German gold hoard is gone. It was Leased into the marketplace 2001 and now they want some of it returned.
Oct 25 2012
Today James Turk shocked King World News when he stated, “The entire German gold hoard was gone because it had been leased into the marketplace. Meaning, the vaults holding German gold were emptied by 2001 because of the Bundesbank leasing activities.”
Turk added, “Half of the gold they (the Germans) leased themselves. The other half of Germany’s gold hoard was eventually leased into the market as well through complicated swaps with the US. But the reality is that as of 2001, all of that German gold was gone. Meaning all German gold worldwide, which was supposed to be stored in vaults, the vaults were emptied of German gold and the gold was leased into the market.”
Turk went on to say, “It’s uncertain if any of that leased gold has ever been returned to those vaults. Meaning, the vaults which are supposed to be storing the German gold hoard may still be empty.”
Incredibly, 11 years ago James Turk had diagnosed the problems of the missing German gold hoard. Here is the 2001 piece titled, “Behind Closed Doors” in which he exposed the German gold was in fact missing:
James Turk 2001 – This past December in “The Smoking Gun” I provided substantive proof that the Exchange Stabilization Fund was intervening in the gold market. From publicly available reports prepared by the Federal Reserve, I established that the weight of gold held as a component of the US Reserve Assets has been changing, and that these changes – some of which are of significant size – result from activity by the ESF. These Federal Reserve reports conclusively demonstrate that the ESF has been intervening in the gold market since at least 1996
Maybe people are skeptical because they haven’t bothered to take the time to read the Federal Reserve reports for themselves. Maybe it’s because it’s easier to accept the word of some government bureaucrat who denies ESF involvement in the gold market than it is to seek out and look for the truth. Maybe they don’t want to believe that the US government is lying to them when Treasury official after Treasury official denies any involvement by the ESF in the gold market. I don’t know. Or maybe it’s because they think that government officials work for the American people – and not for vested interests – in their deliberative sessions behind closed doors. Wouldn’t it be refreshing if we could peek-in behind those closed doors to see what really is being said?
The reality is that very little emerges from behind closed doors, and the minutes and transcripts of closed-door sessions that do make it into the public domain contain redactions that blank out the ‘good parts’ – the revealing statements. But what if someone forgot to redact one of those ‘good parts’? Too fantastic to be true? Well, sit down, take a deep breath and carefully read what follows.
A transcript of the Federal Reserve Open Market Committee has been released for which somebody forgot to get his or her red pen out. Someone forgot to redact some very revealing words about the ESF and its activity with gold. Here’s what was said. [See the transcript from the January 31st 1995 meeting.]
MR. MATTINGLY. It’s pretty clear that these ESF operations are authorized. I don’t think there is a legal problem in terms of the authority. The [ESF] statute is very broadly worded in terms of words like “credit” – it has covered things like the gold swaps – and it confers broad authority. [Emphasis added]
Please read the above statement again, and maybe even a third and fourth time. This statement, which I can only assume was inadvertently not redacted by the FOMC Secretariat, confirms what we already know, but the US government has all along refused to admit – that the ESF is involved in the gold market. In fact, the authority of the ESF is so broad that “it has covered things like the gold swaps”. In other words, the authority of the ESF is so broad it has even been used to authorize “gold swaps”.
some background information is necessary.
The proceedings of each FOMC meeting are taped. These tapes are then transcribed, and the Federal Reserve releases these transcripts after five years. Thus, the transcripts from the 1995 meetings were released earlier this year, and having now read through them, I can honestly say that they contain a treasure trove of material, even though there are many redactions. The important point is that these transcripts are not only informative, but they are an accurate record of what is going on behind closed doors. Here is what the Federal Reserve itself says about the FOMC transcripts:
“Beginning with the 1994 meetings, the FOMC Secretariat produced the transcripts shortly after each meeting from an audio recording of the proceedings, lightly editing the speakers’ original words, where necessary, to facilitate the reader’s understanding. Meeting participants were then given an opportunity within the next several weeks to review the transcript for accuracy.
For the meetings preceding 1994, the transcripts were produced from the original, raw transcripts in the FOMC Secretariat’s files. These records have also been lightly edited by the Secretariat to facilitate the reader’s understanding. In addition, where one or more words were missed or garbled in the transcription, the notation “unintelligible” has been inserted. In some instances, words have been added in brackets to complete a speaker’s apparent thought or to correct an obvious transcription error or misstatement.
