MEET the NEW BOSS
JPMorgan “Sells” Chase Manhattan Plaza HQ in NYC to Fosun for $725 million
by David M. Levitt and Kelvin Wong Oct 18, 2013
JPMorgan Chase & Co. (JPM) has agreed to sell 1 Chase Manhattan Plaza, the tower built by David Rockefeller, to Fosun International Ltd., the investment arm of China’s biggest closely held industrial group, for $725 million. Fosun, which invests in properties, pharmaceuticals and steel, is buying the 60-story, 2.2 million square-foot, lower Manhattan tower, according to a statement it filed to Hong Kong’s stock exchange. China’s developers and companies are expanding in overseas property markets as the government maintains curbs on housing at home to cool prices. Greenland Holding Group Co., a Shanghai-based, state-owned developer, this month agreed to buy a 70 percent stake in a residential and commercial real estate project in Brooklyn.
“There’s a lot of excess capital in China that needs a way out at the moment,” Simon Lo, Hong Kong-based executive director for Asia research and advisory at property broker Colliers International, said in a phone interview today. “Also, by investing in markets like New York, they believe they can gain from the recovery of the U.S. economy and real estate market.” Fosun (656), owned by Chinese billionaire Guo Guangchang, fell 0.3 percent to HK$6.79 at the midday trading break in Hong Kong. Shares in the Shanghai-based company have gained 37 percent this year, compared with the 2.6 percent increase in the benchmark Hang Seng Index. Over the past year, other Chinese developers and wealthy investors have been buying real estate in the U.S. China Vanke Co., the biggest homebuilder listed in mainland China, said in February it joined a residential real estate venture in San Francisco. The families of Zhang Xin, co-founder of Soho China Ltd. (410), the biggest developer in Beijing’s central business district, and Brazilian banking billionaire Moise Safra this year bought a 40 percent stake in New York’s General Motors Building.
The landmark 1 Chase Manhattan Plaza, designed by architect Gordon Bunshaft and built in the 1950s, was once the headquarters of Chase Manhattan Bank. Rockefeller, as head of the bank’s building committee, selected the site and oversaw its construction. JPMorgan intends to relocate about 4,000 employees, most of the people who work in the 60-story skyscraper, to other New York locations, Brian Marchiony, a spokesman, said in August. JPMorgan occupies about half of its space. Jane Zhang, a Shanghai-based spokeswoman for Fosun, declined to comment on how the company plans to use the building when contacted by Bloomberg News by phone.
China’s Largest Conglomerate “Buys” JPMorgan’s Gold Vault
by Tyler Durden / 10/18/2013
comment: “Perhaps they bought the vault because they are getting frustrated by the slow rate of withdrawing German gold from Federal Reserve Bank of NY (matched only by the even slower rate at which Germans are permitted withdrawals) -with a tunnel between the two vaults they are no longer constrained by the 5 ton or so limit of an armored car (which are rather conspicuous if you start running them in shifts to speed up withdrawals).”
New York City — In what is the most remarkable news of the day, which has so far passed very quietly under the radar, Fosun International, China’s largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as “Shanghai’s Hutchison Whampoa”, announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM’s iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million. Here is Bloomberg described the transaction: “Over the past year, other Chinese developers and wealthy investors have been buying real estate in the U.S.” China Vanke Co., the biggest homebuilder listed in mainland China, said in February it joined a residential real estate venture in San Francisco. The families of Zhang Xin, co-founder of Soho China Ltd. (410), the biggest developer in Beijing’s central business district, and Brazilian banking billionaire Moise Safra this year bought a 40 percent stake in New York’s General Motors Building.
To learn more, we first went to the motherlode: the Landmarks Preservation Commission, whose report on 1 CMP describes everyone one wants to know about this building and then much more, such as that: “One Chase Manhattan Plaza combines three main components: a 60-story tower, a 2½ acre plaza, and a 6-story base, of which 5 floors are beneath grade.” So the old Chase HQ, once the stomping grounds of one David Rockefeller, and soon to be the other half of JPMorgan Chase, has 5 sub-basements, just like the NY Fed. Reading on: “Excavations, said to be the largest in New York City history, reached a depth of 90 feet” Or, about the same depth as the bottom-most sub-basement under the NY Fed. But then we hit the jackpot: “Originally constructed with white marble terrazzo paving and enclosed by a solid parapet of white marble travertine that was personally selected by Bunshaft in Tivoli, Italy, the L-shaped plaza levels the sloping site and conceals six floors of operations that would have been difficult to fit into a single floor of the tower, including an auditorium seating 800 [and] the world’s largest bank vault.”
In other words, the world’s biggest bank vault, that belonging to the private Chase Manhattan empire, and then, to JPMorgan, was so safe, the creators even had a plan of action should it sustain a near-direct hit from a nuclear bomb, and suffer epic flooding (such as that from Hurricane Sandy). So, what the real news of today is not that JPM is selling its gold vault, we knew that two months ago, or that it is outright looking to exit the physical commodities business, that too was preannounced. What is extremely notable is that in one very quiet transaction, China just acquired the building that houses the world’s largest gold vault. Why? We don’t know. We do know that China’s gross gold imports from Hong Kong alone have amounted to over 2000 tons in the past two years. This excludes imports from other sources, and certainly internal gold mining and production. One guess: China has decided it has its fill of domestically held gold and is starting to acquire gold warehouses in the banking capitals of the world. For now the reason why is unclear but we are confident the answer will present itself shortly.
TUNNELS between the VAULTS
Why Is JPMorgan’s Gold Vault Located Right Next to the New York Fed’s?
by Tyler Durden / 03/02/2013
When two weeks ago we exposed the heretofore secret location of JPM’s London gold vault (located under the firm’s massive L-shaped office complex at 60 Victoria Embankment) we thought: what about New York? After all, while London is the legacy financial capital of the “old world“, it is in New York that the biggest private wealth of the past century is concentrated, and it is also in New York where the bulk of the hard assets backing the public money of the world’s sovereigns are located, some 80 feet below ground level in the fifth sub-basement of the New York Fed, resting on the bedrock of Manhattan. That the topic of the gold “held” by the New York Fed – historically considered the gold vault with the largest concentration of gold bars in the world – has become rather sensitive, in the aftermath of the Bundesbank’s request to repatriate it (surely, but very, very slowly), is an understatement. Yet in the aftermath of some of the revelations presented here, we believe quite a few other countries will follow in Germany’s footsteps for one very simple reason: suddenly the question of whether their gold is located at 33 Liberty, or just adjacent to it, in what we have learned is the de facto largest private gold vault in the world, located across the street 90 feet below 1 Chase Manhattan Plaza, doesn’t appear to have a clear answer.
But first, some background. The locations of New York’s commercial vaults, like those of London, are closely guarded. While there is occasional anecdotal speculation of where one may find any given vault, a definitive answer is rarely if ever in the public domain. Luckily, the past few years, which saw a surge in the price of gold and silver, have provided a variety of useful clues, as one after another bank applied to have its legacy precious metal vault certified for commercial use with the CFTC. For those who aren’t easily discouraged, buried deep in the bowels of the CFTC’s website, is a veritable goldmine of data, in the form of supplemental applications from assorted CME members, who one after another, and very quietly, had the CME provide supplements to the CFTC vouching for their approval as “licensed depositories and weighmasters for gold, silver, platinum and palladium.” For those curious (and that should be all who are interested by the precious metals space) what constitutes an approvable vault, we present the fully filed supplement application by Brinks (recently best known for having two of its armored cars captured in a Google Streetview snapshot just outside the JPM office at 60 Victoria Embankment) filed with the CFTC: “The application submitted by Brink’s, Inc. and Brink’s Global Services USA, Inc. for licensing its facility at 580 5th Ave., New York, NY for storage of the respective NYMEX and COMEX Gold, Silver, Platinum, and Palladium contracts meets the requirements of the Exchanges.”
