Fingerprints tagged: Western central banks caught dumping gold

20110927-043851.jpg

Take a look at the right-hand end of the chart above, which shows the gold leasing rate.

In the middle of September, just as the SNB announced that it was going to engage in unlimited money printing, thus destroying the one last ‘safe’ fiat currency, the gold lease rate plunges into über-negative territory.

In a natural free market, this would mean that suddenly people prefer oodles of paper money to hard cold bars of gold in the hand.

Just as the last ‘safe’ paper money disintegrates?

Really?

Or is it that the western central banks have dumped tons (if not hundreds of tons) into the coffers of their bullion bank friends, and paid them for the privilege, and then these bullion banks have dumped these tons of gold into ETF custodians in return for ETF share certificates, which have then brought down the price of gold, just when it should have shot up?

Well, let them try.

I’m sure the Chinese and the Indian gold bug community will keep soaking up this largesse and keep redeeming their paper gold certificates for physically-delivered gold, until all the western central banks have ‘leased’ all of their gold and there’s nothing left.

At that point, theoretically the bullion banks will owe back all of these many tons of gold back to the western central banks. If they can find them, of course, buried as they will be under many feet of Chinese and Indian soil (and the sands of the Middle East).

Obviously, the central banks will let their bullion bank friends off this hook, but this time they will be stuck, because they’ll have no more gold and they won’t even be able to confiscate it back again, due to its disappearance overseas.

Oh dear.

The same thing happened to the Roman Empire. The Romans pillaged the whole of Europe for gold, from Wales to Dacia, and then used this gold to buy Chinese silks and other exotic oriental goods via Indian middlemen, until all the gold was gone.

History is rhyming again.

Read more at the FT (heavily obscured by impressive jargon) and more simply at GATA.

It cannot last, so enjoy the dip.

Advertisements

About Andy Duncan

An Austrian Internet Vigilante trying to live Outside the Asylum
This entry was posted in Austrian Economics. Bookmark the permalink.

One Response to Fingerprints tagged: Western central banks caught dumping gold

  1. P.M.Lawrence says:

    The Romans pillaged the whole of Europe for gold, from Wales to Dacia, and then used this gold to buy Chinese silks and other exotic oriental goods via Indian middlemen, until all the gold was gone.

    Not so, in two respects:-

    – that trade mostly wasn’t via Indian middlemen, even if you count Ceylon as India, but via the Central Asian Silk Road (though some was via India and Ceylon); and

    – although that was the way the balance of trade was trending for centuries, improvements like the camel saddle led to camel caravans bringing in gold from West Africa, so repairing the trade imbalance during the fourth century A.D.

Leave a civil and intelligent reply - Comments will be moderated

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s