Could a U.S. Fed scandal cause a crisis in the dollar?
*Dow Theory Letters, by Richard Russell, April 25, 2014
”The dollar is back, with the full faith and credit of the US government behind it. Foreign holders of dollars don’t trust the full faith and credit of the US government, not with a government that owes $17 trillion and has no way of paying it off. Our creditors are more interested in (and worried about) the outlandish 17 trillion dollars of debt that the US owes. What foreign holders of the dollar really trust is the tangible collateral that backs the dollar. That tangible collateral is America’s gold holdings.
Lately we hear an increasing amount of talk regarding whether the US actually holds the amount of gold it says it does. Of course proof of the US holdings of gold would come from an independent audit of America’s gold holdings.
Suspicion has been further increased when Germany asked for a repossession of 300 tons of its own gold. The Fed replied that it would take seven years to send this gold to Germany.
German auditors demanded to inspect their country’s gold, which supposedly was held in the Federal Reserve’s vaults in Manhattan. The Fed prohibited the Germans from inspecting their own gold. Becoming suspicious, the Germans ordered 300 tons of their gold to be shipped back to Germany. The Fed replied it would take seven years to do this. All this has increased suspicion regarding how much gold the US actually owns. R ussell’s suspicion — The US dumped the gold to hold the price down.
I think pressure is now increasing for a private audit of US’s total gold holdings. If it turns out that the US has far less gold than it claims, it will result in one of the greatest scandals in US history. If it turns out that we don’t have the gold, the dollar will crash and interest rates will surge.”
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