Windship
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- May 27, 2014
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No. I think we all know that. If the elite can concock the biggest ponzi scheme in history, they got no problem with stealing the gold too. Lol.
The Biggest Government Lie in History?
Published Tue, Jul 16, 2013 | Louis Basenese, Investment Director
Welcome to the worldās most secure vaultā¦
Completed in 1936, itās encased in 16,000 cubic feet of granite and 4,200 cubic yards of cement.
The vault door weighs an astounding 22 tons and is made of a 21-inch-thick material thatās resistant to drills, torches and explosives.
It comes with a bombproof roof, too.
Additional layers of physical security include: video cameras, minefields, barbed wire, electric fences, armed guards ā even unmarked Apache helicopter gunships.
Oh, and itās stationed on a 109,000-acre U.S. army post.
So whatās inside?
Well, it depends on who you ask.
The government will tell you that almost 5,000 metric tons of gold, or roughly 3% of all the gold ever refined throughout human history, is safely sealed inside the vault.
Others will tell you that the vault (the United States Bullion Depository ā known as Fort Knox) is totally empty.
What if the skeptics are right? And all this protection is just an elaborate cover-up?
What if thereās actually no gold at Fort Knox?
Letās dig a little deeperā¦
Send the Auditors to Fort Knox!
In light of the revelations from NSA whistle-blower, Edward Snowden, itās even harder now to trust Washington politicians.
The government has been doing a lot of things that it said it wasnāt for years (i.e. ā spying on citizens). And that naturally makes me wonder what else it might be up to.
Iām not alone, either.
Three-time presidential candidate, Ron Paul, has long questioned the amount of gold at Fort Knox. He even went as far as introducing legislation in 2011, which proposed an audit.
One thing we can all agree on is this: Lack of transparency always leads to corruption. So Paulās audit demand seems reasonable. Especially considering that the worldās publicly traded companies must undergo annual audits. Why should the Federal government be immune?
Amazingly, though, the last audit of Fort Knox occurred in 1953, right after President Eisenhowerās inauguration. Except no outside experts were permitted, and only about 5% of the gold was tested. So thereās been no full audit in over 60 years!
Over that time, however, the government has sold its gold ā reducing its holdings from about 20,000 metric tons in the 1950s, to the current level of 8,133 metric tons.
So are we just supposed to trust that the government stopped selling? In this day and age, thatās a pretty tall order!
Just ask the Germans.
In late 2012, Germanyās federal court ordered its central bank to conduct annual audits and physically inspect gold deposits worldwide ā including in the United States. For decades, the Bundesbank had relied on written confirmation.
Why the sudden change of heart? It makes me wonderā¦
A More Fundamental Question
Letās give the government the benefit of the doubt for a (brief) moment and ask: Why do we even have gold reserves?
The gold bars, packed tightly into a secure vault, were supposed to give us confidence in our countryās currency. But we cast off the gold standard in 1971 and stopped redeeming currency for gold. So nowadays, gold reserves are nothing more than an asset on the Fedās balance sheet, not an integral part of our monetary system.
So what gives with clinging tightly to it?
Fed Chairman Ben Bernanke says that itās the result of ālong-term tradition.ā
Mark Zandi, Chief Economist at Moodyās Analytics says, āIt may lend some confidence to investors that we have large gold reserves. But itās more symbolic than substantive.ā
Meanwhile, former Fed Chairman Alan Greenspan reportedly said, we hold onto the huge reserves ājust in case we need it.ā (Thatās comforting.)
In the end, if thereās no real purpose for the gold reserves, then why worry about an audit at all?
A Crisis of Confidence
One reason the government might not want an audit is because it would lend importance to an asset that it swears is unimportant.
Or as hedge fund manager James Rickards puts it, āAn audit would give gold too much credit and start to erode the official propaganda that gold is not a monetary asset. After all, no one audits the number of acorns in the national parksā¦ They are too unimportant.ā
Makes sense. Yet, I donāt think thatās substantive enough to justify the refusal.
