<<But let's look at our own fractionalized banking system. If I have a bank with $1 million in deposits, theoretically speaking, I can loan out many times that amount of money, up to 20X, or $20 million, if I remember correctly>>
I don't really understand all the ins and outs of these matters but the above is where the problem lies IMHO.
First, they are taking a big risk with their gold loans. I suspect it will be in excess of the 20x you quote here for sound banking pratice(and I accept). Maybe somebody on this thread will have some idea about the ratio of paper vs. gold is that is being loaned out?
Second, when a bank loans out more money than they have in the bank it does not have the net effect of bringing the dollar down. This is not true for a hard asset like gold. Don't think the same rules apply.
Third, once the CB's and derivative boys figured out they could make more paper money by loaning gold, and they are now into it up to their necks, they CANNOT allow gold to find a free market price (assuming it will be much higher) because people will want the gold they don't have. So this whole thing becomes self-fulling and boarders on being illegal, JMO.
I don't claim to have an idea at what gold should be priced at by the market, but I am pretty sure the price is being held down by unnatural forces.
To be fair, probably the only reason I even care about this is my primary investment tool has historically been via PM stocks. The guys are picking my pocket and I don't like it.
The rich get richer.....
Wayne |
