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A chief Austrian finding is that counterfeiting causes malinvestment.
The fact that most counterfeiting is done by governments and called monetary
policy does not change the consequences one iota. --Richard Maybury
Counterfeit n (15c) 1: Forgery 2: something likely to be mistaken for
something of higher value.
Imagine if the Louvre crafted a near-perfect counterfeit Mona Lisa and hung
it in the gallery behind bulletproof glass. Then imagine that the Louvre held
a public auction selling the real Mona Lisa, but also refused to admit that
the one in the gallery was a fake. Ridiculous! Isn't it?
In most cases a counterfeiter wants to pass off his work onto an unsuspecting
and paying public or to a specific mark. This is true for works of art as it
is for currency. The counterfeiter must make his work at least good enough to
pass muster with the inteded mark.
But it is a special kind of counterfeiter that hides his deception as a
prized possession within his own collection, only to sell the real thing in
hopes of reducing its value. And I do mean special as in education, olympics
and central bankers.
Alan Greenspan
The Tungsten Story
I'm not going to say too much about this story yet because I am still
skeptical. I'm not skeptical because it doesn't fit the context that we know.
On the contrary, it almost fits too perfectly. But this, I think, is my main
point in this post. What is most important as we observe this unfolding story
is our clear understanding of the context that surrounds it.
We live today in a world of rampant fraud and misinformation. Not much is
surprising. In fact, I fully expect some surprises which will DWARF this
tungsten story. But still, so far this story relies on the credibility of
only one analyst who has uncovered, and/or been given, some incredible
information. If the story is true, then we will soon receive corroborating
stories from other sources for reasons that I will discuss in a moment.
If this story turns out to be true, then the context discussed on this blog
and delivered by ANOTHER 12 years ago explains it perfectly. This context
stands alone and aside from this tungsten story. Also, if the story
disappears or turns out to be false, it does not invalidate the pre-existing
context that would have explained it.
Skepticism
Some believe this story is a myth because gold bars are melted down all the
time to make coins, jewelry, or specialized gold disks for industrial plating
used in commercial-grade electronics. This argument doesn't hold water with
me. As I said in this comment, "You would not just
set them loose on the market. You could not afford for them to get sold to
the commercials who would melt them down..."
No, if this story is true then the delivery of tungsten bars to the Chinese
was a fatal "leak". And not necessarily an accident.
What I am skeptical about is this part:
I know folks who have copies of the original shipping docs with dates
and exact weights of “tungsten” bars shipped to Ft. Knox.
Not that Rob Kirby is lying, but this part of the story seems less likely to
me. First of all, you would have to move the new gold in and the old (real)
gold out at some point. It seems unlikely to me that you would do this in a
way that would a) create shipping docs, and b) leave them existing in the
hands of c) someone who was free to later talk about it to Rob Kirby.
I would like to see these documents released online to be scrutinized. I would
be happy to release them here. ;)
The one other thing I would like to see before I attack this story with the
deadly seriousness it deserves, is some sort of a corroborating story out of
China that they indeed unearthed a tungsten scandal. Perhaps there already is
one. If so, please post a link in the comments section!
The fact of the matter is that there should not have been any gold flowing in
or out of Fort Knox during the mid-90's, let alone the whole enchilada. So
"shipping docs with dates and exact weights" of the bars would be
very interesting to see.
Larry Summers
On The Other Hand
On the other hand, like I said at the beginning of this post, the Kirby story
fits the known gold manipulation paradigm perfectly. Let's have a quick
review.
In his article, Rob Kirby says:
And here’s what the Chinese allegedly uncovered:
Roughly 15 years ago – during the Clinton Administration [think Robert
Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5
million 400 oz tungsten blanks were allegedly manufactured by a very high-end,
sophisticated refiner in the USA [more than 16 Thousand metric tonnes].
Subsequently, 640,000 of these tungsten blanks received their gold plating
and WERE shipped to Ft. Knox and remain there to this day.
The mention of Rubin, Greenspan and Summers especially caught my eye. It
tells me that Rob is thinking the same as me if this story is really true.
For the sake of this quick run-through, let's imagine the tungsten bar story
is true.
If so, this epic journey of stupidity by these three men began way back at
the beginning of the Great Depression in 1930 when John Maynard Keynes wrote
in his "A Treatise on Money" that interest rates and general price
levels (infation) were observed to be correlated. Keynes called this Gibson's
Paradox.
John Maynard Keynes
58 years later, in 1988, while at Harvard University Larry Summers published
a paper called Gibson's Paradox and the Gold Standard.
In the paper he theorized that government bonds could be made valuable by
manipulating the price of gold downward. GATA summarizes it like this:
Essentially, the scheme as implied by Summers' paper is to keep
interest rates down and government bond prices up by rigging the gold market,
gold and interest rates ordinarily being inversely correlated.
I've long had a hunch that the scheme became U.S. government policy because
of President Clinton's resentment upon being told, soon after taking office,
that the foremost objective of his administration should be to placate the
bond market. There is a famous quotation about this in Bob Woodward's book
about the Clinton administration's early days, "The Agenda." The
full book isn't available on the Internet but the quotation appears in
several reviews of the book that have been posted. Clinton says:
"We're Eisenhower Republicans here. We stand for lower deficits, free
trade, and the bond market. Isn't that great? ... We help the bond market and
we hurt the people who voted us in."
