Sunday, August 19, 2012

Are Banksters about to Create a Rush into Gold?

This is big, very big. The major players appear to be ready to drive gold through the roof. The Fed is circulating a letter proposing that gold be considered Tier 1 capital, just like Treasury bills. It's not clear why the banksters are behind this, but this could fundamentally change the attitude of banks toward gold.  For the first time in a long time, it would make a lot of sense for banks to buy gold Doug Hornig at
Casey’s Extraordinary Technology  explains the details here.
On June 18, the Federal Reserve and FDIC circulated a letter to banks that proposes to harmonize US regulatory capital rules with Basel III.

BASEL III is an accord that tells a bank how much capital it must hold to safeguard its solvency and overall economic stability.

It's a global standard on bank capital adequacystress testing, and market liquidity risk.

Here's the important bit:

At the top of the proposed changes is the new list of "zero-percent risk weighted items," which now includes "gold bullion," right after "cash."

That's the part to take notice of.

If the proposals are approved by regulators – and that seems likely since adoption of Basel III will be – then this is a momentous change for the gold market.

Now banks will be allowed to hold bullion in their vaults and count it among their Tier 1 assets – in other words, the least risky assets.

That by itself would be bullish for the gold price, as banks that recognize gold's unique characteristics seek to stockpile more of it.

But that's not the whole story…

Gold Regains Money Status

For one thing, Basel III also stipulates that a bank's Tier 1 holdings must rise from 4% of assets to 6%. 
That means that banks may not only replace a portion of their existing paper with bullion, but may use it to meet some of the extra 2% as well.

In addition, this vote of confidence from the highest monetary authorities gives further impetus to the remonetization of gold.

In essence, what's happening is that from now on gold will be considered "money" in virtually the same way as cash or bonds


  1. I don't like gold to be placed in the hands of the banksters. I'd rather everyone kept it in his/her garden or under the mattress.

  2. This would mean that Jordan Weissmann is wrong.

  3. Fat finger error? I just can't find the "gold bullion" button on my keyboard...

    Maybe they've got those new-fangled Golden Dvoraks at the Fed?

  4. "... gold will be considered "money" in virtually the same way as cash or bonds".

    Bonds are money? To me, bonds are the opposite of cash... debt, but then, a Federal Reserve Note is somewhat a bond, now isn't it. At least the convenience store will take Federal Reserve Notes (tries to buy a pack of smokes and a 12 pack of beer with a 10-year bond) :)

  5. I read a similar story on King World News (at the URL below) but that was in June. Was this a new development?,_Chaos_to_Accelerate.html

    Hathaway also added: “The ray of sunshine is the reintegration of gold back in to the financial system. I am seeing increasing discussions, on both sides of the Atlantic, of elevating the status of gold as a reserve asset. There are proposals, under Basel III, to increase gold’s status from a Tier-3, to a Tier-1 asset. So gold will become ‘good collateral,’ meaning you don’t have to haircut it. It’s good capital.

  6. So does that mean they will be eliminating the capital gains tax?