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Stop The Presses: The Fed Can Fund The Treasury With Over Half A Trillion In Emergency Capital

Tyler Durden's picture





 

By now some readers may have read ludicrous stories about the Fed coining multi-trillion precious metal coins in a way to loophole the debt ceiling situation. Granted, this plan is so far beyond ridiculous that we have not wasted the time to comment on it. That, however, does not mean that the Fed is powerless to assist the Treasury in a modestly long-term term fix of the debt ceiling fiasco. In fact, as Stone McCarthy's Raymond Stone observes: "The Fed does not want to be a player in this debt ceiling/potential default debate. It didn't want to be a player in the Bear Stearns debacle, or the Lehman situation. But when push comes to shove the Fed will do what it can to avoid a default." In summary there are three avenues that the Fed can pursue in order to help Tim Geithner prolong the cash illusion modestly longer. The three options for Bernanke are to i) book profits; ii) prepay expenses and, yes, iii) sell gold. Combined, these three approaches could squeeze out well over half a trillion dollars, giving the Treasury breathing room not only past August 2, but potentially into 2012! That said, "The Fed would not want to advertise to Congress the possibility of delaying default. It does not want to take Congress off the hook on increasing the debt ceiling." But it will, if it has to, and the end result will be a delay potentially of up to a month. And if it means selling off the Fed's gold, so be it.

The three plans in detail from Stone McCarthy:

Book Profits

 

The Fed holds roundly $2.6 trln in the System Open Market Account (SOMA). Some of these securities were purchased at a time when market interest rates were substantially above current levels. This subset of SOMA represents securities on which the Fed has unrealised profits. Prior to the onset of the crisis the Fed held roundly $160 bln of Treasuries with maturities in excess of 5 years. These securities have accrued substantial unrealized profits


The Fed could sell some of these securities, book the profits, and then repatriate those profits to the Treasury. If desired, the Fed could reinvest the par value of those securities back into newer Treasuries to maintain the par value of its holdings.

 

Prepay Expenses

 

Every week the Fed repatriates its profits to the Treasury. The weekly profits of the Fed largely represent the weekly accrued interest income from the Fed's SOMA, minus interest expense, operating expenses and accrued dividends.

In 2010 the Fed repatriated $79.3 bln of profits to the Treasury. Effectively the accrual of monies to be paid to the Treasury shows up in an expense account (liability) Interest on Federal Reserve Notes (IOFRN). When the payment is actually made to the Treasury each Wednesday, the IOFRN liability on the Fed's balance sheet is reduced and the Treasury deposit account at the Fed is increased by a similar amount.

 

 

Over the first 6 months of calendar year 2011 the Fed remitted $46.1 bln to the Treasury, up from $35.3 bln in the comparable period of 2010. In other words, in 2011 the Fed's repatriated profits to the Treasury have been on track to bypass the $79.3 bln of 2010.

 

Could the Fed prepay IOFRN to the Treasury? In other words, could the Fed pass along profits before the income is actually accrued on the Fed's books? We think the answer is yes, but are not certain. Effectively this would be similar to prepaying any other Fed expense, such as payrolls, rents, etc.

 

This transaction would effectively reduce the IOFRN liability into negative territory, while increasing the Treasury's deposit by a similar amount. One liability goes down and another goes up.

 

Gold

 

The Treasury holds 261,498,899.316 troy ounces of Gold with a book value of $11.041 bln at $42.22/oz. The Treasury has monetarized this gold by issuing to the Federal Reserve gold certificates in an equal amount ($11.041 bln). The monetarization of gold effectively was an accounting entry providing an increase in Fed assets (gold certificates) and an associated increase in the Treasury's cash deposit at the Federal Reserve.

 

The $42.22/oz official price of gold was last set in 1973. Given that gold is trading above $1,600/oz could the Treasury prevail upon Congress to increase the official price? Would Congress respond under the Gold Reserve Act of 1934? If the official price were reset to $84.44/oz (doubled) the Treasury's deposit at the Fed would rise by $11.041 bln.

 

The Treasury could elect to de-monetarize gold, taking back the gold certificates from the Fed, and having its cash position reduced by $11.041 bln. After de-monetarizing gold the Treasury could presumably sell gold on the open market. Undoubtedly, such sales would drive the price of gold down from over $1,600/oz, but presumably the Treasury would be able to get a good deal more than the current official rate of $42.22 oz.

So there you have it: combined across all there alternatives, the Fed could probably generate over half a trillion in emergency cash, which would last the country well into next year! So perhaps everyone should immediately forget the relentless lies and fearmongering from Tim Geithner (who could not possible see a US downgrade from AAA as recently as three months ago, which is now imminent) and force the Fed to actually help the one entity that it is supposed to help: the United States, instead of the likes of Goldman Sachs or JP Morgan.

Yes, in the process the Fed's barbarous relic "tradition" will be sold off and the market price will plunge, only to subsequently explode to record highs (although we expect that gold would be then be confiscated from the broader population), but at least in the process this will allow the politicians to finally resolve the long-term problems of this country in whole, instead of the proposed partial resolutions that do nothing but at best slow the rate of debt accumulation.

 


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Thu, 07/28/2011 - 17:49 | Link to Comment Dakota Thunder
Dakota Thunder's picture

Sell Gold? 

