Confessions of an Intellectual Geisha

I don't know if you've read the letter copied at bottom in its entirety -- the man who crashed his plane into the IRS building in Austin. It's inarticulate and rambles a lot, and mostly not worth reading. But parts are also a fascinating and revealing psychological confession of the desperate need people have for philosophy, which Joe Stack didn't. Some things he says reminds me so much of characters in Atlas Shrugged -- right down to this, near the end:

"I know I’m hardly the first one to decide I have had all I can stand. It has always been a myth that people have stopped dying for their freedom in this country, and it isn’t limited to the blacks, and poor immigrants. I know there have been countless before me and there are sure to be as many after. But I also know that by not adding my body to the count, I insure nothing will change. I choose to not keep looking over my shoulder at “big brother” while he strips my carcass, I choose not to ignore what is going on all around me, I choose not to pretend that business as usual won’t continue; I have just had enough."

And yet, at the end, he condemns capitalism, and lauds communism! This is the confusion in the minds of too many people.

I had no real interest in reading Stack's suicide note, but looked it up when I read that it had been taken down from his website. Probably because of too much traffic rather than any conspiracy, but I thought I'd better check the content. Definitely not a conspiracy. Stack was just a sadly confused guy who didn't know how to fix things beyond destruction.

I think his suicide note is now being labeled a "manifesto" by the Left to discredit the "anti-government" crowd, including Tea Party protesters, Objectivists, and everyone else they put under that label. The irony is that Joe Stack's note is really an anti-manifesto. A completely un-philosophical screed. The Left would love calling it something so contradictory-- because it would leave the entire realm of philosophy to them, and leave the impression that anyone opposed to big government is a crackpot.

Contrast Joe Stack's letter to Quentin Daniels, in Atlas Shrugged:

Dear Miss Taggart:

I have fought it out for three weeks, I did not want to do it, I know how this will hit you and I know every argument you could offer me, because I have used them all against myself--but this is to tell you that I am quitting. I cannot work under the terms of Directive 10-289 -- though not for the reason its perpetrators intended. I know that their abolition of all scientific research does not mean a damn to you or me, and that you would want me to continue. But I have to quit, because I do not wish to succeed any longer.

I do not wish to work in a world that regards me as a slave. I do not wish to be of any value to people. If I succeeded in rebuilding the motor, I would not let you place it in their service. I would not take it upon my conscience that anything produced by my mind should be used to bring them comfort.

I know that if we succeed, they will be only too eager to expropriate the motor. And for the sake of that prospect, we have to accept the position of criminals, you and I, and live under the threat of being arrested at any moment at their whim. And this is the thing that I cannot take, even were I able to take all the rest: that in order to give them an inestimable benefit, we should be made martyrs to the men who, but for us, could not have conceived of it. I might have forgiven the rest, but when I think of this, I say: May they be damned, I will see them all die of starvation, myself included, rather than forgive them for this or permit it!

To tell you the full truth, I want to succeed, to solve the secret of the motor, as much as ever. So I shall continue to work on it for my own sole pleasure and for as long as I last. But if I solve it, it will remain my private secret. I will not release it for any commercial use. Therefore, I cannot take your money any longer. Commercialism is supposed to be despicable, so all those people should truly approve of my decision, and I -- I'm tired of helping those who despise me.

I don't know how long I will last or what I will do in the future. For the moment, I intend to remain in my job at this Institute. But if any of its trustees or receivers should remind me that I am now legally forbidden to cease being a janitor, I will 'quit.

You had given me my greatest chance and if I am now giving you a painful blow, perhaps T should ask you to forgive me, I think that you love your work as much as I loved mine, so you will know that my decision was not easy to make, but that I had to make it.

It is a strange feeling -- writing this letter. I do not intend to die, but I am giving up the world and this feels like the letter of a suicide. So I want to say that of all the people I have known, you are the only person I regret leaving behind.

Sincerely yours, Quentin Daniels

Somehow, I don't think Stack ever read Atlas.

http://www.businessinsider.com/joseph-andrew-stacks-insane-manifesto-2010-2

Suicide Note of Joseph Stack:

If you’re reading this, you’re no doubt asking yourself, “Why did this have to happen?” The simple truth is that it is complicated and has been coming for a long time. The writing process, started many months ago, was intended to be therapy in the face of the looming realization that there isn’t enough therapy in the world that can fix what is really broken. Needless to say, this rant could fill volumes with example after example if I would let it. I find the process of writing it frustrating, tedious, and probably pointless… especially given my gross inability to gracefully articulate my thoughts in light of the storm raging in my head. Exactly what is therapeutic about that I’m not sure, but desperate times call for desperate measures.

We are all taught as children that without laws there would be no society, only anarchy. Sadly, starting at early ages we in this country have been brainwashed to believe that, in return for our dedication and service, our government stands for justice for all. We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principals represented by its founding fathers. Remember? One of these was “no taxation without representation”. I have spent the total years of my adulthood unlearning that crap from only a few years of my childhood. These days anyone who really stands up for that principal is promptly labeled a “crackpot”, traitor and worse.

While very few working people would say they haven’t had their fair share of taxes (as can I), in my lifetime I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.

And justice? You’ve got to be kidding!

How can any rational individual explain that white elephant conundrum in the middle of our tax system and, indeed, our entire legal system? Here we have a system that is, by far, too complicated for the brightest of the master scholars to understand. Yet, it mercilessly “holds accountable” its victims, claiming that they’re responsible for fully complying with laws not even the experts understand. The law “requires” a signature on the bottom of a tax filing; yet no one can say truthfully that they understand what they are signing; if that’s not “duress” than what is. If this is not the measure of a totalitarian regime, nothing is.

How did I get here?

My introduction to the real American nightmare starts back in the early ‘80s. Unfortunately after more than 16 years of school, somewhere along the line I picked up the absurd, pompous notion that I could read and understand plain English. Some friends introduced me to a group of people who were having ‘tax code’ readings and discussions. In particular, zeroed in on a section relating to the wonderful “exemptions” that make institutions like the vulgar, corrupt Catholic Church so incredibly wealthy. We carefully studied the law (with the help of some of the “best”, high-paid, experienced tax lawyers in the business), and then began to do exactly what the “big boys” were doing (except that we weren’t steeling from our congregation or lying to the government about our massive profits in the name of God). We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.

