Monday, July 11, 2016

Is The BIS Setting Up 
The World For Another Meltdown?
"In 2013, the Bank of International Settlements (BIS), one of the most powerful institutions you may never have heard of – blew it. It snubbed gold .. The BIS, in the aftermath of the financial crisis, had the job of refining the rules that would make sure banks would have enough of a liquidity buffer to ensure there would be no repetition of the financial crisis meltdown. During the worst of the crisis banks were left so high and dry that GE nearly missed a payroll because it did not have access to enough liquidity. The goal was a buffer large enough to cover net bank withdrawals over an extremely stressful 30-day period. It was widely assumed that the BIS would include gold as a financial asset banks could use as part of their liquidity. But, amazingly, when the BIS issued its so-called Basel III recommendations, gold was nowhere to be found. Instead, the BIS listed sovereign debt, common stocks, and BBB+ bonds as among acceptable forms of liquidity — some with a haircut, i.e., at less than full face value. Omitting gold was extraordinary given gold’s outstanding performance .. The BIS, in my view, was intent on preventing gold from being viewed as a currency on par with the dollar. Its fear was that if gold – the only financial asset that can’t be created at will – were treated as a currency, it would quickly grab status as the premier financial asset, the de facto reserve currency of choice. The dollar would play second fiddle, with very uncertain consequences for America .. Imagine how different things would look today if the BIS had granted gold its rightful role as a liquidity buffer. Its price would have soared, but those gains would have meant less need for money printing. There would be little prospect for the kind of vicious circle that prevails today, since gold would rise as new debt was created. There would be no need to backstop debt with more debt, and private and public investors would be far more willing to invest in infrastructure and other productivity-enhancing projects with long-term payoffs."
- Stephen Leeb
link here to the reference

No comments: