There is speculation that Germany may be repatriating gold in the first round of musical chairs in which China is preparing to roll out a gold-backed Yuan. It might be surprising that the Fed might need 7 years to give Germany back its 300 tons of gold … even though the Fed claims to hold 6,720 tons at the New York Federal Reserve Bank.
It’s not confidence-inspiring that CNBC’s senior editor John Carney argues that it doesn’t matter whether or not the U.S. has the physical gold it claims to hold.
On the other hand, many allege that the gold is gone:
1. Cheviot Asset Management’s Ned Naylor-Leyland says that the Fed and Bank of England will never return gold to its foreign owners.
2. Jim Willie says that the gold is gone.
3. Others allege that the gold has not been sold outright, but has been leased or encumbered, so that the U.S. does not own it outright.
$10 billion dollar fund manager Eric Sprott writes – in an article entitled “Do Western Central Banks Have Any Gold Left???“:
“If the Western central banks are indeed leasing out their physical reserves, they would not actually have to disclose the specific amounts of gold that leave their respective vaults. According to a document on the European Central Bank’s (ECB) website regarding the statistical treatment of the Eurosystem’s International Reserves, current reporting guidelines do not require central banks to differentiate between gold owned outright versus gold lent out or swapped with another party. The document states that, “reversible transactions in gold do not have any effect on the level of monetary gold regardless of the type of transaction (i.e. gold swaps, repos, deposits or loans), in line with the recommendations contained in the IMF guidelines.”6 (Emphasis theirs). Under current reporting guidelines, therefore, central banks are permitted to continue carrying the entry of physical gold on their balance sheet even if they’ve swapped it or lent it out entirely. You can see this in the way Western central banks refer to their gold reserves.”
Indeed, it is now well-documented that the Fed has leased out a large chunk of its gold reserves, and that big banks borrow gold from central banks and then to multiple parties.
When the Fed now writes $85 billion of checks to buy Treasuries and mortgages every month, they really have nothing in the “bank” to back them. Supposedly they own a few billion dollars of “gold certificates” that represent a fairy-tale claim on Ft. Knox’s secret stash, but there’s essentially nothing there but trust.. When a primary dealer such as J.P. Morgan or Bank of America sells its Treasuries to the Fed, it gets a “credit” in its account with the Fed, known as “reserves.” It can spend those reserves for something else, but then another bank gets a credit for its reserves and so on and so on. The Fed has told its member banks “Trust me, we will always honor your reserves,” and so the banks do, and corporations and ordinary citizens trust the banks, and “the beat goes on,” as Sonny and Cher sang. $54 trillion of credit in the U.S. financial system based upon trusting a central bank with nothing in the vault to back it up. Amazing!
And given that gold-plated tungsten has turned up all over the world, and that a top German gold expert found fake gold bars imprinted with official U.S. markings, Germans may have lost confidence in the trustworthiness of the Fed. Also, that the Fed had plans to grab Germany gold:
Jim Rickards has outlined possible plans by the Federal Reserve to commandeer Germany’s and all foreign depositors of sovereign gold at the New York Federal Reserve in the event of a dollar and monetary crisis leading to intensified “currency wars” and the ‘nuclear option’ of a drastic upward revision of the price of gold and a return to a quasi gold standard is contemplated by embattled central banks to prevent debt deflation.
Is that one another reason why Germany is demanding its gold back now?
One More Point:
Some think that the war in Mali is connected:
“Mali is one of the world’s largest gold producers. Together with neighboring Ghana they account for 7-8% of world gold output. That makes them a rich prize for nations desperate for real physical gold. So, even as Germany started demanding their gold back from the Bank of France and the New York Federal Reserve, France (aided by the US) decided to invade Mali to fight “Islamists” working for “Al Qaeda.” Of course, “Islamists” has become the catch-all label for people that need to be killed to get them out of the way of the path to riches, and the people being bombed by France (aided by the US) are not “Al Qaeda” but Tawariqs, who have been fighting for their independence for 150 years, long before the CIA created “Al Qaeda”. Left to themselves, the Tawariqs could sell gold to whoever they want for whatever they want, and right now China can outbid the US and France.”
Why does this matter?
Under this theory, the rest of the world’s currencies will sink unless their nations’ can scramble to get their hands on enough gold to lend credibility to their paper. Does anyone think that the U.S. can continue to just print dollars for the purchase of gold? At the current value of the dollar? If you do, please tell us which country will be that seller. Is this why Mali has suddenly popped up on our radar screens? Just a few questions for you to ponder. You draw your own conclusions as to what happens in the U.S. if any of this occurs. Are you ready?