The intent of this exercise and our efforts was to bring about a much-needed re-evaluation of the laws that allow the monsters of organized religion to make such a mockery of people who earn an honest living. However, this is where I learned that there are two “interpretations” for every law; one for the very rich, and one for the rest of us… Oh, and the monsters are the very ones making and enforcing the laws; the inquisition is still alive and well today in this country.

That little lesson in patriotism cost me $40,000+, 10 years of my life, and set my retirement plans back to 0. It made me realize for the first time that I live in a country with an ideology that is based on a total and complete lie. It also made me realize, not only how naive I had been, but also the incredible stupidity of the American public; that they buy, hook, line, and sinker, the crap about their “freedom”… and that they continue to do so with eyes closed in the face of overwhelming evidence and all that keeps happening in front of them.

Before even having to make a shaky recovery from the sting of the first lesson on what justice really means in this country (around 1984 after making my way through engineering school and still another five years of “paying my dues”), I felt I finally had to take a chance of launching my dream of becoming an independent engineer.

On the subjects of engineers and dreams of independence, I should digress somewhat to say that I’m sure that I inherited the fascination for creative problem solving from my father. I realized this at a very young age.

The significance of independence, however, came much later during my early years of college; at the age of 18 or 19 when I was living on my own as student in an apartment in Harrisburg, Pennsylvania. My neighbor was an elderly retired woman (80+ seemed ancient to me at that age) who was the widowed wife of a retired steel worker. Her husband had worked all his life in the steel mills of central Pennsylvania with promises from big business and the union that, for his 30 years of service, he would have a pension and medical care to look forward to in his retirement. Instead he was one of the thousands who got nothing because the incompetent mill management and corrupt union (not to mention the government) raided their pension funds and stole their retirement. All she had was social security to live on.

In retrospect, the situation was laughable because here I was living on peanut butter and bread (or Ritz crackers when I could afford to splurge) for months at a time. When I got to know this poor figure and heard her story I felt worse for her plight than for my own (I, after all, I thought I had everything to in front of me). I was genuinely appalled at one point, as we exchanged stories and commiserated with each other over our situations, when she in her grandmotherly fashion tried to convince me that I would be “healthier” eating cat food (like her) rather than trying to get all my substance from peanut butter and bread. I couldn’t quite go there, but the impression was made. I decided that I didn’t trust big business to take care of me, and that I would take responsibility for my own future and myself.

Return to the early ‘80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer... and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.

For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report (http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport) regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here (http://www.synergistech.com/ic-taxlaw.shtml).

SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.

(a) IN GENERAL - Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:

(d) EXCEPTION. - This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.

(b) EFFECTIVE DATE. - The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.

Note:
· "another person" is the client in the traditional job-shop relationship.
· "taxpayer" is the recruiter, broker, agency, or job shop.
· "individual", "employee", or "worker" is you.

Admittedly, you need to read the treatment to understand what it is saying but it’s not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.

During 1987, I spent close to $5000 of my ‘pocket change’, and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time. I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their “freedom”. Oh, and don’t forget, for all of the time I was spending on this, I was loosing income that I couldn’t bill clients.

After months of struggling it had clearly gotten to be a futile exercise. The best we could get for all of our trouble is a pronouncement from an IRS mouthpiece that they weren’t going to enforce that provision (read harass engineers and scientists). This immediately proved to be a lie, and the mere existence of the regulation began to have its impact on my bottom line; this, of course, was the intended effect.

Again, rewind my retirement plans back to 0 and shift them into idle. If I had any sense, I clearly should have left abandoned engineering and never looked back.

Instead I got busy working 100-hour workweeks. Then came the L.A. depression of the early 1990s. Our leaders decided that they didn’t need the all of those extra Air Force bases they had in Southern California, so they were closed; just like that. The result was economic devastation in the region that rivaled the widely publicized Texas S&L fiasco. However, because the government caused it, no one gave a shit about all of the young families who lost their homes or street after street of boarded up houses abandoned to the wealthy loan companies who received government funds to “shore up” their windfall. Again, I lost my retirement.

Years later, after weathering a divorce and the constant struggle trying to build some momentum with my business, I find myself once again beginning to finally pick up some speed. Then came the .COM bust and the 911 nightmare. Our leaders decided that all aircraft were grounded for what seemed like an eternity; and long after that, ‘special’ facilities like San Francisco were on security alert for months. This made access to my customers prohibitively expensive. Ironically, after what they had done the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY! After these events, there went my business but not quite yet all of my retirement and savings.

By this time, I’m thinking that it might be good for a change. Bye to California, I’ll try Austin for a while. So I moved, only to find out that this is a place with a highly inflated sense of self-importance and where damn little real engineering work is done. I’ve never experienced such a hard time finding work. The rates are 1/3 of what I was earning before the crash, because pay rates here are fixed by the three or four large companies in the area who are in collusion to drive down prices and wages… and this happens because the justice department is all on the take and doesn’t give a fuck about serving anyone or anything but themselves and their rich buddies.

To survive, I was forced to cannibalize my savings and retirement, the last of which was a small IRA. This came in a year with mammoth expenses and not a single dollar of income. I filed no return that year thinking that because I didn’t have any income there was no need. The sleazy government decided that they disagreed. But they didn’t notify me in time for me to launch a legal objection so when I attempted to get a protest filed with the court I was told I was no longer entitled to due process because the time to file ran out. Bend over for another $10,000 helping of justice.

So now we come to the present. After my experience with the CPA world, following the business crash I swore that I’d never enter another accountant’s office again. But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.

When we received the forms back I was very optimistic that they were in order. I had taken all of the years information to Bill Ross, and he came back with results very similar to what I was expecting. Except that he had neglected to include the contents of Sheryl’s unreported income; $12,700 worth of it. To make matters worse, Ross knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me.

