The Reality Behind Gold Backed, Oil Backed and Fiat Currencies

This is a follow on from my essays “Why Russia” and “The Root of All Evil”. I will expand on the various currencies mentioned in the title of this essay plus detail how Russia is about to cause the US to suffer significant inflation and an equally significant loss of world power.

In “The Root of All Evil”, I talked about where money comes from, who manufactures it and how. The short recap is that bankers produce it out of thin air or as book/computer entries, if you like. This ability to create and control the amount of a nation's money supply gives bankers enormous economic power. This economic power inevitably leads to political power.

I also explained how, in the past, the bankers told people that they could exchange their banknotes (or account balances) for gold at any time. This gold backing notionally gave the bankers' banknotes their value. The banknotes were a 'promise to pay' in gold. I also went on to describe how this promise was a somewhat hollow one because the bankers persistently issued far more banknotes than they had gold to back it with. Therefore, only some of the banknotes could be redeemed for gold.

So it has only ever been partially backed by gold and the people who advocate a modern gold backed currency never mention this. They are only offering partial gold backing which is not secure in the way they advertise it to be. It is no different to setting sail on the Titanic with the same arrogance born out of hubris, ignorance and plain old cost cutting with only lifeboats for half the passengers . So it is a scam even in the terms of its promoters.

Gold backed currencies are scams in many other ways as well. But we will have to leave that discussion for another day. What is important at the moment is that even though gold's value is based on not much more than people's perceptions of it, gold will be useful to Russia, China and the other BRICS nations when they displace the US dollar as the international currency. It will be useful for settling the balance of trade with nations who wish to do so. It will give the Ruble and Yuan a fixed value relative to each other and to other currencies as well. Though this can be done without gold, the Ruble and the Yuan will be more acceptable to tentative trading partners if outstanding trade balances can be exchanged for gold. This will be particularly appealing in the face of the losses incurred by Russia and China's trading partners as a result of the US dollar's runaway inflation and it's subsequent loss of value.

It has to be noted again, though, that this universal acceptability of gold is based on peoples perception that it is an enduring store of value and that this is based on other peoples perception of it being so. It is very circular. The trouble with gold is that it is not very useful in itself. You can make jewellery out of it and it is an excellent conductor of electricity but this is still a very limited usefulness. However, perception is all, as they say, and while ever it persists, it is useful (if that is not too obscure!).

When President Richard Nixon took the US off the gold standard (for international settlements) in the early seventies, many people including most economists thought that the US dollar was now backed by nothing. But this was not so then and is not so still. True, you couldn't exchange it with the US federal government or even the Federal Reserve for anything else, but it was in fact backed by oil after the Federal Reserve made a deal with the OPEC countries to only sell their oil for US dollars. Oil, in contrast to gold, is something that is supremely useful! This was the birth of the Petrodollar. The OPEC nations guaranteed the value of the US dollar with their oil. Saudi Arabia, along with the other OPEC nations, committed to exchange their oil for US dollars and only US dollars and they have done so ever since. So it has been untrue to proclaim the US dollar as a fiat currency. It has been oil backed. It is just that it has been someone else's oil!

Now a true fiat currency is one that is not guaranteed to be exchanged for something else by the issuing corporation or issuing nation (or another nation as in the case of the petrodollar). But it is still untrue to say that the fiat currency is backed by nothing. It is, in fact, backed by all the goods and services that it can be exchanged for. The wealth of the nation, in other words. Ultimately, it is all the things that can be bought with a currency that give it its value regardless of whether it is gold backed, oil backed or whatever. Fiat currencies are GDP (Gross Domestic Product) backed.

If you were to ask someone why they want gold, they will most likely tell you they want it as a store of value. Fine, but what do they want that store of value for? Answer, to buy things they want when they want them. Gold is only of value if it can, in turn, be exchanged for necessary goods and services. So the purchase of gold is only an intermediary step. People can't eat gold, they can't cook with it and it won't keep them warm and dry by itself.

Historically, it does keep its value in inflationary times but this is more of an insurance against poorly managed currencies. Also historically, gold has not been a good investment in the long run. Appreciating assets such as real estate and stocks and shares have proved far superior. So, generally speaking, gold is not such a good store of value after all unless the alternative is a badly managed national (or international) currency.

