James Turk – The Entire German Gold Hoard Is Gone
Today James Turk shocked King World News when he stated, “The entire German gold hoard was gone because it had been leased into the marketplace. Meaning, the vaults holding German gold were emptied by 2001 because of the Bundesbank leasing activities.”
Turk added, “Half of the gold they (the Germans) leased themselves. The other half of Germany’s gold hoard was eventually leased into the market as well through complicated swaps with the US. But the reality is that as of 2001, all of that German gold was gone. Meaning all German gold worldwide, which was supposed to be stored in vaults, the vaults were emptied of German gold and the gold was leased into the market.”
Turk went on to say, “It’s uncertain if any of that leased gold has ever been returned to those vaults. Meaning, the vaults which are supposed to be storing the German gold hoard may still be empty.”
Incredibly, 11 years ago James Turk had diagnosed the problems of the missing German gold hoard. Here is the 2001 piece titled, “Behind Closed Doors” in which he exposed the German gold was in fact missing:
James Turk 2001 – This past December in "The Smoking Gun" I provided substantive proof that the Exchange Stabilization Fund was intervening in the gold market. From publicly available reports prepared by the Federal Reserve, I established that the weight of gold held as a component of the US Reserve Assets has been changing, and that these changes – some of which are of significant size – result from activity by the ESF. These Federal Reserve reports conclusively demonstrate that the ESF has been intervening in the gold market since at least 1996.
Though these Federal Reserve reports make clear that the ESF is involved in the gold market up to its ‘earmarks’, a lot of people remain skeptical. I don’t know why that is. It is worth noting that many of the most obstinate skeptics who deny US government involvement in the gold market live overseas and have little, if any, experience or understanding of the way the US government really works. But even Americans find it difficult to accept that the US government intervenes in the gold market. Ironically though, they readily admit that the government intervenes in the debt markets, foreign currency markets, and according to a growing number of people, even in the US stock market. It is therefore most baffling that they do not concede the ESF’s involvement in the gold market.
Maybe people are skeptical because they haven’t bothered to take the time to read the Federal Reserve reports for themselves. Maybe it’s because it’s easier to accept the word of some government bureaucrat who denies ESF involvement in the gold market than it is to seek out and look for the truth. Maybe they don’t want to believe that the US government is lying to them when Treasury official after Treasury official denies any involvement by the ESF in the gold market. I don’t know. Or maybe it’s because they think that government officials work for the American people – and not for vested interests – in their deliberative sessions behind closed doors. Wouldn’t it be refreshing if we could peek-in behind those closed doors to see what really is being said?
The reality is that very little emerges from behind closed doors, and the minutes and transcripts of closed-door sessions that do make it into the public domain contain redactions that blank out the ‘good parts’ – the revealing statements. But what if someone forgot to redact one of those ‘good parts’? Too fantastic to be true? Well, sit down, take a deep breath and carefully read what follows.
A few weeks ago Reg Howe contacted me and asked my view on something he had discovered. He wanted a second opinion on this discovery, just like I contacted him for a second opinion after I came across the Federal Reserve reports showing the ESF’s gold related activity.
When I read what Reg showed me, I was stunned. But at the same time, it was clear to me what I was reading and what had happened. A transcript of the Federal Reserve Open Market Committee has been released for which somebody forgot to get his or her red pen out. Someone forgot to redact some very revealing words about the ESF and its activity with gold. Here’s what was said. [See the transcript from the January 31st 1995 meeting.]
MR. MATTINGLY. It’s pretty clear that these ESF operations are authorized. I don’t think there is a legal problem in terms of the authority. The [ESF] statute is very broadly worded in terms of words like "credit" – it has covered things like the gold swaps – and it confers broad authority. [Emphasis added]
Please read the above statement again, and maybe even a third and fourth time. This statement, which I can only assume was inadvertently not redacted by the FOMC Secretariat, confirms what we already know, but the US government has all along refused to admit – that the ESF is involved in the gold market. In fact, the authority of the ESF is so broad that "it has covered things like the gold swaps". In other words, the authority of the ESF is so broad it has even been used to authorize "gold swaps".
Before further exploring the above quote, some background information is necessary.
The proceedings of each FOMC meeting are taped. These tapes are then transcribed, and the Federal Reserve releases these transcripts after five years. Thus, the transcripts from the 1995 meetings were released earlier this year, and having now read through them, I can honestly say that they contain a treasure trove of material, even though there are many redactions. The important point is that these transcripts are not only informative, but they are an accurate record of what is going on behind closed doors. Here is what the Federal Reserve itself says about the FOMC transcripts:
"Beginning with the 1994 meetings, the FOMC Secretariat produced the transcripts shortly after each meeting from an audio recording of the proceedings, lightly editing the speakers’ original words, where necessary, to facilitate the reader’s understanding. Meeting participants were then given an opportunity within the next several weeks to review the transcript for accuracy.
For the meetings preceding 1994, the transcripts were produced from the original, raw transcripts in the FOMC Secretariat’s files. These records have also been lightly edited by the Secretariat to facilitate the reader’s understanding. In addition, where one or more words were missed or garbled in the transcription, the notation "unintelligible" has been inserted. In some instances, words have been added in brackets to complete a speaker’s apparent thought or to correct an obvious transcription error or misstatement.
Nonetheless, for the pre-1994 transcripts, errors undoubtedly remain. The raw transcripts were not fully edited for accuracy at the time they were prepared because they were intended only as an aid to the Secretariat in preparing meeting minutes. The edited pre-1994 transcripts have not been reviewed by present or past members of the Committee."
In other words, the 1995 transcripts are accurate. There are no disclaimers for them, like those made for the pre-1994 transcripts. Therefore, the above quote by Mr. Mattingly about the ESF and gold is accurate. And who is Mr. Mattingly? Virgil Mattingly is General Counsel of the Federal Reserve, its chief legal advisor.
That Mattingly’s remark passed without comment by anyone in the FOMC meeting implies that everyone knew exactly what he was referring to. In other words, to explain ESF authority his example was purposefully chosen. It was one to which the Federal Reserve Governors could all relate because it was something they saw happen during their watch. In my imagination I can see them sitting around the big FOMC conference table nodding their heads in agreement when Mattingly used this example of the gold swaps to explain how broad the ESF’s authority actually is.
Recognize too that though he is talking in the past tense, it doesn’t necessarily mean the swaps had already happened. They may still be happening because he may be referring to the authority that approved the gold swaps and presumably the swap lines, but not necessarily the date of the actual swaps themselves.
So that this quote of Mattingly is not taken out of context, let me provide some background information. Also, I invite you to read the full 145-page transcript of this January 31st, 1995 FOMC meeting if you would like to confirm both the accuracy of the above quote and the background information I am about to provide. By reading the entire transcript you will also see how frequently material was redacted.
Mattingly’s comments were made in a discussion by the FOMC on the rapidly deteriorating financial situation in Mexico. Crisis conditions had been prevailing since the Peso began tumbling the month before, i.e., December 1994. You will recall that the Clinton administration back then had proposed that Congress provide a $40 billion package of government guarantees to bailout those who had loaned money to Mexico, and that Congress had rejected this proposal. The administration was therefore scrambling to come up with a way to get the money they thought necessary to ‘fix’ the problem. Unable to tap the Treasury directly because of the rebuff by Congress, the administration turned to the ESF.
