the Central Bank Vaults Empty?
by Charles Goyette: Behind
Is it possible
that the vaults of the world’s central banks, believed to be stacked
with gold bullion, are really empty? Is all the gold actually there?
the numbers doesn’t seem to add up.
of the question accelerates in the face of global money-printing,
which is also accelerating. Since the start of the economic meltdown
five years ago, the balance sheets of the world’s central banks
have been growing at a frantic pace.
The U.K. has
led the pack, up 362%, followed by the United States, which is up
223% – even before QE III. China is printing money as well, up 151%
during the period, the European Central Bank, 146%, and Japan, 83%.
a lot of money-printing.
But take heart,
because while the currencies of all those countries are absolutely,
100% fiat – redeemable in nothing but more of the same paper – the
world’s central banks are said to have huge reserves of gold bullion.
The U.S., U.K., the euro zone, Switzerland, Japan and the International
Monetary Fund report having gold reserves of 23,349 tons among them.
of the world’s terminally indebted countries prefer the fiction
that paper money that’s printed at little cost, or digital bookkeeping
entries that are created at no cost, is money and therefore constitutes
real wealth. However, there must be a reason that central banks
universally hold gold reserves.
don’t hold pork bellies.
At this point,
Eric Sprott, of the estimable Sprott Asset Management, enters the
discussion, asking some inconvenient questions. Because something
about the gold numbers – supply and demand – doesn’t seem to add
mystery in brief, from the Sprott report called, "Do
Western Central Banks Have Any Gold Left???"
New mine supply
of gold this year is estimated to be just under 2,700 tons. But
gold demand, growing rapidly over the last 12 years, amounts to
an additional 2,268 tons of new gold demand a year today that
didn’t exist in 2000.
was derived from the buying of just five sources: non-western central
banks (Russia, Turkey, Kazakhstan, Ukraine and the Philippines),
the mints of the U.S. and Canada, ETFs, and Chinese and Indian consumption.
in gold demand seems to actually understate the matter, since it
doesn’t include huge private investment purchases of physical gold
from around the world. For example, Sprott cites China’s Hong Kong
gold imports, expected to reach 785 tons this year, as just one
additional source of net investment that sees real total demand
exceeding new mine supply.
But the private
investment demand amounts to much more than the Hong Kong gold imports
purchases of physical bullion include those by hedge funds and other
institutions (the University of Texas endowment fund alone purchased
and took delivery of $1 billion of physical gold in 2011), as well
as purchases by Russian plutocrats and Persian Gulf petrocrats.
The bull market
in gold has, after all, been a global event.
In short, Sprott
concludes there is a big discrepancy between real physical gold
demand (own any gold bars yourself? If so, they don’t show up in
the demand numbers!) and the purported supply.
Is All the Gold Coming from?
Who is selling
the gold that fills the gap between supply and fast-growing demand?
Who is releasing physical gold to the market without it being reported,
is only one possible candidate: the Western central banks. It may
very well be that a large portion of physical gold currently flowing
to new buyers is actually coming from the Western central banks
themselves. They are the only holders of physical gold who are capable
of supplying gold in a quantity and manner that cannot be readily
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.
UK government, for example, refers to its gold allocation as, ‘Gold
(including gold swapped or on loan).’ That’s the verbatim phrase
they use in their official statement.
goes for the U.S. Treasury and the ECB, which report their gold
holdings as ‘Gold (including gold deposits and, if appropriate,
gold swapped)’ and ‘Gold (including gold deposits and gold swapped),’
that’s as far as their description goes, as each institution does
not break down what percentage of their stated gold reserves are
held in physical, versus what percentage has been loaned out or
swapped for something else.
fact that they do not differentiate between the two is astounding."
Repurchase agreements? A house of cards by any other name would
topple as fast.
It is impossible
to know exactly what shenanigans are afoot at the Federal Reserve.
Have the gold reserves held by the Fed, the property of the American
people, been loaned out? Have the banksters and other Fed cronies
borrowed U.S. gold, sold it to China, and left an IOU in the Fed’s
In an age rich
with banking and other institutional, credit, and counterparty failures
and frauds, such transactions are anything but prudent. Especially
since whatever gold the Fed holds is not its property.
In a one-time
partial audit that the Federal Reserve resisted mightily, the Government
Accounting Office found that from Dec. 1, 2007, through July 21,
2010, the Federal Reserve provided more than $16 trillion – a sum
equal to America’s entire visible national debt – in secret loans
to some of the world’s most politically powerful banks and companies.
Among the major
recipients of the windfall were Citigroup, Morgan Stanley, Merrill
Lynch, Bank of America, Bear Stearns and Goldman Sachs. But the
beneficiaries weren’t just American financial institutions.
Banker to the World?
At one point
(in October 2008), 70% of Fed loans were to foreign banks. Foreign
recipients of the windfall included powerful European banks: Barclays,
Royal Bank of Scotland, Deutsche Bank, UBS, Credit Suisse and others.
Among the disclosures
the Fed was forced to make is that it extended 73 separate loans
for an aggregate $35 billion to Arab Bank Corp., owned in substantial
part by the Central Bank of Libya.
The Fed is
a hot bed of cronyism: The discount window, bond purchasing, its
primary dealer system and pricing structure, currency and gold swaps
and repurchase agreements, Open Market Committee operations, and
The light of
a full and thorough audit is likely to find all kinds of cronies
lurking in these dark corners of the Fed.
And with the
new, third round of quantitative easing under way, it may not be
long before the money-printing game collapses entirely. At that
point the calamity will compound if Americans turn to the vaults
where the gold was purported to be, and find that the gold has long
since been loaned out or otherwise cleaned out.
© 2012 by LewRockwell.com. Permission to reprint in whole or in
part is gladly granted, provided full credit is given.
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