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Old 05-31-2012, 07:27 AM   #1
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Basel III: Gold to be considered for Tier 1 status

http://www.mineweb.com/mineweb/view/...ail&pid=102055

"The Basel Committee for Bank Supervision (or BCBS) as part of the BIS are arguably the highest authority in banking supervision and it is their role to define capital requirements through the forthcoming Basel III rules.

In short, they are meeting to consider making gold a Tier 1 asset for commercial banks with 100% weighting rather than a Tier 3 asset with just a 50% risk weighting as it does today."

This would be incredibly bullish for gold if this happens. Basically it would provide incentive for every bank on the planet to hold gold!

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Old 05-31-2012, 07:34 AM   #2
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I think it's hilarious that it isn't already considered a tier I asset. What a fucking joke these banksters are.
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Old 05-31-2012, 07:46 AM   #3
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Originally Posted by ancona View Post:
I think it's hilarious that it isn't already considered a tier I asset. What a fucking joke these banksters are.
I don't get it, why would they make a "barberous relic" a Tier 1 asset?!

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Old 05-31-2012, 07:52 AM   #4
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Originally Posted by benjamen View Post:
I don't get it, why would they make a "barberous relic" a Tier 1 asset?!
That's easy.... Tradition!
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Old 05-31-2012, 08:35 AM   #5
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...I was about to post a link to Tuesday's Capital Account, with John Butler, referring to that possible development, and the influence that gold not being Tier 1 fin instrument, has on the Gold price suppression. It also ties quite nicely with what our own swissaustrian said about the "liquidity drying up in the markets", thus enforcing gold sales - to raise liquidity.

In two words: regulators in Yurp, have risen the bar for the Tier 1 reserves -> thus forcing the banks to raise some more capital to comply -> thus commercial banks are selling some of their gold, to implement the reserve requirements. Guess who's buying. Central banks . Erm, shall I say, regulators themselves??

That is a very, very short version, I'd recommend to take a look at the whole edition and listen to the guy, he is describing very convincing dynamics in this regard - that would even play out to some degree, even without the manipulations - and why at the end of that "tighter" controls, it will most likely catapult gold significantly. Not to mention if it was accepted as a Tier 1 - all of the sudden, it would be competing on the level playground against government bonds (!). This is why it might not get implemented - these government folks are stupid, but not THAT stupid, I'd say, as to allow shooting themselves not only in the foot, but rather in the head -as their source of cheap credit is concerned.

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Old 06-01-2012, 01:09 PM   #6
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Gold can perform two jobs that other currencies or any other financial instruments can't do; gold acts as a safe haven in times of turmoil. Gold has acted, for the last couple of thousand years, as a means to preserve purchasing power. In 1913 (the year the US Federal Reserve was born) the US dollar was well a dollar, gold was US$20 an ounce. Today, at almost the 100 year anniversary of the Fed the dollar has lost 95 percent of its purchasing power and gold is $1600 an ounce.

If gold is made a Tier 1 Capital asset, banks could operate with far less equity capital than is normally required. Gold would be the new backstop for debt, currencies and bank equity capital. And if done so, institutional investments will shoot up gold prices very soon...
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Old 06-02-2012, 11:03 AM   #7
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Seems like a ploy to get people to let banks hold gold for them, so they can loan it out, like they do with paper. If you read the fine print, it'll probably also state that the gold isn't really yours anymore.

Never trust the banks!
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Old 06-02-2012, 11:23 AM   #8
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Originally Posted by mike View Post:
Seems like a ploy to get people to let banks hold gold for them, so they can loan it out, like they do with paper. If you read the fine print, it'll probably also state that the gold isn't really yours anymore.

Never trust the banks!
Absolutely spot on Mike! Well said man, well said. Never ever trust a bank. They are simply corporations working in their own self interests. Nothing more and nothing less. They no more have your best interests in mind than a burglar breaking in to your home does. They are profit centers and nothing matters to them but making more and more money.
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Old 06-02-2012, 11:28 AM   #9
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Originally Posted by ancona View Post:
Absolutely spot on Mike! Well said man, well said. Never ever trust a bank. They are simply corporations working in their own self interests. Nothing more and nothing less. They no more have your best interests in mind than a burglar breaking in to your home does. They are profit centers and nothing matters to them but making more and more money.
The same could be said for any company. This is the heart of capitalism. Everyone is out to help themselves.

The problem is when you can pay off, I mean lobby, politicians to pass laws to help you or your company.
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Old 06-02-2012, 11:36 AM   #10
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Originally Posted by benjamen View Post:
The same could be said for any company. This is the heart of capitalism. Everyone is out to help themselves.