How can you sell tradition?

I was told tradition is not money.

Thu, 07/28/2011 - 17:55 | Link to Comment NotApplicable
NotApplicable's picture

Well, they have to de-monetize it first...

Thu, 07/28/2011 - 18:43 | Link to Comment Long-John-Silver
Long-John-Silver's picture

I'm confused. If Ben says Gold is not money, why must it be de-monetized before it's sold for money?  /sarc

Thu, 07/28/2011 - 18:56 | Link to Comment saulysw
saulysw's picture

An excellent question! I hope Ron Paul get's a chance to ask him that. I'd love to see him squirm while trying to think of an answer. The more Ben talks about it, the more he digs a hole for himself.

Thu, 07/28/2011 - 20:47 | Link to Comment bankrupt JPM bu...
bankrupt JPM buy silver's picture

Ya, they will sell the kind of gold that Fausto and Juan Jose de Elhuyar found.

www.silvergoldsilver.blogspot.com

Thu, 07/28/2011 - 17:58 | Link to Comment sqz
sqz's picture

Also, "Prepay expenses" looks like a wonderful transfer pricing accounting fudge (turn profits into expenses - normally for the purpose of tax avoidance via regulatory arbitrage)! But I doubt anyone will notice ...

Thu, 07/28/2011 - 20:57 | Link to Comment saulysw
saulysw's picture

Mesmerizing avatar. Took me a moment to see the small blue circle.

Thu, 07/28/2011 - 18:16 | Link to Comment ShankyS
ShankyS's picture

What gold? Got audit?

Thu, 07/28/2011 - 18:46 | Link to Comment Long-John-Silver
Long-John-Silver's picture

You don't trust your government?

Thu, 07/28/2011 - 20:08 | Link to Comment MissCellany
MissCellany's picture

Doubt they'll be able to sell tungsten at $1600 a troy ounce...

Thu, 07/28/2011 - 23:53 | Link to Comment CompassionateFascist
CompassionateFascist's picture

Inasmuch as die Luftwaffe cannot currently hit NY, they can steal Germany's. Or replace it with an IOU.

Fri, 07/29/2011 - 02:50 | Link to Comment Ghordius
Ghordius's picture

Already done, I thought?

Thu, 07/28/2011 - 18:48 | Link to Comment macholatte
macholatte's picture

tradition is transient

 

Thu, 07/28/2011 - 19:06 | Link to Comment Strider52
Strider52's picture

Sell our countries' gold?? Why don't we just cut off our dick while we're at it?

Thu, 07/28/2011 - 19:22 | Link to Comment RevCBH
RevCBH's picture

Please observe the distinction between "our country" and "our government". The latter is the one in possession of the gold, which it shamelessly and blatantly stole from the former. Furthermore, the government is not really ours anymore, if it ever was.

If US GovCorp wants to sell gold at rock bottom prices, I'll be more than happy to scoop some up and secure it somewhere it can't be stolen so easily this time around.

Thu, 07/28/2011 - 19:28 | Link to Comment karzai_luver
karzai_luver's picture

sorry child, if you or any of your critters voted then you endorsed the "country" as it is.

You are just another of the great merican that can't even take responsibilty for your own actions.

Fraud and criminality your own friend.

 

Thu, 07/28/2011 - 23:57 | Link to Comment yipcarl
yipcarl's picture

You are obviously an idiot or have no idea how the system works.  Do you know the word...PATSY?  Yea well one is put up on the Dem side and one is put up on the Rep side.  That's it pal, that's your 'vote'.  you can shove it up your arse, your vote.  This country is no democracy OPEN YOU EYES. 

Thu, 07/28/2011 - 23:57 | Link to Comment CompassionateFascist
CompassionateFascist's picture

Actually, the TP'ers are - so far - doing exactly as they were instructed to do by their voters: stiff the System. Also, you ingnorant fuck, it's (supposed to be) a Republic. Not a "democracy".

Thu, 07/28/2011 - 17:50 | Link to Comment iDealMeat
iDealMeat's picture

Cool..  I'll hop in my truck and head over to Ft. Knox for the sale...

Back er on up.. 

Thu, 07/28/2011 - 18:05 | Link to Comment Frankie Carbone
Frankie Carbone's picture

I don't think gold-plated tungsten is going for $1,600 an ounce bro. 

Thu, 07/28/2011 - 21:08 | Link to Comment DCFusor
DCFusor's picture

Hey, even tungsten is worth more than $42/oz!  But who says they bothered with that charade, anyway?  If you're going to lie....why bother. 

Fri, 07/29/2011 - 00:40 | Link to Comment azengrcat
azengrcat's picture

I guess you did not get the memo about QEZimbabwe

Thu, 07/28/2011 - 17:53 | Link to Comment redpill
redpill's picture

They won't sell the gold, but regardless they can keep this charade going indefinitely. The August 2nd deadline was always an artificial tactic to press the Republicans into compromise prior to the 2012 election cycle heating up.

Thu, 07/28/2011 - 23:37 | Link to Comment Calmyourself
Calmyourself's picture

They will keep it going for years as they continue to use the MSM and "education" system to inculcate the masses to control, theirs of course

Thu, 07/28/2011 - 17:54 | Link to Comment Caviar Emptor
Caviar Emptor's picture

I can help! I can help! 