So what makes for a badly managed currency? One precondition is that the currency be issued by the nation's privately owned banks. This may surprise many as we have traditionally and continually been told that governments can't be trusted to not print money willy nilly and debase the currency causing hyper-inflation. In fact, it is always the privately owned banks that cause hyper-inflation and they do it to loot the nation. The very famous case of hyper-inflation of the Weimar Republic in Germany between the World Wars was caused by the private banks who have blamed the German government for it ever since. (The bankers and their fellow financiers swooped into Germany and bought up everything of value for cents on the dollar.) The Federal Reserve, a privately owned company, has been responsible for the almost complete loss of value of the US dollar since it took over control of it one hundred years ago.

A badly managed currency will be one where money is made available in huge quantities to speculators while at the same time it is restricted to industry thus ensuring the increase in the money supply at the same time it ensures the decline in wealth production which is the ultimate backing for the currency. So there's more money and less to buy with it. Result, rising prices a.k.a. inflation. This is the situation in America today and it is about to get a lot worse because, in the next year or so, there will be a lot less available to buy with it.
(Note: if the increased money supply can be kept out of the productive economy and contained within the speculative markets of Wall St and elsewhere, then general inflation can be avoided for a period)

Any currency is worth what you can buy with it whether that be gold, oil or the production of a nation. When the money supply shrinks as in a classic depression, the prices of the goods on sale drop until the value of the goods collectively match the amount of the Money Supply. This is called deflation. The reverse happens when the Money Supply is expanded past the capacity of the economy to use it productively and results in inflation.

The US has not exchanged its dollars for gold for forty years but, as I pointed out, the OPEC countries have committed to exchange their oil for it. And then there is the GDP of America; its annual production of wealth that can be exchanged for US dollars. But the bankers who control the US government have been winding back the productive output in the US for some decades now. Thus the backing provided by the US's GDP has been diminishing. That the US dollar has any value at all is due to the worldwide expanding oil market over the last few decades and its rising prices.

It is the value of the world's oil that has stopped the US dollar plunging into massive inflation. The Federal Reserve's banker owners have been getting obscenely rich by issuing their paper and computer money against other nations resources while diminishing the wealth of America and Americans. Quite a neat trick.

This massive monetary expansion by the US Fed has been facilitated by Saudi Arabia and all the other oil producing nations, including Russia, and has allowed the US to finance the expansion of the US military which spends more on armaments than the rest of the world combined. They buy all sorts of supplies for the Pentagon by simply printing money and the world has to take it because they need the US dollars to buy oil with. Russia, China and the rest of the world has been paying for the very military that has been oppressing them. Little wonder then that many nations are looking for ways to buy oil in currencies other than the US dollar. Little wonder also that oil producing nations are looking for ways to sell oil for anything other than the US dollar.

Iraq sold oil for Euros for a year until it was invaded in 2003 and destroyed. With the arrival of US and NATO troops, Iraq was back selling oil for dollars again. Libya was selling oil for gold, Euros, you name it. But not any longer since NATO destroyed it, too. Iran has been selling its oil for Euros for a while now and has been subjected to trade sanctions and a never ending stream of threats from the US and israel, two countries totally captive to the international bankers.

Iran has survived because it has the ability to strike back militarily against the US. It has also been supported by Russia and China. China has been buying its oil for Yuan lately and has done currency swaps with a few countries which further decreases their need for US dollars. And now finally, Russia is selling their oil for other currencies including their own Ruble. Why should they continue to pay for the very force that threatens them at every turn?

This is why these countries are being portrayed as the enemies of the world by the US and European (banker owned) media. Pretty soon these countries will stop accepting US dollars for their oil altogether with the result there will be even less to buy with these dollars. But the quantity of dollars floating around the world remains the same even though there is less to buy with it. Therefore the prices of what can be bought will increase till it is equal to the quantity of money. This is called inflation and it will be sizeable. People in America will wake up one morning and find that everything they import is now costing much much more but their salaries and wages will not be going up. In fact, they will be going down as employers slash staff and wages in an attempt to survive. It won't be pretty.

