TRUMP'S TARIFFS - RIGHT OR WRONG, GOOD OR BAD

"In terms of tariffs, it’s interesting to note that the average U.S. MFN tariff on Chinese goods coming into the United States is 2 percent whereas the average MFN tariff on U.S. goods going into China is 35 percent. Is that reciprocal?" Nancy Pelosi

"Donald Trump’s reckless tariffs will cause chaos in our economy, raise prices for consumers and hurt hardworking American families. This is not a strategy — it’s the largest tax hike on the American people in history." Nancy Pelosi

To the rest of the world, Trump's tariffs are bad for world global economy. But they are silent on the tariffs they themselves have imposed on the US for decades.

In the US, the camp is divided. The Trump administration and supporters think it will make American economy stronger in the long term. There are others who say it's going to turn out to be a disaster for the country as increased cost of goods will burden the people. Then there is the strange case of another group of Americans who think tariffs are both good and bad, depending on who pushes the policy. The above two contradictory quotes are from Nancy Pelosi. In 1996 the tariff push by Democrat President Bill Clinton was good. The current Trump initiative is bad.

Countries impose tariffs according to their economic policies, economic development, security interests and social objectives. There is no country with absolute free trade. Singapore and Hongkong remain the only two free trade regimes, but there are still tariffs on alcohol, cigarettes, motor vehicles, petroleum products, sugar-sweetened beverages, other controlled items. The Heritage Foundation's Index of Economic Freedom for 2025 ranks Singapore as the country with the freeiest trade policies, followed by Switzerland, Ireland, Taiwan and Luxembourg. The ranking reflects a country's commitment to economic policies that promote openess, efficiency and competitiveness. Hongkong is not ranked as it is considered a part of China.

The mechanisms for tariffs take many forms, such as import duties, customs duties, excise duties, sin tax, and Singapore's unique COE (certificate of entitlement to purchase a new motor vehicle) and state subsidies for export goods. There are two other areas of unfair trade practices under the radar, but cannot escape the vigilance of the US. These are currency manipulation and value added tax which are two important sore points with the US.

In his first term, Trump acted against China for unfair trade practices, especially its policy of undervalued RMB. In response to Trump's action, China depreciated its currency, making its exports competitive to compensate the higher cost to American importers for their increase in import duties. Over several years the US have accused China, Singapore, Malaysia and a few other countries, of unfair trade practices by manipulating their currencies. Countries with trade surpluses experience upward pressure on their exchange rates which will make their exports less competitive. To prevent the exchange rates from rising, the central banks sell their currencies in open market operations. This means flooding the market with the local currency, keeping it undervalued. In the process the central banks accumulate massive amounts of foreign reserves. This is what makes Singapore and China's sovereign wealth funds build such massive portfolios as the central banks transfer foreign reserves in excess of needs to these state entities to invest. China Investment Corporation manages US$1.3 trillion assets as of March 2025, Singapore's GIC is too embarassed to mention their numbers. The Monetary Authority of Singapore has always defended its open market operations as strictly managing the daily liquidity and preventing wild fluctuations of the rates. However it has remained opaque for decades, never publishing data on its open market operations. Under pressure, MAS had no choice and in recent years it has been publishing its open market operations data, an analysis of which is possible to see whether the trading pattern supports the claim of rate suppression. Nevertheless MAS has continued to amass foreign reserves so much so in 2022 new legislation was passed to enable the Reserves Management Government Securities as a mechanism to facilitate the speedy transfer of foreign reserves to the sovereign wealth fund GIC. This is simply stating facts, no suggestion or nuance the MAS data on open market operations are unreliable.

Trump is the only prominent voice to declare VAT (Value Added Tax) is a tariff. And he is right. Singapore's GST is a form of VAT. Countries with VAT impose the tax on their imports paid for by importers and eventually by the end consumers. Almost all VAT countries do not impose the tax on their exports. In Singapore's GST system, exports are zero-rated, thus suffers no tax. To Trump, US products coming into Singapore are taxed at prevailing GST rate of 9%, but our exports to US are not taxed.

MFN (Most Favoured Nation) is a key principle in international trade under the World Trade Organisation framework. MFN status means a country must give another country the same trade advantages, like low tariffs, quotas, or trade rules, that it gives to any other trading partner. This establishes the basis of fairness for all members of WTO. When a member decides on a rate of tax for a particular product, or class of products, he must apply the same MFN rate to everyone.  This is to prevent discrimination, promote equality and encourage trade liberation. However, countries are free to negotiate for better deals by FTAs (Free Trade Agreements) bilaterally or in blocs. Singapore has an FTA with the US.

Tariffs can be in several forms. Ad volarem is based on percentage of the values of goods. It can be a fixed fee per unit of goods. It can be a compound of both ad volarem and fixed fee. There may be quotas, above which the rates are much higher. There can be anti-dumping duties which are extra charges for goods deemed below market values. There are countervailing duties to offset foreign state subsidies.

It is thus almost impossible to determine what is the average tariff a country imposes on the US. Trump has criticised Canada for its massive 200% to 300% tariff on US goods which some smarty-pants fact check as false explaining those were above quota rates which have never been applied. The idiocy is astounding. Of course Trump was highlighting the ridiculous rates and the fact checkers precisely establish the point - the rates are so high Canadian importers are constrained by the quota.

It seems the Trump administration relied on a simple formula to determine the reciprocal tariff rates. Take the difference of imports from a country less exports to that country expressed as a percentage of the imports from the country, then multiply by 50%. For countries with which US has a surplus, the baseline 10% applies.

That explains why Singapore is hit with 10%. With our GST of 9% and currency manipulation, perhaps the baseline 10% works out equitably for Singapore after all.

Trump's objective for the tariffs seems to have a fast track evolution. He had initially intended it to be targetted tariffs to hit at manufacturing industries that American corporations outsourced to foreign countries. This will force manufacturing back to the US, thus reviving the industry that brings back jobs to the country. Trump then developed the idea for a US sovereign wealth fund that he envisioned will be the largest in the world within a very short time. With the US having a US$36 trillion national debt and perennial budget deficits, one wonders where the capital is coming from. This led to conspiracy theories of revaluation of gold reserves which is nonsensical since it ends up with a meaningless accounting profit. Trump spoke of monetising government assets, details of which no one knows. Most likely he is also envisioning the tariffs to help capitalise the sovereign wealth fund. Then Trump spoke of tariffs as a source of foreign revenue that will enable the government to reduce taxes. This is rather strange because tariffs are in effect paid for by American consumers, it is a form of tax. So it is using one form of tax to reduce another form of tax. Somewhat like our increase in GST offset by CDC vouchers.

Trump's formula of computing the reciprocal tariffs is simply based on 50% of the Trade Deficit Ratio with each country. This approach suggests the aim is to counterbalance perceived unfair trade practices which has contributed to the US trade deficit with each respective country.

There are disagreements within the Trump admin over the tariffs, which is healthy. In particular, Elon Musk and Peter Navarro are apparently on different wavelengths. When an 'X' commenter posted Navarro's video defending the tariff and highlighted his Harvard Phd in economics, Musk responded "A Phd in Econ from Harvard is a bad thing, not a good thing. Results in ego/brains>>1 problem." Musk replied "Yup" when another 'X' user quoted Thomas Sowell:

"In every disaster throughout American history, there always seems to be a man from Harvard in the middle of it."

Indeed there are two Harvard Phd in Economics in Trump's inner circle. Stephen Miran is Chair of the Council of Economic Advisers and Peter Navarro who was Director of the Office of Trade and Manufacturing Policy in Trump's first term, and is now the Senior Trade Adviser. Both support Trump's tariff policies, viewing them as strategic tools to address trade imbalances and protect domestic industries. Miran focuses on the temporary nature and broader economic implications of the tariffs. Navarro emphasises the strategic necessity and long term benefits of the tariffs. When Navarro points out that Musk is an industrialist who is protecting his turf, the billionaire replied "He ain't built shit". He can't say same of Trump who has built big stuff. And Trump has his tariff ideas long before he had Miran and Navarro.

The possible eventual outcome of the tariffs depends on who one speaks to. All Trump-haters have only one view. The outcome will be devastating to global economy. It's a view out of honest conviction for some, and for many it is simply a political contrarian stand to anything Trump. Some are actively working to derail this tariff policy. It is a time when foreign lobby money is working hard, both in Democrat and Rupublican circles. Trump supporters are divided. Some are wary of the pitfalls of tariffs but majority think it will help right the unfairness of trade practices that have been stacked against the US for years.

China has retaliated by imposing increased tariffs against the US instead of reviewing US claims of unfair trade practices and negotiating for middle ground. Canada is whimsily flip-flopping on retaliatory tariffs. Singapore is disappointed at the 10% baseline tariff and will not retaliate. Argentina and Vietnam have said they will bring their tariffs against US to zero. Keir Starmer has said Trump's tariffs are fair and UK will not retaliate. Trump has also said 50 countries have called the White House to talk about it.

Whatever happenened to the MFN principle when China and Canada impose retaliatory tariffs against US? Perhaps MFN does not apply since US is not longer a member of WTO.

To use Trump's vocabulary, it is OK for other countries to screw the US, but the Americans are not allowed to screw them. Trump's tariffs are meant to level the playing field. However, without studying details of existing tariff structures, one cannot say for sure if other countries actually have higher tariffs against US which now face Trump's reciprocal tariffs. For example, the free trade regime of Hongkong, and the very low tariff countries of Switzerland and Taiwan, have also been slapped with high tariffs. A reciprocal tariff to re-calibrate unfair trade practices is an acceptable argument of equality. A reciprocal tariff to adjust trade deficits, which is what Trump's tariffs are all about, is not easy to justify since it does not address the underlying economic issues in the US. It is basically a country with a much higher cost base that has eroded its competitiveness.

(The next blog will discuss the structural traps of persistent trade imbalances which is the bigger picture, that will enlighten the understanding of the macro economics. Tariff wars is the micro issue.)

