In less than three weeks, the most important election of the year will take place in Switzerland, and you haven’t heard of it. While the U.S. focuses on the recent Republican victory, the financial markets are facing an earth-shaking event on November 30th.
This Swiss election seeks to challenge the paper currency (Fiat/Debt) system of the last forty years and possibly undermine the existing power structures of central banks across the globe by introducing the “Save Our Swiss Gold” initiative.
U.S. elections sway back and forth between Republicans and Democrats, but the monetary system never changes nor is ever up for any real debate. The monetary system of the whole world has been firmly in the hands of Keynesians’ ever since Nixon removed the convertibility of dollars and abandoned the Bretton Woods Agreement back in 1971. A positive Swiss vote would threaten this by once again providing the world with a choice between a hard (gold-backed) currency and fiat.
Up until recently, it was the Swiss who were the last holdouts against the Keynesian school of thought. Traditionally viewed as the last bastion of sensible monetary restraint, the Swiss succumbed to the siren call of “actively managed central banking” in September 2011, fixing their currency to the Euro under mounting European pressure.
Somehow, having what the world views as the strongest currency is a bad thing when everyone else is printing like crazy. It wasn’t so much the success of the Swiss currency during this Depression 2.0 but the failure of the rest of the world to restrain itself that lead to its appreciation.
Central bankers hate gold, or any hard currency restraint, because it limits their ability to tinker with the system (see FDR executive order 6102). On November 30th, Swiss voters will go to the polls to reassert their historical position of backing their country’s currency with gold, and possibly setting off a new revolution across the financial world by giving people a real choice.
Backed once again by physical gold, the Swiss public may be the first to finally say “enough” to the ongoing manipulation of the currency markets. No longer would governments be able to create limitless amounts of debt-backed currency without recourse. In response to the constant worldwide manipulations, Russia and China have been aggressively increasing their gold reserves over the last decade. Just recently, even ISIS decided that this is a smart choice as well.
This is a pinnacle moment in monetary history, not only for the Swiss who are reasserting their financial independence, but also for the whole world. What started as a referendum to return a tiny country of 8 million, with a GDP equal to New Jersey, to some semblance of financial sanity, may actually become the wake up call to the world to end the Keynesian delusion that the cure for everything is more debt. Cue the fat lady and the flying pigs.
The likes of Paul Krugman will probably kick and scream that the Swiss are making a poor decision by choosing to return to their fiscally conservative roots. He will be correct in asserting as much. It is a bad decision, but only for the rest of the world that wants to continue following along with a Ponzi economy.
If approved, the “Save Our Swiss Gold” initiative will force three very uncomfortable mandates on the Swiss National Bank and the rest of the Fiat world.
- The Swiss National Bank will NOT have the right to sell its gold reserves.
- The Swiss National Bank must hold at LEAST 20% of its total assets in gold.
- The gold of the Swiss National Bank must be stored PHYSICALLY in Switzerland.
Take a moment to read through these three mandates again. Should they pass, what you just read will upend the existing systems of business as usual. This is probably one of the greatest threats to the monetary establishment in years. Specifically though, it is a direct threat to the paper world of derivative trading that, by-and-large, trades at magnitudes greater than annual supply. This demand for physical delivery over cash (fiat) settlement could lead to exchange failures as the Swiss National Bank will have to purchase approximately 1,500 tons, or about 50% of the world’s current mining production, over the next five years. Meanwhile, for some strange reason, Germany has to wait until 2020 to get delivery of its own supply of minted gold, supposedly sitting under New York City.
It is important to note that before the Swiss Central Bank gave in to the Keynesians in the fall of 2011, gold was trading above $1,900 an ounce; since the “fix,” it has steadily plummeted to below $1,200–all while global debt levels have skyrocketed. A positive vote may reverse this trend.
Financial markets are a lot like poker tables, where big stacks can push even the best players around. For a while now paper has trumped physical, but this referendum is the wildcard in the game. A Black Swan (or in this case, Gold Swan) event of this type may lay bare much of the shenanigans that have been going on in financial circles for some time now. It was only a short time ago that even suggesting that LIBOR/energy markets were being manipulated would have gotten you labeled as some kind of radical; that is, until the truth came out, and the subsequent lawsuits. Many have been wondering for years now about gold and precious metal manipulation, and this election may bring that truth to light. Global players may finally be forced to show their hands, rather than settle with cash.
The Swiss currently hold about 8% of their reserves in physical form. This is down from 43% back in 1999 when they began selling it off at decade-low prices along with the British. And as recently as 2009, it was 18%. Where is all of this gold going to come from, and will the markets around the world be able to make good on delivery when such a large buyer is made public? This standing order may provide a floor on the recently falling gold market, but more importantly, it may just undermine worldwide currencies.
