U.S. Economy Takes Hit from Default Loans
Patrick A. Heller has written on the dynamics of the international gold supply on several occasions. This is an all-important topic that addresses supply and demand as well as global buying/selling transactions and their dynamics. This, of course, directly impacts all of the world’s economies. Mr. Heller informs us that the leasing of gold reserves is commonplace and is used to influence the value of gold itself. Presumably the gold that is leased can be counted as an asset of the lessee and likewise not counted against the gold assets of the lessor. In straightforward terms, this would tend to exaggerate the amount of actual physical gold held by those players, thereby depressing the value of gold artificially on the world market. Some gold is being double-counted. Beside the manipulation of the price of gold on the world market, there is another, disturbing reason that can be envisioned here. That being the credit worthiness of borrowers at the World Bank or IMF being overstated. Loans made based on the security of leased gold reserves, not gold reserves actually owned, would be unsecured or under secured loans made to otherwise non-credit-worthy borrowers. So who is left holding the bag on those bogus loans when there is a default? By far and away our Federal Reserve and participating banks infuse the lion’s share of capital into the World Bank and IMF. That being the case, it is the U.S. economy that would take the hit as the Feds print money to cover the unsecured defaulted loans, infusing the necessary capital into those lenders/central banks to cover the loss. This with a resultant inflationary loss of value of the U.S. dollar. On paper, the lending and underwriting standards of the World Bank or the IMF may look solid. Are they really?
It would be good to see exactly what one of those executed gold lease agreements look like, and the timing relative to incurring debt. Then too, understand who is brokering them with disclosure of fees taken from such leases as they are transacted. As the World Bank and IMF have made loans secured by gold reserves, both leased or owned, a loan document with the World Bank or IMF as lender would likewise be revealing. Has our Fed co-signed on any of these type loans? Another good question.