Because the Federal Reserve was to be part of the proposed bailout, the FOMC was reviewing what role the Federal Reserve would play in conjunction with the ESF. A proposal was on the table for the FOMC’s consideration. A Mr. Fix-it who seems to be the go-between for the Treasury and the Fed was presenting the proposal. His name is Ted Truman. And he was responding to various FOMC members who were questioning whether the ESF had the legal authority to do what was being proposed. Hence, the Federal Reserve’s legal counsel Virgil Mattingly responded, using the "gold swaps’ as an example of just how broad the ESF’s authority actually is.
To give you a flavor of the full discussion underway in the FOMC meeting, here’s a sample of the transcript.
MR. MELZER. What ability do the Treasury or the ESF have to take us out of an obligation [i.e., repay the Federal Reserve] if funds are not appropriated by Congress? Do they have the ability just to say, we committed to this and we are going to pay the Fed off?
MR. TRUMAN. Yes, they could.
MR. MELZER. But if they can do that, why can’t they just advance it themselves?
MR. TRUMAN. They could, but I think they feel that it would be useful to their objectives to have a lot of people – [apparently the rest of his comments are redacted]
The discussion then continues on this point, but touches upon the relationship between the ESF and the Treasury. These comments also establish that the ESF does not use "appropriated funds", meaning that the ESF is answerable only to the Secretary of the Treasury and the President. All actions of the ESF are beyond Congressional authority.
CHAIRMAN GREENSPAN. Could I just formally respond to Governor Lindsey? There is a question here of whether or not the amount the United States Treasury gives us has to be appropriated funds, which I think is really where our examination of the issue has to be. In examining the take-out, we ought to make certain that we talk to them with respect to the question of what happens if they do not get the appropriated funds.
MR. TRUMAN. Mr. Chairman, the Exchange Stabilization Fund does not have appropriated funds.
CHAIRMAN GREENSPAN. Are we going to be getting a take-out from the Exchange Stabilization Fund?
MR. TRUMAN. I think that is what is in the program.
CHAIRMAN GREENSPAN. Okay.
SPEAKER(?). That is not the same as the Treasury.
MR. TRUMAN. Even if we didn’t, the precedent in the 196Os – I think there was a question then about whether the Treasury could engage in foreign exchange operations outside of the ESF – was the use of Roosa bonds in the 1960s. The Treasury floated Roosa bonds to obtain foreign currencies and used some of those currencies to take us out. That did not involve appropriated funds. That was treated as a debt-management operation.
The above passage confirms what we already know, but many people refuse to admit. The ESF is a slush fund beyond Congressional oversight. It can be used to ‘get around’ most anything (i.e., it can skirt normal governmental procedures). No wonder so many people want to do away with the ESF. There is no room for it in our democratic process. It is not subject to the normal checks-and-balances so carefully crafted by the Founding Fathers that have proven over time to be so essential for control within the federal government. The ESF is the antithesis of the American foundation of representative government because it subjects a free people to an unconstitutional governmental force. Still not convinced? Here are some more excerpts:
MR. LINDSEY. My second question has to do with our credibility. I don’t know what questions to ask, and I hope you will help me out in that regard. I have this document in front of me, which includes a page entitled "What is the Exchange Stabilization Fund?" The document came from Treasury International Affairs. I gather it was written by them. I have written enough of these to know what you do, and that is to tell your point of view. Paragraph 3, not to mention the dots indicating an omission in paragraph 2, got me a little nervous. Paragraph 3 says these holdings in the ESF are used to enter into swap arrangements with foreign governments, to finance exchange market intervention, to provide short-term bridge finance, etc., and all these things are great. So, basically paragraph 3 is establishing that this is not unprecedented. My question would be: Do we do all these nice things if it’s not in support of the dollar? Is this unprecedented with regard to the fact that we are supporting another currency?
MR. TRUMAN. The language before the dots is–
MR. LINDSEY. I am talking about the third paragraph. I will go to the second paragraph in a second. I’m sorry. I am running a little out of order. It is saying the ESF has done all these things.
MR. TRUMAN. The legislation governing the objectives of the ESF was changed, I think for the most part in the mid- to late-1970s. The changes included the language that the government of the United States and the International Monetary Fund have the obligation to promote orderly exchange rate arrangements leading to a stable system of exchange rates. That was interpreted to include making loans to Bolivia in helping it maintain a system of stable exchange rates.
MR. LINDSEY. So that has happened before?
MR. TRUMAN. Yes. They have made loans to or financial arrangements with at least 31 countries around the world over the last 50 years.
MR. LINDSEY. I think we all will be asked questions about this. Can you read this paper and tell me that there is not something missing that I should know about, meaning that this is not only the truth but the whole truth?
MR. TRUMAN. I can only say that Treasury lawyers have looked into the question of whether these operations are legal under this broad authorization of what they can do and what the purpose is–
MR. MATTINGLY. If I can help out?
MR. LINDSEY. Yes.
MR. MATTINGLY. It’s pretty clear that these ESF operations are authorized. I don’t think there is a legal problem in terms of the authority. The statute is very broadly worded in terms of words like "credit – it has covered things like the gold swaps – and it confers broad authority. Counsel at the White House called the Treasury’s General Counsel today and asked "Are you sure?" And the Treasury’s General Counsel said "I am sure." Everyone is satisfied that a legal issue is not involved, if that helps. [Emphasis added]
MR. LINDSEY. Is there anything missing on this page?
MR. MATTINGLY. No, there is not. If you look at the last paragraph, for example, that is part of the statute.
MR. LINDSEY. About notifying Congress in writing in advance?
MR. MATTINGLY. The statute says that with the permission of the President they can make loans.
There you have it. The ESF doesn’t have to notify Congress about anything in advance. It is under the sole authority of the Secretary of the Treasury and the President, and they can do "gold swaps" without any Congressional approval, which brings up an important point I made in "The Smoking Gun".
I had noted a curious pattern in the correspondence emanating from the Treasury Department. The Secretary of the Treasury never answered any questioning letters concerning the ESF, even if they were written directly to him. Rather, one of his assistants invariably responded. I therefore wondered whether the Treasury Department chain of command was being relied upon just like President Nixon had tried to rely upon the White House chain of command in an attempt to avoid being sucked into the vortex of a growing Watergate scandal. I even asked in "The Smoking Gun": "Did Secretary Summer’s knowledge of the goings-on in the secretive ESF explain why his underlings, and not him, were writing the letters denying US government involvement within the Gold market?" The above excerpts from the FOMC transcript clearly establish that my question needs answering.
It is becoming increasingly clear as more and more evidence emerges that the Secretary of the Treasury does not answer questions concerning the ESF because he, but not his underlings, know to what extent the ESF is engaged in gold related activity. His underlings can say that the ESF is not involved in the gold market because as far as they know, what they say is true. However, we now have sufficient evidence proving that the ESF is indeed involved in the gold market. Therefore, the Secretary of the Treasury does not respond to letters asking questions about the ESF and its activity in the gold market. He can’t answer them truthfully without ‘spilling the beans’. He obviously knows everything about what really is going on within the ESF, in contrast to his underlings. Or at least most underlings because it appears that one of them is in there up to his elbows washing ESF laundry. His name is Ted Truman.
