The shadow banking system

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investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
The shadow banking system

RE WE SETTING THE PINS UP FOR AN ALTERNATIVE RESERVE CURRENCY?

Are we moving towards the BIS and IMF being fractional reserve banks that will create money & credit - a reserve currency that will satisfy Russia and China with an element of Gold backing? A bank such as the BIS could easily assume this role (if it hasn’t already) as could the IMF with possible banking charter adjustments.

The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency.

Global Real Money GrowthSHADOW BANKING REPLACEMENT

The collapse of the Shadow Banking system and its attendant SIV / CDO structures were at the root of the financial crisis. That structure which is representative of a huge amount of the credit growth since the dotcom bubble burst isn’t coming back soon, if ever. The world needs more liquidity than the central banks or sovereign treasuries can currently deliver politically. The central bankers, huddled in their bimonthly board meeting at the BIS in Basel, Switzerland, know this better than anyone. Their discussions in the very halls of the BIS must resonate with them to use all the tools available at their disposal - quickly.

Paul McCulley and Richard Clarida at Pacific Investment Management Co. (PIMCO) have written extensively about the Shadow Banking System and its growth. An extensive slide presentation on the Shadow Banking System can be found on my web site at TIPPING POINTS. I won’t go into the detail here, but suffice it to say that the shadow banking system collapse has created a massive hole in credit creation that central bankers can’t fill in the manner in which they presently appear to be approaching the problem. Of course appearances can be deceiving

The problem has now reached crisis proportions and the central bankers know they must urgently act in a coordinated manner. Deflation now has a firm hand on the global economy and this must be reversed. I have been calling for a US Quantitative Easing QE II of $5T in my writings for some time. This amount is required for the US alone. The entire global requirement is three to four times this amount.

RE WE SETTING THE PINS UP FOR AN ALTERNATIVE RESERVE CURRENCY?

Are we moving towards the BIS and IMF being fractional reserve banks that will create money & credit - a reserve currency that will satisfy Russia and China with an element of Gold backing? A bank such as the BIS could easily assume this role (if it hasn’t already) as could the IMF with possible banking charter adjustments.

The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency.

http://www.financialsense.com/contributors/gordon-t-long/gold-swap-signa...

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2244
Re: The shadow banking system

"The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency."

-This last paragraph from the Gordon Long article is what caught my attention when I read the article, Investorzzo.  I.e., the idea that gold might be used as an enticement to draw people/countries to adopting the SDRs as the new reserve currency, then, once the swich has been made, start backing off on the gold component (hello brand new fiat currency!).  Hmmm...reminds me of a con game I've heard of; can we say "bait and switch"?!  Per Wikipedia:

"...a bait and switch is a form of fraud in which the party putting forth the fraud lures in customers by advertising a product or service at a low price or with many features, then reveals to potential customers that the advertised good is not available at the original price or list of assumed features, but something different is. This use of this term has extended to similar situations outside of the marketing sense."

It would not surprise me, but I hadn't even thought of the possibility until reading this article...

investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Re: The shadow banking system

Just like the so called banking reform law. It's up to the regulators to police the thing. We all know what that means. Free reign to the banksters and Wall street. Oh, and your comments show that the ponzi scheme continues unabated.

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