According to Federal Reserve Chairman Ben Bernanke:
Gold is not money. It’s a precious metal. We keep it in our vaults because of tradition.
So, if a nation — say, Venezuela — were to demand the full and final return of its (multi-leveraged) gold reserves from vaults across the West, would it be safe to assume that the “ barbarous relic“, and”anachronism” would be delivered quickly and in full? Further, would it be safe to assume that the price of gold would not shoot through the roof? Well, it seems like we are going to get to find out just how “barbarous” this “relic” really is. From Zero Hedge:
In addition to the nationalization of his gold industry, Chavez earlier also announced that he would recover virtually all gold that Venezuela holds abroad, starting with 99 tons of gold at the Bank of England. As the WSJ reported earlier, “The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank.” That’s great, but not really a gamechanger. After all the BOE should have said gold. What could well be a gamechanger is that according to an update from Bloomberg, Venezuela has gold with, you guessed it, JP Morgan, Barclays, and Bank Of Nova Scotia. As most know, JPM is one of the 5 vault banks. The fun begins if Chavez demands physical delivery of more than 10.6 tons of physical because as today’s CME update of metal depository statistics, JPM only has 338,303 ounces of registered gold in storage. Or roughly 10.6 tons. A modest deposit of this size would cause some serious white hair at JPM as the bank scrambles to find the replacement gold, which has already been pledged about 100 times across the various paper markets. Keep an eye on gold in the illiquid after hour market. The overdue scramble for delivery may be about to begin.
This will truly test the concept that “we are no longer using the gold standard”…
Read the fine print: “May be settled in cash as the BOE decides”.
Sorry ’bout that Hugo.
Ed: I don’t think the BoE can pull off paying it in sterling or dollars or bottle caps. It’s not like Venezuela can invade us and occupy London, but what message would that send to the PBoC?
Also I note J.P. Morgan recently predicted $2500 by end-of-2011. Did they know something we didn’t?
Some kind of terrorist link will be made after US trained Columbian Black Ops crews (we call `em banditos in the south) run a few false flags – TV will show images of Chavez carousing with the Bin version not buried at sea – this will be proof of his demonic soul – the ability to raise Oceania’s nemesis back into the lame stream hypno-tube from Davy Jones Locker Venezuela’s assets will be frozen. US Ships will park off the coast and will begin cruise missile fire bombing Venezuelans “to save thousands of lives”. Venezuelan oil will no longer flow, the dollar will inflate to the point gold ozzies cost Zillion Smackers
Ahhh – a fresh front for the continued gentrification by the War Usury’s well garnished Forever Crusade – only this time – with a good breeze, lucky Americans will be able to smell the pops of the inflating corpses of those Venezuelans thet [for sure] “hate us for our freedoms” or freedom to have our daughters be groped by TSA – the collection of all Americans ISP information. We are free – were both suspected terrorists and suspected pedophiles and we ain’t in prison.
It will be good to smell the death we allowed because cause we will no longer be able to afford electricity or cable TV to get our daily death rut.
Ain’t that the way it always goes?
I’m not sure China and Russia will take another “liberation” in their back yard. That smells of — as Chavez once put it — sulphur and brimstone for Venezuela, cause Venezuela ain’t in their back yard. The hawks have long earmarked Chavez as a terrorist, or a threat, or whatever the Pentagon buzzword of the day is. I don’t like the guy, but he has a lot of testicular fortitude. He’s calculated he can get away with it — and I think he might be right. The West will fret and fawn, and Karl Rove will fantasise about Cruise missiles poppin’ some weddings and civilian housing, but there is no way they can afford let US banks default on their liabilities in front of China and the Arabs, who take a keen interest in all things full-faith-and-credit. This isn’t like ’71. The U.S. isn’t a hegemon to NATO that can just say Fuck You to France. This is the era of America as dependant orphan, lost in the wilderness, armed with fuckloads of nukes.
The wealth of the venezolan populace has grown tremendously over the past years and it is due to proper policy making by the current people in power including Hugo Chavez. If they will pull off any stunt, it might cost the USA dearly.
Gives JPM, S&P, Blackrock, Barclays, etc much less to leverage.
Doesnt this raise a more interesting and important question, which other countries/govts/emperors have how much gold stored with boe, jpm, and others ??? Who knows ??
Pingback: The Great Gold Squeeze « azizonomics
Pingback: Is Venezuela Next? « azizonomics
I would like to offer a prayer to Mr. Chavez that he recover fully from his illness in the name of Jesus Christ. Isn’t it a crime to say you’ll hold someone’s gold, and when they ask for it, the gold is not there? This is how wars begin. Chavez’s ally happens to be Russia. Because we have the internet, we ought to be able to stop what a bullet in Serbia started over 100 years ago. If the Bank can’t deliver, prison for the managers!
Pingback: Brazil Slams the West’s Currency War « azizonomics