The Phaserl


The Rehypothecation of Gold, and Why It Matters

Claiming to own X quantity of gold is one thing, and reporting how many times the gold has been pledged as collateral is another.

by Charles Hugh Smith,

When correspondent Scott A. Batten offered to write an explanation of the rehypothecation of gold and why it matters, I quickly accepted. Like many others, I have breezed over the word rehypothecation with the basic understanding that it means assets pledged by counterparties (such as the infamous copper stored in Chinese warehouses) are reused as collateral/repledged–in effect, the same assets are pledged as collateral multiple times.

But beyond this, I have not had a clear understanding of how the rehypothecation of gold reserves threatens the whole shaky edifice of Infinite Greed, oops, I mean neoliberal capital markets.

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2 comments to The Rehypothecation of Gold, and Why It Matters

  • Willie

    The Ft. Knox Gold left the country years ago…

    • Willie

      from James Wardner’s book (written in the early 90’s)

      The Planned Destruction of America

      Here are some amazing facts from ” … Good As Gold?” How We
      Lost Our Gold Reserves and Destroyed the Dollar by Christopher
      Fact 1: From 1958 to 1968, 52 percent of the nation’s gold
      reserves left this country.
      Fact 2: These shipments were made with the knowledge and
      acquiescence of government officials.
      Fact 3: For 35 years, the government has failed to conduct a
      physical inventory of its gold.
      Fact 4: Inquiries into the history of America’s gold reserves
      and the policies behind that history have been
      consistently stonewalled.47
      Christopher Weber has contributed to A Case for Gold, a House
      Minority Report of the U.S. Gold Commission. This report stated that
      at its peak in 1949, Fort Knox held 702 million ounces of gold. By
      1971 only 291 million ounces were left, a loss of over 58 percent.
      Not only have we lost nearly 60 percent of our “good delivery” gold,
      but 90 percent of what remains is coin melt. This means that only 10
      percent of the 264 million ounces held by the Treasury is considered
      “good delivery” gold. The rest is tainted with nearly 10 percent
      copper coin melt. In other words, the gold of America, at $35 an
      ounce, has been sold to foreign bankers.

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