Saturday, July 30, 2011


Translated by Roger Glémet

Jacques Rueff

"...After the war Rueff became one of the leading French members of the classical liberal Mont Pelerin Society, the president of the Inter-Allied Reparations Agency (IARA), and the minister of state of Monaco. Rueff was strongly in favour of European integration and served from 1952 to 1962 as a judge on the European High Court of Justice.

He advised General de Gaulle after de Gaulle became French President in 1958. The 1958 Rueff Plan (also known as the Rueff-Pinay Plan) balanced the budget and secured the convertibility of the franc, which had been endangered by the strains of decolonization.

In the 1960s, Rueff became a major proponent of a return to the gold standard and critical of the use of the dollar as a unit of reserve, which he warned would cause a worldwide inflation. A member of the Académie des Sciences Morales et Politiques, Rueff was elected to the Académie Française in 1964. Foreseeing the emerging European Community Common Market, Rueff recommended cutting barriers to competition in his second report. Along with co-writer Louis Armand and helped by an ad-hoc committee of experts, the "plan Rueff-Armand" - as the press would call it - is published in 1960. The full title of the report is "Rapport du Comité pour la suppression des obstacles à l'expansion économique", which translates as "Report on suppressing barriers to economic growth"..."



The problem of Western currency is more topical than ever. For ten years now, the international monetary system has been patched up by many expedients that were intended to extend its assured life. It cannot endure very long in the present state. The following pages afford a description of its modifications over time. They provide a diagnosis and make a prognosis possible. Some qualification is necessary, however, as regards the rate of foreseeable evolution. The art of monetary expedients has been refined to such a point over the last ten years that no one can predict what artificial devices can be generated by the fertile minds of experts. One thing is certain, however: while additional innovations may stave off the gradual deterioration of the system for a while, they cannot change the outcome. As far as prognostication is concerned, events can never be wrong. But unfortunately, events have already passed judgment. It is to be hoped that they will not continue to show that in the monetary field, as indeed in other fields, the same causes always bring about the same effects, and those who persist in ignoring the past are irrevocably doomed to live the same sequence of events again..."

[Mrt: Interesting part: "Nathanaël or Paper-Gold" pg.131]

"...During the ministerial meeting of 17-18 July 1967, the participants
consistently affirmed and solemnly reaffirmed that any reform
would only be implemented once the U.S. balance-of-payments
deficit had been eliminated, failing which such reform would only
look like an expedient to enable the deficit to be settled for a little
while longer without any gold transfer.
There are two procedures—and only two—for correcting a
balance-of-payments deficit: either administrative action through
authoritative controls of capital outflows, or introduction of an
adequate money-management technique

"Nevertheless, the high monetary authorities of the United States,
urged on by zealous mediators, state that "gold as an exchange instrument
is bound to disappear" and want to substitute "papergold"
The first reason, they say, is that "one does not see how enough
gold could be made available to meet international payments requirements."
With the gold price at its present level, they are certainly right.
But they forget that since the price of gold was fixed at this level
($35 an ounce) in 1934, all prices in the United States have more
than doubled. Gold requirements are not related to a specific weight
but to a specific value. The decision that maintained the price of
the yellow metal at a level unrelated to the general price level has
in fact reduced by more than 50 percent the nominal value of gold..."


The Age of Inflation, 1964
Balance of Payments, 1967
The Gods and the Kings, 1972

Thursday, July 28, 2011

UN - The Commission of Experts (UN)

The Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System

"Following the break out of the financial crisis that originated, in 2008, in the most advanced countries, and then spread over to the emerging economies and less developed countries, the President of the United Nations General Assembly convened a panel of experts to discuss the large array of issues related to it.
In the same breath, the President of the United Nations General Assembly established a Commission of Experts whose mandate is to reflect on the causes of the crisis, assess impacts on all countries and suggest adequate responses as to avoid its recurrence and restore global economic stability.
The Commission will thus produce a report on recommendations to be considered in the preparatory process leading to the Conference at the highest level on the world financial and economic crisis and its impact on development called for in the final document adopted at Doha in December 2008 (resolution A/RES/63/239)."

[Mrt: I will return here in future]

TT - Triffin International Foundation

Triffin International Foundation

The aims that are pursued by the Triffin International Foundation (FIT), which is chaired by Alexandre Lamfalussy, are threefold.

First of all, the Foundation promotes research on the life and work of the economist Robert Triffin (1911-1993), attaching particular value to the role he played as an advocate of European integration. 

It also supports education in the field of monetary integration through the Robert Triffin Chair. 

Finally, the Foundation seeks to enhance the debate on a necessary reform of the international monetary system as part of the Triffin 21 Initiative, which is among others, animated by Tommaso Padoa-Schioppa.





February 8th, 2011

* A group convened by
Michel Camdessus, Alexandre Lamfalussy and Tommaso Padoa-Schioppa,
and also comprising Sergey Aleksashenko, Hamad Al Sayari, Jack T. Boorman, Andrew Crockett, Guillermo de la Dehesa, Arminio Fraga, Toyoo Gyohten, Xiaolian Hu, André Icard, Horst Koehler, Guillermo Ortiz, Maria Ramos, Y.Venugopal Reddy, Edwin M. Truman, and Paul A. Volcker


Monday, July 25, 2011

CBs - Tensions and New Alliances: the Currency Wars Mr. Mario Draghi

Session 2. Tensions and New Alliances: the Currency Wars
Mr. Mario Draghi

Les Rencontres Économiques d’Aix-en-Provence
8-9-10 July 2011

 "The concept of “currency war”, coined by Brazil’s Finance Minister Guido Mantega in September 2010..."

