Thursday, April 10, 2008

Fed Looks for Hyperinflation tools

Man I hate when I post to the wrong blog, this was up elsewhere yesterday in a much more timely manner

The Federal Reserve, having used up most of it's own reserves comprised of Treasuries in making recent loans to the banking industry is looking for new creative ways of loaning or injecting more money than it has, as explained in this Wall street Journal article

As the articles explains the FED could just create money but since that would drive down short term interest rates to the mat, something they are not quite desperate enough yet to try.

The other options include having the treasury create excess treasuries and depositing them at the fed creating extra reserves they can use to plug the dikes, changing laws to encourage larger deposits to the Fed by banks, allowing the FED to directly hold Mortgage Backed Securities, or letting the FED directly issue it's own debt.

Should the Fed ever get the power to create it's own debt without the assistance of the Treasury the U.S. government will for all intensive purposes be neutered and powerless to control their own destiny. Control of the currency is the ultimate power and obligation of any state, but the U.S. Gov through the creation of the FED, recent calls for more FED powers and possibility that they will soon be able to create their own debt are working towards the total corproatization the Nation and a loss of sovereignty to a consortium of bankers.

Each one of these options is variation of the "Print ourselves out of trouble" model which will further fan inflation. If you are having second thoughts about metal investing this alone should show you the desperate state the U.S. economy and the dollar find itself.
With M3 already in the mid teens we should be looking 25% by election time if the FED gets it way. So what is the established number for hyperinflation I've seen a couple of definitions?


Anonymous said...

I just bought 100 oz silver bar from Scotiabank today and the price per oz is $19.88 CAD. However, the silver price today is $18.31 CAD/oz.

How come there is a big difference in price? Did I get tricked by ScotiaBank then?

Please advise.


Carter Apps, dabbler of stuff said...

basically you are paying Scotia's cut, .30 was the bar charge which they claim is a fee for the refiner each and every time it's sold, Yeah right.

they also take the most advantages price when a transaction takes place if your buying they use the ask price on the market, if you are selling they give the bid, the difference here is something that is hard for use to see and we have to trust them, I think it's always padded at least .50 but it could be more.

I figure this is their attempt at making up for the storage fees they would get in a pool account or for certificatse that have no silver backing it. With no private mints and the currency exchange places having higher premiums this the cost of being a silver investor in Canada. Sucks to be us.

Unknown said...

Thanks for the explanation.

So do you think it'd better to buy silver certificate from them because no premium will be charged?

Besides Scotiabank, can you suggest where silver investor can buy physical silver at reasonable cost?

Carter Apps, dabbler of stuff said...

God no, certificates are fraud, they may or may not(probably not) have any silver backing them. This means the banks word not your asset is backing the paper, bank gets in trouble you have nothing.

the other issue is if they don't buy silver with it your added market demand has zero affect on the market price, and taking no supply off the market, It is a shortage/failure to deliver that will make silver fly, paper certifcates will actually divert demand and lessen our profit.

Sorry Polly, Scotia is about as good as it gets in Canada and with recent retail shortages you buy it where you find it.

Don't sweat it, silver will soar and you'll be glad you paid the premium to get a real asset.

Thanks for dropping by.

Anonymous said...

Thanks again for the great explanation! P