We know where at least one of the world’s largest precious metals depositories is located: deep underground the Diamond Tower located in the heart of Manhattan’s jewelry district. Another such supplement was filed by the Bank of Nova Scotia’s Scotia Mocatta. What many may not know is that it was Scotia Mocatta’s vault that was destroyed in the events of September 11, as SM’s vault was located deep beneath 4 WTC. From the application:
The Bank of Nova Scotia’s Scotia Mocatta Depositary (SMD) is an Exchange-licensed depository for Gold, Silver, Platinum and Palladium. SMD has submitted applications, requesting that a new facility, located at International Airport Center, 230-59 International Airport Center Boulevard, Building C, Suite 120, Jamaica, New York,be approved for the storage of gold and silver deliverable against the COMEX Gold and Silver Futures Contracts, and for the storage of platinum and palladium against the NYMEX Platinum and Palladium futures contracts.
History: The Bank of Nova Scotia, doing business as SMD, is an Exchange Licensed Depository for the storage of gold, silver, platinum, and palladium, and its current facility is located in Manhattan at 26 Broadway. SMD was previously known as Iron Mountain Depository (IMD), its name was changed when it was acquired by the Bank of Nova Scotia in 1997. The IMD/SMD facility has been a COMEX licensed delivery point since 1975. SMD has planned to develop a new facility since the terrorist attacks upon the World Trade Center, which destroyed SMD’s facility at 4 WTC. SM subsequently returned to its existing and former facility as an intermediate measure while the new facility was designed and built. In evaluating this application, SMD’s performance in the wake of the terrorist attacks on the World Trade Center must be noted. SMD’s Licensed Depository was located in a sub-basement of the WTC at the time of the attacks. When the material in this facility was trapped within the debris, SMD acted swiftly, offering to purchase any and all of the warranted material that was buried at the request of any holder of warrants to this material. Scotia further prepared to make replacement material stored in Canada available to offset any potential supply shortage that the destruction of its WTC facility might have caused.
Yet one name is missing. The same name which as we reported back in October 2010, reopened its undisclosed New York gold vault after it had been “mothballed in the 1990s.” The name of course is JPMorgan. Curiously (or perhaps not at all), when the CME on behalf of JPM submitted the certification filing alongside the comparable such supplements as filed by Brinks above, it requested a FOIA (Freedom of Information Act) confidential treatment. As a reminder, to be eligible for FOIA exemption status the protected information must be of vital importance to the nation’s safety. This is precisely what JPM thought the details surrounding its New York vault are. To wit:
Pursuant to Sections 8 and 8(a) of the Commodity Exchange Act (“CEA”), as amended, and Commission Regulation 145.9(d), NYMEX and COMEX request confidential treatment of Appendix A, Appendix B, and this letter on the grounds that disclosure of Appendix A and/or Appendix B would reveal confidential commercial information of the submitters (NYMEX and COMEX) and of other persons. Pursuant to Commission Regulation 145.9(d)(5), NYMEX and COMEX request that confidential treatment be maintained for Appendix A and Appendix B until further notice from the Exchanges.We also request that the Commission notify the undersigned immediately after receiving any FOIA request for said Appendix A, Appendix B or any other court order, subpoena or summons for same. Finally, we request that we be notified in the event the Commission intends to disclose such Appendix A and/or Appendix B to Congress or to any other governmental agency or unit pursuant to Section 8 of the CEA. NYMEX and COMEX do not waive their notification rights under Section 8(f) of the CEA with respect to any subpoena or summons for such Appendix A or Appendix B. Please contact the undersigned at (212) 299-2207 should you have any questions concerning this letter. Sincerely, /s/ Felix Khalatnikov
Yet oddly enough, the FOIA request letter itself, while also being filed with a request for Confidential Treatment, never got it. As a result it was posted at this address. Ooops. But a far bigger oops, is that on the first page of said declassified confidential FOIA app, in black ink, we get the missing piece:
In addition, the Exchanges are providing the Commission with the application summary of requirements for the JP Morgan Chase Bank N.A. facility located at 1 Chase Manhattan Plaza, New York, NY.
And so, despite the extended attempts at secrecy, we finally hit the proverbial goldmine vault. So what do we know about 1 Chase Manhattan Plaza. Well, aside from the fact that the 60-story structure, built in the 1950s, was the headquarters of the once-legendary Chase Manhattan corporation, and which when it was built was the world’s sixth tallest building, not much. So we set off to learn more.
To learn more, we first went to the motherlode: the Landmarks Preservation Commission, whose report on 1 CMP describes everyone one wants to know about this building and then much more, such as that: “One Chase Manhattan Plaza combines three main components: a 60-story tower, a 2½ acre plaza, and a 6-story base, of which 5 floors are beneath grade.” So the old Chase HQ, once the stomping grounds of one David Rockefeller, and soon to be the other half of JPMorgan Chase, has 5 sub-basements, just like the NY Fed. Reading on: “Excavations, said to be the largest in New York City history, reached a depth of 90 feet.” Or, about the same depth as the bottom-most sub-basement under the NY Fed. But then we hit the jackpot:
Originally constructed with white marble terrazzo paving and enclosed by a solid parapet of white marble travertine that was personally selected by Bunshaft in Tivoli, Italy, the L-shaped plaza levels the sloping site and conceals six floors of operations that would have been difficult to fit into a single floor of the tower, including an auditorium seating 800 [and] the world’s largest bank vault.
And there you have it: the JPM vault, recommissioned to become a commercial vault, just happens to also be the “world’s largest bank vault.” Digging some more into the curious nature of this biggest bank vault in the world, we learn the following, courtesy of a freely available book written by one of the architects:
On the lowest level was the vault, which rested directly on the rock – the “largest bank vault in the world, longer than a football field.” It was anchored to the bedrock with steel rods. This was to prevent the watertight, concrete structure from floating to the surface like a huge bubble in the event that an atomic bomb falling in the bay would blow away the building and flood the area.
In other words, the world’s biggest bank vault, that belonging to the private Chase Manhattan empire, and then, to JPMorgan, was so safe, the creators even had a plan of action should it sustain a near-direct hit from a nuclear bomb, and suffer epic flooding (such as that from Hurricane Sandy). It is no surprise, then, that the street entrance to this world’s biggest vault located under 1 Chase Manhattan Plaza makes the entrance to any medieval impregnable fortress seem like child’s play in comparison.
Yet it is not what is on this side of the street, which just happens to be known as Liberty Street, that is what is the most interesting part of this whole story. It is what is on the other:
Or, shown another way…
That’s right, ladies and gentlemen, as a result of our cursory examination, we have learned that the world’s largest private, and commercial, gold vault, that belonging once upon a time to Chase Manhattan, and now to JPMorgan Chase, is located, right across the street, and at the same level underground, resting just on top of the Manhattan bedrock, as the vault belonging to the New York Federal Reserve, which according to folklore is the official location of the biggest collection of sovereign, public gold in the world. At this point we would hate to be self-referential, and point out what one of our own commentators noted on the topic of the Fed’s vault a year ago, namely that: “Chase Plaza (now the Property of JPM) is linked to the facility via tunnel… I have seen it. The elevators on the Chase side are incredible. They could lift a tank.” … but we won’t, and instead we will let readers make up their own mind why the the thousands of tons of sovereign gold in the possession of the New York Fed, have to be literally inches across, if not directly connected, to the largest private gold vault in the world.
by Koos Jansen, In Gold We Trust: The Big Reset, Part 1
The sole reason why I became interested in gold is because of the book “Overleef De Kredietcrisis” (How To Survive The Credit Crisis), written by Willem Middelkoop – the Dutch equivalent of Jim Rickards – in 2009. This book opened my eyes and interest for economics and I didn’t stop reading and writing about it ever since. Middelkoop had written four books in Dutch when he decided to switch to English, his latest book has just been relesed: The Big Reset. This book is about the War on Gold and the plans behind the scenes to create a new gold-backed world reserve currency. I had the privilege to do a Q&A with Middelkoop about his latest book. The Q&A will be published on this website in two parts.
