Honest Money

Gold is Wealth Hiding in Oil

Vic Van Rompuy and ECB balance sheet

Posted by Ivo Cerckel on February 16th, 2012

Dear EU president Herman Von Rompuy,

Your father, professor Vic Van Rompuy, was the original sole editor of a collective book by Leuven economics professors introducing undergraduate students to the science-or-not-so of economics.

The book was aptly called “Introduction to Economics” (“Inleiding to the Economie”)
and published by Universitaire Pers Leuven.

The 2000 edition of the book, still called “Introduction to Economics”, was under the editorship of professors Lodewijk Berlage and André Decoster, and was updated from previous editions by Madam Dr. I. Van der Auwera (What happened to Anne Vleminckx?).

One of the eight other authors is still professor Paul De Grauwe.

Nay,
the 2010 edition of the book,
now under the title “Economics – An Introduction”, “Economie – Een Inleiding”,
which I didn’t see here in the Philippines,
has a foreword by … Herman, not Vic but one his sons – you – Von Rompuy.
http://upers.kuleuven.be/nl/titel/9789058677976

The table 17.2 on

p. 471, not 411 as I had written previously, section “The supply of money” (“Het aanbod van geld”) of Chapter 17 “The money market” (“De geldmarkt”)
Parts of the 2010 edition of the book are available here
http://books.google.com.ph/books/about/Economie_Een_inleiding.html?id=WWxP4Mw_x8kC&redir_esc=y
“The supply of money” section of the new Chapter 18 has however not been copied by Google.

of the 2000 edition gives a schematic representation of the balance sheet of the European Central Bank (ECB) – thank you Dr. I. Van der Auwera.

The table gives two elements on the left or active side.
Three elements on the other side.

The second element on the active side is
“Claims on inhabitants/residents (private and public)”
(“Vorderingen op ingezetenen (privé and publiek)“)

The first element on the active side is “GOLD [capitalisation mine] and foreign currencies”
(“Goud en buitenlandse deviezen”)

The balance sheet reports financial position. When a comparative balance sheet for two periods is presented, it shows whether cash increased or decreased.
(Charles T. Horngren, Walter T. Harrison and M. Suzanne Oliver, “Accounting”, Prentice Hall, 2009, 8th ed. (as reprinted for the Philippines), p. 710)

In your speech “A currency for Europe” yesterday, Wednesday 15 February 2012, at the occasion of the launch of a campaign about the euro
at the University of International Business and Economics, in Beijing,
you said that:
“The Chinese leaders recognise that the economic fundamentals of the euro are strong: low inflation, a lower public debt and deficit than in the United States or Japan, an equilibrium on the balance of payments for the eurozone as a whole.”
http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/127993.pdf

Do you really think that the Chinese leaders and the successors to your father – don’t confuse your father with your brother Eric – at Universitaire Pers Leuven are imbeciles
and that they do not consider the fact that the ECB has gold on its balance sheet important?

Lemme explain to you:
The Accounting book I just quoted said that:
The balance sheet reports financial position. When a comparative balance sheet for two periods is presented, it shows whether cash increased or decreased.

For the balance sheet of a Central Bank like the People’s Bank of China and the ECB,
the question is not as for other corporations whether cash increased or decreased,
BUT whether GOLD {real money, not cash] increased or decreased.
http://bphouse.com/honest_money/2009/09/11/with-chinese-freegold-from-a-reserve-currency-to-a-world-standard/

I am happy to inform you
that the Shanghai Freegold Summit is definitely taking place at the Hilton DoubleTree Hotel in Huaqiao/Kunshan from 20 to 23 July 2012;
http://bphouse.com/honest_money/2011/12/16/freegold-conference-shanghai-china-july-20-23-2012/

that the Summit is indeed being organised by the International Society for Individual Liberty
http://www.isil.org/
which page now announces the event;

that I will be a speaker there – booooooo, boooooo, boooooo;

that my paper will still be my euro paper of 2003
(an early version of that paper was published in early February 2000 – that’s 12 years ago – in what was then known as the Belgian newspaper “De Financieel Economische Tijd”):