This left me stuck in the middle of this disaster trying to defend transactions that have no relationship to anything tax-related (at least the tax-related transactions were poorly documented). Things I never knew anything about and things my wife had no clue would ever matter to anyone. The end result is… well, just look around.

I remember reading about the stock market crash before the “great” depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything. Isn’t it ironic how far we’ve come in 60 years in this country that they now know how to fix that little economic problem; they just steal from the middle class (who doesn’t have any say in it, elections are a joke) to cover their asses and it’s “business-as-usual”. Now when the wealthy fuck up, the poor get to die for the mistakes… isn’t that a clever, tidy solution.

As government agencies go, the FAA is often justifiably referred to as a tombstone agency, though they are hardly alone. The recent presidential puppet GW Bush and his cronies in their eight years certainly reinforced for all of us that this criticism rings equally true for all of the government. Nothing changes unless there is a body count (unless it is in the interest of the wealthy sows at the government trough). In a government full of hypocrites from top to bottom, life is as cheap as their lies and their self-serving laws.

I know I’m hardly the first one to decide I have had all I can stand. It has always been a myth that people have stopped dying for their freedom in this country, and it isn’t limited to the blacks, and poor immigrants. I know there have been countless before me and there are sure to be as many after. But I also know that by not adding my body to the count, I insure nothing will change. I choose to not keep looking over my shoulder at “big brother” while he strips my carcass, I choose not to ignore what is going on all around me, I choose not to pretend that business as usual won’t continue; I have just had enough.

I can only hope that the numbers quickly get too big to be white washed and ignored that the American zombies wake up and revolt; it will take nothing less. I would only hope that by striking a nerve that stimulates the inevitable double standard, knee-jerk government reaction that results in more stupid draconian restrictions people wake up and begin to see the pompous political thugs and their mindless minions for what they are. Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer. The cruel joke is that the really big chunks of shit at the top have known this all along and have been laughing, at and using this awareness against, fools like me all along.

I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.

The communist creed: From each according to his ability, to each according to his need.
The capitalist creed: From each according to his gullibility, to each according to his greed.

Joe Stack (1956-2010)

02/18/2010

X( :-S >:) Religicons' Attempts to Steal Submersed Tea <:-P ;P =;

Reading various comments on attempts by religious right and neocons to steal the momentum of the Tea Party movement for their "vision" of the Republican party, as well as reading the organized hatchet jobs on Ayn Rand in the mainstream media (eg, New Criterion), I continue to wonder (as I have for decades without firm resolution) if there isn't value in a true third party. Is the Republican Party beyond redemption? I bring this up despite the inevitable criticism that a third party can't do anything except steal votes that keeps democrat statists in power. Yet, if the religicons keep hold of the Republicans, is that any better?

Until the Tea Party movement, I'd accepted the fact that a third party mainly takes votes from one party's candidates--Republicans, usually--giving advantage to the other party in most elections. In that context, a third party is destructive (unless the Republican candidates are worse).

After Massachusetts, I'm not so sure. If a third party came along today and was very selective about where it ran (always pick your battles so you don't look weak), I wonder if it could be quite successful and influential in shaping the course of politics in this country, even if it only won a few members office in Congress in the near term.

In locales with a large population of independents, I think a third party with a platform constructed to appeal to rational voters who uphold secular government and freedom could draw votes from both Republican and Democratic candidates representing the status quo. I've noticed for some time that neither party represents significant numbers of people today.

That's partly what the Tea Party is a reaction against. Who represents the patriotic, gun-toting guy who wants to get rich and doesn't want to be taxed to death for global welfare programs, but who doesn't think religion belongs in government, has nothing against hard-working immigrants who want to be Americans, and thinks it's nobody else's damned business what a woman does with her body?

Steve Bailey is running here in Colorado as a Republican, and I know nothing of his chances--he's got Left-Wing Boulder in his district, I think. But I never in a million years would have thought a Republican could have taken Ted Kennedy's seat, and certainly not so decisively.

My lack of knowledge of the details of politics makes me highly unqualified to have an opinion, but that's never stopped me before, so I'll say: I think a secular third party (the Tea Party) could do well in targeted places fed up with big government and religion and bad schools and anti-U.S. bashing and any number of other things. Maybe selected districts in California qualify. That would be an excellent counterattack against the neo-religicons trying to subvert the Tea Party message, because it would do an end-run around all their flacks controlling the primary and caucus process. (Remember, that's how the religious conservatives grabbed the Republican Party in the first place.)

I think our opponents are missing the point that when the independents (as in Massachusetts) outnumber the main parties and pull equal numbers from either party in an election, an independent can win. So better to create a party for the independent and give him an intellectual message and a coherent platform to attract like-minded candidates and voters. Better than making him the odd man out in a party of losers.

P.S.: See http://messenger.yahoo.com/features/emoticons/ for explanation of that title.

AGW hits Snowstorm

I'm not the only one to notice, but there's a message here...

A World Lit Only by ...

I've been out of touch for a bit as I've pursued employment and tried to raise venture capital for a high-tech business (not to mention the death of a very close friend pulled me down), but reading an acquaintance's defense of self-interest in another forum, I was inspired to make make my own statement:

The self-interested individual pursues values as the only means of sustaining, furthering and enriching his life, with all that implies. The self-sacrificial person necessarily pursues a course that rejects all values related to life on this Earth. That is the nature and contradiction of sacrifice: the "value" of renouncing values.

The self-sacrificial person upholds the absurd notion of what I'd call the "leaky bucket" ethics--that the bigger the hole and the more you lose the more you gain. (Not unlike Keynesian economics and deficit financing by the government.) It's so absurd that they have to place their reward in the Twilight Zones of Heaven or Social Approval, because no one can act without a personal reward of some kind. The true self-sacrificer is borderline psychotic (psychosis: out of touch with reality): he needs the delusion of a chimera.

The self-interested individual wants to live, here and now. He simply wants his reward in reality and he'll fight to the death, if necessary, to preserve his right to his reward. He'll fight for everyone and everything he holds dear, because to betray or lose those things would make his life--and by implication, all life--impossible and meaningless. Only self-interested individuals who passionately pursue their own happiness can create or preserve values, create or preserve happiness on Earth.

