This page has been archived and commenting is disabled.
Why Central Banks Hate Physical, Love "Earmarked" Gold, And What Is The Difference
Several days ago we showed the dramatic conclusion of what happened to Czechoslovakia's gold which had been placed at the Bank of England for safekeeping days after Germany annexed the central European republic ahead of the start of World War II. We hate the spoil the punchline for those who haven't read the post yet, but the her it is: it was gone; it was all gone.
And all of this happened with the explicit assistance of the Bank of International Settlements which was formed in 1930 to promote the free flow of capital and global economic growth. Instead, time and again, what the BIS has proven its only mission to be, is to facilitate the spread of intangible assets and fiat currencies while it quietly confiscates, sequesters and aggregates (for a select group of individuals) he world's physical assets. Mostly gold.
In fact, until the advent of the BIS, gold held by central banks came in one version. Physical.
It was only after the BIS arrived on the scene did gold's macabre doppelganger, so-called paper, registered or "earmarked", gold emerge for the first time.
Courtesy of Adam LeBor's book exposing the history and inner workings of the BIS, "The Shadowy History of the Secret Bank that Runs the World", below is a brief story of how earmarked gold came into being.
* * *
The Czechoslovak gold affair also highlighted how the bank’s increasingly sophisticated gold operations were growing in reach and importance. The BIS’s gold trades were a primitive forerunner of today’s globalized economy where vast sums instantly fly back and forth at the touch of a keyboard. The technology available in the 1930s was far more primitive, but the principle of buying and selling assets sight unseen and without taking physical possession is the same. This development of a free gold market between central banks via the BIS was significant. Had all the Czechoslovak gold been held in an account at the Bank of England in the national bank’s own name, rather than at a BIS account, it is doubtful that any would have reached the Reichsbank.
The BIS offered central banks a unique service, one unavailable to private companies or individuals who were not allowed to hold accounts there. The BIS held two kinds of gold deposits: bank deposits and earmarked gold. The first was gold deposited there by central banks. In 1936 this accounted for around 14 percent of deposits. (The actual bars of gold were held at the Swiss National Bank in Bern.) The second category was known as “earmarked” gold— gold that was physically held in another bank but that was credited to the BIS’s account (as the Czechoslovak gold in London had been).
The BIS held collective gold accounts at the Bank of England and the New York Federal Reserve. These accounts were subdivided into subaccounts for central banks, which owned the gold, although the gold was physically stored in London or New York. Neither the Bank of England nor the New York Fed was supposed to know which central bank owned the sub-accounts held in the name of the BIS, although as Norman’s correspondence over the Czechoslovak gold affair shows, they did. So if the Bank of France (sub-account X) wanted to transfer funds to the Bank of Hungary (sub-account Y), the BIS simply instructed the Bank of England to make the necessary deposit from sub-account X to sub-account Y. Earmarked gold, as Toniolo notes, “allowed for cheap and confidential transactions between central banks, as the transfer of property merely entailed a bookkeeping change by the BIS.” This was a growth industry for the BIS— in 1935– 1936 earmarked gold movements totaled more than 1,121 million Swiss gold francs. By 1938– 1939 that sum had increased to more than 1,512 million.
BIS managers and directors were immensely proud of the bank’s innovative, new mechanisms for gold and foreign currency trades. But the principle behind earmarked accounts was not nearly as new as they believed. Few, if any, of the BIS directors had ever heard of the island of Yap, in Micronesia. But centuries ago its inhabitants had invented a similar system, one based on large limestone discs. The discs, known as fei, were quarried on a neighboring island and brought back to Yap by boat. The discs, the islanders decided, represented substantial wealth— enough, for example, to pay for a daughter’s dowry. But the “currency” was extremely heavy and almost unmovable. So it stayed in its place, and only the ownership changed with the agreement of the buyer and seller. In fact the stone did not even need to be present on the island. The locals’ oral tradition tells of one disc that fell off the boat into the sea. Rather like the gold deposits at the BIS accounts in London or New York— or indeed any bank nowadays— the physical existence of the submerged fei was taken as a matter of faith. The islanders simply passed the ownership of the submerged disc back and forth— until 1899 when the Germans arrived and colonized the island of Yap.
The islands’ new rulers demanded that the inhabitants repair the walkways that linked the different settlements. The locals ignored their orders, and eventually the Germans decided that they must be fined. Painting a large black cross on the most valuable fei and declaring them to be the property of the government exacted the fine. It worked. The islanders quickly fixed the paths, the German officials removed the crosses, and the islanders once again had possession of their capital assets.