And it won't even cost ya much....

Thu, 07/28/2011 - 17:55 | Link to Comment unky
unky's picture

the fed would never sell gold to the public.

either 1.) they dont have the gold anymore and it just gold-plated tungsten anyway

or 2.) they just default so be it, but never sell the real stuff

Thu, 07/28/2011 - 18:33 | Link to Comment malikai
malikai's picture

It would be sold to the treasury, who then puts it on the crimex or whatever. Don't forget, that gold would be purchased by the kleptocrats after major takedowns shake confidence, giving them a great entry. It would make for a good prize just before the big reset. I would expect similar of other state assets like SPR again, land, resource rights, etc.

I think this tells us we should expect a good old IMF bang-up job. It worked so well everywhere else, why not here?

Thu, 07/28/2011 - 20:08 | Link to Comment trav7777
trav7777's picture

the Crimex is not a gold warehouse for gold miners to shop their wares, dude.  It's a cash-settlement futures exchange.

If the UST sells gold, another sovereign with a large reserve account of $ would buy it

Thu, 07/28/2011 - 21:20 | Link to Comment Mec-sick-o
Mec-sick-o's picture

We have an unnecesary large reserve in $.   It would be nice to add some Ft. Knox Centenarios as diversification to our reserves.

Thu, 07/28/2011 - 21:47 | Link to Comment malikai
malikai's picture

You're right. Probably not crimex. The point being it will be bid on in a market somewhere. Probably a closed market consisting of PDs, Soverigns, the like. Similar to how the SPR was done.

Thu, 07/28/2011 - 17:55 | Link to Comment AladdinSaneGirl
AladdinSaneGirl's picture

There are seriously clever people in Obama's administration eg Steven Chu, i bet they do have a plan like this behind them. Sell emergency gold supplies, like they just did oil. Uh-huh.

In the long term, both gonna go thru roof i guess.

Thu, 07/28/2011 - 17:56 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

There's always a way these guys can get money to keep the rich rich!

The public will suffer, but the elite will be just fine.

Thu, 07/28/2011 - 18:15 | Link to Comment TSA Thug
TSA Thug's picture

There is nothing wrong with a little suffrage. It build character and makes you appreciate the American Dream.

.

--You WILL Obey!
http://www.youtube.com/watch?v=dTOcAt44_QA

Thu, 07/28/2011 - 18:57 | Link to Comment Hook Line and S...
Hook Line and Sphincter's picture

Dear Mr. Thug,

suffrage is the right to vote

suffering is just left of pain

succotash is a meal we should get used to

Thu, 07/28/2011 - 20:22 | Link to Comment TSA Thug
TSA Thug's picture

Who axed for you're help. Dummy. I not might be good at spelling but I'm much better at identifying out of control suspects spewing grammar tits.

Thu, 07/28/2011 - 23:17 | Link to Comment Alienated Serf
Alienated Serf's picture

your username must actually be a description of yourself, not some sarcastic bit.  suffrage?  really?

Thu, 07/28/2011 - 18:09 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Hyperinflation, bitchez!

The real question is, 'does the Federal Reserve have any gold to sell?'  And nevermind it being tungsten, my specific question:  'have they not leased it all already?'

Thu, 07/28/2011 - 18:38 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

the FED admitted during Ron Paul's Monetary Committee hearings that they hold no physical gold. 

That's not to say the Treasury wouldn't hand over its holdings to the FED in an emergency...

Thu, 07/28/2011 - 20:22 | Link to Comment FeralSerf
FeralSerf's picture

Maybe Treasury could sell the gold to the Fed?  Just another multibillion $$ accounting entry and voila more money!

That way they could get around inspections and such.

Thu, 07/28/2011 - 20:34 | Link to Comment Stax Edwards
Stax Edwards's picture

Vic has gone AWOL....we need Vic!!!

Thu, 07/28/2011 - 21:14 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The Treasurie holds no gold; the Federal Reserve Bank holds gold on their books as being in the  i)  NYFED  ii) Fort Knox.  They hold 14k tonnes on their books.  The use the gold as loans to increase their reserves, and then use the reserves on loan to increase their assets, in the fractional reserve sense of the word.

Thu, 07/28/2011 - 18:45 | Link to Comment tip e. canoe
tip e. canoe's picture

'does the Federal Reserve have any gold to sell?'

sure they do, the Germans'...

Thu, 07/28/2011 - 17:57 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Fed selling gold is a China wet dream

Thu, 07/28/2011 - 18:04 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Just like the SPR release, it will be JPM doing the buying.

Thu, 07/28/2011 - 20:09 | Link to Comment trav7777
trav7777's picture

yeah the clan that took over the nation of Germany post-weimar still had access to credit from their banker cousins.

So will it be with JPM.  Their debt ceiling isn't breached.

Thu, 07/28/2011 - 18:18 | Link to Comment Rainman
Rainman's picture

Speaking of the Chinese, the debt limit impasse appears to be the last straw.

http://www.bloomberg.com/news/2011-07-28/roach-says-chinese-officials-appalled-by-impasse-on-raising-debt-ceiling.html

Thu, 07/28/2011 - 18:29 | Link to Comment Missiondweller
Missiondweller's picture

Maybe we can tell them what they so often tell us, "stay out of our business"

Thu, 07/28/2011 - 19:35 | Link to Comment karzai_luver
karzai_luver's picture

maybe you can accept that you owe them money and take it like a man instead of a crying deadbeat.