Happiness on Earth is not created by "do-gooders" who sacrifice to "help" others. It is simply what you have when every individual is happily pursuing their own self-interest and achieving their own values. The self-sacrificer thinks happiness can be caused by short-circuiting the means to happiness and taking away the preconditions for it. The truly selfish individual blows no fuses: he electrifies his life with values (to pursue this metaphor) and the effect is to light the world.

Postscript: After writing this, I coincidentally received a note with these relevant quotes from Ayn Rand:

"Do not confuse altruism with kindness, good will or respect for the rights of others. These are not primaries, but consequences, which, in fact, altruism makes impossible. The irreducible primary of altruism, the basic absolute, is self-sacrifice—which means; self-immolation, self-abnegation, self-denial, self-destruction—which means: the self as a standard of evil, the selfless as a standard of the good.

"Do not hide behind such superficialities as whether you should or should not give a dime to a beggar. That is not the issue. The issue is whether you do or do not have the right to exist without giving him that dime. The issue is whether you must keep buying your life, dime by dime, from any beggar who might choose to approach you. The issue is whether the need of others is the first mortgage on your life and the moral purpose of your existence. The issue is whether man is to be regarded as a sacrificial animal. Any man of self-esteem will answer: “No.” Altruism says: 'Yes.'”

Which then reminded me of Galt's Speech in Atlas Shrugged:

"'Sacrifice' does not mean the rejection of the worthless, but of the precious. 'Sacrifice' does not mean the rejection of evil for the sake of the good, but of the good for the sake of evil. 'Sacrifice' is the surrender of that which you value in favor of that which you don't.

"If you exchange a penny for a dollar, it is not a sacrifice; if you exchange a dollar for a penny, it is. If you achieve the career you wanted, after years of struggle, it is not a sacrifice; if you then renounce it for the sake of a rival, it is. If you own a bottle of milk and give it to your starving child, it is not a sacrifice; if you give it to your neighbor's child and let your own die, it is.

"If you give money to help a friend, it is not a sacrifice; if you give it to a worthless stranger, it is. If you give your friend a sum you can afford, it is not a sacrifice [...] If you give him money at the cost of disaster to yourself--that is the virtue of sacrifice in full.

"Whoever is now within reach of my voice, whoever is man the victim, not man the killer, I am speaking at the deathbed of your mind, at the brink of that darkness in which you're drowning. If there still remains within you the power to struggle to hold on to those fading sparks which had been your self--use it now: the word that has destroyed you is 'sacrifice.' Use the last of your strength to understand its meaning. You're still alive. You have a chance."

Gold and Economic Freedom

A friend recently remarked to me,

I am also not convinced that if there is a total meltdown like these guys predict that precious metals are going to be all that precious anymore. They become themselves a fiat currency, since gold is useless. It's merely a social convention that it's valued (along with being fungible and limited), and that can break down pretty easily. It's easier to believe people will be forced to barter in immediate necessities (e.g. food/water/guns/ammo).

I had to respond to the suggestion that precious metals might not be precious, even in some horrendous economic conditions. I agree, in a way it's a curious thing that people value gold and silver as much as they do, but it's also remarkable that they have valued them so much for so many thousands of years, in economies (Incas, for instance) that were so immeasurably worse than ours. Why this is so is interesting in itself. Some of it was discussed in Greenspan's essay "Gold and Economic Freedom" in "Capitalism, the Unknown Ideal". (I hate referring to Greenspan, but the points in the article are still valid, even if he betrayed his own ideals and everyone else much later.) So I answered:

Gold is far from useless -- many properties of gold make it valuable, even in a primitive society, but even more so in an advanced one:

• malleability and ductility (it's easy to form into complex shapes, and easy to subdivide into very small quantities),
• non-reactive, non-corrosive, and low immiscibility (if that's the right word) with many other elements, so it stays pure,
• non-toxic (safe to handle),
• doesn't oxidize easily (it won't corrode like iron or even silver does, so it retains its form in jewelry, coins and bullion over long periods of time),
• very high density (it has one of the highest atomic numbers to occur naturally and very small quantities can represent large stores of value in other things),
• high electrical conductivity (useful for engineering, but also for verifying the purity of gold),
• easily electroplated (it can be deposited in atomically thin layers), not to mention
• a highly desirable appearance that is created and maintained because of these properties.

Then throw in the historical and mythological value of gold to people -- it occurs throughout history. Subjective, perhaps, but not to be dismissed.

Then consider that someone can't just make gold in their basement -- alchemysts notwithstanding. (Only 161,000 tonnes of gold have been mined in human history -- a cube 67 feet on a side; compare that to all the iron ever produced!)

And last, all these properties make it extremely easy for someone to objectively determine if they are receiving pure gold and not some fake dubloons. It's impossible to devalue gold with fakes, and this offers tremendous protection against being defrauded. Putting aside reports of gold depositories storing fake bullion that no one can get access to to verify, it's extremely hard to make undetectable "slugs" or bullion filled with some heavier metal filling (a combination of two isotopes of tungsten have damn near the density of gold). Combined with a heavy gold plating, it might have a net density and exterior appearance of gold, but you can detect the fake. I looked into it at length a few months ago, not cause I wanted to go into that line of work, but to prove it couldn't be done. I found several completely reliable means of detecting pure gold. For one, electrical conductivity. There's simply no way to fake it, and the equipment to do so can be made in your garage. Magnetic properties exist, also.

Applications today abound in engineering (gold has long been used in many high-performance microchips), dentistry, etc., but even today most gold usage is in jewelry. I did some research awhile ago into gold pricing to figure out why the price wasn't moving very much and found that almost 60% of gold consumption was jewelry (see http://www.research.gold.org/supply_demand/ for instance), and most of the remainder was electronics and bullion, with relatively little into coins. That's one reason the high demand for coins today hasn't driven up the price of gold more than it has.

Back to the main point. As Greenspan discussed (and remember, Ayn Rand edited all those essays -- nothing got written without her agreement with the content), gold is invaluable even in a pre-industrial society as a form of money because it simply is incredibly difficult to conduct transactions on a barter basis alone.

