John Mangun Discusses Where's-The-Gold Theories

In his latest column for the Phillipines' Business Mirror, Mangun reviews the recent financial and fiscal sins committed by central banks and financial institutions, such as the Grecian government hiding the size of its deficit with the co-operation of Goldman, Sachs. Those miscreancies have made credible theories that have typically been branded conspiracy theories: most notably, the one that claims there's no gold in Fort Knox (or a lot less than what the U.S. government claims.)

Related to it is the charge that bullion banks, storage companies for privately-held gold, have not kept the gold on hand but instead have lent it out or even sold it outright. This long-running charge claims the bullion banks inflate the gold supply through those means, in co-operation with the U.S. government, to keep gold prices lower than what they should be.

Mangun focuses on two governments, the U.S. and that of his home:

The Bangko Sentral ng Pilipinas (BSP) claims on its statement of assets that it is holding some $6 billion worth of gold. That may be true in an accounting sense, but it may not be true that the BSP is actually physically holding anywhere near that amount.

The US government says it is holding tens of billions of dollars worth of gold. That is possible but no one really knows. There has not been a physical audit of the gold supposedly stored in Fort Knox for nearly 50 years. It is possible that Fort Knox is not filled with shiny yellow gold, but with pieces of paper, receipts for that physical gold that has been loaned to another government or financial institution....

It is likely that many countries (hopefully not the Philippines) have loaned their gold to companies like Morgan Stanley and that many of those government bank vaults are empty, holding only paper receipts.

I am not saying it has happened, but this could be the reality. Say for a moment that the BSP loaned out its gold when the price was $500 per ounce. The borrower sold the physical gold at that $500 price, hoping they could buy it back at $400 to make a profit and then repay the BSP with physical gold. Now that the price is $1,000, the borrower of gold from the BSP cannot afford to buy back.

So the question that is being asked about and to the world’s central banks is: Do you still have the physical gold in storage or are you holding receipts and promises to pay that are potentially worthless?

He ends his column by saying that he hopes he's wrong about his suspicion that the Bangko Sentral ng Pilipinas has paper instead of gold. There's no parallel opinion about Fort Knox...