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On March 31 the Federal Reserve raised its benchmark interest rate for the sixth time in three years and signaled its intention to raise rates twice more in 2018, aiming for a Fed funds target of 3.5 percent by 2020. LIBOR (the London Interbank Offered Rate) has risen even faster than the Fed funds rate, up to 2.3 percent from just 0.3 percent 2 1/2 years ago. LIBOR is set in London by private agreement of the biggest banks, and the interest on $3.5 trillion globally is linked to it, including $1.2 trillion in consumer mortgages.
Alarmed commentators warn that global debt levels have reached $233 trillion, more than three times global GDP, and that much of that debt is at variable rates pegged either to the Fed’s interbank lending rate or to LIBOR. Raising rates further could push governments, businesses and homeowners over the edge. In its Global Financial Stability report in April 2017, the International Monetary Fund warned that projected interest rises could throw 22 percent of U.S. corporations into default.
Then there is the U.S. federal debt, which has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $21 trillion now. Adding to that debt burden, the Fed has announced it will be dumping its government bonds acquired through quantitative easing at the rate of $600 billion annually. It will sell $2.7 trillion in federal securities at the rate of $50 billion monthly beginning in October. Along with a government budget deficit of $1.2 trillion, that’s nearly $2 trillion in new government debt that will need financing annually.
If the Fed follows through with its plans, projections are that by 2027, U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Trump’s original trillion-dollar infrastructure plan every year. And it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds. Where will this money come from? Even crippling taxes, wholesale privatization of public assets and elimination of social services will not cover the bill.
With so much at stake, why is the Fed increasing interest rates and adding to government debt levels? Its proffered justifications don’t pass the smell test….
Just a terrible convergence of random events which had nothing to do with a carefully choreographed magic show over the past 25 years. I mean, it’s not like they WANT to steal us blind. It’s just that we can’t seem to figure out how to avoid being chumps. Besides, they got away with the great ripoff of the ’30’s, who can fault them for not knowing when to stop?
After Venezuela, Germany, Austria and the Netherlands prudently repatriated a substantial portion (if not all) of their physical gold held at the NY Fed or other western central banks in recent years, this morning Turkey also announced that it has decided to repatriate all its gold stored in the US Federal Reserve and deliver it to the Istanbul Stock Exchange, according to reports in Turkey’s Yeni Safak. It won’t be the first time Turkey has asked the NY Fed to ship the country’s gold back: in recent years, Turkey repatriated 220 tons of gold from abroad, of which 28.7 tons was brought back from the US last year.
According to the latest IMF data, Turkey’s gold reserves are estimated at 591 tons, worth just over $23 billion. This makes Ankara the 11th largest gold holder, behind the Netherlands and ahead of India….
As noted above, Turkey has been one of several countries which have moved their gold from the world’s biggest, and most secure gold vault, that located 95 feet below sea level at 33 Liberty Street in Manhattan, also known as the New York Fed.
The repatriation wave began in 2012, when Venezuela announced it was withdrawing all of its 160 tons of gold at the NY Fed, valued at around $9 billion. Germany’s Bundesbank then demanded 300 tons be returned, with the Fed saying it would take seven years to do so; a scrambling Germany was able to complete the process 3 years ahead of schedule. The Netherlands has also repatriated 122.5 tons of gold.
As a result, according to the latest Fed data, the amount of physical gold stored at the NY Fed has dropped to the lowest on record, or 7.819 thousand tons, following a withdrawal scramble that started in 2014 and continued until the end of 2016. After a 15 month hiatus, withdrawals resumed in 2018, with 15.5 tons of gold repatriated in January and February.
“The central banks started the repatriation already a few years ago, meaning before we had Brexit, Catalonia, Trump, AFD or the rising tensions between the Politburo in Brussels and the nations of Eastern Europe,” said Claudio Grass of Precious Metal Advisory in Switzerland.
According to him, the world is becoming less centralized. “If we follow this trend, it should be obvious that the next step should be an even bigger break up into smaller units than the nation state. With such geopolitical fragmentation comes also the decentralization of power.”