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UNDIES CANNOT BLOCK FARTS, HOW CAN MASKS BLOCK VIRUSES?

There are lots of memes going round carrying variations of the blog title. If you think that's just a joke, great. If you don't, then my retort is if your mask can stop farts, you'll be dead from suffocation in two minutes after putting it on. To be serious, there are many well-respected folks who debunk the efficacy of masks. I am not a fan of mRNA vaccines for Covid-19 but that does not automatically mean I am against masks. On the contrary I think rated masks work just fine and any narrative against that is misinformation.

There is more science to masks than your undies, handkerchief, or the niqab, burqa, hijab or chador. Efficacy of masks is measured by its fluid resistance, oil resistance, breathability, and filtration efficiency.

Fluid resistance is a measure of a mask's ability to block liquid penetration, examples are blood, saliva or respiratory droplets. It is to prevent infectious fluids from penetrating the mask. This is essential for surgeons, dentists and healthcare workers in high-exposure environments.
Oil resistance protects against oil-based aerosols and used in industrial settings for protection against oil mist or fumes.
Breathability is the resistance to inhaling and exhaling, that is, how hard the wearer has to pull in the air or to breathe out, through the mask. This resistance is positively co-related to the filtration of the mask. The higher the resistance, the better is the filtration, and the lower the resistance, the lower the filtration. That is, there is a trade-off between breathability and protection. The easier to breathe, the less protection. Breathability is measured by 2 units of pressure - (1) Pa = Pascal, and (2) mm H₂O (mm of water column).
Filtration efficiency refers to the capability of the mask to entrap microscopic particles including bacteria and viruses.

The higher end masks requiring fluid and oil resistance are for use in healthcare and industrial environments. Masks vary in terms of protection, materials and standards. We are concerned here only with the ordinary disposable non-surgical masks worn by the public.

First, a sense of size:
1 meter = 1,000,000,000 nanometers (nm)
1 meter = 1,000,000 micrometer (µm)
1 µm = 1,000 nm
For comparison, a human hair is about 50-100 µm thick.

Second, know the enemy:
Bacteria are much larger than viruses, typically ranging from 200nm to several µm. The smallest bacteria is Mycoplasma genetalium about 200 nm to the largest Thiomargarita namibiensis about 750,000 nm which is visible to the naked eye. This is a recently discovered sulphur-eating monster in the oxygen-free ocean bed off Namibia.
Viruses are much smaller than bacteria, typically from 20nm to 300 nm. The smallest virus is Porcine circovirus about 17 nm, and the largest is Pandoravirus about 1,500 nm.
The flu virus is 80 nm to 120 nm.
The SARS-Cov2 (Covid-19 virus) is about 50 nm to 140 nm

There is no international standard for masks. The American standard is ASTM F2100 set by NIOSH (National Institute for Occupational Safety and Health). Most countries recognise the US standard and they have their own certified masks standards with equivalence to NIOSH.

NIOSH has 5 filtration efficiency standards:
(The standard is set in relation to particle size of ≤0.3 µm, ie 300 nm)
N95 with ≤95%
N99 with ≤99%
N100 with ≤99.97%
R95 with ≤95%
P95 with ≤95%
"N" means the mask is non-oil resistance; "R" somewhat resistant to oil; "P" strongly resistant to oil.
≤95% means the mask can block 95% of particles the size of 300 nm
No mask is 100% because there may be tiny gaps if not properly sealed.

Oh no, standard filtration criteria based on 300 nm is too big for SARS-Cov2 viruses:
The SARS-Cov2 viruses are smaller than the filtration standard, but there is no need for alarm. Viruses have no independent mobility. They can't fly or crawl through masks. Viruses are transported in moisture droplets which are large.

Size of droplets:
From breathing - 0.1 to 5 µm. These are mostly aerosols, can stay suspended.
From talking - 5 to 50 µm
From coughing - 5 to 100+ µm
From sneezing - >100 µm

Smaller droplets and aerosols can stay airborne for hours and travel long distances. That's why masks are needed for viruses like Covid-19, tuberculosis and measles.
Most droplets are large so will be captured by the filtration layer of masks. But some droplets and aerosols are smaller than 0.3 µm or 300 nm. Don't worry, rated masks have a plan B.

N95 rated general use face masks (non-surgical):
NIOSH N95 masks have filtration efficiency of ≤95% , exhalation resistance of ≤245 Pa (25 mm H₂O) and inhalation resistance of ≤343 Pa (35 mm H₂O).
The difference between NIOSH and other equivalent rated masks is:
N95 have 4 or 5 layers:
An outer layer which is water-resistant, blocks large particles.
An electrostatic filter layer which captures fine particles.
An inner layer of soft comfortable material which absorbs moisture of wearer.

NIOSH products are rigorously tested for filtration, breathability, and fit. Certified products carry NIOSH name and logo, approval number (TC-84A-xxxxxx) manufacturer's name, and other info.

Other Non-NIOSH N95 products are not independently tested. They are checked by manufacturers themselves.

Electrostatic filter layer
Bacteria and viruses can be neutral, positively or negatively charged, depending on its PH, surface composition and environment. Most bacteria and viruses are negatively charged. Negatively charged means its molecules have more electrons than protons, positive-charged means more protons. SARS-Cov2 and flu viruses are negatively charged. The aerosols and respiratory droplets from breathing, talking, coughing and sneezing carry a slight negative charge.

N95 masks have an electret filter which is made of charged polypropylene microfibres. These fibres contain both positively and negatively charged zones, allowing them to capture particles of all charges.

This I know well. I was once with a company doing heat-treatment and powder-coating services in Malaysia. When a spray gun is directed onto a metallic product, the powder sticks to the substrate because of electrostatics. Metallic substrates are neutral and the powder is positively charged. A client had a problem with a particular part of a product where powder coating was unable to achieve their minimum paint thickness specification. I met up with the Singapore paint manufacturer to solve the problem by reducing to a milder positive charge on the powder. That way, when sprayed, less powder will stick to the product substrate thereby enabling a thinner coat.

With electrostatic filters, if the viruses, aerosols and droplets that manage to pass through the outer layer of the mask, they will stick to the electrostatic layer. Thus a higher level of filtration protection is provided.

The big whopper with facial masks:
The above explainer I am sure gives more confidence to those who believe in the use of facial masks. But here's the big problem. Surgical masks are classified as medical device and the importation is controlled by the Health Science Authority. Importers are licenced and product sources are identified helping to make Singapore safe from counterfeit products.

Unfortunately, non-surgical face masks are not classified as medical devices, thus importation is not regulated. Bottom line is, the facial mask you put on could well be made from recycled materials of undies.

Most of the masks out there are unfortunately not certified rated. More probably products of some village industry .

Promoting, or even forcing the public to put on masks which have not met desired standards may be even more dangerous than not wearing it as it gives the wearer a false sense of security to unknowingly take on higher risk exposures.  

 

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THE BIGGER PICTURE OF PALESTINIAN ISSUE YOU NEVER KNEW

The hottest spot in the world for decades has been the region the Romans called "Palestinia". Recent events generated violent protests across US universities and elsewhere, yet how many of those on the campuses really have a clear understanding of the bigger picture. There are loud voices on Singapore social media too. I lost several Facebook friends who cannot tolerate my point of view. It's not a big deal loosing the narrow-mindedness, but I thought it a tragedy that these are well-educated folks and they cannot comprehend history and facts.

In a previous blog I brought out how most people gets riled up by histrionics without a proper perspective of a bigger picture history of things. I want to put out here just plain facts on the Palestine issue, no personal opinions, just to challenge anyone who might wish to rethink things through.

But first, some words on the importance of the subject of History which has been relegated lesser importance in a STEM-driven curriculum. Lack of understanding a country's own past leads to loss of cultural awareness which affects national unity as traditions, values and historical achievements are forgotten. History teaches critical thinking skills as we learn to analyse sources, question narratives and understand causal relationships. Lacking knowledge of history, one struggles with differentiating facts from disinformation. Without history, people tend to be less engaged in politics, democracy or social justice thus weak in civic awareness. Most importantly, in a very connected world today, without history, one lacks global perspective when viewing world events, different cultures and international relations. This leads to narrow-mindedness and tunnel visions. The Palestinian issue is the best example.

There is no Palestinian state or people:

Let's take a historical snapshot of the region.
- 10,000-3,000 BCE : Early human settlements. Jericho was one of these earliest cities.
- 3,000-1,200 BCE: Canaanites, a Semitic people, inhabited the region. They had city states. Egypt had a strong influence over them.
- 1,200 BCE: Philistines and Israelites emerged. Philistines came from the Aegean region and they settled along the Western coast. A nomadic Semitic speaking people from the Syrian mountains began moving into the Eastern part. They were later-day Israelites.
-1,050-93- BCE: Descendants of Jacob took over Cananite lands. Then arose United Kingdom of Israel under David and Solomon and the people were called Israelites. Later split into Northern Kingdom of Israel and Southern Kingdom of Judea. Southerners were called Judeans - Jews for short.
- 722 BCE: Assyrians captured Israel and Israelites were exiled all over the Assyrian Empire.
- 586 BCE: Babylonians under Nebuchadnezzar II conquered Judea and upper crest Jewish families exiled to Babylonia. Solomon's Temple destroyed.
- 539 BCE: Persians conquered Babylon. Cyrus The Great allowed Jews to return to Judea and rebuild the Second Temple.
- 332 BCE: Alexander The Great conquered the region. After his death the region came under the Selucid Empire. This was Greek (Hellenistic) rule.
- 167-160 BCE: The Jewish Maccabees revolt
- 140-37 BCE: Jews set up Hasmonean Kingdom
- 63 BCE-636 CE: Became part of Roman Empire after Pompey entered Jerusalem in 63 BCE.
- 37-4 BCE: Herod ruled the region as a client of Romans. Herod was an Edomite.
- 70 CE: Jewish revolt and Roman Titus destroyed Second Temple.
- 132-135 CE : Jewish Baar Kokhba Revolt. Emperor Hadrian suppressed the revolt and renamed the province "Syria Palaestina" in an effort to erase Jewish ties and memory of the land to destroy Jewish nationalism.
-395-636 CE: Roman Empire divided. Region came under Byzantine Empire. Christianity promoted.
-636 CE: Came under Arab Rashidun Caliphate.
- 661-750 CE: Umayyad Caliphate took over. Dome of the Rock was built.
- 750-1258 CE: Ruled by various Islamic caliphates.
- 1099-1187 CE: Christian Cursaders ruled.
- 1187-1259 CE: Saladin and his Ayyubid Sultanate ruled. Saladin family was Kurdish origin. He later ruled over Egypt but he was not Egyptian,
- 1260-1517 CE: Mamluk Sultanate took over. Mamluks were Eqyptian slaves who took over Egypt. They were a mix of Turkish, Caucasian and Georgian slaves. But they were Muslim converts.
- 1517-1917 CE: The region came under the Turkish Ottoman Empire. Palestinia became a province of Syria.
- 1917 CE : came under British Palestine Mandate. Balfour Declaration in 1917 supports a homeland for Jews.
- 1947: UN partition into Jewish and Arab states. Plan rejected by Arabs.
1948: Israel declares independence. First Arab-Israeli War. "Nakba" or Palestinian exodus took place. Jordan occupied West Bank, Egypt took over Gaza.
1967 : Six-Day War. Israel captured West Bank, Gaza, East Jerusalem, Sinai and Golan Heights.
1993 : Oslo Accords established Palestinian self-rule in parts of West Bank and Gazaa. Hamas and Fatah created political struggles. Israel transferred some control of West Bank to Palestinian Authority - 3 areas were created : Area A (18% of land) PA has full control; Area B (22%) PA has civil control, security under Israel; Area C - (60%) - full Israeli control, including Israeli settlers.
- 2005 : Israel unilaterally disengaged from Gaza. There are now no Israeli settlers or military forces in Gaza. But a blockade of Gaza by Israel and Eqypt exists.
- 2007: Hamas took control of Gaza.

The real history is clear. There never has been a people known as Palestinians in the past nor a state called Palestine.

What do scriptures say?:

The religious undertone of the Palestinian issue is unbearable. So do the scriptures say anything? Let's leave the Bible out since practically everbody knows the story of the Exodus and the Promised Land. Most people, including many Muslims, actually do not know what the Quran says.

"O my people! Enter the Holy Land which Allah has destined for you ˹to enter˺. And do not turn back or else you will become losers.”
Surah Al-Ma'idah 5-21

Allah granted Al-Ard Al-Muqaddasah (Holy Land) to Banu Isra'il (Children of Israel). Now here's food for thought. Quran (Surah 21.105) Allah says that in Psalms he reminded the earth will be inherited by His righteous servants. Indeed Psalms 37-29 says "The righteous shall inherit the land and dwell in it forever." It therefore behoves the 40% liberal Israelis to return to God if they so chose to live in the land. Israel has a demographic that is very different from Western countries. The bright spot is its youths are increasingly moving to the right and the conservative base is growing unlike Western youths who are increasingly progressive liberals..

The religious argument against Jewish heritage to the land is dead on arrival.

The Jews are occupiers right? But what you don't know:

All the ancient people of the region all the way back to 1,200 BCE have disappeared from history except the Israelites. The region since then have been occupied by Assyrians, Persians, Greeks, Romans, Turks and Arabs. Yes, yes, yes. Arabs are occupiers. Now why do they say Isrealis are occupiers when they returned to the land as refugees after WWII? Why do refugees suddenly become called occupiers?

We rightfully call Europeans as colonialists. Today there are 22 Arab nations. Who are the Arabs? Well they spreaded out from Saudi Arabia by the sword. The Arab conquest covered the whole Levant region, Northern Africa, Iberian Peninsula and vast part of Southern Europe. They were finally stopped by Charles Martel in the Battle of Tours in 732 CE. Why are the Arabs not called colonialists and occupiers?

Facts get twisted by choice of words historians use. They call it Arabisation instead of colonialism. The Berbers were the original people who lived in the areas from Egypt to Morrocco, Copts were original Egyptians, Phoenicians lived in the Levant such as Lebanon. There were a lot of Roman and Greek villages that dotted Northern Africa. The Mandeans were a special group of people who lived in the Mesopotamia region (today's Iraq) who followed the teachings of John the Baptist. Ancient peoples of Iraq were Sumerians, Akkadians, Babylonians, Assyrians and Persians. All these people, except the Copts, converted to Islam under duress and merged into the conquering Arab community around the 7th century CE. Today the Copts form about 12% of the population of Egypt. The others became Arabised. How the people became Arabs is a process history records as Arabisation, but in today's language the conversion was a massive humanitarian criminal process. The Arabs colonised the Northern part of Africa and took black Africans as slaves, that's how African slavery on a massive scale started. Today Arabisation seems to be failing in Iran. Iranians have a strong and proud history as Persians. Many are now rejecting Arab culture and religion. Half their mosques have been emptied. Majority of those Iranians that are crazily supportive of the Ayatollahs are Arab occupiers.

The Jews occupy Palestine, right? But what you don't know:

After WWI the region known as Palestine was entrusted to the British as the "Palestine Mandate". The Brits split the land into 4 parts in what is today's Israel, Gaza, West Bank and Jordan. The land given to the Jews was about 12% of the "Palestine Mandate" half of which is the Negev Desert. The Jews accepted the deal, Arabs refused Gaza and West Bank. Even the Brits had to call the cut-out West Bank instead of retaining it's ancient name of Judea and Samaria because that would retain Jewish heritage.

What the public does not talk about is Transjordan. The British gave this to the Hussein family to rule in the land they now call Jordan. There is no Jordan in history. It is of recent human construct. Present day King Abdullah II is the 3rd king of the Hassemite Dynasty that ruled Jordan. The Hassemites are the Arab family that claims direct lineage from Prophet Mohammed. For millenium the family was entrusted the job as Sharif (emir or protector) of Mecca and controlled the Western coastal strip of land of Saudi Arabia known as the Hejab. After WWI the Hassemites lost control of Mecca to the House of Saud. The Jordanian King's great grandfather Hussein bin Ali, was the Sharif of Mecca during WWI. He co-operated with the British to rouse Arab bedouins against the Ottomans, the backdrop for the romance of Lawrence of Arabia. After the war the Brits rewarded the Hassemites with Jordan to the King's grandfather, and Syria to the latter's brother. The original people of the Transjordan were Ammonites, Moabites, Edomites, Nabateans and Romans. In later days some Arab Bedouins moved in and settled sparsely as farmers. There were also Caucasians and Armenians. So in reality, Arabs occupied Jordan today. If we consider the whole British Palestine Mandate, the Arabs has 80% of the land with Jordan alone, plus Gaza and West Bank. The Jews got a tiny 12%. Are Jews the occupiers? The bigger picture tells a very different story.

The Jews are racists, right? But what you don't know:

Israel is the most multi-cultural country in the whole Middle East. Jews form the majority (74%) of the population. Of which 40-50% are Mizrahi Jews of Arab stock (from Middle East & North Africa (Iraq, Iran, Yemen, Syria, Egypt, Morocco, etc.), 30-40% Askenazi Jews (of European stock), about 15% Shepardic Jews (from Portugal, Spain, Northern Africa and Ottoman). There are minor numbers of Ethopian Jews, Indian Jews, Russian Jews.

Arabs from about 21% the majority of whom are Muslims. There are Arab Christians and Druze.

Other minority groups (about 5%) include Caucasians, Armenians, Thais, Africans, Filipinos, even Chinese, all waiting for asylum process.

Today there are close to 2 million Arab Israelis. There are only a handful of Jews living in the 22 Arab nations, estimated about 6,000 to 8,000.

The Palestinians are the largest group of refugees today, right? But what you don't know:

Refugee data comes from the United Nations. Thus the figures can be trusted, right? I bet most people hear of following facts for the first time. The UN has two agencies to look after refugees - United Nations High Commissioner for Refugees (UNHRC) and United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). One agency UNHRC to look after refugees for the whole world, one agency UNRWA for Palestinian refugees alone. UNWRA has 5.9 million registered Palestinian refugees.

UNHRC currently has about 123 million refugees on its records. The majority are internally displaced persons, meaning they are due to internal conflicts and have not crossed international borders. The next big group are economic migrants, mostly of recent occurence due to mass migration policies of EU and US. The current mass migrations in EU and US has deep ideological policy causes which impacts UN approach to solving the problem. UN's traditional task used to be assisting refugees to get settled as soon as possible. For example, one of the biggest refugee event was in 1947 in the partition of India and Pakistan. More than 12 million people crossed the borders. Muslim Indians fled to East and West Pakistan. Hindus and Buddhists fled into India. Initially both local governments handled the problems as UNHRC was formed 3 years later in 1950. By 1950s, the displaced people were largely resettled, except till today, 300,000 Muslims from India Bihar are still unsettled in Bangladesh (formerly East Pakistan). This is largely a political issue between Pakistan and Bangladesh.

The India-Pakistan partition refugees show how such a massive problem can be settled. Now compare this to Palestinians. The UNRWA today has 5.9 million refugees on its records, with 2.3 million spread across 50+ refugee camps in Gaza, West Bank, Syria, Lebanon and Jordan. UNRWA was set up to assist solely the Palestinian refugees during the First Arab-Israel War in 1948. At the time, Palestinian Arab population was about 1.3 million. The war displaced 700,000 Palestinian Arabs. How is it there are now 5.9 million refugees? The reason is population growth AND a special, unique, one of its kind, aspects of the Palestinian refugee situation is that the refugee status is inherited. Children and descendants of the original refugees are also considered refugees and continue to receive services from UNRWA. They may have settled somewhere, got jobs, citizenship, etc, but continue to be listed as refugees and receive services and benefits. Their numbers go up, never down. This contrasts with most other refugee populations, where refugee status is typically limited to the individuals who fled.

