It was Anne Barnhardt’s interview (where she seemed perplexed to find herself somewhere between a cult hero and a pariah) that is the inspiration for this post.

After the unprecedented “legalized theft” of over one billion dollars from MF Global client segregated accounts, Anne closed her commodity brokerage firm, returned all client trading funds, and withdrew her holdings from the international financial and monetary system.

I consider this an unprecedented act of principle, by a woman of honor.

And Anne stands pretty much alone in that regard. I can’t find the particular interview now among the hundreds of Google search results, but as her actions were being digested and reviewed she remarked something to the effect of “Why am I the only one doing this?”

And her question, if we were to uncover the perplexing nature of it, might best be interpreted as, “Why am I the only one here facing reality?” Because in the popular Jim Puplava interview, she states the current reality unequivocally:

This is no longer a nation of laws. This has now transformed into a nation of men … In the case of Jon Corzine, this man has stolen in excess of a billion dollars … This is a former head of Goldman Sachs … he knew going into it he could get away with it (because) he is in tight with the Obama regime. Earlier this year, he bundled high six figures for Obama in one evening! He is a crony of the regime. This is Marxist Communism. There is no rule of law. And these people, these poor MF customers are just sitting out here helpless to do anything because there is no law enforcement. The rule of law no longer exists. There is no longer justice in this nation.

Now we can disagree on certain details. But details aside, THIS IS REALITY. And to face it, to deal with and to prepare for it’s logical conclusions, is a lonely and thankless excercise in this uncertain world.

Ann will now be literally abandoned by friends, relatives and associates as they retreat into the warm embrace of FANTASY, spun by the master himself in his state of the union address. If nothing else, our politicians are well studied in the fantasies we crave, and they feed us our affirmations in right-sounding rhetoric about the great hope and light of the world that our country, and our people and way of life represents.

It is the way of debt-based money, issued by political decree, to be awarded by favour more than earned by labor. It is Triffin’s dilemma, and we love it.

To question “the dream” creates conflict, fear and troubling doubt, even among those of us who should know better.

“Where does this attitude come from,” we are scolded by the voices cocooned up in the fantasy. You see, to accept reality is to reject men like Jon Corzine and Tim Geithner, Rubin, Paulson, Dudley, Gensler, Altman, Orszag, Gramm, Emanuel, Daley and Kashkari to name a few. All are present or former financial market “regulators”. All were former Wall Street insiders, spinning the cocoon. A nation of men rejected, along with their ideology, and their system.

So we stand at the precipice of a great information age, flooded with propaganda, steeped in “reality TV”, entertained by the battle of the primary elections (in superbowl championship style political drama). It is increasingly difficult to ascertain where fantasy ends and reality begins. We want to be comforted. We want to be reassured. We want to be treated fairly and we want to believe that we are part of a system that does treat us fairly, as long as we are obedient to it, and trust in it with all our worth.

We are willing to be obedient to a greater power that rewards us for obedience, so that we can sleep soundly at night, kmowing that evil powers can never forcefully take from us all that we cherish, all that we’ve worked for all our lives, all that we believe in and trust.

And inasmuch as we choose that path, we are nothing more than cattle, of the type that Anne’s firm once traded futures in.

It is a hard and lonely path, this final frontier. Those few who choose to walk it have a long, hard journey ahead. The many – we could call them the 99% to turn a popular phrase – will follow the fork in the road where the fantasy can is kicked perhaps indefinately. That path is soft underfoot and well plowed by the 1% who have prepared it for them.

Either in ignorance or denial, they can hope to trod that path until they end their days on this earth, finally leaving the fantasy behind.

For the few of us who choose the lesser path, I salute you. For this is the final frontier in this life, in the here and now.

For we know that we must at least face reality before we can truly confront it, and thereby change it. For those who stand at the fork in the trail, and who would take refuge in the statement, “but there’s nothing I can do about it”, I would ask only that you embark upon this final frontier, and face reality. THAT is what you can do about it.

All things considered, it is no small thing to do.

Just why do those gosh-darned silly “old-fashioned” central banks hold (real physical) gold in reserve?

