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German Federal auditors handed in a report slamming the Bundesbank for not inspecting their foreign held gold reserves to verify their book value. The report says the gold bars "have never been physically checked by the Bundesbank itself or other independent auditors regarding their authenticity or weight." Instead, it relies on "written confirmations by the storage sites."  The lion’s share of Germany's gold reserves (nearly 3,400 tons estimated at $190 billion) are housed in vaults of the US Federal Reserve, the Bank of England and the Bank of France since the post-war days, when they were worried about a Cold War Soviet invasion. The Bundesbank stated, “There is no doubt about the integrity of the foreign storage sites in this regard". In contrast with best industry practices Germany’s gold reserves do not seem to be independently verified by a third party. Philipp Missfelder, a politician from Merkel’s own party, has asked the Bundesbank for the right to view the gold bars in Paris and London, but the central bank has denied the request, citing the lack of visitor rooms in those facilities, German’s daily Bild reported. The Bundesbank won't let German parliament members inspect the German gold vaulted abroad because the central bank vaulting facilities supposedly lack "visiting rooms." And yet one of those vaults, the Federal Reserve Bank of New York, offers the public tours that include "an exclusive visit to the gold vault".

Curious why there are those with an online business, who believe that handing over their entire back office infrastructure to one company, aka "going cloud" may not be the wisest of ideas. Just ask all those websites that use Amazon's cloud service today, who suddenly went dark when the Amazon cloud crashed.  From the NYT: "Amazon’s data centers in Northern Virginia crashed Monday afternoon, taking with it a number of popular Web sites, from Someecards, the quirky e-card company, to mobile applications like Flipboard and Foursquare.  Amazon reported having problems with the data centers in Northern Virginia. Those problems appear to have had a ripple effect across the Internet with several sites hosted on Amazon’s popular EC2 cloud hosting service also reporting problems."

Government programs created in the 1960s created a culture of dependency, government control, relentlessly higher debt, materialism, and willful ignorance. The incompetence, arrogance, ineptitude and insanity of government officials at the Federal, State, and Local level are stunning to behold. We need to ask ourselves whether we the people are getting better government service and efficiency today; with government spending at 35% to 40% of GDP, than we did in the 1950’s and early 1960’s when government spending was 20% to 25% of GDP. We doubt that most people are getting 60% more value from our benevolent government today than they did in the 1950’s. By encouraging dependency and reliance upon the all-powerful government, the motivation to educate yourself, get married before having children, work hard, and pull yourself out of poverty is diminished. Can a small minority of critical thinking citizens lead a revolution that topples the existing social order and restores the Republic to its founding principles of liberty, self-responsibility, civic duty, and mutual obligation to future generations?

The International Monetary Fund’s paper, “The Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof highlighted a means to wipe out debt by legislation by using state created money to replace the private banking system and was commented on in The Telegraph by journalist Ambrose Evans-Prichard. The full paper can be read here. In sum, the paper illuminates on a plan created in 1936 by professors Henry Simons and Irving Fisher during the aftermath of the US Depression. It examines how money  created by credit cycles leads to a damaging creation of wealth.   Authors, Benes and Kumhof argue that credit-cycle trauma - caused by private money creation – has been around forever and lies at the root of debt catastrophes as far back as ancient Mesopotia and the Middle East. They claim that not only harvest cycles lead to defaults but rather the concentration of wealth in the hands of lenders would have augmented the outcome.

EU leaders committed to establishing a euro-area bank supervisor by year-end, leaving the door open for supplying direct aid to Spanish banks. The EU must now agree on the structure that makes the ECB (European Central Bank) the main supervisor by January 1st.  This new system was created to break the link between banks and governments at the root of the zone’s financial crisis and will roll out in the next year and expect to cover all 6,000 eurozone banks by January 2014. “Our goal is banking supervision that’s worthy of the name, because we want to create something that’s better than what we currently have,” Merkel told reporters. Germany and France argued contentiously about the timing.  Berlin has insisted the supervisor be effective before the ESM can begin cash injections into Spanish banks, those transactions are not foreseeable to occur until the latter half of the year, around the time of Germany’s national elections. Angela Merkel said it would take more than a few months before the supervisor was fully effective and direct bank recapitalisation could be considered. However, the agreement appeared to upset German finance minister Wolfgang Schaeuble's efforts to delay and limit the scope of European banking supervision. Germany has been averse to see its politically sensitive Savings and Cooperative banks come under outside supervision. It rejects any joint deposit guarantee under which wealthier countries might have to underwrite banks in poorer states.

The World Gold Council issued a summary on gold’s price performance in various currencies during the third quarter.  The report looks at influences that monetary policies and central bank actions have on gold. Gold’s 11.1% USD/oz return in 3Q was in response to central bank stimulus measures. Volatility decreased and generally correlated with other assets. Central banks announced a continuation of their unconventional monetary policy programmes in Q3 which mainly are used to lower borrowing costs and supporting financial markets.Financial assets have responded to central bank policy announcements, but gold's reaction has been the strongest. There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. The World Gold Council believes that there are not one but four principal factors that provide further support to the investment case for gold: Inflation risk, Medium-term tail-risk from imbalances, Currency debasement and uncertainty, and Low real rates and emerging market real rate differentials.