If you can't stand it then don't go begging bitch.

 

Thu, 07/28/2011 - 19:20 | Link to Comment DonnieD
DonnieD's picture

Appalling is running your own citizens over with tanks.

Thu, 07/28/2011 - 19:40 | Link to Comment karzai_luver
karzai_luver's picture

Appalling is running over other countrys citizens  with tanks, like you had the guts even for that.

Appalling is killing other countries citizens that you have not even declared war on.

stuff your outrage where the sun don't shine.

 

Thu, 07/28/2011 - 20:26 | Link to Comment DonnieD
DonnieD's picture

What the hell are you babbling about?

Thu, 07/28/2011 - 17:57 | Link to Comment Doubleguns
Doubleguns's picture

Sell the gold plated tungstun bars. Yea they ought to go over real well in China.

Thu, 07/28/2011 - 18:03 | Link to Comment seek
seek's picture

Oh, the scam potential here.

Sell gold at it's currently booked price (which I think is around $45) to GS.

Fund government for a few more months. When scam is revealed... "We had to sell it!"

edit: the details I spoke of were in the story... slow today.

Thu, 07/28/2011 - 17:59 | Link to Comment tmosley
tmosley's picture

Hmmm, the true purpose of all this theater raises it's ugly head.  No wonder China has been so quite.  No doubt they are planning to buy up the entire Ft. Tungsten reserve in one fell swoop.

Thu, 07/28/2011 - 18:45 | Link to Comment malikai
malikai's picture

I think the PDs probably believe they can get ahold of it first.

Thu, 07/28/2011 - 17:59 | Link to Comment Cheiro
Cheiro's picture

Can't have a gold standard if you don't have any gold...

Thu, 07/28/2011 - 18:15 | Link to Comment Frankie Carbone
Frankie Carbone's picture

Nor can you have an economy if you don't have any gold and the rest of the world goes to the gold standard. 

 

Sir, you have been caught with illegal bullion in your home. How do you plead? 

Thu, 07/28/2011 - 21:47 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Sir, you have been caught with illegal bullion in your home. How do you plead?

You'll have to ask my attorney: 7.62x51mm, Esq.

 

Thu, 07/28/2011 - 17:59 | Link to Comment Piranhanoia
Piranhanoia's picture

I would like to place an order immediately for these new coins before they are devalued.

Thu, 07/28/2011 - 17:59 | Link to Comment Dr. No
Dr. No's picture

Sell the gold!  Sell the gold!!!

Seriously though, the Author did not explain how bailing out the treasury bennefits the FED.  Paper loss on treasuries in case of default?? the FED shareholders wouldnt care about that.  The FED can buy treasuries from FED shareholders at face value.  Until someone explains how bailing out the treasury helps the FED, I wouldnt spend much effort on the what ifs.

Thu, 07/28/2011 - 19:15 | Link to Comment Dr. Engali
Dr. Engali's picture

The fed( parasite) can't let the U.S. (host) die. It must keep it around as long as possible to transfer as much wealth as possible.

Thu, 07/28/2011 - 21:05 | Link to Comment Diogenes
Diogenes's picture

The big interests no longer regard the US as a going concern to be milked. They regard it as a junker to be stripped of assets. CF Catherine Austin Fitts.

Thu, 07/28/2011 - 18:01 | Link to Comment goldfreak
goldfreak's picture

How much gold do they have anyway? 200-300 billion worth? just enough to keep up the farce for a few more months?

 

Thu, 07/28/2011 - 18:02 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Stay calm, Bitchez... If Fed sells gold China, India, Russia, Iran and Saudi Arabia will run to buy every scrap at any cost (ie exchanging their worthless dollars for something real). 

Fed/Treasury knows this. If they sell now it's game over as far as future cred

Thu, 07/28/2011 - 19:19 | Link to Comment Smiddywesson
Smiddywesson's picture

Ding!!!  Gentlemen, we have a winner!  Caviar Emptor gets the big brain of the day award.

ALL the centrral banks are buyers, and yet, gold and silver have been on a long march, not a short sprint.  If the Treasury sells all the gold that is left, there is ample buying power out there.  You would see a "drastic" drop in prices of 3%-8%, and then the price of gold and silver would ramp right back up to the going rate and continue the march.  I have no fear at all about the USA dumping their stock on the markets and ruining me.  The long side is a very safe trade with virtually unlimited demand and a global horde of potential Johnny-Come-Latelys.  We won't see the bull market in PMs broken before they break the fiat currencies, it has progressed far, far, past that point. 

Sleep well, Big Brained Bitchezzz

Thu, 07/28/2011 - 19:38 | Link to Comment SilverRhino
SilverRhino's picture

The day the Fed sells gold is the day to max out the CC's on all PM's asap.   Because that debt with become worthless sooner than later.

Thu, 07/28/2011 - 19:51 | Link to Comment Dr. Engali
Dr. Engali's picture

They could still confiscate gold to increase their supply.

Thu, 07/28/2011 - 21:50 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

They could still confiscate gold to increase their supply.

They'll end up collecting far more lead than gold.