"If we look back at the developments in the international monetary system over the past 30 years, we see that among advanced economies the era of competitive devaluations has come to an end. By the end of the 1990s, a large body of research had emerged pointing out the conflict between intervention in foreign exchange markets and the commitment of monetary policy to price stability. In the United States, the doubts about the effectiveness of sterilized interventions prompted their abandonment some time after the Mexican crisis. In Europe, the adoption of a single currency put an end to the realignments that had characterized first the “Snake” and then the first two stages of the European Monetary Union."

"...Currency interventions in these economies are now made only in case of excessively rapid and large fluctuations. In the years from 1981 to 1997 the Federal Reserve intervened 453 times, more than 30 interventions per year on average. In the last 12 years, in contrast, it has intervened only twice, on September 2000, when the euro had reached a record low against the dollar, and on 18 March this year, in the aftermath of the earthquake that hit Japan...."

The European Central Bank has intervened only four additional times, in September and November 2000. Japan has been somewhat more reluctant to abandon currency interventions, because of the continuing upward pressures on the yen in the face of a troubled slow-growing economy. Yet, after 2004, it has intervened only twice, on September 2010 and this year in the days following the earthquake.



Saturday, July 23, 2011

Ethical - Fairtrade gold

"Fairtrade and Fairmined certified gold, the world's first independent ethical certification system for gold, will offer you the guarantee of a product which has been responsibly mined It's important to know how your most treasured pair of earrings or your showpiece necklace started their journey. Important because all Fairtrade and Fairmined gold is mined from small-scale and artisanal mines in a way that seeks to reduce dependence on harmful chemicals. Good news for mining communities in South America and good news for the people who live and mine there. Look carefully and you'll find the Fairtrade and Fairmined stamp on the inside of every piece."


Friday, July 22, 2011

GATA - Follow up on Lambourne´s claim

Are the central banks running a fractional gold system?
16 December 2010

 "This thought is prompted by a forensic study of the Bank for International Settlements’ records and accounting procedures with respect to its dealings in gold, which was presented by Robert Lambourne to the Gold Symposium in Sydney on 9th November.

Lambourne points out that the BIS was founded in 1930, when settlements between central banks routinely involved gold, and the primary function of the BIS was to facilitate these settlements without the physical transfer of bullion. This involved gold accounts being maintained at the BIS for gold owned by central banks, with other central banks at the main depository centres. Lambourne cites the example of the pre-war German Reichsbank, which held gold through the BIS in Amsterdam, Berne, Brussels, London and Paris..."

Central banks were offered two different types of account at the BIS, earmarked and sight: earmarked accounts recorded gold held separately and specifically for a central bank, and sight accounts were non-specific. Earmarked gold is allocated, while sight gold is unallocated; earmarked is custodial and sight is co-mingled.

It will be difficult enough to stop a run by unallocated account holders on the bullion banks, without forcing a cash-payout amnesty. But if the central banks themselves cannot supply the necessary bullion to prevent this, the prospect of a total collapse of paper money will be staring us all in the face..."


[Mrt: Interesting development here when one reads the last 5 docs. So, how it is and what is behind the closed doors actually happening?]

Thursday, July 21, 2011

GATA - Follow up on OECD & BIS docs


BIS gold records may facilitate double counting, study concludes

By: Chris Powell and Robert Lambourne

BIS - 80th Annual Report

80th Annual Report
1 April 2009–31 March 2010;
Basel, 28 June 2010

submitted to the Annual General Meeting
of the Bank for International Settlements
held in Basel on 28 June 2010

Ladies and Gentlemen,
It is my pleasure to submit to you the 80th Annual Report of the Bank for International Settlements for the financial year which ended on 31 March 2010. The net profit for the year amounted to SDR 1,859.8 million, compared with SDR 446.1 million for the preceding year. Details of the results for the financial year 2009/10 may be found on pages 144–7 of this Report under “Net profit and its distribution”.

The Board of Directors proposes, in application of Article 51 of the Bank’s Statutes, that the present General Meeting apply the sum of SDR 374.1 million in payment of a normal dividend of SDR 285 per share costing SDR 155.6 million and a supplementary dividend of SDR 400 per share costing SDR 218.5 million. These dividends would be payable in any constituent currency of the SDR, or in Swiss francs.

The Board further recommends that SDR 148.6 million be transferred to the general reserve fund, SDR 12.0 million be transferred to the special dividend reserve fund and the remainder – amounting to SDR 1,325.1 million – to the free reserve fund.

If these proposals are approved, the Bank’s dividend for the financial year 2009/10 will be payable to shareholders on 8 July 2010.

Basel, 11 June 2010 JAIME CARUANA
General Manager


Wednesday, July 20, 2011

UN - System of National Accounts 2008

System of National Accounts 2008
European Commission 
International Monetary Fund 
United Nations
Organisation for Economic Co-operation and Development
World Bank


"3. Acquisitions less disposals of valuables

The asset boundary

10.149 Valuables include precious metals and stones, antiques and other art objects and other valuables. However, not all items that may be described by one of these titles should necessarily be included as a valuable in the balance sheet of the owner. The intent of the heading is to capture those items that are often regarded as alternative forms of investment. At various times, investors may choose to buy gold rather than a financial asset and pension funds have been known to buy “old master” paintings when the prices of financial assets were behaving in a volatile manner. Individuals (households in SNA terminology) may also choose to acquire some of these items knowing that they may be sold if there is a need to raise funds.