How did you started to invest in gold?
Because of the books by Indian economist Ravi Batra in the 1990’s I became aware of the anti-cyclical nature of gold. Through my internet research in 1999, when the internet bubble was getting pretty scary, I had learned about GATA and learned a great deal about fiat and hard money. After I took profits on my real estate investments in Amsterdam between 2001 and 2004 I started to invest in physical gold and silver and bought my first shares in precious metal companies in 2002. In the following yearns I experienced that investing in junior mining and exploration companies who worked on new discoveries delivered the best results. This first led to the publication of the Gold Discovery Letter and in 2008 to the start of the Gold Discovery Fund, which was renamed Commodity Discovery Fund in 2010 because some investors like the commodities more than gold. We have some 600 high net-worth Dutch investors and invest in (junior) mining companies. 50% is gold related, 25% silver related. We also have some Rare Earth and base metal investments. Because of the ongoing ‘World Championship Currency Debasement’ we expect much high prices for precious metals in the next few years.
Your new book is named The Big Reset, isn’t our current monetary system sustainable?
No, we now have arrived at the point where it is not the banks, but the countries themselves that are getting in serious financial trouble. The idea that we can ‘grow our way back’ out of debt is naive. The current solution to ‘park’ debts on to the balance sheets of central banks is just an interim solution. A global debt restructuring will be needed, as economists Rogoff en Reinhart recently explained in their working paper for the IMF. This will include a new global reserve system to replace the current failing dollar system, probably before 2020.
So you are not on your own with this call?
Right after the near death experience of the global financial system at the end of 2008 the IMF and others started to study the possibilities for a next phase of the financial system. In 2010 the IMF published a study titled ‘Reserve Accumulation and International Monetary Stability’ for a financial system without a dollar anchor. The United Nations called for ‘a new Global Reserve System’ based on the IMF’s Special Drawing Rights (SDR’s) a year later. The SDR was created in 1969, at the time the London Gold Pool couldn’t hold gold at $35 and the U.S. lost over 10,000 tons of gold because countries like France and the Netherlands returned excess dollar reserves to the U.S. treasury and demanded physical gold. This development led to the end of the gold backed dollar in August 1971, when President Nixon closed the gold window and the first dollar crisis started. It led to the run up of gold towards $880 in 1980. The UN idea is endorsed by China who has publicly stated several times that it is dissatisfied with the present dollar-orientated system. In 2009 China’s Central Bank Governor Zhou Xiaochuan advocated a new worldwide reserve currency system. Late 2013 the Chinese state press openly called to ‘de-Americanize’ the world’. In an official op-ed the idea for ‘the introduction of a new international reserve currency to replace the dominant U.S. dollars’ was mentioned again. According to the London based think thank Official Monetary and Financial Institutions Forum (OMFIF) it will take many years before the renminbi will mount a credible challenge to the dollar. The euro is not suitable either.
How will this change unfold?
Our financial system can be changed in almost every way as long as the main world trading partners can agree on these changes. Two major problems in the world’s financial system have to be addressed, the demise of the U.S. dollar as the world reserve currency and the almost uncontrollable growth of the worldwide mountain of debts and central banks’ balance sheets. A reset planned well in advance can and probably will consist of different stages. So currently the U.S. together with the IMF seems to be planning a multiple reserve currency system as a successor of the current dollar system. But this system which still include and center around the dollar, but other important currencies will be added at its core. OMFIF has published an interesting study last year. They remarked: ‘This marks the onset of a multi-currency reserve system and a new era in world money. For most of the past 150 years, the world has had just two reserve currencies, with sterling in the lead until the First World War, and the dollar taking over as the prime asset during the past 100 years. The pound sterling has been in relative decline since the Second World War. The birth of the euro in 1999 has turned the European single currency into the world’s no. 2 reserve unit, but it has been now officially accepted that the dollar and the euro share their role with smaller currencies. The renminbi has attracted widespread attention as a possible future reverse currency. But it’s still be some years away from attaining that status, primarily because it is not fully convertible.’
Some American insiders have even been calling for a return to the gold, isn’t it?
In an open letter to the Financial Times in 2010 titled ‘Bring back the gold standard’, the very well connected and former President of the World Bank Robert Zoellick pointed out he wants to use gold as a reference point in order to reform the current failing financial system. Mr. Zoellick explained an updated gold standard could help retool the world economy at a time of serious tensions over currencies and U.S. monetary policy. He said the world needed a new regime to succeed the ‘Bretton Woods II’ system of floating currencies, which has been in place since the fixed-rate currency system linked to gold broke down in 1971. He said the new system ‘is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi. The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.’
According to the famous publisher Steve Forbes, who was also an advisor for some of the presidential candidates in 2012, ‘the debate should be focused on what the best gold system is, not on whether we need to go back on one.’ So it was at no surprise for me to see an interview with professor Robert Mundell in Forbes magazine, in which he argued for a return to the gold standard. Mundell can be seen as one of the architects of the euro, and has acted as an advisor to the Chinese government as well. Mundell said: ‘There could be a kind of Bretton Woods type of gold standard where the price of gold was fixed for central banks and they could use gold as an asset to trade central banks. The great advantage of that was that gold is nobody’s liability and it can’t be printed. So it has a strength and confidence that people trust. So If you had not just the U.S. dollar but the U.S. dollar and the euro tied together to each other and to gold, gold might be the intermediary and then with the other important currencies like the yen and Chinese Yuan and British pound all tied together as a kind of new SDR that could be one way the world could move forward on a better monetary system.’
And China supports these ideas for a currency reset?
As you know Chinese Central Bank Governor Zhou Xiaochuan advocated a new worldwide reserve currency system as early as 2009. He explained that the interests of the U.S. and those of other countries should be ‘aligned’, which isn’t the fact in the current dollar system. Zhou advised to develop the SDR’s into a ‘super-sovereign reserve currency disconnected from individual nations and able to remain stable in the long run’. According to some experts the IMF needs at least five years more years to prepare the international monetary system for a worldwide introduction of SDR’s to be used worldwide. Some doubt if we will have the luxury to wait that long. The fact China is stopped buying U.S. Treasuries in 2010 and have been loading up on gold ever since tells a great deal. Chinese high level officials have indicated China wants to grow their gold reserves ‘in the shortest time’ to at least 6,000 tons, in anticipation for the next phase of world financial system. A recent report by Bloomberg suggest The People’s Bank of China and private investors has been accumulating over 4,000 tons since 2008. The Chinese are afraid the U.S. could surprise the world with a gold revaluation. Wikileaks leaked a cable sent from the U.S. embassy in Beijing early 2010. The message, which was sent to Washington, quoted a Chinese news report about the consequences of such a dollar devaluation as it appeared in Shanghai’s Business News:
‘If we use all of our foreign exchange reserves to buy U.S. Treasury bonds, then when someday the U.S. Federal Reserve suddenly announces that the original ten old U.S. dollars are now worth only one new U.S. dollar, and the new U.S. dollar is pegged to the gold – we will be dumbfounded.”
Can you explain the love for gold by the Chinese?
They know, even from their own history, gold has been used again and again to rebuild trust when a fiat money system has reached its endgame. As you might know, from your own studies, the main academic journal of the Chinese Communist Party’s Central Committee published an article in 2012 that sheds a light on the Chinese monetary or should we say gold strategy. The article [exclusively translated by In Gold We Trust] was written by Sun Zhaoxue, president of both the China National Gold Corporation (CNG) and the China Gold Association (CGA). Sun stated:
‘Increasing gold reserves should become a central pillar in our country’s development strategy. The state will need to elevate gold to an equal strategic resource as oil and energy, We should ‘achieve the highest gold reserves in the shortest time. Individual investment demand is an important component of China’s gold reserve system; we should encourage individual investment demand for gold.’
According to my research the Chinese are now in the final stage to grow their gold reserves to 6,000 tons. They want to grow these reserves towards 10,000 tons before 2020. That amount will bring the Chinese on par with the U.S. and Europe on a gold/GPD ratio. This opens the door to a possible joint US-EU-China gold supported financial system like the IMF’s SDR-plan. Such a reset could also be backed by Russia since they have accumulated over 1,000 tons, most of it since the start of the credit crisis in 2008.
Do China (and Japan) have the same debt problems like the western countries?
According to John Mauldin, author of ‘The End Game’ and ‘Code Red’ China is ‘even more addicted to money printing than the US or Japan’. Despite national financial reserves of almost $4,000 billion, China has been confronted with its own debt crisis, after Chinese banking system’s assets grew by $14 trillion between 2008 and 2013. The old Chinese communist leadership still remembers how they succeeded to grab power because of the monetary problems between 1937–1949. Their main goal is to avoid social unrest like China experienced during a period of hyperinflation after World War II.
What do the Chinese know about the War on Gold?
Sun Zhaoxue explained in 2012: ‘After the disintegration of the Bretton Woods system in the 1970s, the gold standard which was in use for a century collapsed. Under the influence of the U.S. Dollar hegemony the stabilizing effect of gold was widely questioned, the ‘gold is useless’ discussion began to spread around the globe. Many people thought that gold is no longer the monetary base, that storing gold will only increase the cost of reserves. Therefore, some central banks began to sell gold reserves and gold prices continued to slump. Currently, there are more and more people recognizing that the ‘gold is useless’ story contains too many lies. Gold now suffers from a ‘smokescreen’ designed by the US, which stores 74% of global official gold reserves, to put down other currencies and maintain the US Dollar hegemony.’
He then also explained how the US is debasing the value of its currency in a move to get rid of too much debt: “The rise of the US dollar and British pound, and later the euro currency, from a single country currency to a global or regional currency was supported by their huge gold reserves. Especially noteworthy is that in the course of this international financial crisis, the US shows a huge financial deficit but it did not sell any of its gold reserves to reduce debt. Instead it turned on the printer, massively increasing the US Dollar supply, making the wealth of those countries and regions with foreign reserves mainly denominated in US Dollar quickly diminish, in effect automatically reducing their own debt. In stark contrast with the sharp depreciation of the US Dollar, the international gold price continued to rise breaking $1900 US Dollars per ounce in 2011, gold’s asset-preservation contrasts vividly with the devaluation of credit-based assets. Naturally the more devalued the US Dollar, the more the gold price rises, the more evident the function of US gold reserves as a hedge.’
Additional proof of the Chinese knowledge about the gold price suppression can be found in message leaked by Wikileaksfrom the American Embassy in Peking about a Chinese newspaper report: ‘The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.’
The office building of JPMorgan with its largest private gold vaults at Chase Manhattan Plaza, opposite to the New York Federal Reserve building, has been recently sold to the Chinese. This indicates the US and China seem to be working together in advance towards a global currency reset whereby the US, Europe and China will back the SDR’s with their gold reserves so the dollar can be replaced.
Synopsis of The Big Reset: Now five years after the near fatal collapse of world’s financial system we have to conclude central bankers and politicians have merely been buying time by trying to solve a credit crisis by creating even more debt. As a result worldwide central bank’s balance sheets expanded by $10 trillion. With this newly created money central banks have been buying up national bonds so long term interest rates and bond yields have collapsed. But ‘parking’ debt at national banks is no structural solution. The idea we can grow our way back out of this mountain of debt is a little naïve. In a recent working paper by the IMF titled ‘Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten’ the economist Reinhart and Rogoff point to this ‘denial problem’. According to them future economic growth will ‘not be sufficient to cope with the sheer magnitude of public and private debt overhangs. Rogoff and Reinhart conclude the size of the debt problems suggests that debt restructurings will be needed ‘far beyond anything discussed in public to this point.’ The endgame to the global financial crisis is likely to require restructuring of debt on a broad scale.
‘REDBACKS’ (see also ‘GOLDBACKS’)
Yuan can become dominant world reserve currency – survey / February 27, 2014
The Chinese yuan can overtake the dollar as the leading international reserve currency, a new poll of institutional investors indicates. The authors of the survey, conducted by the Economist Intelligence Unit and commissioned by State Street financial services, polled 200 senior executives at institutional investors with knowledge of their exposure to yuan assets. Half of the respondents were from the firms headquartered in mainland China (including Hong Kong and Taiwan) and the other half were based elsewhere. The report accompanying the survey points out that by the end of 2013, the yuan has risen to become the second-most-used trade financing currency and ninth-most-used currency for payments globally.
A majority – 53 percent of respondents said that they believe the yuan will one day surpass the dollar as the top currency in international holdings of foreign-exchange reserves. In China 62 percent expressed this opinion, compared to 43 percent of respondents outside the country. Last May International Monetary Fund analysis showed that the dollar had slumped to a 15-year low, heightening concerns that it may lose that status as global reserve. Chinese officials are diligently working on sustaining their national currency, promoting it beyond the frontier. In October 2013, the government of China agreed a pilot program to create a UK based yuan hub that allows London investors to buy up to $13.1 billion (80 billion yuan) of stocks, bonds and money market instruments directly, avoiding Hong Kong transactions. The move gave the yuan a firmer footprint in Europe and helped to overcome the euro in December, becoming the second most widely used currency in global trade. Only 11 percent of respondents have said that they do not expect the yuan to become a major reserve currency, a split between 16 outside China and six onshore, according to the poll. Among the former, the most often cited reasons are that the yuan will never enjoy enough liquidity across all asset classes to offer a viable option as a reserve currency, and that people will not trust the yuan as a store of value, the survey says.
The very few pessimists from China-headquartered institutions, meanwhile, say that people would be“concerned about future policies of the Chinese government and opposition from other economic powers, such as the US, the EU and Japan.” But the consensus is that one day it will be a yuan world, according to the survey. “As China’s economic influence grows, the global importance of the renminbi (yuan) will become magnified. Indeed, while for decades it has been a ‘greenback world’, dominated by the US dollar as the world’s primary reserve currency, many think a ‘redback world’, in which the renminbi enjoys premier status, is increasingly a possibility,” the survey’s authors concluded.
MEANWHILE : U.S. TREASURIES SELL-OFF
A month ago we reported that according to much delayed TIC data, China had just dumped the second-largest amount of US Treasurys in history. The problem, of course, with this data is that it is stale and very backward looking. For a much better, and up to date, indicator of what foreigners are doing with US Treasurys in near real time, the bond watchers keep track of a less known data series, called “Treasury Securities Held in Custody for Foreign Official and International Accounts” which as the name implies shows what foreigners are doing with their Treasury securities held in custody by the Fed on a weekly basis. So here it goes: in the just reported latest data, for the week ended March 12, Treasurys held in custody by the Fed dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.
