And so it begins …

January 15, 2013 15 Comments
By

IPJ invites you to consider this today from Zero Hedge:

In what could be a watershed moment for the price, provenance, and future of physical gold, not to mention the “stability” of the entire monetary regime based on rock solid, undisputed “faith and credit” in paper money, German Handelsblatt reports in an exclusive that the long suffering German gold, all official 3,396 tons of it, is about to be moved.

Specifically, it is about to be partially moved out of the New York Fed, where the majority, or 45% of it is currently stored, as well as the entirety of the 11% of German gold held with the Banque de France, and repatriated back home to Buba in Frankfurt, where just 31% of it is held as of this moment.

And while it is one thing for a “crazy, lunatic” dictator such as Hugo Chavez to pull his gold out of the Bank of England, it is something entirely different, and far less dismissible, when the bank with the second most official gold reserves in the world proceeds to formally pull some of its gold from the bank with the most.

In brief: this is a momentous development, one which may signify that the regime of mutual assured and very much telegraphed – because if the central banks don’t have faith in one another, why should anyone else? - trust in central banks by other central banks is ending.

Much more importantly, it is being telegraphed as such, with Buba fully aware of just what the consequences of this (first partial, and then full; and certainly full vis-a-vis the nouveau socialist regime of Francois Hollande which will soon hold zero German gold) repatriation will be in a global monetary arena, which is already scraping by on the last traces of faith in a monetary system that is slowly but surely dying but first diluting itself to oblivion.

15 Responses to And so it begins …

  1. Greg Tingey
    January 15, 2013 at 9:31 am

    Oh dear.
    THERE IS NOT ENOUGH GOLD ON THE PLANET TO USE AS A MONETARY BASE.

    IT CANNOT BE DONE.

    Or had you not noticed that inconvenient fact?
    I will agree that the present monetary “system” is creaking & in serious need of adjustment & urgent repair, but a “gold standard” is not, EVER going to work.
    Please note that I am not proposing an alternative solution, only that at present, we have a rage of partially-bad potential solutions. As to which is the least bad is another matter – but “gold” it certainly ain’t!

    • January 15, 2013 at 2:13 pm

      Oh, if monitized at $2000 per oz, there is plenty to set a new Gold Standard.
      link to demonocracy.info

      Of course, it would mean that fractional reserve banking would have to be reigned in, and debt leverage, and money printing controlled…

      But of course we must remember that Gordon Brown sold most of our UK Gold reserves at the bottom of the market..

      • Greg Tingey
        January 15, 2013 at 6:09 pm

        NO
        Let’s try that again, shall we?
        There is not, physically, enough gold on the planet.

        Got that – I didn’t use any words that were too long or difficult, did I?

    • amfortas
      January 16, 2013 at 1:31 am

      Cannot be done, eh? And said with such authority. :roll:

  2. Rossa
    January 15, 2013 at 3:10 pm

    If you take a look at the infographic for world government reserves the UK is missing. Italy has 2,451.8t, France has 2,435.4t and the ECB a paltry 502.1t. Does this mean the UK has less gold left than the ECB?

    Wonder how much has been adulterated with the infamous tungsten? And the amount of 166,500 tonnes for all the gold in the world is only the official figure. Considering what most people think about the banks these days I doubt if that is a true figure in any sense of the word.

    And maybe after seing this graphic for US 10 year treasury bonds you can see why gold is so popular. Not much room to decline further.

    link to finance.yahoo.com^TNX+Interactive#symbol=^tnx;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined

    • January 15, 2013 at 8:44 pm

      The UK – 310.3 tonnes

      Currently the UK has the 17th largest gold reserves in the world, but the total amount we currently stock is lower than the amount of gold we decided to sell in 1999.

      Seeing that the price of gold had been steadily falling for years, Gordon Brown made the decision to sell off 395 tonnes from the national reserve, at an average price of $276.6 an ounce, and invest the money elsewhere. It turned out to be a bad call, to say the least, with the gold price consistently rising since then and traders even referring to the generational low in the gold price as the “Brown bottom”.

      At the time of writing, gold costs more than $1,800 an ounce, six-and-a-half times as much as when the decision to sell was made, meaning we missed out on close to $20 billion.

      link to uk.finance.yahoo.com

      • Greg Tingey
        January 16, 2013 at 10:11 am

        “gold costs more than $1,800 an ounce” …..
        According to whom?
        Where is the absolute measuring stick, against which this so-called “price” can be judged?
        Haven’t you go it yet?
        ALL currency is “fiat” money – try reading “Making Money” by Pterry for a very sarcastic (& funny) exposition of this publicly-believed sham.

