Annual worldwide demand grows 1.5 million barrels daily and the reserve margin shrinks.
It's a demand-driven commodity, where the reserve margin on the supply side has shrunk to under 2 million barrels per day.
In today's liberalising markets, regulators have yet to figure out the best way to achieve that reserve margin without damaging the new incentives they are trying to introduce.
Asset purchases by the Fed normally lead to a multiple expansion of money since, at the margin, reserve requirements are only about 10 percent of deposits.
The Federal Reserve Board requires long equity margin accounts maintain a balance of 50% equity, 50% margin debt.
"In almost every region we're soon to be below the safe margin (for reserve energy) for high energy use days, " he says.
Clearly, this was due to the wipe-out of speculators on margin who were not buying silver as a monetary reserve, but as a risky trade.
FORBES: Silver Down 30%, Gold Off 11% As Panic Hits Precious Metals
Argentina did not choose a pure currency-board model: the government has a thin margin of discretion (working mainly through changes in bank reserve requirements) which it has used, especially to ease strains in the financial sector.
President Herbert Hoover believed in a balanced budget, and our Federal Reserve Board sat on its hands while investors bought stock on 10% margin.
But they must abide by Federal Reserve Board rules barring the use of the credit lines for purchasing or carrying margin stock.
That effort is a reminder that when all the active-duty, reserve-component, retiree and dependent beneficiaries of the present system are added up, they exceed the margin of victory in many swing states during the 2008 election.
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