“With Chinese Freegold from a reserve currency to a world standard”
by Ivo Cerckel
Tuesday, 2 September 2003
http://www.free-europe.org/english/2003/09/with-chinese-freegold-from-a-reserve-currency-to-a-world-standard/
replace “derivates” in the text with “derivatives”;

Here’s the latest:

Tuesday February 14, 2012
Shanghai eyes OTC gold trading
http://biz.thestar.com.my/news/story.asp?file=/2012/2/14/business/10731535&sec=business
SHANGHAI: The Shanghai Gold Exchange plans to launch over-the-counter gold trading and is in talks with the China Foreign Exchange Trade System to conduct these trades via the interbank market, according to an official from the exchange.
The exchange also has plans to start exchange-traded-funds for gold to tap rising demand in China. It was also considering rolling out palladium contracts. – Reuters

I know also:
Chinese “gold rush”: country diversifying assets
Published: 01 February, 2012, 13:58
http://rt.com/business/news/china-gold-economy-assets-231/
SNIP
China is the world’s fifth-largest holder of gold and seems to be in the market for more. Analysts believe Beijing snapped up around 500 tons of gold in 2011, double what it bought in 2010.
UNSNIP

and I know this:
China gold imports from HK surged in 2011
Last updated: February 7, 2012 4:15 pm
By Leslie Hook in Beijing
http://www.ft.com/intl/cms/s/0/d26cd2d6-518d-11e1-a99d-00144feabdc0.html
SNIP
China’s gold imports from Hong Kong more than trebled in 2011 from the year before, hitting a record 428 tonnes as savers flocked to the yellow metal as a hedge against inflation.
China is expected to overtake India soon as the world’s largest gold consumer, and the figures, which are considered a proxy for China’s overall gold imports, underscore the country’s growing appetite for the metal.
UNSNIP
FT will be angry because I quote.
They should first send me their weekly “Best of Lex” and then their daily etc.

But what’s really happening here?
Welcome to SGE
Shanghai Gold exchange
Shanghai Gold exchange (SGE thereafter), approved by the State Council and founded by the People’s Bank of China, performs the regulated functions stipulated by Management Rules of Gold Exchange and organizes gold transactions with the principle of openness, fairness, justness and honesty.
http://www.sge.sh/publish/sgeen/

Yes, this was part of the answer:
Tuesday February 14, 2012
Shanghai eyes OTC gold trading
http://biz.thestar.com.my/news/story.asp?file=/2012/2/14/business/10731535&sec=business

But does the People’s Bank of China also proceed to the marking to market of its gold reserves at the Shanghai Gold exchange?
Seems improbable? I don’t know.

that I must therefore confess that I still have more questions than answers about the gold policy of the People’s Bank of China which policy is, I think,  similar to that of the European System of Central Banks and (thus) of the ECB;

that I hope to provoke some answers next July in Shanghai.

Try to cogitate about that!

And this, Herman!

Ad nauseam:

The euro is the first currency that has not only severed its link to gold, but also its link to the nation-state.
(International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002
http://www.ecb.int/press/key/date/2002/html/sp020509.en.html

Freegold means that the euro has a gold component and a paper component, and puts a “firewall” between both so that gold’s valuation as a wealth-preserving asset cannot be pulled lower by the inevitable inflation of the paper component of circulating currencies. It is the (quarterly) marking to market (MTM) of the gold reserves of the Eurosystem, not to the model of $42.2 like the USA central bank (originally $35), by the Eurosystem which provides that wall.

Gold is an item not related to euro monetary policy operations.

Let gold trade freely behind the real firewall – like it did for the Ancients,
a wealth asset that stands beside money,
yet has no modern label or official connection to money.