In other words, the 1995 transcripts are accurate. There are no disclaimers for them, like those made for the pre-1994 transcripts. Therefore, the above quote by Mr. Mattingly about the ESF and gold is accurate. And who is Mr. Mattingly? Virgil Mattingly is General Counsel of the Federal Reserve, its chief legal advisor.
That Mattingly’s remark passed without comment by anyone in the FOMC meeting implies that everyone knew exactly what he was referring to. In other words, to explain ESF authority his example was purposefully chosen. It was one to which the Federal Reserve Governors could all relate because it was something they saw happen during their watch. In my imagination I can see them sitting around the big FOMC conference table nodding their heads in agreement when Mattingly used this example of the gold swaps to explain how broad the ESF’s authority actually is.
To give you a flavor of the full discussion underway in the FOMC meeting, here’s a sample of the transcript.
MR. MELZER. What ability do the Treasury or the ESF have to take us out of an obligation [i.e., repay the Federal Reserve] if funds are not appropriated by Congress? Do they have the ability just to say, we committed to this and we are going to pay the Fed off?
MR. TRUMAN. Yes, they could.
MR. MELZER. But if they can do that, why can’t they just advance it themselves?
MR. TRUMAN. They could, but I think they feel that it would be useful to their objectives to have a lot of people – [apparently the rest of his comments are redacted]
The discussion then continues on this point, but touches upon the relationship between the ESF and the Treasury. These comments also establish that the ESF does not use “appropriated funds”, meaning that the ESF is answerable only to the Secretary of the Treasury and the President. All actions of the ESF are beyond Congressional authority.
CHAIRMAN GREENSPAN. Could I just formally respond to Governor Lindsey? There is a question here of whether or not the amount the United States Treasury gives us has to be appropriated funds, which I think is really where our examination of the issue has to be. In examining the take-out, we ought to make certain that we talk to them with respect to the question of what happens if they do not get the appropriated funds.
MR. TRUMAN. Mr. Chairman, the Exchange Stabilization Fund does not have appropriated funds.
CHAIRMAN GREENSPAN. Are we going to be getting a take-out from the Exchange Stabilization Fund?
MR. TRUMAN. I think that is what is in the program.
CHAIRMAN GREENSPAN. Okay.
SPEAKER(?). That is not the same as the Treasury.
MR. TRUMAN. Even if we didn’t, the precedent in the 196Os – I think there was a question then about whether the Treasury could engage in foreign exchange operations outside of the ESF – was the use of Roosa bonds in the 1960s. The Treasury floated Roosa bonds to obtain foreign currencies and used some of those currencies to take us out. That did not involve appropriated funds. That was treated as a debt-management operation.
The above passage confirms what we already know, but many people refuse to admit. The ESF is a slush fund beyond Congressional oversight. It can be used to ‘get around’ most anything (i.e., it can skirt normal governmental procedures). No wonder so many people want to do away with the ESF. There is no room for it in our democratic process. It is not subject to the normal checks-and-balances so carefully crafted by the Founding Fathers that have proven over time to be so essential for control within the federal government. The ESF is the antithesis of the American foundation of representative government because it subjects a free people to an unconstitutional governmental force.
some more excerpts:
MR. LINDSEY. My second question has to do with our credibility. I don’t know what questions to ask, and I hope you will help me out in that regard. I have this document in front of me, which includes a page entitled “What is the Exchange Stabilization Fund?” The document came from Treasury International Affairs. I gather it was written by them. I have written enough of these to know what you do, and that is to tell your point of view. Paragraph 3, not to mention the dots indicating an omission in paragraph 2, got me a little nervous. Paragraph 3 says these holdings in the ESF are used to enter into swap arrangements with foreign governments, to finance exchange market intervention, to provide short-term bridge finance, etc., and all these things are great. So, basically paragraph 3 is establishing that this is not unprecedented. My question would be: Do we do all these nice things if it’s not in support of the dollar? Is this unprecedented with regard to the fact that we are supporting another currency?
MR. TRUMAN. The language before the dots is–
MR. LINDSEY. I am talking about the third paragraph. I will go to the second paragraph in a second. I’m sorry. I am running a little out of order. It is saying the ESF has done all these things.