From the FOMC transcripts it is quite apparent that Ted Truman has a special role. Though recorded in the attendee list in the FOMC transcripts under the featureless title of "economist", his role is anything but ordinary. The transcripts reveal that he clearly speaks for the Treasury Department in FOMC meetings, and is very knowledgeable about the ESF. The insight displayed by him in the FOMC minutes makes it clear that he is not just fully informed about the ESF and its operations, but that he probably is also intimately involved in ESF decision making. Consequently, the following excerpt is particularly intriguing.
MR. PARRY. What is the size of the ESF?
MR. TRUMAN. The usable funds in the ESF today, counting the foreign exchange as usable, amount to roughly $25 billion.
MR. PARRY. Can you say how it is broken down?
MR. TRUMAN. About $5 billion is invested in Treasury securities and the balance is roughly equally divided between marks and yen. I think they have slightly more yen than marks. MR. PARRY. Thank you.
MR. BOEHNE. Is any of it obligated in any way beyond what we are talking about with Mexico?
MR. TRUMAN. It is obligated only in the sense that they have one other swap arrangement with the Bundesbank.
Wouldn’t it be interesting to know what this swap arrangement with the Bundesbank entailed? What is the nature of this swap? Is it a Dollar/Deutschemark swap facility? Or is something else being swapped, like gold perhaps?
Gold being swapped with the Bundesbank? It’s an outrageous thought. Or is it? I have already established that the ESF is very much involved with gold. The only thing I haven’t established is with whom the ESF has those gold swaps that Virgil Mattingly was talking about.
Let’s put one and one together here to see if we can come up with an answer. According to Virgil Mattingly, the ESF has authorized gold swaps, presumably in the recent past (circa 1995). According to Ted Truman, the only outstanding swap facility of the ESF (circa 1995) other than the one established for Mexico is their facility with the Bundesbank. Ergo, the ESF has a gold swap facility with the Bundesbank.
It’s an interesting proposition, and one that fits well with another newly discovered fact. Some very interesting sleuthing by Mike Bolser, who has been assisting Reg Howe in his lawsuit against the BIS, has revealed that the Treasury has made a small but very significant accounting change. Mike noticed that the Treasury Department has changed the designation of nearly 1700 tonnes of inventoried gold at the US Mint’s facility in West Point, New York (approximately 21% of the total US Gold Reserve) from "Gold Bullion Reserve" to "Custodial Gold".
The August 2000 Status Report on US Treasury Owned Gold stored at West Point has a designation of "Gold Bullion Reserve". But the September 2000 and subsequent status reports inexplicably designate this same gold that is stored at the US Mint in West Point as "Custodial Gold".
This change was made without explanation, so rather than let the matter remain unexplained, Mike diligently contacted the Treasury asking what seemingly are two uncomplicated questions. Would the Treasury please explain why they made this change, and what does this change in designation mean with respect to the ownership status of the gold at West Point?
They are simple questions, but perhaps they touch too close to a nerve. Not surprisingly, the Treasury so far has not responded to Mike. I have some views on what Mike discovered, and why the Treasury is so quiet about it. I think this change in asset classification is related to the ESF gold swaps. Here’s my thinking.
The change Mike spotted possibly occurred as a result of accountants looking at the financial statements of the US Mint being prepared for its annual report ending fiscal year 2000. Note that the previous director of the Mint (Phillip Diehl) resigned in early 2000, so this was the first annual report signed by the new director (Jay Johnson). If there is one thing that government bureaucrats do well, they take great pains to call things by their right name. To do otherwise would put their job in jeopardy if something under their responsibility came under Congressional scrutiny, and it was subsequently determined that the name assigned to something was incorrect or misleading.
Therefore, this change in the descriptive label for nearly 1,700 tonnes of gold at West Point from "Gold Bullion Reserve" to "Custodial Gold" was purposeful. It happened for a reason. This conclusion is all the more plausible because the Treasury did not change the classification from "Gold Bullion Reserve" to "Custodial Gold" to describe the gold stored in Fort Knox or at the US Mint in Denver. Maybe new US Mint director Johnson saw something he didn’t like. What could that have been?
I’ve already put one-and-one together to establish that the ESF has "gold swaps" with the Bundesbank. It therefore does not require much conjecture to add one supposition to the equation by concluding that the gold in West Point has been swapped with gold owned by the Bundesbank, thereby necessitating its reclassification from "Gold Bullion Reserve" to "Custodial Gold". Here’s what I think has happened.
The Treasury Department wanted to make gold available to some bullion banks. This statement is based on my basic premise that several of the big banks have gold books that are hopelessly imbalanced. By having borrowed short and loaned long, these banks have in their quest for profits imprudently fallen into the alluring but usually fatal banker’s deathtrap – a mismatched loan book. But what’s worse for these banks, it is even more difficult and treacherous to try extricating themselves from this particular deathtrap because they haven’t mismatched their loan book of dollars, which we all know can be created by the Federal Reserve ‘out of thin air’ if dollars are needed to bailout banks from a deathtrap predicament. Instead, these banks have mismatched their gold book. And no one – not even the Federal Reserve – can create gold out of thin air.
So given this reality about the nature of gold, the Treasury had to turn elsewhere to find the gold necessary (1) to keep these banks from defaulting on their bullion obligations arising from their mismatched gold books in an environment where metal had become increasingly difficult to come by and/or (2) to keep the gold price low so that the likelihood of default by the banks would be lessened, even though metal would remain tight because fabrication year after year was exceeding newly mined supply. Rather than accept the bitter pill that certain banks were about to default on their bullion obligations, the Treasury looked for alternatives and found one – they put their hand into the till, until recently known as the Gold Bullion Reserve at West Point. They swapped this gold with the Bundesbank. I’ll explain how they did it, but let’s first consider the practical aspects of this transaction.
In all likelihood, these particular bullion banks needed gold in Europe where their obligations were originally established. There is very little gold lending in New York. It is a practical problem to ship the gold out of West Point without raising the alarm of government auditors. It is costly too. Also, it is likely that some of the gold in West Point is coin-melt from the 1933 gold confiscation. Even if it could be smuggled out of the West Point vault into the market without raising suspicions, the alarm bells would go off at the refiner and soon thereafter in the market because everyone knows that only the US government has coin-melt bars. The appearance of coin-melt bars in the market would immediately raise suspicions that the US Gold Reserve was being dishoarded, an outcome that the Treasury would obviously take steps to avoid in concocting its scheme because the US Gold Reserve cannot be depleted without Congressional approval. Therefore, one is faced with the practical considerations of overcoming these hurdles, but the answer is relatively simple.
The Treasury has gold in West Point. The Bundesbank has gold in Europe. The Treasury cannot directly do a deal with the Bundesbank because unlike the ESF, the Treasury is subject to Congressional oversight. So instead the Secretary of the Treasury and the President decide to use the ESF to set up a swap line for gold with the Bundesbank.
By so doing, the gold in the Bundesbank’s vault in Europe becomes ESF gold, to do with as they please – i.e., the ESF lends this metal to bailout certain bullion banks. And the Bundesbank now owns the gold in West Point, which as a result was purposefully re-classified from Gold Bullion Reserve to Custodial Gold because the Treasury no longer owns this gold, having swapped it out through the ESF in exchange for gold in Europe owned by the Bundesbank. Case closed. The mystery of the abnormally low gold price is solved. The ESF did it.