The problem is when you can pay off, I mean lobby, politicians to pass laws to help you or your company.
Agreed, but the point I was making is never ever trust them to "hold" something for you.....ever. As was pointed out, the devil is in the details, and usually in number three font at the bottom of page 184 of some contract you have to sign.
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Old 06-02-2012, 11:40 AM   #11
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...or when contracts are not enforced, law is not being executed, and no one goes to jail. Otherwise, I wouldn't have any issues, NOT trusting the banks, yet still doing business with them -as long as contracts are honoured/can be enforced, rules are not being bent, and stupid or crooked are getting what they deserved, instead of bailouts or non-prosecution.

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Old 06-02-2012, 01:07 PM   #12
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Bushi,
Unfortunately, the enforcement of CDS are primarily the underwriters of the very same contractrs. These guys are teh rulemakers and the gamers at the same time.
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Old 06-06-2012, 03:10 AM   #13
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Originally Posted by benjamen View Post:
This is the heart of capitalism. Everyone is out to help themselves.
No, banks are counterfeiters running a ponzi (totally illegal and immoral on both counts) and they have a government-sanctioned monopoly on their counterfeiting, ponzi operation. They also rob us through inflation, while privatizing their profits and socializing their losses via a coercive government.

None of this has anything to do with Capitalism. Capitalism is about mutually beneficial contracts between consenting parties, property rights, and the rule of law.
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Old 06-20-2012, 08:23 AM   #14
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Update from the FDIC:
http://www.fdic.gov/news/news/financ.../fil12027.html

"The following exposures would receive a zero percent risk weight under the proposal:

•Cash;
•Gold bullion;
•Direct and unconditional claims on the U.S. government, its central bank, or a U.S. government agency;
•Exposures unconditionally guaranteed by the U.S. government, its central bank, or a U.S. government agency;
•Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral development banking organizations
•Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed below)."

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Old 06-20-2012, 08:56 AM   #15
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Tradition!

Quote :
...
Q. Treatment of Collateralized Transactions

The proposal allows banking organizations to recognize the risk mitigating benefits of financial collateral in risk-weighted assets, and defines financial collateral to include:

•cash on deposit at the bank or third-party custodian;
•gold;
•investment grade long-term securities (excluding resecuritizations);
•investment grade short-term instruments (excluding resecuritizations);
•publicly-traded equity securities;
•publicly-traded convertible bonds; and,
•money market mutual fund shares; and other mutual fund shares if a price is quoted daily.

In all cases the banking organization would be required to have a perfected, first priority interest in the financial collateral.
...
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Old 06-20-2012, 09:00 AM   #16
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Gold bullion, hopefully not paper.
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Old 06-20-2012, 09:24 AM   #17
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Originally Posted by swissaustrian View Post:
Gold bullion, hopefully not paper.
"In all cases the banking organization would be required to have a perfected, first priority interest in the financial collateral."

That doesn't sound like most paper to me, but I'm guessing that paper claims to "fully allocated" gold do meet the criteria - at least until someone attempts to redeem the paper claims for the (re)hypothecated physical gold.
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Old 06-20-2012, 09:28 AM   #18
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"first priority interest in the collateral" could also be JPM's interest in the gold of GLD for example. In the end the little guy will always lose. Otherwise these rule changes wouldn't be considered.

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Old 06-20-2012, 12:18 PM   #19
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Quote :
...
Way back, on October 6, 2011, I wrote an article that addressed the probable return of gold to reserve asset status, in the private banking world. Now, the first steps are being taken. Once these rules are passed into law, for example, gold bullion will fulfill bank capital requirements better than Fannie Mae or Freddie Mac bonds. This reflects the real world reality. The proposal is a reform that could prevent future financial instability.

Perhaps, the most interesting thing about the notice, is its choice of words to describe an unspecified US "central bank". Why describe the central bank in an amorphous manner? Why not refer directly to Federal Reserve? Perhaps, many people, in high places, including the top people on the Federal Reserve Board itself, have concluded, as I have, that Fed will not survive this crisis.

The most important thing from the standpoint of precious metals investors is that gold is slated to return to the center of the financial universe. Under this joint proposal, co-sponsored by FDIC, OCC and the Federal Reserve, gold will once again be a zero risk asset in the private banking world. It has been legally barred from that most important of positions for 80 years now. That return will have profound implications.

Gold's return to the top tier in banking assets will result in a big increase in demand. Increased demand will eventually be reflected in an increased price. Other precious metals, like silver (iShares Silver Trust ETF: SLV) and platinum, will probably be floated alongside, because the price of both are now, and have always been, intrinsically linked to the price of gold.
...
http://seekingalpha.com/article/6687...nking-universe
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Old 06-28-2012, 07:20 AM   #20
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Article on the implications of this change:
http://wallstcheatsheet.com/stocks/i...al-asset.html/

“A key reason why gold has not been acting like a safe-haven asset in recent months is because banks are so capital impaired that they are scrambling to reduce their holdings of risky assets in favour of so-called ‘zero-risk-weighted’ "

This is also one of the big reasons precious metals took a big hit in the 2008 crash. This is making me want to pick up some gold!
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