Financial writer Bill Holter says the Fed cutting bank reserves to 0% for the first time in history is a “huge deal” and a red flag for what is coming. Holter explains, “The idea behind lowering the reserve requirement is basically making it easier for banks to lend. In the later part of March, they went to 0% to make it easier for banks to lend. . . . With zero reserve requirement, it could create unlimited lending. . . . The Fed will raise the reserve requirement when it wants to tighten credit, and they will lower it when they try to loosen credit. Getting rid of it all together means the reverse of zero is infinity. So, they are trying to reflate again.”
What could go wrong? Holter contends, “All sorts of things could go wrong. You could have banks lending to any type of project. What it does is it opens the door to more fraud. It opens the door to fraudulent lending and fraudulent borrowing. The bank could be basically busted, and it still won’t matter because they could still lend. If a bank has zero reserve requirement, that does not preclude them to lend.”
So, the bank can never go out of business? Holter says, “Yes, in essence, that’s what the reserve requirement says. They are not required to have any reserves backing your account and your deposits. They can lend as much as they want to with no reserve requirement backing it. I’ll go one step further and say look at what the Fed is doing buying junk bonds. It is putting junk bonds on their balance sheet, and the next thing is they will be buying stocks. . . . So, what’s backing the money itself? It is no longer pristine credit. It is anything and everything in the credit market. The next step is the Fed is probably going to be buying stock.”
Is zero reserve requirement at the banks a sign we are getting close to the end of the Ponzi scheme we have been living through? Holter says, “I’ll answer this with a familiar saying, and that is ‘desperate people do desperate things,’ and that’s pretty desperate. How safe is a banking system that has no requirement for reserves?”
This all circles around to gold and the increasing demand for physical ownership. Holter says, “There is huge demand for physical gold. The amount of gold standing for delivery has increased almost every single day since first notice day. . . . If you go back two years ago, that never ever happened. . . . It looks like the Bank of International Settlements (BIS) is supplying the market to tamp down the price. We don’t know when an actual failure to deliver event is going to happen, but the system has gotten so large that once you get a crack in the credit markets or a question of the credit worthiness of the U.S., you will see capital flow to gold and clean that market right up. Once that does happen, gold and silver will go into hiding. . . . People will not sell their gold or silver for fiat currency. . . . People are waking up to the fact that there is a massive problem in the credit markets. In the past, the safe haven has been the dollar and Treasuries, but if the problem is the dollar and the credit worthiness of Treasuries, what’s the next step of protection? All capital roads lead to gold. That is your safe haven. Gold is the ultimate safe haven. It’s God’s money.”
Join Greg Hunter of USAWatchdog.com as he goes One-on-One with Bill Holter of JSMineset.com.
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.