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Kyle Bass, hedge fund manager of Hayman Capital, has quite an interest in gold and silver.

February 6, 2012 – Kyle Bass, hedge fund manager of Hayman Capital, has quite an interest in gold and silver. Typically known for making very significant bets against the grain and against politically correctness, and winning, Bass made headlines when he took delivery of the physical gold that he manages on behalf of the University of Texas. When he considered the leverage in the fractional reserve system, which governs in precious as it does in fiat currencies, he quickly realized that a withdrawal of any significance, about 4 percent, would initiate a naked short squeeze and jeopardize the University’s holdings.

Banks are not required to keep the amount of cash they have in deposit on hand. Rather, they are only required to keep 10 percent, and sometimes less, of the cash accessible. The rest is loaned out at interest, generating revenue. The problems with this system are myriad, but the most understandable is the question of what happens when a significant number of customers want their cash at the same time. Essentially, the bank cannot pay.

It was in regards this system that Kyle Bass took delivery of the physical gold. Because he was managing the gold on behalf of a very large investment fund, the University of Texas, and because he is such a well-known figure in finance, it raised eyebrows, among other things.

Bass has also said that buying gold is “insurance against the idiocy of the political cycle.” And while it sounds cavalier, Bass would know as he regularly meets with individuals like Barney Frank.

Now, Bass is saying, “Don’t sell your gold.” He sees gold and silver as the strongest protection against the federal policies increasingly in effect that are diluting the power of the dollar. Pointedly, Bass said, “as every day goes by, I see deflation in the things you own and inflation in the things you need.”

This means that monetary policy is changing the values of assets in such a way that it damages the wealth of Americans. At the same time, necessities such as gasoline, food, housing, and even up to and including education are becoming astronomically more expensive.

Gold and silver retain an inherent value even as the Fed messes with the money supply, that makes gold and silver the best insurance for the Quantitative Easing policies, low interest rates, and deflation coming.

Shannon King

Senior Staff Writer – GoldSilver.org

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