Whatās more likely is that an audit would raise more questions than it answers. Like, if the gold is really there, does it really all belong to the government?
I say that because central banks routinely lease or lend out gold. But current reporting guidelines donāt require them to distinguish between gold owned outright and gold swapped with another party.
Instead, the U.S. Treasury simply states its holdings as āgold (including gold deposits and gold swapped).ā Or in the British governmentās case, āgold (including gold swapped or on loan).ā
Again, such a lack of transparency opens the door to abuse. Not only could all the gold be on loan (perhaps on unfavorable terms), but banks could also be āre-loaningā that very same gold, thereby creating a āpaper pyramid of gold.ā
The process is known as ārehypothecation,ā and itās exactly what happened during the mortgage crisis with collateralized debt obligations. And we all know how that ended.
An audit might also reveal that the government dumped some gold on the world markets to manipulate prices. (Yes, governments have done that before.) And if the U.S. government even sold a little without telling us, trust would be irreversibly broken.
More spectacularly, an audit might reveal that Fort Knox is littered with gold-painted tungsten. Here, too, a precedent exists, as counterfeit bars turn up from time to time. Although I doubt a government would confess to being so incredibly duped.
Fort Knox: A New Stimulus Project
It would reportedly take 400 people, working full-time for six months, to test all the gold at Fort Knox for purity. It would cost at least $15 million, too. For me, thatās not a deterrent, though.
Sounds more like an economic āstimulusā project. Lord knows weāve squandered way more tax dollars on projects with no tangible benefits. Besides, we could use some new jobs.
Bottom line: If you believe the government routinely lies or covers up its actions, we canāt simply laugh off the idea that thereās no gold in Fort Knox. Until an audit is done, the facts provide more questions than answers.
And while I donāt believe Fort Knox is completely devoid of gold, itās certainly possible that our gold reserves are lower than reported and/or not wholly owned by the U.S. government.
So what does that mean for the price of gold? Stay tuned for tomorrowās column. Iāll address that question to provide a real-world, logical price target for gold.
Ahead of the tape,
Louis Basenese
The Biggest Government Lie in History?
Published Tue, Jul 16, 2013 | Louis Basenese, Investment Director
Welcome to the worldās most secure vaultā¦
Completed in 1936, itās encased in 16,000 cubic feet of granite and 4,200 cubic yards of cement.
The vault door weighs an astounding 22 tons and is made of a 21-inch-thick material thatās resistant to drills, torches and explosives.
It comes with a bombproof roof, too.
Additional layers of physical security include: video cameras, minefields, barbed wire, electric fences, armed guards ā even unmarked Apache helicopter gunships.
Oh, and itās stationed on a 109,000-acre U.S. army post.
So whatās inside?
Well, it depends on who you ask.
The government will tell you that almost 5,000 metric tons of gold, or roughly 3% of all the gold ever refined throughout human history, is safely sealed inside the vault.
Others will tell you that the vault (the United States Bullion Depository ā known as Fort Knox) is totally empty.
What if the skeptics are right? And all this protection is just an elaborate cover-up?
What if thereās actually no gold at Fort Knox?
Letās dig a little deeperā¦
Send the Auditors to Fort Knox!
In light of the revelations from NSA whistle-blower, Edward Snowden, itās even harder now to trust Washington politicians.
The government has been doing a lot of things that it said it wasnāt for years (i.e. ā spying on citizens). And that naturally makes me wonder what else it might be up to.
Iām not alone, either.
Three-time presidential candidate, Ron Paul, has long questioned the amount of gold at Fort Knox. He even went as far as introducing legislation in 2011, which proposed an audit.
One thing we can all agree on is this: Lack of transparency always leads to corruption. So Paulās audit demand seems reasonable. Especially considering that the worldās publicly traded companies must undergo annual audits. Why should the Federal government be immune?