 

Thu, 07/28/2011 - 18:04 | Link to Comment LehmanRefugee
LehmanRefugee's picture

umm...why can't they just "cancel" some or all of their $1.6 trillion treasury holdings? inflationary?

Fri, 07/29/2011 - 00:05 | Link to Comment CompassionateFascist
CompassionateFascist's picture

I'm afraid the Red Shield would not approve.

Thu, 07/28/2011 - 18:04 | Link to Comment keepmydollar
keepmydollar's picture

Profits on the government debt it bought during the meltdown.  Ha I love it.  The Fed prints up some dollars and then reaps profits by selling treasuries it purchased at a depressed rate.  They then give this profit back to the people who they loaned the money to in the first place.  Even fairy tales are more believable than the shit going on for real.

Thu, 07/28/2011 - 18:14 | Link to Comment unununium
unununium's picture

Sorry, "book profits" is also squarely in the beyond ricidulous category.  As ZH has often pointed out, the Fed paid par for most of this stuff -- that's why it is called a bailout.

Selling it would book massive losses and actually create a drain on the Treasury.  That's why the Fed accounting rule change was put through!

Thu, 07/28/2011 - 18:17 | Link to Comment CoolClo
CoolClo's picture

"Every week the Fed repatriates its profits to the Treasury. The weekly profits of the Fed largely represent the weekly accrued interest income from the Fed's SOMA, minus interest expense, operating expenses and accrued dividends."

 

These  (6% on profits) dividends are tax free form Local, State and Federal income taxes.

Thu, 07/28/2011 - 20:07 | Link to Comment Raymond Reason
Raymond Reason's picture

So, if i'm understanding this correctly, the US interest on the debt payments are not actually an expense, if the bond was purchased by the FED (through the PD), because the interest, after admistrative expenses, is given back to the Treasury?

So as the system implodes, and the Fed buys the lions share, there is no interest expense. 

Oh what a whacky world.  I need a drink.

But it makes sense, now ....obviously.  Otherwise who would actually be putting this interest income in their pocket....tax free.   

Thu, 07/28/2011 - 18:05 | Link to Comment Atomizer
Atomizer's picture

We know this is a bluff, so lets play along. I love to buy tradition, bring it on Bernank.

Thu, 07/28/2011 - 18:05 | Link to Comment flaunt
flaunt's picture

How much is Tungsten going for these days, anyway?

Thu, 07/28/2011 - 18:38 | Link to Comment TheDriver
Thu, 07/28/2011 - 18:05 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

even the damned archetypal fool who wrote this horseshit for stoned mcarty was smart enuf not to put his or her name on it!

Thu, 07/28/2011 - 20:05 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

make that raymond stone.  my apologies for calling the damned fool anon. only one junk? i'm surprised i didn't piss off the whole site!

i won't get into the damned fool's raving about, gold, the Treas., the FED, congress, ft knox, and what they shld do so goldi-locks is happy, forever.

well, ok, but just part of it (Paste):  The monetarization of gold effectively was an accounting entry providing an increase in Fed assets (gold certificates) and an associated increase in the Treasury's cash deposit at the Federal Reserve.

translation?  the T sold the value of the gold to the FED as "gold certificates" and then the goobermint spent the money.  so, the goobermint "owes" the FED for the "gold certificates" if it ever wants to "unencumber" the gold.  in ft knox.  yeah.

and then, he tells us exactly what to do about it, which is nice, really, and well done and very clearly shows that raymond stone knows what's up and how to get things done when it comes to encumbered gold in fort knox, ky, and what we need to do to get it the fuk off the books, before somebody actually wins the right to lookat it, like last time in the truman administration or---wait!  that was ike, wasn't it?  man, those mccarthy hearings were a bear, weren't they?

any questions, please refer them to raymond who may be taking deposits for select clients to actually purchase certificates of ownership of this gold, and thereby insure their own family's security of wealth while really helping out the old USA by buying, uh,...gold certificates redeemable for gold at the Treasury. is that right?  unless the "gold window" is closed that day, for some reason, of course?

stoned mcarty---paper gold since 1849!

 

Thu, 07/28/2011 - 20:05 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Hey Slewie, Who is the more badass pirate now?

 http://i55.tinypic.com/r93600.jpg

Thu, 07/28/2011 - 20:52 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

How did you get this picture of Penelope Cruz?

Thu, 07/28/2011 - 21:03 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Never heard I looked like Penelope Cruz before, that is a new one.

Thanks, I guess...

Thu, 07/28/2011 - 21:10 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Must have been the pirate costume.

Thu, 07/28/2011 - 21:21 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

now that you have the ears, b_B, i will waive the requisite ass check (most begrudgingly, for the record) award you a "9.9" for a fabulous ass, unseen & ungrabbed (at least by me, dammit), and fondly relinquish the helm to milady.

Thu, 07/28/2011 - 21:55 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

No, actually, that's not a peg leg in my pocket.

 

Thu, 07/28/2011 - 23:18 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Vielleicht Electric Junk oder auch der LSD Marsch?

Thu, 07/28/2011 - 20:35 | Link to Comment Raymond Reason
Raymond Reason's picture

That Gold may have sold or monetized 10 times....in keeping with established banking traditions. 

Thu, 07/28/2011 - 21:22 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Calm down Slewie, the Tresurie holds no gold.  They have loans for paper gold, similar to if you held shares of GLD.  Not real. 