10.150 Costs of ownership transfer, such as valuers’ and auctioneers’ margins, are often incurred when valuables are exchanged. As with other non-financial assets, these costs are treated as gross capital formation and included in the value of the items when recorded in the balance sheet.

Transactions in valuables

10.151 A possible categorization of valuables is: precious metals and stones; antiques and other art objects; and other valuables. This list should be regarded as indicative and supplementary rather than a standard breakdown. The context of each category is described to assist in identifying and valuing valuables.

Precious metals and stones

10.152 Precious metals and stones are treated as valuables when they are not held by enterprises for sale or use as inputs into processes of production nor are held as monetary gold and are not held as a financial asset in the form of unallocated metal accounts.

Antiques and other art objects
10.153 Paintings, sculptures, etc., recognized as works of art and antiques are treated as valuables when they are not held by enterprises for sale. In principle, museum exhibits are included under valuables.

Other valuables

10.154 Other valuables not elsewhere classified include such items as collections of stamps, coins, china, books etc. that have a recognized market value and fine jewellery, fashioned out of precious stones, and metals of significant and realizable value. .."


"Chapter 11: The financial account

11.8 Financial assets consist of all financial claims, shares or other equity in corporations plus gold bullion held by monetary authorities as a reserve asset. Gold bullion held by monetary authorities as a reserve asset is treated as a financial asset even though the holders do not have a claim on other designated units. Shares are treated as financial assets even though the financial claim their holders have on the corporation is not a fixed or predetermined monetary amount.


"...C. Recording of individual financial instruments

1. Monetary gold and SDRs

11.44 Monetary gold and Special Drawing Rights (SDRs) issued by the International Monetary Fund (IMF) are assets that are normally held only by monetary authorities.

Monetary gold

11.45 Monetary gold is gold to which the monetary authorities (or others who are subject to the effective control of the monetary authorities) have title and is held as a reserve asset. It comprises gold bullion (including gold held in allocated gold accounts) and unallocated gold accounts with non-residents that give title to claim the delivery of gold. All monetary gold is included in reserve assets or is held by international financial organizations. Only gold that is held as a financial asset and as a component of foreign reserves is classified as monetary gold. Therefore, except in limited institutional circumstances, gold bullion can be a financial asset only for the central bank or central government. Transactions in monetary gold consist of sales and purchases of gold among monetary authorities. Purchases (sales) of monetary gold are recorded in the financial account of the domestic monetary authority as increases (decreases) in assets, and the counterparts are recorded as decreases (increases) in assets of the rest of the world. Transactions in non-monetary gold (including nonreserve gold held by the monetary authorities and all gold held by financial institutions other than the monetary authorities) are treated as acquisitions less disposals of valuables (if the sole purpose is to provide a store of wealth) and otherwise as final or intermediate consumption, change in inventories, exports or imports. Deposits, loans, and securities denominated in gold are treated as financial assets (not as gold) and are classified along with similar assets denominated in foreign currencies in the appropriate category. A discussion on the treatment of allocated and unallocated gold accounts appears under currency and deposits.

11.46 Gold bullion takes the form of coins, ingots, or bars with a purity of at least 995 parts per thousand; it is usually traded on organized markets or through bilateral arrangements between central banks. Therefore, valuation of transactions is not a problem. Gold bullion held as a reserve asset is the only financial asset with no corresponding liability."


"Other deposits
11.60 It is possible to hold accounts for both “allocated gold” and “unallocated gold”. The distinction is precise, practical and recognized in the balance sheets of units holding these accounts. An allocated gold account gives full outright ownership of the gold and is equivalent to a custody record of title. The unallocated gold account does not give the holder the title to physical gold but provides a claim against the account provider denominated in gold. In effect, therefore, it is a deposit denominated in gold. They are thus treated as deposits in foreign currency. Accounts that are held for allocated gold, on the other hand, are treated as holdings of valuables unless they are held by monetary authorities, or other units authorized by them, as reserves..."


"Appearance and disappearance of financialassets and liabilities

12.36 Financial assets that are claims on other institutional units are created when the debtor accepts the obligation to make a payment, or payments, to the creditor in the future; they are extinguished when the debtor has fulfilled the obligation under the terms of the agreement. Monetary gold held in the form of gold bullion, however, cannot be created and extinguished in this way; hence when it becomes a reserve asset it enters the financial part of the balance sheet as a reclassification in the other changes in the volume of assets account from valuables to monetary gold. (At the time it is acquired by a monetary authority it is first classified as a valuable.) The same recording is followed for allocated gold accounts that become part of monetary gold. When allocated gold accounts become reserve assets they are reclassified from currency and deposits to monetary gold, also in the other changes in the volume of assets accounts. Monetary gold may be sold to another monetary authority but otherwise any reduction in holdings follows a similar declassification path; the monetary gold is reclassified to be either a valuable (in the case of gold bullion) or currency and deposits (in the case of allocated gold accounwhen they occur, are recorded in terms of valuables or currency and deposits and not in terms of monetary gold.ts). Subsequent transactions, if and when they occur, are recorded in terms of valuables or currency and deposits and not in terms of monetary gold..."


