Gold Near 6-Month High, Ahead of ECB Meeting
Posted by WARREN MOSLER on September 6th, 2012
Looks to me like the central bankers are worried the outcome will be inflationary, or worse. Seems when gold goes up it turns out it was central bank buying of one sort or another.
For all practical purposes they have an unlimited budget to buy gold. It falls under what I call off balance sheet deficit spending. The central bankers buy in their own currency, paying for it with a credit to the account of the seller’s bank they enter on their own books. The gold is accounted for as the asset and the (new) funds credited the liability, no questions asked, no budget rules involved.
September 6th, 2012 at 10:33 am
How is it off balnce sheet?
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WARREN MOSLER Reply:
September 8th, 2012 at 3:05 pm
in the sense that it ‘doesn’t count’ as deficit spending.
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September 6th, 2012 at 10:54 am
Central banks support digging holes in the ground and looking for shiny objects. Maybe they should be thrown in the hole with their shiny objects as well. Disgusting, God forbid if they used money to buy something useful.
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September 6th, 2012 at 11:18 am
Kind of like stealth deficit spending. Reminds me of accounts in Peter Bernstein’s book “The Power of Gold”, of how President Roosevelt and then Treasury Secretary Morgenthau raised the price of gold incrementally day by day over a period of time in 1934 from $20.67/oz to $35/oz. Morganthau’s diaries revealed that he would meet with the President in his bedroom each morning with an objective to push the price of gold up a few cents with the hope that other commodities would follow. On one such occasion they were planning an increase of 19-22 cents, but Roosevelt suggested 21 cents because it was a lucky number because 3 X 7 = 21.
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September 6th, 2012 at 2:10 pm
More money printing in action.
Can a country print it’s way to a higher standard of living. Is it really that easy? That’s all you have to do? wow
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Walid M Reply:
September 6th, 2012 at 7:47 pm
@JBH, If your currency does not become valuleless in the process
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WARREN MOSLER Reply:
September 8th, 2012 at 3:12 pm
you can if you are suffering from lack of printing.
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September 7th, 2012 at 9:10 am
How is buying gold different than F-16′s.
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WARREN MOSLER Reply:
September 8th, 2012 at 3:21 pm
different type of crash risk?
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September 7th, 2012 at 12:28 pm
It may not make much sense for a central bank to buy gold, but for those of us that cannot print money, despite what Mike Norman thinks, gold is not a bad idea. $35 under Roosevelt, $1700 now. I’d rather have some shiny objects under the mattress than fiat.
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