From Turdville With Love; An open letter to the good people of Switzerland

201
Mon, May 12, 2014 - 9:51pm

I hate to be the bearer of bad news, Switzerland, but what you suspected all along is actually true. Your gold is gone. All of it. Leased and sold away by your central bankers and politicians.

As recently as 1996, the Swiss Franc was considered "good as gold". Why was this the case? Since the early 20th century, the Swiss Franc had offered a reserve backing of gold. This uniquely sound currency had given the country of Switzerland considerable financial power and independence, yet, at the urging of their politicians and central bankers, the Swiss willingly forfeited this enviable position.

The demise of the Franc and Swiss sovereignty began in 1992 when the Swiss made the fateful decision to join the International Monetary Fund (IMF). The IMF's Articles of Agreement (Article IV, Sec 2b) clearly state that no member country can have a currency linked to gold and, as such, Switzerland immediately set out on a course to de-link the Franc from gold. Just four short years later, the Swiss National Bank (SNB) and the Swiss government had formed a plan to eliminate the Franc's gold backing and, in March of 1997, a revision of the Nationalbank Act was passed and all links of gold to the Franc were removed. Further, since the Swiss constitution mandated sound money, it had to be amended, too. Thus, in a hastily organized vote, a new Swiss constitution was approved in May of 2000. (https://www.efd.admin.ch/dokumentation/medieninformationen/archiv/00382/...) This served to finally and permanently sever the Franc's gold backing and initiated the Swiss into the world of global fiat currency.

The SNB has spent the 14 years since leasing and re-leasing the country's gold reserves. In 1999, the SNB reported gold reserves of 2,590 metric tonnes. The most current "audit" of SNB reserves showed just 1,040 metric tonnes of gold remaining on the balance sheet and I believe that none of this is actual, physical gold. Instead, what the SNB holds are paper claims and promissory notes. The remaining 1,040 tonnes has been sold and re-sold into the marketplace by greedy bullion banks, intent upon suppressing price through the leverage of paper metal futures contracts and rehypothecation. In other words, the "gold" that the SNB claims to hold/own on behalf of the Swiss people is gone. This makes the Swiss people just another bagholder, certain to be left in line wanting with all of the other holders of unallocated accounts when the fractional reserve bullion banking system inevitably collapses.

Furthermore, I've come to the conclusion that it was this last bit of Swiss gold that was utilized to suppress and manipulate price away from the alltime highs of September 2011. What makes me think this? Let's start with a history lesson...

Again, the Swiss officially forfeited their birthright of national independence and sovereignty when they joined the IMF in 1992. Then, by formally de-linking the Franc from gold in 2000, they accepted full membership into the clique of fiat currencies. Regardless, and perhaps just by tradition, the Swiss Franc was still considered a "safe haven" currency as late as 2011. But that's when things got out of hand.

You recall 2011, don't you? Under the weight of $600B worth of QE2, the U.S. Dollar Index was collapsing. From a high near 90 in mid-2010, it had fallen to near 73 by the spring of 2011. Shortly thereafter, the U.S. fiscal situation began to wobble as "Debt Ceiling" negotiations took place in Washington and the U.S. credit rating was downgraded by Standard & Poor's. The ensuing political rancor drove gold from $1500 to $1900 in eight weeks. Also catching a bid in this "safe haven" trade was the Swiss Franc and, in the summer of 2011, it also rallied over 20%.

"We can't have this!", screamed the Swiss Keynesians. "Something must be done or our export-driven economy will suffer", they warned. So what happened next? The SNB went ALL IN.

In the wee hours of Tuesday, September 6, 2011, the SNB announced a permanent and horrific change to the Swiss currency. Henceforth, the Franc would be linked/pegged to the Euro. No more safe haven bid. No more national sovereignty. Going forward, the Swiss were all in. Their fortunes had been officially tied to the fortunes of the European Union, for better or for worse. At this point, there was no further reason to hold any gold in reserve. Why would the Swiss need it? Their currency was now officially fiat and it's value was permanently pegged to another fiat, the Euro. What purpose would gold serve going forward? As the Keynesians say, it had become "a barbarous relic".

Left as the sole remaining "safe haven", one would have expected a huge rally in gold on 9/6/11, likely moving price up and through $2000/ounce from the weekend close near $1920. Instead, with the same counter-intuitive move to which we've all grown accustomed in the time since, gold was raided and price was smashed. Here are some flashback c&ps for you. First two charts from 9/6/11 and 9/7/11 showing the unusual price action:

And, as you might imagine, I was actively chronicling these events on this site. Here's a sample from Wednesday, Sept 7:

"I think it's quite clear now why gold responded yesterday in the opposite direction from what you would have expected. With central banks actively managing a debasement of their currencies, we are now seeing them also attempt to actively manage a debasement of gold, too. Be careful. Be very careful.

We all wondered yesterday why gold would plunge on the SNB news. Now we know. In an attempt to mitigate the "negative" effect on francs priced in gold, the SNB sold a massive amount of gold futures at the same time. How do we know this, because it appears that the same thing earlier today.

Yes, that's 7,000 contracts (700,000 ounces) (nearly 22 metric tons!) dumped on the Globex while London and NY are closed! This should also raise your deja vu spidey senses regarding silver in May. The $ drop in silver was greater because the silver market is considerably smaller. However, it's the same strategy. Maximize the downward impact and collateral damage by executing the attack at a time of minimal liquidity. This all wreaks of malicious manipulation. If you are trading, be prepared for anything."

And there you have it. Speculated upon at the time and again here in this post: The SNB is the culprit. It was the remaining SNB gold that was leased and dumped onto the market in late 2011, shoving price back from the record highs and smashing gold for nearly 0 in a little over three weeks. What was left of the Swiss gold was then leased to bullion banks throughout 2012 and the first half of 2013. Physical demand only increased, however, and that remaining Swiss gold has now been delivered to China and points East. Yes, the SNB still shows this leased gold on their balances sheet as an asset. Most every other western Central Bank utilizes the same accounting gimmick. Instead, it should be listed as a liability as the actual, physical underlying is no longer there. It is...gone for good.

Sensing this, a movement has begun in Switzerland to reclaim their sovereignty and birthright. The Swiss People's Party (SVP), which was the only major party voting against the new Constitution back in 2000, began an initiative last year to re-enforce a gold backing to the Franc. After collecting more than the requisite 100,000 signatures, a national referendum on the issue is planned. First, however, a vote was held last week in Swiss parliament. This procedural vote is basically a "recommendation" from Parliament, designed to impact the eventual, national vote. Here's how Bloomberg described it in an article dated May 5:

SWITZERLAND (BLOOMBERG) - >

Swiss parliamentarians urged rejection of a popular initiative that would curtail the Swiss National Bank’s independence by requiring it to hold a fixed portion of its assets in gold.

Members of the Swiss parliament’s lower house voted 129 to 20 with 25 abstentions today against the plan, which demands that at least 20 percent of the central bank’s assets be in gold. It would also disallow the sale of any such holdings and require all SNB gold be held in Switzerland.

No date for a national vote has yet been set. The government in November also recommended the initiative be opposed, saying it would impinge upon the SNB’s ability to conduct monetary policy. Parliament and the multi-party government issue recommendations on all national referendums as a matter of procedure.

Of course! How could anyone, in their right mind, be in favor of this:

  1. Demanding that at least 20% of your central bank assets be in gold
  2. Disallowing any sale of said gold
  3. Require repatriation of all foreign-held gold

Don't you silly peasants know what's good for you? By making these demands, you "impinge on your central bank's ability to conduct monetary policy" and "curtail the SNB's independence"!

Then, check this out, also from the same Bloomberg story. Last year, even Thomas Jordan, the head of the SNB, got in on the act:

"SNB President Thomas Jordan took the extraordinary step of commenting on politics last year when he urged rejection of the initiative, saying it would crimp the Zurich-based institution’s independence and force it into “large-scale” purchases to meet the required 20 percent threshold."

Hmmm. "Large-scale purchases", just to get back to the 20% threshold? Well, that's interesting, now isn't it? And what about this repatriation requirement? Why should that be a big deal? The SNB currently provides this list of its gold storage:

  • 70% (728 mts) of the gold is already held in Switzerland
  • 20% (208 mts) is held at The Bank of England
  • and 10% (104 mts) is held at The Bank of Canada

I can't speak for the 104 metric tonnes held in Canada but the Swiss people should be very nervous about the gold the SNB allegedly stores in London (https://www.tfmetalsreport.com/podcast/5678/empty-vaults-london). Also, the SNB has been reticent to discuss where in Switzerland their gold is stored. Could this be because the "gold" is stored with the Bank of International Settlements for easy distribution and leasing? And where is the BIS? It's in Basel, of course. And where is Basel? It's in Switzerland!! How about that??

Look, I'll cut the chase here to save some time. Here's the "open letter":

To the good people of Switzerland:

You have been scammed and sold down the river. Your politicians and bankers, in a pathetic attempt to consolidate power and curry favor with the EU, have given away your independence and your historic sovereignty. You should be angry.

The initiative you have taken and the referendum you have planned are all well and good. I applaud you for taking these steps within the context of Swiss law and tradition. However, you must understand what is truly at stake and if you don't take more powerful and forceful acts soon, the likelihood of you ever regaining your birthright as an independent, sovereign nation is slim.

The next steps you undertake must include these:

  • Demand an immediate and full, independent audit of the SNB gold reserves. This is your gold, not the SNB's, and you should be allowed a full accounting.
  • All Swiss gold that is held domestically must be held in Swiss-owned bank vaults, not at the BIS.
  • Demand an immediate repatriation of all foreign-held gold. Do not accept excuses regarding "logistics". Give the BoE and the BoC no more than 90 days to return your gold.
  • Immediately de-peg the Franc from the Euro and divest yourself of all accumulated Euro holdings. Ignore the Keynesian shills who would have you believe that a strong currency is bad for economic growth.
  • Use the process of divesting yourself of the Euro to accumulate and rebuild your gold reserves. Then, use these reserves to once again partially back your currency.

