Monday, May 27, 2013

From paper reserves to gold reserves

This author does a good job of describing the coverage ratio:  backing each currency unit with gold reserves.  But what he doesn't address is that official gold reserves are over-stated, due to re-hypothecation.  In layman terms, the gold holdings in central banks worldwide don't exist because they have been re-pledged, leased out, or outright sold off to multiple entities.  The golden empire is naked.

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