To the sophisticated financiers of the twentieth century, such an episode would have seemed charming but irrelevant. But as Milton Friedman later noted, it was very relevant indeed. Neither gold nor stone discs have any inherent value. Their worth is completely arbitrary, the worth that we give them. The painting of the Yap islanders’ stone discs had precise parallels in 1932 when the Bank of France decided to sell its dollars. The bank feared that the United States would not adhere to the traditional gold standard at $ 20.67 for an ounce of gold. It asked the Federal Reserve of New York to use its dollars held there to buy gold. As it was expensive and risky to ship the gold across the Atlantic, the Bank of France asked the New York Fed to simply store the Bank of France’s newly acquired gold at its account there. Friedman described what happened next:
In response, officials of the Federal Reserve Bank went to their gold vault, put in separate drawers the correct amount of gold ingots and put a label or mark on those drawers indicating that they were the property of the French— for all it matters they could just have done so by marking them “with a cross in black paint” just as the Germans did to the stones.
This event — or arguably non-event— had serious consequences. The French sale of dollars drove the exchange rate down, while the franc strengthened, even though nothing had actually happened. What was the difference, asked Friedman, between “the Bank of France’s belief that it was in a stronger monetary position because of some marks on drawers in a basement more than 3,000 miles away and the Yap islander’s conviction that he was rich because of a stone under the water a hundred miles or so away?” Evidently, not very much.
»
- 34557 reads
- Printer-friendly version
- Send to friend
- advertisements -
A lot of words, I buy a ounce a month, 20 oz. of silver as well. What are going to do about it? I don't gamble and don't invest in Ponzi schemes.
ito facilitate the spread of intangible assets and fiat currencies while it quietly confiscates, sequesters and aggregates (for a select group of individuals) he world's physical assets. Mostly gold.
Which it promptly sells to consumers in India.
If gold is a worthless, barbarous relic, why do Central Banks hoard as much as they can?
Well i don't know!
Maybe we need a reality show about their horrible hoarding of gold addiction as since they must have a serious problem for doing as such!
Then maybe we can all understand and grow together as a society with our heads up Hillary Clinton's golden ass attained from poster slaves of income!
"Neither gold nor stone discs have any inherent value. Their worth is completely arbitrary, the worth that we give them"
Stopped right there.
Retard.
Lighten up. One could argue that only air, water, and food have intrinsic value to humans.
Funny thing is that gold is ACTUALLY gaining instrinsic INDUSTRIAL value more each day. Just not enough to stop the manipulation dead in its tracks just yet.
Any comodity has value to someone. The point is that if you don't have physical possession, you must trust the actual possessor.
The Yapese knew that the next step, if they ignored the Iron Crosses painted on the wheels, was physical confiscation, or destruction.
I suppose if I want one of those wheels, I'll have to find a neice to volunteer to get married there...
..this was pretty damn good..
Think about what the Brits did to Sierra Leone in the f’n Hut Tax War.
If you don’t know about it, look it up.
Yes, but month 3 purchase is approching and your liquidity is as busted as the vaults of Ft Knox.
"Why Central Banks hate phyz and love paper..."
I can name that tune in One word: "CONTROL"
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/e4mV9C
The gangbangksters hate anything they can't create out of thin air.
Certain things in life should never be handed to another for safe keeping. Gold, Fine Scotch, guns and chocolate are a few on my list.
Miffed;-)
1. Chocolate ;)
2. Guns
3. Scotch
4. Gold
0. Toiletries! Especially, TP and Feminine Hygiene products.
Unless you're at total pig or moron.
I have found an empty box of feminine hygiene products is the best storage for almost anything. If it weren't for the weight, I'd stick my XD-40, Oban and PMs in one. Sometimes the simplest things are the best.
Miffed;-)
If SHTF then the gold price denominated in rolls of toilet paper will plummet.
A Johnny Walker Green Label cheers to ya (what I have in the traveling bar today)!
LaPhroaig And Ardbeg being my favorites as I like those smokey peat Scotches...
I need to branch out more. My favs are Glenlivet and Oban.
Miffed;-)
You forgot silver and lead.
The four percious metals: Gold, Silver, Blued Steel and Lead.
I started to collect Scotch but I found it kept disappearing around the time I lit a cigar. Chocolate disappears even faster with my wife's help.
I would include my Wife on that list as well! :>D
So what's the point here? Gold has no more value than limestone?
Why is marble more expensive than limestone?
Exact same chemical formula, but a different atomic structure.
Umbilical lint has more value in your head maybe.
Yes, I don't get that either. When people decided to come up with a convenient medium of exchange to supplant the barter system, the logical choice was gold. Why? Because it's indestructible, even by fire. Limestone is not indestructible.
I didn't down vote u for asking just because ur assumption isn't complete. Among golds rareness which brings it value among other properties and in ability to create out of thin air or clone....
