The above link was reported last week to little fanfare nor outrage but I urge you to read this and do some thinking for yourself as to how big this really is. It was reported that a “Gold scam” of just under $60 Billion was uncovered in China. $60 Billion, no big deal right? Just your run of the mill Madoff scheme or thereabouts. $60 Billion? Chump change in today’s world, less than what the Treasury “adjusts” their borrowings on the last day of each month. $60 Billion. Far less than what Greece needs to “fix itself” and not even in the same league as what Spain or Italy need to survive. The word “billions” is thrown around today like the word “millions” was when we were kids, today, $60 Billion is nothing more than a popcorn fart in a windstorm!
But wait, let’s look at it from another point of view. (I must confess that even though I knew the math, for some reason it just didn’t seem right so I re did it and rechecked it to make sure I was correct) At $1,600 per ounce of Gold, the Dollar value of ALL the mining production across the globe comes to the whopping figure of …wait for it……..roughly $125 Billion! So this “little scam” that was uncovered that apparently began back in 2008, represented about 1 half of 1 years total GLOBAL Gold production. Or should I say “diverted” that amount of demand since it doesn’t look like the Gold was even purchased. Very roughly, over the last 4 years, 12.5% of total production that was “thought to have been purchased”, but wasn’t. This “$60 Billlion” is equal to roughly 1200 tonnes.
GLD is purported to also own 1,300 tonnes. Was THIS Gold actually purchased? A few months back, Bob Pisani of CNBC did his very own “Geraldo” imitation and strutted out a nice and shiny 400 ounce bar while grinning from ear to ear. This was an attempt to “assure” investors that their Gold from the GLD ETF was really there. He made one little boo boo, when they did a close up on the bar, the serial number was legible. One those nut case Gold Bugs then went and researched the bar only to find out that it wasn’t even owned by GLD, no, it was owned by another. Which lead me back then and even still to wonder, if that bar was being “safe guarded” by HSBC, how in the world did it actually see daylight and leave the vault? If it were mine, you can bet I’d be pretty pissed off if some bonehead was holding up my $650,000 bar on TV and representing that someone else owned it. HSBC…remember them? The bank now under investigation for drug/arms/money laundering? Yes, one and the same, the custodian for GLD. While I’m on the subject, I should mention that JP Morgan, the largest “short seller of Silver” on the COMEX is the custodian for SLV, the big Silver ETF. I can think of a whole bunch of analogies here, foxes and hen houses, prisoners guarding the prison etc. but no fictional/comical analogy even comes close to the real world fraudulent situations. It does make you wonder though, who could have dreamed these situations up in the first place AND believed it would pass any smell test? It truly takes “hiding in plain sight” to another level!
In any case, I thought it might be a good idea to compare the total global production value of Gold to a few things for perspective. Please remember that we are using the wildly overpriced, manic bubble price of $1,600 per ounce for Gold to come up with $125 Billion!
The U.S is now deficit spending $125 Billion PER MONTH or 12 times global Gold production. The balance sheet of the Federal Reserve is close to $3 Trillion, 24 times the value of global production. The U.S. spent $56 Billion on the food stamp program back in 2009, this was before they decided that food handouts were a “stimulus” and endeavored to expand their “customer base” by 50%. TARP was 6 times global production. The ECB has created and lent well over 1 Trillion Euros over the last year, another 10 or so times global production. Britain just last week announced another 60 Billion Pound stimulus or 3/4’s of a years production. The US owes (not including another $100 Trillion or so off books) an “on book” figure of $16 Trillion or 130 years worth of total global Gold production.
I could go on and on but I think you get the point, $60 Billion in paper Dollars is chicken feed, in real metal though, it takes half a year to dig it up. If you have ever seen a working mine and consider that ALL the mines in the world only produce $60 Billion in 6 months is mind boggling. Gold production/reserves in relation to the entire system does not even amount to a pimple on an elephant’s ass. Gold is minuscule in size or relation, you might even use the word “trivial”. Central bankers would love for and have tried forever to “marginalize” Gold and portray it as a “fringe or trivial” investment. As for the Buffetts and Mungers of the world that want you to believe that only cavemen buy Gold, what a disservice to humanity and if Hell does exist, I would bet that a nice warm spot in the corner is reserved with their names!