Mwana Africa - A New beginning

However, before I go.

I thought you guys might like to see how the Banking system is... How can I put this?..Fxxxxxd!

Because The gold in their vaults (even if it has a slip of paper attached to it with your name on it..) is...Well..How can a I put this?

Well I can't, not as well as the Mogambo Guru anyway. So without further ado...Read On...


TO TRUST, OR NOT TO TRUST
by The Mogambo Guru

Things are getting so weird that even my Extreme Mogambo
Paranoia (EMP) seems oddly inadequate. For example, gold
is going bananas! Several people asked me what this
could possibly mean, but as usual, I have no idea.

I do know that there are a hell of a lot of people
sitting on some big, big, big positions on the short
side of gold (and mining shares too), and these hapless
chumps are getting crushed, I mean freaking crushed,
with gold soaring like this. The statistic that keeps
pounding, pounding, pounding in my Tiny Little Mogambo
Brain (TLMB) is that there is, reportedly, a short
position in gold, measured in umpteen jillions of
ounces, that is 78 times as big as all the gold in the
whole damned world!

That means that one guy has some gold, and 78 guys think
that they own some gold, but they don't. All they have
is a slip of paper that says, "I owe you gold" and
signed by somebody. Somebody who does not, obviously,
have any gold to give!

What I am confessing is that people who sent money to
The Mogambo Gold Depository (actually a shoebox in the
back of my closet) and think they have some gold, just
because I promised that I would store gold for them, are
screwed. I always meant to go out and get some gold like
I said I would, but one thing led to another, and then
there was that drunken brawl at Paula's Passion Pit of
Prancing Princesses that I taken full responsibility
for, and am still paying for all the damages.

So, don't get me wrong, but the gold you thought I was
storing for you...sorry. Bummer, huh?

Fortunately, I have taken the wise precaution of wording
the deposit contract to mimic the Comex rules, and now,
since I am on the hook to lose a lot of money, I can
merely cancel their stupid contracts and give them their
original money back! Without interest! Hell, I might
just keep the money for myself to make up for my looming
losses from the lawsuits that will soon be filed. It's
the American Way!

But the point is that people who erroneously think they
have gold safely stored away someplace, and who have not
seen the '60 Minutes' show where they expose this dirty
little Mogambo scam of mine, are all out dancing in the
streets, thinking they are rich, rich, rich, and they're
buying drinks for everybody. They're all laughing and
having fun. And every time gold goes up by another few
bucks, everybody is even happier and they start having
even more fun!

So, in a strange yin-yang thing, you can bet that this
rise in gold has lots and lots of other people - namely
the people who are short all that gold, and the central
banks who lent all that gold to bullion banks, who sold
it long ago at prices far below this, and are now net
short in gold - are in a real panic. Now all those
shorts are rushing about in desperation, including
elected officials, banks, bullion banks, central banks
and especially the Federal Reserve, which is also
nervous about all that gold belonging to the United
States that has been lent out to guys who can't pay it
back! Yow!

The only guys who are NOT rushing around in panic are
the guys who have taken possession of physical gold
bullion. They know exactly where their gold is, and we
have enough firepower to keep it, too. One of these days
real soon, there will be lots and lots of guys who will
ring our doorbells ("ding dong!"), who will say things
like, "Please please, please, please, please, please,
please sell me some of your gold!" and who also want to
buy it at absurdly high prices. If you are buying gold
right now, then one day that will be your doorbell
ringing, and you can decide for yourself if you will
sell them a little of your gold for some big, big money,
or chase them off with a mighty shotgun blast and your
laughter ringing in their ears.

But this is not about how I let off a few warning shots
at a neighbour's kid who was acting a little too
suspicious to suit me, but about how this is just the
weird, scary stuff that always happens at the end of
long, credit-fuelled booms, especially ones where the
government is the major buyer of goods and services,
like now. In short, there are a lot of desperate rats
trapped in a lot of corners, and they are ferociously
lashing out in fear and panic, which is, if you have
seen any horror movies at all involving rats, a very bad
situation, indeed.

I bring this up because a guy who likes to be an
"anonymous source" reports:

"If a bank has physical possession of some gold which it
owes you as its creditor, the bank itself is the current
owner of the gold."

An interesting thing to consider! On the other hand, if
the gold you deposited at the bank has your name on it
as the owner, then you have what is known as "allocated
gold". But if all you have is a deposit slip showing
that some ounces of gold were deposited, then you have,
unfortunately, unallocated gold. Our anonymous source
goes on to say:

"Unallocated gold is the most widely traded form of gold
in the world. While this gold remains unallocated to
you, the regulator considers it part of a bank's liquid
reserve."

He figures that 99% of gold deposits are in unallocated
form, and therefore all the deposited gold is, in
effect, in a big commingled pile in the basement of the
bank.

Another way of looking at this stunning fact is, "This
makes unallocated gold an attractive way for the bank to
maintain its regulated liquidity, because you have paid
for your gold, and the bank is free to use your money,
while it is also able to add your unallocated gold
holding to its own reserve."

Being stunned to speechlessness at the revelation, I
nevertheless raise the Bony Pointing Finger Of The
Mogambo (BPFOTM), and tap on your computer screen so
that you pay special attention to where he says that the
bank uses your gold as part of its reserves!

If you are not impressed by the use of the exclamation
point, or if you are not likewise impressed and
horrified by the actual words, then I know that 1) you
are still young and trustful, and 2) I also know that
you don't realise that bank reserves are the assets that
the bank can legally use to offset its own losses.

My mighty Mogambo Super Brain (MMSB) detects a sudden
disturbance in the fabric of the cosmos, as you are
saying to yourself, "The banks can protect themselves
and their owners by confiscating and selling the assets
of the depositors? Yow!"

Yow indeed, young grasshopper!

So, your unallocated gold could, and would, be sold if
the bank were in need of cash. If the bank went bankrupt
and insolvent, then you would be put in the line with
all the other creditors, and you would divvy up what is
left, if anything, after the bondholders have been paid
and the secured creditors have been paid and lots, and
lots, of other people have been paid and the furniture
has been repossessed.

Hahaha! Trust the banks? Hahaha!


Regards,

The Mogambo Guru
for The Daily Reckoning