Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Zardoz who wrote (80219)	1/7/2002 11:50:45 PM
From: long-gone	Read Replies (1) \| Respond to of 116759

Enron reflected in gold accounts racket Miningweb By: Tim Wood Posted: 2002/01/07 Mon 10:29 \| © Miningweb 1997-2001 PRINCETON, NJ -- The circle is closing on US government accounting improprieties that mirror the events behind Enron's collapse. James Turk, full-time proprietor of GoldMoney.com and part-time conspiracy sleuth, has uncovered the sort of slick financial scheming that gave investors cause to abandon Enron. If the US no longer owns much gold reserve after pledging it for use in dubious off balance sheet transactions, then there is also every reason to short the country's stock - the dollar. Turk shows that the application of business accounting standards to the national accounts has forced a clean up in how the US Treasury and Federal Reserve deal with gold. The net result is a $20 billion hole in the US balance sheet. What he has found does not irrefutably prove the alleged conspiracy against gold, but the fast and loose behavior evident in Fed and Treasury accounting is astonishing. There is no company that could massage its accounts so blatantly, for so long, and not get carpeted for it. But, what is government's purpose if not to formalize dishonesty? Murky The first fiddle relates to the pricing of gold. Prior to 1997, the US gold reserve was priced at market value while gold liabilities were priced at $42.22. Hardly a conservative interpretation of assets and liabilities… GAAP makes that sort of fudge illegal, so the consolidated financial statements reflect the arbitrary lower value for both. That pricing change neatly squares the $11 billion in gold the Treasury makes available to the Fed with its entire stock of bullion – 261.7 million ounces. A fifth of that gold appears to be in foreign hands. Turk has argued previously that the US swapped 1,700 tonnes (54.7moz) of bullion with Germany's central bank, but could find no record in the accounts for it. Now he believes the transaction is revealed within a $31.2 billion foreign currency liability item. He says the swap transaction was further secured by an issue of Special Drawing Rights (IMF funny money). The Bundesbank then transferred ownership of its gold to the US's Exchange Stabilization Fund which made it available to the bullion banks, presumably to cap increases in the metal's price. Turk supports his interpretation of the Bundesbank's call on US gold with the inexplicable reclassification of gold vaulted at Westpoint from "Bullion Reserve" to "Custodial Gold." Accounting phraseology is always more art than science, but its underlying meaning is always purposeful. Some bad news While the new findings contribute greatly to making the case for a conspiracy to suppress the gold price, it is not all positive. Firstly, the Fed and Treasury are not acting illegally. Indeed, they are merely practicing that peculiar modern American art – doing what is legal even when it is wrong. They are free to act beyond the purview of Congress and are enjoying that liberty thoroughly. Second, the national financial statements reveal a negative net worth of around $6 trillion. That makes gold a pinprick in the whole scheme of things. At $300 an ounce, the entire gold stock is only worth $80 billion, or a mere 1.6 per cent of the problem. In that sense it looks irrelevant in the whole scheme of things. However, don't be too quick to dismiss the impact. Would you have rather owned Enron's oil and gas or its stock and bonds when things got pear shaped? Answers are overdue The Enron example goes further. When questions about Enron's murky accounting were first asked of ex-CEO Jeff Skilling and Chairman Ken Lay early last year, they brushed aside the critics as morons. But the morons were right all along. The least a chief executive can do when confronted with evidence of accounting problems is to reassure investors that all is well. As Enron demonstrated, personal assurances are not enough. Complete transparency is required or your stock is going to get flushed past the s-bend. Of course, you may not give a rat's backside about your shareholders because you set the stock price in the first place and you know you'll get paid the super pension regardless. Then the investors are going to get flushed. The best shareholders can do is at take a little insurance, say 5 per cent of your portfolio, and spend it on gold. mips1.net