This inflation will prompt oligarchs, corporations and national governments to dump dollars quickly to get some value back before they become completely worthless and so exacerbating the inflation in the process. Once the sell off starts, it will snowball. US dollars won't ever be completely worthless but that will be the fear and perception that will drive the wholesale dumping of the once mighty dollar.

Russia, as the world's largest exporter of oil and gas, is in a very powerful position regarding the US and it is moving against the US dollar because of the provocations from the US government and the bankers. The result will be that the US won't be able to finance it's massive military any more. The network of bases around the world will have to shrink drastically because many host nations will not take the US dollars for payments. So the US government will have to use other currencies or gold which will now put them in the same position as every other nation in that they will have to now exchange goods for gold or other nations' currencies to pay for what they buy.

The bankers have used the American government and the American military as enforcers for their totally exploitative banking system that has impoverished the world through depressions and wars. Even those countries that have done relatively well could have been much wealthier with their own home-grown finance.

It's all grinding to a halt for the bankers and with it their dreams of owning the whole world. They are desperate to hold on to whatever power they can and so we are seeing this desperation in their rash moves in the Ukraine. Their best hope now is to divide the world again as they did in the Cold War with Russia and China and isolated them from the Americas, Europe and the rest of Asia. This will force Europe and the Asian Pacific nations to continue to use the US dollar for oil and other international trade.

To this end, I can see the bankers forcing the issue in Ukraine by ordering violence against the people of Eastern and Southern Ukraine.

If they are successful, they will have secured the whole of Ukraine (less the Crimea, of course) and it will be an implicit threat to the other countries under their heel. If they are unsuccessful and parts of Ukraine end up with Russia as the Crimea did, then the bankers through their media will portray Russia as the aggressor and use this to pressure Europe in particular to sever trade and political relations with her. This will consolidate the bankers' power over the NATO allies and stop the likes of Germany allying themselves more closely with Russia and away from the US (and the US dollar!)

What is not acceptable to the bankers is doing nothing for the time being or, worse, accepting Russia's proposal of a federation of Ukraine's regions as they know that in time Ukraine will gravitate increasingly towards Russia and will become prosperous as a result of Russia's far more equitable finance/banking system. It also helps that Russia is not run by psychopaths and that they have demonstrated respect for international law – unlike the US or israel who now are seen as completely untrustworthy; even murderous!

So on the face of it, it doesn't look good for the Ukrainians as the options the bankers leave them involves bloodshed and the loss of lives. But the Russians have made a habit of coming up with the unexpected, as in Syria and the Crimea, that has not only given them a further advantage over the banker run US but has also saved lives.

Here's hoping that pattern continues.


McJ's picture

Gold, Forex and suicides

Another great read James. You are on a roll lately! It really helps to have the big picture overview when trying to understand current events.

A few links that may or may not be of note smiling and I don't know exactly how to put this all together but it appears there are some desperate measures (ie major thefts, frauds, murders/suicides and coverups) going on at the top of the heap with gold and the foreign exchange reserves. Not a surprise, of course especially since the US won't have the gold needed to settle their debts when the US dollar value plummets and the banksters are desperate to save their hopes of world hegemony.

"Russia has just dropped another bombshell, announcing not only the de-coupling of its trade from the dollar, but also that its hydrocarbon trade will in the future be carried out in rubles and local currencies of its trading partners – no longer in dollars – see Voice of Russia

Russia’s trade in hydrocarbons amounts to about a trillion dollars per year. Other countries, especially the BRICS and BRCIS-associates (BRICSA) may soon follow suit and join forces with Russia, abandoning the ‘petro-dollar’ as trading unit for oil and gas. This could amount to tens of trillions in loss for demand of petro-dollars per year (US GDP about 17 trillion dollars – December 2013) – leaving an important dent in the US economy would be an understatement."

"China and Russia are quitting US dollar or at least significantly cutting the dollar share in their forex reserves. Politically correct American analysts call this process “rapid forex reserves diversification”. In fact, some economists see this trend as a threshold in the unfolding world crisis because the whole pyramid of global finance is based on one simple fact – financial regulators around the world buy the US debt (dollar & treasuries) no matter what.

