Dallas Fed Admits, “For the next 8 months, the Nation’s Central bank will be monetizing the Federal Debt”Posted on Nov 08, 2010 in Economic News, Federal Reserve & Bankers
Time to begin the Chairman impeachment proceedings. It is one thing for blogs like Zero Hedge to argue (rightly) for the past 1.5 years that the Fed’s actions in the Treasury space are nothing but direct debt monetizations. After all, one can always argue semantics, as some peers have enjoyed doing in the past. Yet when an actual Federal Reserve Fed President, in this case Dallas Fed’s Dick Fisher states it without any trace of hiding the underlying intent, then things get a little serious. To wit: “For the next eight months, the nation’s central bank will be monetizing the federal debt.” It gets worse: even though Fisher realizes that what he is doing is unconstitutional, he also admits that the Fed’s actions are now is effectively a policy tool: “Here is the message: The Fed is going out of its way to be a good citizen. It is time for the Congress to do the same.” In other words, the myth of the Fed’s political independence is now destroyed. All pretense has now gone out of the window as the Fed realizes this is the last “all in” bet. If this fails, it is over. Yet maybe someone in power can precipitate this much needed reset. After all it was Ben Bernanke who testified under oath that the “Federal Reserve will not monetize the debt.” It is time he is impeached and prosecuted for this lie.
One of the completely unmentioned side effects of the recent surge in gold prices, has been the fact that one of the biggest holders of gold, the GLD ETF (presumably physical, even though it is kept in the cellars of HSBC in London, one of the two banks recently charged with a RICO suit for precious metal price manipulation) which as of close today held 1,294 tonnes, has not really bought any gold in over 5 months. The issue is that GLD’s gold actual holdings, which feed right into its NAV, have been flat since June, peaking at 1,320.44 tonnes on June 29, and flat-lining and even declining through today. Since then, however, gold spot has risen by 14%. As the chart below shows, GLD tends to reindex its NAV in spurts, buying up gold during specific periods when gold goes up, notably in March of 2009, and between May and June of 2010. As of today, the trust’s NAV per GLD in gold is at an all time low of 97.67. The bottom line is that GLD is now long overdue to replenish its actual gold holdings, net of redemptions. Assuming that GLD will increase its holdings in line with prior accumulations, when gold price surged, the ETF may soon be due to buy about 200 tonnes of gold. Should that happen, GLD will further increase its distance to 6th sovereign holder of gold, China, which as of September 2010 held “just” 1,040 tonnes. As to what would happen to the price gold if it is made known that there is a buyer for 200 tonnes of gold, we leave to our readers’ imagination.
Leading economies should consider readopting a modified global gold standard to guide currency movements, argues the president of the World Bank.
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