Yes, central banks do lease, move, and “hold” gold in reserve, yet … like the FED … they tend to be quite opaque regarding their actions involving this “tradition”. Still … there is nothing in the financial world less opaque than physical possession.

And Ben is perfectly correct in his answer.

TRADITION
Origin:
1350–1400; Middle English tradicion < Old French < Latin: a handing over or down, transfer, to give over, impart, surrender, betray chiefly law, Roman law, Scots law the act of formally transferring ownership of movable property; delivery. c.1380, from O.Fr. tradicion (1292), from L. traditionem (nom. traditio) “delivery, surrender, a handing down,” from traditus, pp. of tradere “deliver, hand over,” from trans- “over” + dare “to give”. The word is a doublet of treason (q.v.). The notion in the modern sense of the word is of things “handed down” from generation to generation.

We will come to see the origin of the term return to its “traditional” use.

This Rob Kirby article could be the most satisfying, relatively concise, accurate and complete description of the current state of affairs in the world economy I’ve ever read.

Surely, readers of Zero Hedge will recall Bill Gross’s recent lament of “paranormal” activity in the bond markets, though several good articles about the crucifixion of bond vigilantes have preceded Gross’s revelations since 2008, many referenced here at letthemfail.

As we get deeper into the crux of things, we get a mighty good summation by Kirby:

The ESF participates in these [interest rate derivative] trades taking “NAKED INTEREST RATE RISK” – meaning they do not provide their counterparties with the requisite amount of bonds to hedge their trades – thus forcing them into the “free market” to purchase them. This generates UNBELIEVABLE “stealth” settlement demand for U.S. Government securities. This is how/why U.S. Government bonds and hence the Dollar can be made to appear “bid-unlimited” – even when economic fundamentals are SCREAMING otherwise. The amount of demand for cash government bonds that can be conjured out-of-thin-air in the derivative interest rate swap complex … measured in hundreds of Trillions in notional – literally OVERWHELMS the cash bond settlement process.

This means bond yields are set arbitrarily – in accordance with Fed / Treasury policy – NOT IN FREE MARKETS. This also explains why there are no identifiable end-users for the dizzying growth in interest rate derivatives [swaps] – the trade is all attributable to the Treasury’s ‘invisible’ ESF – an institution that is not publicly accountable to ANYONE or ANYTHING. This is why other nations can and do have, from time to time, failed bond auctions while America never has and NEVER WILL BE ALLOWED TO. This is all done in stealth to facilitate and give an air of legitimacy to the U.S. Treasury’s ZIRP [zero interest rate policy].

Now take a deep breath, sit back, and let that settle in. Because Kirby next refers to the work of Eric de Carbonnelle (who literally dropped off the planet in 2011) as the definitive treatise on the subject. We have been talking about the bond side of derivatives for years, and I began quoting deCarbonnel about a year ago, citing his work beginning in 2009.

Most importantly as the discussion progresses, I think Kirby makes the most persuasive bridge from the understanding of these blatant inverse derivative relationship manipulations, and the outrage which inevitably ensues in the mind of the typical Internet activist / blogger, to the logical solution which sometimes wears the unfortunate label of “gold bug”:

Complete Capture of the Derivatives Complex and Defiling of Fiat Capital

That irredeemable fiat money is designed to fail – by its very nature – is laid out very well in Chris Martenson’s, Crash Course – a staple which everyone is encouraged to take the time to watch.  But rather than let the “fiat” U.S. Dollar fail, as all irredeemable fiat currencies are designed to do, [central planners] BOUGHT TIME through the capture of the DERIVATIVES PRICE CONTROL GRID – by blatantly commandeering the unlimited resources of the U.S. Treasury’s ESF along with the printing presses of the Federal Reserve.

Physical Precious Metal:  The Achilles Heel of Fraud

As the interest rate swap mechanism is used to corral interest rates – so are gold futures contracts on exchanges like COMEX and the London Bullion Market Association [LBMA] used to suppress the price of the U.S. Dollar’s number one competing currency alternative – gold.

Strong dollar policy is the number one priority of the ESF (and its ruling party) and artficial debasement of gold is a necessary byproduct of that policy, expressed in dollar leverage as the collective notional interest rate derivative “cloud” looming above the much smaller real world economy of real assets.

