Trust in the United States – Gone.  Countries Pull Gold, and Dollar Out of Favor

A consequential development was revealed first by Senate Candidate and House Representative Alex Mooney in his questioning of the highly corrupt Fed Chairman Jerome Powell.  Powell refused to answer a basic question on foreign gold holdings held by the Fed.

The concern resulting from the apparent exit of gold from the Fed relates to foreign perceptions of the United States.  Threats by this administration and acts to sanction Russia by taking Russian assets held in the United States diminish the faith other countries have in the US.  If a problem arises between Argentina and the US, would the US take Argentine gold?  I think clearly yes as this administration despises Milei and uses leverage in manners that the United States previously would not.

As reported by Zerohedge, and originally authored by Ken Silva of Money Metals:

Weeks after Federal Reserve Chairman Jerome Powell evaded a sitting congressman’s questions about the central bank’s foreign gold holdings, the Fed has also declined to comply with a Freedom of Information Act request for records about such holdings.

The Federal Reserve’s lack of transparency comes amidst reports that countries are removing their gold and other assets from the U.S. in the wake of the unprecedented Western sanctions imposed on Russia over its invasion of Ukraine. According to a 2023 Invesco survey, a “substantial percentage” of central banks expressed concern about how the U.S. and its allies froze nearly half of Russia’s $650 billion gold and forex reserves.

Rep. Alex Mooney, R-W.Va., asked Powell about the matter in a December letter, only to have the Fed chair respond last month with evasive non-answers, telling him that the Federal Reserve does not own gold but holds it as a custodian for other entities—a fact that the congressman presumably already knew.

Following Powell’s evasive response, Headline USA filed a FOIA request with the Fed for records reflecting how much gold the Federal Reserve Bank of New York currently holds in its vault, as well as records reflecting the ownership stake that each of FRBNY’s central bank/government clients have in that gold. The FOIA request also sought records about the Fed’s gold holdings prior to Russia’s February 2022 invasion of Ukraine.

However, the Federal Reserve denied the FOIA request on Wednesday.

Board staff consulted with staff at the Federal Reserve Bank of New York (‘Reserve Bank’) and have been advised that such records, if they exist, would be Reserve Bank records, and consequently, not subject to the Board’s Rules Regarding Availability of Information,” the Fed said.

Brilliant letter from US Rep. Alex Mooney this week to Jerome Powell re #Gold and #USGoldReserves. Be interesting to see if he receives a reply (unlikely) lol.
See below!

Rep. Alex Mooney sent a letter asking Jerome Powell if other countries are repatriating their gold again.

Hot darn that would be fascinating to see what he would say if he ever responded...

The concern does not stop at Fed holdings of foreign owned gold.  The falling trust in the Fed also reflects poorly on the US Dollar as the world’s reserve currency.  The United States currently is the base currency for many globally traded commodities including oil.  In banking, the dollar has historically been held at a higher value and even been viewed as in short supply given global demand to execute transactions in dollars, with derivatives such as interest rate swaps or even issue foreign bonds in dollars.  The higher demand for the dollar historically caused dollar basis swap spreads to be at a premium relative to other major currencies.  

With the dollar as the reserve currency this vastly expands the Treasury’s ability to issue debt globally.  However, as countries arrange new methods to use alternative currencies as a base to transactions and financing, the deeply indebted United States will have a harder time financing its rapidly rising debt. 

This will be seen in increasingly negative dollar swap spreads, where the US previously had substantial positive swap spreads.  In February, consistent with this concern, Reuters reported:

The spread on two-year U.S. swaps over two-year Treasuries was at -14 basis points (bps) on Wednesday, pulling away from the -23 bps hit in late December its tightest, or most negative level on record.

Shorter-term spreads used to be positive though. With the recent transition to risk-free SOFR from Libor, there is no longer a premium for credit risk embedded in swap rates that pushed them higher in the past.

Analysts also said negative swap spreads reflect investor perception that U.S. sovereign risk has deteriorated and Treasuries are no longer viewed as as risk-free.

Biden has proven that in a mere three and a quarter years, this idiot and his moronic Administration could destroy an exceedingly powerful financial system.  Granted, many bad actions occurred over the last 30 years to weaken the United States, but Biden’s corruption has vastly weakened our “credit” along side the profligate spending.

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