Mexico Mike...

Hi Bill!
The stories continue to surface about individual investors with fully paid for bullion in storage that are having difficulty taking delivery. Now if one went into a bank to withdraw a chunk of cash from a savings account, and was informed the bank had trouble issuing the cash, think of the consequences. We all know that banks operate on a fractional reserve basis with the cash deposits and yet there still had better be enough cash in the vault to meet the day to day transaction needs. A run on any bank is catastrophic since it is almost impossible to restore confidence once people have lost trust in the safety of their cash deposits. So this concept that the bullion held in storage by banks is not there may be a very serious issue.

The problem becomes more acute when one considers that bullion is not supposed to be subject to any transaction risk whatsoever. It is a custodial agreement with the banks, and storage fees are charged. If indeed the banks have taken full payment for gold and silver with the obligation to purchase and safely store bullion, and then they have gone out and leased it to another party, or just invested the money in other sectors with the assumption they could buy bullion later - this constitutes a breach of trust. It is fraud, and no different from any other ponzi scheme where money is accepted from one party and used to settle obligations with another. So how now does one reconcile that some major trusted banks in our system may have in fact participated in fraud? And this is not just some tinfoil hat fantasy, there is already at least one incident on record of a bank being fined for charging storage and representing that bullion was held on behalf of clients that did not in fact exist.

And of course if in fact there is an issue with bullion that is supposed to be in storage but is not available for withdrawl, it represents yet another source of demand for the shrinking inventory of worldwide bullion that has not been accounted for. Can you imagine GFMS adding a line in their published reports for Bullion Fraud estimates? It would be a very crowded note on the ledger if one accounts for the bullion that has already been double-counted in CB holdings and then leased out the back door. None of this appears in the official supply statistics and therefore the official numbers are pure crap, entirely underestimating the total world bullion demand.

If you have two parties that buy 10 tons of gold in a year, and the same 10 tons was sold to each of them through accounting fraud, then your real demand is 20 tons that year, and not the 10 tons that would be officially documented and supported by the gold storage numbers. When that pompous ass Jeffery Christian acknowledged the fraud issue was far more severe, with as much as 100 ounces of gold sold for every one ounce of real bullion that changes hands, what he has confirmed is that the official gold inventory numbers are cooked.

This is the ugly secret that the banks do not want the public to understand. This is why there is such strong opposition to allowing an audit of Fort Knox. This is why the contradictory standards have been implemented, mandating how countries report on their gold holdings and transactions. It is so very important to maintain this opaque cloud around all gold inventory numbers because the reality would trigger a run on all banks if people understood that the gold reserves are long gone.

The transfer of wealth has been well hidden and is almost complete. Canada has already sold all of its CB bullion reserves. The US has likely given up half or more of the documented reserves. Europe has sold thousands of tons of gold openly, and perhaps much more in swaps and leases. The 'poor' eastern nations have been buying gold and countries like India, Sri Lanka, China, Turkey, and Vietnam are accumulating this vast wealth as the blizzard of money printing devalues the dollar. One of the greatest swindles in human history occurred a few hundred years ago when the Pilgrims convinced the native indians to part with Long Island in exchange for a handful of beads and trinkets. This scam is now playing out in real time as the gold of the west is handed over to other nations in exchange for cheap crap at Walmart. When the dust settles, the nations that own gold will control the wealth and all others will be left with worthless paper and declining standards of living.

The banks that are having so much trouble delivering gold for clients are just a small part of the corruption that runs to highest levels in our system. This is why there is so little resolve to restrain or punish the players that get caught. A small fine and no admission of guilt, and then business as usual. I think the best advice one can take is to get your bullion out of the custody of any third party, and do it fast.
Cheers!
MexicoMike

We all know our man's favorite stock is ECU!