Or, Herman, do you write introductions to (your father’s) books you don’t read?
Or to books you consider worthless?

Gij zijt zot, Kamaraad!
(The gentleman may be krazy! Cannot be?
Check your premises, said Ayn Rand.
Tis impossible to be and not to at the same time and in the same respect, the Philosopher, i.e., Aristotle, had said in his Metaphysics.)

met de complimenten van Zorro,

Ivo Cerckel
ivocerckel@siquijor.ws

This was my tribute to

https://twitter.com/#!/freegolds
Freegolds
@freegolds
the correct angle of view is gold pricing the currency.. instead of the currency pricing gold.
goudforum.com • http://goudforum.com/

who in one of his tweets asked why no mainstream economist draws attention to the fact that the ECB has gold on its balance sheet .

No related posts.

5 Responses to “Vic Van Rompuy and ECB balance sheet”

  1. Ivo Cerckel Says:

    This was my article in Belgium’s De Financieel Economische Tijd, now De Tijd, in early Februaty 2000, just before I left for the Philippines. Unfortunately, I didn’t expressly discuss oil for gold-euro.

    Replace “euro” with “renminbi”

    ===

    About euro, dollar, oil and gold

    Insert: ‘Will the euro replace the dollar as the reserve currency in international trade?’

    Since its birth in early January 1999, the euro lost already 16 percent of its value vis-a-vis the dollar to the effect that one euro is now worth less than one dollar. If you look at the behaviour of the European Central Bank (ECB), this is no reason to worry. Why not? The answer has perhaps something to do with the role which the euro could play in international trade. Until the birth of the euro, international trade was completely dominated by the US dollar. Since the end of the 19th century, the dollar was freely convertible to gold. President Roosevelt knew better in 1933 and he retained this convertibility only for foreigners. Americans were ordered to hand in all their gold. President Nixon knew even better in 1971 and put also an end to this convertibility, then $ 35 an ounce, for foreigners.

    The oil producers from the Middle-East could therefore obtain less gold than before with the dollars received for their oil. Out of love for gold, they were thus forced to increase their prices which caused the first oil crisis. The price of gold rose to over $ 800 up till 1980. Since then gold has fallen back to $ 230 to be at present just above $ 280.

    The reason is not that there is too few but too much demand for gold. Due to the high demand, 10 to 14,000 metric tonnes of paper gold contracts have been signed since 1980. Those contract are concluded by gold mines with the bullion banks, among others, the prominent US banks J.P. Morgan, Goldman Sachs, Credit Suisse/First Boston and Republic, in order to secure their future income. The contracts are being guaranteed by the central banks. They are in fact wagers upon the future price of gold as it will be determined by the buying and selling of the traders of physical gold. The contracts are sold by the bullion banks to the oil producers and by the gold mines to the hedge funds. Every increase in the price of gold leads to problems for the gold mines (cq the hedge funds) which must then sell gold below the market price. And what’s the risk for the hedge funds if the realise that they cannot reimburse their loans because the necessary gold will only be mined in 10 years time? Hence, the recent problems for the whole financial sector and especially for the quoted banks and thus for the dollar in connection with the fiasco’s of Ashanti Goldmines and Long Term Capital Management (LTCM).

    The existence of this paper gold market is being threatened just as the dollar was threatened in 1933 and 1971. Because this market is “expressed” in dollars and because there is now competition for the US dollar, this dollar is also being threatened. What now? Will the euro replace the dollar as the reserve currency in international trade? This euro is being backed by 15 percent of gold reserves. Because the trade balance euroland is, in contradistinction to the American trade balance, positive, a rising price of gold will support the value of the reserves of the euro and thus the euro itself.

    On September 26, 1999, 15 European central banks signed the Washington Agreement, during an IMF meeting. This agreement recognised that gold will remain an important part of global monetary reserves and that the involved central banks will, apart from the sales which have already be decided, not sell gold in the next five years.

    On December 06, 1999, the Dutch central bank announced that it would sell the first 100 tonnes of the 300 tonnes provided for in the Washington Agreement, through the Bank for International Settlements (BIS) and thus not through the London market. The BIS can sell or place gold without influencing the price of paper gold. This announcement by the Dutch central bank is the first step of euroland which confirms its direction. Part of these 100 tonnes have in the meantime been placed in brackets/pieces through the BIS. Switzerland is also considering to sell through the BIS.

    On Tuesday January 25, 2000, the Bank of England proceeded to a sale of 25 metric tonnes of gold through a ‘private’ auction whereby demand exceeded offer by a factor of 4.3. The price at which the gold was sold was only 3 dollar more than the spot price of $ 286 for paper gold on the London market that day. However, it is now clear that there exist two prices of gold, one for paper gold and one for metal gold. The hour of truth comes when the ECB will buy gold on the market with the dollars in its reserves. This will increase the value of the euro. The dollar will be confronted with the fact that the dollars circulating abroad will be repatriated which could perhaps lead to inflation in the US.

  2. Ivo Cerckel Says:

    That organisers ask me to clarify that

    the Shanghai July-20-23, 2012 Summit
    at the Hilton DoubleTree Hotel
    in Huaqiao/Kunshan, China

    is NOT a Freegold Summit

    but that it is the Austrian Economics Summit
    and thus encompasses a much broader range of issues.

  3. Ivo Cerckel Says:

    The table 17.2 on p. 471 of the 2000 edition of the Leuven book “Introduction to Economics”, under the editorship of professors Lodewijk Berlage and André Decoster, updated from previous editions by Madam Dr. I. Van der Auwera,
    becomes the unmodified table 18.2 of Chapter 18 “Money and Banking” (“Geld en Bankwezen”n) of the 2010 edition of the book, now under the title “Economics – An Introduction”, and under the sole editorship of professor André Decoster, and with a foreword by Herman Von Rompuy.

    This chapter was written by professor Paul De Grauwe, says the table of contents of the 2010 edition.

    As The Economist puts it:
    Worse, the costs of pursuing the banks for wrongdoing are difficult to contain: uncertainty over legal risks may make it harder for them to attract capital, which would affect their capacity to lend. Only the late-night lawyers will be happy with that.
    (The Libor scandal
    Year of the lawyer
    Banks face another punishing year of fines and lawsuits
    Jan 5th 2013 |From the print edition
    http://www.economist.com/news/finance-and-economics/21569053-banks-face-another-punishing-year-fines-and-lawsuits-year-lawyer

    Is that not the same with currency?
    We are told that the USA dollar is backed by the
    - wealth-producing capacity of the USA
    - capital of the country (wealth-producing capacity, not the capital city, ‘hoofdstad’ if you happen to read Dutch – how much is the country worth
    WHEREAS
    it should be backed by its gold reserves.

    Banks originated as warehouses.

    As Roland Leuschel puts it
    banks used to have the right to issue receipts for the gold, hiding in oil, they held in reserve. This right was taken away from them by the institution of central banks.
    (Roland Leuschel and Claus Vogt, “Das Greenspan Dossier, Wie die US-Notenbank das Weltwährungssystem gefährdet. Oder: Inflation um jeden Preis”, http://www.finanzbuchverlag.de, 2006, 3rd ed., p. 299)

    Depositors deposit gold in bank.
    Bank issues a certificate of deposit (CD)

    Such deposit is not part of the bank’s capital.

