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<p>[QUOTE=&quot;fatima, post: 1359046, member: 22143&quot;]Gold has another distinction from silver that isn&#039;t well understood, because the mechanics of fiat money are not understood.&nbsp; It&#039;s probably the most important distinction.&nbsp;&nbsp; Gold is the only monetary metal held by central banks including the Federal Reserve as a reserve for the base money supply.&nbsp; (MB).&nbsp;&nbsp; It is a hard asset on the Fed&#039;s balance sheet used to balance out the liability of fiat MB.&nbsp;&nbsp; MB also includes other assets including US Treasury paper,, and demand deposits that member banks deposit at the Fed to cover their own reserve requirements.&nbsp; The law requires the Fed to to keep the MB sheet balanced.&nbsp; i.e. solvent.&nbsp;&nbsp; </p><p><br /></p><p>The importance of gold&#039;s role in this doesn&#039;t make sense until one understands that money which you and I use in the real economy is not part of MB.&nbsp;&nbsp; Instead this is known as the circulating money supply and that is reported as M0, M1, M2 and until the mid 2000s, M3.&nbsp; (MN)&nbsp; Now MN is a function of MB.&nbsp; That is the total amount of MN can&#039;t exceed a multiplier of MB.&nbsp;&nbsp; MN is created by fractional reserve banking including all the extremely complicated financial vehicles created in the last decade when they broke down Glass Stegal.&nbsp; </p><p><br /></p><p>I hope you are still with me.&nbsp;&nbsp; To summarize MB is created or destroyed by the Fed and the law requires the Fed to hold hard assets in balance including gold.&nbsp;&nbsp; MN, the circulating money is created by FRB and is a function of MB.&nbsp;&nbsp; The Fed traditionally controls MN by changing the interest rates and adjusting the size of MB.&nbsp; The problem the Fed has now is that due to past actions, and the fact that interest rates are 0%, this tool is now gone.&nbsp; So they are left with expanding MB.&nbsp;&nbsp; The insidious tool created to do this is called QE.&nbsp;&nbsp; </p><p><br /></p><p>Basically the way QE works, is the Fed creates a &quot;bank&quot; for itself, loads it down with MN, then takes this money and uses it to buy financial assets from the banks.&nbsp; The Fed then uses this paper and deposits it as a &quot;bank&quot; demand deposit back to itself and MB is now increased.&nbsp; Furthermore, now that MB is increased, they can increase MN by 10X that amount.&nbsp;&nbsp; The Fed buys all kinds of assets via it&#039;s dealers and things such as toxic loans are considered &quot;assets&quot; for the purposes for what the law requires in terms of assets backing up the base money.&nbsp;&nbsp; </p><p><br /></p><p>If you got this far, then good because it&#039;s easy to get lost since the rational mind refuses to believe it.&nbsp; In the minds of these banksters, it&#039;s perfectly OK to take these kinds of gambles.&nbsp;&nbsp; However,&nbsp; this where gold comes in.&nbsp; If the real world this paper is very sensitive to interest rates and other issues and could become worthless.&nbsp; If that were to happen it could push the Fed into insolvency which would invite all kinds of political interference.&nbsp;&nbsp; Hence, Gold, becomes hugely important, more more than they will admit, in holding onto their reserve requirements.&nbsp;&nbsp; Because MN is a multiple of MB, gold has a huge role in the amount of circulating money available to the economy.&nbsp; </p><p><br /></p><p>This is why Gold is different than Silver.&nbsp;&nbsp; This is why Gold&#039;s role against currency is completely different than that of all other metals.&nbsp; That is, the Central Banks need it to protect their reserves and that need is going to continue to increase.[/QUOTE]</p><p><br /></p>

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