The Big Lie + What Happened To Ukraine’s Gold?

The Big Lie is that Central Banks don’t care about gold.  Nothing could be further from the truth.  Ben Bernanke more than once claimed that he didn’t understand gold.   When Ron Paul asked Bernanke in front of Congress why Central Banks own gold if it’s irrelevant, Bernanke flippantly suggested that it was out of tradition.   In both cases Bernanke was lying and he knew it.

In comparison, Greenspan seemed to have some respect for the laws of economics and – at least that I can recall – never would outright state that gold was not an economic factor.   Greenspan lied as much as Bernanke did about everything else but he never committed himself to lie about gold.  Most of you have probably read Greenspan’s 1966 essay, “Gold and Economic Freedom” (linked).  I have read it several times because it explains as well as anything out there why gold works as a currency and why Government-issued fiat currency does not.

What I find amazing about The Big Lie about Central Banks and gold is that if gold really is considered to be irrelevant, the how come Central Banks – especially the Fed – are so secretive about their gold storage and trading activities?  What’s even more amazing is that no one other than Ron Paul and GATA asks them about this.   Think about it.  GATA spent a lot of money on legal fees attempting to get the Fed to publicly disclose its records related to the Fed’s gold activities.    The Fed spent even more money denying GATA’s quest.  And how come the Fed won’t submit to a public, independent audit of its gold vaults?

This brings me to the issue of the Ukraine’s gold.  According to public records, the Government of Ukraine owns 33 tonnes of gold that was being safekept in Ukraine.   Last week a Ukrainian newspaper reported that acting PM Arseny Yatsenyuk ordered the transfer of that gold to the United States.   The actual report is here:  LINK.   Jesse’s Cafe Americain provided a translated version here:  LINK.

On the assumption that the report is true, and so far I have not seen any commentary or articles suggesting it is not true, the biggest question is, how come the U.S. has absolutely no problem loading up and transporting 33 tonnes of gold from Ukraine to the U.S. but seems to have difficulty loading up and transporting any of Germany’s gold from New York to Berlin?  And how come the U.S. and Ukraine seem to care about that gold at all, if indeed gold is irrelevant?  It would seem that it would be a lot less expensive  and logistically complicated just to have the U.S. military post a few armed guards around the gold if they’re worried about theft.  On the other hand,  I’m sure Putin would be happy to buy the gold from Ukraine.

What makes the story even more interesting is that GATA’s Chris Powell has spent considerable time trying to get an answer to the question of whether or not the U.S. has taken custody of Ukraine’s gold.   When he queried the NY Fed, they responded with:  “A spokesman for the New York Fed said simply: “Any inquiry regarding gold accounts should be directed to the account holder. You may want to contact the National Bank of Ukraine to discuss this report” (LINK).    After trying for two days to get an answer from the U.S. State Department, they finally responded by referring him to the NY Fed (LINK).  

The final piece in verifying that the report is true is deflection from Ukraine.   Mr. Powell has queried the National Bank of Ukraine, the Ukrainian Embassy in DC and the Ukrainian mission to the UN in NYC.  Crickets.  As Chris states the case:   “The difficulty in getting a straight answer here is pretty good evidence that the Ukrainian gold indeed has been sent to the United States.”

Unfortunately, it is likely that the citizens of Ukraine will end up paying the same price for allowing the U.S. to “safekeep” their sovereign gold.  That price is the comforting knowledge that their gold has been delivered safely to vaults in China under U.S./UK bullion bank contractual delivery obligations, where it will be locked away for centuries.

All this skullduggery over a barbarous relic that has been deemed irrelevant by the U.S. Federal Reserve.

14 thoughts on “The Big Lie + What Happened To Ukraine’s Gold?

  1. Awesome! I’m in favor of any reason or excuse whatsoever to use the word “skullduggery” more often in daily communication – right on Dave!

    Until someone comes up with a good reason to distrust that Ukrainian newspaper, I’m rolling with that story being accurate. And if it is, it speaks volumes.

    Thanks for posting the link to Greenspan’s essay, I’ve been meaning to hunt that down.

    Have a good weekend,

  2. Price Signals of Global Slack

    Some key economies, including the U.S., have been enjoying increased export growth by certain measures. Yet, as discussed in ECRI’s U.S. Cyclical Outlook in January, “the U.S. is able to boost exports only by cutting prices, because exporters simply lack pricing power.”