Now why are Palestinian refugees treated like a forever problem? Various reasons may be offered, particularly to the non-state status of Palestine. In reality, it points to money. It is big business managing the Palestinian refugee problem. UNHRC mission is mainly humanitarian and assisting to solve settlement issues for refugees. UNRWA's mission extends into providing many municipal and state services to Palestinian refugees which include education (running schools for Palestinian children), healthcare (operating clinics and hospitals), food aid (providing assistance to those in need) and social services (offering support for shelter, legal assistance, and vocational training). There are people who don't wish the status to end. They need an Elon Musk-like DOGE urgently to check waste, financial abuse and efficiency.

There are no Jewish refugees, right? But what you don't know:

Over 2 million Jews fled persecution in 3 waves. The first were the pogroms from anti-Semitism in Eastern Europe and Russia, then escape from Nazi persecution. The last wave was from persecution in Arab and Muslim lands between 1950-1970. Close to 1 million Jews flad from the Islamic sword - Iraq (130,000), Egypt (75,000), Morocco (250,000), Algeria (130,000), Tunisia (105,000), Yemen (50,000), Syria and Lebanon (50,000) and Iran (80,000).

There were no UN assistance for Jewish refugees. The fist two waves were pre-UNHRC so it is historical. The 3rd wave were single-handledly managed by the Jews themselves. Most of the refugees came home to Israel. In urgent situations of persecution, Israel sent planes to countries like Ethopia, and brought back their poorest brethens of different colours back to the land of their heritage.

No Jews appear as a data in some UNHRC record and no Jews are rotting in some refugee camps because Israel welcome them all home.

Twenty-two Arab states with unimaginable plentitude of land and oil wealth refuse to absorb their Palestinian brethens. But they send out propaganda messages to the rest of the world for their cruelty and callousness to Palestinian plight. A message many Singaporeans take to heart ignorant of the bigger picture.

The Grand Mufti of Jerusalem worked with Hitler, right? But what you don't know:

Al-Husseini met with Adolf Hitler in 1941 and sought Nazi support for an Arab revolt against British rule and the establishment of an Arab state that opposed Jewish migration to Palestine. He actively supported Nazi propaganda, urging Muslims to fight for Germany. He encouraged the extermination of Jews in Europe and lobbied against Jewish refugees being allowed to escape to Palestine. Al-Husseini helped recruit Muslims into the Waffen-SS, particularly the Handschar Division, which committed atrocities in Bosnia. He was reportedly aware of Nazi concentration camps and their role in the Holocaust. The Nuremberg Trials (1945–1946) focused on top Nazi officials, and while al-Husseini was recognized as a Nazi collaborator, he was never formally indicted. Yugoslavia sought his extradition for war crimes due to his role in the SS recruitment, but it was never carried out. He later moved to Egypt, where he remained under the protection of Arab leaders.

Zionism was essentially a political movement to fight for the creation of a Jewish state in their heritage land. It took its name from Mt Zion which is a deeply symbolic and religiously important site that represents God’s presence, Jerusalem, and the hope of redemption for the Jews. But like all such organisations, there are always extreme Left and extreme Right elements that pulls the movement in different directions. There were extremists elements that committed acts of terror. In the main, the center held sway. But in the hearts of detractors, the extremes colour their perception and they paint Zionists a dark and dubious characterisation.

In the 1930s, Nazi Germany supported Zionist emigration to Palestine through agreements like the Haavara Agreement (1933). This was in line with Hitler’s goal of making Germany "Judenrein" (free of Jews). So they facilitated the emigration of Jews from Germany to Palestine. As the Jewish population grew in Palestine, the Germans soon found they had a bonus. Palestine became a major importer of German products at a time when the West had imposed a sanction on the Nazis. For a while trade prospered and German industrialists invested in Palestine. Zionists and Nazi Germans collaborated in a short part of history most people never knew.

So why did Hitler move from expulsion of Jews to mass murder?.

The voluntary emigration of Jews to Palestine was not going fast enough. Nazis explored relocating Jews to Madagascar (Madagascar Plan, 1940) but abandoned it due to logistical issues and the British naval blockade. Other countries, including the U.S. and Britain, restricted Jewish immigration, leaving Germany with millions of Jews they couldn’t deport. As the war progressed, and Germany entered Austria, Poland and Soviet Union, the Nazis suddenly found themselves controlling millions more Jews, making deportation impractical. The Jewish problem became unmanageable. Hitler and the Nazis escalated their anti-Semitic ideology during the war, increasingly portraying Jews as an existential threat blaming them for Germany’s economic struggles and for allegedly conspiring against the Reich. The SS leadership, particularly Himmler and Heydrich, pushed for more extreme measures. The Wannsee Conference (1942) formalized the Final Solution, shifting from deportation to systematic extermination. The chaos of World War II allowed genocide to be carried out in occupied territories without global intervention. The cover of war gave the Nazis the chance to conduct mass killings while keeping most details hidden from the world.

Both the Grand Mufti and Zionists collaborated with the Nazis. The first promoted humanitarian crimes against the Jewish race, the second worked to bring Jews to Palestine and set up a new state in their heritage homeland through the pen rather than by the sword.  

The two-state solution will solve the problem, right? What you don't know:

Majority of countries, including Singapore, support the proposition for a two-state solution. In fact, many countries have actually recognised Gaza and West Bank as a Palestinian state. This is a geopolitical paradox, a solution backed by many but rejected by Hamas who, as a franchise of Muslim Brotherhood, demands a single Judenrein Palestine state, one without Jews. A two-state solution is a Sisyphean struggle.

Hamas, as an organization, has for years rejected the two-state solution and calls for an Islamic state in all of historic Palestine, without Israel. This position is outlined in its 1988 charter, which explicitly seeks the destruction of Israel and views the land as an Islamic endowment (waqf) that cannot be ceded. The charter also contains anti-Semitic rhetoric and references to Islamic teachings regarding governance and jihad.

However, in 2017, Hamas issued a new political document that softened its language, stating it was willing to accept a Palestinian state within the 1967 borders but without recognising Israel. This did not amount to full acceptance of a two-state solution but was seen as a strategic shift in rhetoric. But one waries about the Islamic doctrine of Taqiyya, a doctrine of lying (which is not permitted in Islam) as a war strategy of deception. Taqiyya is a Shia Islam thingy and Hamas is Sunni. But try convincing the Israelis it don't matter.

Regarding the broader Islamic ideology, while some Islamist groups advocate for a global Islamic rule, interpretations vary. Hamas's position is rooted in a nationalist and religious framework, specifically focused on Palestine, rather than a general global Islamic caliphate. However, it aligns ideologically with the Muslim Brotherhood, which envisions an Islamic political order but not necessarily immediate global rule. Verily, verily.

President Donald Trump has called for deportation of Gazaans and suggested Egypt and Jordan should accommodate them, allowing for the reconstruction of Gaza. However one may think of Trump's suggestion, it is a recognition that nothing has worked in the last 100 years, an entirely different approach is needed.

In the bigger scheme of things, a two-state Palestine already exists out of the British Palestine Mandate. One Palestine state is Jordan, the other is Israel. Recognition of this may perhaps be the way forward.

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PARSING PROF BEN LEONG'S TAKE ON THE INCREASE IN GST

I confess I am an addict. To coffee, that is. I used to down up to 15 cuppas a day. There was a time my secretary was so worried she had to intentionally place 2 big glasses of cold water on my desk every day to make sure I had some H2O intake daily. I am however, no connoisseur of coffee. Not the type to discuss Arabica, Robusta or Liberica, nor whether it is washed, natural, honey processed or by anaerobic fermentation, or how they are roasted. Not for me the high end outlets of Starbucks and the likes. For me the old kopi-o in days of ole where coffee shop employees in prison-style striped pajamas rose at 6am from slumber on their canvas beds along five-foot ways, to roast the coffee beans, where the aroma filled the air for a hundred metres away. By mid-1970s, such coffee had disappeared. I used to have Saturday morning jogs at MacRitchie Reservoir with some pals and then drove all the way back to a little coffee shop at High Street for typical Singapore breakfast of coffee, toasted bread and half-boiled eggs. In the mid 1970s, that was the last coffee shop to roast their own beans. As situation changes, personal habits change to cope. From kopi-o I resorted to coffee-white to make the fully-roasted imports palatable to my taste buds. In recent years, with rising prices, coffee-shop cuppas are a luxury. I have resorted to 3-in-1 ready-made coffee, more particularly to one "Ye-Ye" brand which is the cheapest and 'mostest' with 45 satchets per packet. How the king has fallen.

I am late on the discourse following Prof Ben Leong's take a few weeks ago on the impact of GST where he used the cost of a cuppa for his illustration. You have a right to agree or disagree with Ben's views. I have always said I like to see academia and the Singapore intelligentsia step up to educate and lead discussions on matters of civil and national interest. This has seldom been the case in Singapore. Failure of this creame de la creame of our society to step up is what French philosopher Julien Benda (1867-1956) called “La Trahison des Clercs” or “The Treason of the Intellectuals.” From this perspective, I appreciate Ben's article. Ben totally rejects opposition leader Pritam Singh's claim of "turbo-charged inflation", but to his credit, the data-analytics professor sticks to issues and not ad-hominems, as it should be.

Before addressing Ben's specific points, let me relate some aspects of GST.