This brings the total Treasury holdings in custody at the Fed to levels not seen since December 2012, a period during which the Fed alone has monetized well over $1 trillion in US paper. So is this the proverbial beginning of foreign dumping of US paper? Could Russia simply have designated a different custodian of its holdings? No, because as of most recently it owned $139 billion in US paper, or well above the number “sold” and a custodial reallocation would mean all holdings are moved, not just a portion. For another view, here is what the bond experts at Stone McCarthy had to say: “We don’t have a ready explanation for the plunge in custody account holdings. One thing that is striking about the drop is that the last several days was not a period of heavy market buzz about “central bank selling” of Treasuries, at least to the best of our knowledge. China and Japan are by far the largest holders of Treasuries, with holdings of $1.269 trillion and $1.183 trillion in holdings at the end of December, respectively. China’s holdings are more skewed to central bank holdings. Selling of Treasuries would appear to be at odds with China’s recent effort to depreciate its currency, although on March 5 and 6 there was a brief correction in that trend.”
LONG on AMERICA
Meet The Brand New, And Shocking, Third Largest Foreign Holder Of US Treasurys
by Tyler Durden / 03/18/2014
Something hilarious, and at the same time pathetic, happened earlier today: at precisely 9 am the US Treasury released its delayed Treasury International Capital data (which was supposed to be released yesterday but was delayed because it snowed) which disclosed all the latest foreign Treasury holdings for the month of January. Among the key numbers tracked and disclosed, was that China’s official holdings increased from $1.270 trillion to $1.284 trillion, that Japan holdings declined by a tiny $0.2 billion, that UK holdings increased by $7.8 billion to $171 billion, and that holdings of Caribbean Banking Centers, aka hedge funds, declined by $16.7 billion. Here is Reuters with the full data summary (save it before this article is pulled ).
So why is it hilarious and pathetic? Because just three short hours later, the Treasury - that organization that has billions of dollars at its budgetary disposal to collate, analyze and disseminate accurate and error-free data – admitted that all the previously reported data was in effect made up! Of course, it didn’t phrase it as such. Instead, what TIC did was release an entire set of January numbers shortly after it had released the “old” numbers, which differed by a small amount but differed across the board – in other words, not a small typo here and there: a wholesale data fudging exercise gone horribly wrong. For example:
- Instead of a $14 billion increase, China’s revised holdings were only $3.5 billion higher.
- Instead of unchanged, Japan’s holdings suddenly mysteriously increased by $19 billion in January.
- Instead of plunging by $17 billion, the Caribbean Banking Centers were down by a tiny $1 billion.
- And instead of the previously reported increase of just under $1 billion, the all important Russia was revised to have sold $7 billion, bringing its new total to just $132 billion ahead of the alleged previously reported dump of Fed custody holdings in mid-March.
That this glaring confirmation that all TIC data is made up on the fly, without any real backing, and merely goalseeked is disturbing enough. For what it’s worth, thelatest TIC data is here . Feel free to peruse it before it is revised again. However, what was perhaps more disturbing than even that was the revelation that as of January, the US has a brand new third largest holder of US Treasurys, one which in the past two months has added over $100 billion in US Treasury paper, bringing its total from $201 billion in November, to $257 billion in December, to a whopping $310 billion at January 31. The country? Belgium
The same Belgium which at the end of 2013 had a GDP of just over €100 billion, or a little over one-third what its alleged UST holdings are. And somehow the Treasury expects us to believe that tiny Belgium – the center of the doomed Eurozone which is all too busy running debt ponzi scheme of its own -bought in two months nearly as much US Treasurys as its entire GDP? Apparently yes. However we are not that naive. So our question is: just who is Belgium being used as a front for? Recall that for years, the “UK” line item on TIC data was simply offshore accounts transaction on behalf of China. Of course, since China hasn’t added any net US paper holdings in the past year, the UK, and China, are both irrelevant in the grand scheme of things. But not Belgium. Because with Russia (or someone else) rumored to have sold or otherwise reallocated $100 billion in US Treasurys in March away from the Fed , we wouldn’t be surprised if the Belgium total holdings somehow soared to over $400 billion when the March data is revealed some time in May. Courtesy of the excel goalseeking function of course. Needless to say, this all ignores the initially confirmed fact that all the data presented above is made up gibberish, goalseeked by a bored intern at the Treasury, and whose work got zero error-proofing before its released to the entire world earlier today. So… just what is going on with this most critical of data sets – official foreign holdings of US paper, and how long before an Edward Snowden emerges from the depths of the US Treasury building and reveals that behind all the data manipulation and unaudited figures was none other than the Fed, whose holdings, far greater than represented, are all that matter, and everything else is merely one grand, theatrical plug?
A graphic for “China’s Red Nobility,” from a 2012 investigative series on corruption among the country’s leading families.
‘the RED NOBILITY’
Another Bloomberg Editor Explains Why He Has Resigned, Over Its China Coverage
“For the international press, there are many reasons for crimped ambitions.”
by James Fallows / March 25 2014
Four months ago, The New York Times ran a big story contending that Bloomberg editors had quashed an investigative report about corruption among leaders in China. The Times story was clearly based on informed comment from people inside Bloomberg who were unhappy about the result. It said that higher-ups at Bloomberg were worried that the story would hurt the company’s sales of financial terminals—the mainstay of its business—inside China, since the main purchasers would be directly or indirectly subject to government control. Like the NYT and some other Western news organizations, Bloomberg was already “on probation” with the Chinese government, because of some very brave and probing official-corruption stories the previous year—including the one on “Red Nobility” that is the source of the graphic above. As a reminder, here are the main story steps since then:
- The FT did a similar report (here, but paywalled), also clearly based on inside-Bloomberg sources and also saying that Matthew Winkler, Bloomberg’s editor-in-chief, had ordered the story killed, for fear of ramifications inside China.
- Bloomberg denied the reports, in categorical but not specific terms. I.e., variations on: Of course we didn’t bow to political pressure, and the story was just not ready yet.
- Amanda Bennett, a long-time editor and reporter with experience in China (she was co-author of Sidney Rittenberg’s book, The Man Who Stayed Behind), promptly resigned as head of Bloomberg’s investigative unit. She did not explicitly address the controversy but made her feelings clear in her resignation statement. It said: “I am totally proud of the work of the Bloomberg Projects and Investigations team over the past five years…. I’m also most proud of the groundbreaking June 2012 story that the team led, that for the first time exposed the wealth of the relatives of China’s top leaders. I’m proud of the courage it took from top to bottom in Bloomberg to make that happen.”
- Michael Forsythe, the Bloomberg reporter who had worked for decades in China and was involved in these corruption-investigation stories, was quickly suspended by Bloomberg. He later joined the NYT staff.
- Bloomberg continued to deny the allegation of knuckling-under but refused to address any specifics. The story that reportedly was underway has not yet appeared. Soon after the flap broke, I received several calls from people inside Bloomberg, all of them insisting that I say nothing that could identify them, or even about the fact that we had talked. One was from a person who warned me that it would be a big mistake to put too much faith in what this person said were competitively motivated attacks by Bloomberg rivals. The other calls were from Bloomberg reporters or staffers, who said that the NYT and FT reports were essentially accurate. I wrote to the man who reportedly gave the spiking order, editor-in-chief Matthew Winkler, and did not hear back.
- Then, last week, the chairman of Bloomberg L.P., Peter Grauer, seemed to confirm the original accounts by saying that it had been a mistake for Bloomberg ever to deviate from its business-oriented coverage.
