Friday, December 10, 2010

Raising Required Reserve Ratios Matter Little

Raising reserve requirements have nothing to do with bank lending.  The only reason that it would matter is that there will be less cash to loan out.  But with excessive monie printing happening around the globe, how would it matter if cash can be fractionaly reserved at 10, 9, or 8 times the amount held?  Loans are not being made, so once again will it matter?  It will not. A rate hike on the other hand...

A real rate hike for real interest rates could have an effect on  the markets.  The signal would flash a lack of confidence in the current cooperative world Central Bank policy, as all Major Central Banks have sustained rates near zero.  If anyone of the Banks flinched, there would be a rush to the exits.  Look for gold to be the beneficiary of this action.

The dollar has a long history as the world's reserve currency, the longest ever before it, because before, the only known currencies traded around the globe were precious metals.  The dollar is an imposter.  It is a trick on all people.  Many have and are becoming aware of this fact.  It is now only a matter of time before its fungibility is not only questioned, but retired.

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