It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting."

It was reported earlier that after the coup d'état in Ukraine, their gold reserves were stolen and moved to the US. According to Jim Willie London banks are stealing the Saudi's gold. And we know of course, that the US won't return Germany's gold because they don't have it. I am wondering who exactly is ending up with all this gold, if it is not going into the Nation's vaults/accounts but into the hands of private bankers (the usual suspects). And what does that mean in terms of settling foreign debts? If the US and Britain are stealing it because they anticipate they will need it to settle foreign debts what happens when the private banksters have it? Will they be using it to set up a gold backed currency? And why, as Willie notes is the Saudi's gold mostly going to China? Because of Chinese demand for gold?

"On March 1, statistician and economist Dr. Jim Willie announced that London banks are currently confiscating and selling off Saudi Arabian gold reserves which diplomatically puts an end to the 40 year Petro-Dollar relationship between the West and the oil rich Arab kingdom.

They defended the Petro-Dollar defacto standard for 40 years. Their USTreasury Bonds and Wall Street bank stocks might be safely tucked away, but their Gold Accounts are being systematically stolen in London. Their gold is needed too much to preserve the system that lacks gold in urgency. The Saudis are being thrown under the bus, their gold stolen, their image vilified.

The following came out of a conversation, a string of messages shared with some colleagues and a London source. “There will be no easy heads-up alert on the quick changes to the gold market.

The rehypothecation of official gold accounts has entered a new phase. The gold owned by defenders of the Petro-Dollar is being seized, confiscated, pilfered, and stolen for the unspoken purpose of continuing the fiat paper currency regime with the tainted debauched USDollar at the center. The Saudi gold in London will be totally gone in a few more months. To be sure, it is going mostly to China. The Saudis are being gutted. - Jim Willie, Golden Jackass"

From Bloomberg we learn that JP Morgan is selling the Chase Manhatten Plaza building that houses it's bank vault to the Chinese.
Covering shorts? (And 'coincidentally' the building is directly across from the Fed and their vaults are rumoured to be connected to each other by underground tunnels. It would be a fairly simple matter to be moving the gold around between the two, I presume. )

From Zero Hedge this:

"On the surface, there is nothing spectacular about the weekend news that JPMorgan is seeking to sell its 1 Chase Manhattan Plaza office building. After all, the former headquarters of Chase Manhattan Bank, located deep in the heart of the financial district and which was built by its then chairman David Rockefeller, is a remnant to another time - a time when banking was about providing loans, not about managing and trading assets which has become the realm of Midtown New York, and since JPM already has extensive Midtown exposure with its offices at 270, 270 and 245 Park, the 1 CMP building always stood out as a bit of a sore thumb. Of course, as Zero Hedge readers first learned, the big surprise is literally below the surface, some 90 feet below street level to be exact, where the formerly secret JPM gold vault is located, which also happens to be the biggest commercial gold vault in the world.

It was only a month ago when we learned that JPM was planning to exit the physical commodity business, and today we know that the firm is set on disposing of its one crowning asset in the commercial gold vaulting industry. This begs the question: is JPM set to fully and completely exit the precious metals vertical which it inherited when it was handed Bear Stearns on a $10 platter (together with the now defunct firm's legacy short positions)? If so, is it also in the process of unwinding any and all legacy precious metals exposure including rumored "whale-sized" shorts in the paper silver and/or gold axes, and what happens to the price of silver and gold when a massive stock position becomes "flow" in the other direction (i.e., short covering)?"

And this:

"That's right, ladies and gentlemen, as a result of our cursory examination, we have learned that the world's largest private, and commercial, gold vault, that belonging once upon a time to Chase Manhattan, and now to JPMorgan Chase, is located, right across the street, and at the same level underground, resting just on top of the Manhattan bedrock, as the vault belonging to the New York Federal Reserve, which according to folklore is the official location of the biggest collection of sovereign, public gold in the world.

At this point we would hate to be self-referential, and point out what one of our own commentators noted on the topic of the Fed's vault a year ago, namely that:

Chase Plaza (now the Property of JPM) is linked to the facility via tunnel... I have seen it. The elevators on the Chase side are incredible. They could lift a tank."