The abnormally low gold price is the result of the mounting irrefutable evidence that the ESF is deeply involved in the gold market, and I do mean deep. They are involved in some 1,700 tonnes worth because that is the weight of gold stored in West Point, which was probably being swapped at the rate of a few hundred tonnes per year from circa 1995 through 2000. There are two other tidbits that I would like to share with you that add even more validity to this supposition.
First, a couple of months ago I was analyzing the 1998 and 1999 balance sheets of the ESF. Being an ex-banker, I know a little bit about accounting, including where to find the big holes through which the proverbial truck can be driven. And suffice it to say, I found one of those, which could suggest that in these two years 975 tonnes of gold came into the market from the ESF. Interestingly, after reaching this conclusion, I wanted to test it. So I called a top gold market expert whose supply/demand analyses are second to none, and who believes that gold from the US reserves has been coming into the market for several years.
Without telling him about my analysis of the ESF balance sheet, I asked him how much gold he thought came out of the Treasury/ESF in 1998 and 1999 in total. His response was 1,000 tonnes, a mere 25 tonnes difference from what I deduced from the ESF financial statements. When I told him this, that we had both reached the same conclusion from different sources, he chuckled but was not in the least bit surprised, being so convinced that the Treasury/ESF has been a major source of metal for years. I have thoroughly reviewed his supply/demand numbers since 1994 and have determined that as much as 2,000 tonnes of gold from the US reserve may have entered the market in order to make the gold price as low as it is, which leads me to the second tidbit that I would like to share with you. It is just as intriguing.
This same individual told me several months ago about some astonishing intelligence he had learned from a source in Europe. He told me that the Bundesbank’s gold vault was empty, which seemed so preposterous that I found it hard to believe. He also admitted that this news startled him when he learned about it, and that he did not have an adequate explanation for it. He knew that the Bundesbank was an active lender of gold, but he had a difficult time accepting the possibility that all 3,400 tonnes that it owned had been loaned. Yet he was confident that his source had provided him with accurate information.
We now know what has happened. The Bundesbank has loaned 1,700 tonnes, one-half of its 3,400 tonnes reserve; the other 1,700 tonnes were swapped for gold in the US reserves, requiring the change in the West Point vault from Gold Bullion Reserve to Custodial Gold. In other words, the Bundesbank’s vault is empty because one-half of their gold is stored in West Point not Europe, and the other half has been loaned out.
Despite the irrefutable proof that the ESF is involved in the gold market, two questions remain unanswered. First, what’s the ESF’s motive? Unfortunately, we just don’t know for certain.
Many, including me, claim that it is to use gold to provide the liquidity needed to bailout some big banks that have imprudently grown their gold books by recklessly expanding credit and mismatching their asset/liability maturities. These banks are the ones with the unusual – some say abnormal – derivative activities that are named as co-defendants in Reg Howe’s suit against the BIS. That this list includes Germany’s largest bank may explain why the Bundesbank would agree to participate in this gold swap scheme. It was bailing out one of its own.
Others claim the ESF aims to manipulate the gold price to make inflation numbers look better than they really are by keeping the gold price artificially low. And there are some who argue that the US government, acting at the behest and under the instructions of the big banks, aim to destroy their combined arch enemy – gold, regardless of the fact that the gold mining industry would be destroyed along with it.
This last theory is not outlandish. It has currency because gold is the world’s only free-market money. In contrast to national currencies, all of which circulate only because of government fiat, Gold’s value derives from everyone who understands that it has usefulness as money. And governments and banks don’t like the fact that while they can manipulate gold for a time – and as have we have seen in recent years, even a long time – they cannot in the end control the price of gold anymore than they can control the price of a Picasso painting. The value of a Picasso is determined by the free-market, and so too is gold. In short, you and I give gold its value – not the central banks, not the US government or any other government, either acting alone or together. But the US government either has not yet learned – or refuses to admit – this reality that its power to control gold is limited, which is an inexplicable conclusion unless you accept the notion that governments have short memories and need to relearn what logic says they should have learned from experience.
If logic prevailed, the US government would have learned from its ill-fated attempt in the 1960′s to keep the price of gold abnormally cheap at $35 per ounce that the market determines gold’s value. But instead, the US government is about to learn that it cannot keep a manipulated ‘floating-rate’ gold price from rising any more than it was able to keep the manipulated ‘fixed-rate’ gold price from rising thirty years ago. The free-market rate of exchange between dollars and gold will prevail, eventually repeating today what happened in the 1970′s after the artificially low $35 rate was no longer tenable – the gold price will skyrocket higher. It is well worthwhile keeping in mind that the gold price rose nearly three-fold in the eighteen months after the fixed-rate price was abandoned in August 1971.
Then there is the second unanswered question. To what extent is today’s exceptionally low gold price the responsibility of certain bullion banks, which have cheapened gold by extending gold credit to such an extreme, and the ESF, by perpetuating this scheme? This question too does not have an answer, at least not yet. But as the truth about the ESF’s involvement in the gold market continues to emerge and become more widely known, the price of gold is destined to rise to a more normal level, just like it did after August 1971. The high price that gold eventually achieves will indicate how badly certain bullion banks and the ESF have damaged gold mining companies and the gold industry.
In conclusion, while we don’t know whether any of these motives for manipulating the gold price that I ascribed to the US government are accurate, one point is clear and cannot be denied. The US government cannot claim that the ESF is not involved with gold. We now have the irrefutable proof that establishes beyond any reasonable doubt that the ESF is indeed involved in the gold market. We know this for a fact because of our peek behind closed doors.
KWN will follow up with Turk at the beginning of next week for more coverage on this unbelievable situation.
Statistics: Posted by DIGGER DAN — Sun Oct 28, 2012 11:10 pm
View full post on opinions.caduceusx.com
FLASH: German gold report reveals secret sales that likely were part of swaps
Submitted by cpowell on Mon, 2012-10-22 20:27.
3:51p CT Monday, October 22, 2012
Dear Friend of GATA and Gold:
With the Associated Press report appended here, the German gold audit story has just exploded into the English-language press with some important revelations:
– The gold vaulted by the German central bank, the Bundesbank, with the Bank of England "has fallen ‘below 500 tons’ due to recent sales and repatriations. …" So despite the lack of official announcement, Germany lately has been selling gold from London — perhaps as part of the secret "strategic activities" grudgingly acknowledged two years ago by the Bundesbank to GATA’s friend, the German financial journalist Lars Schall:
The lack of announcement of the sale of the German gold in London suggests that the sale was actually part of a gold swap with another central bank — like the New York Fed. That is, the powerful implication here is that German gold in London was sold at the behest of the United States and in exchange Germany took title to United States gold vaulted in the United States — or title to gold supposedly vaulted in the United States. This way the Bundesbank could continue to claim ownership of the same amount of gold without lying, at least not technically.
As for the Federal Reserve and the U.S. Treasury Department, when you rig every market you can’t worry so much about lying.
Of course such gold swaps were the target of GATA’s federal freedom-of-information lawsuit against the Federal Reserve in U.S. District Court for the District of Columbia, a lawsuit concluded somewhat successfully last year, having pried from the Fed an admission that it has secret gold swap arrangements with foreign banks:
– The Bundesbank is resisting accountability and has censored part of the auditors’ report in the name of protecting secrets of the central banks storing the German gold. But why should there be any secrets about it? Nobody’s asking for the combination numbers to the vaults, and the combination wouldn’t do anyone any good anyway, as the vaults are guarded. Do these secrets involve gold loans and leases and other legerdemain? That seems to be the case.