Bill Clinton
So Clinton was elected in 1992 and took office on January 20, 1993. Meanwhile
Larry Summers, who is known for proposing brash ideas, had left Harvard
in 1991 and joined the World Bank as Chief Economist. On April 5, 1993, less
than three months after Clinton took office, Larry Summers left the World
Bank to join the Clinton administration as Undersecretary for International
Affairs in the Dept. of Treasury.
One month later, on May 18, 1993, Alan Greenspan made an amazing statement at
a Fed meeting that has only now come to light:
"I have one other issue I'd like to throw on the table. I
hesitate to do it, but let me tell you some of the issues that are involved
here. If we are dealing with psychology, then the thermometers one uses to
measure it have an effect. I was raising the question on the side with
Governor Mullins of what would happen if the Treasury sold a little gold in
this market. There’s an interesting question here because if the gold
price broke in that context, the thermometer would not be just a measuring
tool. It would basically affect the underlying psychology.”
--Alan Greenspan (05/18/93)
Less than three months later, on exactly Aug. 5, 1993, the (c)overt gold
manipulations begin:
The appearance of the intervention in NY, repeatedly led by principal
actors JP Morgan Chase and Goldman Sachs, is so marked that a particular day
August 5, 1993 can be identified as the date of onset of the anomalous
downward trade in gold on the NY Comex. [1]
How do we know the date when the systematic interventions began? By
observing their execution times. These actions are not divided evenly
throughout the day, but instead tend to focus on important time points such
as the PM-Fixing and the New York closing price. Additionally, COMEX trading
hours are preferred. This creates an intra-day pattern that can be
statistically identified and allows us to pinpoint the starting date of the
interventions on August 5, 1993 (*). [2]
Robert Rubin
Of course Robert Rubin joined the team as Treasury Secretary on January 11, 1995,
promoting Larry Summers to Deputy Secretary. This lasted until July 2, 1999
when Summers took over Rubin's job as Secretary of the Treasury!
A few years ago a man named Frank Veneroso did some amazing reseach on the
mid 1990's and the gold market. This report is a must-read. Here was his
conclusion about the mid-90's:
What are the implications of all this dry statistical analysis for the
claims of GATA? To our mind, it is very simple. There is much evidence that
the consensus data on supply and demand is wrong and that the supply coming
from the central banks is higher than the consensus estimates. In our
opinion, the fact that the central banks do not acknowledge this but simply
keep affirming the consensus data---despite abundant evidence to the
contrary---represents considerable support for the allegations of GATA that
there may be something deliberate and intentionally clandestine about the
large flows of official gold that have been depressing the gold price.
Now, with all of this context in mind, let's take one more look at Rob
Kirby's "conspiracy theory"...
Roughly 15 years ago – during the Clinton Administration [think
Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3
and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very
high-end, sophisticated refiner in the USA [more than 16 Thousand metric
tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold
plating and WERE shipped to Ft. Knox and remain there to this day.
Can you see now how his mention of Rubin, Summers and Greenspan caught my
attention? I am still a little skeptical of the details, but the story sure
seems to fit. It will be interesting to watch what else develops.
Battle
of the Titans
I mentioned earlier that I would talk about why I believe that more
information will definitely be forthcoming if this story is indeed true.
Well, here it is.
Us little people (the Lilliputians) tend to believe that "the
Giants" have a master plan for controling us and stealing everything we
have. This is simply not true, hard as it is to believe for us lilliputians.
Just because things work out a certain way doesn't mean it was planned just that
way. Yes there are many evil plans. Yes there are some really bad guys. But
with all the players in the global scheme of things the law of probabilities
says that some will come out way ahead and be dubbed... "the
masterminds".
But the way it works in reality is that there is a battle royale raging
between these "Giants". I call it the Battle of the Titans. And in
this tungsten story, as it stands today, one of these Giants has royally
screwed another, and maybe many more.
Any Giant sitting on a hoard of 400 oz. LGD bars today as his personal wealth
reserve is checking them out very closely. Count on it! And this includes
some very large investors in GLD (among other ETF's) that were certainly not
"in on the scam".
So keep your eyes peeled for relevant stories and please post them here. I
don't have time to read everything. Like I said in my linked comment above,
"if this duped buyer found out what he had, he might be inclined to keep
it a secret until he could unload the bad bars on someone else." But now
this strategy has changed. Now that Rob Kirby has published his articles,
these "duped buyers" will come to the conclusion that it is better
to blow the lid off this scam and go after the perps.
My
Conclusion
It has been speculated by many people over the past decade that once we are
in the heat of the fire the US Treasury's gold will be employed in defense of
the dollar. Perhaps this was what some of the Giants were counting on. Before
1971 the dollar was considered to be "good as gold". Since then it
was considered to be "hard currency" amongst a world full of soft
currencies. Perhaps now it will be considered to be "Good as
Tungsten"? I wonder how this will affect the next move from the People's
Republic of China. Hmm....
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