        The “vulue” of gold is what peolpe decide to put on it, no more & no less, the same as silver, or platinum or cowrie shells, or printed notes, or bills of excange or even the price of your next meal.
        THERE IS NO ABSOLUTE STANDARD.
        And, in fact, there never was one …..

        • Single Acts of Tyranny
          January 16, 2013 at 10:10 pm

          I think the point some commentators were eluding to was that gold is relatively scarce, cannot be created at will by mendacious governments and has never suffered an inflationary meltdown rendering it valueless in the last 6,000 years whereas paper currencies have.

          At the time of writing gold is $1680.05 per troy ounce according to an interaction between buyers and sellers meeting at the equilibrium point.

          To say nothing is absolute is true to an absolute extent; What is a centimeter for example? You have to relate it to something else to give it a value. But it is wrong to claim that all currency is fiat. Fiat is defined as an arbitrary order or decree, an authorization or sanction by government. Gold needs no such authorisation from the government, people will accept it has value. Paper on the other hand absolutely needs government decree to be acceptable, try spending Pesetas today.

          Gold could indeed be monetised easily enough. It is wrong to say that there is not enough gold in the world for monetary purposes. Certainly at current prices, more fiat currency circulates than there is gold to cover. I am sure I don’t need to point out the obvious solution or implication.

          Critics claim a gold standard would be deflationary. It probably would. this is what is supposed to happen as economies become more efficient, stuff gets cheaper. Only debtors fear this.

          Who are the biggest debtors in the world? Thus why no governments support a return to gold.

          • Greg Tingey
            January 17, 2013 at 1:13 pm

            NO gold could NOT be monetised.
            This is wishful thinking – “Because I want it to be so” – like religious believers & GW deniers, for example, or “birtheres” in the USSA.
            Yes, it actually WOULD be nice if we could return to a real gold standard – but it would not & does not work.
            What MIGHT work would be a return to the Bretton Woods system.
            But that has its own disadvantages, as do all systems.

            Which set of disadvantages do you want to live with?

        • AlexB
          January 17, 2013 at 9:31 am

          So you suggest moving to the golem standard then?

          • Single Acts of Tyranny
            January 17, 2013 at 12:22 pm

            I don’t know of any alternative that is not inherently inflationary and which causes boom/bust cycles.

            The fiat system we have is clearly failing as politicians cannot be trusted not to create mega debts and run unsound and dishonest monetary systems.

          • Greg Tingey
            January 17, 2013 at 1:14 pm

            It would be just as arbitrary & no better or worse than the one we have!

  3. Greg Tingey
    January 17, 2013 at 1:17 pm

    P.S. – & gold does NOT cause boom-bust cycles?
    Look at the history of boom/bust in the C19th, tied to the discovery of gold in: California / Klondike / S Africa ….

    I also think everyone here might need to read N N Taleb, too!

    • January 17, 2013 at 3:43 pm

      One lesson that was drummed into me from a very early age was never destroy anything until you have something better to put in its place.

      It is always easier to destroy than to build, so much more simple to critisize, to run down or undermine than to create. To be negative about everything around you.

      Having done just that on just about every subject on this blog for quite some time, I wonder whether Greg Tingey has an original thought of his own, without asking us all to read the work of someone else.

      What positive, original, creative thoughts does Greg Tingey have with regards to the economy, because lets face it, until someone comes up with a solution there is only going to be more pain for everyone.

      • Greg Tingey
        January 18, 2013 at 11:59 am

        Personal & untrue abuse.

        Regarding the subject at hand.
        We HAVE a system – it is faulty, but a return to the “gold” standard would make things worse.
        I half-suggested a return to a previous system (Bretton Woods), which also has its disadvantages.
        Which set of disadvantages do you want to pick?
        An unanswered question….

United Kingdom Time

Subscribe

Email us at contact orphans of liberty [all one word] at gmail dot com

Authors

For more about these renegades, click on the name to go to a short profile:

AK Haart
Churchmouse
James Higham
JuliaM
The Quiet Man

Orphans logo


Feel free to take this for your sidebar.