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Politics, Astrophysics, Missing

Money & Finance > Gold Money Alert: More Than a Helping Hand
 

Gold Money Alert: More Than a Helping Hand

https://mybloggers.com/mail/read.link.php?messageid=14345&url=http%3A%2F%2Fgoldmoney.com%2Fen%2Findex.php



James Turk
James Turk
Founder of GoldMoney
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GoldMoney Alert
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More Than a Helping Hand
One of the basic functions of a central bank is to act as the
'lender of last resort'. This facility is used to keep banks liquid
during a period of distress.
For example, if a bank is experiencing a run on deposits, it will
borrow from the central bank instead of trying to liquidate some of its
assets to raise the cash it needs to meet its obligations. In other
words, the central bank offers a 'helping hand' by providing liquidity
to the bank in need.
The following chart is from the Economic Research Department of the St. Louis Federal Reserve Bank. Here is the link: https://research.stlouisfed.org/fred2/series/BORROW. This long-term chart illustrates the amount of money banks have borrowed from the Federal Reserve from 1910 to the present.

This chart proves there is truth to the adage that a picture is
worth a thousand words. It's one thing to say that the present
financial crisis is unprecedented, but it is something all together
different to provide a picture putting real meaning to the word
'unprecedented'.
It is an understatement to say that the U.S. banking system is in
uncharted territory. The Federal Reserve is providing more than just a
'helping hand'.
This chart should alert everyone to the perils of putting your
wealth on deposit in a bank. The magnitude of the borrowing by banks
shown on this chart is signaling that the banking system is suffering
from more than a lack of liquidity. The real question we need to be
asking ourselves is whether the banking system is solvent, i.e.,
whether the assets of banks in the aggregate have greater value than
the banking system's liabilities.
I distinguish 'liquidity' from 'solvency' in an article I wrote last year for my monthly column on Kitco.com. Here's the link: https://www.kitco.com/ind/Turk/turk_nov122007.html. In this article I quote Ludwig von Mises as follows: "Finally
the masses wake up. They become suddenly aware of the fact that
inflation is a deliberate policy and will go on endlessly. The crack-up
boom appears. Everybody is anxious to swap his money against 'real'
goods, no matter whether he needs them or not, no matter how much money
he has to pay for them."

The above chart indicates to me that we are on the cusp of a
crack-up boom. Owning gold and silver and avoiding the dollar are now
more important than ever.


Published by GoldMoney
Copyright © 2008. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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information contained in this report has been compiled from sources
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without the prior consent of GoldMoney.

posted on July 30, 2008 6:31 AM ()

Comments:


Good article Laura
comment by shesaidwhat on July 30, 2008 8:06 AM ()
Deregulation encouraged most institutions into questionable or downright criminal credit instruments. As these failed, lenders drew back from the lending business even the best projects. The government pumped more money into a system that had little productive use for it. The borrowers lost confidence. Once the depositors lose confidence, there is nothing left to continue. The system collapses.YPiR
comment by bumpedoff on July 30, 2008 7:49 AM ()

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