Take an industrial example of barter, though. Imagine you're a big farmer with a lot of wheat and what you need desperately is gasoline to power your tractors, but the guy selling the gasoline has plenty of wheat already, and he doesn't want to expend the effort to find buyers of wheat, nor build facilities to store your wheat, nor bear the risk of having the wheat go moldy on him till he finds a buyer. (Maybe it's right after the wheat harvest and everyone and their cousin is selling wheat, but fall rains are a possibility.) But suppose you have some hard money -- great: for the guy selling gasoline, that's fungible and it saves him a lot of work and eliminates the risk of your transaction. But suppose the government is promoting paper currency while running xerox machines night and day. That paper may be rapidly diminishing in value (as today). The guy selling the gas has to make an estimate of the rate of decline in value of the paper money, including a generous margin of error in his own estimate. He ups the price of his gas to include the extra risk and the time value of money, till he can spend it himself.

But suppose you, the seller of wheat come to this guy with hard gold -- a form of currency that the government *can't* dilute and devalue. Your stature goes up with the gasoline seller, immensely. (Assuming he won't get thrown into prison because the government has made possesion of gold a capital offense.) You've suddenly eliminated the risk and time factors from his transactions. You get a big discount on your gasoline. Likewise, when you want to sell your wheat to the local grainery, how do you view the transaction if the grainery pays you in gold or in government fiat? I bet you offer a much better price for gold, especially if the economy sucks.

But what if the grainery offered you copper instead (maybe they're getting paid in copper wire stolen from the power lines around the country)? Copper is running around $3/lb today (http://www.metalprices.com/FreeSite/metals/cu/cu.asp). Gold, in contrast, is about $1100/troy ounce (14.6 troy ounce/lb), or $16,000 per pound. On top of that, gold is over twice as dense as copper (19.3g/cc vs 8.92 g/cc), so you can carry home almost twice the value of gold from your harvest ($35k/lb). Or twice the value back into town to pay for other farm supplies (like gasoline).

When you consider all these factors, it's just very, very unlikely (I would say impossible, barring the wiping out of 99.99% of the human race to scattered tribes of 20 people or less per tribe) for gold to lose its value, and for humans to rise to any higher level, they will need an objective form of currency which gold provides better than any other substance.

Gold Price Manipulation?

Here's something I wrote about 10 months ago that is relevant to my last post. I dug up information in relation to the question of "is the price of gold being manipulated?" While I don't claim to have a good answer to my speculation about gold swap/trades being a possible mechanism for price suppression (I've had a half-dozen people respond, about 50-50 pro-con), this data at least appears to support the assertion that demand is way up relative to supply:

http://www.research.gold.org/supply_demand/ Identifiable gold demand

Note that the table shows that gold bar hoarding is only 9% of total demand. True or not, that would greatly diminish the upward price pressure on gold from panicked investors. On the other hand, note that I don't have figures for Q4 2008 or Q1 2009 -- the panic has surely accelerated since the election and the "stimulus bill" (even among supporters of that bill).

If you grant that gold production is declining, the link says:

"The biggest contributor to the increase in total identifiable demand in Q3 was identifiable investment, up 137.5 tonnes (56%) relative to year-earlier levels. Jewellery demand rose 45.5 tonnes or 8%, while industrial and dental demand declined 11%."

In other words, even after significant declines in industrial consumption of gold, demand is way up. Interestingly, you'll note that they say "bar hoarding" is only about 9% of total demand -- but up 69% from a year ago. What *isn't* given is coin hoarding. Right now, all accounts suggest that something approaching 100% of coins are being hoarded... and coin minting is up 60%.

A related report from the same guys says (see http://www.gold.org/assets/file/pr_archive/pdf/GDT_Q1_2008_pr.pdf):

" With financial markets still reeling from the global credit squeeze amid growing inflationary pressures, dollar demand for gold reached US $20.9bn in the first quarter of 2008, a 20% increase over the same period in 2007 and more than double the level of four years earlier. However, tonnage demand for gold at 701 tonnes was down 16% on the same period last year and represents the lowest quarterly figure for five years, according to Gold Demand Trends, which is released today by World Gold Council (WGC)."

This is from May 2008, but I still find it absolutely bizarre, if I even understand what they are saying. Jewellry accounts for about 60% of world gold demand, and they say

"Jewellery demand declined 21% year-on-year to 445.4 tonnes, the lowest quarterly level since the early 1990s"?

Perhaps it's the general economic decline. They do say (again, this was May 2008),

"Industrial and dental demand declined by 5% on year earlier levels to 110.3 tonnes, primarily in response to the deteriorating US economy, and a slowing in demand for consumer electronics."

From the charts below, industrial and dental demand for gold is about 20% of world demand, so a 5% drop represents about a 1% drop in overall world gold demand, year on year.

They also say

"The supply of gold was 6% higher in Q1 2008 than a year earlier, primarily driven by increased scrap supply which in turn was a reaction to the rising gold price. Mine output remained constrained, little changed from Q1 2007 levels at 593 tonnes, while net official sector (central banks) sales were 8% higher than in Q1 2007."

These guys are a little more optimistic about gold production than other reports, which suggest an actual decline in mine production. But again -- this report was May, 2008.

Here's a possible partial explanation for the price of gold not skyrocketing: Maybe it's already priced out for today's events. From this link:

"While it has already come far from its humble beginnings in the $250s in April 2001, [gold's price] has a long way to run yet."

In other words, gold is 4 times more expensive today than 8 years ago. Now, one of the most interesting (and significant) things about price mechanisms is that they anticipate events. Let me hypothesize, then, and ask: did smart investors start anticipating world events from 2001 forward to bid the price of gold up? In other words, is the explanation for the lack in more dramatic upward movement in the price of gold today simply because the price of gold has already anticipated today's events?

I think that is part of the explanation, though not all of it. The same applies to stocks when a glowing earnings report causes a decline in the stock price, simply because the earnings half a point below expectations -- the stock declined because it was priced at the market's expectation of all future earnings, and when the most recent earnings report comes in a little lower than that projection, the cumulative future earnings decline in the new projection, so the value of the company declines. (That is, I'm arguing on the basis of my theory that the value of a company is the sum of all future net earnings, discounted for risk, uncertainty, and the time value of money.)

