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October 18, 2006

A Swap Story: Borrowed From The Bank of England
by Rob Kirby

Every now and then even the most unwitting prospector finds a nugget in his pan. Recently, with a little help from my friends - O.K., with a lot of help from my friends - this golden revelation just happened to bonk me straight between the eyes;

WASHINGTON (Dow Jones)--U.S. gold exports rose 55.0% in August from the previous month, and was up 83.0% from the previous year, the Commerce Department reported Thursday.

So, I'm sure many of you are figuring, "big deal", gold exports from the U.S. are up - so what?

Well, it was not until a very well informed friend, who shall remain anonymous, conveyed this "color" regarding the numbers above, in a private e-mail, that this began to make sense to me;

"With a deficit in gold supply world wide, it is highly unlikely that this is US owned gold leaving the country. You should be aware that when a foreign central bank repatriates its gold from storage at the Federal Reserve Bank of New York, it shows up as a export credit in the trade data of the US. This is not American gold! I first noticed this back in 1997, when ECB member banks had already repatriated about one third of the gold they had stored in America in the aftermath of World War ll. This process is on-going and accelerating. You can't blame these ECB banks! When a nation drops habeas corpus and the Geneva Convention, a little matter like theft of other nation's stored gold is not a stretch....."

Now, this got me to thinking; just how much gold is 113 million grams denoting U[nited] King[dom]? Well, the answer is approximately 113 tonnes. Amazing to think that the U.S. Trade Deficit would have been another 2.5 - 3 billion worse without the inclusion of this "export", ehhh?

This, in turn, got me to thinking about things like Gordon Brown and his well publicized sale of 60 % of Sovereign British Gold at less than $ 300 per ounce and the make up [like how much they have left] of Great Britain's remaining sovereign gold reserves?

You know, it's amazing what you "bump into" when you start poking around looking for something else!

In doing a bit of research about the make up of Great Britain's sovereign gold reserves, I ran across this tidbit [footnote on the bottom of page 5 of 8 of the pdf file] regarding different types of gold swaps that the Bank of England presumably utilizes,

"Under a gold location swap, gold stored in a particular physical location is swapped with a market counterparty for specified period with gold stored in another physical location. Under a gold quality swap, gold of a particular quality [fineness] is swapped with a market counterparty for a specified period with gold of different fineness. In each case a fee is built into the transaction."

To be honest, until today, I've never heard of a "GOLD QUALITY SWAP". Given the amount of research I've done in this area - I would only offer that this would make a Gold Quality Swap a "rare bird" indeed. But this got me to thinking WHO could possibly be involved in such a transaction if one were to occur.

And With Inclusion In These Footnotes, They Do Occur...

Fundamentally, a Gold Quality Swap would allow the holder of "less than fine" bullion to effectively sell or transact it publicly and remain anonymous. GOLD COIN melt just happens to ALL be 22 carat. Now ask yourself who would possibly care about such a thing? After all, Central Banks have declared gold a Barbarous Relic, sell it all the time - and usually have news conferences to pre announce up coming sales to boast about them, don't they? So why would a sale of "less than pure" gold need to be kept a secret? The "best fit" / counter party is; the US TREASURY OR THE FED [see argument below] was the other side of these trades. In fact, they are the most plausible counterparty for such a transaction - arising from the great confiscation of gold coin in the U.S. in 1933.

You see, U.S. sovereign gold stocks are alleged to be 8,133 tonnes. The breakdown is as follows;

- roughly 4,500 tonnes of fine gold [400 oz. good deliver bars]

- the balance in less than fine [22 carat] coin melt bars

Why Would The Treasury Keep This So Quiet?

If the U.S. Treasury were "known" to be selling this "melt" gold - disorderly markets could ensue. Remember folks, the U.S. Treasury is alleged to own 4,500 tonnes of fine deliverable gold bars stored at Ft. Knox, Kentucky and West Point, N.Y. If there was need for them to "mobilize" coin melt, it raises an even bigger question mark as to whether or not this 4,500 tonnes of fine gold is still there to sell?

