Jim Rickards: Inflation Via Gold Revaluation Could Take Just Minutes But Probably Needs Longer

• Jim Rickards: Inflation Via Gold Revaluation Could Take Just Minutes But Probably Needs Longer
  by Chris Powell, http://thenewsdoctors.com/
  Fund manager, author, and geopolitical strategist Jim Rickards, writing for the Daily Reckoning, noted again yesterday that central banks can always create inflation by devaluing their currencies against gold.
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  Rickards writes: “The Fed can cause massive inflation in 15 minutes. They can call a board meeting, vote on a new policy, walk outside, and announce to the world that effective immediately, the price of gold is $5,000 per ounce.
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  “The Fed can make that new price stick by using the Treasury’s gold in Fort Knox and the major U.S. bank gold dealers to conduct ‘open market operations’ in gold. They will be a buyer if the price hits $4,950 per ounce or less and a seller if the price hits $5,050 per ounce or higher.
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  “They will print money when they buy and reduce the money supply when they sell via the banks. This is exactly what the Fed does today in the bond market when they pursue QE. The Fed would simply substitute gold for bonds in their dealings. The Fed would target the gold price rather than interest rates.”
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  True enough as far as it goes, and as Rickards notes, it has been done before, more or less. But there may be a couple of problems with such an approach.
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  First, somebody is massively short gold in the fractional-reserve gold banking system. The short position is probably shared between central banks, bullion banks, mining companies, and ordinary investors. A sudden spectacular rise in the gold price could destroy some of those institutions and people, unless force majeure could be declared to nullify their obligations or government agreed to assume them. There would be immense legal difficulties there.
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  Second, it’s unlikely that any such upward revaluation of gold would ever be attempted without international agreement and coordination with all major governments and central banks. Otherwise it would destroy international finance, debt, and trade.
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  But three years ago the U.S. economists and fund managers Paul Brodsky and Lee Quaintance speculated that such a scheme may already be in the works — that to inject some fairness into the worldwide devaluation of otherwise unpayable debt, central banks were quietly redistributing gold reserves among themselves in preparation for the monetary metal’s upward repricing:
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  read more.

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