The system doesn’t have a personal vendetta to make gold appear unworthy, rather everything policy makers are doing to keep the dollar “strong” creates downward “price” pressure by necessity. Gold paper leverage is a necessity. A means to an end, that being the “strong dollar”.

But there are ideological and geopolitical forces both from within this country and from beyond, who are rejecting the inverse relationship between debt and asset expressed in the acceptance of derivative financial positions taking priority over the real world economy of productive labor and the real assets they produce.

And the ideology spans both the top 1%, as well as the bottom 99%. So alignments are forming. When the confidence fails, and counterparty payment is demanded in gold, the entire paper construct fails.

The people truly have the power to help foster POSITIVE change – they just don’t quite realize how yet. But more and more are realizing it, every day. All they need to do is be on the right side of the present system’s final trade.

More and more now know “where we have been” and can now more clearly “see where we are going.”

It’s pretty likely that there will be another bailout of the real estate market, but why? I mean after all, we already did that by marking the MBS balance sheet valuations of the Too Big To Fails to fantasy. And then we “bailed out” the difference between those fantasy values and true mark to market values.

Well that’s just the beginning. You see, the strategy of bubble creation is a long, slow, politically managed bail out between real world valuations and the banks “bubble world” you are indebted to. And the imbalance between these two worlds is destroying the real economy, as the banks foreclose upon their collateral.

Now we could hope that the true decline in collateral values, as millions of Americans strategically (or out of necessity) default, would be a huge problem for the banks. But it’s not really the collateral being marked to fantasy that’s the issue here, it’s the mortgages – or the debts – which you owe. You see, it’s really not the banks that are Too Big To Fail, it’s the debt issuance / debt expansion “system” which they support.

As long as the debt is marked to fantasy, what does it matter if you default? As long as the collateral is marked to fantasy, what does it matter if home values continue to plunge? You see, it is merely the political will of the key players in this charade, primarily the FED and its primary dealers (but many, many more) that enable this destructive cycle to play out, saving the bubble debt at any cost.

The obvious solution, though it is unimaginable in our managed paradigm, is to mark the debt down to market. You could do it yourself, since your servicer, your politicians, your banks, and the creators of that system certainly won’t. They’re betting you won’t sacrifice your good credit rating, but the credit-worthy will be subject to all manner of hidden taxes to subsidize those who already have. Managed perceptions.

Could you imagine sending a letter to your mortgage servicer telling them that you have analyzed the true market value of your home, and found it to be 45,000 dollars less than your current principle, and that you have calculated the new mortgage payment, applying the interbank lending rate plus 1% (more than fair) and will begin sending them the new payment, based on your new principle, and new rate of say 1.5%?

Good luck with that. .. and yet … that is exactly what every mortgage holder in the world should do. Facebook revolution anyone?

And if this was “imaginable” enough to go forward, when the banks refused, people would hold the line and begin defaulting on their mortgages in so great a number, we would force a one time emergency revaluation to clear debt from the system and stabilize the marketplace such that both bank balance sheets, and the real economy, are at an equilibrium. And a true global recovery could begin. If one does it, you have a deadbeat. If a million do it, you have a revolution.

My friends, who would have the balls to get rolling on this?

Especially now that the classe politique has just postured with some interesting preparations to stave off that very event: Homeland Security “monitoring” of social media and Obama’s outrageous, un-Constitutional precedent of preventive detention.

But whether someone contrives a common sense debt-reset through a facebook homeowners revolution or not, the reset is coming.

Yes, ”political will” is planning to maintain the debt service status quo, even to the extent of designating objectors as “terrorists” attempting to destroy our American Demoratic way of life (the way of debt money issuance under political control) but the global default event is coming anyway, unless you believe that global policy makers will allow for generations of debt to stifle real growth forever.

They created this debt-based, Federal Reserve, dollar reserve system out of the ashes of war, to prevent future generations of war-torn despair. Do you really think they are going to milk air eternally from countless future generations obligated to this nominal expanding debt? Not by their actions today they won’t. Not when they become even more wealthy by reversing this trend in the new asset based system (and are touted as heros for it).

It is merely a matter of how much more savings homeowners will allow banks to steal before the BIS calls the global “system” holiday.

