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World Bank Whistleblower Says Paper Currencies To Be Back By Precious Metals

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Many people have claimed that the worlds reserve currency, the US Dollar will eventually cease to provide that role only to be replaced by a basket of currencies or one backed by gold. Karen Hudes, World Bank whistleblowe,r has confirmed that paper currency will be underpinned by precious metals.

I had the opportunity yesterday to speak with one of the western world’s most courageous and astute women, Karen Hudes, Former Senior Counsel to the World Bank—now turned whistle-blower.
It was a powerful conversation, as Karen spent 20 years with the World Bank as an attorney and economist, before being “let-go” after reporting internal fraud and corruption.
During the interview Karen indicated that the world is rapidly changing, with western power structures breaking down, economic & political influence gravitating to BRICs nations, all amid a pending currency transition which will highly favor precious metals.   Hudes stated: “All of the countries of the world are going to allow precious metals to serve as currency, and this will be an underpinning for paper currency, as we’ll have both systems at the same time.”

From Tekoa Da Silva:

Starting out by discussing the shocking centralized power she witnessed while working at the World Bank, Karen explained that, “A study done by three [Swiss] systems analysts who used mathematical modeling [shows] how the [world’s] 43,000 transnational corporations were being controlled through interlocking corporate directorates. There’s a group of 147 companies, most of them are financial institutions, and what they’ve done, is through the interlocking directorates, they control 40% of the net worth of these [43k] companies, and 60% of their earnings…so that group has been using the presidency of the World Bank as kind of a puppet to dominate the world—that’s [now] finished.”

A major shock to that centralized power base, according to Karen, was the recent move by BRICs nations leaders to bypass the World Bank for their financing needs, by establishing their own development bank. “As the BRICs [nations] economic power grows,” she explained, “they’re not going to be strangled anymore through the grabbing [of] their resources…So their decision to start their own development bank was their way of letting [world] governments know…that its time to end this corruption.” 

Major moves toward monetary independence are also being made by growing numbers of U.S. states, Karen added. She explained that, “The states are starting to have legislation recognizing gold and silver bullion as legal currency. This is [also] a very strong signal the states are sending to the federal government, that the time to get serious about ending the corruption in the financial system is now here.”

When asked her thoughts on what this all means for the world monetary system, Karen said, “What’s going to happen, is we’re going to have all the countries of the world, sit down and figure out what’s going to be the best, most orderly transition from the current system that we have, [which has] profound imbalance and unsustainable deficits…[this change] is going to happen as each country makes its preference known, because the system we have now is not transparent, and the biggest change [in the new system], is that there’s going to be transparency.”

That transparency may be found through a gold-backed currency system, Karen noted, as, “All of the countries of the world are going to allow precious metals to serve as currency, and this will be an underpinning for paper currency, [as] we’ll have both systems at the same time. This is my guess, as I mentioned—I am an economist.”

As a final comment speaking towards her difficult journey as a World Bank whistle-blower, Karen said, “I’ve been struggling now for years, to tell the American public what’s [been] going on. I haven’t gotten through, because this [financial] group has bought up the press and has been spreading disinformation systematically. That undermines the whole point of a democracy. How can voters vote without an informed opinion, without the information that they’re entitled too? So this strangle-hold on information is going to end in very short order.”

For further background on corruption in the World Bank check out the interview of whistleblower Karen Hudes.

Source: Silver Doctors, NSNBC

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Paper Gold Volumes Vs Physical Gold Volumes

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goldAlthough I have been writing about the subject of gold price manipulation (check out Thunder Report) rarely have I seen the relationship of paper gold sales volume put in context to physical gold sales volume. The figures are quite startling and quite clearly demonstrate that the real price of physical gold is a multitude higher. In Q1 2011, on the LBMA, sales of paper gold per day was the equivalent of over 2 years annual production of gold.

To start with lets take a look at the LBMA and its attitude.

Most gold trading – both physical and paper – clears through the London market, with dealers and banks settling transactions for clients around the world. According to the LBMA website, “a credit balance on a loco London account with an LBMA member represents a holding of gold or silver the same way that a credit balance in the relevant currency represents a holding on account with a New York bank or Tokyo bank.” Further, the LBMA explains “Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held. The client is an unsecured creditor.” (London Bullion Market Association, 2012)

Let us pause here to re-emphasize a point. When you deposit money at a New York or Tokyo bank, you no longer own the money. You own a claim – you own bank credit. Banks are free to use deposits as they please – typically as a base to leverage – aka fractional reserve banking. As the LBMA points out, loco London accounts operate in the same way – they are bank credit denominated in gold. So long as the bank meets its’ contractual obligation, paper gold and allocated physical are fungible.

Over the decades, the derivative market for gold has grown exponentially. What began as a means to finance new gold production has morphed into an untenably leveraged marketplace.

