[drivebyacct2]

It doesn't. The FDIC doesn't have a fraction of the money needed to insure a fraction of the money that is supposedly FDIC-insured. More over, the United States likely lacks the gold to back our current currency, let alone the currency needed to prop up those who lose money in the situation of the decreasing number of banks failing.

[oasisbob]

The FDIC doesn't have a fraction of the money needed to insure a fraction of the money...

Sure it does. The FDIC makes an annual assessment on financial institutions ranging from 2.5 to 45 basis points to keep the insurance fund solvent. In 2009 there were many special assessments to replenish the fund.

Insurance is always leveraged. Those skilled in the art are actuaries.

[georgemcbay]

US currency hasn't even pretended to be backed by gold since the early 1970s.

[drivebyacct2]

I was more referring to the fact that we fail to produce proof of the limited amount of gold that we claim to have and every attempt to audit it is rebuked magically.

In terms of the question, how would it be handled from an FDIC perspective if it came to a worst case scenario... it'd be a shit-show.

[Locke1689]

I was more referring to the fact that we fail to produce proof of the limited amount of gold that we claim to have and every attempt to audit it is rebuked magically.

I think you're just rambling. Our currency isn't gold backed -- who cares how much the US govt. has in gold repositories and why does it need to be checked?

[stayjin]

No he isn't. If ( just for the sake of the argument ) RMB replaces USD as the international currency base, US has absolutely nothing to back dollar value and prevent it from dropping.

[ubernostrum]

Pretty much every useful currency these days is "backed" by absolutely not one single atom of metal.

Which, it turns out, works just fine -- the belief that gold has value is roughly as magical as the belief that saying some words can turn wine into blood (and a prime sign of religious dogma in both cases).

[wnight]

The problem is that in ditching gold they went straight to faith-based currency. Even if gold was ugly and useless it'd still be a better base for currency than nothing because of its scarcity. It's too easy to create more money. We don't even print it anymore.

[swombat]

Of course it does - the strength of the US economy.

The US economy may be fucked up in many ways, and may face some harsh transitions if it can no longer rely on the strength of the dollar as an international currency, but it is still a large economy. The loss of that strength will not magically result in the dollar having "no backing".

Certainly, if the dollar was replaced by the RMB internationally, the dollar would start to drop against other currencies - until it reached a realistic equilibrium point.

[roel_v]

Yes, of course, and everybody knows that. The gold standard was abandoned across the world in the 20th century because it's unsustainable and inflexible. Please stop promoting this conspiracy-theory nonsense.

[anonymous246]

I think he's talking about the repeated rebuffs to the calls for audits of the supposed gold at Fort Knox by people such as Ron Paul (http://www.foxnews.com/politics/2010/08/31/rep-paul-calls-fo...)

The "conspiracy" theory goes that this gold has either been loaned (that's why Ron Paul phrased his question to also check if they're "obligated") or sold to drive down gold price thereby making dollars are more attractive investment than gold. Hence the call for an audit. The "conspiracy" theory further suggests that all the world's central banks are doing this.

[JoachimSchipper]

I don't really see it. FDIC insurance promises to give you dollars. Worst case, they just start the presses.

A precipitous drop in the value of the dollar would be unpleasant (including for for Americans with savings), but I don't see what FDIC has to do with it.

[nkassis]

They would just call up the federal reserve and have them print money. When accounts close down it's money that disappear from the money supply that the fed would replace.

[drivebyacct2]

Exactly, but surely this move would be transparent to those who trade with/in USD.

[gburt]

Its sad that this has been voted down because you mentioned gold, you're completely correct, other than saying "gold" instead of "wealth" or "power".