This article is to issue a critical warning to all Indian citizens about the newly introduced gold “monetization” programs, of which some aspects are much more realistically an Indian gold demonetization scheme. So the question at hand is the following: Could bankers be duping Indian citizens into participating in a reverse alchemy scheme? Indian Prime Minister Narendra Modi launched a 3-pronged scheme to allow gold to become an important part of the Indian economy – an Indian gold demonetization and bank deposit scheme, the issuance of bank and federal gold-backed bonds, and a gold coin and bullion selling program, in which an initial 15,000 5gm gold coins, 20,000 10 gm coins, and 3,750 20gm bullion bars will be made available to the Indian public.
The only aspect of this 3-pronged program, however, that I deem trustworthy at this point, until proven otherwise, are the gold coin and bullion selling program. Why? The answer is simple. The other 2-aspects of this 3-pronged program advocate against our advice at maalamalama to specifically hold all of your physical gold outside of the global banking system. Both the Indian gold demonetization scheme and the gold-backed bond scheme require depositing physical gold at a bank and receiving digital credits and paper in return. For this reason, even though Modi refers to it as a gold “monetization” scheme, I refer to it more realistically as an Indian gold demonetization scheme. If bankers never commit fraud and always keep 100% of the gold allocated specifically to the depositor, and we can be 100% guaranteed of this stipulation always being enforced at all times, then I would not have a problem with India’s gold monetization program and gold-backed bond program. The only problem is that history tells us that bankers will always commit fraud under these circumstances. Consequently, why should we take their word this time around that they will not commit fraud again and use the gold deposits to undermine and suppress the price of gold against the gold depositors’ best interests?
For example, we already know, beyond a shadow of a doubt that the gold derivatives futures markets in New York and London are entirely fraudulent and that pricing mechanisms in these markets literally have zero relationship to the supply and demand determinants of physical gold. The UK Financial Conduct Authority fined Barclays Bank £26 million and banned Barclays banker Daniel Plunkett for artificially engineering a gold “puke” in gold futures markets to plunge gold prices on a specific day to ensure that they would cheat their client out of a payment of £2.3 million. Furthermore, this fraud would not even have been exposed had it not been for the client’s sophistication in understanding and identifying the fraud executed by the Barclays banker. I literally have witnessed other bankers execute the exact same pattern of fraud executed by Barclays banker Plunkett dozens of times in the past, and for which no banker was arrested or prosecuted.
Given the history of banker fraud in gold paper derivative markets in which banks use paper markets to plunge gold prices, Indian citizens must ask themselves this pressing question, “Do I really want to give up the security of holding my physical gold outside of the banking system and then deposit it with the very bankers that have been repeatedly proven to execute fraud against my best interests?”A second example of very likely fraud executed by bankers in gold derivatives markets is the gold GLD ETF (along with the silver SLV ETF). Bankers have always refused and/or failed to provide any proof that their paper gold ETF, the GLD, which they claim to be 100% backed by gold, is actually 100% backed by gold instead of just fractionally backed with it, as is almost certain to be the case. And when bankers attempted to assuage concerns of GLD holders that their paper purchases were actually 100% backed by physical gold held in their vaults, as they claimed, they failed miserably, as the serial number of a bullion bar they claimed was part of their vaulted gold that backed GLD purchases failed to match serial numbers of bullion bars contained on the GLD ETF bullion bar list.
In fact, 2 years before the potential scam of the GLD was revealed to the world through this mismatch of gold bar serial number fiasco, I reported on our maalamalama blog multiple reasons why people should question the legitimacy of banker claims that the GLD and SLV ETFs were fully backed by physical holdings after I inspected the prospectuses of both paper vehicles that contained a plethora of questionable language and banker claims. By the way, since 2009, bankers have removed a lot of the shady language that was first contained in the original prospectuses of the GLD and SLV. However, just because they have removed the questionable statements that orginally appeared in the prospectuses, this certainly does not mean that bankers are now operating both investment vehicles honestly.
