Central Banks Don't Have Physical Gold
As I have presented before (and this brings further evidence), the world's physical gold is bein...
James Turk has written several essays and numerous articles on money and banking, much of which can be found on his Free Gold Money Report website. He is the co-author of The Coming Collapse of the Dollar (Doubleday 2004), which has been updated for a paperback version entitled The Collapse of the Dollar.
James Turk told King World News on October 30, 2012: “... we have seen an ongoing scramble to turn paper-gold into physical metal. But here’s the important point, this scramble for physical metal has grown because it has now moved from the hedge fund community to central banks.”
Here is what Turk had to say: “The situation concerning Germany's gold reserves is receiving increasing attention, Eric, which is a good thing because gold reserves are one of the pillars underlying any country’s sovereignty.”
James Turk continues:
“One could argue that under the gold standard, which was in place until 1971, it made practical sense for a country to store some of its gold with the central banks of its major trading partners. That's because the gold was used to settle trade imbalances, which was accomplished by moving gold within a central bank’s vault from the payer’s cubicle to that of the payee.
But that rationale for foreign storage disappeared in 1971 when the gold standard was abandoned and a policy of global fiat currency was introduced. Now trade balances are settled with accounting entries on a central bank’s computer.
So today a country's gold has a different purpose. It provides the essential monetary reserve for security. It is the nest-egg every country needs if things go bad, and we know from history that they often do.
Gold provides the foundation upon which a country can re-build its monetary system after a currency collapse. With the euro teetering on the edge of a cliff and Bundesbank monetary discipline having been abandoned by the ECB, these may be some of the motivations in Germany now to find out where its gold really is.
A point I have made many times, Eric, is that we must view gold and central banking in their proper perspective. Gold is not a barbarous relic. The real barbarous relic is central banking when it perpetrates State control of money. This control impedes the market process that is an essential part of any free society. Controlling money is like controlling free speech. If a government controls a country’s money, it controls its people.
So consider what happened, for example, in the 20th century. Gold was taken from the people by Lenin in Russia, Mussolini in Italy, Hitler in Germany and Roosevelt in the United States. Why did they do it? It was to increase the power of the State by taking money that government can't control – namely gold – out of the hands of the people."
"Anyway, Eric, let's carry this one step further. If a country can control its people by controlling the people’s gold, then a country can also be controlled when its gold is in the central bank of another country. For example, you may remember Alan Greenspan describing in Congressional testimony that gold is the ultimate form of payment. Others have also stated how Nazi Germany ultimately relied on gold to make purchases for war materiel.
So is it just a coincidence that the Bundesbank says its gold is stored in the US, UK and France, the major Allies that occupied West Berlin and West Germany after the war? Having fought two world wars in just three decades, isn't it possible that the Allies sought in those post-war years with memories still filled with wartime horrors to prevent a future war with Germany by keeping possession in their vaults of the ultimate form of payment? The Allies were simply denying in the 1950s and 1960s a war-torn, divided and occupied country of its sovereignty by holding the gold Germany earned in its post-war economic boom.
The gold market has been manipulated for over a hundred years and the central banks have been willing participants, with the possible exception of the Bundesbank. Its participation may have been unwilling given Allied control and occupation of West Germany in the decades following WW II. Maybe the Bundesbank was not allowed to have its gold returned to it.
But let’s turn away from the geopolitics to a more important point here, Eric. We are witnessing the same thing I have touched on time and again since 2009 when one of the world's top hedge funds called Greenlight Capital reported that it had switched its huge holding of GLD into physical metal. Gold was about $920 at the time. This switch highlighted the difference between paper-gold and physical gold.
Since then we have seen an ongoing scramble to turn paper-gold into physical metal. But here’s the important point, this scramble for physical metal has grown because it has now moved from the hedge fund community to central banks. Look, for example, at how long it took Venezuela to have its 200 tons of gold returned. They had to wait 3 months just to receive the first shipment, so it had probably been leased out. There is a good possibility that it had to be bought in the open market. So can you imagine how long it will take Germany to collect 10-times that amount?
The repatriation of gold out of secretive central banks that have controlled the gold reserves of most countries since WW II back to the countries that own it is, I expect, going to be a major force driving gold higher in the months ahead. The reality is finally being recognized that central banks have less gold in their vaults then people think. This deception is a result of the IMF policy which allows central banks to hide the true weight of gold stored in their vaults.”
Here is what Turk had to say: “There is an interesting thing I read a few months ago. It was an autobiography of the President of the Reichsbank, who was President (of the Reichsbank) back in the 1920s. His name was Hjalmar Horace Greeley Schacht.”
James Turk continues:
“Schacht was on a visit to the Federal Reserve of New York in the 1920s, and the President of the Federal Reserve, a guy by the name of Strong, offered to show Schacht his gold. They went down into the vault, and after a period of time, the people who were in the vault said they couldn’t find the German Reichsbank’s gold.
This (astonishing interaction with the Federal Reserve) is recorded by Schacht in his autobiography (some three decades after it took place)." -- Read Complete Articles (original source).