While it is true that history reminds us that,

"It is generally believed that all the gold coins surrendered under Roosevelt's call-in were melted or refined into .999 fine bullion bars. That was not the case. It was to the government's advantage to give the foreigners gold coins instead of bullion bars.

With the official price of gold at $35 an ounce, a foreign bank presenting $35 million paper dollars received 1,000,000 ounces if the Treasury delivered gold bullion. However, when the Treasury delivered gold coins with a face value of $35 million, it delivered only 967,500 ounces, saving 32,500 ounces. Each $20 Liberty and St. Gaudens (Double Eagles) contains .9675 ounce of gold. The smaller coins contain the same proportions. Therefore, it was to the Treasury Department's advantage to give out U.S. gold coins instead of bullion bars. Additionally, before Roosevelt's call-in, millions of old U.S. gold coins already had made their way to Europe."

Reality and logic would dictate that no one - other than a party that stands to benefit from gold price suppression - would benefit from "swapping" a hoard of American Gold Coins in this type of transaction which is, by definition as a "swap", reversed at maturity. What this type of transaction would accomplish for the owner of less than fine gold; it would provide instant gratitude of exchange tradable [deliverable] gold and perhaps more importantly - it would BUY TIME.

To understand the relevance of "buying time" - one only need remember the words of former Secretary of the Treasury [Clinton Admin.] Robert Rubin as he revealed the motivation or drivers of crisis management in the interaction between himself, Lawrence Summers, the ESF [exchange stabilization fund], the IMF and presumably the Maestro at the Fed - during the Clinton administration. On pages 290 - 291 of his book, In An Uncertain World, referencing the Brazilian financial crisis of the late 1990s, Rubin outlines how very expensive "bad decisions" can buy time. Sometimes, he asserts, these bad decisions have a great deal of merit because they can,

"..Probably defer the impact of the collapse for six or eight months,
and that will more than justify the effort."

Furthermore, who else besides the U.S. Treasury would be concerned about public disclosure regarding their dis-hoarding of less than pure bullion? For any counterparty to be enticed into this transaction - to pay the fees [alluded to above] associated with doing so, there would necessarily have to be an identifiable benefit. Here again, this places the U.S. Treasury and their "stash" of coin melt as the most plausible counterparty for such a trade. This passage is included only to acknowledge the existence of large quantities of American Gold Coins that were shipped to Europe before the gold window was closed by President Nixon in 1971.

The fact that the Bank of England acknowledged Gold Quality Swaps, circa 2002, is a SMOKING GUN. But it can only logically mean one thing; namely, that American Coin Melt has most likely been utilized / mobilized or collateralized prior to that time - presumably in efforts to suppress the price of gold.

So it now appears plausible that the U.S. Treasury has been involved in Gold Swaps.

The Bank of England has, perhaps inadvertently, implied as much.

Did The Treasury Act Alone, Or Did The Fed Act As Agent?

Two major points here:

The first question is whether or not the Treasury or the FED really owns the gold in the first place? One should remember,

The consolidated balance sheet of the Federal Reserve Bank provides an accounting summary of all phases of Federal Reserve Bank operations. This balance sheet, also known as the statement of condition of the Federal Reserve banks, is appended in a condensed form.

Major asset accounts in the consolidated balance sheet includes the following:

1. Gold certificate account. This account represents warehouse receipts issued to the Reserve banks by the Treasury against its gold holdings. In return the Reserve banks issue an equal value of credits to the Treasury deposit account. This amount represents the nation's entire official gold stock. New gold certificates credits may be issued only if the Treasury acquires additional gold or if the statutory price of gold is increased.

Second, if the FEDERAL RESERVE lists warehouse receipts for the Treasury's gold on its "balance sheet", do they not already OWN the gold? If they already own the gold, would they not be aware that a huge portion of it is already missing and another portion of it has been swapped?

So there it is folks, TITLE to the NATION'S GOLD - "CLEAR AS MUD"; it sure looks like a bunch of it is not where it's supposed to be but who should be concerned - The Federal Reserve or the U.S. Treasury or the American People? You decide.