– The campaign to repatriate the German gold has gotten noticed in a big way.
– The Bundesbank has been officially reprimanded by another German government agency for negligence in its custodianship of the national gold.
– The Bundesbank won’t let German parliament members inspect the German gold vaulted abroad because the central bank vaulting facilities supposedly lack "visiting rooms." And yet one of those vaults, the Federal Reserve Bank of New York, offers the public tours that include "an exclusive visit to the gold vault" — provided, apparently, that you’re not an elected representative of the German people:
GATA has made further informational requests of the Federal Reserve, Treasury Department, and State Department involving their gold records:
Since those agencies have failed to respond, GATA now is entitled to bring more freedom-of-information lawsuits against them. But we can’t do that without sufficient financing.
The auditors’ report about the German gold demonstrates that the Western central bank gold price suppression scheme — part of a vast scheme of rigging all major markets — can be exposed and defeated by persistent clamor and demands for information. If you haven’t already considered helping us financially, please do so now:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Unease about Germany’s unchecked gold reserves
By The Associated Press
via Boston Globe
Monday, October 22, 2012
BERLIN — Germany’s central bank has failed to properly oversee the country’s massive gold reserves, which have been stored abroad since the Cold War in case of a Soviet invasion, independent auditors say.
The central bank must renegotiate its contracts to gain the right to inspect its gold bars, which are worth tens of billions of dollars and are stored in the United States, Britain, and France, the Federal Auditors Office said in a report to lawmakers obtained by The Associated Press on Monday.
The report says the gold bars "have never been physically checked by the Bundesbank itself or other independent auditors regarding their authenticity or weight." Instead, the Bundesbank relies on a "written confirmations by the storage sites."
Most of Germany’s gold reserves — some 3,400 tons worth an estimated $190 billion at current rates — have been kept in the vaults of the U.S. Federal Reserve, the Bank of France, and the Bank of England since the postwar days, when Berlin worried about a possible land war with the Soviet bloc.
The auditors maintain that the central bank must be able to at least inspect samples of its gold bars at regular intervals to verify their book value.
The report acknowledges that such inspections might be logistically complicated, but it stresses that "this cannot discharge [the bank] from the necessity to carry out an inventory."
The central bank said in a reaction to the report that was also sent to lawmakers Monday that it sees no reason for a physical inspection of the bars. "There is no doubt about the integrity of the foreign storage sites in this regard," it stated.
The debate on most of the gold reserves being held by foreign authorities has caused some inevitable conspiracy theories questioning their very existence, but several German politicians have also voiced unease.
Philipp Missfelder, a leading lawmaker from Chancellor Angela Merkel’s center-right party, has asked the Bundesbank for the right to view the gold bars in Paris and London, but the central bank has denied the request, citing the lack of visitor rooms in those facilities, German daily Bild reported.
Given the growing political unease about the issue and the pressure from auditors, the central bank decided last month to repatriate some 50 tons of gold in each of the three coming years from New York to its headquarters in Frankfurt for "thorough examinations" regarding weight and quality, the report revealed.
An initiative backed by some German economists, industry leaders, and a few lawmakers dubbed "bring home our gold" launched in May has attracted some 10,000 supporters online so far.
But Finance Minister Wolfgang Schaeuble and others maintain that there is no reason to worry.
"I currently have no doubt about the stock and the storage of the gold reserves," said Priska Hinz, the opposition Greens top lawmaker on the budget committee. "I do not doubt the reliability of the foreign central banks," she told the AP.
Several passages of the auditors’ report were blacked out in the copy shared with lawmakers, citing the Bundesbank’s concerns that they could compromise secrets involving the central banks storing the gold.
The report said that the gold pile in London has fallen "below 500 tons" due to recent sales and repatriations, but it did not specify how much gold was held in the U.S. and in France. German media have widely reported that some 1,500 tons — almost half of the total reserves — are stored in New York.
* * *
Statistics: Posted by DIGGER DAN — Wed Oct 24, 2012 1:52 am
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Top German Economists Say Greece Is Lost
Several top German economic institutes on Thursday warned that German growth is slowing as the country continues to be hampered by the ongoing euro-zone debt crisis. And Greece, they say, will be unable to "free itself from its debt burden" and will need another haircut.
Chancellor Angela Merkel had been hoping that her trip to Athens earlier this week would help demonstrate Germany’s solidarity with Greece as it struggles to overcome its debt crisis. Just two days later, however, leading economic institutes in Germany have darkened the mood considerably. The institutes presented their autumn economic forecast on Thursday, and cast doubt on whether Greece would be able to remain part of the euro.
"We believe that Greece cannot be saved," said Joachim Scheide from the Kiel Institute for the World Economy, one of several top economic institutes tasked by the German government with examining the state of the country’s economy twice a year.
Oliver Holtemöller, of the Halle Institute for Economic Research, was also pessimistic at the Thursday press conference called to present the evaluation. He said it is unlikely that Greece will ever be able to free itself from its debt burden — and called for a new debt haircut for the country.
The idea is not likely to go over well. Any new restructuring of Greek debt would necessarily involve the country’s international creditors rather than solely affecting private investors as last spring’s €100 billion haircut did. On Thursday, German Finance Minister Wolfgang Schäuble rejected a debt-haircut proposal by the International Monetary Fund, saying it was not helpful. Euro-zone finance ministers also oppose the idea and the European Central Bank has said that forgiving the Greek debt it has on its books is out of the question.
Bad News for Germany and Europe
Alternatives, however, are few and far between. And that, combined with the threat of further euro-zone turbulence, the report makes clear, spells bad news for both the German and European economies.
Specifically, the report forecasts that German economic growth for 2012 will only end up being 0.8 percent, slightly down from recent predictions, and that growth next year will likely be weak. Instead of the 2 percent previously forecast, the report released on Thursday now estimates GDP growth of just 1 percent in Germany in 2013. That growth, such as it is, will come almost entirely from exports, which are holding up, the report says.
But that is the best-case scenario, based on the assumption that the debt crisis in the euro zone does not worsen. The report’s authors, however, do not believe the worst has passed. "The current evaluation of the German economy is based on the assumption that the situation in the euro zone … will gradually stabilize and investor confidence will return. That, however, is in no way assured," the report reads. "Downside risk dominates … and the danger is great that Germany will fall into recession."
Furthermore, Germany’s top economic institutes made clear that they are dissatisfied with the steps thus far taken in the euro zone to solve the ongoing crisis. First and foremost, the analysts repeated a demand made in earlier reports that the euro zone come up with a framework for ensuring orderly bankruptcy proceedings for member states. "Domestic debate in countries like Germany and Finland have made it clear that there is a decreasing willingness to increase aid payments or make transfer payments," they write. As such, they say "it makes more sense for creditors to take part in the costs of the crisis."
Report co-author Kai Carstensen, of the Kiel Institute for the World Economy, put it more clearly at the Thursday press conference. Referring specifically to the unlikelihood that Greece will be able to manage its debt burden anytime soon, he said, "it is time to draw the consequences: No to aid payments, yes to debt restructuring."
The report was also heavily critical of the European Central Bank’s plan to purchase unlimited quantities of sovereign bonds from debt-ridden euro-zone member states on secondary markets. "The ECB is becoming the guardian of national budgetary policy and possibly even holds sway over the solvency of individual countries," the report reads. "In addition to the bank’s independence, its credibility is also in danger."