3. Financial assets and liabilities

Monetary gold and SDRs

13.55 Monetary gold is to be valued at the price established in organized markets or in bilateral arrangements between central banks.

[Mrt: A two-tier market?]


Monetary gold

17.240 Monetary gold (including allocated gold accounts) consists of two subcategories, physical gold bullion and unallocated gold accounts, both of which are held by the monetary authorities (or other units authorized by them) as part of reserves. Although it may not be possible to publish these two subcategories separately for reasons of confidentiality, it is important to understand the different considerations that apply to each of them.

17.241 Gold bullion takes the form of coins, ingots, or bars with a purity of at least 995 parts per thousand. Gold held as a valuable by commercial banks or as inventories by some specialized industries, for example jewellers, may be indistinguishable from gold bullion or may be of a lower quality. Physical gold, excluding gold bullion included in monetary gold, whether gold bullion or not, can be referred to as commodity gold (since it is traded on commodity markets).

17.242 Gold bullion may be sold by one monetary authority to another in another country. In such a case the exchange is recorded as an exchange of financial assets only. In all other cases, the gold is reclassified as commodity gold and thus a valuable held by the monetary authority (and is no longer part of reserves) and is then sold as commodity gold. The reclassification is recorded in the other changes in the volume of assets account as demonetization of gold. If the gold is sold abroad it will feature in exports and imports of the countries concerned. When commodity gold is sold, there may be a trade margin attached to it. When a monetary authority acquires monetary gold a reverse path is followed. The gold is acquired initially as commodity gold either from a domestic unit or from abroad and is subsequently reclassified to monetary gold as monetization in the other changes in the volume of assets account.

17.243 There is no interest earned on gold bullion held as a valuable but it is subject to nominal and real holding gains and losses as the gold price changes. Interest can be payable when one monetary authority lends gold bullion held as reserves to another monetary authority.

17.244 Unallocated gold accounts are treated as foreign currency deposits unless they are held by the monetary authorities as part of foreign reserves. Unlike gold bullion, unallocated gold accounts have counterpart liabilities. Because the unallocated gold accounts classified as monetary gold must be held as part of foreign reserves, the counterpart liability is necessarily held abroad. The counterpart liability will not be treated as part of monetary gold in the counterpart country. (Assets held abroad as part of foreign reserves are generally not identified as such within the liabilities of the partner country.) If a monetary authority acquires an unallocated gold account to be treated as reserves, it is recorded first as an acquisition of a foreign currency deposit and then reclassified to monetary gold as a change of classification in the other changes in the volume of assets account. Removing an unallocated gold account from reserves is recorded as, first, a change in classification from monetary gold to a foreign currency deposit and then as a disposal of the deposit.

17.245 Unallocated gold accounts attract interest and a service charge and are also subject to nominal and real holding gains and losses as the gold price alters.

9. Definition of monetary gold and gold bullion revised
Reference: chapter 11, paragraph 11.45 and 11.46 A3.116 The definition of monetary gold has changed in the 2008 SNA in order to align with BPM6. The change stems from the recognition of allocated and unallocated gold accounts whereby the allocated gold account provides title to the physical gold and the unallocated gold account is a deposit denominated in gold. The latter is treated as foreign currency if held with non-residents. Gold bullion (that is, coins, ingots or bars with a minimum purity of at least 995 parts per thousand) is the only financial asset recognized with no corresponding liability when held as a reserve asset by the monetary authorities. Monetary gold is defined as gold to which the monetary authorities (or others who are subject to the effective control of the monetary authorities) have title and is held as a reserve asset and comprises gold bullion and unallocated gold accounts with non-residents)


UN - SNA_codes: history

Historic Versions of the System of National Accounts

"The broad objective of the System of National Accounts (SNA) is to provide a comprehensive conceptual and accounting framework for compiling and reporting macroeconomic statistics for analysing and evaluating the performance of an economy..."

"...The 2008 SNA, which is an update of the 1993 SNA, addresses issues brought about by changes in the economic environment, advances in methodological research and the needs of users...."


[Mrt: Upgrading knowledge about classifications, good to check the history and development of non/monetary gold classifications...]

OECD accounting again - 2006 guide for statistics


Cancels & replaces the same document of 20 September 2006 

"...Classification of monetary gold and SDRs. In the 1993 SNA, Monetary gold and SDRs is a
single category for which a secondary level of classification as monetary gold and SDRs,
respectively, is absent. Monetary gold and SDRs is also a major financial asset category in the
monetary statistics, but Monetary gold and SDRs are shown as separate categories in the
presentations of central bank accounts in the sectoral balance sheet and the Central Bank

"...14. In 2008, an update of the 1993 SNA will be published as the 1993 SNA, Rev. 1. The extensive
collaborative efforts of national accounts statistics specialists from many countries has led to the
identification of several methodological revisions that will appear in the 1993 SNA, Rev. 1 and that
have been integrated into the methodology in this guide. These new features are:
Unallocated gold deposits. Deposit claims on gold (as opposed to title claims on physical gold)
are classified within Deposits in this guide
. This type of deposit is not specifically covered in
the 1993 SNA or the MFSM...."


