Conservative governments are less secretive and more open

In today's evidence of an ongoing wave of conservative thinking, the German central bank decided, after many years of seemingly pointless push back, to disclose exactly how much gold it has, where it is located in the world, and what form the gold is in, including purity of each brick.

The list is over 2000 pages long.  Gee, that's a lot of detailed data to keep track of for what amounts to a couple truck loads of pet rocks, yeah?  In any case, the German government used to say that there were "security concerns" with releasing the info.  Of course, there were no security concerns and this is proven by the fact that they released the data to the world, not just to the internal trouble maker political party that led the fight in in its disclosure.  "Security concerns" is the blanket catchall phrase that really means "you are not important enough for us to care about".  It likely also means "if we don't tell you then how can we be held accountable later on, information is power and we don't need to share power with you."

I find it interesting that the Bundesbank decided, even in the face of reduced pressure to deliver it, to provide this list.  Why now?  Why do they suddenly care if they impress the public or not?  Certainly the fact that all eyes are now looking at Germany in a negative light because of the shenanigans of VW was a factor IMO.  That incident did more to impugn the good name of German workers than anything in the last 50 years.  It painted the whole country with the brush of "lying cheater".  Of course, the notion that VW speaks for or actually represents all Germans is ludicrous.  But we are talking about group think here and group think / herd think does not consider all of these truths.  It sees what it wants to see.

In fact, that is sometimes why it works in your favor as well so you have to take the good with the bad.  Consider how "German engineering" got such a great name for all Germans based on the work of a few that happened decades ago.  Today the reality of German engineering is understood by anyone who bought a pricey BMW sports car, used it for a while and then sold it for one reason only: it was going off warranty and they did not want to be exposed to large repair bills that they felt were inevitable because of German engineering.  It would be much more fair to talk about Japanese engineering when it comes to car quality.  Nobody ever sold their Lexus just because it had 4 years on it.  That in fact is the time to buy them because Japanese engineering ensures that you will get another 6-10 years of great service from it.  My wife is still driving a 1997 Lexus ES300 bought new in late 1996 and it runs like a top with over 200k miles on it...

In any case, the move by Bundesbank might impress some people but the fact is that all they provided is a description of gold that they have a paper claim to.  Nowhere in that list did it show who this gold might have been loaned to and for how long it had been loaned to them.  Importantly, it also didn't show how many different people it has probably been "loaned" to.  That's right folks, the loans we are talking about here do not involve physical movement of the metals.  When someone wants to borrow gold, they simply get the equivalent of a dry cleaning ticket saying that the brick (or fraction of it) belongs to them.  They don't actually get to have the gold.  The excuse/reason for working like this, beyond pure convenience, is that a bar in storage has been weighed and assayed and is of a certain size.  Such bars are called "London Good Delivery Bars" or LGD.  If you take physical possession of a LGD bar and it leaves the confines of the secure facility, it is no longer LGD until re-certified, a process that costs enough money so as to dissuade most people from taking delivery.

And that is how the fractional gold system works today, no different than back in the 1600s when gold smiths would keep the gold of the town merchants in their vaults while handing out paper receipts.  These became the basis of paper money as people would trade the receipts instead of going to retrieve their gold from the vault and then using it to purchase things they need from their savings.  Of course, this system was just too tempting not to game and the goldsmiths began to cheat on it by writing up receipts for gold that did not exist it its vaults and then going into the economy to purchase things with it.  I guess the moral here is never to accept paper money from a banker because you can be pretty sure that he came by it dishonestly.

But there is another aspect, that of the dangling sweater thread.  This is a reference I will use into the future.  It refers to a thread in a knitted sweater that has broken and is thus at risk of being pulled on.  Due to the interconnected nature of the knitting, pulling on that threat essentially un-knits the sweater.  Well, in any organized criminal endeavor you will find parts of the operation are legit and other parts are corrupt.  The legit parts give an outward impression of truth and normalcy to the other parts.  Everyone in the deal knows what is going on but the legit portions of the business just focus on their own operations and ignore the fact that they are part of a broader conspiracy of lies. 

In the final days of the life of an organized criminal gang, these legit operations rush to prove their honesty.  Taken in a vacuum, it seems to do no harm to the broader criminal enterprise but the legit portions are not doing this randomly.  They sense something bad is about to happen and they want to get out in front of it to show everyone that they themselves are in fact not dirty.  Thus when it all comes tumbling down they can argue that they were honest and their recent actions proved this so they should be able to avoid prison and in addition they should be allowed to keep their cushy administrative jobs.  These parts of the organization become the dangling thread.  They are a handle which, if grabbed onto and pulled just a little, will begin to unravel and thus uncover the weakness and corruption of the broader organization.

I think that might be what we just witnessed with Bundesbank's detailed accounting release.  Those in charge of tracking the physical bars wanted to distance themselves from the rest of the fractional gold leasing operation which anyone who will open their eyes to will understand is going on.  All it will take now is for someone to begin pulling on that thread.  The next obvious request from Bundesbank is to document not who owns each bar or fractional unit thereof (that would be a clear violation of privacy of the owner) but rather for an accounting of what percent of the physical stock is out for loan as evidenced by something that cannot easily be explained by something other than fractional reserving of the gold supply. 

For example, I would recommend going after the figures relating to revenues produced by gold lending operations.  From these numbers it should be easy to deduce how many times the gold has been loaned to different people.  If interest rates on a gold loan are, for example, 3.5% and we are told that 100% of the gold is on loan and then we find that gold leasing revenues significantly exceed .035 x the street value of the gold then we can do simple math to determine in aggregate how many times the gold has been loaned to multiple people at the same time.

Now is where it gets interesting.  With exactly the right questions asked, the accounting dept, who knows exactly what is going on but who hide behind the fact that they have been ordered to do it, have to make a choice.  They either lie to the public or they tell the truth.  If they lie then they are basically exposing themselves to massive risk that will certainly involve loss of job and pension and even jail time if caught.  Well, these accountants will not want to do that!  They will not want to risk themselves in order to provide more air cover for their corrupt bosses at a time when major scandals are being uncovered.  The herding signals are now clear: If you are only dirty at a peripheral level whereby you can argue that you were ordered to comply at risk of losing your income, it is BETTER TO JUST COME CLEAN and face the music early on in the collapse than to dig your heels in and try to resist it.

When stated like this you can feel it, can't you?

Trust me, you are not alone.  The herd is waking from its magickal stupor and pretty soon the LEOs and the privileged oligarchs are going to get the horns.  New readers should understand that I am not just making this stuff up in real time.  There are years of observation and analysis that have led me to these conclusions and predictions.  I have documented this thinking many times over the years in posts like this one.  They go all the way back to the beginning of this blog and then before in private emails to friends and family on these topics.

Buffett warned us that when the tide goes out we will then see who is skinny dipping.  I think the tide is well on its way out right now.  VW just got caught skinny dipping.  They will not be the last and they will not be the biggest.  This is not over until major, major names in European politics and then US corporations and politics go down in flames.  There are lot of people skinny dipping who you would never think capable of it.