It is a complicated subject... As I went to wiki and went down to value and began reading...
I know it can also be better explained elsewhere but wiki brought up interesting pros and cons and how gold helped countries avoid the Great Depression as compared to others.
https://www.google.com/search?q=gold+value+of+money&ie=UTF-8&oe=UTF-8&hl...
Also in the over production of currency.. Gold will hold va?ue if too much currency is over printed and becomes of little value. Coins used to in america have more of the metal value in them in the olden days as to not be considered just paper as they always had the value of the metal to hold their value up....
Now if the American government hadn't gotten jealous of peeps on streets with gold in the Great Depression in which they seized ~ america would have survived the Great Depression more easily with liquidity from the grass roots up. But they were too bizy digging themselves all the way into the hole with no escape except central planning by institutionalize do robbers.
That is why it is wise not to out all eggs in one basket of gold. There are many things of value which go up in value as compared to a currency which has been made fiat via too much paper printing and national etc debt. Silver and copper is harder to confiscate by the giv as it is used in production. But recently I have heard many new uses for gold than as a currency backing...
And many things of value not hit too hard by deflation which takes place as the economy falls out before hyper inflation occurs to lack of stuff that no one could make money off selling as the prices fell so hard they lost money between purchase and out the door sale.
How much do you think you'd get for one troy ounce of limestone?
Depends on what's in the limestone... This particular slab of limestone is Very Valuable!
/www.ucmp.berkeley.edu/diapsids/birds/archaeopteryx.html
Why do Diamonds have more value than Charcoal?
Hint: Both have Carbon. [tick, tock]
Because De Beers' diamond monopoly chokes off its global supply?
Duh... You can't fire up the barbie with diamonds?
Duh....and you can't fire up Barbie with charcoal
People who truly understand gold knows the BIS was created to STEAL gold. Even Greenspan wrote (1966, before he sold out to the Money Power)
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves."
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
The BIS is the head of the serpent.
The true enemy of humanity.
100% true story... I was hiking around the hills of Los Angeles a few years ago and I found an odd thing. A small lizard had trapped a large snake (that ostensibly tried to eat it) by the mouth. For hours I was amazed at how this little lizard had trapped the snake's mouth closed by gripping it between it's own jaws. Quite a spectical. If the lizard let go of the snake, it would surely eat it, eventually I knew it would get to tired of resisting/fighting and be killed. I waited and waited for hours to see what would happen. The snake was a poisenous snake and it was near where people lived so I gave up watching and cut the snakes head clean off with a spade. The lizard jumped back and ran away happy as shit. Moral of the story. Even if a serpant is sure to kill you, a gift from God may cut its fucking head off!
Socialized humans characteristically understate/ignore the intrisic capability for abstraction in "lower" animals. It's there, it's a biological precedent for the "higher" animals, and we're not so special that way.
Very true.
The BIS (serpent) may be so distracted trying to eat 'us' (lizard) that they may not realize that there is a Bear and a Dragon standing over them with a fucking great shovel, watching and waiting with perverse satisafaction. The question is, 'when' do they decide, for the good of others, to cut it's head off.
The prevailing drab & mechanistic science frowns on discussions of elan vital, consciousness, etc.
Such things are threating to some and concealed by others.
Great story! Thanks.
One evening my 19lb tomcat brought in a field mouse for the usual play-with-it-till-it-dies-then-eat-it routine. But this was no ordinary mouse. When the cat set it down, instead of making a run for it, the mouse sat up on its haunches, facing the cat and just squeaked like it was giving him holy hell. The cat sat there with a WTF look. What a show -- it would be like you or me giving hell to T-Rex! This went on a minute or two and I decided that mouse deserved another shot. I caught him, took him outside and let him go. Courage comes in surprising packages. There is much more to animals that most people know.
Nonsense. Rather it is the central banks.
"Gold and gold receivables".
this is a great example of the central banking sham. 'central banking' and the resultant 'fiat' money is nothing more than a legalized graft that is secured by coercion from the taxpayers.
let us PREY.
the only valid monetary system could only be one totally free and guarded from any manipulation. it would not be constant, but would yield a greater return than any ever imagined.
Went to Detroit. Many years ago. They kill you for change. Your future
There is a stench of evil that permeates the streets of Basel. The NAZI bank headquarters did not spawn there without reason. La Garde dog however, is delUSional if she believes this hive of iniquity will be the serpent's eye after the collapse.
This must be the tenth post pushing this POS book. It's contains NOTHING. Not even anything approaching an outline of how it operates today. Just a bunch of WII crap and anecdotal stories. The author is either a friend of one of the Tyler's or it's a paid placement.