    EXCEPT
    under more common “unallocated” gold accounts,
    (January 29, 2013 7:16 pm
    Swiss banks lose old taste for gold
    By Jack Farchy, Commodities Correspondent
    http://www.ft.com/intl/cms/s/0/46c25732-6a10-11e2-a7d2-00144feab49a.html#axzz2JXU7moF3

    As I quoted in the post above:
    The balance sheet reports financial position. When a comparative balance sheet for two periods is presented, it shows whether cash increased or decreased.
    (Charles T. Horngren, Walter T. Harrison and M. Suzanne Oliver, “Accounting”, Prentice Hall, 2009, 8th ed. (as reprinted for the Philippines), p. 710)

    Do The Economist and the FT not understand this?

  4. Ivo Cerckel Says:

    Our Masters call what they did already four years ago with bankster Monte dei Paschi di Siena and others, re-”capitalisation”.

    As professor John Farrar puts it on p. 125 of the first edition his “Company Law” (London, Butterworths, 1985):

    CAPITAL

    ORIGINALLY
    this notion of capital was confined to loans of currency
    In the Guild system:
    little need for capital stock
    the principal asset of the business was the skill and connections of the tradesman.
    the only capital he needed was to build or rent a house, purchase tools or stock and set himself up

    LATER
    the notion of capital took in other assets and acquired a wider meaning than loan
    word became adjective
    capital stock
    the funds or quantity of money the companies are by their charter allowed to employ in trade
    16th century: growth of the capitalist class
    ==>
    concept of capital as a FUND OF MONEY

    This development was facilitated by the removal of the prohibition on usury.
    For a time, such capitalists ran the risk of being held to be partners.
    The “commenda” never gained a strong foothold in English law because of the backwardness of the English accounting system,

    As yours truly put it 25 years ago on p. 29 of his unpublished LL.M. dissertation at Exeter University “A Critique of the Role of Harmonisation of European Company Law” quoting the late Leuven professor Jan Ronse, “Algemeen Deel van het Vennootschapsrecht”, Leuven, Acco, 1975, pp 10-16:
    The general partnership and the limited partnership originated in the medieval customary lawe.
    The general partnership originated like the “societas fratrum” from the continued estate of a “pater familias”
    but departs from it by important rules which derive from the fact that it was intended to carry on a commercial business.
    The “commenda”, the limited partnership, was a company whose structure was based on a separation of ownership and control.
    It was a contract by which one or more persons (“commendatores”] entrusted (“commendare”) money or goods to merchants by way of commission or mandate in order to trade overseas.
    This contract of “commenda” was introduced in the 12th century by Italian merchants [like those founding bankster Monte dei Paschi di Siena?] who created this limited partnership to attract capital from investors who did not desire any role in management or any responsibility for decision-making.
    This contract resulted in the creation of a company with two different kinds of partners:
    one or more general partners whose liability was unlimited
    and
    one or more silent partners who participated in the risk of the enterprise only to the extent invested.

    END OF QUOTE FROM THE DISSERTATION

    Leuven is a Catholic University.

    As Saint Thomas Aquinas, who lived in the thirteenth century (1225–1274), i.e., just after the “commenda” had been created, puts it in His Reply to the Fifth Objection of Article 2 of Question 78 of the Second Part of the Second Part (yes, the Second Part has again two Parts) of His “Summa theologiae” :

    Reply to Objection 5. He who lends money transfers the ownership of the money to the borrower. Hence the borrower holds the money at his own risk and is bound to pay it all back: wherefore the lender must not exact more. On the other hand he that entrusts his money to a merchant or craftsman so as to form a kind of society, does not transfer the ownership of his money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand as something belonging to him, part of the profits derived from his money.
    http://www.newadvent.org/summa/3078.htm

    Summa theologiae IIa IIae, qu. 78, art. 2,
    Ad quintum dicendum quod ille qui mutuat pecuniam transfert dominium pecuniae in eum cui mutuat. Unde ille cui pecunia mutuatur sub suo periculo tenet eam, et tenetur integre restituere. Unde non debet amplius exigere ille qui mutuavit. Sed ille qui committit pecuniam suam vel mercatori vel artifici per modum societatis cuiusdam, non transfert dominium pecuniae suae in illum, sed remanet eius, ita quod cum periculo ipsius mercator de ea negotiatur vel artifex operatur. Et ideo licite potest partem lucri inde provenientis expetere, tanquam de re sua.