Amazingly, though, the last audit of Fort Knox occurred in 1953, right after President Eisenhowerās inauguration. Except no outside experts were permitted, and only about 5% of the gold was tested. So thereās been no full audit in over 60 years!
Over that time, however, the government has sold its gold ā reducing its holdings from about 20,000 metric tons in the 1950s, to the current level of 8,133 metric tons.
Just ask the Germans.
In late 2012, Germanyās federal court ordered its central bank to conduct annual audits and physically inspect gold deposits worldwide ā including in the United States. For decades, the Bundesbank had relied on written confirmation.
Why the sudden change of heart? It makes me wonderā¦
A More Fundamental Question
Letās give the government the benefit of the doubt for a (brief) moment and ask: Why do we even have gold reserves?
The gold bars, packed tightly into a secure vault, were supposed to give us confidence in our countryās currency. But we cast off the gold standard in 1971 and stopped redeeming currency for gold. So nowadays, gold reserves are nothing more than an asset on the Fedās balance sheet, not an integral part of our monetary system.
So what gives with clinging tightly to it?
Fed Chairman Ben Bernanke says that itās the result of ālong-term tradition.ā
Mark Zandi, Chief Economist at Moodyās Analytics says, āIt may lend some confidence to investors that we have large gold reserves. But itās more symbolic than substantive.ā
Meanwhile, former Fed Chairman Alan Greenspan reportedly said, we hold onto the huge reserves ājust in case we need it.ā (Thatās comforting.)
In the end, if thereās no real purpose for the gold reserves, then why worry about an audit at all?
A Crisis of Confidence
One reason the government might not want an audit is because it would lend importance to an asset that it swears is unimportant.
Or as hedge fund manager James Rickards puts it, āAn audit would give gold too much credit and start to erode the official propaganda that gold is not a monetary asset. After all, no one audits the number of acorns in the national parksā¦ They are too unimportant.ā
Makes sense. Yet, I donāt think thatās substantive enough to justify the refusal.
Whatās more likely is that an audit would raise more questions than it answers. Like, if the gold is really there, does it really all belong to the government?
I say that because central banks routinely lease or lend out gold. But current reporting guidelines donāt require them to distinguish between gold owned outright and gold swapped with another party.
Instead, the U.S. Treasury simply states its holdings as āgold (including gold deposits and gold swapped).ā Or in the British governmentās case, āgold (including gold swapped or on loan).ā
Again, such a lack of transparency opens the door to abuse. Not only could all the gold be on loan (perhaps on unfavorable terms), but banks could also be āre-loaningā that very same gold, thereby creating a āpaper pyramid of gold.ā
The process is known as ārehypothecation,ā and itās exactly what happened during the mortgage crisis with collateralized debt obligations. And we all know how that ended.
An audit might also reveal that the government dumped some gold on the world markets to manipulate prices. (Yes, governments have done that before.) And if the U.S. government even sold a little without telling us, trust would be irreversibly broken.
More spectacularly, an audit might reveal that Fort Knox is littered with gold-painted tungsten. Here, too, a precedent exists, as counterfeit bars turn up from time to time. Although I doubt a government would confess to being so incredibly duped.
Fort Knox: A New Stimulus Project
It would reportedly take 400 people, working full-time for six months, to test all the gold at Fort Knox for purity. It would cost at least $15 million, too. For me, thatās not a deterrent, though.
Sounds more like an economic āstimulusā project. Lord knows weāve squandered way more tax dollars on projects with no tangible benefits. Besides, we could use some new jobs.
Bottom line: If you believe the government routinely lies or covers up its actions, we canāt simply laugh off the idea that thereās no gold in Fort Knox. Until an audit is done, the facts provide more questions than answers.
And while I donāt believe Fort Knox is completely devoid of gold, itās certainly possible that our gold reserves are lower than reported and/or not wholly owned by the U.S. government.
So what does that mean for the price of gold? Stay tuned for tomorrowās column. Iāll address that question to provide a real-world, logical price target for gold.
Ahead of the tape,
Louis Basenese
~S~