For those unfamiliar with Swiss elections, the law prohibits TV and radio advertising by individuals or special interest groups to ensure that these people-driven issues are spread and debated about by word-of-mouth, not by multimillion-dollar ad buys, like they are here in America. Issues like abortion, minimum wage, and infrastructure projects are routinely decided upon directly by the people of Switzerland, not in backroom deals by politicians. This election will be free from what many describe as outside influence.
Swiss voters are hoping to soon decide the fate of their own currency. If they are successful, and recent polling data suggests they will be, they will remove control of their currency from the hands of the experts who sold off the bulk of their gold reserves at prices between $300-$500 an ounce over the last decade and a half. The once bitten, twice shy Swiss hold the fate of future monetary policy in their hands with their upcoming vote–the repercussions of which will be felt all across the globe if they vote YES..
For the outsiders, the real fun will come in the next few weeks while we watch these same Swiss government officials try to explain why restoring a sound currency, that served them very well for hundreds of years, is now a very bad idea. Their answers will likely provide fodder for Swiss laugh tracks for years. Stay tuned.
The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed
From: Zero Hedge | by Tyler Durden
Following the stunning announcement in January 2013 that the Bundesbank would repatriate 674 tons of gold from the NY Fed and the French Central Bank, a year later the Bundesbank followed up with a just as stunning revelation that of the 84 tons the bank was supposed to bring back home, it had managed to obtain just a paltry 37 tons, with only 5 tons originating from the NY Fed.
The reason given for this disappointing amount was as follows:
The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly.” Additionally, the Bundesbank had the “support” of the BIS “which has organized more gold shifts already for other central banks and has appropriate experience – only after months of preparation and safety could transports start with truck and plane.” That would be the same BIS that in 2011 lent out a record 632 tons of gold…
Going back to the main explanation, we wonder: how exactly is a gold transport “simpler” because it originates in Paris and not in New York? Or does the NY Fed gold travel by car along the bottom of the Atlantic, and is French gold transported by a Vespa scooter out of the country?
Supposedly, there was another reason: “The bullion stored in Paris already has the elongated shape with beveled edges of the “London Good Delivery” standard. The bars in the basement of the Fed on the other hand have a previously common form. They will need to be remelted [to LGD standard]. And the capacity of smelters are just limited.”
Or, simply said, generic pretexts for a failure to follow through with the Bundesbank’s original intention of redomiciling physical gold, especially after Zero Hedge posted in November 2012 proof of collusion between the 1968 Bank of England and the Fed seeking to defraud Deutsche Bank: ‘Bank Of England To The Fed: “No Indication Should, Of Course, Be Given To The Bundesbank…”
The charade ended with a thud in June of this year, when instead of continuing the farce, Germany simply gave up, providing an even more laughable reason why it can no longer even pretend to collect its physical gold located at New York’s 9 Liberty Street.
Germany has decided its gold is safe in American hands. “The Americans are taking good care of our gold,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic bloc in parliament, said in an interview. “Objectively, there’s absolutely no reason for mistrust.”
And that was it: not a single word more from Germany on the topic of its failed gold repatriation initiative. Until this week, when Deutsche Bank – the bank which is Germany’s equivalent to America’ Goldman Sachs in terms of policy decision-making – once again revealed just what the true reason behind the failure of Germany’s attempt to bring its gold back. From Robin Winkler’s special report:
… the gold community paid great attention to the decision of the German Bundesbank to “bring German gold home”. At the beginning of 2013, the Bundesbank announced it would repatriate 300 tonnes of gold stored in the US by 2020. It is well behind schedule, citing logistical difficulties. Yet diplomatic difficulties are more likely to be the chief cause of the delay, especially seeing as the Bundesbank has proven its capacity to organise large-scale gold transports. In the early 2000s, the Bundesbank incrementally repatriated 930 tonnes of German gold held by the Bank of England.
Because if anyone knows what really happened behind the scenes in Germany, and inside closed doors at the Bundesbank, it is Deutsche Bank.
And there you have it: it wasn’t transportation, or “good delivery standards” concerns, or anything remotely related to Germany “decididng its gold is safe in American hands”, but just the opposite: Germany was pressured to keep its gold in the US after a “diplomatic” line of communication was opened, most likely the result of the Fed making it all too clear clear to the Bundesbank not only who runs the show, but what the assured failure to repatriate Germany’s gold would mean for “price stability.”
Which has, for now at least, ended Germany’s gold repatriation demands.
Now the question is, just how will the US pressure the Swiss “diplomatically” to make sure its own gold repatriation referendum does not succeed. Because if Germany failed miserably to obtain 674 tons of gold in 2013, it is assured that Switzerland will find absolutely nothing in its quest to obtain more than double, or 1,500 tons, of gold as a successful November 30 referendum outcome would require.
Then again, considering it was Obama’s action that destroyed the Swiss banking sector after the US crushed the centuries-long tradition of “Swiss banking anonymity”, this could be just the right action with which “neutral” Switzerland could finally take its revenge on the regime that cost it what was for centuries the primary source of capital inflow into the small and so very prosperous (until then) central-European nation.