To maintain confidence in the USdollar, the gold price must be suppressed.

As long as the marketplace holds “paper” gold on par with physical gold, the dollar price of gold is suppressed because of the new, synthetic paper flow. In order to maintain confidence in the $USD as a store of value – flow of gold bidding for dollars is desperately needed. As we see it, the US Dollars’ ability to function as a store of value, and global reserve currency, is now completely dependent on the continued flow of (and confidence in) ‘paper’ gold.

Paper Gold Volume size Vs Physical Gold Volume.

How big is the flow of this combined market? Total trading volume for 2011 was estimated at 50,459,865,000 ounces. (Gold Fields Mineral Services, 2012) 50 BILLION OUNCES!! As a point of reference, the World Gold Council states that annual mine production for the last 5 years has averaged approximately 83,000,000 ounces, and total above ground stock of physical in all forms is approximately 5,465,500,000 ounces. (World Gold Council, 2012) One might conclude that a significant amount of leverage exists in the gold markets given the fact that in 2011, the volume of paper gold that traded equaled 10x the amount of physical gold that has been mined in history! Consider further that the WGC estimates that only 19% of existing above ground stocks is categorized as “investment”, and nowhere near all of that 19% sits in LBMA vaults in good delivery form, ready to satisfy paper claims. Further, Central Banks (estimated to hold approximately 20% of the gold stock) today are net buyers – not sellers.

The last liquidity survey by the LBMA of its members revealed some startling information regarding paper gold sales volumes.

By August 2011, 36 of the 56 Full LBMA trading members submitted returns for the new survey, and the results were rather shocking. Quietly, the size of the “paper” gold market had grown to monstrous proportions – successfully creating a tsunami of paper gold flow. In fact, according to the Q1 2011 LBMA Liquidity survey, over 173,713,000 ounces or 5,400 tons of “paper gold” per day (more than 2 year annual physical production) turns over with only 2/3 of LBMA members reporting!

Looking to the COMEX we can get another glimpse of the ratio of paper contracts to the physical.

How many paper claims exist on the relatively small stock of bullion? For a few hints, we can look to the COMEX. As of October 30, 2012 COMEX gold Open Interest equaled 454,742 contracts (45,474,200 ounces of gold). COMEX registered inventory stood at 2,735,041 ounces for a factor of 16.6X. (CME Group, 2012)

Is a leverage factor of 16 enough for you to take action? For some very prominent fiduciaries, the answer is a resounding “YES”. In a 2011 interview Kyle Bass of Hayman Capital (who helped the University of Texas Endowment take delivery of nearly $1 Billion in physical gold bullion) described a conversation he had with an exchange official:

“When I talked to the head of deliveries at COMEX NYMEX, I was like, ‘What if 4% of the people want deliveries?’ He said, ‘Oh Kyle, that never happens. We rarely ever get a 1% delivery.’ And I asked, ‘Well, what if it does happen?’ And he said, ‘Price will solve everything’ and I said, ‘THANKS, GIVE ME THE GOLD’ – (Bass, 2011).

                                                                                                                                              

When looking at the demand figures, you would normally expect the price to sky rocket, but not gold.

Let’s look at the leverage a different way. In 1Q11, the 36 reporting members of the LBMA disclosed gold sales of 5,593,743,000 ounces versus purchases of 5,350,183,000 ounces (see line 1 – London Turnover). Based on the survey, we deduce that in 1Q11 excess demand for gold was 243,560,000 ounces which translates into approximately 7,575 metric tons. In a typical year, quarterly physical production (new mining supply) is approximately 625 tons. One would imagine that with a traditional commodity, physical demand outstripping new supply in a given quarter by a factor of 10 would cause a significant increase in price!! And for commodities like copper, corn, or cotton that would certainly be true. Yet during 1Q11, the price of gold rose from $1410 to $1439…a $29 dollar per ounce increase. (LBMA, 2011)

So with the true price of gold masked behind the paper gold price, the smart hands are holding onto their physical. Where does that leave the true price?

We believe that the largest holders of physical gold have very strong hands – and $1,400 per ounce is nowhere near high enough a price to coax significant new flow into the market. As a simple mind exercise, let’s imagine this dollar denominated gold demand was met exclusively from new mine production – no paper flow and no existing physical bidding for dollars. Based on the LBMA liquidity survey and WGC data, newly mined (average) per quarter flow of 625 tons physical gold would have needed to absorb 100% of that $337 Billion dollar demand. And in order to do so – gold could not have been at $1,400/oz. Instead, to clear the market gold would have averaged a price of $16,920! This is a partial glimpse at the true Freegold concept (Another, 1997) – no paper gold flow – a return to a purely physical marketplace. Although this may sound like an amazing price – if we apply a “reserve” factor of 16.6 to the LBMA demand statistics, we’d suggest that $16,000 gold would be a bargain. It’s all a matter of perspective.