All this is prelude to the latest news, which is Ben Richardson’s resignation as a Bloomberg editor. Jim Romenesko had the story yesterday, followed by this from Edward Wong of the NYT, who also had the story about Michael Forsythe back in November. After I saw the item on Romenesko, I wrote to Richardson asking if he would say more about the situation. This may be the time also to share something I received from a person inside Bloomberg at the time the news first broke, which is a useful complement to what Ben Richardson says. This Bloomberg employee said:
There is a bigger contradiction for the company than most people perceive. Outsiders think the worst explanation for this controversy is that it’s concerned about selling terminals within China. It’s bigger than that. Really it’s about continuing sales all around the world, if Bloomberg can’t promise having the fastest inside info from China.
Everyone knows that it’s a company that exists on the terminals. But now that they have saturated the US market, all of the growth will come from areas with these deep contradictions between the company’s financial-business interests and its journalistic aspirations.
PREVIOUSLY : CHINESE GIVEN TUNGSTEN-FILLED FAKE GOLD BARS (also GERMANY)
Gold Finger – Operation Grand Slam With A Tungsten Twist
I’ve already reported on irregular physical gold settlements which occurred in London, England back in the first week of October, 2009. Specifically, these settlements involved the intermediation of at least one Central Bank [The Bank of England] to resolve allocated settlements on behalf of J.P. Morgan and Deutsche Bank – who DID NOT have the gold bullion that they had sold short and were contracted to deliver. At the same time I reported on two other unusual occurrences:
1] – irregularities in the publication of the gold ETF – GLD’s bar list from Sept. 25 – Oct.14 where the length of the bar list went from 1,381 pages to under 200 pages and then back up to 800 or so pages.
2] – reports of 400 oz. “good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.
If anyone were contemplating creating “fake” gold bars, tungsten [at roughly $10 per pound] would be the metal of choice since it has the exact same density as gold making a fake bar salted with tungsten indistinguishable from a solid gold bar by simply weighing it. Unfortunately, there are now more sordid details to report. When the news of tungsten “salted” gold bars in Hong Kong first surfaced, many people who I am acquainted with automatically assumed that these bars were manufactured in China – because China is generally viewed as “the knock-off capital of the world”. Here’s what I now understand really happened: The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes]. This was apparently all highly orchestrated by an extremely well financed criminal operation. Within mere hours of this scam being identified – Chinese officials had many of the perpetrators in custody. 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. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.
The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly “sold” into the international market. Apparently, the global market is literally “stuffed full of 400 oz salted bars”. Makes one wonder if the Indians were smart enough to assay their 200 tonne haul from the IMF?
A Slow Motion Train Wreck, Years in the Making
An obscure news item originally published in the N.Y. Post [written by Jennifer Anderson] in late Jan. 04 has always ‘stuck in my craw’:
DA investigating NYMEX executive – Manhattan, New York, district attorney’s office, Stuart Smith – Melting Pot – Brief Article – Feb. 2, 2004
A top executive at the New York Mercantile Exchange is being investigated by the Manhattan district attorney. Sources close to the exchange said that Stuart Smith, senior vice president of operations at the exchange, was served with a search warrant by the district attorney’s office last week. Details of the investigation have not been disclosed, but a NYMEX spokeswoman said it was unrelated to any of the exchange’s markets. She declined to comment further other than to say that charges had not been brought. A spokeswoman for the Manhattan district attorney’s office also declined comment. The offices of the Senior Vice President of Operations – NYMEX – is exactly where you would go to find the records [serial number and smelter of origin] for EVERY GOLD BAR ever PHYSICALLY settled on the exchange. They are required to keep these records. These precise records would show the lineage of all the physical gold settled on the exchange and hence “prove” that the amount of gold in question could not have possibly come from the U.S. mining operations – because the amounts in question coming from U.S. smelters would undoubtedly be vastly bigger than domestic mine production. We never have found out what happened to poor ole Stuart Smith – after his offices were “raided” – he took administrative leave from the NYMEX and he has never been heard from since. Amazingly [or perhaps not], there never was any follow up on in the media on the original story as well as ZERO developments ever stemming from D.A. Morgenthau’s office who executed the search warrant. Are we to believe that NYMEX offices were raided, the Sr. V.P. of operations then takes leave – all for nothing? These revelations should provide a “new filter” through which Rothschild exiting the gold market back in 2004 begins to make a little more sense: “LONDON, April 14, 2004 (Reuters) – NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild [ROT.UL], will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.”
Interestingly, GATA’s Bill Murphy speculated about this back in 2004;
– “Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but suspect:”
– *SOMETHING IS AMISS. THEY KNOW A BIG GOLD SCANDAL IS COMING AND THEY WANT NO PART OF IT. …”
– “ROTHSCHILD WANTS OUT BEFORE THE PROVERBIAL “S” HITS THE FAN.” BILL MURPHY, LEMETROPOLE, 4-18-2004
Coincidentally [or perhaps, not?], GLD Began Trading 11/12/2004
In light of what has occurred – regarding the Gold ETF, GLD – after reviewing their prospectus yet again, it becomes pretty clear that GLD was established to purposefully deflect investment dollars away from legitimate gold pursuits and to create a stealth, cesspool / catch-all, slush-fund and a likely destination for many of these “salted tungsten bars” where they would never see the light of day – hidden behind the following legalese “shield” from the law:
Excerpt from the GLD prospectus on page 11:
Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.
The Fed Has Already Been Caught Lying
Liberty Coin’s Patrick Heller recently wrote, Earlier this year, the Gold Anti-Trust Action Committee (GATA), filed a second Freedom of Information Act (FOIA) request with the Federal Reserve System for documents from 1990 to date having to do with gold swaps, gold swapped, or proposed gold swaps. On Aug. 5, The Federal Reserve responded to this FOIA request by adding two more documents to those disclosed to GATA in April 2008 from the earlier FOIA request. These documents totaled 173 pages, many parts of which were redacted (covered up to omit sections of text). The Fed’s response also noted that there were 137 pages of documents not disclosed that were alleged to be exempt from disclosure.
GATA appealed this determination on Aug. 20. The appeal asked for more information to substantiate the legitimacy of the claimed exemptions from disclosure and an explanation on why some documents, such as one posted on the Federal Reserve Web site that discusses gold swaps, were not included in the Aug. 5 document release. In a Sept. 17, 2009, letter on Federal Reserve System letterhead, Federal Reserve governor Kevin M. Warsh completely denied GATA’s appeal. The entire text of this letter can be examined at http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf. The first paragraph on the third page is the most revealing. Warsh wrote, “In connection with your appeal, I have confirmed that the information withheld under exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”
This paragraph will likely be one of the most important news stories of the year. Though not stated in plain English, this paragraph is an admission that the Fed has in the past and may now be engaged in trading gold swaps. Warsh’s letter contradicts previous Fed statements to GATA denying that it ever engaged in gold swaps during the time period between Jan. 1, 1990 and the present. [Perhaps most importantly], this was GATA’s second FOIA request to the Federal Reserve on the issue of gold swaps. The 173 pages of documents received for the 2009 FOIA request all pre-dated the 2007 FOIA request, which means they should have been released in the response to the earlier FOIA request. This establishes a likelihood that the Federal Reserve has failed to adequately search or disclose relevant documents. Further, the Fed response admitted that it had copies of relevant records that originally appeared on the Treasury Department Web site, but failed to include them in its response.