GST was first introduced in 1994 at 3% with a promise of no further increase for next 5 years. I remember very well although I cannot recall which Minister said at the time, the purpose of GST was not to increase additional revenue, the government had no need for additional revenue. The government had acted on the recommendation of the 1986 Economic Committee for a structural change from direct to indirect taxes to maintain international competitiveness in attracting investments, and to sustain its economic growth to create well-paying jobs for Singaporeans. So the game plan was reduce direct taxation and increase GST over time. As a result the highest band for personal tax has come down from 33% to 23% and corporate tax from 30% to 17% today. To ensure that the change is not regressive and onerous for the lower income, a slew of subsidies and aid packages both long and short term in tenor, and cash and non-cash in kind, including an increase in the minimum taxable income band, were crafted and implemented over the years.

I do not recall anyone doing any studies whether the spirit of the structural change has been achieved. The government has calibrated the micro levelling mechanisms but no one can really ascertain if the outcome has been equitable.

However, in recent years, the purpose of GST has been changed and no one has taken the government to task on a broken promise. Increases in GST is now for the purpose of raising revenue. It is to support infrastructure development and increasing healthcare cost of an ageing population. While GST has been increased to raise revenue, Estate Duty was abolished in 2008. This was not in the 1994 recommendation for structural change in taxation. And of course, Singapore has never had Capital Gains Tax, unless the gains came about in a manner considered as trading instead of investment. So apparently absence of Estate Duty and Capital Gains Tax have not been enough to make Singapore competitive despite the fact all the countries that we are fighting against for FDI have these taxes. The argument against not having Estate Duty and Capital Gains Tax is generational wealth concentration in the hands of a few while wage earners bear a disproportionate tax burden.

In my prevous blog on "a window-dressing line in the budge" I showed a simple confirmation bias with this data representation:

We can show there is insufficient budget for corporate grants/subsidies, or Other Expenses (e.g. health care). It is of course easier to sell to the public the burden of increased taxation is for their healthcare, than to say it is for freebies and benefits for the business class, including foreigners, or for some funds locked up for years for future development projects.

Using a cuppa that cost $1.00 for illustration, Ben says :
(1) In the absence of inflation, a GST increase of 1% means a cuppa should be $1.01, but the difficulty of collection necessitates the vendor to price up $1.10.
(2) With inflation and GST the vendor may also price it up to $1.10
(3) Hence "simple Math tells us that the impact of a GST increase would likely be smaller in a period of high inflation rather than that during a period of low inflation."

Let's ignore all other factors how a vendor prices his products, such as competition and psychological pricing. Ben's point (1) is a truism. Almost all vendors will round-up, seldom round-down, and never round-down in the case of small value products.

Ben's points (2) and (3) is saying the 10 cts increase is split between inflation and GST causation. A low inflation of 1% means 1 cts is attributed to inflation, 9 cts to GST. With higher inflation of say 9%, 9 cts is inflation and only 1 cts is GST. Thus the higher the inflation, the lower the impact of an increase in GST.

The proposition Workers' Party leader Pritam Singh made in parliament was the increase in GST at this time may "turbo charge" inflation. With his "simple math" Ben asks where is Pritam's "turbo charge"? Ben does not actually address the proposition. He sidesteps the real issue and presents a misleading comparison that does not logically refute the original proposition. In logical argument, Ben commits a straw man fallacy and a non sequitur (faulty reasoning). Here's why: 

Straw Man Fallacy – The original proposition states that a GST increase during high inflation exacerbates inflation. However, the criticism reframes the argument into a narrow, simplified math problem about whether a vendor's final pricing would be more or less impacted. This misrepresents the actual argument, which concerns broader inflationary pressures rather than isolated pricing adjustments.

Non Sequitur – The conclusion that “the impact of GST increase would likely be smaller during high inflation” does not logically follow from the example given. Just because inflation already pushes prices up does not mean that an additional GST hike has less impact; rather, it can compound existing inflationary pressures by adding another layer of cost increases across goods and services. For example, a 9% inflation pushes a cuppa up to $1.09 which of course the vendor rounds up to $1.10. A further increase of 1% in GST then pushes the cuppa up to $1.111 which the vendor rounds up to $1.20

To help us to understand, we should be asking has there been any studies of this nature and what are the findings? The answer is yes, there have been studies and experiences we can learn from.

We should firstly understand the specifics we are talking about. VAT is value-added tax which is a pass-through tax. Each vendor in a supply chain pays a tax for which he obtains a credit against the tax he collects from his customer. The net effect is it is the final customer who bears the tax. A Sales or Consumption Tax is simply a tax levied on the ultimate consumer.

Singapore's GST is a variation of VAT. Vendors are either GST-Registered or Non-GST Registered. A GST-registered vendor is in exactly the same position as a vendor in a VAT system. He pays tax for his purchases for which he receives a credit which is applied against the tax he collects from his customer. The net he pays over to the IRA. This net tax represents the tax on the value he has added to the cost of the product or service. A non-GST registered vendor pays for tax on his purchases like any consumer. He receives no credit for the tax he paid and he collects no tax from his customers. He may choose to absorb the tax, or he may pass it on to his customer, more often not, this is the case.

What this means is in the case of a non-GST registered vendor, the tax he paid becomes a cost to him which he embeds into his sales price. This creates an incident of a tax-on-tax thus increasing the cost to the final consumer beyond the actual increase of GST. In the example of the cuppa, Singapore's coffee consumption per capital is about 1.12 kg per year. The coffee market for 2025 is projected to be about $240m, a sizeable amount would be from the coffeeshops. The aggregate tax-on-tax is substantial to the benefit of IRA. The logic flows that the more non-GST registered vendors there are in a supply chain, the higher is the impact of tax-on-tax. The cost is amplified where each vendor in a supply chain rounds up his prices. Therein lies Pritam's "turbo charge".

Studies have shown VAT and Sales Tax increases lead to short-term price hikes, but the overrall long-term impact on inflation varies depending on factors such as the breadth of the tax base, the ability of business to absorb the tax, and the overall economic environment. At times of sustained general inflationary trends, such as in current times, it would be foolish to expect business to absorb the cost of increased direct taxes.

In 2024 Germany increased VAT from 7% to 19%. Research using the Synthetic Control Method indicated 31% of the tax increase was passed on to consumer prices immediately, with pass-through rising to 58% over the following 6 months. This corresponds to consumer price increase of 6.5%, which is a notable short-term inflationary effect in the specific sector affected by the tax hike.

In 1997 when Japan was having deflationary pressures, consumption tax was increased from 3% to 5% which contributed to reduced consumer spending and prolonged economic stagnation.

In January this year, UK extended VAT to private school fees, leading to nearly 13% increase in those fees. This increase alone contributed in the overall inflation rate to 3%, up from 2.5% in December 2024.

Ben's "simple math" does not take into account market psychology. He admits the possibility of profiteering but made no attempt to understand what actually happens on the ground. Is profiteering prevalent? Profiteering is the practice of making excessive or unfair profits exploiting a situation where consumers have little choice or where prices are expected to rise further. This often occurs in monopoly pricing and during crises, shortages or regulatory changes (such as tax hikes). Rounding up is a form of profiteering for low value items where in percentage terms, the rounding up far exceeds the tax increase. Profiteering occurs frequently where customers do not fully understand the tax calculations, prevalent in cases where there are bundled costs. In the retail markets, profiteering occurs where businesses expect weak enforcement. And most logically, profiteering occurs in an environment where there is a general inflationary trend because a price hike won't stand out -- this describes the situation we are in right now.

In 2015, Malaysia's introduction of GST saw businesses rounding-up excessively laying the price increase on tax compliance costs. It forced the government to set up a hotline for price gorging complaints. Japan's Consumption Tax hike from 5% to 8% saw prices increased by more than 3% with business blaming higher supplier costs. UK increased VAT in 2011 from 17.5% to 20% saw restaurants raising prices by more than 2.5% claiming it was "for simplicity".

But don't worry about profiteering in Singapore. We have the Committee Against GST Profiteering. CAP is convened with each GST hike in 1994, 2003, 2007, 2023 and 2024. It has no teeth. It listens to consumer complaints and reaches out to businesses to mediate and adjust their prices. Members of CAP comprises of MPs, grass-root leaders and others. Same-O same-O ownself-check-ownself mechanism that assures us no profiteering in Singapore.

Ben tells lower income Singaporeans they never had it so good with the $800 GST vouchers (I believe it is $850). This subsidy covers the 1% increase in GST for an annual consumption of $80,000 which is certainly much more than the lower income families' expenditure. He is right about this. The government pays out more than it collects. Since 1994, the government has always provided subsidies in the year of GST increases. However, in 1994 the government described such subsidy as a means to let the public to first learn to live with the additional tax burden. In other words, it is meant to give the public time to normalise the pain of extra tax burden. Machiavelli would have approved of this. It is better to impose a tax and give a subsidy in year 1 rather than to impose tax in year 2 without subsidies.

We are told the GST increase is necessary to collect more revenue to meet expected increase in healthcare cost for an ageing population. The government is certainly not at the stage of impending budget deficits when one takes into consideration the contributions from national reserves and the vast amount of cash stashed away in long term endowment funds. This is a topic best covered by Kenneth Jeyaratnam. I don't wish to be branded a "reserves raider" so I shall therefore avoid this topic.

I would like, however, to compare how the business world reacts to expected deficits in their revenue. If solvency is not the issue and liquidity is a short term problem, debt is of course a solution. But if the business environment has changed and profitability is down, the knee jerk reaction is to cut cost. When Elon Musk took over Twitter in 2022 and found advertising numbers were not what he was led to believe, exacerbated by woke advertisers pulling back ad placements, Musk cut cost aggressively by mass layoffs, reduced infrastructure spending and renegotiated contracts. Within 2 years he had stabilised the company and 'X' valuation has now returned to where Twitter was when he acquired the company. Bill Clinton did the impossible of balancing the US budget in 1998 to 2001 by aggressive down-sizing of the government, letting go between 380,000 to 480,000 personnel. In 1993 his Budget Reduction Plan raised taxes on high earners and reduced spending. Trump is trying to tame the US gargantuan budget deficit and national debt by down-sizing government and cutting waste and financial abuse. And he is doing this by lowering tax rates and re-imaging the economy.

