With the value of the U.S. dollar exponentially declining since the establishment of the Federal Reserve Bank in 1913, it comes as no surprise that many world leaders and international economists have expressed their desire for a new world reserve currency. In light of the global financial crisis, Russia may be moving toward a sound economic solution — gold.
On Monday, January 24, the First Deputy Chairman Georgy Luntovsky of the Central Bank of Russia (CBR), announced plans to purchase over 100 metric tons of gold every year — increasing the bank's gold reserves by 13 percent in 2011. Last year alone, the CBR expanded its gold holdings by 23.9 percent to 790 tons. Why the sudden increase? “The current set of reserve currencies and the main reserve currency — the U.S. dollar — have failed to function as they should,” Russian President Dmitry Medvedev told a Shanghai Cooperation Organization summit on June 16, 2009, adding that he would like to see the Russian ruble become a global reserve currency.
Medvedev’s desire for the ruble to be a global reserve currency, or part of a new economic world order, may not be the only reason for the sudden gold increase. With the signing of the Customs Union treaty last month, the leaders of Russia, Belarus, and Kazakhstan agreed to establish a free-trade zone among themselves with a common currency. The Customs Union — set go into effect on January 1, 2012 — has been regarded as the economic restoration of the Soviet Union.
I don't know of a single central bank foolish enough to sell gold in this environment. Gold has always been money to the East. It is only a recent occurrence that it lost its luster in the West, although the tides have turned if you look at the ECB's numero uno asset on their balance sheet.
The IMF "sales" were likely closeouts of previous swaps with certain central banks.
China and Russia are buying all their domestically produced gold and then some. That's really all we need to know.
IMHO anything movable and tangible is better than the Federal Reserve Note. But gold will always be the wealth reserve par excellence. I bet noone noticed what the President of Tunisia's wife just fled her home country with?
Post by pappyjohn99 on Jan 29, 2011 0:43:45 GMT -5
I have been giving silver eagles to my family and friends for years, and carry one around in my pocket because I like the way it feels. I also carry a few FRN's around in a money clip since I hate to sit on a wallet all day. I sometimes ask my friends which they think is more valuable, this silver coin or these paper notes? It breaks my heart when they look at me with complete confusion. I try to use it as a teaching moment but many people just don't get it. (Shrug) I try.
I've given up on the role of missionary, and instead post these articles for those few who like to talk about them. They don't garner a lot of readership. But maybe there is a lurker who could gain something from them, I don't know.
Here's an oldie but a goodie on gold's relationship to politics. It is economic freedom and it's too bad the author lost his way.
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.
Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
I personaly don't think it could be done.The logistics of it are mind boggeling. But if just talking about the possibility of it makes it jump a few bucks in price,my gold coins will rise.
It's not going to happen overnight, but it is happening as we speak. People said the same thing about the pound sterling when it was the world's reserve currency. Now that the Bank of China is internationalizing the yuan over here, I'd open an account with them...but they only have two facilities, both on the extreme coasts.