Various Indian government officials are pushing their potential reverse alchemy schemes upon the public, urging them to turnover their physical gold holdings to bankers in exchange for digital credits to bank accounts and the issuance of paper certificates. PM Modri has claimed that gold bonds can “empower women”, a claim that reeks of the 1960s and 1970s women’s liberation “right of women to work” movement that succeeded in doubling the tax base for the Rothschild banking cartel. Finance Minister Arun Jaitley has already announced that interest earned on physical gold deposited into the banking system will be exempt from all taxes. On the surface that appears to be a fantastic benefit to Indian citizens, but before Indians embrace this benefit, they must question whether or not the physical gold they turn over to bankers will actually be kept in bank vaults or if it will be hypothecated hundreds of times and leased into the open market to suppress the price of gold as Central Bankers have historically chosen to do when given access to physical gold. . This is a question Germans wished they had asked of themselves before they turned over their physical gold to US Central Bankers for holding. Furthermore, the interest granted on physical gold deposited into bank vaults still yield a real net loss when excessive government gold import taxes are factored into the equation.
German Central Bankers employed by the Bundesbank announced in 2011 that they were holding 3,396 metric tonnes of gold on behalf of the German people. They revealed that 45% of these holdings, or 1,536 tonnes, was being held by US Federal Reserve bankers. In 2012, the German government, under extreme pressure from its citizens to prove that US Central Bankers actually still had their gold and had not sold it off in the open market or leased it out to their puppet bullion banks on Wall Street in previous years to suppress the price of gold, demanded the repatriation of just a tiny fraction, or 150 tonnes of the 1,536 tonnes held by US Central Bankers. During the first year after Germany’s repatriation request, US Central Bankers returned a paltry 5 tonnes of gold out of the 150 tonnes requested. After this insult, Germany increased the request for 300 tonnes to be returned by 2020, which was still less than 20% of their gold held by US Central Bankers. In 2014, US Central Bankers returned 85 tonnes to Germany, and earlier this year, an additional 90 tonnes had been confirmed as returned to Germany. Still, there are many questionable irregularities with the return of even this small fraction of Germany’s gold to date thus far.
In 2014, the 5 tonnes of gold returned to Germany came in the form of melted down and recast gold bars, thereby confirming that the gold returned to Germany was not the gold Germany had deposited with US Central Bankers. If this gold was not Germany’s gold, whose was it? Was it gold stolen from Iraq or Libya? Since Germany only asked for less than 20% of their gold back from US Central Bankers, why is it taking 8 years for US Central Bankers to return it? Why could it not be returned in a few weeks time as is entirely logical if the US Federal Reserve bankers actually still have it? Why has Germany not requested for all of its 1,536 tonnes of gold to be returned, and why did they only ask for a paltry 300 tonnes be returned? This is not a broke and bankrupt post-WWII Germany of which we are speaking and certainly Germany can build vaults secure enough to store all 1,536 tonnes of its gold. As there is absolutely no reason for Germany not to hold 100% of its gold within its domestic borders, why are they continuing to allow other countries to keep their gold? Finally, why did the Bundesbank release statements that all of the gold returned to them in 2014 and 2015 matched serial numbers, fineness and weight of bars given to the US Central Bankers for holding when in 2013 none of the bars matched? Though German Central Bankers released their gold bar list, only because of extreme public pressure to do so, the gold bar list contained bar melt/inventory numbers, fineness, and weight, but still lacked refinery names, refinery numbers and manufactured years. In other words, the bar list released by the Bundesbank was still far from transparent.
So Indian citizens, with tons of historical precedent from which not only to draw, but also from which to learn, one would be advised to weigh bankers’ claims that physical gold deposited with a bank will remain there with extreme skepticism. Unless you can be given written assurances in any contract you sign with a banker that they will expressly not use the gold deposited with them to suppress the price of gold, you should refrain from participating in their physical gold into paper gold programs. With gold bonds ranging from 1-3 years, 5-7 years and up to a whopping 12-15 years, with penalties for early withdrawals, if I had to guess, I would say there is a 99.9999% chance that your gold is going to be sold off into the open market during the duration of these bonds, even if bankers claim in the prospectuses that the gold that backs these bonds will never leave their vaults.