The Fed's business is to lease gold.  That is what they do.  In fact, that is all they do.

Fri, 07/29/2011 - 00:53 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

hey, mr_L-non_H!   i stipulated to raymond stone's analysis for the sake of seeing it as a scheme to get encumbered gold off the T's books.

he sez: The Treasury holds 261,498,899.316 troy ounces of Gold, then he starts talking about how to get it off the books, so "Stop The Presses: The Fed Can Fund The Treasury..." and so on. 

you see, i think that the whole idea that the FED is s'posed to "fund" the Treasury is just, basically, bullshit, also. you say it is the FEDs "business to lease gold"and that "In fact, that is all they do." and , frankly, i was not aware of that fact. 

i accepted raymond stone's analysis b/c i wanted to discuss his ideas and where they pointed me.

i see you have a new avatar!

Fri, 07/29/2011 - 02:32 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

They Live, and we, as pirates, will bag the gold.  And the analysis, may not be feasible, but it brings up some good points.  The Fed will try and swap what they can while they have the chance to keep the ponzi a rollin' until a later date.  If it be leasin' the gold on their reserves (paper, tungsten, or not) or buying up all the fiat toxic assets in the world.

Fri, 07/29/2011 - 04:06 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

and bless their black-bastard little hearts, too, i might add.

JUST.DON'T.CHARGE.IT.TO.US!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Thu, 07/28/2011 - 18:06 | Link to Comment bsdetector
bsdetector's picture

Do you ever get that sickening feeling that it's all rigged? And that it will always be this way?

Thu, 07/28/2011 - 20:05 | Link to Comment Diogenes
Diogenes's picture

Yes, since I was 19.

Thu, 07/28/2011 - 20:51 | Link to Comment Imminent Crucible
Imminent Crucible's picture

"Something is wrong with everything."

--Francisco d'Anconia

Thu, 07/28/2011 - 23:57 | Link to Comment Alasdair
Alasdair's picture

"Two novels can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other involves orcs."

Thu, 07/28/2011 - 18:07 | Link to Comment Clint Liquor
Clint Liquor's picture

The FED would sell Treasuries? To whom? They had to buy them because noone wanted them in the first place.

Thu, 07/28/2011 - 18:18 | Link to Comment Hansel
Hansel's picture

+1, and when they go to sell, the front-running algo bots will crush the Treasury market.

Thu, 07/28/2011 - 21:06 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

They won't sell anything.  They know this ends with the BIS issuing a new fiat standard and that standard will be judged by i) gold reserves  ii) fiat reserves  iii) debt owned  iv) gdp/debt incurred  etc.  They want collateral for when the New World Order issues a one world reserve currencie.  This is why China, Russia, India, the House of Saud, etc have not spent their dollars.  All is fair in love and war.

Thu, 07/28/2011 - 18:22 | Link to Comment TSA Thug
TSA Thug's picture

Offshore US Corporations. Piles-o-cash that they need to get rid of soon.

.

--You WILL Obey!
http://www.youtube.com/watch?v=dTOcAt44_QA

Thu, 07/28/2011 - 20:29 | Link to Comment Raymond Reason
Raymond Reason's picture

Bingo, Clint, BINGO!

Thu, 07/28/2011 - 18:07 | Link to Comment Catullus
Catullus's picture

So if the Fed "booked profits", it would create a liquidity drawdown in organizations that have the ability to lever off that liquidity. Just to pay revenues to the treasury department so some lazy DC beaureacrat can get paid on time? Eh. Not high priority.

Just access the reverse repo line that Fannie and Freddie have at the Fed. There's $600billion right there. They can easily make it 5 months.

Thu, 07/28/2011 - 18:11 | Link to Comment Wipewithpaper
Wipewithpaper's picture

You can bet the 88.00 per oz gold will be sold 1st to the illumini, on a 1st right of refusal basis.  Then balance of any gold left over after that offering will  bid on the open market at going rates.

Which one of us do you think will get that single ounce ???.  

Thu, 07/28/2011 - 18:16 | Link to Comment bania
bania's picture

selling gold does not seem transitory

Thu, 07/28/2011 - 18:20 | Link to Comment Black Friday
Black Friday's picture

But the Fed has no gold...It was given to the ESF by way of the Treasury in 1933 according to the Gold Reserve Act.

Thu, 07/28/2011 - 20:39 | Link to Comment Raymond Reason
Raymond Reason's picture

It may have been "given" a number of times.  But THEY BLOODY KNOW all that matters is who possesses the physical. 

Thu, 07/28/2011 - 18:20 | Link to Comment equity_momo
equity_momo's picture

HELP!

 

Im running out of popcorn. Like totally down to the uncooked kernels.

Plenty of Blantons though. Weekend starts here.

Thu, 07/28/2011 - 18:42 | Link to Comment infinity8
infinity8's picture

I love the grannies! Wash 'em down with whiskey. . . mmmmmmmmmmmm

(said the politician)

Thu, 07/28/2011 - 18:20 | Link to Comment pepperspray
pepperspray's picture

Plan B

Thu, 07/28/2011 - 18:23 | Link to Comment Poor Grogman
Poor Grogman's picture

If gold is sold it will be for appearances only.