Well, who knew it was gonna actually get close to fisty-cuffs? According to CNN Polls, 65% believe Obama won (with 50% saying by a lot) and 19% that Romney won by a lot. Obama dominated speaking time 44:05 to a mere 40:50 for Romney (almost the same margin as in the last debate); but Romney (somewhat ironically) crushed Obama in the drinking game 44:23. Obama Intrade Odds wavered during the debate ending marginally higher but S&P 500 futures are tracking lower. Twitter interest fell 30% from the first debate. Full Bloomberg Headlines and Top Ten Debate Lines below. Obama uttered a brisk 7651 words for a 173 word/min pace (172 last debate) while Romney's 8006 words  were spoken at a 196 word/min pace (slower than his 217 pace of the last debate) but still the winner. So, time: Obama, drinking-game: Romney, word-count: Romney - the winner of tonight's debate is Mitt Romney.

The head of industrial and precious metals trading at Barclays, Cengiz Belentepe, has told Bloomberg that investors are selling their investments in gold ETFs and opting for the safety of allocated physical gold.

Barlcay’s Belentepe said “the question is whether the pace of buying has slowed, or whether the people have become a bit more sophisticated in recognizing the costs and liabilities.”

When push comes to shove, China still has the bigger gun over Japan on many other levels, and the U.S. most likely has to at least sit in the bed it’s made so far.

• U.S. Military Is Sent to Jordan to Help With Crisis in Syria (NYT)
• IMF Weighing New Loans for Europe (WSJ)
• Romney Targets Obama Voters (WSJ)
• China’s Central Banker Won’t Attend IMF Meeting Amid Island Spat (Bloomberg)
• Japan Calls China PBOC Chief Skipping IMF Meeting ‘Regrettable’ (Bloomberg)
• German media bristles at hostile Greek reception for Merkel (Reuters)
• The End Might Be Near for Opel (Spiegel)
• IMF sounds alarm on Japanese banks (FT)
• Cash Tap Stays Dry for EU Banks (WSJ)
• Goldman in Push On Volcker Limits (WSJ)
• IMF Vinals: Further Policy Efforts Needed to Gain Lasting Stability (WSJ)
• King signals inflation not primary focus (FT)

With much fanfare, and as Athens News pointed out, 10 minutes early, the German delegation landed in Athens at 1:20 pm local time, and has brought with it 7,000 part-time Greek police jobs: look for a massive drop in the Greek unemployment rate next month. For the next 6 hours everyone will be praying that the ghost of Gavrilo Princip has not found a new host. In the meantime, the most inexplicable of official visits will take place as Angela Merkel paints the town red (hopefully not literally).

Update: HUGO CHAVEZ WINS VENEZUELA RE-ELECTION, ELECTORAL COUNCIL SAYS. Contrary to exit polls as noted earlier, Chavez won 54.4% of the vote, with 90% of the votes counted, and a 80.4% turnout, according to the Electoral Council. At least the local APCs are fully stocked on Whoppers for the next few days.

While the world awaits with bated breath to find out if Hugo Chavez has lost the first "presidential" election in 14 years (an outcome with major implications for the crude market), which according to the latest exit polls he was trailing 48.1% to 51.3% to challenger Henrique Capriles, Diebold post-processing and hanging chad pro forma-ing notwithstanding, the question is what happens if there is a peaceful overthrow at the helm of the Latin American commodities powerhouse. And we use the term "peaceful" loosely: because the twitter stream is currently abuzz with a picture of tanks in Venezuela's capital as seen below. Hopefully they are merely waiting in line at the drive thru for the latest BK value meal and nothing more.

It appears social unrest is resurgent on the streets of Bahrain once again.  Following the funeral procession earlier in the week (of a young boy who died in earlier street battles with police), protesters are once again gathering and marching to the Pearl Roundabout. Police are active with tear gas and fires are breaking out... via Twitter: #Bahrain is in chaos.

Precious metals have all run up with the recent loose money policies enacted by various governments.  Clearly the market darling of late is silver which is now gaining favour in Asia for its value appeal.  Spot silver traded in New York has risen by 27% since the end of June, while the price of spot gold has increased by a meek 12%. Analysts say future Indian demand is key for silver’s price to climb. Futures contracts for silver at India's largest commodity exchange, the Multi Commodity Exchange, rocketed 30% in September compared with July, while volumes fell by 10% for gold futures contracts over the same period. Indian rupee weakness sent gold prices in rupees to an all time high this year, while silver never exceeded the record it hit last April. Rupee-denominated silver is currently being quoted around 20% below the record. Indian investors have ceased purchasing because the 2 weeks ending Oct. 15th is regarded as inauspicious.  The buying will commence and peak during the week ahead of the Hindu festival of Diwali on November 13th. In China, on the Shanghai Futures Exchange silver futures were up 29% at the end of September verses the end of June, while gold climbed 13%, according to data from the exchange's website.

Alan Wheatley, Global Economics Correspondent for Reuters has written a very interesting article, 'Analysis: China's currency foray augurs geopolitical strains’ where he emphasizes China’s desire to wean out the US dollar’s currency reserve status. China is actively taking steps to phase out the US dollar which will decrease volatility in oil and commodity prices and deride the ‘exorbitant privilege' the USA commands as the issuer of the reserve currency at the centre of a post-war international financial architecture which is now failing.   In 1971, U.S. Treasury Secretary John Connally said, "It's our currency and your problem". China is frustrated with what it sees as the US government’s mismanagement of the dollar, and is now actively promoting the cross-border use of its own currency, the yuan, or also called the renminbi, in trade and investment. China’s goal is to decrease transactions costs for Chinese importers and exporters. Zha Xiaogang, a researcher at the Shanghai Institutes for International Studies, said Beijing wants to see a better-balanced international monetary system consisting of at least the dollar, euro and yuan and perhaps other currencies such as the yen and the Indian rupee. "The shortcomings of the current international monetary system pose a big threat to China's economy," he said. "With more alternatives, the margin for the U.S. would be greatly narrowed, which will certainly weaken the power basis of the U.S."