"...62. The classification scheme for the financial assets and liabilities in the sectoral balance sheets in
the monetary statistics is shown in Box 2.2. A single valuation rule—either book value or market/fair
value—is applied to each category of financial assets and liabilities..."

[Mrt: Nice to know that SDR are treated officially the same way as monetary gold.]

Chapter 4. Classification of Financial Assets
125. Some countries issue gold coins, which are held for intrinsic value, or commemorative coins, which are held for numismatic value. If not in active circulation, such coins should be classified as nonfinancial assets rather than as financial assets, and within Other accounts payable by the seller/issuer.

126. Central bank or central government holdings of unissued or demonetized currency are recorded as nonfinancial assets in the sectoral balances sheets. Demonetized currency should be removed from the balance sheet upon disposal.

156. This manual recommends that gold loans be treated as off-balance-sheet items (i.e., not recorded as transactions). If the gold is on-sold, however, the on-selling party (i.e., the gold borrower) should record a gold transaction, in like manner to gold swaps. The gold underlying a gold loan is referred to as gold in an allocated account for which an ownership claim on physical gold exists. Gold in an unallocated account, which refers to a gold-denominated claim against a third-party (not the physical gold holder), is classified as a financial asset, specifically as a deposit.

166. Sixth bullet. Should read: “ Valuation adjustment shows the net counterpart to changes in the value of assets and liabilities on the balance sheets of financial corporations, excluding those changes in value (i.e., gains or losses) that are recorded in profit or loss for the period.


[Mrt: The whole doc is worth a read, otherwise i would not post it, right? :o)]

Tuesday, July 19, 2011

OECD - Back to oecd history doc - 1991 gold accounting

Gold in international systems of national accounts

Meeting of national account experts; 1991

 paragraph 13:

[Mrt: interesting is also the page 5 case about how Brazil dishoarded private 130t of gold]


Dedicated to gold miners

Kevin Telmer, Artisanal Gold Council

"...To genuinely solve the problem of making gold sustainable and supporting human rights, the OECD needs to work proactively to support the economic development and reduce the poverty of 10 million miners currently operating in high‐risk areas..."


IMF - The Macroeconomic Statistical Treatment of Reverse Transactions

The Macroeconomic Statistical Treatment of Reverse Transactions

Fourteenth Meeting of the IMF Committee on Balance of Payments Statistics; Tokyo, Japan, October 24-26, 2001
Prepared by the Statistics Department International Monetary Fund

*no comments, no extracts, more in Selected bibliography section*

[Mrt: 41 page long detailed nice study document]



Cancels & replaces the same document of 21 September 2004

National Accounts and Economic Statistics - Financial Accounts


This document has been prepared by John JOISCE - IMF (USA)

"...This paper is for the information of the members of the Advisory Expert Group (AEG), regarding the currently accepted treatment of repurchase agreements, securities lending without cash collateral, gold loans, and gold swaps. The paper also sets out areas where work is continuing by the IMF Committee on Balance of Payments (Committee) and on which the Committee will provide further reports in due course..."


8. Gold swaps are usually undertaken between monetary authorities. The gold is exchanged for foreign exchange deposits (or other reserve assets) with an agreement that the transaction be unwound at an agreed future date, at an agreed price. The monetary authority acquiring the foreign exchange will pay interest on the foreign exchange received. Gold swaps are typically undertaken when the cash-taking monetary authority has need of foreign exchange but does not wish to sell outright its gold holdings. In that manner, gold is a leveraging device. Gold swaps sometimes involve transactions where one of the parties is not a monetary authority (usually it is another depository corporation). Gold swaps between monetary authorities do not usually involve the payment of margin.

9. Gold loans or deposits are undertaken by monetary authorities to obtain a non-holding gain return on gold which otherwise earns none. The gold is “lent to” (or “deposited with”) a resident or nonresident financial institution (such as a bullion bank) or another party in the gold market with which the monetary authority has dealings and confidence and which is probably acting as an intermediary for a gold dealer or gold miner which has a temporary shortage of gold. The intermediary will, in turn, “lend” the gold to the dealer or miner – in effect, a change in ownership of nonmonetary gold then occurs. In return, the borrower may provide the monetary authorities with high quality collateral, usually securities (frequently, but not necessarily, substantially in excess of the value of the gold provided) but not cash, and will pay a “fee” thereby increasing the return from holding gold. The collateral does not change ownership and is treated as an off-balance sheet holding of the monetary authority.

10. The nature of gold swaps and gold loans/deposits is similar to that of repos and securities lending in that the market risk toward the underlying asset (in this case, gold) remains with the original holder: if gold prices increase, the volume of gold returned is the same as that swapped, while the same value of the foreign exchange (as defined at the time of the initiation of the swap, plus any accrued interest) is returned.


"...Statistical treatment
11. The statistical implications of gold swaps and gold loans/deposits are complex and have not been fully worked through. Work is still being undertaken by the Committee to address the implications. In particular, gold may be double counted with either a gold swap or gold loan/deposit if the party acquiring the gold were to on-sell it outright, because both the original owner and the outright purchaser would report ownership of the gold. In addition, there is the difficulty of having monetary gold being used in these transactions for purposes other than for reserve assets, and how (de)monetization would apply if the gold is sold for industrial purposes. Moreover, there is a proposal, as part of the revision to BPM5 and the update of 1993 SNA, to treat (some) nonmonetary gold as a financial asset, rather than a commodity, and the outcome of that discussion may have further implications on the treatment of gold swaps and gold loans/deposits. Finally, how the “fee” for gold swaps and gold loans/deposits should be treated has yet to be resolved. All these matters are being considered by the Committee and a report will be taken to the AEG in due course."


