The impact of Germany's repatriation on the dollar revolves around an
unanswered question: why will it take seven years to complete the
transfer?
The popular explanation is that the Fed has
already rehypothecated all of its gold holdings in the name of other
countries. That is, the same mound of bullion is earmarked as collateral
for a host of different lenders. Since the Fed depends on a
fractional-reserve banking system for its very existence, it would not
come as a surprise that it has become a fractional-reserve bank itself.
If so, then perhaps Germany politely asked for a seven-year timeline in
order to allow the Fed to save face, and to prevent other depositors
from clamoring for their own gold back - a 'run' on the Fed.
Now,
the Fed can always print more dollars and buy gold on the open market
to make up for any shortfall, but such a move could substantially
increase the price of gold. The last thing the Fed needs is another gold
price spike reminding the world of the dollar's decline. - in a recent article by Peter Schiff
Peter Schiff is a well-known commentator appearing regularly on CNBC, TechTicker and FoxNews. He is often referred to as "Doctor Doom" because of his bearish outlook on the economy and the U.S. Dollar in particular. Peter was one of the first from within the professional investment field to call the housing market a bubble. Peter has written a book called "Crash Proof" and a follow-on called "The Little Book of Bull Moves in Bear Markets". He is the President of EuroPacific Capital, which is a brokerage specializing in finding dividend-yielding, value-based foreign stocks.
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