Furthermore, the report adds, such behavior could trigger high inflation, which would seriously damage the ECB. "Should higher rates of inflation result, it will be extremely difficult to re-establish the ECB’s credibility," the report says. Still, for 2013, the research institutes forecast a modest inflation rate of 2.1 percent.
Statistics: Posted by yoda — Thu Oct 11, 2012 10:16 am
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Study from German Economists Shows that Tax Competition and Fiscal Decentralization Limit Income Redistribution
By Daniel J. Mitchell
Simply stated, I want people to have the freedom to benefit from better tax policy in other jurisdictions, especially since that penalizes governments that get too greedy.
I’m currently surrounded by hundreds of people who share my views since I’m in Prague at a meeting of the Mont Pelerin Society. And I’m particularly happy since Professor Lars Feld of the University of Freiburg presented a paper yesterday on “Redistribution through public budgets: Who pays, who receives, and what effects do political institutions have?”
His research produced all sorts of interesting results, but I was drawn to his estimates on how tax competition and fiscal decentralization are an effective means of restraining bad fiscal policy.
Here are some findings from the study, which was co-authored with Jan Schnellenbach of the University of Heidelberg.
In line with the previous subsections, we find that countries with a higher GDP per employee, i.e. a higher overall labor productivity, have a more unequal primary income distribution. …fiscal competition within a country or trade openness as an indicator of globalization do not exacerbate, but reduce the gap between income classes. …expenditure and revenue decentralization restrict the government’s ability to redistribute income when fiscal decentralization also involves fiscal competition. …fiscal decentralization, when accompanied by high fiscal autonomy, involves significantly less fiscal redistribution. Please also note that fiscal competition induces a more equal distribution of primary income and, even though the distribution of disposable income is more unequal, it is open how the effect of fiscal competition on income distribution should be evaluated. Because measures of income redistribution usu-ally have adverse incentive effects which consequently affect economic growth negatively, fiscal competition might be favorable for countries which have strong egalitarian preferences. A rising tide lifts all boats and might in the long-run outperform countries with more moderate income redistribution even in distributional terms.
The paper includes a bunch of empirical results that are too arcane to reproduce here, but they basically show that the welfare state is difficult to maintain if taxpayers have the ability to vote with their feet.
Or perhaps the better way to interpret the data is that fiscal competition makes it difficult for governments to expand the welfare state to dangerous levels. In other words, it is a way of protecting governments from the worst impulses of their politicians.
I can’t resist sharing one additional bit of information from the Feld-Schnellenbach paper. They compare redistribution in several nations. As you can see in the table reproduced below, the United States and Switzerland benefit from having the lowest levels of overall redistribution (circled in red).
It’s no coincidence that the United States and Switzerland are also the two nations with the most decentralization (some argue that Canada may be more decentralized that the United States, but Canada also scores very well in this measure, so the point is strong regardless).
Interestingly, Switzerland definitely has significantly more genuine federalism than any other nation, so you won’t be surprised to see that Switzerland is far and away the nation with the lowest level of tax redistribution (circled in blue).
One clear example of Switzerland’s sensible approach is that voters overwhelmingly rejected a 2010 referendum that would have imposed a minimum federal tax rate of 22 percent on incomes above 250,000 Swiss Francs (about $262,000 U.S. dollars). And the Swiss also have a spending cap that has reduced the burden of government spending while most other nations have moved in the wrong direction.
While there are some things about Switzerland I don’t like, its political institutions are a good role model. And since good institutions promote good policy (one of the hypotheses in the Feld-Schnellenbach paper) and good policy leads to more prosperity, you won’t be surprised to learn that Swiss living standards now exceed those in the United States. And they’re the highest-ranked nation in the World Economic Forum’s Global Competitiveness Report.
View full post on Cato @ Liberty
Merkel criticized as danger to German democracy
It’s the strongest criticism of Angla Merkel’s grip on power so far: A member of her own conservative party has published a book, describing Merkel as a danger to democracy in Germany.
"The Godmother" is a book that Chancellor Angela Merkel probably won’t read.
Rumors are circulating that the Chancellor indignantly put aside an excerpt published in the German newspaper "Frankfurter Allgemeine Zeitung" after reading just a few lines. Nevertheless, the 300-page "anti-Merkel" book penned by the 71-year-old-publicist, Gertrud Höhler, a confidante of former Chancellor Helmut Kohl, has the makings of a bestseller in political Berlin. More than 80 journalists and camera teams crowded into the federal press conference on Thursday.
Höhler worked as an adviser to former chancellor, Helmut Kohl
Höhler’s book is about more than the tired old allegations that Merkel, for instance, pushes all male rivals out of her way, has not internalized any values and makes decisions only when she knows which way the scale will tip.
Merkel, nicknamed "Mutti" or mommy in political circles, becomes a "godmother" in Höhler’s book. She establishes a "silent variant of authoritarian power that Germany has yet to experience." The author lists a number of attributes, such as stealing ideas from political rivals, leveling the party system to an all-party-state and sloppily handling legal norms, ethical standards, parliament and the constitution – and often reprimanded by the Federal Constitutional Court. In short, she points to a decline of political morals.
"German-tailored suit" for Europe
Perhaps all of this is linked to the 35 years that Angela Merkel lived under a dictatorial regime in East Germany. No one knows for sure what drives Merkel, who learned in the GDR to read between the lines, act silently, never say too much and be suspicious, Höhler noted when introducing her book.
"How Angela Merkel is rebuilding Germany" is the subtitle of "The Godmother." In Höhler’s view, other Europeans should be concerned about Merkel’s thirst for power as the Chancellor is giving Europe a "German-tailored suit."
Is Merkel running her party like Marlon Brando in the movie The Godfather?
The facts that the author has compiled on a creeping loss of democracy in Germany and Europe aren’t new. What is new at first glance is the exaggerated role attributed to Merkel in this process. This reveals how much some conservatives in the Christian Democratic Union (CDU) are challenged by Merkel’s claim to power and how her "values of abstinence, coolness and dispassion have forced them into a corner," Höhler said.
The sudden change of direction in energy policy that Merkel pushed through practically over night, the end of military service, the plans to lower taxes and abandon traditional views on the family by granting more rights to homosexual couples – these are all examples that have led to insecurity across the party. "Godmother" author Gertrud Höhler, long a member of the CDU, also worked as an adviser to Helmut Kohl.
Biting their tongue
Höhler’s book has a dedication "to all who are still biting their tongue." How many of these there are in the party is not clear. The CDU, for a long time, has had the reputation of being overly submissive to their chancellor when they’re in government and it is Merkel’s popularity that the CDU will have to thank if it manages to remain in power past the 2013 election. Toppling the chancellor from within the party is therefore very unlikely. Whoever wants a career in the CDU avoids crossing Merkel. Only old party veterans no longer seeking new positions dare to speak out. One of them is 72-year old Josef Schlarmann, head of the party’s committee on small and medium-sized companies. He recently criticized that the party was merely taking orders. Attempts to go against Merkel’s course have so far failed.
The most recent case was when the so-called Berlin circle of some 35 CDU politicians announced a "conservative manifesto" to criticize what it perceived as the CDU taking over too many of the center-left’s policies on social issues. The politicians said that they’d been encouraged to do so by thousands of letters from party members and other citizens. But the launch of the manifesto, planned for this Friday, has been cancelled on short notice, with a new date announced for autumn. Angela Merkel – who has just been named the world’s most powerful woman again – is most likely not all too worried about it.