And that is the long and the short of it folks. People are doing this today, wittingly or not, but not in great enough numbers to force the event, just large enough to force continuing bailouts, in accordance with the designs of the kleptocracy. And in the meantime, the kleptocracy is acquiring real assets with first tier money on the backs of their debt-slaves.

You can voluntarily agree, or object, to the continued shifting of productive labor wage earnings into fraudulent debt subsidization, but mathematically, this cannot go on indefinately. The debt must be marked to market. It is just a matter of how great a collapse will get the job done.

As I write this, many “gold bugs” are shaking their heads in dismay. How can gold now be plunging again? It’s rise yesterday affirmed all our suspicions that the “weak hands” had been “flushed out”. Now “gold” will inexorably rise and never fall again.

Why are our experts always DEAD WRONG? I’ll tell you why. Because they speak English. They should be reading the thoughts of Russia, India, China, and some smaller developing countries who speak my thoughts in their native tongue. But these western minds cannot grasp the truth.

I had an amazing conversation this morning with a long-time friend of mine, who’s always been gold friendly, and he said, ‘I’ve been reading a lot on the weekend and I got the impression gold is going to be weak in the next few months.’ He asked, ‘Should I sell half of my gold position with the idea of buying it back in the third quarter?’

I said, ‘Are you out of your mind? I don’t know what you were reading, but I would be very surprised, unless the whole world melts down, if gold would be weak at all in the next six months. In fact I would say it’s going to go up $400 or $500 an ounce in the next six months.’ But that’s the kind of sentiment that’s out there and this was from a guy who has been a player in gold for years.

John, the whole world is melting down before your very eyes. I mean, Jesus Christ, the world’s most insolvent TBTF bank now accounts for 20 basis points in the projected S & P. Player? STOP using gold’s name in vain. You are not trading gold, you are trading PAPER. Gold never becomes weak or strong, only YOU do, by your fears and greed and lust for “position” over your “weaker” handed paper trading adversaries.

Try only to realize the truth. THERE IS NO SPOON. There is only yourself. YOU bend the price. Stop being a paper player and start being a gold holder before you suffer a heart attack over your own mirage!

The only “position” you should assume is the position of placing real, physical yellow metal into your secure possession. You DO remember what that yellow metal is don’t you? You have held it in your hand haven’t you? John Embry, you DO HAVE “billions” of real physical gold secured in vaults backing the Sprott physical gold fund DO YOU NOT????

Then why do you address the fears of fools this way? Why do you play into this paper pricing game? Is it because the truth you know cannot be understood in Western terms, to rally other “players” around, or do you in fact not know it after all?

These western traders are so predictable. When the paper falls, they hyperventilate and come up with all sorts of technical excuses for the temporary woes of the perceived decline of real metal. When it rises they all rejoice, “See, told you so.” and so on and so on and so on.

Once the dollar begins it’s decline … it’s use to establish a gold market will end. This will cause an unexpected delayed positive impact on gold values as gold’s paper marketplace goes through tremendous convulsions. We may see dollar price inflation in all things, yet gold values fall as contracts fail from constricted supply.

So predictable. And when you are that predictable, you are vulnerable. I grow weary of your tell. Please leave the table so the remaining grown ups can look one another in the eye and see who blinks first. In your changing reality, MILLIONAIRES will be the new middle class. And the generational wealth dynasties who sit upon tons of physical gold in vaults beneath the estate are burning their paper ties as we speak.

As long as investors believe in paper gold, their wealth will be slowly absorbed by physical gold buyers until trading breaks down.

Do you really think the Rothschilds are the fools, and that people who hold paper for value will be laughing all the way to the bank as that worthless relic of a barbarous past plunges into irrelevance? Perhaps the Roths should have filled those vaults with paper after all? The holders of tons of gold will be the new Trillionaires, perhaps Quadrillionaires, in  your paper terms.

Fools live in the paper Matrix created for them to serve as slaves.

Spoon boy: Do not try and bend the value of gold.
That’s impossible. Instead… only try to realize the truth.
Neo: What truth?
Spoon boy: There is no gold.
Neo: There is no gold?
Spoon boy: Then you’ll see, that it is not the gold price that bends, it is only yourself.