Finally, the best description of paper gold yet..

Paper Gold is just like allocated, unambiguously owned physical bullion…until it’s not.

Source: ZeroHedge

17% Of Silver In Comex Gone In One Day

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Last friday a client of JPMorgan got tired of holding paper silver and asked for the delivery of 3.6 million ounces, which is 17% of all the registered inventory of silver. The full amount wasn’t met which begs the question what happens when others eventually follow suit and how long will it be before everyone panics and swaps paper for physical? Its long been know that paper silver out numbers physical, therefore someone is going to be disappointed when the paper is eventually traded for the real stuff.

This week’s interview with gold dealer Tom Cloud of National Numismatic Associates comes as precious metals are correcting and rumors are swirling around Comex silver.

Dollar Collapse: Hi Tom. It’s been an interesting couple of days for silver, with a big Comex draw-down being followed by a sizable price drop. If the silver market wasn’t so obviously free and honest, it might be tempting to suspect some kind of manipulation…

Tom Cloud: Late Friday afternoon a big client of JP Morgan requested delivery of 3.6 million ounces, which is 17% of all the registered inventory of silver (assuming it’s all really there). But only 1.6 million ounces were reported moved. A lot of people are asking where the rest of it is. If it wasn’t immediately available and the client allowed JP Morgan to move it in pieces, that’s another sign of very tight supply.

Ordinarily seeing that much silver inventory move would make the price go up, but at the same time they – probably the same people — were buying shorts to drive the market down late in the day when trading was slow.

DC: The size of the silver draw-down raises the question of what happens if a few more big players want to turn their futures contracts into physical metal. Would this cause a delivery disruption or outright default on the Comex?

TC: Somebody stepped up and said ‘no more paper for me; it’s time to get the real thing in my name.’ They’ve played the [paper silver] game and benefited from it and now they want their silver. But not everyone can do that. There is 100 times as much silver paper [in the form of futures contracts] as there is physical, which means a lot more people think they own silver than there is silver in the world. At some point someone will be left out. If 17% of Comex inventory is taken out in one move, then you don’t need that many more big players to take delivery to see this thing fall apart.

A lot of people were already worried about this, and what happened Friday certainly raises the odds that others with paper claims are going to ask for physical. This morning I’m seeing a lot of dealers buying a lot of silver for their own inventories. This is a very scary situation.

DC: Has an exchange ever defaulted on a commodity?

TC: I don’t know of one that has completely defaulted, where they drain their warehouses of product. So it would be a huge event. And the picture for gold, though not as urgent as silver, is also pretty tight, with futures contracts far exceeding available physical.

DC: So what does the prospect of a Comex default mean for precious metals investors? How can we play it?

TC: Only gold bars from major fabricators like ScotiaMocatta and Johnson Matthey can be used to settle a Comex futures contract. That is, they’re approved for future delivery. When the shortage hits, if you’re holding one of these bars the premium is going to shoot straight up, so in addition to a higher spot price you’ll make money on the wider premiums. Because of this, a lot of my larger investors buy Comex bars exclusively instead of coins.

There are now ten different mints producing Comex gold bars. Two years ago there were four. Comex is smart. They know it’s gonna hit the fan and are now willing to approve other brands in order to increase their sources of metal. I don’t think they’d be approving these other brands if they didn’t expect a default. It’s the same with silver. 24 months ago there were two approved fabricators, Johnson Matthey and Engelhard, making bars you could deliver on a futures contract. Today you’ve also got Ohio Precious Metals, Academy, and Royal Canadian mint.

But even in the absence of a Comex default, bars are cheaper than coins. They’re not made by a country, but by large refineries, and because of this their premiums are lower. One exciting thing that happened this year is the introduction of one-ounce Comex silver bars from Johnson Matthey. The premium is $2 an ounce, which is about $0.75 an ounce more than for a 100-ounce bar. But it’s a dollar an ounce cheaper than for a Silver Eagle coin, so they’re selling very well.

DC: How do you store Comex bars once you’ve bought them?

TC: Several ways. You can take delivery of them and arrange your own storage. The newest state-of-the-art depository is Diamond State in New Haven, Delaware. They’re tremendous. A buyer can arrange to have their bars shipped directly there, generally for free. They’ll handle the paperwork and charge an annual storage fee. If you buy through us, we have a warehouse where customers can store their bullion for three years for free. It’s allocated, so you own specific coins or bars, and it’s all insured.

Source: Dollar Collapse

Massive Attempt At Silver Price Manipulation

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Yes we all know who as a vested interest in making sure silver does not take off. Over the weekend paper silver was sold off in huge volumes(6 month total US silver supply in minutes) again to try to smash the momentum since the recent QEver announcement from the Fed. What I enjoy most from these stories is that eventually the dam will burst and will be interesting to see the manipulators panic. Excellent work from SilverDoctors below:

Apparently Blythe’s monkey’s are burning the Sunday midnight oil in order to prevent silver clearing $36 and triggering JPM’s rumored silver derivative losses.