Statistics: Posted by yoda — Fri Aug 24, 2012 2:43 pm
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German, UK fears stymie revival in EU wheat hopes
The revival in hopes for the European Union wheat harvest went into reverse as German farmers raised doubts over forecasts of increased production, and the UK crop was identified as ripe for downgrades.
Deutscher Bauernverband (DBV), the German farmers’ association, pegged the domestic wheat harvest at 21.9m tonnes, well below last year’s 22.7m-tonne harvest, which many analysts have forecast will be exceeded this year.
Strategie Grains, the influential analysis group, last week lifted its forecast for the German wheat crop, the European Union’s second biggest, to 23.4m tonnes, as it raised its estimate for the bloc’s total harvest, including durum, by 1.9m tonnes to 133.3m tonnes.
The DBV downgrade reflected localised cases of "massive winterkill" in a February cold snap which had prompted large-scale resowings of wheat fields typically with other crops. Spring wheat area expanded by some 50%, but to a relatively small 153,000 hectares.
‘UK downgrades ahead’
The data followed a caution from broker FCStone over the damage to wheat prospects in the UK, the EU’s third-ranked producer, thanks to persistent rains which have cut hopes for a rise in sowings being reflected in extra production.
"Results coming from the field in the UK continue to foster a large degree of variability, with test weights and falling numbers falling and premiums for quality receiving plenty of support," the broker said.
"At least 1m tonnes will be shaved from UK wheat output estimates, taking it down to the mid-to-low 14m-tonnes range," compared with 15.3m tonnes last year.
With prospects for quantity, as well as quality, UK wheat users have been importing from continental European countries such as Denmark, as well as Germany, an important source of harder milling varieties, Agrimoney.com has been told.
Indeed, Deutscher Bauernverband acknowledged the support to crop quality from an improvement in weather towards the end of the growing season.
UK wheat production and (plantings)
2012-13: "mid-to-low 14m tonnes", (2.01m hectares)
2011-12: 15.26m tonnes, (1.97m hectares)
2010-11: 14.88m tonnes, (1.94m hectares)
2009-10: 14.08m tonnes, (1.78m hectares)
2008-09: 17.23m tonnes, (2.08m hectares)
Sources: Agrimoney.com, Defra, HGCA
With recent weather "mostly good, winter wheat could be harvested often with satisfactory moisture content", reducing the need for drying and protecting protein levels in many key growing areas.
At FCStone, Jaime Nolan Miralles said: "The big issue was about quality more than quantity," given earlier fears that the French crop, the EU’s biggest, and largely of soft milling varieties, had suffered significant weather damage too.
"On that score, we got out of jail with France to a large extent," given a late turn drier in the weather. "It looks like something similar happened in Germany too."
The DBV was more upbeat over Germany’s barley production, pegging it at 9.8m tonnes, a rise of 12% year on year, with hopes of substantial amounts of spring crop making malting grade.
Spring barley was of "generally good quality", and largely of lower protein levels, below 11.5%, demanded by brewers.
With France too appearing to have harvested a good-quality spring barley crop, prospects appear good for malting barley supplies outside the UK, where Scotch whisky distillers may be forced to look outside Scotland for supplies.
For rapeseed, the association foresaw a recovery in production to 4.4m tonnes, thanks to a recovery to 3.4 tonnes per hectare in the average yield.
On the London futures market, feed wheat for November delivery rose 1.0% to a fresh contract high of £208.60 a tonne as 15:15 UK time (09:15 Chicago time), contrasting with falls in the grain on other markets.
London prices are being given an extra boost by the prospect of the Ensus bioethanol plant in northern England reopening, with capacity for more than 1m tonnes of wheat a year, with the Vivergo plant, of similar size, set for launch in the fourth quarter.
In Paris, soft milling wheat was 0.1% lower at E267.50 a tonne, while Chicago’s December lot was 0.5% lower at $9.17 ½ a bushel.
Statistics: Posted by yoda — Wed Aug 22, 2012 3:21 pm
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For the first time, criminal charges have been pressed against a German rabbi for performing circumcisions, a Jewish weekly reported on Tuesday.
A doctor from Hesse filed a criminal complaint against Rabbi David Goldberg, who serves in the community of Hof, in Upper Franconia (northern Bavaria), according to the Juedische Allgemeine weekly newspaper. The chief prosecutor of Hof confirmed that charges had been filed against the rabbi. The charges are based on the controversial decision of a Cologne district court, which ruled in June that circumcisions for religious reasons constitute illegal bodily harm to newborn babies.
“I am shocked,” said Cologne Rabbi Yaron Engelmayer, co-chairman of the national umbrella group of Orthodox rabbis in Germany, in a first reaction to the report. This marks the first time that a court in the Federal Republic of Germany is investigating a rabbi for performing a religious ritual, Engelmayer told the paper.
Goldberg, a qualified mohel (ritual circumciser) who says he has performed more than 3,000 circumcisions, was informed about the criminal charges against him by journalists, the paper said.
Born in Jerusalem, the 64-year-old has been the rabbi of Hof since 1997. Before World War II, about 3,000 Jews lived in Hof. Today, the community counts about 400 members.
The Cologne court decision caused a major uproar in Germany’s Jewish and Muslim communities, leading the Bundestag to pass a joint resolution calling on the government to ensure legal certainty for ritual circumcisers. “A medically professional circumcision of boys, which does not cause unnecessary pain” should be “generally permissible,” the resolution read.
While the Jews in Germany feared the implications of the Cologne ruling, they expressed confidence last month that they would be able to continue performing the rite.
“At the moment — in our view — the verdict formally does not severely affect the ability to perform circumcision since the decision of the court is formally not binding for other cases,” the secretary-general of the Central Council of Jews in Germany, Stephan Kramer, said.
Rabbi Engelmayer, from Cologne, told The Times of Israel in July that the court decision had “enormously” impacted Jewish life in his community. “De facto it looks as if doctors across the country are afraid [to perform circumcisions],” he said.
“The mohels are inquiring, and we tell them: without circumcision, there is no Judaism,” he said at the time. “Therefore it is hard to imagine how the courts could criminalize a correctly performed Jewish circumcision ceremony. It would be too harsh a sign, especially from Germany.”
Engelmayer added: “I think that Germany will refrain [from permanently outlawing circumcisions], also in light of the chorus of outrage, the criticism and the damage it could do to Germany’s image in the world.”
Statistics: Posted by yoda — Tue Aug 21, 2012 12:36 pm
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German Opposition Calls for Wealth Tax
German opposition politicians believe the country’s wealthiest should be doing more to help solve the national deficit problem.
In Germany, the opposition center-left Social Democrats and environmentalist Greens want to copy France and apply new taxes to the wealthy to help reduce the national deficit. So far, Chancellor Angela Merkel’s government says it isn’t interested. But proponents say it could bring an additional 11.5 billion euros into the public coffers each year.
In France, it featured as one of the biggest political platforms in François Hollande’s campaign to become president. Now, calls are growing in Germany to introduce a wealth tax in order to combat a national budget deficit that has swelled during the economic crisis.