The only way I would trust any other program than one in which I can buy physical gold coins and bullion and hold it outside the banking system, were if these following conditions existed, in writing, in the contracts that describe these programs and in Indian law:
(1) the bank assigns specific allocated gold bullion bars and coins to the gold I deposit at a bank,
(2) I am allowed to verify the physical location and the purity of said gold bars and coins at any time I desire by means of an independent, not a bank, auditor at the bank’s expense, and
(3) the punishment to a banker were he to ever violate either of the above two conditions (for both stored coins and bullion) is the same as outlined in the US Coinage Act of 1792 below:
Section 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of the fine gold or fine silver therein contained, or shall be of less weight or value than the same out to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer death.
Even if PM Modri and Finance Minister Jaitley’s intentions are pure with their newly instituted gold programs, if they have not instituted severe punishments to uphold the integrity of their gold programs to ensure that fraud does not occur, then their trust that bankers will uphold these gold programs honestly is misplaced and naïve and I would consider any physical gold placed in the custody of commercial bankers or Central Bankers to be part of the Indian gold demonetization plan. Without such regulations in place, this leaves their gold programs incredibly open to banker fraud, which history has already informed us will happen. The only way to ensure the integrity of such programs is to adopt the same punishments for banker fraud as contained in the US Coinage Act of 1792. And even so, if such punishments were adopted, I would still have second, third, and fourth thoughts, were I Indian, of willingly putting my physical gold into the hands of bankers. Every time the public has done so, such programs have ended very poorly for the people with no benefit to them despite false and hollow banker promises of many benefits to the people. Recall that bankers duped South Koreans, including very sadly even my own grandmother, to hand over physical gold in a “Collect Gold for the Love of Korea” campaign during the 1997 SE Asian Financial Crisis. Bankers took advantage of the extreme nationalism of Korean citizens to trick them into willingly handing over 8 tonnes of gold for zero compensation in just the first week of the program.
The final amount of collected gold was kept hidden from the public and never revealed after the bankers reached their target early in their campaign to rob South Korean citizens of their gold. Since all the collected gold was sold off and immediately given to IMF bankers to pay down IMF debt, the program would have been much more appropriately called “Collect Gold for the Love of Bankers”. I wonder how much gold Koreans would have willingly donated to “save their country” if they knew they were saving not their country, but only bankers. In conclusion, even if Modi’s and Jaitley’s intentions are pure, bankers will corrupt their gold programs without severe penalties to discourage this fraud. Of this I have zero doubt. The collective history of banker fraud in LIBOR markets, Forex markets, gold and silver derivative markets, and the resultant billions of Euros and dollars that they have already paid as an indictment of their crimes, has proven to us that there is no fine that can be imposed upon them that will stop their fraud. And if severe punishments are not in place to protect Indian citizens, then Indian citizens, I urge all of you just to continue what you have been doing and to ignore the allure of these newly introduced gold programs, as the aspects being pushed by Government officials reek of an Indian gold demonetization plan. Despite the claims of politicians and bankers of how wonderful it will be for you to convert your physical gold into digital bits on a hard drive on a bank’s server and into paper certificates, keep converting your digital and paper rupees into physical gold and physical silver whenever you can, and keep possession of your family’s wealth outside of the banking system.
Recall that politicians in India have a recent history of colluding with the Reserve Bank of India (RBI) to prevent Indian citizens from converting their digital rupees into physical gold. In early 2012, the Indian government raised import taxes on gold by 900% from a mere 1% to a massive 10% within a little over a year’s time. Furthermore, by 2013, they had raised import taxes on gold jewelry to a stifling 15% in an attempt to stop Indian citizens from converting unsound digitial and paper rupees into the sound money of gold. Politicians, when working with bankers to establish gold programs, do not deserve the benefit of any doubt because of their past history, and unless their gold programs live up to the conditions I’ve stated above, we should be wary to reject them. India may very well be a testing ground for bankers to discover if they can convince people to turn their physical gold into digital and paper gold, and they may very well attempt to spread these programs to other countries worldwide if they achieve success with them in India. If similar “gold programs” are introduced in your country, you now know why you should remain highly skeptical of them as well.
Other related maalamalama posts:
Is This the Gold and Silver Mining Stock Washout For Which We’ve Been Waiting All Year?