Towne on "Money" or how nations steal from their citizens

Below is part of a long series of articles by Jake Towne for Seeking Alpha. Jake is British, which makes some of the comments below more interesting.

Due to industrial consumption, a shocking surprise to many is that silver's aboveground stocks are far less than gold's.

...THE WILES OF "PAPER GOLD" AND "PAPER SILVER"

As previously stated, Gold is the world's smallest major market. In 2007, the last reported year, the London Bullion Market Association (LBMA) exchanged over $20 Trillion USD in gold. This was larger than America's GDP of $14 Trillion USD, and the LBMA trading only represents about 75% of the world totals. Furthermore, the IFSL estimates the LBMA's volume is quite likely three-to-five times larger since much of the transactions are increasingly netted out and cleared without appearing in the statistics. This is despite the fact that all of the aboveground gold stock 160,000 metric tons melted down would fit inside of a cube roughly 20 meters to a side.

Due to industrial consumption, a shocking surprise to many is that silver's aboveground stocks are far less than gold's. The best estimates range from 30,000 metric tons on the low end to 60,000 metric tons on the high end - a cube that is at most 18 meters to a side. As seen in the graph, the market capitalization of silver is just a small fraction of gold's which makes it far easier to manipulate.

In 1974, New York's COMEX futures market was opened to gold trading, paving the way to the "paper gold" derivatives and ETF's of our modern day. In December 2008, the notional value of all gold derivative contracts was $395 billion USD, or roughly equivalent to 15,000 metric tons of gold. To put this in perspective consider than futures markets are typically used as hedging operations for commodity producers, trading basis risk for price risk. Since the annual production of gold is around 2,500 metric tons, and the contracts are all within a year, the large notional value becomes questionable. And to put this in perspective with silver, in 2007 the equivalent of the entire aboveground stock of gold was exchanged every 269 trading days while the equivalent of the entire aboveground stock of silver is exchanged every 9 trading days.

Here is another little known fact I dare not omit since gold is saved and not consumed, it's stocks-to-flow ratio is about 60. This means that there is the equivalent of ~60 years worth of production in aboveground stock for every year of mine production. This is in stark contrast to all other commodities, where the stock-to-flow ratio hovers around 1. Please see the graph. This ratio is the key reason why gold is money and a currency.

Perhaps this chart Theodore Butler graciously allowed me to publish from his article "Making the Case" most aptly the gold and silver manipulation by U.S. Banks most clearly below.

Furthermore, in a 2003 lawsuit against the world's largest gold producer, Blanchard and Company charged Barrick Gold (ABX) with manipulation of the gold price by using central bank gold, Barrick replied that they could not be sued without the central bank and other bullion dealers present as necessary parties, and that the central banks had sovereign immunity. Barrick's motion to dismiss was also a confession of the state of the gold market.

Termination of the forward sales contracts would leave the bullion banks with no right to recover the promised gold from the gold producers; yet, they will remain obligated to repay the borrowed gold to the central banks. In order to satisfy their obligations to the central banks, the bullion banks would have to purchase gold on the spot market at prices that may be substantially higher than the price at which they sold the borrowed gold... It would expose the bullion banks to monumental financial losses. (p. 20-21/24)

Barrick's motion to dismiss was settled out of court, and shortly thereafter Barrick announced its hedging operations were terminated.

The Barrick Gold case was preceded by Howe vs. BIS, where, as a BIS shareholder, Reginald Howe charged the Bank of International Settlements, Alan Greenspan, Treasury Secretary Larry Summers, Goldman Sachs, Deutsche Bank, and others with fraud and manipulation of the gold price in the derivatives market and on the COMEX in 2000. In a long, twisting decision, U.S. federal Judge dismissed the case due to lack of standing. However, none of the claims were refuted and Lindsay resorted to questionable logic that Greenspan and Summers were above the law and unable to be sued in 2002. James Turk picks apart the decision in his commentary here.

One final but quite important note that due to the nature of futures markets, the gold cartel just as easily can profit when the price rises as when it falls. It is typically rare (~1%) for a paper gold futures contract to be settled in gold. Most often, it is simply rolled over. The game of golden musical chairs stops when the expected deliveries of physical metal off the exchange shake the confidence that metal will be delivered, resulting in a heightening of counterparty risk.

CONCLUSION

It took me extensive amounts of research to conclude that the gold and silver prices are manipulated, and GATA was the first and prime source of this information. For many seeing this for the first time, I apologize if the above is too complex. Looking back, it should have been much easier – if you listen to the central banks, they literally state they doing this.

One must not forget that central banks are simply government-sanctioned tools of the elite to debase and manipulate the currency in an orderly and politically-expedient manner, regardless of their claims to maintain "political independence." The simple truth is that the central banks were designed to control the "money power" which eventually MUST and WILL BE returned to We the People.

However, I expect no one to believe the same as I without doing the same research as I have, and to that effect, please see my source list. Any questions, especially feedback to the contrary, please ask them below and I will do my best in replying in a timely fashion.

Lastly, let's ask what if I am wrong, and what are the consequences? Nothing.

But what about the possibility that GATA, myself, and many others are correct? Then Larry Summers, the director of the Obama administration National Economic Council, should receive a trial by jury, not left free to continue to meddle with the world economy. As individuals, we must end this charade and help destroy the gold cartel or the gold cartel will proceed to annihilate what's left of the free market in our America, the greatest nation to ever be conceived in the liberty of the individual by the minds of men.

Got physical gold? Physical silver? (Please note ETF funds like GLD and SLV, run by cartel members HSBC Bank and JP Morgan Chase Bank, do not count.)