Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: IngotWeTrust who wrote (43332)	10/19/1999 3:37:00 PM
From: ahhaha	Respond to of 116764

Why is a loan of gold to GS significant? The FED makes loans to members all the time. Whereas GS isn't a member GS can ask one of their clearing banks to function as intermediary. No different from any other loan. It is part of the 1913 FED charter to do exactly that: bail out anyone in trouble. This can be a good thing, but repeated use has made the medicine worse than the disease. Nonetheless, a gold loan to GS is no big deal and it's 2 cents when compared to the money disaster the FED is precipitating with the scale of money implied created by the RP free float. It is that which feeds the will to inflate at the infinitesimal margin and it is the only existing economic machinery problem in existence. All other problems are managed by mechanisms called free markets. We don't have a free market money so this problem flaps in the wind. You won't find Mundell or anyone else saying a word about that. They have lots to say about a free market in the Euro vis-a-vis other currencies, but they've missed the boat completely on the need for a free market in money in the dollar vis-a-vis the dollar. If you stop the fiat intervention of FED in the market for money, gold would fluctuate +- 1 dollar in price indefinitely. The expectation that gold will fluctuate more than this causes the FED to shoot themselves in the foot because they created the environment which enabled GS customers to leverage nominal gold holdings. It's the environment of artificially cheap money. Cheap money enables the gold carry trade and the shenanigans that attend it including encouraging clever profit seeking central banks to mobilize idle inventories. So it is not an issue for GS. It's the FED bailing out the FED. There is no greater disaster than that feedback mechanism because the sympathetic vibration builds until the limit is reached and then chaos prevails.