Let's look at a more realistic figure of a lower income family's annual spending. How about $2,000 a month, that seems reasonable. That means annual expenditure is $24,000. Assuming this is all taxable, that would mean an additional tax burden of $240 with a 1% increase in GST. Now I'm going to take the picture in another direction instead of comparing to the GST vouchers like what Ben did to say you guys had it good, receive $800 and pay out $240. What if the government raises additional revenue by a capital gains tax instead, let's say a very reasonable low rate of 5%. The Law Minister would have to pay up only $4,400,000 of his $88m gains on the sale of his house. The IRA could collect from one person, and spare 18,333 lower income families from additional tax burden. By not taxing the rich, and assuming interest of 3% p.a., the Minister earns interest income on the $4,400,000 which is $132,000 each year. By taxing the rich, the lower income families, having a higher propensity to consume, would have $240 to spend  instead of paying for the increase in GST. The 18,333 lower income families would be able to spend $4,400,000 adding to the economy each year.

I find Ben presented a simplistic and PAP-apologetic-sque view and this is evidenced no better than by the Law Minister sharing the article on his Facebook page and grading it "Excellent". The Minister's enthusiasm of the article betrays the kind of tone-deaf attitude we have long come to expect of our government.

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THE FOOL'S GOLD AT FORT KNOX

A country may amass vast gold reserves, but if it’s built on the illusion of wealth, it’s only fool's gold — shining bright but lacking true value.

The mysterious massive flight of gold out of London to US, the clamour for audit of the secretive Fort Knox, the huge US national debt, and the Secretary of Treasury's talk of monetising assets to fund the Sovereign Wealth Fund proposed by Trump, all these provide a fertile ground for all sorts of conspiracy theories about gold reserves. It is disappointing when a well-respected conservative voice jumped into the fray. Glenn Beck, a former CNN host, speaking on his Blaze Media a few days ago, said that someone in US with deep pockets is buying the gold. The innuendo is the US government. He brought up the hazy theory of the government accumulating gold and together with all existing gold reserves kept at a book rate of US$42/ troy oz, a revaluation scheme is on hand which will wipe out the national debt.

Well, the US government simply hasn't got the resources to buy up these massive amount of gold shipped from London. With the US national debt at US$36.5T and gold at US$3,000/oz, it will take 12.16B oz or 379,000 metric tons of gold to pay off the debt. As at 2023 the total gold ever mined to date in the world was 208,874 metric tons. There just isn't enough gold in the world.

Regardless, Trump's comment that he is ushering in "the golden era" is taken as a cryptic message by diehard conspiracy theorists. There is something going on with gold.

China has the highest reserves in the world of US$3,455B, US is third with US$910B. If gold is excluded, China is still #1 with foreign exchange reserves of US$3,264B. US has a small forex reserves of only US$228B which is even lower than tiny Singapore's US$365B. The reason is simply because most international trade is conducted in US$ so unlike other countries, the US does not need to hold its own currency in reserves. Forex reserves is essentially meant to provide a country with sufficient liquidity for importation of goods. It is also seen as a backing for its own fiat currency. In the case of US, since it maintains only a small amount of forex reserves, their gold reserves is crucial as a backing for the dollar.

As at December 2024 the US' holding of 8,133 tons of gold is the highest in the world. Germany follows at a distant 2nd place with 3,351 tons. China is 5th with 2,280 tons. The US keeps its gold in several places, the major ones are Fort Knox, Kentucky (5,484 tons), West Point Mint NY (1,680 tons) and Denver Mint, Colorado (1,362 tons).

Neither the Federal Reserve nor the US Treasury take part in leasing out gold to bullion banks. That means all the gold should be intact at its place of storage. There have been visits by notable personalities to Fort Knox, including President Eisenhower, congressional delegations, secretaries of the Treasury, and one public delegation. But there has never been any independent audit conducted, ever.

During the Great Depression, the US was under severe spiral deflation brought about by excessive supply from overproduction, especially in the agricultural sector. GDP down, banks and businesses go burst, unemployment skyrocket. To fight deflation, the government needed to inject inflation. At the time, the US was still under the gold standard system. Without an increase in gold reserves, it cannot increase money supply to spur the economy. Something had to be done with gold to get out of the depression.

In 1933, by executive order, Roosevelt confiscated gold coins, bullion and gold certificates. Compensation was set at US$20.67/oz. Private individuals can no longer own gold bars. This allowed the government to control gold. After confiscation in 1934, by the Gold Reserve Act (1934). the gold reserves at the Fed were transferred to Treasury. The price of gold was then reset at US$35/oz. That means from 0.0484 oz, every dollar can now be exchanged for only 0.0286 oz of gold. That effectively devalued the dollar by 41%, thus allowing for more money printing and liquidity into the market.

The US gold reserves is like in a quantum state of superposition. They are in two places at the same time.

Most people do not know the US gold is in both the Federal Reserve as well as in the Treasury Department. The US gold reserve of 4,200 tons was originally held by the Fed but in 1934 the ownership was transferred to the US Treasury. In turn the Treasury issued gold certificates to the Fed based on US$35/oz. In the Treasury, the gold is carried at cost of US$42.2222/oz. So the Treasury has ownership of the physical gold, and the Fed has the paper gold. By law, those gold certificates cannot be redeemed for gold.

During the Great Depression, there was massive dislocation of currency values. UK and Germany had already left the gold system in 1931. In 1944, currencies were realigned by the Bretton Woods Agreement. US$ was fixed to gold and convertible at US$35/oz. All other currencies were pegged to US$.

The Treasury gold reserves was 4,200 tons in 1934. After Bretton Woods, US gold reserves began to build up rapidly and peaked at 20,000 tons by 1958. Several reasons accounted for this. As US$ became the major reserve currency, many countries sold gold for dollar to build their forex reserves. US received substantial gold for war reparations. After WWII many countries were broke and had to pay for imports with their gold reserves. US gold mining production enjoyed a boom ride.

Then the Triffin Dilemma manifested. This is something I wrote about BRICS here. As international trade exploded, US needed to print dollars to provide liquidity to the world. Sooner or later it runs out of gold to back the dollar. It was suspected Uncle Sam printed more dollars than the gold it had to back it. Inflation follows, exacerbated by military spending on the Vietnam War and President Lyndon Johnson's social spending programmes (Democrats buying votes programmes). Loss of faith in the value of US$ drove many countries to convert their US$ forex reserves to gold. France's President de Gaulle was outspoken over the value of the dollar. A popular story had de Gaulle sent warships to US when he was denied France's request for return of gold. The truth is US never reneged on the guarantee of convertibility under Bretton Woods Agreement.

The rush to convert dollar to gold depleted US gold reserves. In 1971 President Nixon had no choice but to suspend convertibility of the dollar, and Bretton Woods Agreement collapsed. US gold reserves had decreased to 8,133 tons by 1971 till today.

In the same year, the Smithsonian Agreement was signed to fix world currency system. US$ was devalued to US$38/oz of gold and other currencies re-aligned to the dollar and allowed to trade within a 2.25% band. In other words, currencies were re-pegged to the dollar. Several currencies like British Sterling, Deutschemark and Yen became stronger than US$. However, confidence in the convertibility of the dollar could not be revived.

The arrangement proved unsustainable. By 1973 the peg to US$ collapsed and almost all countries maintained floating rate in the new era of fiat currencies, ie paper money backed by nothing.

In 1973 the dollar became fiat and devalued to US$41.2222/oz. That has been the book value of gold reserves carried in the book of the Treasury till today. Most central banks hold gold reserves in their books at cost. This has been the case with the Monetary Authority of Singapore. Singapore's gold reserves at Dec 2024 is 219.96 tons with a book value of US$18.451B which means the cost is US$2,611.42/oz. This suggests the major part of MAS' gold is of recent acquisition.

The US Treasury revaluation resulted in gains of (4,200 tons from US$20.67/oz to US$35) + (8,133 tons from US$35/oz to US$42.2222/oz) = US$3.82B. Actual figures may differ given there could have been some sales of gold during the relevant periods). This gain is transferred to an 'Exchange Stabilisation Fund' (ESF)

The US does not manage its foreign exchange rates like other countries maintain floating rates by interfering in the forex market in daily open market operations, buying and selling to keep the rates within certain bands. The US Treasury uses the ESF only in certain special situations. For example in the Paris Accord the ESF was used to help stabilise US$ exchange rates with several countries during the first few years of floating rates.

When gold is revalued, nothing happens. It's just an accounting concept. The US Treasury assets of gold increased in value by US$3.82B and on the liability side of the books, there is a profit of the same amount. This profit item is simply transferred to an account called the ESF. Just accounting entries. There is no money involved. What it means is of the total assets of the Treasury, US$3.82B is reserved for use by the ESF. Say for example, US$1B of the fund is to be used for something. Treasury pays out cash so it's asset (cash) is reduced by US$1B and on the liability side, the ESF a/c is equally reduced.

The price of gold has shot past US$3,000/oz. Based on this price, the reserves of 8,133 tons at US$3,000/oz adds up to US$786.57B, hardly making a dent on the national debt of US$36.5T. There goes one conspiracy theory. It cannot even balance the budget which in the last 8 years averaged US$1.7T deficit.

A revaluation of US gold reserve at US$3,000/oz would see a paper profit of US$773.5B. This is just an accounting number which goes to increase the ESF. To make use of it, the gold has to be monetised. There were talk of possibility of selling some of the gold, ie monetise it, to partly fund the proposed Sovereign Wealth Fund. But if the budget is still negative, it would mean the government has to increase debt to get the funds to use. The good news is dipping into the ESF does not require Congressional authorisation, thus giving the Executive more leeway. The bad news is by law, the ESF is only meant to be used to manage the exchange rate. Another conspiracy theory shut down.

There she sits, all these gold, in Fort Knox and elsewhere. A so-called 'barbaric relic' of the past Gold Standard system. Revaluing it means depreciating the US$ against gold by 7,006%. Selling them off will shatter confidence in the dollar which no longer has gold backing and who knows how much it will depreciate against other currencies?