But, once again, this all casts an even greater question mark as to whether the 4,500 tonnes [of the 8,133 tonne official total] of fine gold in 400 ounce good delivery bars alleged to be in the vaults of Ft. Knox and West Point are really there? If the Treasury [or the FED] still owned fine gold, why would they enter into a QUALITY GOLD SWAP to procure the same? Would it not make sense that the Treasury [or FED] would use [sell] their existing stocks - if indeed they existed?

So it appears that U.S. Sovereign Gold Stocks are at least 4,500 tonnes lighter than the 8,133 tonnes officially reported.

No wonder this resource has not been credibly audited since the Eisenhower Administration.

Making Sense Of It All...

Evidence now strongly suggests that the existence of a whole lot [if you consider 4,500 tonnes a lot, that is?] of Official American Sovereign Gold is dubious at best.

Has the missing gold has been put to use - by bankers - to suppress the price of gold in the market place as GATA has so fervently documented and claimed?

Could it be that average folks just do not understand that a truly free market in gold [rising prices] has historically put the brakes on money / credit creation in the same way a fire alarm conveys the message - EVACUATE!

We now live in world without monetary fire alarms folks! This has not occurred by accident; bankers, who control the flow of money and credit have seen to it - they disconnected them. In this light, the sage words of the esteemed Mr. Hugo Salinas Price take on even greater meaning,

"Bankers are not thinkers. They are quite ordinary flesh and blood people who want to expand their business so as to collect as much wealth as possible. Their attention is not upon matters of principle. The bankers and the economists in their pay devised methods for eliminating the barriers to the expansion of their business, which is lending money.

To make a long story short, the derivatives - which were invented to facilitate the ever increasing speed and volume of transactions caused by the application of increasing amounts of energy to society - ended up by displacing the underlying original referent itself, gold and silver money.

Today, banknotes are no longer derivatives of gold or silver. They refer to no underlying value and promise nothing to the holder. They are now no longer money, though they look like what we think money should look like."

I will admit that I'm completely and utterly nauseated with these revelations. It reminds me of how my country, Canada, was swindled out of her sovereign gold reserves. To best articulate my thoughts in this regard I'm now going to defer to yet another "fellow writer / researcher" whom I've never met personally, but follow their work religiously - who had this to say [in response to my most recent missive] last Thursday evening;

"I agree with nearly everything you say, have you notice that whenever JP Morgan Chase appear you know that shit is going to happen? It is always but always JP Morgan Chase

It is obvious that they are mucking about with energy as they mess with all he other markets, but it will not last especially with energy.

Simple fact is that you need PHYSICAL gasoline when you fill your car and PHYSICAL Natural Gas when you heat your home. The amount in total storage is tiny in relation to daily use either they have got to back off and leave supply and demand to discover price or default on there obvious exchange or OTC derivative SHORT contracts. It is only a question of time until we start the next upwards in crude oil.

I agree with what you say about Fort Knox they are probably guarding nothing, thing is you do not need Gold to drive your car or heat your home. Probably the figures released for "storage" and the SPR are a fantasy but they cannot push this to far before the game is up.

This is the real problem we are led by congenital liars, the "quality" of the official figures is massively at question.

We ignore it all and concentrate on the big primary trends, we know the day to day noise is designed to whip dumb money out of there positions and ultimately accounts. You are playing a very heavily loaded dice if you get involved in that game.

A Customer asked me a few years ago what I thought about the City Of London as I am British. I told him to imagine a casino on the outskirts of town, run by the mob, full of dead beats, drunks, con men, hustlers, shysters and particularly rough prostitutes. Where all the cards are marked and the tables bent that is the City Of London. Wall Street is the other lower class establishment that they own.

Unfortunately when it all collapses as it inevitably must the Bankers who own the media and all the politicians will get the Media to turn on the "guilty" politicians. This is what they always do, only when people turn on the real cause of the centuries old problem THE BANKERS with some well timed assassinations and violent extremism will anything change.

What is the point in getting involved in the political process to change anything? That is another loaded dice, violent extremism is what they are afraid of which is why they have the draconian Patriot Act to "deal" with anybody who goes against there system. The Media and Politicians are disposable puppets - it is who controls these puppets that we should all worry about THEY ARE THE REAL ENEMY.