The world is rapidly changing and tomorrow will not be like yesterday. The current global financial system, based upon promises, debt and unlimited fiat currency will one day soon by replaced by a system that returns the world to a sound money platform. The monetary powers of the 21st Century will come to the forefront by virtue of their accumulated reserves of sound money, not by their addiction to easy money.

You, Switzerland, still have time to act and prepare but you must move quickly. The possibility exists for you to reverse course and demand change but time is short. The end of the great Keynesian experiment is upon us. Reclaim your gold and your sovereignty now or be forever consigned to the trash heap of fiat currency history.

Faithfully submitted with all sincerity,

TF

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  201 Comments

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rl999
May 14, 2014 - 11:36am

Uranium

There are numerous positions recommended by casey research. UEC and CCJ are two of his top picks. He just sold URPF or URPT - uranium participation fund.

To summarize one of his articles - the japanese nuclear disaster caused the price to plummet when they sold all their uranium fuel into the market. now they are going to restart all their power plants, right after they buy all the fuel on the open market. This should cause price to spike.

He views this as a 1-5 year speculation. Says it costs more to mine it than you can sell it for per kg. Says it needs to go up substantially (but I cant remember his price target).

CPE
May 14, 2014 - 11:33am

@ivars

No one knows the future, but a change in the global financial system of that magnitude will not come without massive strain on TBTJail counterparties. The Quadrillion in derivatives is completely unreserved. I don't believe there is any way to judge the magnitude of the sort of real demand on physical when it loses the alchemous paper trappings and counterparties realize there is nothing else that is truly a liquid haven in the storm.

Look at the blue chart above, the Reserve Bank of India estimates 92 paper claims for every real physical ounce. And yet it's still a few basis points of the notional value of "financial" assets. When demand finally bids for real physical, no price will be too high. Printing will be Weimaresque. Banks won't trust each other and derivatives, which are completely unreserved, will pop up out of nowhere since they are all off balance sheet. Either they blow up or the IMF papers them over by printing a hundred trillion to prop up the net becoming gross on those awful things.

ivars
May 14, 2014 - 11:26am

@CPE

Yes dollars will be replaced partly by e.g. remnibi, no big deal. Dollar supply will stop growing, gold price in USD will have now reason to go up above 2011 spike. It was overstretch of USD as reserve currency that caused the bubble. Now with remnibi in sight to share the burden of reserve currency, investors will slowly relax on Gold price in USD.

CPE
May 14, 2014 - 11:19am
May 14, 2014 - 11:19am

Uranium

Are there any Uranium ETFs?

My retirement trading account will not let me invest in stocks, just mutual funds and ETFs.

ancientmoneyrealitybiter
May 14, 2014 - 11:13am

realitybiter re: uranium, UEC, CCJ . .

"He says Uranium is severely underpriced. Need at least $70 a pound to be sustainably mined. Demand is strong. Both Japan and Germany are realizing they can't live without it. Current price is $29 a pound....down from $150"

------------------------------------------------------------------------------------------------

If I wanted to be in stocks, these are ones I would consider as good value plays, based on the fact that I believe uranium is undervalued based on the demographics today.

However, if dollars become worthless, (or worth less) then dollar-denominated stocks would be difficult to wring value out of, I think.

Or, if the demographics suddenly change (a failure of the western financial system would put the brakes on most everything in construction, etc. for awhile), the "value" may diminish or tank.

And, unlike gold or silver, you can't stack physical uranium very easily.

It might be a good trading play, for short-term gains to plow back into PMs, but to me it's too risky given the world situation today. Just my humble opinion, of course.

Safety Dan
May 14, 2014 - 11:01am
CPE
May 14, 2014 - 11:01am

But the bubble in is dollars not gold

The bubble is in FRN's, not gold...

ivars
May 14, 2014 - 10:57am

Typical price pattern after

Typical price pattern after bubbles ( this is bitcoin):

If you overlay this with gold , there is not much upwards excitement in next 20 years:

__________________

realitybiterrl999
May 14, 2014 - 10:56am

RL999 UEC

Listened to a Rick Rule interview a week or so ago. He says Uranium is severely underpriced. Need at least $70 a pound to be sustainably mined. Demand is strong. Both Japan and Germany are realizing they can't live without it. Current price is $29 a pound....down from $150

To his credit he was one of the first to cite the madness of the first uranium bull market and the correction.

Nuclear power is an incendiary topic. Over the course of the last several decades it has been documented that some of the most vocal anti-nuke sources were none other than "big coal". This makes sense. Nuclear was quite the threat to coal. Nat gas, being readily abundant, is now the big comp. The global warming advocates like nat gas better than coal, but see nuke as cleaner...Not stating any opinion, just the landscape.

The chart action on CCJ looks fantastic for a very, very robust base. Weeklies have put in a very very big floor and making higher lows and highs. I suspect that launch will be quite volatile for the little playas like UEC.

As always, wtfdik? I own UEC. I had gotten so board with it that I had forgotten that I owned it until its big green day stuck out like a sore thumb yesterday....

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