Gold: A Pot Worth Watching
gold-eagle.com
<< There are four ways this scheme (central bank gold leasing) could self destruct:
1. The borrowed gold disappears once it has been sold into the physical markets. It ends up as jewelry in China, India, other parts of Asia, and the rest of the world. If central banks demand repayment, something they might do if their perceptions of risk in this market change, the supply available for repayment has diminished. As with other unsupervised or unregulated markets, no one has a comprehensive view of the size of long and short positions. It is safe to say, though, that because the downside of gold has been a one way street, there is very likely a large imbalance on the short side.
2. Anti-deflation policies might start to work. Asia might recover. The markets will anticipate this before a bureaucratic price fixing scheme can react.
3. Economic and financial market conditions could worsen. Even more extreme anti-deflation measures would be imperative. A collapse of confidence in the dollar, the financial markets and intermediaries would awaken investment demand for gold.
4. Official sector demand could rise. Most recently, commentary in China advocated increased exposure to gold at the expense of the dollar. There are also rumblings that Asian nations may soon band together to form their version of the IMF, except that the gold backing may be much more significant. >>
Remember this ditty
He who sells what isn't his'n
must buy it back or go to prison
Doesn't seem to apply anymore, at least if you are a hedge fund and AG is your lender ... You just might get bailed out and given a bonus to boot!
I guess Fort Knox just starts to get an echo as the gold is replaced by piles of government script.
John
PS - Watching the madness of the crowds on wall street, I feel like the guy that had the good sense not to go where he knew there was going to be a riot, and then missed the action.
Oh well, I guess at least I won't get taken out and shot like the rest of them. < g >
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