Friday, October 22, 2010

The Banks And The "Fractional" Gold/Silver System...

This is a letter sent into Bill Murphy's "Midas," which can be read daily at  Anyone who buys "bullion" from a big bank and allows the bank to "safekeep" it after reading this accounting deserves the paper currency they'll ultimately end up with in the end:

"Bill, Chris

I am in the final stages of getting delivery of some rather spread about metals holdings. UBS have been giving me consistent delays and aggravation eg "no problem - takes about ten days" followed by in two weeks time after I chase them "we have to have a wet signature, to replace your fax - just our system" - and then still later "your gold coins will take considerably longer, as there are a lot" - it is actually 250 we are talking about which I should not have thought was that many at all.....

Worse, right on the day arranged for delivery, they are claiming they have only just received the instruction and there will be further delays.

Worse yet, they are now saying that my Silver is held in a metal account, despite my paying for bars, and that if I want bars they will have to be made!!! at a cost of approximately 10%!!! This despite their continuing clear advertisement of Kg Silver bars on their website.

They ask then whether I would like to close my position instead in view of the cost. None of this was of course discussed or in play when I bought and I have asked them to retrieve the recordings of the order conversation. I have of course declined to "Close my position" because this means selling at their miserable freakin' bid, and letting them off their silver obligations scot free. I ordered Kilo bars, which I paid for in advance including TVA a few years ago and however this turns out it shows just another twist in the lying stinking conspiracy that is now pervasive. What I shall probably do is to leg in on ZKB, and close the account whilst demanding the bars. If I have to, ultimately I shall pay and then seek redress through the banking ombudsman in the in the UK which is of course the jurisdiction in which I lived when I made the purchase. Since they too operate in London, they may find this an embarrassing conversation, or then again they may get off scot free.

Just thought you might care to warn prospective delivery takers of the sort of wiles that are now being used to escape metal delivery obligations. My own feeling is that I am not big enough for them to care too much about, but what it does drive out it seems to me is that they are operating to instructions to try to make it as difficult as possible to take delivery, and to make sure there is the disincentive of a haircut into the bargain. The basis of trust has been completely discarded.

(This "Dave" is not me - I would never buy my bullion thru a bank nor would I ever invest in the Monex and Kitco leveraged gold accounts).  This particular "Dave" will be fortunate to get his actual physical bullion delivered to him - eventually.  At some point in the future everyone else who buys their gold in this manner will not be so lucky.

I also wanted to share this exerpt from the latest issue of The Privateer.  Many are not aware that the U.S. Constitution mandates gold and silver as the only permissable legal tender.  But then again, the Constitution has largely been rendered irrelevant by the tyranny of big Government:

Article 1, Section 8 of the US Constitution reads as follows: “The Congress shall have Power ...To coin Money, regulate the Value thereof, and of foreign Coin.”

At the time that this document was being debated, the 13 colonies which were to become the original US states coined their own money. So did most other states and provinces in nations throughout the world.  In most non-English European languages and in languages of nations ever further removed, the words for “coin” and “currency” were the same or synonymous. Money as it passed from hand to hand in the economy of the day was coin everywhere. Paper money had been a disastrous failure wherever it had gained sway, not least the “Continental currency” issued to fight the revolutionary war in the US.

Article 1, Section 10 of the US Constitution reads as follows: “No State shall ...make any Thing but gold and silver Coin a Tender in Payment of Debts.” Please remember that when this phrase was inserted in the Constitution the federal government in Washington DC did not yet exist. The States were expressly forbidden from coining money. The clear implication in this clause was that they could not replace GOLD and SILVER coin as a means of extinguishing debt. The Congress as it was being set up by the Constitutional convention was given no EXPRESS power except one - the power to COIN money.
Congress still has that power, of course, but it is a minor detail today amongst the printing press and electronic money which represents almost all of the global “supply” of US Dollars.


  1. Hey Chico,

    Isn't it nice to see the USD and gold getting
    along so well together?

    I'm with Stu T: USD and Gold move together in a nice dance for awhile.

    Can you put your hate-on for the USD on the back-burner for now? LOL. Let's be friends.

  2. LOL. I don't hate the USD. I'm neutral toward as far as emotions go. I just call it as it see it. I believe I'm on record saying that I expect a corrective bounce to the 80 level. I also said that if it can't get back to 80 before it rolls over, it's in big trouble. This country is in big trouble.