Look at history the Rothschild's lent money to both sides in all the Napoleonic Wars !!!! The Wall Street banks backed Trotsky, The Wall Street Banks many of them Jewish !!!! Backed Hitler into power who then murdered 6 million of there own people !!!

War means massive military spending and reconstruction THE BANKERS CHARGE INTEREST ON EVERY CENT THAT THIS COSTS Quo Bono = Who Benefits? The Military production machine also benefits for example do you think the Carlyle Group and Halliburton are suffering with the Afghanistan or Iraq wars Quo Bono = Who Benefits?

You can go on and on, with example after example."

Ironical [sic] isn't it - how, in the spirit of this article, "swapped" or "borrowed words" from a fellow writer can "substitute" for and stand for exactly the way I feel?

This is an assessment of facts that are non-denominational and instead of dividing any of us - should be galvanizing all of humanity.

And you can all take that to the bank!

Addendum: Commentary By Adrian Douglas - Regular Contributor at www.Lemetropolecafe.com

Bill,

In the Midas of October 13 Rob Kirby made the following contribution:

QUOTE

Doing a bit of research about the make up of Great Britain's sovereign gold reserves and I ran across this tidbit [footnote on the bottom of page 5 of 8 of the pdf file] regarding different types of gold swaps that the Bank of England presumably utilizes,

"Under a gold location swap, gold stored in a particular physical location is swapped with a market counterparty for specified period with gold stored in another physical location. Under a gold quality swap, gold of a particular quality [fineness] is swapped with a market counterparty for a specified period with gold of different fineness. In each case a fee is built into the transaction."

END

This is a "real smoking gun" find by Rob Kirby. I believe the only possible counterparty for such type of "quality" swaps would be the US Treasury (the US Treasury officially owns the US gold stock not the Federal Reserve). Searching around I found the following on the goldensextant website.

http://www.goldensextant.com/commentary23.html

QUOTE

In the course of thus far unsuccessful efforts to obtain details from the Bundesbank on its gold reserves and any gold swaps it has with the United States, one of GATA's German supporters came across some interesting but mostly forgotten details on U.S. gold reserves. Professor Antony C. Sutton in The War on Gold ('76 Press, 1978), pp. 114-116, described an unaudited report by the U.S. Mint detailing the composition of U.S. gold reserves as of November 30, 1973. It showed that of then total 255 million ounces, 206 million consisted of 400 oz. bars of a fineness between .890 and .916 with almost another million ounces having a fineness between .917 and .994. Thus, at that time, more than 80% of the total U.S. gold stock did not meet the standard good delivery requirement of .995 or better.

Professor Sutton's account is confirmed by the late James Blanchard in Confessions of a Gold Bug (Adam Smith, 1990), pp. 76-77:

One of the other projects NCMR [National Committee for Monetary Reform] got involved with was to ask for an auditing of the Fort Knox gold. There was great resistance at first, but finally the Treasury listed the actual number of gold bars, their size and purity. Until then the Treasury had been claiming that we had 264 million ounces of gold in reserve, and that it was made up mostly of .995 to .999 pure bars. What we found was that it was almost entirely made up of melted gold coins from the 1930s at .917 (22-karat) purity.

END

As far as I know the US is the ONLY holder of "official" gold that does not meet "good for delivery" quality. There are two reasons why the US must swap this gold to sell into the market. First of all if 400 oz bars show up of less than 0.995 fineness there is only one possible source and so the market would know about it and the gold price suppression scheme would be toast. Secondly, the world's gold refineries are working day and night. There is no spare capacity to be able to reprocess US goldstock. But the real point of interest is the fact that this swap agreement format exists means that the US is using its gold (indirectly) to hold down the price. This means that the Cabal is hitting the wall in terms of available supply. It also puts in context the comment by Axel Weber of the Bundesbank that they were "being asked to enter into gold swap arrangements".

Cheers
Adrian Douglas

Rob Kirby
Kirby Analytics

Copyright © 2004 - 2006 Rob Kirby

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