Basel III Just what is it?

We have all heard/seen ... whatever a lot of talk about Basel III from the roos. They are constantly stating/implying that a large element of Basel III is a move to asset based currencies. This has never set quite right with me, so I finally went to the BIS (Bank of International Settlements) web site section on the Basel agreements to see what this all was actually about. http://www.bis.org/publ/bcbs189.htm The result? It's all about bank liquidity and maintaining the proper balance of rishk in the assets held along with a sufficient capital base. The documents talk about assets, stocks, derivatives, earnings, risk, equity ... etc ... but not one word about currency, gold, silver, oil ... it's just not there.

Here are a few tidbits of relevance:

"Basel III" is a comprehensive set of reform measures, developed by
the Basel Committee on Banking Supervision, to strengthen the
regulation, supervision and risk management of the banking sector. These
measures aim to:

• 
  improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
  
• 
  improve risk management and governance
  
• 
  strengthen banks' transparency and disclosures.
  

The reforms target:

• 
  bank-level, or microprudential, regulation, which will help raise
  the resilience of individual banking institutions to periods of stress.
  
• 
  macroprudential, system wide risks that can build up across the
  banking sector as well as the procyclical amplification of these risks
  over time.
  

These two approaches to supervision are complementary as greater
resilience at the individual bank level reduces the risk of system wide
shocks.

B3 Framework Summary Table

While Gold is mentioned in some of the documents, it is clear that they consider and treat it as a currency for the purpose of evaluation assets and risks, NOT as a basis for those assets.

Gold is to be dealt with as a foreign exchange position rather than a commodity because its volatility is more in line with foreign currencies and banks manage it in a similar manner to foreign currencies.

http://www.bis.org/publ/bcbs128.pdf (page 179 bottom)

From Page 365 of the same document:

The treatment of securitisation exposures is presented separately in Section III. The standard risk weight for all other assets will be 100%.265 Investments in equity or regulatory capital instruments issued by banks or securities firms will be risk-weighted at 100%, unless deducted from the capital base according to Part 1 of the present Framework.

265 However, at national discretion, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities can be treated as cash and therefore risk-weighted at 0%. In addition, cash items in the process of collection can be risk-weighted at 20%.

MY conclusion, gold is considered the same as cash under Basel III. It is not, nor is any other precious metal or asset the basis of currency valuation. (In fact all other precious metals are considered commodities under the guidelines.) For purposes of calculating liquidity and balance sheets the only thing that applies to currency is a risk adjustment based upon the credit ratings of the individual country. I am not an economist, and I do not pretend to understand all the info I have been looking at, but still I understand enough to conclude that any roo who starts blatting about Basel III, Treasury Bills, and asset based currency is pretty much full of it.

That's my conclusion and until someone proves me wrong I'm sticking by it ... Does this make me any less confident? Nope, not one iota, it's just another example of those people who want to feel important throwing out terminology to impress the sheeple, counting on the fact that 90% of the people will never check it out.

http://news.yahoo.com/republicans-tease-gold-standard-idea-seen-full-bugs-050102148--business.html


Republicans tease with gold standard, but idea seen full of bugs

Reuters – 15 hrs ago







Related Content

• 
  Gold Bullion from the American …
  

NEW YORK (Reuters) - U.S. Republicans have all but guaranteed the backing of the "gold vote" this November by raising an idea that even the most bullish mainstream bullion boosters believe is unrealistic - a return to the gold standard.

Gold prices would likely surge to $10,000 an ounce, the greenback's credibility would vanish and global superpowers would risk a new trade war if Republicans were to restore the link between the U.S. dollar and gold that was severed 40 years ago.

But that isn't stopping Republicans from considering the idea, who will call for a commission to look at restoring a fixed value for the dollar, according to a draft of the party platform to be adopted at the Republican National Convention that begins on Monday in Tampa, Florida.

Gold has returned to the political discourse recently with the growing prominence of politicians like Ron Paul, the congressman from Texas who has said that he decided to enter politics on the day that President Richard Nixon shut the "gold window" in 1971, and with the Tea Party, which helped Utah pass a law last year to make gold legal tender.

But their support won't change the practical hurdles that would face such a wrenching shift in the currency system, one likely to have catastrophic effects on trade and growth.

To back the U.S. monetary based currently at around $2.56 trillion by the 262 million ounces of gold held by the United States government means bullion prices would soar as high as $10,000 an ounce, Capital Economics strategists said.

A sudden appreciation of the dollar's value would crush the greenback's credibility as the world's reserve currency and severely undermine the international trade balance.

"It is hard to conceive of the circumstances under which no one would want to hold any dollars," they said.

The World Gold Council, a trade group funded by gold mining companies to promote the many uses of bullion, including by investors, deems such a move "unlikely," citing international disagreement over the converting price and the fact that annual growth in gold stock may not match the monetary base.

Even the Gold Anti-Trust Action Committee (GATA), a group dedicated to exposing what its founders say is a conspiracy by Wall Street banks, the Federal Reserve and others to depress the price of gold and silver, doesn't see it happening.

At best they're hoping that the RNC will provoke an audit of U.S. holdings, proving GATA'S claim of a conspiracy.

"It really would be something for the Republican platform to call for a truly independent audit of the Fed and U.S. gold reserves," said GATA's chairman, Bill Murphy, a former Boston Patriots wide receiver who worked as a commodity broker on Wall Street before founding GATA in 1998.

