“The Secret Return to the Gold Standard”

There’s a secretive group that meets four times a year writes Bruce Pile at Seeking Alpha. In 1988, this secretive group issued Basel I and in 2004 it was Basel II. And now in 2012, they are issuing Basel III.

Both Basel I and II took the then fashionable view of what money is – government bonds, mortgage backed securities, cash, etc. Gold was included in what they allow as capital, but as a “tier 3 asset” (not real money), and thus was only allowed to be reserves for loans at just 50% of its market value, much like, say an art collection would be.

What is Basel III? Basel III rules are set to go into effect January 1, 2013 and changes Gold from tier 3 asset to  tier 1. That means Ben Bernanke will have to change his tune to: “Yes, Gold is money!” Central banks have already begun to purchase Gold as part of their reserves. “The World Gold Council revealed net central bank purchases in 2011 exceeded 455 tonnes (14.5 million ounces), the largest purchases since 1965. And it reported banks will purchase 700 tonnes (22 million ounces) of gold for this year alone…”

To just get back to the gold/currency balance averaged over the decade of the ’80s, gold would have to increase in price some 15 fold.

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