And if you have been following the banker suicides there was another high profile death. This time the son of a former CEO of Goldman Sachs.

"On March 13, the son of Jon Corzine was found dead in Mexico City of an apparent suicide. Jon Corzine was the former CEO of Goldman Sachs, head of MF Global, and Governor of New Jersey, as well as being a long time campaign financier for President Barack Obama.

The son of former New Jersey Gov. Jon Corzine killed himself in a Mexico City hotel, sources told The Post on Thursday.

Jeffrey Corzine, 31, was the youngest of Corzine’s three children with ex-wife and childhood sweetheart Joanne Corzine.. - NY Post
While little is known about the circumstances behind Jeffrey Corzine's alleged suicide, his death comes on the heels of at least eight unusual banker deaths, many of which were also labeled as suicides despite the near impossibility of one of them being attributed to suicide by nail gun.

Jeffrey's father, Jon Corzine, is a banking insider who has controlled many top levels of the financial system, and has been intimately involved in both politics and central banking for decades. In November of 2011, the former head of Goldman Sachs was involved in a highly controversial commodities scandal in which he re-hypothicated customer accounts to act as collateral for several big bets involving Greek bonds and other toxic assets. His actions led to MF Global's bankruptcy, and the loss of over $1 billion to MF Global customers. However, his political ties to the Obama Administration helped him avoid several criminal charges tied to fraud and theft."

So, this also caught my eye and I am also wondering if the death of Corzine's son may have been a warning to him to be quiet about what he knows about Forex and/or other frauds, thefts etc.

"However, on Feb. 5, an insider and former head trader for a top banking firm issued a warning that new information is out which shows that 'hit squads' have been made active in the Wall Street area, and that a high level banker tied to recent investigations into Forex manipulation, along with up to three dozen others involved in scandals, are being targeted for potential assassination in light of their viability as witnesses and whistle blowers to federal and financial regulators.

Word on the "street" watch for a top level American bankster to expire. Hit teams are fully operational in Wall Street. (REDACTED) HIGHLY VISIBLE POWER BROKER- co-ordinating. Speak to you soon. Please post this to warn sheep. V-UPDATE 9:24 AM MOUNTAIN-NEXT ON THE HIT LIST CITI EXECUTIVE TIED IN WITH FOREX FRAUD -HIT LIST HAS 3 DOZEN MORE NAMES-DESPERATE TIMES REQUIRE DESPERATE MEASURES IN THE WORLD OF MONETARY CONTROL! JPM can't hold yellow metal shorts on notional gold. LIBOR and derivative hits continue as bankster suddenly commit "suicide". 43 are on the knock off list and counting. The shock waves of this and many other scandals are creating turmoil everywhere. - V, Guerrilla Economist, Q Alerts"

"In 2013, several major financial scandals rocked the banking world, with hundreds of trillions of dollars in fraud being investigated by multiple agencies. From J.P. Morgan's London Whale scandal, to HSBC's settlement over money laundering for drug cartels, and now, an ongoing investigation into Forex and precious metals price manipulation, one or more of these crimes could bring down a fragile financial system that is already cratering under the threat of a simple taper by the Federal Reserve."

'JP Morgan holds 60% Notional of all gold derivatives'

"Perhaps the only question we have after seeing the attached table, which shows that as of Q3, 2013 JPMorgan owned $65.4 billion, or just over 60% of the total notional ($108.2 billion) of all gold derivatives in the US, is whether the CFTC will pull the "our budget was too small" excuse to justify why it allowed Jamie Dimon to ignore any and all position limits and corner the gold market?

