The past couple of days I've been blogging about banks and the national security state, and over the past few months, the bearer bonds scandals and the calls from various countries for audits and even repatriation of their gold. With respect to the latter issue, the burden of my blogs has been to show:
- that there is massive obfuscation in the official amounts of gold said to be in existence; and,
- that whatever the amount really may be, any portion of this amount in the hands of central and/or prime banks in the west has been massively re-hypothecated.
Well, the latest country to get in on the "audit act" is Austria. Here I am going to depart from my normal practice of referencing an article, and reference rather one of my favorite characters - that's the only way to describe him - on Russia Today TV, Max Keiser. Here what concerns us is within the first six minutes of the episode:
Now this is wonderful in any number of ways, for not since the days of Conrad von Hoetzendorf have we seen such wishful thinking on the part of those highly placed in Austrian power circles.
This wishful thinking is ably, if not enthusiastically, exposed by Keiser: (1) the Austrian central bank admits that it has leased out almost 20% of its gold (thus making our rehypothecation scenario a little more plausible), (2) audits of gold are often audits of ledger entries, rather than the physical gold, (3) banks are stalling on audits of physical gold, because real physical audits would end the obfuscation of amounts that have made the rehypothecation possible.
Well, we can at least be thankful that Vienna has clarified the issue a bit: some 20% of a nation's gold reserves is involved here, not a few percentage points, and we can well bet that the Austrian bank is probably lying (have we any reason to trust any of them?), and that this amount is probably far higher. And of course, what can be leased can be sub-leased, and re-sub-leased...and with that, we're right in the middle of the rehypothecation scenario.
Of course, Keiser is correct: banks have been selling us on the idea that only monetized debt is real money, and that gold and silver are not. But there are two things missing here: (1) the notion of debt-free money (think JFK's $4 billion of United States notes here), and (2) the far more important issue of just how much gold is there, really? In a world where so much gold has been re-hypothecated, what are the effects if (1) the real figure is far below the most conservative publicly stated figure? and conversely if (2) the real figure is far above it? And in a world where there might be a huge hidden system of finance, why obfuscate the amounts of gold in the first place, much less re-hypothecate it?
I strongly suspect that until we start asking questions such as these and the speculative possibilities that they represent, that we are not going to get to the bottom of what's been going on.
See you on the flip side.