Gold As Tier 1 Asset = More Elitist Loans Aimed at the Meddlesome Middle Class
Much has been reported regarding the US Treasury, Federal Reserve and FDIC seeking comment on the altering of capital adequacy rules pertaining to gold held as reserves at a bank. Currently, when gold is held as an asset, it is “risk weight” is 15%, which means a 15% discount on its current value for capital adequacy. So, when a bank holds gold, one must take 15% taken off of the spot price so as to arrive at the amount off of which a bank can make loans. What’s being proposed is that gold not be discounted in the slightest, thus placing gold on the same plain as cash. As the document states:
217.131 Mechanics for Calculating Total Wholesale and Retail Risk-Weighted Assets.
(i) A bank holding company or savings and loan holding company may assign a riskweighted asset amount of zero to cash owned and held in all offices of subsidiary depository institutions or in transit; and for gold bullion held in a subsidiary depository institution’s own vaults, or held in another depository institution’s vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities.
Many suggest this will lead to banks to begin accumulating more gold so as to bolster their capital. Perhaps this is so. But, the question in my opinion is, What will this achieve? The current system is totally useless as a tool to achieve freedom, and anybody who doesn’t recognize this is behind the times. What would come of this, the change of regulations governing gold as a reserve in the U.S. banking system, are more assets off which to make fraudulent loans. Loans with too much vector, critical mass, handed out wantonly as an enslaving handshake from the lender to the borrower. The banking establishment will make a loan off of the Queen’s stool, held in a vault somewhere near a seed bank on Antarctica. These loans off gold are surely to come encumbered by innumerable accounting tricks, etc. so as to make this new precedent destructive, taking on the attitude of its greater banking environment.
This is not to say that gold cannot be used in the practical transactions, but merely to point out that anything introduced to the current banking system will be intended and used for elitist practices, not populist.