Why sell something that is undervalued and already encumbered when you can create unlimited Benny bux at no cost?

The IMF sales "to help poor countries" are in the same category.

Smoke and mirrors on a global scale.

Just buy what you can before the credits come up and the lights go on.

Thu, 07/28/2011 - 18:25 | Link to Comment Bindar Dundat
Bindar Dundat's picture

Why do you Americans simply kick the can down the road until  AFTER November 2012.  That way you can have a national referendum in the form of an election.... Just a thought....

Thu, 07/28/2011 - 18:26 | Link to Comment equity_momo
equity_momo's picture

DONT PANIC!

 

A man with a beard on the teevee says Barry can mint 2 x ONE TRILLION DOLLAR COINS.

POOOF , its back.

hahhahahah lololololol did i just get RickRolled?

Fk me sideways. Wtf . im well aware this country is run by morons FOR morons but this shit is jack-knifing into the Twilight Zone.

Thu, 07/28/2011 - 18:26 | Link to Comment tigersea
tigersea's picture

Sovereign governments such as the United States can print new money. However, there's a statutory limit to the amount of paper currency that can be in circulation at any one time.

Ironically, there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.

Thu, 07/28/2011 - 18:49 | Link to Comment zerozulu
zerozulu's picture

This is a legal fraud.

Thu, 07/28/2011 - 19:46 | Link to Comment karzai_luver
karzai_luver's picture

the whole thing has always been so.

damn dirty apes are just now figuring it out.

Thu, 07/28/2011 - 20:28 | Link to Comment FeralSerf
FeralSerf's picture

It's be cheaper to mint one $2 trillion coin.

Thu, 07/28/2011 - 18:28 | Link to Comment Seasmoke
Seasmoke's picture

i cant wait for the $500,000 Obama , so i can pay off my mortgage with one piece of paper

Thu, 07/28/2011 - 18:29 | Link to Comment Bindar Dundat
Bindar Dundat's picture

Why don't you Americans simply " kick the can down the road" until AFTER THE  2012 election.  Make the next election about something important .... just a thought!

Thu, 07/28/2011 - 18:29 | Link to Comment Bindar Dundat
Bindar Dundat's picture

Why don't you Americans simply " kick the can down the road" until AFTER THE  2012 election.  Make the next election about something important .... just a thought!

Thu, 07/28/2011 - 18:29 | Link to Comment bilbobaggins
bilbobaggins's picture

The Fed can't sell the Gold only the Treasury can. Stupid article, rather than selling it, they could just mark it to market like the ECB does and change the book value from $42.22 to $1600 and change. This would provide over $410 billion to buy them some time. (and the opposite would happen, gold shoot up, IMO)

Thu, 07/28/2011 - 20:49 | Link to Comment Shell Game
Shell Game's picture

Exactly. Very simple accounting ledger fundamentals.  Agree on the gold move north..

Thu, 07/28/2011 - 18:30 | Link to Comment buzzsaw99
buzzsaw99's picture

Yeah, right, the fed will pull $500B out of the market (just like that :snaps fingers:) and give it to CONgreff without any adverse effects. LMAO!

Thu, 07/28/2011 - 18:33 | Link to Comment Missiondweller
Missiondweller's picture

This is what's wrong with the Fed. They're always there to bail institutions out instead of letting them fail and allowing a reset.

Thu, 07/28/2011 - 18:36 | Link to Comment sbenard
sbenard's picture

So does this then make the Congress irrelevant and we now have a Dictator -- His Majesty, Obama -- or will the Fed have to eat the losses if Congress doesn't increase the debt limit as Wall St is so certain that it will?

Thu, 07/28/2011 - 18:36 | Link to Comment Sudden Debt
Sudden Debt's picture

Selling whatever is left of the US gold... that's like selling the crown jewels of England.

After this there is nothing backing up the currency anymore. If China decided to drive the gold price up after that and back it's currency up by 30.000$ gold...

What can America do to ever back it's currency up also to maintain it's reserve currency status?

to be honest, I'm pretty fascinated to see how the Swiss gold backing will happen and what kind of effect it will have.

 

 

Thu, 07/28/2011 - 18:54 | Link to Comment Shameful
Shameful's picture

Right.  But you have to look at the game, it's an asset and wealth pillage.  The Fed Gov owns most land in the Western US as well.  I can assure you it will be sold at bargain basement prices to insiders when the time comes.  The Gov is little more than a tool to funnel wealth into pre-selected hands.  So while I doubt there will be a public sale of gold I would be utterly stunned if the gold was unencumbered. No audit since what the 50s?  Would anyone care to trust Uncle Sugar to hold their wealth for 60 years with no audit?  That gold is LONG gone or there but legally transferred to another entity.

Thu, 07/28/2011 - 18:37 | Link to Comment zerozulu
zerozulu's picture

Gold will be up $50 tomorrow!!!

Thu, 07/28/2011 - 18:42 | Link to Comment Sudden Debt
Sudden Debt's picture

No, it will go down. Unless the debt ceiling is approved and dollar will also go up.