MR. TRUMAN. The legislation governing the objectives of the ESF was changed, I think for the most part in the mid- to late-1970s. The changes included the language that the government of the United States and the International Monetary Fund have the obligation to promote orderly exchange rate arrangements leading to a stable system of exchange rates. That was interpreted to include making loans to Bolivia in helping it maintain a system of stable exchange rates.
MR. LINDSEY. So that has happened before?
MR. TRUMAN. Yes. They have made loans to or financial arrangements with at least 31 countries around the world over the last 50 years.
MR. LINDSEY. I think we all will be asked questions about this. Can you read this paper and tell me that there is not something missing that I should know about, meaning that this is not only the truth but the whole truth?
MR. TRUMAN. I can only say that Treasury lawyers have looked into the question of whether these operations are legal under this broad authorization of what they can do and what the purpose is–
MR. MATTINGLY. If I can help out?
MR. LINDSEY. Yes.
MR. MATTINGLY. It’s pretty clear that these ESF operations are authorized. I don’t think there is a legal problem in terms of the authority. The statute is very broadly worded in terms of words like “credit – it has covered things like the gold swaps – and it confers broad authority. Counsel at the White House called the Treasury’s General Counsel today and asked “Are you sure?” And the Treasury’s General Counsel said “I am sure.” Everyone is satisfied that a legal issue is not involved, if that helps. [Emphasis added]
MR. LINDSEY. Is there anything missing on this page?
MR. MATTINGLY. No, there is not. If you look at the last paragraph, for example, that is part of the statute.
MR. LINDSEY. About notifying Congress in writing in advance?
MR. MATTINGLY. The statute says that with the permission of the President they can make loans.
There you have it. The ESF doesn’t have to notify Congress about anything in advance. It is under the sole authority of the Secretary of the Treasury and the President, and they can do “gold swaps” without any Congressional approval, which brings up an important point I made in “The Smoking Gun”.
the Treasury Department has changed the designation of nearly 1700 tonnes of inventoried gold at the US Mint’s facility in West Point, New York (approximately 21% of the total US Gold Reserve) from “Gold Bullion Reserve” to “Custodial Gold”.
The August 2000 Status Report on US Treasury Owned Gold stored at West Point has a designation of “Gold Bullion Reserve”. But the September 2000 and subsequent status reports inexplicably designate this same gold that is stored at the US Mint in West Point as “Custodial Gold”.
This change was made without explanation, so rather than let the matter remain unexplained, Mike diligently contacted the Treasury asking what seemingly are two uncomplicated questions. Would the Treasury please explain why they made this change, and what does this change in designation mean with respect to the ownership status of the gold at West Point?
They are simple questions, but perhaps they touch too close to a nerve. Not surprisingly, the Treasury so far has not responded to Mike. I have some views on what Mike discovered, and why the Treasury is so quiet about it. I think this change in asset classification is related to the ESF gold swaps. Here’s my thinking.
The change Mike spotted possibly occurred as a result of accountants looking at the financial statements of the US Mint being prepared for its annual report ending fiscal year 2000. Note that the previous director of the Mint (Phillip Diehl) resigned in early 2000, so this was the first annual report signed by the new director (Jay Johnson). If there is one thing that government bureaucrats do well, they take great pains to call things by their right name. To do otherwise would put their job in jeopardy if something under their responsibility came under Congressional scrutiny, and it was subsequently determined that the name assigned to something was incorrect or misleading.
Therefore, this change in the descriptive label for nearly 1,700 tonnes of gold at West Point from “Gold Bullion Reserve” to “Custodial Gold” was purposeful. It happened for a reason. This conclusion is all the more plausible because the Treasury did not change the classification from “Gold Bullion Reserve” to “Custodial Gold” to describe the gold stored in Fort Knox or at the US Mint in Denver. Maybe new US Mint director Johnson saw something he didn’t like. What could that have been?
I’ve already put one-and-one together to establish that the ESF has “gold swaps” with the Bundesbank. It therefore does not require much conjecture to add one supposition to the equation by concluding that the gold in West Point has been swapped with gold owned by the Bundesbank, thereby necessitating its reclassification from “Gold Bullion Reserve” to “Custodial Gold”. Here’s what I think has happened.
The Treasury has gold in West Point. The Bundesbank has gold in Europe. The Treasury cannot directly do a deal with the Bundesbank because unlike the ESF, the Treasury is subject to Congressional oversight. So instead the Secretary of the Treasury and the President decide to use the ESF to set up a swap line for gold with the Bundesbank.
