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Financial crash in sight… the gold of the Bank of France

2024-03-30 10:09:44

This article follows the one published on March 29, 2024 on the financial crash in sight.

By registered mail dated April 7, 2023addressed to Mr. Villeroy de Galhau, governor of the Bank of France, the National Circle of Economists reiterated the need to put in place a massive purchase plan for gold as a safe haven, in view of the major economic crisis currently occurring. Here is the text of the letter, to which no specific response was given.

A little reminder of history is necessary: ​​in 1933, thanks to the confiscation of American GoldRoosevelt had succeeded in revive the American economy and to restore confidence in the system which was exposed to chain bankruptcies due to the Great Depression. Indeed, this gold made it possible to perpetuate the American debt, the dollar being at the time dependent on gold.

For a private investor, the purchase of gold corresponds to a form of “debanking”. Replace one intangible financial asset by a real physical asset allows the investor to prevent and protect themselves against the effects of a financial or banking crash. This protection works except in cases of state confiscation such as Roosevelt’s Executive Order 6102.

On the markets, gold has just broken all its trading records for ten years.

Gold’s serial records are accompanied by those of all European stock market indices. And this is more than surprising given the state of the economies of various European countries.

A possible explanation comes from the fact that companies listed on the Paris stock exchange are no longer really French.

But then who controls these companies? Of what nationalities? O surprise: we find Blackrock, Vanguard, Amundi again which hold 25.9% of CAC 40 companies !

These companies are also shareholders in a good number of laboratories that manufactured Covid vaccines, as well as owners of a large part of Ukrainian agricultural land.

In order to compensate for losses due to the recent failures of the American banking sectorthese investment companies therefore have a particular interest in seeing prices continue to rise.

These funds use high-frequency trading algorithms (a form of expert system that “trades” (buy or sell) as much as possible according to established rules. Machines based on artificial intelligence rules that help erase the emotions of traders 80 years !). These algorithms no longer take into account the real economy to trade and therefore vary prices. A disconnect between the productive economy of the primary sector and the financial economy. This partly explains the recent manipulations and the records broken by the European stock exchanges, records totally uncorrelated with the current state of the economies of the countries in question, even if these records were supported by exceptional profits announced by listed companies. However, in principle, the markets anticipate, which is clearly no longer the case.

Indeed, not content with making almost all the volumes, bankers issue derivative products: downward or upward options on securities, indices or metals. The original purpose of these derivatives was to hedge a risk – for example, from the rapid increase in the price of oil or other commodities that a company could not reflect in its prices.
In theory, market operators are supposed to acquire the counterparties of these derivative products. However, most of the time this is not the case. The perfect example is on metals for which the sum of existing derivative products on gold or silver would be impossible to provide if clients wanted to transform these purchase options into physical holding. Banks therefore engage in completely uncontrolled monetary creation through these products. And therefore make the community take this risk.
But what do they do with these products? Already, they use them for their own account in order to speculate with leverage on the variables they have chosen to play: whether index derivatives intended to hedge portfolios or to amplify an upward phenomenon. Then, they sell these financial products to professionals and the public.

We can thus cite the improbable Volkswagen case of 2008 where hedge funds (speculative funds) having decided to play the stock downwards found themselves in an improbable corner. In fact, the Porsche company had purchased 31% of VW’s capital through call options on the stock itself from bankers. These selling bankers had themselves purchased the necessary securities if these sold options were to be exercised. The hedge funds which had sold Volkswagen securities without any consideration (naked short selling, without owning the underlying security, naked short in English) therefore found themselves obliged to repurchase shares at any price. securities that in fact no longer existed, which caused the share price to double in two days. Hedge funds would have lost between 20 and 30 billion euros on this famous Volkswagen corner. Only financial markets outside the real world allow such aberrant situations.

This system also applies to indices. These indices which are calculated on the basis of a basket of shares. But, once again, banks often “forget” to hedge against the necessary counterparties in their index management. What we call ETFs (exchange traded funds). Real risks which are not always appreciated at their fair value and which can be costly if positions were to be unwound (Kerviel affair of Société Générale) or if margin calls were to be made on these unhedged positions.

The catastrophic state of French finances, the state of our economy, the tens of thousands of business bankruptcies, must therefore alert us to push us to demand real control of our public finances, through the gold control of the Bank of France which has just announced catastrophic results: “An abysmal loss for the Banque de France, victim of the rise in its interest rates”.

The transparency of public accounts is an obligation, especially in an economic context where the decorrelation between finance and the economy is total.. This is all the more accentuated when there are budgetary slippages such as that of 15 billion announced by the Minister of the Economy Bruno Lemaire, thereby demonstrating unprecedented amateurism. And it is not government spokesperson Prisca Thevenot who will come as reinforcement, because she was not able to answer the simple questions of “who will buy our debt” in the coming months, or at what price. And this is even before France’s rating is reviewed.

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