Market is causing interest rates to begin to escalate.


GALTGULCH8

Recommended Posts

Many interest rates are based on the rate of the U.S. Treasury Bonds which have risen recently from 1.4% to 2.8% with the prospect of going much higher.

The consequences of such a rise in rates will cause the recovery to stop. The cost of national debt service will go up substantially which will require higher taxation further interfering with the recovery as well as the market.

This is not something which might happen in the distant future rather it is beginning to happen and will worsen in the weeks ahead.

Just as a tsunami is preceded by the tide going out first, we are witnessing volatility in the precious metals markets. The cause of the recent decline in price of gold and silver was caused by central bank interventions such as naked short selling of futures contracts.

I understand that as many as one hundred people have a paper claim on a particular ounce of gold being held in certain banks or depositories. Ninety nine of them will be disappointed because they will not receive the gold they think they own rather they will be paid in fiat paper currency.

The Bundesbank in Germany recently requested return of 300 tons of gold being stored in NYC in the Federal Reserve Bank there but was told it would take seven years to receive it.

That is a consequence of a fractional reserve policy in effect in the gold market as well as in the banking system itself.

You are about to discover first hand what it will be like to experience a rising interest rate in US Treasury Bonds which has been artificially held down for years by the Federal Reserve Chairman.

His policies have been mistaken but he believes in them fanatically and still thinks that more printing will lead to full employment and prosperity.

I hope you have an exit strategy if you live in a large city.

Just in case you think I am making this up here is a link to an article at www.kingworldnews.com

http://tinyurl.com/maponlb

gg

Link to comment
Share on other sites

The consequences of such a rise in rates will cause the recovery to stop. The cost of national debt service will go up substantially which will require higher taxation further interfering with the recovery as well as the market.

Mainstream media drowns us with this mantra. Must I hear it on an Objectivist site, too? What about savers? What about politicians being pressured to reduce their profligate spending?

I understand that as many as one hundred people have a paper claim on a particular ounce of gold being held in certain banks or depositories. Ninety nine of them will be disappointed because they will not receive the gold they think they own rather they will be paid in fiat paper currency.

This seems like another complaint about the futures market from somebody lacking understanding of it. Many people/firms who hold futures have no intention to make/take delivery. Their purpose is only a price hedge. I will give you a stark example. Suppose an airline wants to lock in prices for jet fuel it expects to need for the next several months. It can't strictly because there is no futures market for jet fuel. However, it can buy futures on crude oil, for which the price roughly correlates with the price of jet fuel. Obviously, the airline would not want to take delivery of crude oil. But it can close the position before expiry, having achieved a price hedge.

The Bundesbank in Germany recently requested return of 300 tons of gold being stored in NYC in the Federal Reserve Bank there but was told it would take seven years to receive it.

That is a consequence of a fractional reserve policy in effect in the gold market as well as in the banking system itself.

I'm glad to see you on more solid ground.

LINK.

Link to comment
Share on other sites

"What about savers? What about politicians being pressured to reduce their profligate spending?"

What about them? Are you saying that savers and responsible politicians will fix the economic problems?

"This seems like another complaint about the futures market from somebody lacking understanding of it. Many people/firms who hold futures have no intention to make/take delivery. Their purpose is only a price hedge."

All things being normal, there is no problem. The problem comes when there is a financial crisis and currency collapses. In such a situation they would all want to take delivery of the gold.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now