2012 will be the year that people will ask themselves, “Am I part of the problem or part of the solution?”

2012 will be the year that paper gold is written into the dirt, as bigger MF Globals go talons up, in more frequent succession.

The deflationists will have all manner of technical explanations for the “plunging value” of gold in this final shakedown, as the paper pricing mechanism fails and the last fools panic out of paper. The smart money will have already beat them to the window because they understand the following thoughts:

Hyperinflation Part I, II, III.

These thoughts fly fast and high over the average head today, but in November of 2012 they will become “Ahh-haaahhh” moments … of clarity.

In the meantime, have a GREAT YEAR developing your economic value proposition in a changing and challenging world. Invest in yourself, increase your independence, find marketable value in your own self-worth, and pay no mind to the TERROR that my words bring to the debt robots inhabiting the crumbling kingdom of FIAT.

Because my “fearmongering” just makes me a sort of Terrorist after all, doesn’t it? I have seen many “eternal optimists” question the unquestionable since October of 2008, when governments first began saving the fraudulent debt by buying it outright with your children’s future. And this was a mere warm up for October, 2012.

But to challenge the Paper Kingdom and call its Emperor naked has a price. The naked emperor speaks … see what his wisdom tells of the fate of those who challenge the Paper Regime:

When even CNBC turns on Fascism posing as Democracy, there is hope.

An interesting few days lately. Some metals traders suffered great psychological pain and anguish, while physical gold advocates rejoiced at the gift of cheaper gold, still available in small quantities everywhere, to add to their holdings.

Those who rejoiced realize that this depiction below is no REAL representation of the true value of physical gold. As for the paper traders who were emotionally crushed by what their paper says they are worth, I have little empathy for them.

And unfortunately, we must say “physical” gold, because when pundits and traders and analysts use the term “gold” I’m really not sure which gold they mean, the real gold or the paper gold, or some percentage blend of the two between 199 to 1 and 50-50 perhaps ???

No, the current “price discovery mechanism” still appears to “function” in all it’s assinine glory, but this recent excercise in madness does drive home a point. How long before this convulsive, schizophrenic, counter-intuitive, manipulable, emotion-response driven price “discovery” method is abandoned? How long before the realization that this representation of price is seen by all as “completely false”?

I suggest that it will be close to the time that you look at your stack of 100 dollar bills and say, “this representation of value is completely false”. Perhaps we will have to experience the price inflation of a USDollar hyper-expansion, even before the pricing mechanism of paper gold collapses in its hyper-divergence from real asset value. But I do think one will follow the other in quite short order.

When the “price” of gold falls, PGAs do not need counseling from someone who’s “been there before”, they just go and buy more. Pretty simple. They understand that the yellow metal that you hold in your hand, which sounds a certain way when it clinks to the surface of a wooden table, does not fluctuate in value, hour by hour and day by day. Rather it increases in value, in an inverse relationship to the weakness of human nature.

As long as I see these weaknesses all around me, in the form of debt contagion and bailouts, misled revolutions, misrepresented wars, greed, graft and corruption, entitlement for votes, unbridled fascism, manipulation of all sorts, confidence swindles of every stripe, financial predation, outright theft and general madness in fiat currency printing to paper over it all … I am quite sure that the only thing my little pile of yellow metal is doing is growing ever more necessary, and ever more valuable, to the final settlement of the rapidly expiring dollar reserve system, and the corresponding once in a lifetime repricing of gold.

But there are a great number of people who DEPEND upon a source of income derived from this agreed upon game of chance, this paper pricing confidence game. And they live and die by it. They know it’s a Ponzi scheme. They know it is manipulated by the inventor of the game and the stronger hands in it. And yet they play the casino at its own game, against one another. What an honorable profession. As I said, I have little empathy for the pain of illusion within a confidence game.

They should be more focused on the peril of an economic Treaty of Versailles being levied upon the USDollar, for being so irresponsibly managed. Because the USDollar faction is alone now, and the real gold in quantity is almost in position.

When the USDollar fails, and US Debt holders demand payment in gold, and the BIS steps in to settle, will the gold be there, and at what price? Really that is all that matters now. What will your contribution to your country’s settlement be? Paper, or Gold? Will you be one of them, or one of those?