[Mrt: No idea if there is some update already here.]

OECD - Reverse Transactions based on OECD

 Reverse Transactions

[Mrt: There is no info about the date or who wrote this document. I pick those 4 pages which I find important]

What are reverse transactions?
All involve sale of an asset but original owner remains exposed to asset
A repo involves sale of securities at a specified price with a commitment to repurchase the same or similar securities at a fixed price on a specified future date or with an “open” maturity.
A repo is viewed from the perspective of the seller of securities (“cash taker”). The agreement is called a reverse repo when viewed from the perspective of the securities buyer (“cash provider”).

Securities lending the same as repo except no exchange of cash (terminology may differ)
Same legal change in ownership but with “lender” remaining exposed to market gains/losses.
Collateral usually provided but usually not available for resale by “lender” until/unless default by “borrower”
Securities “borrower” pays fee for the “loan”

Gold swaps:
...similar to repos; gold swapped for foreign exchange, with commitment to return the gold at agreed price.
Market risk (of price loss/gain) remains with lending monetary authority
Volume of gold returned, plus accrued interest (rate of interest agreed at inception of swap)

Gold loans/deposits:
...similar to securities lending: no cash involved but full ownership transferred, even though market risk remains with “lender”.
“Borrower” may record gold as foreign currency deposit liability on balance sheet
Volume of gold repayable.
Collateral (usually securities) provided by “borrower”. Not usually available to “lender/depositor” until/unless default
Fee payable by “borrower”


Gold swaps
used to provide cash taker with liquidity in situation where it is reluctant to sell gold holdings
Gold loans
provide liquidity to gold market; assist “borrower” (who may be intermediary or gold miner) to make delivery when short of gold

Issues for consideration: securities lending
If treated in analogous manner to collateralized loan for repo
No transaction recorded
Same potential risk of double counting as for repo if/when security on-sold outright
Reflects market exposure of original owner
What does the fee represent?

Issues for consideration: securities lending
If treated as transaction in underlying security
Transaction recorded so follows legal change of ownership
Possible need for creation of financial derivative
Contrary to market view; fee hard to explain
Avoids potential double count if/when on-sold
Issues for consideration: gold swaps
If treated in analogous manner to collateralized loan for repo

Potential for “overstating” reserve assets
Demonetization not necessary if swapped with non-monetary authority; commodity gold for outright purchaser and “short” for on-seller
Consistent with payment of interest on foreign exchange received
View of central bankers and market exposure of original owner

Issues for consideration: gold swaps
If treated as outright sale of gold:

Follows legal change of ownership
Possible need to create financial derivative
Avoids potential “overstatement” of reserve assets
Contrary to central bankers’ views and with market exposure of original owner
Interest payment difficult to explain/interpret
Demonetization necessary if swapped with non-monetary authority

Issues for consideration: gold loans
If treated in analogous manner to collateralized loans for repos:

No transaction recorded by monetary authority
Possible deposit liability with no deposit asset
Consistent with payment of fee
No demonetization necessary if swapped with non-monetary authority
Reflects market exposure of original owner
Consistent with view of central bankers

Issues for consideration: gold loans
If treated as transaction in gold:

Contrary to central bankers’ views
Contrary to market exposure of original owner
Central bankers unlikely to provide information
Avoids potential double count
Requires demonetization if deposited/lent to non-monetary authority
Creation of financial derivative probable



Château de la Muette


Since 1949, it has been headquartered in the Chateau de la Muette in Paris, France. After the Marshall Plan ended, the OEEC focused on economic questions.

[Mrt: Why are my searches all the time hitting this family?]

Monday, July 18, 2011

PT - Paul Tustain visual presentation

IX Investor Presentation - 27 October 2006

 Article & Pictures from 27 Oct '06!

BullionVault offers its own view on gold


[Mrt: simply put.]

PT - Paul Tustain on "In search of reliable scarcity"

The Economist and Gold - 31 May 2011

 "...Gold offers humanity one exceptionally useful property; it has an extraordinarily stable stock. There are 166,000 tonnes of the stuff above ground (worth about 8 trillion dollars) of which about 88% is held as a value store of sorts, in jewellery (52%) and bullion (36%). The stock is growing by about 1.5% a year, from the combined efforts of all the world's miners.

[Mrt: In Asian countries jewellery is another way of savings bought by weight rather than art properties]

It is because gold is each of:

    geologically rare;
    elemental (i.e. incapable of being manufactured); and
    industrially useless,

that it has this reliable stock quantity. Nothing else can do it; not silver, which is 80 times more common in the ground, nor platinum, which is far too useful as a catalyst to offer stock stability.

Reliable scarcity is the key property savers require of money, which otherwise fails to store value. But of course we don't need gold to deliver reliable scarcity, we can usually create that reliable scarcity artificially, as we do with our modern currencies.

Now the marginal utility explanation. When new currency is too freely issued reliable scarcity becomes under-supplied, and savers go in search of it. Having seen artificial reliable scarcity fail in one currency, the promise of it in another is unconvincing, so they turn to natural reliable scarcity, and demand for it increases dramatically as governments print money. This is what drives gold up. Mr Sandberg is right though, that it will eventually go down again, when currencies' artificial scarcity once more becomes reliable, and when those currencies start to generate a yield..."

[Mrt: Is this last blue sentence true? or will new Fofoa´s higher level  hold? Time will tell. Utility for savers and a hard lesson will  teach us I believe. Then freegold as a possible outcome?]

"...The question, therefore, is whether the savers who own 100 trillion dollars of dated debt instruments in the bond markets will take fright at continuing money printing policies of the US and other governments. That 100 trillion of dated debt has already started running down the clock. It is shifting to the short end, where it behaves more and more like cash..."

[Mrt: The ticking monetary bomb.]


PT - Random pick of Paul Tustain article

The man who taught Warren Buffet - 7 May 2006 

"...There is only one way these spending pressures can be halted, and that is to restore the final decision on public spending to the producers of wealth. Taxpayers must regain their right to obtain gold in exchange for the fruits of their labour. This restoration would give the people the final say-so on governmental spending, and would enable wealth producers to control the issuance of paper money and bonds.
I do not ask you to accept this contention outright. But if you look at the political facts of life I think you will agree that this is the only genuine cure..."

"...Before 1933 the people themselves had an effective way to demand economy. Before 1933 whenever the people became disturbed over Federal spending they could go to the banks, redeem their paper currency in gold, and wait for common sense to return to Washington." ..."

"...For those 60 years the US has been able to put strong dollars into circulation and buy the world's goods at low prices.  The result is a world awash with dollars, waiting to be released when, for whatever reason, a different reserve begins to look more attractive. ..."


[Mrt: The feedback loop has been deliberately broken.]

PT - More of Paul Tustain


Article history

20 Jun '11 Is Gold Just a Useless Metal? Paul Tustain
31 May '11 The Economist and Gold Paul Tustain
14 Apr '11 What is Today's "Fair Value" Gold Price? Paul Tustain
20 Apr '10 Recent Concerns Regarding "LBMA Gold" Paul Tustain
11 Feb '10 Gold – the Ultimate Bubble? Paul Tustain
27 Nov '09 Gold Buyer's Checklist Paul Tustain
09 Oct '08 Gold & the Flood of Cheap Government Money Paul Tustain
02 Sep '08 Tale of Two Malls Paul Tustain
21 Aug '08 Fooled by Randomness Paul Tustain
21 Jul '08 The Red Queen: Sex & the Evolution of Human Nature Paul Tustain
14 Jul '08 The Richest Man in Babylon Paul Tustain
11 Jul '08 Popular Financial Delusions Paul Tustain
07 Jul '08 The Great Crash 1929 Paul Tustain
30 Jun '08 The Age of Gold: The California Gold Rush & the New American Dream Paul Tustain
30 May '08 Who Gets My Apple? Paul Tustain
01 Apr '08 Why Rescues Don't Work Paul Tustain
20 Dec '07 Train Wreck Imminent Paul Tustain
11 Dec '07 Investment Landfill, Part II Paul Tustain
07 Sep '07 Bernanke's plums Paul Tustain
28 Aug '07 The gathering storm Paul Tustain
30 Jun '07 Investment landfill Paul Tustain
22 Jun '07 Bear Stearns, hedge funds & toxic waste Paul Tustain
27 Oct '06 IX Investor Presentation Paul Tustain
15 Sep '06 Two factors influencing September's price Paul Tustain
12 Jul '06 BullionVault Paul Tustain
02 Jul '06 London Paul Tustain
26 Jun '06 China Paul Tustain
24 Jun '06 The Case For Gold Paul Tustain
03 Jun '06 Lies & statistics Paul Tustain
01 Jun '06 On banking confidentiality Paul Tustain
22 May '06 Principals and agents Paul Tustain
16 May '06 Error messages from the economy Paul Tustain
07 May '06 The man who taught Warren Buffet Paul Tustain
01 May '06 The Portuguese airline passenger Paul Tustain
25 Apr '06 The Depression Paul Tustain
20 Apr '06 Hyperinflation Paul Tustain
16 Apr '06 Different ways of looking at risk Paul Tustain
12 Apr '06 The value of rarity Paul Tustain
11 Apr '06 Avoid banks Paul Tustain
17 Mar '06 Pricing gold in a glut currency Paul Tustain
17 Feb '06 Punishment for a central banker Paul Tustain

[Mrt: and now there is plenty fresh of study material :o)]

PT - Monetary Episodes From History

Full article here: The following is collection of short articles on the history of money

Gold at the junction of monetary systems

"...A previously successful credit based system will eventually collapse under the weight of its historical circumstances and the excesses of credit which it is sucked into at the time of its greatest success. As the process of collapse unfolds one monetary store after another demolishes savers.  If they hold notional long term obligations like pensions the underwriters fail.  If they hold institutional debt the issuers fail.  If they hold bank notes and the banks fail It takes very few failures before the population starts to see risk in every credit based construct. Their faith in their institutions evaporates, and they become acutely aware of the dangers of anything intangible, and anything whose supply can relatively easily be expanded. This is when they begin to think obsessively about things whose supply is subject to some fundamental limit..." 

Gold as a money of choice

"...Gold based money - even for economic superpowers - is temporary.  It disappears from circulation and seeks out the next great producers - to whom it will generally gravitate in settlement of new international trading debts.

