Get Out the Tin Foil Hats

Matt Taibbi has written some interesting articles about finance in recent years. Here is the beginning of one such article. 

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything. 

This is pretty much what I have been saying—the whole market is rigged. In an earlier article I suggested various pre-investments one could make. If the whole market is rigged, how is any investment possible? You can speculate, but you cannot invest

What in particular does Taibbi suggest has been rigged? Libor (the interest rates paid in London), and interest-rate swaps (a form of derivatives) are easily-proved examples. 

Another example was the recent drop in gold prices. While gold was due for a correction, someone suddenly dropping 400 tons of gold on the market was bound to affect the price. Using money borrowed at near zero interest rate, 95% of the sale was borrowed. This amount is about 1/6 of all yearly production around the world. 

This sale forced others who had borrowed money to buy gold to sell their gold to meet a margin call. If one borrows 95% of a purchase, and the price drops 5%, the investor either has to come up with more money or sell. More gold on the market meant prices had to drop. The fact this gold did not exist did not matter. This cascade continued for some time. 

Minion of the Grand PoobahThere was an unexpected side effect. Gold and silver were in effect on sale. Retail investors all over the world rushed to buy real gold in coins or bullion form. There is now a shortage of physical gold and silver. As I write this blog post, gold is now headed back up. 

Was this a conspiracy? In one sense yes, in another no—but it is definitely market manipulation. 

Adam Smith suggested in 1776 that if businessmen get together, prices will be fixed. So in that sense these market manipulations are a conspiracy. But no, the businessmen do not get at lodge meetings and take orders from the Grand Poobah.

So get out the tin foil hats, the markets are manipulated. 

Is the Gold Still in Fort Knox?

I never wear such a hat as it is well known that such hats make it easier for the government to track you. Get out your aluminum foil hat. At least that is what I thought about the possibility of Fort Knox being empty before one presentation at the Cambridge House seminars. I had only heard the goofy version of this, that Fort Knox and the gold at the Federal Reserve in New York was missing.

No, the gold is there all right, but the real question is "How much of it is pledged or lent to banks?" This is how it works. The Fed leases gold to a "gold bank" for a modest fee. The gold bank issues certificates can be redeemed for gold. The gold bank then buys bonds, often government bonds in the country that lent the gold to the bank in the first place. This has a great effect from the government perspective. They receive a fee and get to sell their bonds. From the bank's perspective they get a great spread on the difference between what they pay the central bank and the interest they receive from the bonds they buy—a win/win for both parties. Since most money center banks, the big ones, are bankrupt if they marked their assets to the price the market would give them for these assets, this allows them to replenish their capital on the sly. In fact a lot of the various oddness in the financial markets is explained by the banks’ desperate need for capital.

Pay No attention to the Banker behind the curtain. Are the banks doing this? Yes, the Austrian central bank released that they had lent a considerable amount of their gold out. How many other central banks did this? We do not know.

So is everything fine? Sure, as long as the paper gold is not ever returned to the central bank or the Federal Reserve. But if gold goes higher, and the banks are forced to return the gold and draw out the paper gold from circulation, these banks will go bust. In that case what will happen to the paper gold, the ETF? It will be worthless. If you buy gold, do not buy ETF's.

Can we be certain that this is a big a problem as I think it is? No. But there was one new interesting data point that became common knowledge. Germany has its gold stored mostly at the Bank of England, France, and the Federal Reserve. This is a legacy of the Cold War where it was feared that the Soviet Union might steal it in war. There was considerable buzz about German gold in Germany. So it was announced that all the gold would be returned—over 7 years. 

Will the German Bundesbank still love the Fed after 7 years? 7 Years.

7 Years!

7 Years?

Why not 7 months? I have no idea what is going on, but something is wrong. The probability that the gold is being double counted to drive down the price just went up—by a lot.

Here is a presentation similar to the one I saw at the Cambridge House seminars. I have my doubts about the extent of the problem, and we do risk being stuck in tinfoil hat territory, but there is no doubt that this gold lending is happening.

The Man

I liked this mini-drama a lot. As is typical in such productions, the writing and acting are first-rate. I almost included the tag humor as it is a good example of typical wry British humor. 

“We enjoy the comfort of opinion without the discomfort of thought”

I like this quote enough that I have placed it along side my motto on the right side of the blog:

For the greatest enemy of truth is very often not the lie — deliberate, contrived and dishonest — but the myth — persistent, persuasive, and unrealistic. Too often we hold fast to the clichés of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought.

- John F. Kennedy, Yale University commencement address (June 11, 1962)

It seems only fair to apply this principle to the death of the one who said it. In that vein I read an interesting article about the JFK assignation assassination. 

I must be careful as the article fits in with my internal filters. I may blog about the CIA's Northwood project, and the Bay of Pigs incident,  which may have caused the Cuban missile crisis.  But this quote really jumped off the page:

E. Howard Hunt, the infamous CIA agent who overthrew the government of Guatemala and worked in the CIA’s anti-Castro Cuban operations, and who later achieved infamy as one of the Watergate burglars, had his deathbed confession revealed by his son in 2007. In his confession, E. Howard Hunt revealed that it was the CIA and Lyndon Banes Johnson who were behind the assassination, and that he, himself, was involved.

Here is a Wired article on the subject of Hunt's confession.

Click here to listen to a clip of the actual audio file of Hunt's death bed confession.  

I have heard or read nothing in Andrew Marshal's article, or anywhere else, to indicate a conspiracy of Jewish Satanist Bankers. But that does not mean there are not various conspiracies. There may be. But I am not convinced of any "uber" conspiracy. If you really want to go deep, deep into the weeds, you can read more about Hunt's death bed confession by buying his son's book. I see no reason to go there. 

There are many possiblities. 

1. Hunt lied. (The fact that his son is making money for his confession supports this.)

2. Hunt really was involved. 

3. Hunt lied, but there was still a murder plot, but Hunt was not involved. 

I remain unconvinced by these kinds of things. Hunt telling the truth seems to me to be the least likely option. 

Let’s say that Kennedy was assassinated by Jewish Satanist Bankers. What can you or I do about it? Nothing, absolutely nothing. Your best option is to keep a low profile and separate yourself from Babylon as much as possible. This is the exact strategy I suggest. Reading all these weird books, and ultimately becoming weird yourself, is a waste of time. 

I do have a personal connection to Kennedy. The house I live in was built by an heir to the Hyatt Hotel fortune. He was afraid of assassins so he built a secret bedroom only accessible from a secret passageway. (He was eventually murdered they say, so he may not have been paranoid.) The rumor is that Kennedy clandestinely met Marilyn Monroe in that bedroom—now my bedroom. I may be sleeping in the same bed they slept in. 

Yuck.