CENBANKS STOCK UP

Despite widespread disbelief, a reintroduction of the gold standard has gained more support in recent years amid an intensifying debate over how to tackle U.S. debt levels and spending, and increased global anxiety over the stability of fiat currencies - a government-issued currency whose value is based on the issuer's guarantee to pay the face amount on demand.

"The idea is that it forces the U.S. to live within its means," said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott, which has around $54 billion in assets under management. "Think of it as a person with a debit card rather than a credit card. The debit card holder can only spend to what he or she has in the bank."

Governments abroad are also renewing their interest in owning gold as part of their reserves due to economic uncertainty. World central banks as a group became net buyers in 2010 after two decades of net sales. Official-sector purchase is on track to rise to a record high this year, WGC said.

The world official sector currently held about 29,500 tonnes, or 17 percent of the world's above-ground stocks. This compares to 19 percent held by investors and nearly half of the stocks made into gold jewelry.

REAGAN REDUX

The Republican proposal is reminiscent of a Gold Commission created by President Ronald Reagan in 1981, 10 years after President Richard Nixon broke the link between gold and the dollar during the 1971 oil crisis.

Reagan's commission ultimately supported the status quo, saying "restoring the gold standard does not appear to be a fruitful method for dealing with the continuing problem of inflation."

In 1973, the U.S. government raised the official dollar price of gold to $42.22 per ounce. A year later, Americans were permitted to own gold other than just jewelry.

The U.S. Congressional Budget Office warned on Wednesday that massive government spending cuts and tax hikes due next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution.

REAL POLITICAL MOTIVE

Instead of planning for a gold standard return, the Republicans are trying to placate supporters at next week's RNC and to gain more firepower in the party's promoting responsible U.S. fiscal and monetary policies in the upcoming federal elections in November, analysts said.

Minutes from the Federal Reserve's latest meeting suggests the U.S. central bank will adopt stimulus fairly soon unless economic conditions improve dramatically. Some expect Fed Chairman Ben Bernanke could use his speech at the central bank's gathering in Jackson Hole, Wyoming, at the end of this month to send a strong message to markets.

"Examining a return to the gold standard is one avenue to show the public and markets a level of seriousness about the U.S. dollar, monetary policy and the budget deficit," said Jeffrey Wright, managing director of Global Hunter Securities.

(Editing by Leslie Adler)

Another instance where not undertnding what is actually being talked about can create for some massive confusion.

I was aware that the Basel III had NOTHING to do with RV, and the constant referring to "global reset" has people guessing.

when I saw this article I had decided NOT to stir the pot, but referrence filed it. Now that you brought this to further understanding, the article I added will help with the explaination of what different people are talking about, and help them to put it in to perspective.

Also for the record - any rumors you hear about G-20, G-7, G anything for that matter - G stands for Geographic location - and refer to an area of countries that have more dealings with each other than other countries.



Great Job Kevind53 ! As usual a pleasute. By the way - I think - think - I have an apology coming your way. I have almost completed my quest for the sanction issue - and it is very much leaning toward you being very accurate and I having a misunderstanding. Been alot of reading and research - but this thing called life has been getting in the way. (lol)

IQD4us, so the above article means nothing?

I think it's a new 'Model' of vacuum cleaner, or somthin'- You know, like the 'Dyson Ball'-

The return to the gold standard sounds good, but let's look at the 70's for a minute. Inflation was out of control and although the war in Viet Nam and other events may have played a role in it, a big part of the problem then was the inability of the value of the dollar to float and adjust as other currencies changed value. This was making it impossible for us to compete on the modern world markets. As I have said, I am no economist, but it is my understanding that this was the major reason behind moving the dollar off the gold standard.

I see another potential problem, alluded to in the article IQD4US posted. With the value of gold constantly fluctuating, it seems to me this would greatly complicate the whole exchange picture. How do you track the value of your currency when it is based on a traded asset who's value can fluctuate wildly. Then throw in the futures market, plus the fact that it could be trading at one value in say New York, and at a totally different value in Hong Kong. How do you set the rates? If you lock the value of Gold like we did before 1971 it would solve that problem, but then you have the inflexibility problem staring you in the face.

As I am said I am no sort of economic weenie, but all I see is a huge can-o-worms! :shock:

punisher wrote:IQD4us, so the above article means nothing?

Kevind53's post is in effect. Others are using thier lack of knowledge to base a world currency reset under the Basel III.

the article I brought shows that it is not possible without throwing the world into financial chaos to return to the gold standard.

There is a reason that IMF and WTO exist. They study all that is necessary to determine a "country's worth" and that countrys "postion" in respects to the rest of the countrys in the world. They are also who decides what loans can be made - or when a country is in need of emergency funds due to natural disaster - which ALL countries pay into according to their "standing".

Its a great idea for someone who's background in NOT in economics but in politics. Just like the MP's and PM's in Iraq - they are politicians not financial experts - so they speak of the deletion of the zeros without ANY real background on the subject - applying only what they feel it will do to them as an individual.

That's why they have a parliment AND Shabibi....

Sometimes I hesitate to post some of the deeper articles BECAUSE if you don't have kowledge of a specific subject - just reading it and applying it in how it would work in your own life may NOT be the way it is actually intended or the reality of how it is...but I have learned that in DDD people WILL ask questions....I know I do !

Thanks for the response.

Glad to see this thread debunking the stupid talk of Basel III requring asset backed currencies that is making the rounds again, total BS and never going to happen.

Smoke and mirrors from the rest-