Friday, February 8, 2013

Where is Germany's Gold ?

The impact of Germany's repatriation on the dollar revolves around an unanswered question: why will it take seven years to complete the transfer? 

The popular explanation is that the Fed has already rehypothecated all of its gold holdings in the name of other countries. That is, the same mound of bullion is earmarked as collateral for a host of different lenders. Since the Fed depends on a fractional-reserve banking system for its very existence, it would not come as a surprise that it has become a fractional-reserve bank itself. If so, then perhaps Germany politely asked for a seven-year timeline in order to allow the Fed to save face, and to prevent other depositors from clamoring for their own gold back - a 'run' on the Fed.

Now, the Fed can always print more dollars and buy gold on the open market to make up for any shortfall, but such a move could substantially increase the price of gold. The last thing the Fed needs is another gold price spike reminding the world of the dollar's decline. - in a recent article by Peter Schiff

4 comments:

  1. Why dont they make NRA themed scary monster movies?
    Monster brakes down door (BANG!) movie over.

    ReplyDelete
  2. "breaks" is not spelled 'brakes" (I wonder if the literary level is reflective of a similarly limited IQ?)

    ReplyDelete
    Replies
    1. make that literacy and literary...

      Delete
  3. Fiddling while Rome burns...OK now, back to sleep.

    ReplyDelete

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