A miniature replica of the May 2nd, 2011 drive by shooting was just completed, as silver was knocked down the proverbial mine-shaft moments ago, dropping nearly a dollar in nano-seconds on Monday’s Asian open.

Volume data indicates that 3,297 contracts, or 16.5 million paper ounces of silver were dumped on the market in a mere 5 minutes between 9:00 and 9:05pm EST.
In other words, approximately 1/2 of the entire US annual silver production was dumped on the market by the cartel in a 5 minute period on a Sunday night.

Silver was drifting under $34.50 prior to the raid which knocked .80 off the metal nearly instantaneously at precisely 9:00pm EST:

Paper Gold Vs Physical Gold- Ann Barnhardt Explains Decoupling

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In light of what happened with MF Global , Ann Barnhardt explains the decoupling between the paper price of gold and the physical. We may have seen signs of this already this week whereby gold prices collapsed but the physical demand was up. 

It is only a matter of time before the paper price of gold and the spot cash price diverge. When it does diverge it will be disorderly and sudden. This is because the situation is dynamically unstable. No manner of smoke and mirrors or shoestrings and bubble gum is going to change the fact that we are talking about fraud.

The thing newbies to this kind of thinking must realize is that the price of gold will not rise to Freegold valuations, it must fall hard first. This is simply because the paper gold (futures) market cannot exist with Freegold. Freegold cannot be “free” until the paper market dies and paper supply collapses with it. This very process frees gold.

Since gold is priced by the futures market, price will fall as the process Ann describes plays out. It will dawn on people at some point that “in your hands physical” is the only safe place to be where your capital has a 100% chance of being retained and not stolen. The smart ones will immediately cash out in dollars and head for somewhere where they can acquire physical. The dumb ones will attempt to take actual delivery, and I mean actual where they hire a Brinks truck to pick the shit up at the vault. Then they will find out that the “delivery” was really and IOU (Certificate) for gold. When they show up at at the vault they will be informed that the gold has already been removed by some guy that an identical Certificate. That’s when the shit hits the fan and real panic sets in.

In short order we are going to see a divergence of the paper price and the spot price. For us small ants it will look like this: we will be licking our chops as price collapses on the Comex and we will call our favorite gold dealer with a purchase order. He is then going to quote us a price that in no way resembles the price on the CNBC ticker. He will politely tell you that the real price is what he is quoting, and that is if you are lucky. This is going to happen so fast he probably will say he’s not a seller at any price, but would be more than happy to buy your gold.

Waiting for the gold price to plunge in order to pick up your physical at a bargain price is a fools errand and will end with you holding a fistful of dying dollars. The flow of gold will disappear and gold will go into hiding. Only a Freegold price will bring it back out into the light of day.

So be happy when the price of gold is rising, it means you can still buy physical gold with your bank credit. Do not be happy because you are richer, it is a pittance compared to real Freegold valuations. Do not be depressed when gold price plunges because you are less rich. Be depressed because you do not have enough physical gold and do not have the capability to purchase more. Be happy when price plunges if you have spare bank credit or have enough physical gold to preserve your wealth at Freegold valuations.

Reason For Gold Selloff ?

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Rehypothecation has been put forward for the reason of the massive sell off of gold over the last few days.This can be defined as follows:

Rehypothecation is a practice that occurs principally in the financial markets, where a bank or other broker-dealer reuses the collateral pledged by its clients as collateral for its own borrowing.”

So in relation to GLD (which is owned by HSBC), an article by ZeroHedge has suggested that after MF Global, investors are beginning to suspect what very few knew already, was that gold accounts owned by clients had their gold reused  and relent. So fewer people are trusting paper gold or that GLD will be of much use when SHTF.

Source: ZeroHedge

 

A good interview below by Kyle Bass also touches this. Fast forward to relevent part on collateral at 9min 30 secs in.
http://plus.cnbc.com/rssvideosearch/action/player/id/3000061932/code/cnbcplayershare

Anyone For Physical Silver ?

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Above ground Supply in Months –

1950 – 140 months supply
1970 – 70 months
1990 – 55 months
2010  -11 months
(700 million ounces of above ground silver ounces)

This translates to a 93% collapse in global inventory

Where Silver goes

Electronics
1999 100million oz
2011 250 million oz

Solar
1999 not reported
2010 75 million oz
2014 130million oz projected.

Investment
1986  10million oz
2010  35million oz

a new mine takes 10yrs from discovery to product an oz.

Nevada produced
1997 25 million oz
2010 7.3 million oz

COMEX trades of paper silver are 100 times physical silver
1bn oz per day traded in paper

So have you got yours yet?

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