But anticipated gold price projections can't be the full explanation for the relatively stable price of gold today. The dramatic increase in demand today should still be driving prices up at a faster rate than they are, I think. I go back to my comment that a 5% increase in the demand/supply ratio of oil can double the price of oil.

So the question here remains to be proved: is the rate of increase in the price of gold in line with the increased demand, or is there government manipulation holding the rate lower?

Look at the price over the last 34 years, unadjusted for inflation:

You might not think the price of gold is being suppressed, but now here it is adjusted for inflation:

Wait till the coming increase in inflation (maybe hyper) steps in about 12 - 24 months from now. That curve will rocket upward.

This article http://www.zealllc.com/2008/goldfund2.htm makes the point

"...global gold production is actually falling despite the relatively high gold prices. Annual gold mined today, which is 70% of the world’s supply, is running over 4% lower than when this bull began in 2001! "

They provide a chart in another link (http://www.zealllc.com/2008/goldprod2.htm):

When you consider that the economy is far worse today that it was in 1980, and the panic among investors is unequaled since 1929, and gold production is declining as well, you simply have to suspect Something is Rotten in Denmark.

As an experienced gold mining investor on my list remarks (http://www.larrymylesreports.com/Case_For_Gold.htm):

"In mid-December a reader forwarded me a timely article exposing the plight of Swiss gold refiners and their ‘difficulty in keeping up with demand for gold bullion leading to long delivery times as investors were becoming wary of other stores of wealth.’ ...'I have been in the gold business for 30 years and I have never experienced anything like this,” said Bernhard Schnellmann, director for precious metal services at Argor-Heraeus, one of the world’s three largest refineries. He went on to say, “Even though production has increased dramatically since the middle of the year…..we simply cannot cope with the demand.' ...In the case of coins, the delivery date has gone from a couple of days at the beginning of the year, to six to eight weeks! And remember, the Swiss refineries are working day and night, seven days a week. ...Something has to give - especially when global production is estimated at approximately 2,500 tonnes annually…and global demand is closer to 4,000 tonnes. And those are 2007 figures and do not take into consideration the dramatic rush to bullion."

I've heard and read of numerous reports of long delivery times, which are consonant with a much higher price of gold than we are seeing -- certainly much higher than $950/oz in today's world.

Total identifiable demand (World Gold Council): 1133 tonnes (Q3 2008). Up 18% from Q3 2007.

Let's take the premise that Q3 numbers, being before the election and before the meltdown, are grossly understated. I'm going to arbitrarily put the present Q1 2009 non-industrial bullion and coin demand at 100% higher than than Q1 2008 (bar hoarding / coins from table at top): 400 tonnes. I suspect this considerably understates the actual private demand at this moment in time. This represents an increase in world wide demand of 200 tonnes, year-on-year. Out of a total demand of 1133 tonnes, that's a 17.6% increase in the supply/demand ratio.

If you take a cue from the oil market, and say that each 5% increase in supply/demand doubles the price, I'd expect that 17.6% increase to be reflected in a 2^(17.6/5) = 11.5: increase in price -- say, $10,000/oz.

NOTE that I don't include national gold reserves in this calculation -- they are "out of the market" and don't represent a supply on the market, per se, except to the extent governments choose to throw them in. It's a government-run cartel, not unlike the diamond cartel which keeps diamond prices higher than they would otherwise be.

But let's see what total national reserves of gold are. From Wikipedia: "11,065 tonnes as of December 2007" (http://en.wikipedia.org/wiki/Official_gold_reserves). So the current private demand of 400 tons (I speculate from extrapolation) is a miniscule fraction of national reserves:

I abridged the full table. But what you can see is that the U.S. reserves (73.5% of the world) are by far the largest, and an increase in private demand of 200 tons for Q1 2009 (as I speculate) can easily be handled by the Treasury simpling selling bullion onto the market. They aren't going to run out. Of course, to keep it up for an entire year would take 800 tons -- not chump change.

It appears that at present I don't have to go to more exotic gold-swap theories to explain how central governments can suppress the price of gold, and the day to revisit that discussion may yet be coming, but about then governments will begin nationalizing gold. So ... buy small quantities to avoid reporting requirements, and find a secure hiding place. (NOT a safe deposit box.)

Tungsten Plugged Gold?

A month ago a friend sent me a gold investment article (at bottom) regarding the risk of buying gold ETF's backed by fake gold bars and a conspiracy theory involving the U.S. government, so I did a little investigating. I concluded that, while it is possible to fake the density of gold with gold-plating on tungsten bars, it wasn't possible to fake gold bars for even moderately sophisticated testing using other criteria. Since this dovetails with my last two posts on gold, I thought it might be of general interest so I'm posting here. I replied as follows:

----- begin reply -----
I see from google (searching "gold tungsten plugged bars fraud") that this story also was on kitco, but do you really think the U.S. Government was involved (even indirectly) in making plugged gold bars to suppress the price of gold? You didn't express an opinion.

Did they really do it? That's the $1123/oz question. I couldn't find anything on snopes. It would be a fraud the likes of which I've never heard, and the consequences would be, well, earth shaking. It seems rather unlikely, but I've gotten so suspicious of the government that I could almost believe it.

I looked up the density of gold and tungsten to verify the claim of equal density. It's hard to get an exact definition for a given temperature and isotopic composition, and web values are vague, but for best information I could quickly find, gold comes is 19.32 gm/cc at 293Kelvin and Tungsten comes is 19.3 gm/cc @ 293Kelvin (http://www.chemicalelements.com/elements/w.html).

The half-lives of gold isotopes are relatively short -- seconds to days, so it's not possible to have any appreciable mass fraction in any isotope but Au-197. Tungsten, however has stable isotopes of W-180, W-182, 183, 184, and W-186. The given values of tungsten density do not, as I say, indicate the mass fraction for each isotope, but W-184 is the most common isotope (31% of mined tungsten). That means, a bar of pure W-186 could be 1.1% more dense (or 19.5gm/cc) than a bar of W-184. So it's entirely feasible to mix 10% W-186 with 90% W-184 to get exactly the same density of tungsten as gold.