 

Thu, 07/28/2011 - 18:42 | Link to Comment fishface
fishface's picture

It could have been worse

my first thought when I read the headline was option

iiii) at night when everyones asleep the Bernank sneaks down in the basement for a little printjob

and voila ...

next morning...he calls his old mate Timmah

 

 

He who can print can do anything

Thu, 07/28/2011 - 18:48 | Link to Comment Sudden Debt
Sudden Debt's picture

The Printing Press is stronger than Default

Thu, 07/28/2011 - 19:04 | Link to Comment fishface
fishface's picture

The Printing Press is faster than Inflation

Thu, 07/28/2011 - 19:09 | Link to Comment Shameful
Shameful's picture

Not near the end of the cycle.  In the later phases of the hyper inflationary cycle, inflation actually moves faster than the printing as people anticipate ever increasing printing.  But really once you are in that deep phase of hyperinflation one should have been long out of fiat.

Thu, 07/28/2011 - 19:29 | Link to Comment fishface
fishface's picture

Beat  the cycle print 10^15 instead of 1000,000,000,000,000

 

 

He who can print can do anything

 

 


Thu, 07/28/2011 - 20:38 | Link to Comment FeralSerf
FeralSerf's picture

Denominations should be the logarithm of the amount.  i.e. million (if they still use 'em) is 6, billion is 9, trillion is 12, quad is 15, etc. That way inflation won't seem nearly so bad.

 

Thu, 07/28/2011 - 18:45 | Link to Comment Hmm...
Hmm...'s picture

By now some readers may have read ludicrous stories about the Fed coining multi-trillion precious metal coins in a way to loophole the debt ceiling situation. Granted, this plan is so far beyond ridiculous that we have not wasted the time to comment on it.

Not to be rude, but the original poster either made a huge typo, or s/he doesn't understand the argument.

The argument is not for the FED to do any such thing.  The argument is that the Treasury can coin multi-trillion dollar coins using the US Mint and deposit them at the Fed.

I'm not sure why you're "not wasting time" debating a plan that is not only legal, but was set up specifically for this type of situation.

The rest of your article may have merit about what the Fed can or can't do... but the seignorage argument has little to do with the Fed.

Thu, 07/28/2011 - 18:51 | Link to Comment Debtless
Debtless's picture

It is fantastical yet true. Treasury CAN coin money and does  - pennies, nickels, dimes, etc...and each is legal tender money that is NOT backed by debt - unlike fiat DOLLARS.

So a coin from treasury with any value they insist is perfectly legal...in a ridiculous self-mastuerbatory sort of way.

Thu, 07/28/2011 - 19:03 | Link to Comment tip e. canoe
tip e. canoe's picture

one (& maybe the only) way for citizens to break the back of the FED is if a critical mass of peeps started redeeming FRNs for coins and begin transacting only in coins.

Thu, 07/28/2011 - 22:26 | Link to Comment Dr. No
Dr. No's picture

The only way to break the FRN is for all gov. Contractors tonot accept dollars. All gov contractors and workers would need to refuse providing service for dollars. If the government could not do business cuz no one accepted their money, they would need to find a new means of exchange. I dont see this Happening anytime soon.

Fri, 07/29/2011 - 10:01 | Link to Comment tip e. canoe
tip e. canoe's picture

me neither...either of them

Thu, 07/28/2011 - 18:54 | Link to Comment Sudden Debt
Sudden Debt's picture

It can't be made out of a metal or PM.

The value of the coin has to be roughly the same of the nominal value.

So if you would coin a platinum, gold or silver coin, it would mean that the FED says 1 ounce of those metals is worth a trillion and that would create the most ammount of trillionaires on the planet and hyperinflation out of this galaxy.

 

Nop: IT HAS TO BE A PAPER NOTE.

 

Thu, 07/28/2011 - 19:00 | Link to Comment Debtless
Debtless's picture

What if it were a copper coin the size of Rhode Island?

Thu, 07/28/2011 - 19:12 | Link to Comment Pool Shark
Pool Shark's picture

I was thinking a pink, triangular rubber coin approximately 6,800 miles on each side...

http://www.urbandictionary.com/define.php?term=Ningy

(RIP Douglas Adams)

 

Thu, 07/28/2011 - 19:30 | Link to Comment Sudden Debt
Sudden Debt's picture

Only if all the characters of EVERY DISNEY CARTOON EVERY SHOWN is  on it.

 

Thu, 07/28/2011 - 19:26 | Link to Comment Not For Reuse
Not For Reuse's picture

nonsense, you have Grisham's Law backwards. They can stamp any piece of metal with whatever face value they want, and as long as face value >= melt value, that piece of metal will work perfectly fine as a circulating unit of USD

Thu, 07/28/2011 - 20:42 | Link to Comment FeralSerf
FeralSerf's picture

Maybe they could use plutonium.  I hear the U.S. has a lot of it and some people are willing to pay a high price.  (As long as they aren't put into general circulation, that is.)

Thu, 07/28/2011 - 19:49 | Link to Comment karzai_luver
karzai_luver's picture

correct on all points.

 

Thu, 07/28/2011 - 18:46 | Link to Comment Debtless
Debtless's picture

Let DC print a giant golden can, value it a kazillion dollars - then all of those bitchez can take turns kicking it back and forth down the road.

Thu, 07/28/2011 - 18:54 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Need to have a telethon just to see how many idiots would send contributions to reduce the deficit...

Thu, 07/28/2011 - 19:34 | Link to Comment Dakota Thunder
Dakota Thunder's picture

I have some old monopoly money I can send them.

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