The Communism Channel (CNBC) did a propaganda piece on gold. They were promoting it all day. My father was really interested. He watches CNBC all day.
Sometimes, it’s worth watching propaganda, just so you can identify the lie. The “gold special” was a secret advertisement for the GLD fund.
It started out innocently enough. They showed the deepest gold mine in the world. They showed a gold refiner. They showed a jewelry manufacturer. They talked about “good delivery bars”. So far, no lies.
Then, they gave “a tour of the vault where HSBC stores the gold for GLD”. They showed a vault filled with gold bars, or, as they would say on zerohedge, a vault filled with gold-plated tungsten bars.
They slipped in one interesting bit of truth. “This vault holds the gold for GLD, and the gold for other HSBC customers.” That’s the magic of rehypothecation. The same gold bar may be promised to multiple people! When/if HSBC declares bankruptcy, you’ll probably get Corzined just like MF Global’s customers. If HSBC promised the same gold bar to multiple customers, the lie won’t be found out until HSBC goes bankrupt and the assets are liquidated. That’s exactly what MF Global did, raiding customer funds to pay for gambling losses. Even if you had a warehouse receipt, you became a creditor in bankruptcy just like everyone else! When HSBC declares bankruptcy, the GLD shareholders will be unsecured creditors. Until then, every GLD shareholder is contributing to HSBC’s gambling fund, rather than investing in gold.
They also had the fund manager flat-out lie. He said “GLD is a 100% full-reserve gold investment.” That is *FALSE*. GLD owns gold futures and paper equivalents. If you read the fine print of the fund prospectus, GLD may lend out gold to short sellers. They can invest in paper-equivalents of gold. GLD doesn’t have to disclose how much actual physical gold they have, and how much paper.
I was *OFFENDED* to see the GLD fund manager flat-out lie and say that GLD is 100% full-reserve, and that it would be illegal if GLD wasn’t full-reserve. I wonder if they cleverly edited it,? The interviewee said “That would be illegal!” in response to another question, but then showed the interviewer asking about GLD!
Notice the propaganda trick. The first 80% of the show was honest. They talked about gold miners, gold refiners, and jewelers. Then, BAM, at the end, they talk about GLD and what a safe 100% full-reserve investment it is. What a cleverly constructed lie! Did the producers of the show never bother to read the GLD prospectus? They flagrantly ignored it.
Suppose that GLD really is fractional reserve and not full reserve. As long as more people buy GLD than sell, the scam continues, just like with any Ponzi. If every shareholder sold GLD and bought physical, there wouldn’t be enough physical for everyone, and the price would skyrocket. As long as you can con new people into buying, the scam continues.
It was very educational, seeing the Communism Channel flagrantly lie. It was a thinly disguised ad for paper gold GLD. If you mix lies with a lot of truth, people won’t notice your lies. Some stupid people will be tricked into investing in GLD, instead of physical, and they’ll get Corzined out of their investment. I was VERY OFFENDED to see CNBC flagrantly lie, saying that GLD was 100% full-reserve.