Friday, January 25, 2008

Trichet behind the curtain

Gold spiked over $900 today, and I just had to bring this up, because Trichet is acting like the leader of the world's central banks. Here's the latest finances of the ECB:

The first paragraph states:

In the week ending 18 January 2008, the decrease of EUR 41 million in gold and gold receivables (asset item 1) reflected the sale of gold by one Eurosystem central bank (consistent with the Central Bank Gold Agreement of 27 September 2004).

Here's an example from a sale on March 31, 2005:

31 March 2005 - The ECB’s gold sales
The European Central Bank (ECB) has completed a programme of gold sales amounting to 47 tons of gold. These sales are in full conformity with the Central Banks’ Gold Agreement, dated 27 September 2004, of which the ECB is a signatory. It is not the ECB’s intention to sell more gold for the first year of the agreement, starting on 27 September 2004 and ending on 26 September 2005.

Now they sold 47 metric tons of gold on March 31, 2005. The average price of gold for that quarter was $427. At $427, a metric ton is worth $13,728,050. Timesx47 tons=$645,218,350. Today with gold at $911.80, a metric ton is worth $29,314,370. Timesx47 tons=$1,377,775,390. The difference? $732,557,040. But they did this countless times, to the tune of $107 billion!

If you look at their balance sheet, on line 1, you''ll see that the ECB has $210,663,000,000 billion Euro's of gold, or about $310 billion. But the ECB has been selling the physical asset of gold, for an electronic currency. And they left $107 billion on the table by selling their gold at lower prices for paper dollars!

Now today, SocGen is all in a huff because they jammed billions and billions and billions of futures into the market to take a $7.3 billion dollar loss, when the market couldn't take the selling, and the bank declares the handling (ie panic selling) of the trade gone awry as prudent. The markets were down 5% that day, and a joker from SocGen's head of asset management at the bank, Philippe Collas said: "It's not possible that our covering operations contributed to the market's fall.'' Are you kidding me????? They dumped $73 billion into the market in one day!

The chairman, Daniel Bouton said, "Had we not acted swiftly, the loss could have been 10 times worse." When did dumping massive amounts of stock into a panic become prudent??

Now you know why SocGen didn't take Bouton's resignation. He dumps into a panic, and they lose $7.3 billion. The head of the ECB, Trichet, has been continually dumping gold, leaving $107 billion on the table! But SocGen's says their loss is the trick of a genius rogue trader! And now, tonight the Financial Times is reporting that the ECB knew about the trades, and gave SocGen permission to postpone it's announcement, which is what I speculated this morning!

Give me a break! Maybe Trichet of the ECB should hire Mr. Kerviel, the "rogue trader!"

At least he was bullish!

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