    Enough said.

    Do my homework, yourself!

  5. Hugo Says:

    Hi Ivo,

    I did follow the goldtrail and I learned a lot from it. Still considering political actions I think it is way too good to be true and unhandy for TPTB. If you dont mind me playing the so called advocate of the devil. The mail theses of freegold is that oil goes to EU(ro) instead of Dollars. For some reason the EU(ro) enjoys attacking countries who like other settlement then Dollars. Iraq, Iran, Libya come to mind. The damage it does to the EU(ro)pean economy isnt a problem at all for them EU(ro) leaders.

    Another claim was made by Mr. Duisenberg. The EU(ro) is the first country to sever the link between gold and nation states. Somehow it turned into a giant ponzi pump and dump currency. Nation states still have to bail out failed banks. No seperation there. Hence goldman sacks at the wheel. And boy does Mario the destroyer love it.

    By the way, Iam sure you know the EU(ro?) was set up by US intersts. Way easier to destroy them and make them support the dollar that way (by making them buy subprime morgages, derivatives that wont pay out etc).

    That were some general statements. Now to your points to Mr von Rompuy;

    ….”That they do not consider the fact that the ECB has gold on its balance sheet important?”
    They dont think that is important. They know the EU(ro) central bank reserves are for the most part paper gold reserves. There is a reason non of the EU(ro)pean CB’s have their gold audited. Nor does the ECB. Posession is 90% of the law as you know. The FED has defaulted on once 100% and once partially on gold and nothing happened. Good incentive to just take the gold from European central bankers. What they gonna do? Good weapon against the EU(ro) if you pull the gold card, your gold is gone and EU(ro)pe goes 3th world instantly.

    ”BUT whether GOLD {real money, not cash] increased or decreased.”
    Even the ECB had to admit it decreased since the introduction of the EU(ro) (in ounces). I bet they also commit huge accountingfraud since they allow ”mark to fantasy”. Adding extra damage to their balance sheet to the papergold they have on their balancesheet. I think thats the reason they had a paperman from Goldman Sachs as ECB man and joined forces with the USA to keep the EU(ro) position by force, threats etc. See the still hidden threat letter to the Irish.

    ”SHANGHAI: The Shanghai Gold Exchange plans to launch over-the-counter gold trading”
    Smart move, more paper gold not on the balance sheets. How much leverage u think they will take on? Seems the Singapore rulers also moved away from freegold just as the EU(ro) did.

    ”performs the regulated functions stipulated by Management Rules of Gold Exchange and organizes gold transactions with the principle of openness, fairness, justness and honesty.”
    Lol, you got to be kidding right?

    ”The euro is the first currency that has not only severed its link to gold, but also its link to the nation-state.”
    As I explained above it didnt. What mr Duisenberg could have better said is what mr Carroll Quigley in the 1960 era already stated (mentor of mr Clinton);

    The goals of the dynastic bankers have been nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalistic fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. he apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s
    central banks which were themselves private corporation.

    The EU(ro) achieved that goal as the first!

    ”The reason is not that there is too few but too much demand for gold. Due to the high demand, 10 to 14,000 metric tonnes of paper gold contracts have been signed since 1980.”
    There is huge demand for paper gold. Not real gold. Iam sure it will fail someday. And will restart, like any force majeur event. If there is indeed a huge demand of real gold. I bet that its EU(ro)pean gold.

    Sometimes I think the EU(ro) with this design was created (inc the big delay) was to keep the world patient for a way long time and keep the Dollar so they could do what they did.

    anyway, the 2 advocate of the devil cents. Dont worry, I really like gold and consider it the only real money. Keep up advocating freegold.

    regards Hugo

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