What kind of magic is keeping the uk in the air?
Alas, it is the mythical Shruggin Atlas of the Rand cult
Case 1
Lots of people laugh at Gordon Brown because he
sold Britain's gold at a historically low price. He's easy
to make fun of, but this one is not his fault.
Apparently, he was covering the gambling debts
of the British banks that were rehypothecating
everything they could hide in a vault.
Verdict: REHYPOTHECATE
BROWN’S ASS.
HE DIDN’T SEE FIT TO CHANGE REHYP LAWS
read 'em: Jesse's cafe
Brown's
Bottom: Why Gordon Brown Sold England's Gold On the Cheap To Bail Out the Banks
Although
this is nothing new, as I and several others have reported this several times
in the past, with a very nice documentary on it having been done by Max Keiser,
this is still a very important article for two reasons.
First,
it lays out rather nicely the gold panic of 1999 and Brown's Bottom, which is
the low in the price of gold achieved by the dumping of 400 tons of gold into
the world market at an artificially low price by the British government.
This
was done apparently to bail
out a bullion bank or two who were enormously and irretrievably caught short of
gold by the carry trade.
Second,
it provide a good description of the gold carry trade. When gold is leased out
by a central bank, the bullion bank takes possession of it and sells it into
the market, and invests the proceeds. At the end of the lease period, the
bullion bank buys the gold bank in the open market and returns it to the
central bank.
... And again, although it is
not mentioned in the article, Britain's gold depletion to save the private banks is infamous only because of the
clumsy manner in which it was conducted. It is thought that several other European central
banks have gold listed on their books which they no longer have, because
of this pernicious habit of lending
out the gold on the cheap to the banks, only to have it sold off in the
market, never to return, leaving only a stack of paper promises. [IOU A PILE OF
GOLD. too bad I don't have one because it's been rehypothecated- Costick67]
And
finally, the most intractable problem which the bullion banks face today is
that no central bank has a stockpile of
silver left which with to bail them out. So they are caught playing a shell
game, robbing Peter to
pay Paul, and living in dread of the day of reckoning when their schemes
will be exposed, and the markets will go into default. [ROBBING MUAMAR TO PAY
CESAR CHAVEZ.-Costick67]
...TELEGRAPH It seemed almost as if the Treasury was
trying to achieve the lowest price possible for the public’s gold. It was.
One of the most popular trading plays of
the late 1990s was the carry trade, particularly the gold carry trade.
In this a bank would borrow gold from
another financial institution for a set period, and pay a token sum relative to
the overall value of that gold for the privilege.
Once control of the gold had been passed
over, the bank would then immediately
sell it for its full market value. The proceeds would be invested in an
alternative product which was predicted to generate
a better return over the period than gold which was enduring a spell of
relative price stability, even decline.
At the end of the allotted period, the bank
would sell its investment and use the proceeds to buy back the amount of gold
it had originally borrowed. This gold would be returned to the lender. The
borrowing bank would trouser the difference between the two prices.
This
plan worked brilliantly when gold fell and the other asset – for the bank at
the heart of this case, yen-backed securities – rose. When the prices moved
the other way, the banks
were in trouble.
This is what had happened on an enormous scale by early 1999. One
globally significant US
bank in particular is understood to have been heavily short on two tonnes of
gold, enough to call into question its solvency if redemption occurred at the prevailing
price.
Goldman Sachs, which is not understood to
have been significantly short on gold itself, is rumoured to have approached
the Treasury to explain the situation through its then head of commodities
Gavyn Davies, later chairman of the BBC and married to Sue Nye who ran Brown’s
private office.
Faced with the prospect of a global collapse in the banking system,
the Chancellor took the decision to bail out the banks by dumping Britain’s
gold, forcing the price down and allowing the banks to buy back gold at a
profit, thus meeting their borrowing obligations.
... Responsibility is evaded by all bar those
on whose shoulders it ought to rest. The gold panic of 1999 was expensively
paid for by the British public. The one thing politicians ought to have bought
with that money was a lesson in the
structural restraints which needed to be placed on banks now that the
principle that they were ultimately
public liabilities had been established.
It was a lesson which could have acted to
restrain all players in the credit market boom of the 2000s. It was a lesson which nobody learnt.