By so doing, the gold in the Bundesbank’s vault in Europe becomes ESF gold, to do with as they please – i.e., the ESF lends this metal to bailout certain bullion banks. And the Bundesbank now owns the gold in West Point, which as a result was purposefully re-classified from Gold Bullion Reserve to Custodial Gold because the Treasury no longer owns this gold, having swapped it out through the ESF in exchange for gold in Europe owned by the Bundesbank. Case closed. The mystery of the abnormally low gold price is solved. The ESF did it.
(continuing . . .This same individual (a top gold expert) told me several months ago about some astonishing intelligence he had learned from a source in Europe. He told me that the Bundesbank’s gold vault was empty, which seemed so preposterous that I found it hard to believe. He also admitted that this news startled him when he learned about it, and that he did not have an adequate explanation for it. He knew that the Bundesbank was an active lender of gold, but he had a difficult time accepting the possibility that all 3,400 tonnes that it owned had been loaned. Yet he was confident that his source had provided him with accurate information.
We now know what has happened. The Bundesbank has loaned 1,700 tonnes, one-half of its 3,400 tonnes reserve; the other 1,700 tonnes were swapped for gold in the US reserves, requiring the change in the West Point vault from Gold Bullion Reserve to Custodial Gold. In other words, the Bundesbank’s vault is empty because one-half of their gold is stored in West Point not Europe, and the other half has been loaned out.
what’s the ESF’s motive? Unfortunately, we just don’t know for certain.
Many, including me, claim that it is to use gold to provide the liquidity needed to bailout some big banks that have imprudently grown their gold books by recklessly expanding credit and mismatching their asset/liability maturities. These banks are the ones with the unusual – some say abnormal – derivative activities that are named as co-defendants in Reg Howe’s suit against the BIS. That this list includes Germany’s largest bank may explain why the Bundesbank would agree to participate in this gold swap scheme. It was bailing out one of its own.
Others claim the ESF aims to manipulate the gold price to make inflation numbers look better than they really are by keeping the gold price artificially low. And there are some who argue that the US government, acting at the behest and under the instructions of the big banks, aim to destroy their combined arch enemy – gold, regardless of the fact that the gold mining industry would be destroyed along with it.
The US government cannot claim that the ESF is not involved with gold. We now have the irrefutable proof that establishes beyond any reasonable doubt that the ESF is indeed involved in the gold market.
An article published a few weeks ago, indicated Mexico stored about 97% of their gold in NY, London and Switzerland. Has their hoard been swapped, leased or loaned out? How many obligations or claims have been made on that same metal?
This past year, Venezuela repatriated their gold from London. If that gold had been leased or obligated multiple times, what gold was used to replace that which was removed from London vaults?
Germany wants a 150 tons of their gold returned to Germany. This appears to be a warning ‘shot across the bow’. If that portion of their gold cannot be returned, then all claims and liabilities made in written contracts, swap arrangements and leases are bogus and will be exposed as such. It would be a Black Swan event like no other and fiat currencies would immediately implode.
Now we fast forward to now. This article appeared Oct. 24, 2012.
The Germans Are Coming for Their Gold
Published: Wednesday, 24 Oct 2012 | 5:10 PM ET
By: John Carney
Senior Editor, CNBC.com
A German federal court has said that country’s central bank should conduct annual audits and physically inspect its gold reserves worldwide, including gold in the custody of the Federal Reserve Bank of New York. In addition to the FRBNY, Bundesbank gold is stored in London, Paris and Frankfurt.
For decades, the Bundesbank has relied on written confirmation of its gold holdings in London, Paris and New York. According to the report from the German audit court, the last time Bundesbank officials physically inspected the central banks gold holdings was, well, never.
(It should be stated that the folks at FT Alphaville quote a report saying an inspection took place in 1979/1980.)
Interestingly enough, the Bundesbank is apparently quite happy with taking the word of other central bankers about the existence, location and size of its gold reserves. It put out the word that it disagrees with the Audit Court, which only has advisory power and cannot force the Bundesbank to follow its recommendations, about the need for inspections. Nonetheless, the Bundesbank is actually going to follow the recommendation that it verify the gold stocks. It also has plans to ship some 150 tons of gold back to Germany for a more “thorough examination.”
If their gold cannot be repatriated, this ‘shadow’ banking system that is hidden from the public and the Congress, may blow up.