Now that Federal Reserve governor Warsh has admitted that the Fed has lied in the past about the Fed’s involvement with gold. It should now be very clear to everyone why the Fed is lying and the true nature of what they are hiding / withholding. An important footnote to consider is the inter-twined-ness of the U.S. Federal Reserve and the U.S. Treasury [can anyone really tell them apart?] as well as this duopoly’s two principal agents – J.P. Morgan-Chase and Goldman Sachs. When one truly grasps the nature of these highly conflicted relationships it gives a fuller meaning to words recently uttered by Goldman head, Lloyd Blankfein, who claimed, “I’m doing god’s work”. Does this really mean that Mr. Blankfein believes that the Federal Reserve is god? You can judge for yourself. While the Fed prints money like no one else could – except god almighty himself [or Gideon Gono, perhaps?] – I really doubt that was the intent back in 1864, when the U.S. adopted “In God We Trust” as their official motto.
The original story was not about passing fake gold jewelry or fake gold bars to fool uniformed, public buyers (which is always a possibility). Moreover, the original report was about 400-ounce bars and not 500-gram bars. Last, the original tale alleged that the US produced and stored some 640,000 bars of this stuff at Fort Knox and transferring another 800,000 bars or so to central banks and others around the world. This original story was really far out; though I admit that Clinton was a gross liar; and he and the US government were both fully capable of such dishonesty. I wouldn’t put anything past either of them.
Back on Oct 1, 2008, goldseek.com published the Goldsmiths XVII with a story citing the work of Edward Durrell and Peter Beter that questioned the presence of the alleged US gold supply at Fort Knox back in the 1970s. After this story came out on Oct 1, 2008, there was a surge of other articles (some from the same source of the later tungsten story) that the alleged gold in Fort Knox was not there, in fact. Frankly, I took it that the tungsten gold story was simply one more along the same line trying to prove that Fort Knox didn’t have the gold it was supposed to have (as I had broached earlier on Oct 1, 2008). The original story about the US using and storing gold plated tungsten bars at Fort Knox and passing them off to central banks around the world has no merit whatsoever. Alternatively, could dishonest people try to pass gold-plated tungsten bars (or other mineral fillers) as being real to unsuspecting lay buyers? The answer here is whether a cat has got a tail or not. Yes, dishonest crooks could try to pass gold-plated tungsten, steal, brass, iron and you name it bars to unsuspecting buyers. I allowed this in my article on the subject at www.analysis-news.com. I also told the movie story of the Maltese Falcon and how a lead copy of it was covered in black paint to try to make people think that under the paint one would find the gold falcon. Well, like Sidney Greenstreet immediately did (when he scraped off some of the paint to find out what was under the paint); I too would make some effort to verify any gold bar or gold jewelry I buy. It might not be so bad to be swindled with a small fake gold ring, but I would hate to be swindled with a large, 400-once, fake bar worth $400,000 on the market.
The question in this original tungsten story is not whether there has been or could be fake, gold-plated tungsten bars floating around in the world, in the hands of private persons; but correctly the story was actually about the US government producing some 1.3 to 1.5 million of these to store some 640,000 of them at Fort Knox and to distribute the remaining 800,000 or so of them to central banks around the world. This original story never had and still has no worthwhile merit. My take is that it was wrong and being passed out for reasons other than to inform and educate the public. It boggles my mind how people can now latch onto a story that a refinery found a 500-gram, fake, gold-plated, tungsten bar and claim that that find in some way proves the validity of the original story about the US government and its alleged 640,000, 400-ounce, fake bars in Fort Knox and the remaining 800,000 or so 400-ounce bars being transferred to central banks around the world. It blows my mind on how in the world can people connect the two stories and say that they link or are the same.
The Bottom Line
Despite the bad information and confusion associated with the tungsten story, there are at least four other fall-outs over it which deserve mention—one positive and three negative. The good positive fact is that the huge publicity over this apparently false, original story provoked much follow-up in the gold media to cause buyers to at least acknowledge that they could be swindled by so-called gold sellers. This is a good thing, despite the conflict/inconsistency between the original story and the follow-up stories. Yes, gold fans like me need to take some positive steps to be sure that when I buy gold that I am buying the correct quantity and quality of gold. But there are also at least three really bad negative features. The first big negative feature crops up from the advice of the Coin Update News with words to buy and hold gold coins, etc physically in one’s possession and checking them out when purchased. This sounds good; but it contrasts sharply by all would be purchasers of ETF gold and even investors in the Central Fund of Canada. Per the generated fear, the ETF and Central Fund of Canada could be stuck with large quantities of fake, gold-plated, tungsten bars. While there are negative features for both of these entities, I would suggest that they shouldn’t necessarily be tainted with the tungsten story.
In a second negative feature, this Coin position also contrasts shapely with what I have been saying for my own account for years. My take is to get my gold purchases out of this country completely. If I can buy it and inspect it here and then get it out—fine. But in many cases, I may find it difficult if not impossible to buy it here and get it out. Often I will find it more practical to buy it overseas and leave it there. But obviously, wherever I might buy some gold, I would insist that I obtain a valid authentication or insurance agreement protecting against it being a fraud. This is common sense and I believed in it long before the tungsten story surfaced. For my part, I will gladly take some risks in buying gold from a good dependable source overseas in comparison with sitting on my duffs and facing the prospect of the state confiscating my gold in the US. And I don’t believe for a minute that buying gold and storing it in nearby Canada is a good proposition for me. I must hasten to say that when the Cabal strikes with confiscation, the arms of Big Brother will reach out to seize it in Canada, Britain, Australia and New Zealand as well as in the US. There is still one more bad feature about the original gold-plated tungsten tale. I must suggest that it supports and plays directly into the hands of the Cabal manipulating the price of gold worldwide. There is no question about it whatsoever; many persons thinking about buying gold will now back off for fear that their purchases might be fakes.
HOW to KNOW if your GOLD BARS are FAKE
Charlatan Exposed: Gold and Tungsten / February 13, 2010
We know this is coming really late after the debate has mostly died down, but we wanted to memorialize Metal Augmentor’s thinking on the subject of tungsten-filled gold bars. We also know we said that we wouldn’t officially address this issue because it is too silly, but something tells us that the tungsten bugaboo will rear its ugly head again so it’s probably worthwhile to go ahead and thoroughly debunk it.
Not surprisingly, our take on the topic is that it is almost entirely pure BS, and below you will find how we arrived at that conclusion.
First, here is how this rumor burst on the gold scene, with Rob Kirby proclaiming: “…reports of 400 oz. “good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.
Why Tungsten? If anyone were contemplating creating “fake” gold bars, tungsten [at roughly $10 per pound] would be the metal of choice since it has the exact same density as gold making a fake bar salted with tungsten indistinguishable from a solid gold bar by simply weighing it. Unfortunately, there are now more sordid details to report. When the news of tungsten “salted” gold bars in Hong Kong first surfaced, many people who I am acquainted with automatically assumed that these bars were manufactured in China – because China is generally viewed as “the knock-off capital of the world”. Here’s what I now understand really happened: The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes].
This was apparently all highly orchestrated by an extremely well financed criminal operation. Within mere hours of this scam being identified – Chinese officials had many of the perpetrators in custody. 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. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.
Now let’s examine reality, shall we? First, let’s note the excellent if incomplete work that has already been done on this subject. For example, Doug Hornig, Senior Editor of Casey’s Gold & Resource Report, has concluded: “That tungsten was cited as the culprit is no surprise, because it’s the metal of choice if you want to imitate a big chunk of gold. Put some gold plating on tungsten and it will fool all the cheap, non-invasive tests, such as specific gravity, surface conductivity, scratch, and touch stone. For a conclusive result, you have to drill into the bar, take a core sample, and submit it to more sophisticated verification techniques – fire assay, optical emissions spectroscopy, or X-ray fluorescence – and that involves a lot of time, trouble, and expense.
