Friday, February 18, 2011

Fools' Gold

Posted by Patrick A Heller on February 17, 2011 10:32 AM

JPMorgan Chase just announced that it is willing to accept physical gold as collateral for loans made by the bank. In effect, the bank is accepting gold as representing liquid money! However, there is an interesting side note to this development. JPMorgan Chase is a major custodian for gold exchange traded funds. Therefore, it should know whether the ETFs really possess all the gold it supposedly owns to cover 100% of its outstanding shares. Well, JPMorgan Chase specifically will not accept gold ETF shares as collateral against loans made by the bank. Does someone at the bank know something they are not telling the public?

The judge in the Freedom of Information Act lawsuit by the Gold Anti-Trust Action Committee, Inc. (GATA) seeking information about gold swaps by the Federal Reserve has issued an order to the Fed to turn over one document by February 18 that the Fed had attempted to exempt from disclosure. The judge had reviewed ten documents to evaluate whether there were valid grounds to exempt them from disclosure. Though the judge did exempt nine documents from disclosure, the nature of the subject of the documents did go on the record. Some of them involved the US government discussing gold swap arrangements with other central banks. This information proved that the Federal Reserve had lied when it constantly claimed that no such gold swap discussions ever occurred.

It is possible that Rep. Ron Paul (R-TX) may use his subcommittee chairmanship to pressure the Fed to disclose more information about it gold holdings and trading practices, which efforts were blocked by Congressional leadership in the previous Congress.