    In fact, year-over-year growth in world trade prices remains in a cyclical downturn, and dropped deeper into negative territory, hitting an eight-month low in December. Indeed, this measure has exhibited almost continuous price deflation since early 2012, barring a couple of abortive forays into positive territory.

    As the chart shows, this measure has rarely been so consistently negative, the last occasion being in the wake of the Global Financial Crisis. Before that, it had turned negative around the 2001 U.S. recession.

    The other extended period of deflation seen in this measure was for nearly four years in the late 1990s, when a massive once-in-a-lifetime deflationary shock resulted from the integration of China, India, and the ex-Soviet economies into the global economy. This period also included the Asian crisis.

    Today, there is no such crisis or structural deflationary shock comparable to that experienced in the late 1990s. Thus, the mounting deflation in world trade prices is signaling growing slack in the global economy.

  3. Greenspan is a perfect example of how political power corrupts morals and judgement. The younger Greenspan would have been aghast at the actions & statements of the older Greenspan. Ron Paul is the only modern-day example I can think of who stuck to principles once in office. St. Ron?

  4. Dave,

    After reading the article and links the last two paragraphs sure brought me back into my comfort zone. I will pass this on to all my MSM friends resting on the beaches with their heads secured in the sand.

    Walter Cronkite

    “It’s not news unless I say it is.”

  5. Each country is either an aristocracy, ruled by hereditary wealth and status; or else a democracy, ruled by the public or “demos” (without hereditary wealth or status being a major factor deciding a person’s success).

    It’s either one, or the other — or somewhere between those two political poles.

    The American Revolution was waged against aristocracy (which was the longstanding system), who happened to consist of British aristocrats. The American Revolutionists fought to establish a democracy instead. They did this, though democracy had never before existed (except in very limited form, in very small places, such as ancient Athens, and even there only briefly).

    Thus, the American Revolution was a truly revolutionary “revolution,” unlike any before it.


    On 13 March 2014, Robbie Couch at Huffington Post headlined “Chelsea Clinton Tells SXSW That She’s ‘Obsessed With Diarrhea’ — For a Great Reason,” and showed video of this U.S. princess, daughter of a former President, saying, “I’m obsessed with diarrhea” because “I find the fact that 750,000 children still die every year around the world because of severe dehydration due to diarrhea unacceptable.” Reader-comments following this report did not object to the star-system that has taken over in our country and that propelled her upwards, the system that causes a person of no remarkable abilities (such as this princess) to have news-media flocking to her, and reporting every self-promotion that issues from her (so that not only the ex-President’s wife, but also their daughter, will inherit the dynasty-founder’s public attention), while far-more-capable actual experts on the given subject receive no such hereditary advantage, and are ignored by star-struck media.

    Chelsea’s parents are centi-millionaires because, due to Bill Clinton’s (earned) Presidency, they receive (unmerited) enormous speaking fees, of hundreds of thousands of dollars for each speech they give at closed-to-the-press meetings at Goldman Sachs, etc., fundraising for themselves or their political campaigns, plus favored access to investment information, and other such advantages that are typical for aristocrats and that cause inequality of wealth to be soaring in this country — as it now is soaring.

    Chelsea Clinton’s paparazzi press constitutes a sign of America’s descending into aristocracy.

    But, instead of democratic revulsion against it, the reader-comments to this news-story were like this:

    “Hillary 2016 and Chelsea in 2024!!!!”

    “goodonya Chelsea!!!!”

    “Look at the great genes she has…, smarter & smartest…..U GO GIRL!!!”

    “She really is a cutie. More importantly, she is a smart cookie.”

    She hadn’t said anything noteworthy, but people were praising her as if she had.

    And, so, since this country is degenerating from a democracy into an aristocracy, our “news” media become more and more focused on less and less qualified “stars” such as she. Competency is no longer rewarded with success. And incompetency increasingly is. Not only the body-politic, but the economy, thus head downhill.

    This is becoming a “whom do you know” country, no longer a “what do you know” one — much less a “what can you do” economy.

