What we are witnessing is a sea change in which market forces are driving a de facto return to the gold standard. All that is missing for this to be a de jure gold standard is some regulatory and legal recognition and one has been proposed. The Basel Committee for Bank Supervision, the maker of global capital requirements is studying making gold a bank capital Tier 1 asset. - Professor Lew Spellman, University of Texas from The Spellman Report (link below).The source of that quote is a must-read essay written by Lew Spellman, who is a professor of finance at the University of Texas of business school. He has also served as Assistant to the Chairman of the President's Council of Economic Advisors and as an economist at the Federal Reserve. It is the latter two prestigious roles which make it both surprising that Professor Spellman would have written this essay and, yet at the same, thereby reinforces its validity. You will not find this piece mentioned in ANY mainstream media news source in this country.
Spellman lays out the case for for the subtle, systemic manner in which gold is slowly creeping back into use by the banking system as an asset being used to back paper currencies and financing transactions. Those of us who study the precious metals markets on a daily basis, in the context of the overall global financial system, have been pointing to this dynamic for a while now. For instance, Spellman links the announcement in which the Basel Committee is studying making gold a Tier 1 banking asset. This was announced several months ago and remarked upon widely in the precious metals community. I doubt anyone's financial adviser called them up to point this out.
The market, along with the massive Central Bank accumulation of gold by China, Russia and several of China's strategic allies - like the other BRIC countries - is starting to force this transformation. I say "the market" because most of the collateral that has been pledged to secure paper financial transactions has been pledged/rehyopothecated (see MF Global, Lehman, Madoff). This is especially true in the repo market where sovereign paper/Treasuries was historically the only asset to be used. Now Central Banks have stretched the range of credibility and extended collateral status to everything except the Brooklyn Bridge (who knows how many times that's been rehypothecated...). The last man standing is gold and it is being forced by the market back into the system as a paper anchor by necessity. Eventually gold will remain as the bastion of "flight to safety" because of its ultimate utility for that purpose.
Everyone needs to read this essay and make sure they understand what is happening and why. Here's the LINK For me, this essay has "seminal" status because it was written by a former "insider" to elite circles - the elite circles which constantly denigrate and revile gold - and because it will likely expose a wider circle of market observers to a systemic dynamic that is taking place with little or no acknowledgement by 99.5% of all market participants.