The market, of course, long ago realized it wold be a hassle to fully assay every large gold bar every time it changed hands. That would create bottlenecks all over the place. Thus, to facilitate liquidity and protect large traders, the London Bullion Market Association (LBMA) came up with the good-delivery bar system, otherwise known as the “good delivery circuit.” The system begins with a group of accredited refiners, all of whom have been certified by equally accedited assayers. The refiners manufacture the 400-oz. bars, applying their stamps and serial number before sending them out. Requirements for making and remaining on the LBMA’s good-delivery list are stringent, and those on it zealously guard their status. It’s of great importance to them because most of the vaults to which they ship product – the next step in the circuit – won’t accept anything but good-delivery bars.
This thing isn’t foolproof, nothing is, but it ensures a pretty decent paper trail, a formal, recorded history of who held the bars, when, and in which approved facility – all the way from refiner to end user, whether that be an individual, a central bank, or an ETF. No buyer wants something from a non-accredited seller, and no one else in the chain wants to get fingered for supplying phony gold. That would get them kicked out of a very lucrative loop, and sued into the bargain. What about gold bars that come from a non-accredited source or are otherwise circulating outside the good-delivery circuit? That could mean you. You’re not part of the circuit to begin with. And yes, if you bought something that wasn’t good-delivery certified, the possibility that you have acquired some fake gold exists.
If you’re concerned about the source, you might want to have your gold assayed in order to alleviate your worries. This will become an issue when you choose to sell. In that instance, a dealer will almost certainly require an assay as part of the bargain, even if you have the chain of custody paperwork and it all checks out. And you can’t blame him. There’s no way he can be certain of what you did to it while it was in your possession. The only exception might be if you have a long-standing, mutually trusting relationship with him, originally bought it from him, and are selling it back to him. But even that’s no guarantee. What you most emphatically want to avoid is the worst-case scenario: arranging a sale, then having your gold flunk an assay, laying you open to charges of fraud.
If you sell to another private owner, rather than a dealer, he will surely ask for an assay, and you shouldn’t be offended if he does. Nor should you hesitate for an instant to demand one if you buy from a private party. Although this is not a recommended way to acquire gold bars, it may be possible that something comes along that you can’t refuse. Just be very careful. If someone has a gold bar for sale but is in too much of a hurry to wait for an assay, walk away.
Your takeaway from all the hoo-hah about tungsten bars should be that whenever a sensational rumor like this hits the Internet, and it doesn’t immediately graduate to Bloomberg, you always have to ask why. Financial reporters read blogs, too. You can be sure they’ve seen the rumor and asked the obvious questions: What’s the source? Who are the people who reported the appearance of the tungsten bars named? For that matter, why aren’t they raising holy hell if they’ve been ripped off? Where are the lawsuits? No serious journalist who can’t turn up the answers is going to give the story credence. If it were true, the appearance of several thousand tungsten bars, for each of which someone has been suckered into paying a hundred grand or more, this would be big, big news. It wouldn’t stay confined to a few websites for long. This isn’t to say that someone good isn’t digging deeply into this story right now. Nor that they won’t be able to prove it out. It is to say that, more than likely, the rumor is false.
In summary, there’s no reason to believe that there is a real issue with counterfeit bullion coins at the moment. That doesn’t mean they don’t exist, nor does it mean that evolving technology might not make them more profitable in the future than they are now. If you’re at all worried, simply deal with someone you trust. Establish a relationship with a gold dealer who has built a strong reputation, preferably over a matter of decades. Buy from them even if you stumble across some mail order supplier who is charging less of a premium. Another excellent piece of analysis comes from Adrian Ash of BullionVault:
Non-investment use accounts for well over three-quarters of demand each year, and a big chunk of that is met in the form of Good Delivery bars. Yet there are no reports from jewelers, chip fabricators, dental suppliers or any other end users of the bullshit currently trying to pass as “insider news” on the web. Bottom line? Good Delivery does what it says on the tin. The wholesale market is liquid and cost-efficient precisely because it’s warranted by the chain of integrity. The question of full re-assay is redundant. And on top of that, we guarantee every gram of BullionVault gold.
So, here is what Metal Augmentor would like to add to this discussion. First, we would note there are relatively cheap devices for non-destructive verification of gold coin purity and authenticity, for example the Fisch detector, which is a simple (if precisely engineered) device to measure the dimension and weight of popular bullion coins. Even this is probably overkill because the odds of you buying gold-clad tungsten coins is extremely low given that the only practical method of manufacture involves an easy-to-detect thin electroplate of gold on a pure tungsten core (see below). The electroplate of gold would obviously need to be a precise alloy such as gold-silver-copper for American Ealges, gold-silver for Kruggerands, etc. in order to produce an exact color and hue match, but this would work only with bullion coins that are (supposed to be) pure gold since for gold-alloy bullion coins a pure tungsten core would actually mean the counterfeit coin is too heavy. In other words, the counterfeiter’s job is much more difficult then it first appears.
Combined with the fact that most modern bullion coins issued by national mints such as the Royal Canadian Mint or U.S Mint are expertly struck with very expensive and sometimes one-of-a-kind minting equipment — if you look using a jeweler’s loop at the “field” or unadorned surface of mint-struck bullion coins compared to privately-struck rounds, you will clearly see the difference — that would be incapable of properly striking an extremely hard metal like tungsten (or depleted uranium), counterfeiting modern bullion coins becomes a very expensive and perhaps nearly impossible proposition for the enterprising crook-to-be.
Second, for larger items of bullion including kilo and up gold bars, there are “secret” proprietary tests out there that are non-destructive and do not require drilling the bar for assay. These methods generally involve measuring specific gravity by weighing the gold bar in water combined with a simple thermal conductivity test (gold absorbs and releases heat at a different rate compared to tungsten) or a very thin needle probe that is inserted into the bar in several places to check for the much harder tungsten, depleted uranium or gold-tungsten-uranium-iridium alloy core. At least one “do it yourself” gold bug has figured out how to do this:
Your fake gold is cute. So is my hydrolic press with a properly tempered steal needle with which I intend to put a hole in all of the gold bars that I receive. The holes will not devalue the gold. The non holes in the titanium will certainly degrade it’s value. Isn’t it amazing what you can buy at the local tool company. The gold bars can be punched many times before they need recasting.
Third, here is probably where the whole “tungsten gold bar” rumor/scam probably originated from. These are “soft gold tungsten alloy” bars sold as thermal or electrical conductors for advanced electronic or military applications. You will also note that the alloy is almost entirely gold (83.3% or 20 karat), which is why it is relatively “soft” (compared to pure tungsten, which has a Mohs hardness of 7.5, besting any other metal except chromium).Others have claimed it might have been from here instead. I assure you, however, that the products being churned out by China Tungsten Online (Xiamen) Manu. & Sales Corp. are rather easily distinguishable from the real thing. Simply put, tungsten electroplated with gold is never going to look or feel just right if used to “simulate” bullion. The electroplate is quite thin so there will be no characteristic bumps, dents or scratches on the surface as there would be with .995+ fine gold bullion bars that have seen even the barest minimum of handling, and the classic “bite test” will fail spectacularly with the tester very likely suffering a broken tooth on account of tungsten’s hardness. If the gold-plated tungsten is meant to “simulate” gold jewelry, it might look visually convincing (18K gold is relatively hard and 14K is even harder) but a very simple “file and acid” test as employed by every pawn shop and jewelry store on the planet is going to detect the item as a fake. If you don’t believe me, we urge you to contact China Tungsten directly:
Besides, if you don’t know how to identify true gold or gold-plated tungsten alloy products, you can consult us directly by email: firstname.lastname@example.org or call us by 86 592 5129696.
In conclusion, there is very little risk that you might end up with tungsten-filled coins or gold bars, but if you are buying in large quantity then it will be worthwhile to employ some of the non-destructive tests noted herein.