And finally, from Max Keiser:
"The point here is that any extra futures selling that is related to the use of gold in CCFDs is not why the price of gold was held down in the face of rampant demand from China for physically delivered gold.
The reason that China was able to import over 2,000 tonnes of gold in 2013 without the price being driven a lot higher is because:
1) roughly 1,000 tonnes of gold were removed from all of the physical gold ETFs in 2013
2) it is well-documented that the Bank of England unloaded 1,300 tonnes of gold into the market sometime in April 2013, around the time that the price of gold dropped $200
3) 116 tonnes of gold were removed from Comex vaults.
The “disintermediation” of at least 2400 tonnes of physical gold from custodial vaults which could be physically delivered to eastern buyers is what offset the massive demand from China and several other eastern hemisphere countries, all of whom imported record amounts of physical gold during 2013.
Without this massive supply of physical gold, the price of gold in the face of Chinese demand would have soared in 2013. While there may have been short-term effects on the market price of gold when a gold-related CCFD transaction was being executed, the use of gold and gold futures in Chinese CCFD transactions for the purposes of creating cheap capital definitively did not cause the price of gold to go lower in 2013.
The price of gold was contained during 2013 by official western Central Bank intervention in the gold market. And it was primarily orchestrated by the Federal Reserve for the purposes of defending the reserve status of the U.S. dollar and to keep interest rates artificially suppressed for the purpose of enabling the U.S. Government to continue issuing low-cost debt.
Anyone who has been studying the enormous body of work done by GATA, James Turk and a few others over the last 14 years knows the truth about why the price of gold is many multiples below what would be its free market price level. Apparently Zerohedge has been skipping this crucial segment of gold market research and knowledge."

So, they are manipulating the price of gold keeping it artificially low to protect the dollar's reserve status and they are stealing the actual physical gold of other nations so they have it to sell to China? cover their short positions? cause they need it to cover foreign trade accountd if the dollar value plummets? Cause they are greedy evil fuckers? And what is the Forex manipulation about such that they may be murderering bankers to cover it up especially considering the recent moves made by China and Russia to cut their US dollar shares in their own foreign exchange reserves?

A lot of questions, I know! Nevermind me, I'm trying to muddle my way through understanding all of this - no need to answer all of them. sticking out tongue It helps me to see it laid out, so to speak. One things for sure, looks like the banksters are going down soon.They won't be able to hold back the tide for long with all their lying, theft, manipulation, ponzi schemes, meddling, murder, warmongering etc. etc. being exposed. laughing out loud

McJ's picture

Jim Willie article

Here is a link to the entire Jim Wille article I referenced above. He is a bit colorful. smiling I notice that he doesn't specifically mention the Jewish banking interests. He attributes most of the blame to the US and Britain but he does mention dual citizens at one point.

And here is another quote from him (not from the linked article but from this radio interview ( )about how the Saudi gold is being stolen.

"The events in Syria have really broken the U.S./Saudi linkage. And now a very interesting thing is happening, that’s going to come into the news, and I’m going to spill it. The London bankers and the New York bankers together are stealing the Saudi gold.

Any gold owned by Saudi Arabia that is not inside Saudi Arabia is being stolen. They use the word rehypothication. All that means is that it’s in a Saudi gold account, and the London bankers are using it for their purposes and putting in I.O.U.’s. They don’t call it theft because they replace it with an I.O.U..

So it’s like someone coming into your garage and stealing your Audi, or stealing your Ford, and leaving a little note there saying ‘we owe you $18500′ and come look for it later, cuz we needed your car. – Jim Willie, Feb. 7."


Jim Willie is good value. So is Jim Sinclair. There must be a thing about Jims and money!

The price of gold that isn't there!

Hi McJ,
Lots of great links and quotes there! I've been away for a few days and am working my way through them now.

Yes the price of gold has been held down for a long time - years, in fact, even with the rapid price rises in the last few years. Another valid way of looking at it is that the price of the US dollar has been held up (compared to gold). It kind of makes more sense looking at it that way.

The Fed in the US has been printing money and flooding the world with it for years and especially since the GFC in 2008. Otherwise known as Quantitative Easing (QE), printing money in excess of the economy's ability to use it to increase production is very inflationary.

It is especially so when all the money created in this manner has been directed into speculative endeavours and manipulating markets, as has happened in the US, instead of going to consumers and the manufacturing base in America. So it has been highly inflationary making the holding down of the price of gold essential to mask the inflation and so maintain the image of the US dollar as relatively stable (which allows them to print even more money!)

