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The
Feb 13th H.3 Report has worsened. Now non-borrowed
reserves are at -19.2B. On Feb. 7th the Fed issued the following statement: The H.3 statistical release indicates
that nonborrowed reserves of depository institutions have declined substantially
since mid-December to a level that is now negative. This development reflects
the provision of a large volume of reserves through the Term Auction Facility
(TAF) and has no
adverse implications for the availability of reserves to the
banking system.
By
definition, nonborrowed reserves are equal to total reserves minus borrowed
reserves. Borrowed reserves are equal to credit extended through the Federal
Reserve’s regular discount window programs as well as credit extended
through the TAF. To maintain a level of total reserves consistent with the
Federal Open Market Committee’s target federal funds rate, increases in
borrowed reserves must generally be met by a commensurate decrease in
nonborrowed reserves, which is accomplished through a reduction in the Federal
Reserve’s holdings of securities and other assets. The
negative level of nonborrowed reserves is an arithmetic result of the fact that
TAF borrowings are larger than total reserves.
Ms.
Baum of Bloomberg commented on this article on Feb. 8th. She must be
either ignorant or complicit.
Who
does the Fed and Ms. Baum think they are kidding? This most certainly
has ‘adverse implications for the availability of [the purchasing power of the] reserves.’
Yes, the Fed is playing its role as lender of last resort. However, by
lending money it has printed out of thin air it does not provide
‘reserves’ of substantive purchasing power.
An
arithmetic result showing insolvency and bankruptcy. In other words,
the Federal Reserve system can only write hot checks so long. Typical Ponzi
Scheme that is now unraveling as the Federal Reserve’s holdings are
dissipated into black holes on the member bank’s balance sheets.
It
appears the Federal Reserve will Cross the Rubicon and begin monetizing the
non-performing or illiquid debt instruments. If that happens then gold
will surely and quickly reach $2,000. The nominal amount of US$ is
irrelevant as gold is the standard of purchasing power. With gold
people can be confident
that one ounce is one ounce or 10 barrels of oil and not a third of an ounce,
no ounces or no oil as a result of an ‘arithmetic result.’
I hope
everyone reading this has taken steps to remove the layers of counter-party risk posed by
institutions and instruments (that includes the US$) between
them and their purchasing power. Watch this video to understand why GoldMoney is
not subject to these problems.
Trace Mayer
RuntoGold.com
Trace Mayer,
J.D., holds a degree in Accounting from Brigham Young University, a law
degree from California Western School of Law and studies the Austrian school
of economics. He works as an entrepreneur, investor, journalist and monetary
scientist. He is a strong advocate of the freedom of speech, a member of the
Society of Professional Journalists and the San Diego County Bar Association.
He has appeared on ABC, NBC, BNN, many radio shows and presented at many
investment conferences throughout the world.
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