Russia Continues To Buy Gold
Posted by WARREN MOSLER on April 28th, 2011
Looks like QE scared Putin into buying gold:
Russia Continues To Buy Gold
By Rhiannon Hoyle
April 28 (Dow Jones) — Russia’s central bank is continuing to make steady gold purchases, while sales by signatories to the third Central Bank Gold Agreement meanwhile remain negligible, the World Gold Council said Thursday.
Russia added 8.2 metric tons of gold to its reserves between December and February–the most significant change in reserves reported by any country, the WGC said.
It appears to be continuing “its long-term program of gold accumulation,” with sustained buying primarily in the domestic market, the industry body added.
At the end of February the Russian central bank held 7.3% of its reserves in gold, at a total of 792.3 tons, according to data the WGC collected from the International Monetary Fund and other sources.
Sales of gold by CBGA signatories have meanwhile accounted for less than one ton so far during the second year of the agreement, which began in September, the WGC added. The agreement, which covers the gold sales of the Eurosystem central banks, Sweden and Switzerland from September 2009 to 2014, states that annual sales will not exceed 400 tons and total sales over the period will not exceed 2,000 tons.
Other substantial purchases between December and February included a reported 7-ton reserve increase in Bolivia, taking the country’s total holdings to 35.3 tons, or 15.1% of its overall reserves, the WGC said.
“While Bolivia has not made any public comment on this increase in gold holdings, it is very likely that the central bank has simply decided to restore its gold holdings relative to its growing foreign currency reserves, similar to other recent emerging market central bank purchases,” it noted.
The data was released in the council’s regular statistical update on gold reserves in the official sector.
April 28th, 2011 at 1:14 pm
Maybe this is the right thread to bring up again the question that is still puzzling me about financial assets.
Gold might not be a financial asset since it has no corresponding liability, but it is an asset in the financial system nevertheless.
How does it work within your framework? Because it seems to me that central banks buying and selling gold correspond to removing and adding NFAs. And since the price of gold is market determined, it would mean the private sector creates NFAs endogenously.
I am not taking into account changes in the supply of gold to keep things simple.
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Tom Hickey Reply:
April 28th, 2011 at 1:36 pm
Seems to me that gold is a real asset. When a cb buys gold, it creates reserves to do so. So Russia buying gold puts newly created rubles into the global economy, and someone has to want to save in rubles to do so. This is essentially the same as the cb buying another real asset, but cb’s are generally only permitted to buy gold rather than other real assets.
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April 28th, 2011 at 1:54 pm
Sounds ironic that Russia creates rubles to buy gold. Almost like they have more faith in gold than their monetary system?
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Matt Franko Reply:
April 28th, 2011 at 3:24 pm
You got it! All the others (well most) just seek USD balances… I guess the current crop of Russian insiders (former KGB) just can’t bring themselves to do it!
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PJ Pierre Reply:
April 28th, 2011 at 4:23 pm
This also may be to help bolster there bilateral trade agreement with China.
http://www.chinadaily.com.cn/china/2010-11/24/content_11599087.htm
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WARREN MOSLER Reply:
April 28th, 2011 at 6:13 pm
they may have also decided to stop adding to their dollar reserves?
beowulf Reply:
April 28th, 2011 at 8:33 pm
I guess the current crop of Russian insiders (former KGB) just can’t bring themselves to do it!
Good point, they probably know firsthand how easy it is to counterfeit. :)
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save america Reply:
April 29th, 2011 at 1:41 am
LOL BEO! :) Don’t forget all those russian/chinese hackers breaking into US banks and such and other spreadsheets and marking up zeroes in bank accounts and on credit cards and treasury balances.
Rodger Malcolm Mitchell Reply:
April 29th, 2011 at 9:14 am
Counterfeit money is equal in value to real money, so long as it is not discovered.
beowulf Reply:
April 29th, 2011 at 4:30 pm
“It’s the miracle of counterfeiting.” :o)
http://yglesias.thinkprogress.org/2010/09/does-the-money-have-to-come-from-somewhere/
save america Reply:
April 30th, 2011 at 4:30 am
“But the mere arrival of counterfeit hasn’t increased the quantity of goods and services the country can produce.”
True BEO, the arrival of more money (fake or real) hasn’t increased the global output of oil.
Here is one guy that has a new solution possibly, warren’s USVI has an oil refinery, maybe warren should like at growing some algae next to his superyacht.
http://www.financialsense.com/financial-sense-newshour/big-picture/2011/04/23/3/algae-to-oil-the-silver-bullet-for-energy
WARREN MOSLER Reply:
April 30th, 2011 at 5:01 pm
the counterfeiting ‘helps’ when it removes fiscal drag imposed by the govt that’s overtaxing us for the size govt we have.
if taxes were at the right level in the first place the counterfeiting would be entirely inflationary
Ed Rombach Reply:
April 28th, 2011 at 4:26 pm
Maybe the Russians are buying gold with dollars earned from selling oil. Probably only Russian miners would want to accept Rubles for gold.
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Tom Hickey Reply:
April 28th, 2011 at 11:24 pm
Yes, that sounds more probable that creating rubles.
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WARREN MOSLER Reply:
April 28th, 2011 at 6:08 pm
i think they buy gold with their oil revenues, which could mean a variety of foreign currencies.
but yes, mainly dollars, which also helps explain the dollar decline
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Tom Hickey Reply:
April 28th, 2011 at 11:23 pm
Are these countries buying gold because of the dollar depreciation, not wanting to save in a currency that is declining.
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April 29th, 2011 at 4:47 am
WM – here’s a take on your ECB proposal you might find interesting:
http://www.interfluidity.com/v2/1513.html#comment-15977
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WARREN MOSLER Reply:
April 29th, 2011 at 7:00 am
thanks, just posted! must be too intimidating for them to conduct the discussion on this site.
And over there Rammy gets away with a lot he might get called out on here…
:)
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Mario Reply:
April 29th, 2011 at 12:39 pm
I don’t see your post over there…what name did you post under?
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Tom Hickey Reply:
April 29th, 2011 at 12:58 pm
Warren, your comment must have gotten caught in the spam filter.
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WARREN MOSLER Reply:
April 30th, 2011 at 4:52 pm
ok. happens
April 29th, 2011 at 9:34 am
Interesting video on pegged rates in the 1940′s:
http://vimeo.com/22977594
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Mario Reply:
April 29th, 2011 at 12:28 pm
YES!!! Very interesting.
It seems he still believes though that tax revenues actually “pay for things” which seems to be why he’s so upset with Bernake supporting the tax cuts when they should be spending instead.
Other than that though…he’s spot on it seems to me and ironically blends MMT ideas very well into the current institutions and possibilities we have available to us today…his ideas and suggestions seem much more plausible and would be much more widely accepted by the public versus our ideas of going to no-bonds, etc. LOL!!
Warren…do you know these guys? You should hook up with them…and maybe let them know how government spending works and they can help MMT with getting some policy recommendations that might actually go somewhere…a more consumer conscious Fed would be widely appreciated by the public I think.
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beowulf Reply:
April 29th, 2011 at 4:42 pm
Tim Canova is a good guy. If you’ll recall, he wrote a magazine piece a few months ago about Fed operations during the 1940s
http://prospect.org/cs/articles?article=the_federal_reserve_we_need
After that article was published, I sent him a link to Warren’s book and he wrote back mentioning that he’d met Warren in Miami (late 90s IIRC) back when he taught at U-M. And since every MMT conversation loops back to Bill Vickrey eventually, Canova mentioned also his friendship with Vickrey and forwarded an interesting article he’d written about him.
Critics of Vickrey’s full-employment macroeconomic vision have noted that his Nobel was awarded not for such progressive views but for his earlier work in microeconomics. This article connects Vickrey’s early theoretical work with his full-employment blueprint.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=929221
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April 29th, 2011 at 2:19 pm
Mario,
The zero interest rate is not essential to MMT. The essential MMT point here, as I understand it, is that interest rates are a policy variable and can be pegged at a low number. 3/8ths for 90 days and 2 point something for long bonds sound pretty low to me.
And I really agree it makes MMT solutions through fiscal intervention much more palatable for non-MMTers since a low interest rate (less than the growth rate) avoids the exploding debt to gdp ratio fiscal conservatives (and deficit doves) fret about.
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