Looking for your input regarding a hypothetical scenario.....

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r101958's picture
r101958
Status: Martenson Brigade Member (Offline)
Joined: Aug 24 2008
Posts: 257
Looking for your input regarding a hypothetical scenario.....

Here is the hypothetical scenario: 

A government tells you that it is offering a large amount of treasury bonds in the near future. You (a rep from a different government) reply that you would like to buy some bonds but you are afraid you can not because of the profligate printing and spending of the other government. The other government then tells you that your government will be handsomely rewarded for buying their bonds. You respond - how can that be possible when we will most probably lose money due to the low interest rates you pay? The other government informs you that you should buy gold and silver futures at this and this date and only sell when they advise you to do so. You reply that this sounds interesting but how do I know that this will make up for the difference in what my government would otherwise lose? The other government replies that it is simple. They will discontinue shorting gold and silver at a certain time and allow the price to appreciate. Then after we see that the bond sale has been a success we will contact you. You will then sell your futures,  afterwhich we will start shorting silver and gold again. (The same government offers this deal to a few other governments at the same time.)

I would like your thoughts as to whether this is at all plausible; especially after the 'successful' treasury sales this week and the interesting movements in PM prices. Thanks ahead of time for your thoughts/input.

r101958's picture
r101958
Status: Martenson Brigade Member (Offline)
Joined: Aug 24 2008
Posts: 257
Re: Looking for your input regarding a hypothetical ...

Ok. Not even one thought floating around out there? I will not be offended if there is a reply that says 'that is totally crazy'. Just looking for some intelligent feedback/input. Is it totally 'off the wall, crazy' ? Is it even possible? Is it too insulting to even imagine? Hey, anything will do. Thanks.

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Looking for your input regarding a hypothetical ...

I'll give it a shot.

Assume "A goverment" is the US. Assume the "other" government is the US Federal Reserve. In other words they are all ready doing it. Throw in the major banks that are manipulating PM's, the IMF and the EU. Its already happening.

nickbert's picture
nickbert
Status: Diamond Member (Offline)
Joined: Jan 14 2009
Posts: 1208
Re: Looking for your input regarding a hypothetical ...

I would say that while conceivable, it doesn't seem to me that such a scheme would be worth the time of the governments in question.  The ratio in today's prices of total gold (several hundred billion was it?) to Treasury paper (trillions and trillions) is tiny, and so the amount of potential profit to be made in an insider-trading-like scheme such as this is peanuts compared to the amount of money the US gov't wants to borrow.  Not to say that crooked deals like this aren't being made regularly, just that they probably involve swapping government bonds (as per CM's proposed intergovernmental 'check kiting scheme' scenario) rather than dealing in gold & silver.  If you're going to risk getting caught doing something shady, might as well make it for big stakes right?  Maybe such a deal with gold & silver trades might be something to sweeten the pot, but doing it for it's own sake is the government-scale equivalent of robbing 7-11 convenience stores... minimal payoff for a lot of risk and work.

- Nickbert

r101958's picture
r101958
Status: Martenson Brigade Member (Offline)
Joined: Aug 24 2008
Posts: 257
Re: Looking for your input regarding a hypothetical ...

Thanks you both for your input. I was thinking something like this might be used for enticement (perhaps to ME countries, GB and China) to offset the losses they might realize on buying treasuries with such a low yield. And, like JO stated, this would not be the only vehicle of this sort. There are equities and any other number of manipulated markets. Problem is, there are always losers in this exchange and most often it is the small guys that lose out.

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