Uncle Sam is the leprechaun sitting there guarding all the glittering gold that represents wealth, stability and history, and wondering what to do with it. Meanwhile, the world around him is furiously trading gold, using it as a store of value and an economic foundation.

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THEY DON'T TELL YOU THE REAL REASON FOR FEBRUARY GOLD FLIGHT FROM LONDON TO NY

The London gold flight: a perfect storm of tariffs, arbitrage… and, of course, Trump — because who else?

Every pundit on print media, cable networks and online news outlets, and whatever experts, say Trump's tariffs is the cause for the massive flight of gold out of London to New York in February. In the absence of evidence, is that really the case? Could there not be any other explanation?

Pundits all say the fear of tariff and geopolitical risks made traders move their physical gold to COMEX. Just about everyone seems to accept this is the underlying reason, including subject matter experts. This is absolutely incorrect.

For commodities, an anticipation of tariff will cause prices in the futures market to decline. The reason is tariffs tend to dampen demand for the goods and slows down economic activities. The poor economic outlook causes hedgers and speculators with long positions to rush to sell, forcing futures prices down. Whether the spot market for these commodities will also decline depends on the inventory situation. If there is a huge supply, spot prices will drop. If the huge supply cannot be diverted to other markets fast enough, perishable commodities will see spot prices fall steeply. In the 2018 US-China trade war, when China imposed tariffs on US soybeans, futures prices plunged by about 20% almost instantly. Spot prices gradually followed as unsold soybeans built up in US silos. In 2022, sanction on Russian oil caused futures prices to drop — but spot prices stayed high initially due to supply disruptions. Only when inventories swelled later on did spot prices adjust downward.

Gold, on the other hand, behaves in the opposite direction. Anticipation of tariff (not necessarily a tariff on gold, but generally), gold futures tend to rise. Tariffs tend to dampen demand and the economy generally, at least in the short term, causing nervousness in various markets such as equities. Gold is a safe haven in times of uncertainty. Whether the spot price of gold will rise as futures rises depends on several other factors. This is because unlike commodities, gold reacts not just in response to immediate supply, but to financial flows which is impacted by investor sentiment, interest rates, and currency movements. Furthermore, unlike other commodities, physical gold supply is more or less fixed. Every ounce of gold that has been mined is still in existence, they are not consumed, other than a small fraction that goes into industrial products and jewelry. Generally, demand and supply affect the spot price of commodities. In the case of gold, supply is fixed. It is it's availability, that is, liquidity, that matters. That availability is subject to market dynamics in ways very different from other commodities. This I explain below.

Gold is a financial product, not physical goods like all the other commodities. In the history of international trade, no one except India has imposed a tariff on gold. But India is unique as far as demand of gold is concerned. 70% of India's gold imports go into jewelry (it's a big deal in weddings) and religious ceremonies. The tariff was to balance demand for a consumable good and foreign exchange concerns.

There is of course the possibility of embargo or sanction on gold tied to geopolitical conflicts or efforts to cut off financial support to targeted regimes. During WWII, the Allies imposed gold trade restrictions to prevent Nazi Germany from using looted gold to fund its war effort. During the 1980s, apartheid South Africa faced global sanctions, including restrictions on its gold exports. In 2018, the US blocked transactions involving Venezuelan gold to prevent Maduro from using the country's gold reserves to prop up his government. 

In the case of Russia, don't play play. It is the third largest producer of gold after China and Australia. A sanction on Russian gold is currently in place to prevent them using their resource to finance the Ukraine war effort. However, this sanction applies only to Russia's reserves and newly mined and refined gold. It does not include Russian gold already in LBMA (London Gold Market) and COMEX, the largest gold futures market in NY. The reasons for not interfering with LBMA and COMEX are due to practical, legal and market considerations. (1) Gold is fungible. It is melted, casted and re-casted and rebranded. There is no chain-of-custody, or blockchain technology, so it cannot be tracked to its origin. For example if there is tariff of gold coming into US from anywhere in the world, those gold may have US COMEX origin. It is a ridiculous situation of US tariff on itself. (2) LBMA and COMEX relies on "Good Delivery Standards" which means all previously accepted gold remains valid. (3) A ban will create massive legal contractual issues on all existing contracts, ETFs backed by physical gold, and all those gold already in the vaults of all industry players. (4) Most important of all, it would create a financial nuclear bomb as it first disrupts liquidity in gold trading hubs which distorts prices and then spreads panic across all sectors of the global financial market due to their interconnectedness.

It is for reason (4) above that a gold tariff will never happen. Trump is imposing a tariff on steel and aluminum for reasons of national security. The US needs to build its own steel and aluminum industry. Gold is not a metal as steel or aluminum as far as its function in the market is concerned.

Physical gold takes flight for fear of confiscation during war and in times of severe economic conditions. Nazi Germany seized gold from occupied countries. Looted gold were melted and rebranded by the Swiss. Stalin banned gold ownership by private individuals. Venezuela under Chavez and Maduro confiscated gold and nationalised gold mines. In 1959 Australians had to sell their gold to the central bank. In 1933 Roosevelt forced Americans to sell their gold, including paper gold, to the government for US$20.67/ounce. Gold was then revalued to US$35/ounce which devalued the dollar and boosted government reserves. This lasted till 1974. This is certainly not the geopolitics situation in UK currently where gold flees the country.

Now that we have taken the emotion, the Trump-hating, and the tariff and geopolitical nonsense out of the way, we can try to understand what actually happened in the London gold flight.

There is always a price differential between the London spot price and the futures price of gold in COMEX, NY. Ordinarily, spot prices are lower due to the carry cost of physical gold. These are storage, insurance and financing cost. Futures contract include this carrying cost which is why it is typically higher. This is a normal market condition called contango. The spot price is driven by market supply and demand dynamics. The gold futures market is driven by the spot price, expectations of various risk parameters such as inflation, interest rate movements, geopolitics, investor sentiments, etc, and more importantly, market speculators whose trades in non-deliveries impact futures prices.

Sometimes the futures price will be driven much higher than the contango, creating arbitrage opportunities. When such opportunities arise, bullion traders will buy spot and sell futures at the higher price, making an arbitrage profit. Arbitrageurs drive demand for physical gold, the spot price is pushed higher till the arbitrage opportunity closes. This is the normal dynamics of the market. Financial derivatives exploit price discrepancies, relying on the expectation of bullion traders to balance supply and demand across markets, thereby aligning prices. The arbitrageur benefits from the price correction facilitated by others' physical movements without engaging in the logistics themselves. This approach underscores the efficiency of financial markets, where price imbalances can be corrected through various mechanisms, not solely dependent on the physical transfer of gold. Physical gold may or may not be delivered in COMEX depending on the traders preference on method of settlement. In other words, arbitrage does not mean physical gold has to be shipped to COMEX for delivery

Gold price has risen 44% in the last 12 months. Currently it is at US$2,900+ level, the highest it's ever been in the last 5 yeas. There are several reasons for the bullish view on gold -- central banks have been on a buying spree since 2022, inflation, rising geopolitical risks in Europe, rise in USD interest rate, expectation of a valuation correction of equities, the impossible US national debt and anticipation of dollar's collapse, and fear of US tariff on the metal. But the long term trend is irrelevant to determining what happened in February. It is the supply and demand situation in the trading days in February.

In the week of Trump's inauguration, the spread hit US$60. This however, is not the first time the gold market has seen such a wide spread. The chart above shows the period of price dislocation between spot and futures. There are 4 distinct periods - 2019 (pandemic), 2008 (global financial crisis), 2001 (dot com bubble), and 1975-1990 (post gold standard era). In times of uncertainty, gold prices rise due to its safe haven reputation. These were times of uncertainty and money flows into gold. The spreads build up and arbitrageurs enter the market pushing up spot prices eventually smoothening out the gap. .In 1975 gold futures was launched, there was a long period of volatility. The spikes in the 4 periods mean there were arbitrage opportunities and it shows the efficiency of the pricing mechanism in the market as spikes eventually get even out. There were no flight of physical gold out of London in the earlier 3 events simply because there were sufficient physical gold in both markets to meet demand. In early 2020 also around February that year, there was a similar flight of gold out of London to COMEX. This was because the pandemic caused disruptions and huge delays in logistics and re-casting of physical gold in Zurich, forcing bullion banks in London to ship gold to NY.

February 2025 had the same spike pattern and huge spread, and same physical gold flight as in 2020. What happened in 2025 February cannot be attributed to fear of tariffs. Tariff is simply another factor that brings uncertainty to the market, just like pandemic, financial crisis, dot com bubble, which all tend to push gold prices higher with increased demand for physical gold and derivatives. .

By mid February, after the massive outflow of physical gold from London, the spread has dropped to US$28 level. This shows it is availability or liquidity of physical gold that allows the market dynamics to recalibrate the price differential. If there is no liquidity in physical gold in the futures market, traders move gold from LBMA to COMEX. This happens all the time as the spot and futures price smoothens out the price hikes and generally goes unnoticed. In February the scale of it and the clogged logistics blew the situation into public awareness.

Almost all traders close out their futures positions before expiration by an offsetting contract and take profit or loss. This is cheaper than taking delivery and bearing carry cost or buying spot to deliver.

To close out the futures short (sold) positions, the arbitrageur can (1) 'roll-over', that is extend his short position with a new sell contract.. Or he can (2) do a gold swap with a bullion bank. In both cases, there is no delivery of physical gold. The arbitrageur has (3) the third option of delivering physical gold. If he has no inventory in COMEX, he ships his gold from London to NY. Whichever option he takes, it is driven by cost consideration.

Rollover becomes more costly when the price between the expiring month of the contract and the next month is increased, ie the spread has grown larger. A swap is borrowing or leasing of physical gold to back a futures short position. The leasing cost rises when liquidity gets tight, ie there is lesser gold in the market.

For physical delivery, there are shipment, insurance and storage cost to consider. Previously, shipping gold from London to New York was very expensive because the two markets had different specifications. London gold bar is 400 oz each whereas COMEX gold bar is smaller at 100 oz. The gold had to be sent to Zurich to be smelted, re-casted, rebranded and assayed before it can be sent to COMEX. This added a huge layer of cost. In the Covid-19 pandemic, the logistical delays of shipping to Zurich made the mechanism inefficient for the market. There has since been an integration between LBMA and COMEX making the different gold bars acceptable to both markets. This drastically reduces the cost of transferring the physical gold.

So the answer to what caused the massive flight of gold from London to NY boils down to simple math. Physical delivery was cheaper than 'rolling over' the futures contract and gold swaps. That begets the question of what caused the other two options to be more costly. For that to happen, there must be what is known as a "squeeze" in the spot and futures markets. Now we are getting into the crux of the situation.

First, lets try to understand the physical gold supply side.

Bullion banks in London hold gold bars in their vaults. These holdings are split into 'allocated accounts' and 'unallocated accounts'. Customers who want ownership of their gold hold them in allocated accounts. These gold bars the banks cannot make use of. The banks are simply the custodians. The unallocated accounts comprise of the banks' own reserves and customers who keep their gold there but has no lots identified to them. They have no direct ownership. Their position is that of a creditor. Obviously it is much cheaper for customers to maintain unallocated accounts. The bank can lend gold out of the unallocated accounts and earn leasing fees.

The Bank of England's vault holds about 400,000 gold bars but owns only 2 nominal pieces. It serves as a custodian for UK's gold reserves of 310 tons, as well as for other central banks and financial institutions. It does not trade but serves as administrator for its customers who leases out some of their gold.

In NY, COMEX holds only a small portion of the gold. Most of their gold is in COMEX-approved vaults of bullion banks. COMEX gold is classified into 'Registered gold' which is gold tied to contracts and ready for delivery; and 'Eligible gold' that meets delivery standards but not yet available for trade.

NY bullion banks maintain their gold in 2 main categories -- (a) COMEX gold which they cannot make use of, and (b) 'Off-Exchange gold" which comprise of 'Allocated gold' of their customers and 'Unallocated gold" of their customers together with their own reserves. They also act as custodian of central banks gold as well as the reserves of EFTs (gold exchange-traded funds).

The Federal Reserve does not hold physical gold of its own. The US Treasury holds the governments gold but it does not participate in the gold market directly.

A 'short squeeze' is when short sellers find themselves with inadequate physical gold to deliver. Their position will be force closed by a call on their margins. A 'supply squeeze' is when the market itself has a shortage of physical gold to go around. When a supply squeeze occurs, prices rise and roll-over and gold swap options become more expensive and physical delivery becomes the choice of settlement. NY bullion traders are forced to ship their gold over from London to meet their obligation. This was exactly what happened. So we need to understand where the demand is coming from that caused the supply squeeze.

Pundits say the fear of tariffs caused traders to take gold delivery. Certainly the fear of tariffs increased the uncertainty and investors turn to gold. But it is not in the way most people think. There are a few ways this demand manifested. (1) First, investors with physical gold accounts stored in bullion bank vaults moved from 'unallocated' to more costly 'allocated' accounts' to gain ownership for better security. This decreased the float or liquidity, or supply of gold, ie the balances in unallocated accounts for bullion banks to lease out and liquidate their own short positions if any. (2) Increased uncertainty caused central banks to cut down on leasing activities thus decreasing the float to the market and increased gold swap costs, which in turn further increases demand for physical gold as arbitrageurs prefer delivery than roll-over or gold swap. (3) More prominently is the role of gold ETFs. Market uncertainty caused investors or hedgers to flock to paper gold by investing in gold ETF. These ETFs need to hold physical gold reserves to back their paper gold. Total holdings of gold by ETFs is about 10 times of UK's gold reserves. That gives an idea how big the sector is. In February huge inflows of funds into ETFs caused a substantial increase in demand for physical gold. For example, India, which is a huge consumer of physical gold, saw a huge inflow of US$456m in January into gold ETFs. (5) Lastly, arbitrageurs who had built huge short futures positions all rushed for physical gold to meet delivery obligations.

The supply of gold is fixed. The supply of gold available, ie the float represented in the 'unallocated accounts' of bullion banks and central banks, is much smaller. A supply squeeze happened in COMEX in February and bullion banks needed to transfer their gold from London to NY to meet their obligations. Clearly this had nothing to do directly with tariffs.

Lastly is a speculation, but a high possibility. Whenever there is huge financial upheaval, conspiracy theory involving Rothschilds arises. Not this time since the Rothschilds exited gold business a long time ago citing increased competition, increased risks and lowered earnings. London is the major physical gold market and the major bullion banks include JC Morgan Chase, HSBC, UBS, Scotiabank, Goldman Sachs, Standchart and ICBC-Standchart. London is an OTC (over the counter) market. So a lot of things these fellas do no one knows. Follow me now.

Fractional banking is a mechanism that allows commercial banks to make use of their customers' deposit money by lending them out and earn an interest spread. As money gets re-deposited, they can lend out again. So there is a multiplier effect. If they hold 10% reserves, every new $ deposited can result in $10 being created in the market. In other words, the banks can 'print' money. In a similar way, bullion banks can make use of physical gold deposited with them to 'print' much more paper gold in the futures market. This gives them a great ability to move markets.

Bullion banks have significant control over the paper gold or futures market which they have manipulated for decades. They flood the futures market with vast amounts of 'naked' shorts, meaning not backed by physical gold. This overwhelms demand and prices fall artificially which they then buy back. History is rife with such market manipulation. They are not worried of getting caught. The fines are nothing compared to the profits they can make. Examples of such manipulation:

- April 2013 over 400 tons of futures contracts were dumped in a few minutes which triggered stop-loss orders and gold crashed US$200 in 2 days even though there was strong demand for physical gold.
- 2020 JP Morgan was fined US$920m for fraudulent trading between 2016-2019. It's an illegal market manipulation called "spoofing" of placing large fake sell orders. When the price has gone down, they cancel the fake orders and buy at lower prices.
- Bullion banks can oversell on unallocated gold. They write more futures than their reserves of unallocated gold can support. If there is too much demand for physical gold, they delay payment or cash-settle at suppressed prices. This was what happened during the pandemic.
- Bullion banks are 'authorised participants' in gold ETFs like SPDR Gold Shares (GLD). They can issue or redeem ETF shares based on supply-demand. Thus they are in a position to influence gold flows. In 2013 GLD gold reserves fell by 500 tons which coincided with a gold price crash. This suggests ETF liquidation was used to supply physical gold and suppress prices.
- Bullion banks trade in derivatives instead of physical gold. They used gold swaps and forward contracts to delay physical deliveries thus preventing price hikes. Bank of International Settlement often collaborates in this to prevent prices from rallying. BIS conducts hundreds of tons of gold swaps monthly.

Looking at the history, it is very likely bullion banks were caught shorting the market leading up to February and frantically moving their gold from London to COMEX. Anyone caught with huge short positions in gold futures in January must have made tremendous losses.

Given the banks proclivity to short the market, one must ask why are governments not tightening regulations. Here we go into another probability of conspiracy theory. Governments do not want gold prices to rise, period. Governments (and central banks) prefer stable or moderate rises in gold prices for currency stability and economic perception:

- An increase in the price of gold is a double-edged sword for central banks. Its asset valuation has grown, but their fiat currency has depreciated.
- Gold competes with interest-bearing assets. Higher gold prices could push investors to dump bonds or currencies, forcing central banks to raise interest rates to stabilize their currencies — which can hurt economic growth. Keeping gold prices tame reduces this pressure.
- A soaring gold price can signal to markets and the public that something is fundamentally wrong with the economy or monetary system. To avoid panic, governments may prefer to suppress rapid gold price increases.
- Gold is traditionally seen as an inflation hedge. If prices spike, it might make official inflation report look suspicious.
- There is a geopolitical angle. High gold prices empower countries with large gold reserves like Russia and China and undermine confidence in US$ which is the major reserves currency. Controlling gold price volatility helps to protect the status of US$.

For these reasons, there is no doubt governments work in concert with bullion banks to prevent gold prices from rising too much too fast. Central banks play a crucial role in providing gold liquidity by leasing gold to bullion banks via BIS acting as brokers. The US Treasury does not lease out gold but it helps to control prices using its Exchange Equalisation Fund buying and selling gold. There exist an undeclared effort to suppress prices. There will never be a wild ride on gold prices like cryptos.

Those who doubt a bullion banks-government connection exist should recall an event known as "Brown's Bottom". This event outperforms Ho Chin's folly in 2009 when Temasek ill-timed the disposal of all those bank investments at a time when prices were lowest,  and sustained hundreds of millions in losses. In 1999-2002 Gordon Brown was Chancellor of Exchequer. As Treasurer, he sold 400 tons of gold which went mostly to China and other emerging markets. The idea then was gold was unnecessary to protect their fiat currency. It was to be monetised and invested in interest-earning assets and foreign currency reserves. That was IMF recommendation. Gold prices crashed. Bullion banks were holding huge short positions at the time, of course coincidentally, When prices crashed and hit rock bottom, bullion banks bought back cheap and made a market killing. Brown sold 60% of UK's gold reserves at rock-bottom price of average $257/oz, hence "Brown's Bottom". Peter's Principle prevailed and Brown went on to become UK's Premier in 2007.

What then caused the massive gold shipment from London to NY?  Was it Trump's tariffs? Was it arbitrageurs? Was it because bullion banks overtraded in paper gold in excess of their reserves? Was it Bullion banks out doing their national service shorting the markets to keep prices down and got caught in a supply squeeze? One thing is for sure, it was not due to COMEX traders want physical gold delivery because of the threat of tariffs.

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