-----BEGIN PGP SIGNED MESSAGE----- Hash: SHA1 > David Hillary wrote: > > >Central banks hold reserves of assets sufficient to pay all their > >currency liabilities and all their deposit liabilities. This can > >be seen from their balance sheets. > > > Is this a joke? > > The assests the central banks hold are called I.O.U.'s. I don't > know about Australia, but in the United States the dollar is > backed by debt. > A dollar is nothing more than debt token. It is not even a > promise to pay any more.
The assets of central banks are debt securities -- debts of governments, corporations, individuals and other central banks and the assets of their central bank owner. The liabilities of central banks are currency and central bank deposit liabilities, which are assets to their owners (governments, corporations, individuals and other central banks). Central banks' balance sheets are like any other banks' balance sheets, consisting of assets, liabilities and owners' equity. Central banks are not insolvent. They are capable of paying their debts. This is not a joke. Central banks can redeem the entire monetary base of central bank balances and currency liabilities. The HKMA (Hong Kong Monetary Authority) is a currency board, but it can be considered a type of central bank, that happens to peg its currency to the USD (@HK$7.80=US$1). The HKMA has (more than) US$1 for each and every HK$7.80 in circulation and therefore its promise to redeem HK$7.80 for US$1 is credible -- it has enough US$ to redeem the entire monetary base at this rate. Central banks such as the Reserve Bank of Australia, while they do not peg their currency to the USD or any other currency, they, like the HKMA, do have assets that they use to defend the value of their currencies. The value of these assets exceeds their liabilities. > > Dollars are only worth what people are willing to exchange them > for. > The dollar is accepted worldwide because of the stability of the > US Government, not because it is actually worth anything. When > the US falls into a deep recession the value of the dollar will > not be much. > That is why the Fed is scrambling to try to stop it. A central bank can provide a monetary base to an economy and the value of the currency unit is that which equilbriates supply and demand for it. The central bank controls the value of the monetary unit by influencing supply by various means. It also attempts to influence demand by providing stability and credibility in its supply and the utility of its currency. Why do people have so much difficulty understanding money and banking? Its not easy but its not impossible to understand either. David Hillary -----BEGIN PGP SIGNATURE----- Version: PGPfreeware 7.0.3 for non-commercial use <http://www.pgp.com> iQA/AwUBO7qpCxNDEcR4nEncEQIqLQCdEpAwD74+9m9nQzHin1X6HDFmlcgAoPNU rpQKFyCAHurtLIXn5ZcFPJkh =R6mW -----END PGP SIGNATURE----- --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] Did you know that e-metal is a wonderful holiday gift? Avoid the hassle this year!