    One of the best ROR periods for gold was when it was moving in tandem with the USD back in last 2005...

  3. The Coinage Act was passed in 1792 by Congress to establish the official weights and measures of the coins to be circulating in the US (Gold and Silver only).

    Section 19 of the Act established the penalty for anyone caught debasing the currency which was death.

    I'll leave it at that for now, but it amazes me that the Treasury and the FED can debase the dollar in broad daylight and no one calls them on it.

  4. Hi Dave in Denver,

    A follow-up to my question from last night about the practicality of owning physical gold.

    Do you envision a point in American society where the dollar will be so debased that grocery stores, gas stations, etc. will be conducting business in both gold and paper money? Seems to me that business owners would just find it a nightmare, paperwork-wise, regarding all the financial reporting and taxes. Bad enough when all you're dealing with is the dollar, compounded when trying to figure out how to conduct business dealing with physical gold.

    What if our gov't *pulls an FDR* and outlaws owning physical gold like they did during The Great Depression?

    I really wish you'd post a comprehensive commentary on *why* we should be owning physical gold, other than the fact that it makes us wealthier on paper as the dollar goes south. Don't get me wrong, I'm on your side and own physical and gold coins myself. Just playing Devil's Advocate a little and, plus, I'm sorta' confused myself why I own the stuff.


  5. Adam I appreciate your thoughts, reflections and inquiry about this. It's quite a "nebulous" topic with lots of room for interpretation and polemic debate.

    Most people do not realize that the executive order issued by FDR is still open. It was never revoked and there has never been legislation passed to pre-empt its reimplementation.

    Having said that, how this whole thing unfold requires some thinking "outside of the box." If this country ever gets into the situation you describe, it will foster a very dynamic "underground" economy in which many of us will only transact in bullion.

    By the time we get into that scenario, it is highly probable that several States may seceed from the Union. State secession is something a few visionaries have written about in past and I always wondered how that would occur. But we are starting to the nascence of that type movement in States in which bills proposing the implementation of gold/silver as State mandate currency have been floated but of course not seriously considered. I know this type of bill has been proposed in Colorado, Idaho, Montana and few others.

    Over time this kind State legislative proposals will get more support. It's the kind of legislation that could lead to secession, especially in States which operate within prudent budgets. Eventually the populace in these States will rebel against subsidizing and transferring their wealth to aburdly bankrupt States like California, Illinois, NY, NJ, etc. It's the kind of dynamic that could lead to secession.

    If that happens then you will want to move to one of those States, plenty of gold/silver bullion in tow. Make sure you are accumulating both gold and silver - silver for fungibility in smaller transactions.

    At some point, the "regression to the mean" state of existence globally will be a regression back toward the "mean" use of bullion or a bullion-backed currency. Those who possess a lot of bullion will emerge in superior wealth postions to those who don't

    What most people also don't realize is that in reality the Government collected very little of the bullion held privatel during FDR's monetary tyranny.

    The bottom line is that holding bullion is the best hedge you can have. But let's hope our system does not descend into that state of being - alhtough it appears inevitable. It;s not about wealth accumulation as much as it is about financial survival.

  6. “What most people also don't realize is that in reality the Government collected very little of the bullion held privately during FDR's monetary tyranny”

    Per the book “Coin Clinic 1001 Frequently Asked Questions” by Alan Herbert
    Only about 7% of the gold bullion, gold coins and gold certificates (paper money that was backed by gold) was turned into the government. The rest went across the border to Canadian or Mexican safe deposit boxes, or went overseas to Swiss safe deposit boxes, well outside the reaches of Uncle Sam. The same thing would happen to day if gold were confiscated.

    The reason gold was confiscated was gold was recognized officially as money, and if the government had more gold it could print more money. Nowadays a US gold confiscation would admit to the world that gold is money, meaning gold held overseas would be considered much more valuable than US Dollars, meaning game over for the greenback.

    Back in to mid to late 1970’s, there were businesses that offered to not only sell gold but keep it safe in their safes. After enough customers bought gold the businesses would close up and the owners vanish along with the gold, leaving the customers to realize they had not bought gold at all, or all had bought the same gold sold over and over again.

    Sounds like UBS learned this con and put it into practice.