The widespread loss of confidence that is currently taking place does not have many benefits. It would be much better if important institutions were trustworthy, competent, and efficiently managed. But to fix them, we first need to recognize the problems.
People who spent all their time marginalizing gold fanatics as crazy and conspiracy theorists are now finding themselves on the sidelines.
Suddenly, it makes sense for large segments of Americans to question whether long-held assumptions are true. It is the people who implicitly trust what bureaucrats and bankers have told them who look a little foolish.
The veil is being lifted. Investors in gold and silver should be prepared for some interesting revelations and, perhaps, changes in the metals markets.
They should also be wary of “experts” who still cling to conventional wisdom. Now is the time to ask questions, not to blindly trust.
The following assumptions are absurd. Those who defend them are, at best, naive, or perhaps have some interest in preserving the status quo.
SILLY ASSUMPTION #1: There are no problems with decades-old audits of US gold reserves, including the bars at Fort Knox, and it is unreasonable to ask for a new audit that also examines liens.
The best reason to conduct a comprehensive audit of US gold is that bureaucrats desperately want to avoid it and resist all efforts to conduct a new inventory and analysis of each and every bar.
There are three possibilities regarding US gold reserves. The worst possibility is that some of the gold is missing.
Another possibility is that US gold has been leased or otherwise encumbered and is no longer 100% available to the US Treasury.
The best-case scenario is that the gold is all there and unencumbered, but much of it is in the form of cast gold bars (90% purity), which are illiquid (as the bullion markets require much higher purity).
Anyone who still trusts what officials have told them and ridicules the idea of a thorough audit in these times is a fool. It is high time to examine the gold with a magnifying glass. In any case, audits are never a one-off event.
SUPOSED FOOL #2: Price manipulation is not a problem in the metals markets.
Recently, several major banks that trade gold bullion, including JPMorgan Chase, pleaded guilty to widespread price manipulation. The Department of Justice stopped them, although the CFTC did not.
There are thousands of documents, chat logs, and voice recordings showing traders conspiring with their peers at other banks to manipulate prices and harm their own customers.
That was the moment when it became completely untenable for anyone to claim that the gold and silver markets are free and fair. The “conspiracy theory” is now officially a conspiratorial reality.
A valid question we must examine is whether the manipulation that occurs is merely situational or systemic, and who is involved.
Furthermore, it is more than a little naive to believe that federal regulators and committed Justice Department officials were willing or able to root out this corruption among the world's most powerful and well-connected banks.
A more informed view is that it can be difficult to get a fair deal when playing in the highly leveraged casino that is the futures market.
SILLY ASSUMPTION #3: The Federal Reserve must maintain its independence.
Americans have been told for over 100 years that it is vital for our central bank to operate on its own. We must somehow trust that Federal Reserve officials have the best interests of Americans at heart.
This is despite clear evidence that the Fed's real mandate is to look after the Wall Street banks that literally own the Fed. This includes the massive bank bailouts of 2008, which benefited executives who demonstrated terrible judgment and in some cases perpetrated fraud.
It is highly questionable to insist that it is sensible to have an “independent” (read: unaccountable) Federal Reserve. Those who claim that the central bank's token efforts at transparency are adequate are either not serious or not honest. They should read Ron Paul's “End the Fed.”
The truth is that the Federal Reserve is a black box that channels trillions of dollars. Who still thinks that's a good idea?
Clint Siegner, Money Metals