a ‘paper reality’ because this reality is only real in as much as it is allowed in legal, or put better, socially acceptable terms, if not genuinely legal ones. Americans are not a nation who hold with legalities – or at least, they don’t when it means they have to do the confessing. What is socially acceptable does not mean that it is either real or healthy. Question a person on such a point – that is to say, the discrepancy between socially acceptable realities and the genuine reality – and you will usually hurt them. Socially acceptable realities are often illusory, and pricking illusions is painful.
The Gold Bubble.
And it is a bubble! Just like the South Seas Bubble that kicked off the modern phenomena of perceived values. Now it must be clearly stated that in human terms, gold has no practical use whatsoever.
Therefore, it has no practical value. You cannot put a true value on it because nobody needs it – save for its use in electronics, but this is a very new – and transitory phenomenon. This usage of gold will vanish as fast as it appeared. Oh, just like a bubble! Thus it is the perfect commodity to spin people’s belief, and when people are gullible, as most are today, they will swallow the belief whole – and quite as importantly, won’t ask difficult questions.
Like: “is there any gold in Fort Knox?”
They’ll get a response that basically gives them lots of words and not much by way of real substance. A little like the gold in Fort Knox, then. Because the US government – or any bank, for that matter – can hold physical gold on their books and lend it out. Which is the important thing to note here: the gold can be ‘lent out’ in a certain manner and still be officially sanctioned as being present in the now empty vault. Well, now we know why the US government has so much gold, and so little time for auditing it. Oh, and it’s why the German government doesn’t have a snowball’s chance of getting theirs back.
Given the American’s ability to make laws that allow such behaviour, it’ll come as no surprise when those laws get bent – or even broken. The gold that has been lent out has been lent out for so long that getting it back raises something of a problem.
The people who ‘borrowed’ it in 1969 had sold it in 1974 and, well, they do intend returning it at some point. Oh, and they are still paying for the right to have borrowed it, so that’s fine, isn’t it? Well, on paper, it is. And assuming nobody wants to come and audit the gold in – “now do you mind not talking about the gold in Fort Knox,” asks a burly security guard. “You’ve talked about it rather too much. I think it’s time to stop, either that or my boss isn’t going to be very happy.”
Okay, so the gold is in Fort Knox, and we must accept that because legally speaking, it is. Just don’t force the issue or you’ll regret it.
The ability to write down gold on paper and have it accepted as being real has another side: the Americans saw a way to make money. They could sell a contract that stated that it represented an amount of physical gold, let’s say, a tenth of an ounce. Well, it can be for any amount, given how much money you want to spend.
I will add here that the person selling will be well dressed, take you to a nice restaurant and speak of everything positive.
If you don’t recognize the character of such a person, you’re in trouble. Back to the paperwork: this piece of paper tells you that you ‘own’ a certain amount of gold. All well and good: you pay for the purchase, you pay for the legal documents – and in some cases, you even pay for the storage of that gold! After all, it’s safer than keeping it in your own home, isn’t it?
Well, what with one thing and another, these nicely dressed types realized that nobody was checking to see how much paper they printed or how much gold they had – or more importantly, hadn’t – bought. With this level of auditing – a very Anglo–Saxon kind of auditing – it was obvious that an Anglo–Saxon salesman would get the message. Thus we have the unenviable situation where there is between 208 and 293 times as much gold on paper as there is in reality.
And all because someone turned a ‘blind eye’ to the regulations. Well, no surprises that it was an Anglo–Saxon Admiral who coined that phrase. There are things that Anglo–Saxons are good at, storytelling and lyrics being two. There are things they are extremely good at as well: fraud.
Just try getting that gold which you legally own…
… you’ll find the same bluster, the same lengthy paragraphs of legalese that you don’t understand… and you go home wondering if you made a mistake. But then, once back home and when it comes to explaining things to the wife, it is a case of excuses, long words – or if the individual isn’t linguistically gifted – insult.
Here we have the two ends of the stick: the fraudster abusing his linguistic gifts to sell or defend himself and the defrauded who, on account of selfish pride, cannot admit to being defrauded.
The two ends of the stick lead to a healthy market in paper gold. The figures are in tons, by the way. That is to say, three million tons of paper gold are sold every day – and transaction charges must be paid to the American based Comex organization (Comex, ‘Commodity Exchange’). A nice little earner if ever there was, and as much an excuse not to look into the details as any.
Thus it is obvious that there is a lot of demand for gold. What’s more, with the paper variety, it’s easy enough to satisfy. “You wanna gold? Here!” just print another document with the appropriate figures on it and hey, presto! You’ve got money in your pocket!
It’s not quite as straightforward as that, but the details of the regulation mean that it’s only recognized
fraudsters people who can exploit this legal loophole.
The Other Side Of The Coin.
Well, of course, this means that people who buy the real stuff are getting something of a bargain. Imagine if the demand for gold was limited to the purchase of the real metal! Imagine the impact of a market that is saturated with a demand that is three hundred times the availability… the price would sky–rocket. Even with three quarters of the buyers looking for other investments, the market would be seriously under supplied. Even with nine–tenths of the buyers looking elsewhere, the price would spike.
China, Russia and India would be onto a good thing; they’ve been buying the stuff for years. In economic terms, they’re sitting on a gold mine. America, on the other hand would have a few problems: with the value of gold denominated in dollars, the perceived value of the dollar would disappear down the plug–hole. Should the value of gold spike by say, 50 fold – which if the market expectations were starved in the manner imagined, would be a modest increase – the same bar of gold would be worth 50x more dollars… that is to say, if the gold is the same, the dollar looks less valuable – and less valuable by a colossal amount. Never believe the economists who say that there is a relationship between price and value: because it is not true, and especially in the case of gold which is a product that few can use in their life or work.
Fraudsters are always hoist by their own petard. It’s how reality works.