Fearless

I have been around the securities business for a long time & I have never seen a loan made in this business without the borrower providing adequate collateral including stocks, bonds, T-Bills, Bankers Acceptance & so on. Even the folks who accepted ABCP thought the collateral they received was adequate! There is one exception known as a day-to-day loan which the borrower pays a small fee & must clear the loan by the end of the business day. This is to allow for physically moving securities during the day.

According to your theory a "bullion bank" says "I'll take $4 billion worth of gold" then put that gold into their vault & then receive a cheque (negative rates) from the provider each month with no risk! Maybe it's just a storage fee! Can you provide a source of reference which states that these gold loans do not require collateral. It seems preposterous to me that a rogue trader could cause a huge loss to a gold lender as the bank went down!

Regards

Joltin