    Democracy in the U.S. is dying, and those are just some signs of the broader trend toward a rule by aristocrats, otherwise called “plutocracy,” which inevitably means, in fact, rule by thieves, stealing from the masses to enrich the classes: kleptocracy. Because inherited wealth or status is stolen from everyone else, not earned in fair competition.

  6. “how come Central Banks – especially the Fed – are so secretive about their gold storage and trading activities?”
    It is because they do not want the public to know that they, a privately owned corporation, own the gold we like to think of as “our” gold,or “Treasury gold”, and the chatter about whether it is in Fort Knox is nothing but misdirection

  7. The Hidden Rot in the Jobs Numbers

    Most commentators viewed the February jobs report released on March 7 as good news, indicating that the labor market is on a favorable growth path. A more careful reading shows that employment actually fell—as it has in four out of the past six months and in more than one-third of the months during the past two years.

    Although it is often overlooked, a key statistic for understanding the labor market is the length of the average workweek. Small changes in the average workweek imply large changes in total hours worked. The average workweek in the U.S. has fallen to 34.2 hours in February from 34.5 hours in September 2013, according to the Bureau of Labor Statistics. That decline, coupled with mediocre job creation, implies that the total hours of employment have decreased over the period.

    Job creation rose from an initial 113,000 in January (later revised to 129,000) to 175,000 in February. The January number frightened many, while the February number was cheered—even though it was below the prior 12-month average of 189,000.

    The labor market’s strength and economic activity are better measured by the number of total hours worked than by the number of people employed. An employer who replaces 100 40-hour-per-week workers with 120 20-hour-per-week workers is contracting, not expanding operations. The same is true at the national level.

    The total hours worked per week is obtained by multiplying the reported average workweek hours by the number of workers employed. The decline in the average workweek for all employees on private nonfarm payrolls by 3/10ths of an hour—offset partially by the increase in the number of people working—means that real labor usage on net, taking into account hours worked, fell by the equivalent of 100,000 jobs since September.

    Here’s a fuller explanation. The job-equivalence number is computed simply by taking the total decline in hours and dividing by the average workweek. For example, if the average worker was employed for 34.4 hours and total hours worked declined by 344 hours, the 344 hours would be the equivalent of losing 10 workers’ worth of labor. Thus, although the U.S. economy added about 900,000 jobs since September, the shortened workweek is equivalent to losing about one million jobs during this same period. The difference between the loss of the equivalent of one million jobs and the gain of 900,000 new jobs yields a net effect of the equivalent of 100,000 lost jobs.

  8. Dave,
    I’m wondering what your take is on something I have noticed recently. In a recent column, Kira Brecht suggested that the Russians might be dumping their US Treasuries as international holdings dropped by $105B for the week ending March 12. I don’t think the Russians can afford to do that and I have another suggestion/ possibility.
    For a lot of years now the Chinese Yuan/ Remnibi has been slowly appreciating– occasionally the Chinese gov’t knocks it back a bit, but generally the appreciation continues. All of the sudden a month ago the Yuan dropped (before recent data from China about year on year trade) and has not gone back to a path of appreciation. In fact, it has been depreciating more against the US dollar since and this is during a period where the US dollar has dropped relative to most other currencies. Do you think it possible the Chinese are engineering the Yuan’s value down so that they can get a maximum of Yuan back while dumping US Treasuries? Certainly any loss in dollar values of their foreign exchanges they take dumping treasuries, if they don’t do it all at once, would be mitigated/ offset by the ensuing rise in the dollar value of their gold holdings, no? Could this be the Chinese recognizing the end game is nigh and divesting themselves of US Treasuries while they still can?
    If so, those unpredictable time lines for the fall of the US dollar and the rise of gold could be coming awfully close to now, no?
    Justin from Canada

    1. Russians can afford to dump that size in Treasuries as long as the Fed has a buyer. We don’t know for a fact that the bonds that left the Fed’s custodial were sold or just moved offshore. We don’t even know that it was the Russians. Any of the above are possible. I did notice, and have been meaning to write a blog post about it, that the monetary base went up $135 billion in January and the excess reserve accounts at the Fed went up by $105 billion. QE was only supposed to be $75 billion in January. It’s possible that the Fed monetized the bonds the were removed from its custodial account.

      Your idea on the yuan is very possible as well. Think about this: dropping the value of the yuan increases the dollar value of China’s gold holdings.

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