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<p>[QUOTE=&quot;SilverSurfer, post: 913910, member: 21603&quot;]. One example of this was when GATA seized on part of my explanation of basic gold trading and banking practices and, once more misrepresenting and distorting both reality and my comments, implied that I had exposed gold as a fractional reserve asset, as if yet another conspiracy had been revealed.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; The fact that gold trades on a leveraged basis, as well as on an ounce-for-ounce basis, should not be a surprise to anyone in the markets, and certainly should not come as any surprise to the self-described “experts” at GATA. However, because I have become aware that this is an area of confusion for many retail investors, I’ll take a moment to set the record straight.</p><p>&nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Fractional reserve banking is not a new concept. It has existed for thousands of years. There is nothing shocking nor revelatory about this. The fractional reserve nature of bullion banking is analogous to the widely understood concepts of fractional reserve banking in currencies such as U.S. dollars. If one wants to own U.S. dollars outright, it is possible to keep a pile of bank notes (dollar bills) in one’s mattress or in a safe or vault. Alternatively, one may choose to deposit the money in a bank. The bank doesn’t really have enough cash on hand to allow all the depositors to withdraw all their cash at the same time. However, a system of checks and balances exists to ensure that a “run on the bank” can eventually be met, even if not immediately. Prior to the creation of the Federal Reserve System in the United States no such checks and balances existed, and people who put money in private banks often found that there was no money there when they came for it. FDIC insurance was implemented to give depositors more confidence in their bank deposits after bank runs in the wake of the 1929 stock market crash.</p><p>&nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Similarly, if one wants to own physical gold outright, one&nbsp; may do that. In the bullion banking industry, this is called an <i>allocated&nbsp; account, </i>meaning that the investor has specific gold bullion bars allocated to them. The investor is the legal owner of that gold bullion, and the bank, if one is involved at all, is merely providing vault storage for a fee. This is exactly analogous to a bank offering safe deposit boxes which customers can use to store cash if for some reason they are skeptical of the bank’s ability to make good on money deposited in a regular account. Instead of being paid interest for depositing cash in a bank account, one would have to pay a fee for the safe deposit box. Similarly, allocated bullion accounts always involve the client paying storage fees to the bullion bank for the use of its vault to store their bullion. </p><p>&nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; However, gold also is a financial asset that is banked. In&nbsp; bullion banking jargon, this is called an <i>unallocated account.</i> Just like cash deposited in a checking account, the bank represents that it has enough assets to service the expected volume of withdrawals, but it doesn’t necessarily have enough bullion to allow all the depositors to withdraw all their gold all at once. many gold “certificate programs” are <i>unallocated</i> bullion accounts.This is well understood by professionals in the industry and by most investors involved in these assets. Again, it should come as no surprise to anyone with bona fide credentials as an expert of any kind in the gold bullion marketplace. Yet GATA has tried to portray the fact that banks are required to hold only a portion of their gold assets, as they do money, as somehow being scandalous</p><p><br /></p><p><br /></p><p>This came from CPM group Jeffrey Christians.&nbsp; Here read the article yourself.</p><p><br /></p><p><a href="http://www.kitco.com/ind/jeffreychristian/jeffreychristian2010-05-27.html" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://www.kitco.com/ind/jeffreychristian/jeffreychristian2010-05-27.html" rel="nofollow">http://www.kitco.com/ind/jeffreychristian/jeffreychristian2010-05-27.html</a></p><p><br /></p><p>What other proof do you need?[/QUOTE]</p><p><br /></p>

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