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Wednesday
Jan162013

Germany Reacts To The Retiring Treasury Secretary's Parting Shot

 Jim Sinclair

The following is a missive that we received from Jim Sinclair this morning, who is the host of a web site called Jim Sinclair's MineSet. He sums up the situation much better than we can so its well worth the time spent on reading what he has to say. The above link will take to his site and his updates via email are free, so you have nothing to lose by signing up for them.

Here we go: 

My Dear Extended Family,

I respectfully disagree with most of the explanations given today on the why of German actions in gold. My understanding is that the causal event of this notification actually came from the actions of the US Exchange Stabilization Fund and the long term plans to strengthen the euro.

I have published a chart from Patrick showing the extreme change in the ratio of gold to fiat currency presently being held in reserve by Euroland.

First you need to understand what the Exchange Stabilization Fund is and is not. It is an account at a major gold bank in the name of the Exchange Stabilization Fund. This fund can legally trade in gold and does. The President of the USA and the Secretary of the US Treasury run this fund. Those two managers by law are permitted to designate another manager if they wish. The fund can trade long or short, borrow or lend anything. Basically this is a an account that can legally do anything it wants whenever it wants in secret as the year end statement can easily be brought to only benign activates by warehousing all the trades.

Their broker is quite an expert in that strategy to wash year-end positions for clients.

What occurred as I am told is an act in Germany in reaction to a parting shot from the retiring Secretary of the US Treasury via the Exchange Stabilization Fund.

When gold traded at $1918 it was setting up for a challenge of a very important round number, $2000. The sell off was a product of long liquidation in an anticipation of $2000 in a fast market. Gold did fall on its own weight into the $1800 area, however the body block at $1800, $1775 and $1750 was a product of the Exchange Stabilization Fund operating as an account of a major Gold Bank. Seeing that, this gold bank went to the short side for the account of its hedge funds and not wholly owned trading arm. This gold bank issued a public statement that the gold market was dead as a doornail, finished and completed.

On the level of central banking there are no secrets. The long term plan for the currency war between the euro and the dollar is a derivation of the Free Gold Thesis. That means a significant change in the percentage of fiat currency versus gold at market value held by Euroland as reserves. This thesis has a target for cooperating Asian central banks for gold holdings at no less than 15% at market value. I question some of the thesis of Free Gold thinkers, but much of it has been in my writing for more than a decade on what the end game recovery will look like.

I am told that the parting shot to break gold's back by the Exchange Stabilization Fund was considered a direct attack on the Euro strategy for what the end game recovery will look like. The Free Gold thesis requires significantly higher gold prices to work and to elevate the euro back in reserve by choice category.

The German reaction was not political but rather a direct warning that they could demand return of their gold just like DeGaulle of France did in the 60s by making a direct and immediate demand for conversion of the US dollar holdings into Gold.

A major central bank will not insult another major central bank unless it is an act of financial war. It has not come to that yet, but it is not that far away. It is 2015 to 2017 and not 2020.

The reason that gold is relatively firm after the media leak and release on the night of the 14th is that I am not the only person who knows the real story. The price of gold will go to and beyond $3500. Gold will be market to market by the majority, if not all, major central banks. This will balance the balance sheet of the many and major debtor nations and will provide the platform for recovery after unwinding.

Respectfully,

Jim

.....................................................................

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Reader Comments (1)

Jim Sinclair is quite mistaken if he believes "On the level of central banking there are no secrets." Central bankers are a clubby lot (I once saw a notice for an exhibit of the Washington, D.C. Fed's art gallery reserved for bankers), but how does Banker A really know how much fiat Banker B is surreptitiously printing in his basement? The answer is he does not, and this is why a gold standard existed until WWI (when our own Fed began to morph into Dorian Gray. What DeGaulle did in 1972 was no "warning"- he clearly saw that between simultaneous deficit spending for a "Great Society" and a disastrous Viet Nam War, there was no way the U.S. could be maintaining faith with the 30-year-old Bretton Woods conference promise to exchange Eurodollars for gold at $35/oz., and so he beat the rest of the world to the punch by exchanging all his dollars for gold, whereupon P{resident Nixon "closed the gold window." (most people think FDR took us off the gold standard, but it was Mister "I Am Not a Crook.")
It is about time that men who are not crooks step forward to reinstitute the gold standard- or any standard, for that matter. The U.S. will be forced in, kicking and screaming: the greatest irony of history would be for the Chinese, who, in Marco Polo's day gave us paper money, to be the ones to do it.

January 17, 2013 | Unregistered CommenterRobert

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