W-184 constitutes about 31% of known tungsten, and W-186 is 29% (http://en.wikipedia.org/wiki/Isotopes_of_tungsten). Even if we assume this is the fraction going into the density of 19.3gm/cc, it is still possible to skew the mass fraction of W-186 upward to give the same density of gold.

That said, there are tests other than density to detect a tungsten bar plated with gold. (eg, http://reactor-core.org/~djw/myblog/archives/2008/10/24/T12_14_56/) Nuclear resonance imaging would NOT help (gold plating shields the measurements), but magnetic fields reportedly have unique eddy-current signatures. I didn't investigate further here. It's possible. Eddy currents excited by an oscillating magnetic field will cause a material to heat up in proportion to the resistivity of the material. Some cook top ranges use this effect, and might be employed to analyze a gold bar. You could probably put a gold bar in a caloric bomb surrounded by a 60Hz field from a transformer, and measure the temperature rise over some minutes. A tungsten plugged bar should give higher temperature for the same heating time.

DC electrical resistance measurements could detect a plugged bar, if you contacted it carefully at both ends. (You'd probably needs a hydraulic press.) The resistivity of gold is 2.271 micro-ohm-cm at 300K. The resistivity of tungsten is 5.65 micro-ohm-cm. A bar plugged 50% with tungsten should have a resistivity about 3.971 micro-ohm-cm, about 74% higher. But you have to measure the resistance of an entire gold bar, which will be VERY low.

A 400 oz gold bar has dimensions of 20cm x 8cm x 4.5cm. The resistance end-to-end is 1.26167 micro-ohms. Applying a voltage of 10 microvolts across it would generate a current of 7.926 amps. A W-plugged gold bar would have a current of about 4.56amps. This would be a very noisy measurement, but if you filter the signal, it could be accurately measured with a cheap multimeter. The effect of contact resistance at both ends of the bar, however are significant. What it will do is reduce both currents and narrow the difference in dc current. That's why I say it's important to get a very good electrical contact which is very low resistance (less than the bar itself, preferably) and consistent from bar to bar measurements. But not impossible.

However, a dead sure test would be to measure the heat capacity of a gold bar, the amount of heat needed to raise the temperature of a material by 1 degree kelvin. Gold has a heat capacity of 0.129 joules / gm-K, and tungsten has a heat capacity of 0.134 J/gm-K. That's a difference of 3.88% which should be easily measurable -- unless someone was REALLY clever and used two or more elements to plug the gold to match both heat capacity and density. Not impossible in principle, but it would require research to ascertain if practical. But it would be difficult if not impossible to match heat capacity, density AND electrical resistivity, because gold is the third lowest resistance material, behind only copper and silver. But Cu and Ag are so much less dense than gold, I'm not sure you could compensate the higher resistivity of tungsten without lowering the density of the gold bar too much.

I could also imagine a sound test -- strike a gold bar with an exact force and duration with a computer controlled metal hammer, and measure the sound generated, then run that through a spectrum analyzer. A quick check shows tungsten has a velocity of sound of 5174 m/s and gold has a velocity of 1740m/s. That's a huge difference. You could hear that difference. For sure by dropping a tungsten plugged gold coin on the floor.

Another test is thermal conductivity. Gold is 320W/m-K and Tungsten is 174W/m-K. That would be just as hard to conceal, though the measurement would be awkward.

What I conclude is that plugged gold bars are easy to detect (and one reason gold is such an ideal monetary standard), but you do have to use the right techniques. I wonder what methods are used by the mints? I could see them getting defrauded by using only a density test, and once they take possession, even if they discover the fraud, they probably wouldn't want to reveal it.

It makes me wonder how silver bars / coins could be faked?

You know, in this day and age, there could be a market for low-cost gold testing machines, but of course, the thieves could fake those, too.

---- end reply to friend ----


-------- Posted Thursday, 12 November 2009 | Digg This ArticleDigg It! ---------
Source: GoldSeek.com
http://news.goldseek.com/GoldSeek/

Gold Finger - A New Take On Operation Grand Slam With A Tungsten Twist
By: Rob Kirby

I’ve already reported on irregular physical gold settlements which occurred inLondon, England back in the first week of October, 2009. Specifically, these settlements involved the intermediation of at least one Central Bank [The Bank of England] to resolve allocated settlements on behalf of J.P. Morgan and Deutsche Bank – who DID NOT have the gold bullion that they had sold short and were contracted to deliver. At the same time I reported on two other unusual occurrences:

1) Irregularities in the publication of the gold ETF - GLD’s bar list from Sept. 25 – Oct.14 where the length of the bar list went from 1,381 pages to under 200 pages and then back up to 800 or so pages.

2) Reports of 400 oz. “good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.

Why Tungsten?

If anyone were contemplating creating “fake” gold bars, tungsten [at roughly $10 per pound] would be the metal of choice since it has the exact same density as gold making a fake bar salted with tungsten indistinguishable from a solid gold bar by simply weighing it.

Unfortunately, there are now more sordid details to report. When the news of tungsten “salted” gold bars in Hong Kong first surfaced, many people who I am acquainted with automatically assumed that these bars were manufactured in China – because China is generally viewed as “the knock-off capital of the world”. Here’s what I now understand really happened:

• The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars (roughly 60 metric tonnes). This was apparently all highly orchestrated by an extremely well financed criminal operation.
• Within mere hours of this scam being identified – Chinese officials had many of the perpetrators in custody. And here’s what the Chinese allegedly uncovered:
• Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA (more than 16 Thousand metric tonnes).
• Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.
• The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly “sold” into the international market.

Apparently, the global market is literally “stuffed full of 400 oz salted bars”. Makes one wonder if the Indians were smart enough to assay their 200 tonne haul from the IMF?

