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Are the Central
Bank Vaults Empty?
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?
Something about the numbers
doesn’t seem to add up.
The importance 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
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%.
That’s a lot of
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.
Central banks 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.
They don’t hold pork
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 up.
Here’s the mystery in
brief, from the Sprott report called, “Do Western Central Banks Have Any
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.
That number 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.
This increase 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 he
Other substantial 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
Where 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, Sprott
“There 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 tracked …
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.
“The 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.
“Same 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),’ respectively.
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.
“The fact that they do
not differentiate between the two is astounding.”
Loans? Swaps? Repurchase
agreements? A house of cards by any other name would topple as
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 vaults?
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
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
Central Banker to
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
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 so on.
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 they have long since been cleaned out.
For your Freedom and