Another advantage to the bankers of holding gold price down is that it is cheaper for them to buy to cover their short positions that you mention. Np doubt they have been gambling on the gold futures market and with derivatives and other options and have made many losing bets in the process. The way to cover losses from trading is to increase trading hoping to win back and double up. But as most gamblers know, that is a recipe for disaster (though it doesn't stop it from being followed!)

So the bankers have had to surrender gold they don't have and use someone else's gold for the time being thinking they will be able to cover their position in the future. But it doesn't work out that way and now they have to make good the gold that they "borrowed" to the original owners; people like the German, Saudi and Chinese govts and who knows who else?

All this is causing a shortened life expectancy for bankers. They are either being suicided by their employers to keep them quiet and not testifying to govt regulatory and criminal investigative bodies or they are being killed by the bankers creditors after being pumped for information on who did what with their gold. Or both scenarios are being employed.

McJ's picture

The Forex Fix

So this is the Forex fix.
"The closing currency “fix” refers to benchmark foreign exchange rates that are set in London at 4 p.m. daily. Known as the WM/Reuters benchmark rates, they are determined on the basis of actual buy and sell transactions conducted by forex traders in the interbank market during a 60-second window (30 seconds either side of 4 p.m.).The benchmark rates for 21 major currencies are based on the median level of all trades that go through in this one-minute period. 

The importance of the WM/Reuters benchmark rates lies in the fact that they are used to value trillions of dollars in investments held by pension funds and money managers globally, including more than $3.6 trillion of index funds. Collusion between forex traders to set these rates at artificial levels means that the profits they earn through their actions ultimately comes directly out of investors’ pockets.

IM collusion and “banging the close”

Current allegations against the traders involved in the scandal are focused on two main areas:

 Collusion by sharing proprietary information on pending client orders ahead of the 4 p.m. fix. This information sharing was allegedly done through instant-message groups - with catchy names such as “The Cartel,” “The Mafia,” and “The Bandits’ Club” - that were accessible only to a few senior traders at banks who are the most active in the forex market.

 “Banging the close,” which refers to aggressive buying or selling of currencies in the 60-second “fix” window, using client orders stockpiled by traders in the period leading up to 4 p.m.
These practices are analogous to front running and high closing in stock markets, which attract stiff penalties if a market participant is caught in the act. This is not the case in the largely unregulated forex market, especially the $2-trillion per day spot forex market. Buying and selling of currencies for immediate delivery is not considered an investment product, and therefore is not subject to the rules and regulations that govern most financial products."

Of course like the Libor scandal before it, this massive manipulation of currency pricing is all the fault of regulators asleep at the switch. 

"The forex scandal, coming as it does just a couple of years after the huge Libor-fixing disgrace, has led to heightened concern that regulatory authorities have been caught asleep at the switch yet again."

Really? Yet again? How do these guys keep their jobs? Maybe they should try caffeine or something. smiling

And heh, it's simply an "irony" that the Bank of England knew about it for several years, thought it was good idea and gave traders the thumbs up. And no doubt regrettable for them that as a result of this revelation they been have "dragged into a second rate-manipulation scandal".

"The irony of the forex scandal is that Bank of England officials were aware of concerns about exchange rate manipulation as early as 2006. Years later, in 2012, Bank of England officials reportedly told currency traders that sharing information about pending customer orders was not improper because it would help reduce market volatility."

Hmmm...if this is only a second rate scandal that the Bank of England, for one, has been incidentally "dragged into"' I am wondering why certain powerful people might be needing a banker "hit list" to cover it up. 

Regarding the Forex Fix,

Regarding the Forex Fix, rigging the closing prices of a market is as old as international markets themselves. I know from personal experience in the Australian stock market that it was very common for as far back as forty years ago. Everybody knew about it and it was practiced by the major firms, for instance, to set the overnight opening market price in London. There is no such thing as a free market. They are all rigged to some extent.

The Bank of England (and the Fed) are in on it all. These banks are owned by the major banks who are the major traders. One of the main reasons for the existence of Central banks is to co-ordinate the pillaging of their host nations for the benefit of their owner bankers.

For sure these central banks, the banks that own them and the regulatory bodies that are bought by them will claim incompetence when caught but it is always much more than that. Sure they are incompetent but they are first and foremost corrupt. Corruption is the reason they exist.

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