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Good News for Gold Holders . . . From the Federal Reserve!

Written by Gary North on July 2, 2012

Will wonders never cease? The Federal Reserve is proposing a new rule for financial institutions that hold gold bullion instead of currency.

Today, any firm that does this must discount it by 15%. Under the new rule, this discount will be removed.

The FED has asked for public comments on its proposed rule.

Here is the press release from the FED. It deals with new rules on bank capital.

The Federal Reserve Board on Thursday invited comment on three proposed rules intended to help ensure banks maintain strong capital positions, enabling them to continue lending to creditworthy households and businesses even after unforeseen losses and during severe economic downturns.

Taken together, the proposals would establish an integrated regulatory capital framework that addresses shortcomings in regulatory capital requirements that became apparent during the recent financial crisis. The proposed rule would implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Capital is important to banking organizations and the financial system because it acts as a financial cushion to absorb a firm’s losses,” Federal Reserve Chairman Ben Bernanke said. “With these proposed revisions, banking organizations’ capital requirements should better reflect their risk profiles, improving the resilience of the U.S. banking system in times of stress, thus contributing to the overall health of the U.S. economy.”

There is no mention of gold here. But there is in another official document that has been jointly issued by the FED and the FDIC. On page 129, we read:

Assets not included in a defined exposure category. (i) A [BANK] may assign a risk-weighted asset amount of zero to cash owned and held in all offices of the [BANK] or in transit and for gold bullion held in the [BANK]’s own vaults, or held in another [BANK]’s vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities.

Why is the FED considering this? Because new rules governing international banking have recommended this. This is part of a rule called Basel III. It is coming from the world banking community.

To the question, “Is gold money?” the answer is “yes, according to the international banking community.” It serves as their money.

It’s not the public’s money. It was around the world in early 1914, before World War I. It was in the USA before Roosevelt confiscated the nation’s coins.

The bankers officially dismiss gold as irrelevant. But it’s not irrelevant for them.

For a video on the gold rush by central banks, posted on the Wall Street Journal’s site, click the link.

Continue Reading on live.wsj.com

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12 thoughts on “Good News for Gold Holders . . . From the Federal Reserve!

  1. Tea Leaf says:

    Now that you can keep your gold where the U.S. government can take it away for you with the push of a single computer button anytime they deem necessary. I would say this is not very good news! If the U.S. was not on the verge of financial collapse, and was being operated by an administration we could trust, this would probably be a good idea.

  2. CKent222 says:

    This could be an easy way for the Fed to get the names of people holding gold! This administration now has me so that I don't trust my own mother!

  3. They are just trying to push the price of gold down by discouraging people from buying it and at the same time dumping wha they have on the market also driving the price down therefore making it cheaper for them to buy up and keeping us all enslaved. Whoever controls the gold controls the money whoevr controls the money controls the country whoever controls the country controls the government whoever controls the government controls the people. We should control the government but most people are quite happy cowaring in their little comfy zones
    while the government slowlyh hacks away at that comfy zone until all ..you hav left is shirt on your back.

  4. MontanaMEL says:

    IF they were required to "discount" the value of any GOLD "they held for their own account/benefit, by 15% before…that was a disincentive for them to hold any at all – unless it was an "inventory for sale" item…commem's, Chinese "year" coins, etc…
    NOW…with the disincentive REMOVED…meaning that they can "hold gold and watch it appriciate" just like we can… which means it becomes a "storehouse of value" for them… This now puts them "IN THE MARKET FOR GOLD" at any "LOW PRICE" to be had…and, remember…they have access to the FED DISCOUNT WINDOW AT 0.125% interest rate…BILLIONS can be had for less than a single percertage point…eh?… Do you get the picture??

    (Continued)…

  5. MontanaMEL says:

    (continued from above)

    Your BANK…watches Gold, monitors' it closely, and when it "dips" to say $1,697/oz your friendly bank hit's the FED WINDOW for say 25 BILLION… They then call say 10 major sources for HARD METAL GOLD around the world and place they timed orders – freezing the price at $1.698+/-…plus their negotiated 1/2% sales/purchase fee/margin… The will finally get all their gold, in say 12 to 18 months or so… IN THE MEANTIME…you want to buy some gold too…at $1,697… You call Kitco and place your order…only to find the sales price quoted before you can transact is now $1,712 due to your bank's monster orders hitting the same market you are trying to buy into…

  6. MontanaMEL says:

    (Continued from above)…

    Meanwhile, your bank has now "leveraged" it's asset on hand/or allocated in it's name…and, LOANED OUT maybe 12.5 BILLION "new dollars" to an assortment of low credit risks – like LC's for Intl' trade transactions…making 1/4% on the front, and 1/4% on the back-end of that..total of 1/2% INTERST INCOME in say 60-120 days or so… AND, when that GOLD MARKET opens in the morning of the next day, the price will now be $1,713 and rising due to the banks monster purchase pressure..and, they have placed a hard-stop/sell order at say $1,868/oz…when they will sell maybe 10% of their total "inhand" holdings into that raising market…and every other day or so there after.. THE BANK MAKES A KILLING…YOU PAY MORE FOR ANY GOLD YOU PURCHASE AFTER THEY GET THIS 100% value rule in place!

  7. MontanaaMEL says:

    (continued from above…finally)

    AND, when that GOLD MARKET opens in the morning of the next day, the price will now be $1,713 and rising due to the banks monster purchase pressure..and, they have placed a hard-stop/sell order at say $1,868/oz…when they will sell maybe 10% of their total "inhand" holdings into that raising market…and every other day or so there after.. THE BANK MAKES A KILLING…YOU PAY MORE FOR ANY GOLD YOU PURCHASE AFTER THEY GET THIS 100% value rule in place!

  8. […] banking system in times of stress, thus contributing to the overall health of the U.S. economy.”READ MORE July 2nd, 2012 | Tags: bullion, Federal Reserve, gold | Category: Uncategorized google_ad_client = […]

  9. Gary,
    I sent the article about the proposed Fed rule on gold to my local Local Bank. I told them everything and they didn’t bite. Can you explain this?

    I told him that it would make gold holdings more profitable to banks. I asked if it will this affect his (and my) bank? And won’t this surely raise the price of gold if the rule is adopted? I further told him that this rule if implemented (and the Fed seems to be ok with it) will go into effect Jan 2013. It puts gold on an equal footing with other monies and could make it a great protection and profit asset. I noted that I’m Not a gold salesman nor am I in the gold industry. I told him that I just hoped someone at my bank would crunch the new numbers.

    Here is their answer. Can you explain its meaning and why the answer is so terse????????

    =======
    The response I got from our president said the bank cannot hold gold as an investment, only for inventory to buy and sell. It provides no return other than capital returns.

    Greg *******
    Vice President

  10. […]   Good News for Gold Holders . . . From the Federal Reserve! by Gary North Tea Party Economist […]

  11. When the time is finally right and the time has really arrived to sell your gold hoard, so you can eat, who is going to buy it?
    There will be a disorderly que 10miles long won't there? You wil get shot and robbed while you wait. You also have to risk
    the travel to Birmingham or London with your sack of gold in your socks. Give me a break! You would be better off stockpilling
    tin foods or something that you can eat that will not perish easily.

  12. David Ocala says:

    Am I better off getting the engine in my car to run… or replacing flat tires? I know… why don't I do both?