The opposition center-left Social Democrats and the Green Party are proposing that Germany reintroduce a wealth tax that the country eliminated in 1997. Under the proposal, a 1 percent annual tax would be applied to Germans with assets exceeding €2 million (about $2.5 million). The tax allowance would be double that figure for married couples, Norbert Walter-Borjans of the Social Democratic Party (SPD), who is finance minister for the state of North Rhine-Westphalia, said on Wednesday.
With the tax, the politician said, Germany’s wealthiest people would play a role in consolidating the country’s national budget. At only 1 percent, he added, the tax would not present a major burden on the rich. Walter-Borjans said his state, along with Rhineland-Palatinate, Baden-Württemberg and Hamburg — all governed by the SPD or Greens — planned to introduce an initiative in the Bundesrat, Germany’s upper legislative chamber representing the interests of the states, where the opposition also holds a majority of votes, after the summer recess.
The German Institute for Economic Research (DIW) think tank estimates that a wealth tax would provide an additional €11.5 billion annually for the federal budget. North Rhine-Westphalian Finance Minister Walter-Borjans says that estimate also takes into account the possible emigration of wealthy Germans to other countries. For his state alone, which is Germany’s most populous with nearly 18 million of the country’s entire population of almost 82 million, the tax could raise an addition €3.5 billion a year.
Not About Taxing Granny
"That would be an extremely important step in terms of consolidation," the minister said, adding that the measure was "emphatically not about grandma’s little house or the grandkids’ savings account — and also not the middle class." Walter-Borjans said that only people with major wealth would be tapped. DIW estimates that the wealth tax would be applied to around 140,000 people in Germany.
The parties haven’t presented specific details about the proposal, Walter-Borjans said, but he suggested that "initial plans" had been discussed. Further talks are expected in September to form a concrete plan, with an initiative in the Bundesrat to follow in the autumn.
"Private monetary assets in Germany have grown to an extreme degree — from €3.6 trillion to €4.7 trillion between 2001 and 2011," Walter-Borjans said. If you include tangible assets, then that figure is closer to €10 trillion.
Under the proposal, Germans would be required to submit a special tax form detailing their wealth and assets based on the current market value, the minister said. The politician said additional details, like how double taxation of some assets could be avoided, still had to be considered. Loopholes that can be used by the rich to hide their assets in companies and other institutions would also have to be closed.
On paper, Germany’s wealth tax still exists, but it has not been applied since 1997. That year, the country’s highest court, the Federal Constitutional Court, declared that the law was unconstitutional in its current form. The debate over its reintroduction first began last week, after an alliance of social organizations, unions and other groups called for stiffer taxes to be applied to the wealthy. The calls have been met with strong resistance from the conservative-liberal government of Chancellor Angela Merkel.
Statistics: Posted by yoda — Thu Aug 09, 2012 2:45 pm
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James Turk: Where was the German gold?
Submitted by cpowell on Sun, 2012-07-01 12:49. Section: Daily Dispatches
7:40p ICT Sunday, July 1, 2012
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk is the latest researcher to expose central bank slovenliness in regard to gold, this time in the memoirs of Hjalmar Schacht, the currency commissioner who ended Weimar Germany’s hyperinflation and went on to become president of the Reichsbank for a while in the early days of the Nazi regime.
Turk reports that Schacht’s autobiography, "Confessions of the Old Wizard," published in 1955, describes how the Federal Reserve Bank of New York couldn’t find the German gold held there when Schacht visited in the 1920s but that Schacht laughed it off. "Schacht," Turk writes, "apparently considered friendship to other central bankers and his membership in their exclusive club to be a higher priority than his responsibility as guardian of a nation’s gold."
Even now the Bundesbank, successor to the Reichsbank, seems to be laughing off concerns about the security of German gold reserves that continue to be vaulted abroad as evidence grows of the juggling and misapplication of national gold reserves generally and, particularly, of the Bundesbank’s surreptitiously swapping gold with the United States for market-rigging purposes.
Turk’s commentary is headlined "Where Was the Gold?" and it’s posted at GoldMoney’s Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Where was the gold?
I am an avid reader of monetary history. Of late I have been focusing on the monetary events of the 1920s and 1930s. By learning from the maelstrom that riled the global financial scene during those two tumultuous decades, I aim to better understand present circumstances because there are many similarities between then and now.
I’ve just finished a fascinating book published in 1955 entitled Confessions of The Old Wizard. It is the autobiography of Hjalmar Horace Greeley Schacht, whose improbable name reflects his North Schleswig ancestry and his father’s admiration of an American newspaper editor.
For those not familiar with him, Schacht is generally given credit for ending in 1923 the Weimar Republic hyperinflation and putting Germany once again on a sound monetary footing, commendable feats which earned him the nickname “The Old Wizard”. He did this first as Commissioner of the Currency for the Finance Ministry and thereafter as President of the Reichsbank. For these achievements, he received worldwide acclaim as well as fame, if that word accurately describes the popular attention and respect given to a skilled central banker.
Schacht’s autobiography contains many stories and anecdotes, including those of his meetings with dozens of famous people. But Schacht’s account of a meeting with Benjamin Strong is one I found particularly important, shocking even.
Strong was president of the Federal Reserve Bank of New York from its creation in 1914 until his death in 1928. Strong, Schacht, Montague Norman of England and Émile Moreau of France were the most powerful and influential central bankers of their time.
Strong was in effect the head of the Federal Reserve because the New York bank back then dominated the system. Reforms in the 1930s diminished somewhat the power of the New York bank, but to this day it remains vitally important because it alone of the 12 Federal Reserve banks transacts with other central banks. For example, there is reportedly some Bundesbank gold stored in the Federal Reserve Bank of New York’s vault near Wall Street, which is it often said contains the world’s largest accumulation of gold.
It is the same vault Schacht visited during one of his trips to New York to meet with Benjamin Strong. Here is how Schacht relates this remarkable event.
Another amusing incident arose from the fact that the Reichsbank maintained a not inconsiderable gold deposit in the Federal Reserve Bank in New York. Strong was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked:
“Now, Herr Schacht, you shall see where the Reichsbank gold is kept.”
While the staff looked for the hiding place of the Reichsbank gold we went through the vaults. We waited several minutes: at length we were told: “Mr. Strong, we can’t find the Reichsbank gold.”
Strong was flabbergasted but I comforted him. “Never mind: I believe you when you say the gold is there. Even if it weren’t you are good for its replacement."
Shocking, isn’t it. Clearly, it is bad enough that the Reichsbank gold could not be found nor, according to Schacht’s account, did Strong offer to find it. But regardless whether it could not be located due to bad recordkeeping by the Federal Reserve or because the gold was not in the vault is not as significant as Schacht’s nonchalant response to what he astonishingly calls an “amusing incident”. Where is his outrage that the Reichsbank gold could not be located? Why is there no worry about the disposition of the gold and its safety? After all, as President of the Reichsbank, he had responsibility for all of its assets, of which gold is by far the most important.
What can we learn from this event? Schacht apparently considered friendship to other central bankers and his membership in their exclusive club to be a higher priority than his responsibility as guardian of a nation’s gold. Schacht did not question Strong, so the actual location and true circumstances of the Reichsbank gold remained unknown. This astonishing incident would not have occurred if the Reichsbank had instead stored the gold in its own vault.
This article has also been published at Smart Investor.
Tags: Fed, Germany, gold reserves
Author: James Turk
Statistics: Posted by DIGGER DAN — Mon Jul 02, 2012 1:16 am
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