A Slow Motion Train Wreck, Years in the Making

An obscure news item originally published in the N.Y. Post (written by Jennifer Anderson) in late Jan. 04 has always ‘stuck in my craw’:

DA investigating NYMEX executive - Manhattan, New York, district attorney's office, Stuart Smith - Melting Pot - Brief Article – Feb. 2, 2004

A top executive at the New York Mercantile Exchange is being investigated by the Manhattan district attorney. Sources close to the exchange said that Stuart Smith, senior vice president of operations at the exchange, was served with a search warrant by the district attorney's office last week. Details of the investigation have not been disclosed, but a NYMEX spokeswoman said it was unrelated to any of the exchange's markets. She declined to comment further other than to say that charges had not been brought. A spokeswoman for the Manhattan district attorney's office also declined comment.

The offices of the Senior Vice President of Operations - NYMEX – is exactly where you would go to find the records [serial number and smelter of origin] for EVERY GOLD BAR ever PHYSICALLY settled on the exchange. They are required to keep these records. These precise records would show the lineage of all the physical gold settled on the exchange and hence "prove" that the amount of gold in question could not have possibly come from the U.S. mining operations – because the amounts in question coming from U.S. smelters would undoubtedly be vastly bigger than domestic mine production.

We never have found out what happened to poor ole Stuart Smith – after his offices were "raided" – he took administrative leave from the NYMEX and he has never been heard from since. Amazingly (or perhaps not), there never was any follow up on in the media on the original story as well as ZERO developments ever stemming from D.A. Morgenthau’s office who executed the search warrant.

Are we to believe that NYMEX offices were raided, the Sr. V.P. of operations then takes leave - all for nothing? These revelations should provide a “new filter” through which Rothschild exiting the gold market back in 2004 begins to make a little more sense:

“LONDON, April 14, 2004 (Reuters) - NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild (ROT.UL), will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.”

Interestingly, GATA’s Bill Murphy speculated about this back in 2004;

“Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but suspect:”

*SOMETHING IS AMISS. THEY KNOW A BIG GOLD SCANDAL IS COMING AND THEY WANT NO PART OF IT. …”

“ROTHSCHILD WANTS OUT BEFORE THE PROVERBIAL "S" HITS THE FAN.” BILL MURPHY, LEMETROPOLE, 4-18-2004

Coincidentally (or perhaps, not?), GLD Began Trading 11/12/2004

In light of what has occurred – regarding the Gold ETF, GLD – after reviewing their prospectus yet again, it becomes pretty clear that GLD was established to purposefully deflect investment dollars away from legitimate gold pursuits and to create a stealth, cesspool / catch-all, slush-fund and a likely destination for many of these “salted tungsten bars” where they would never see the light of day – hidden behind the following legalese “shield” from the law:

Excerpt from the GLD prospectus on page 11:

http://www.spdrgoldshares.com/media/GLD/file/SPDRGoldTrustProspectus.pdf

Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.

The Fed Has Already Been Caught Lying

Liberty Coin’s Patrick Heller http://www.libertycoinservice.com/ recently wrote,

Earlier this year, the Gold Anti-Trust Action Committee (GATA), filed a second Freedom of Information Act (FOIA) request with the Federal Reserve System for documents from 1990 to date having to do with gold swaps, gold swapped, or proposed gold swaps.

On Aug. 5, The Federal Reserve responded to this FOIA request by adding two more documents to those disclosed to GATA in April 2008 from the earlier FOIA request. These documents totaled 173 pages, many parts of which were redacted (covered up to omit sections of text). The Fed's response also noted that there were 137 pages of documents not disclosed that were alleged to be exempt from disclosure.

GATA appealed this determination on Aug. 20. The appeal asked for more information to substantiate the legitimacy of the claimed exemptions from disclosure and an explanation on why some documents, such as one posted on the Federal Reserve Web site that discusses gold swaps, were not included in the Aug. 5 document release.

In a Sept. 17, 2009, letter on Federal Reserve System letterhead, Federal Reserve governor Kevin M. Warsh completely denied GATA's appeal. The entire text of this letter can be examined at http://www.libertycoinservice.com/ http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

The first paragraph on the third page is the most revealing. Warsh wrote,

"In connection with your appeal, I have confirmed that the information withheld under exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

This paragraph will likely be one of the most important news stories of the year.

Though not stated in plain English, this paragraph is an admission that the Fed has in the past and may now be engaged in trading gold swaps. Warsh's letter contradicts previous Fed statements to GATA denying that it ever engaged in gold swaps during the time period between Jan. 1, 1990 and the present.

[Perhaps most importantly], this was GATA's second FOIA request to the Federal Reserve on the issue of gold swaps. The 173 pages of documents received for the 2009 FOIA request all pre-dated the 2007 FOIA request, which means they should have been released in the response to the earlier FOIA request. This establishes a likelihood that the Federal Reserve has failed to adequately search or disclose relevant documents. Further, the Fed response admitted that it had copies of relevant records that originally appeared on the Treasury Department Web site, but failed to include them in its response.

Now that Federal Reserve governor Warsh has admitted that the Fed has lied in the past about the Fed’s involvement with gold. It should now be very clear to everyone why the Fed is lying and the true nature of what they are hiding / withholding.

On Doing God’s Work

An important footnote to consider is the intertwined-ness of the U.S. Federal Reserve and the U.S. Treasury (can anyone really tell them apart?] as well as this duopoly’s two principal agents – J.P. Morgan-Chase and Goldman Sachs. When one truly grasps the nature of these highly conflicted relationships it gives a fuller meaning to words recently uttered by Goldman head, Lloyd Blankfein, who claimed, “I’m doing god’s work.”

Does this really mean that Mr. Blankfein believes that the Federal Reserve is god? You can judge for yourself. While the Fed prints money like no one else could - except god almighty himself (or Gideon Gono http://www.reuters.com/article/latestCrisis/idUSL2176351, perhaps?) – I really doubt that was the intent back in 1864, when the U.S. adopted “In God We Trust http://www.reuters.com/article/latestCrisis/idUSL2176351 http://en.wikipedia.org/wiki/In_God_We_Trust ” as their official motto.

And that’s my two cents worth for today.

Got (real) physical gold yet?

Rob Kirby

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