Curiously the strongest industrial exporting nations of the last 50 years (notably Japan and Germany) have chosen to accumulate US dollars rather than gold, and now, instead of possessing bullion within their own borders these great exporters now own substantial slices - apparently some 40% - of the capital stock of foreign countries (particularly the United States) which buy their exports.

This is a break with ordinary patterns of international trade.  It indicates that Germany and Japan are trusting the people of the USA to defend foreigners' property rights over American self-interest..."

"...There is evidence that the Arabian oil exporters show a growing appetite for gold, with Dubai having comfortably the largest per capita gold inventory in the world, and Saudi Arabia having a reducing tolerance for dollars.  Equally interesting is a growing Chinese demand..." 

Source: Money for the powerful

[Mrt: How interesting that: "Paul Tustain is the editor of and director of BullionVault". This reminds me of Alar Tamming and Tavex story :o)]

Sunday, July 17, 2011


"...Spartan citizens were debarred by law from trade or manufacture, which consequently rested in the hands of the Perioikoi, and were forbidden (in theory) to possess either gold or silver. Spartan currency consisted of iron bars, thus making thievery and foreign commerce very difficult and discouraging the accumulation of riches. Wealth was, in theory at least, derived entirely from landed property and consisted in the annual return made by the helots, who cultivated the plots of ground allotted to the Spartan citizens. But this attempt to equalize property proved a failure: from the earliest times, there were marked differences of wealth within the state, and these became even more serious after the law of Epitadeus, passed at some time after the Peloponnesian War, removed the legal prohibition of the gift or bequest of land.

Full citizens, released from any economic activity, were given a piece of land which was cultivated and run by the helots. As time went on, greater portions of land were concentrated in the hands of large landholders, but the number of full citizens declined. Citizens had numbered 10,000 at the beginning of the 5th century BC but had decreased by Aristotle's day (384–322 BC) to less than 1,000, and had further decreased to 700 at the accession of Agis IV in 244 BC. Attempts were made to remedy this situation by creating new laws. Certain penalties were imposed upon those who remained unmarried or who married too late in life. These laws, however, came too late and were ineffective in reversing the trend...."


"...Issuance of coinage was forbidden. Spartans were obliged to use iron obols (bars or spits), meant to encourage self-sufficiency and discourage avarice and the hoarding of wealth. A Spartan citizen in good standing was one who maintained his fighting skills, showed bravery in battle, ensured that his farms were productive, was married and had healthy children...."



"...“It was now impossible to buy foreign goods and no cargo of merchandise would enter a Spartan harbor, no teacher of rhetoric trod Laconian soil, no begging seer, no pimp, no maker of gold and silver ornaments – because there was no coined money. Thus gradually cut off from the things that animate and feed it, luxury atrophied of its own accord.”

The wealthy had no outlet to show off their wealth and were resigned to keep it in storage.

Craftsman, now released from useless jobs, began to work in the manufacture of essential goods such as tables and chairs, so the competition among them was fierce and the resulting quality of these products first rate. ..."

Another link:


"...In fact throughout that time the Spartan iron coinage was perfectly operable on a notional value both enforced by law, which declared its status as legal tender, and underwritten by state integrity. It was only the eventual breakdown of Spartan political strength which finished the money, not the over-issuance of the coinage..."

"... Athens grew to culturally dominate Sparta in the 50 years after the apparent victory of the Spartans in the Peloponnese war Spartan merchants’ confidence in their iron coinage started to wane, and they steadily preferred to use gold and/or silver which was creeping into the system.
As the situation deteriorated the state decreed that "no coin of gold or silver should be admitted into Sparta," and that they should "use the money that had long obtained". The decree did not pass into practice because the choice was a bleak one - no goods, or goods traded in gold..."

[Mrt: The case of Sparta is very interesting! Does that mean that it was a close to Freegold environment? iron medium of exchange abundant but almost worthless to save in]

Another link:

Saturday, July 16, 2011

EU - Public consultation - Update for units of measurement directive

March 2007
Public consultation - Update for units of measurement directive
Subject : Consultation on the Units of Measurement Directive (80/181/EEC)

Source: Public consultation - Update for units of measurement directive

[Mrt: I posted it some time ago at Fofoa, its already discussed there, 46 pages long doc, worth a detailed study, lot about physical/paper gold market and possible move to Swiss area in case LBMA looses its credibility, some interesting parts to be extracted later]

EU - "VAT: special scheme for gold"

"VAT: special scheme for gold

Council Directive 1998/80/EC of 12 October 1998, supplementing the common system of value added tax and amending Directive 77/388/EEC - Special scheme for investment gold. [Official Journal L 281 of 17.10.1998]



In order to promote the use of gold as a financial instrument, this Directive introduces a tax exemption for supplies of investment gold. Previously, the normal tax arrangements applied to investment gold...

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal
Directive (EC) No 1998/80EC17.10.19981.1.2000OJ L 281 of 17.10.1998

Source: GOLD zero VAT taxation

[Mrt: an important document to be checked]

Othe docs:

Free movement of goods Infringement proceedings against France with regard to precious metals

Tuesday, July 12, 2011

The G-20 and the currency war

The G-20 and the currency war
Jean Pisani-Ferry, 25 October 2010
(This article was a recent contribution to The Brookings Institution)

"...every country seems to be aiming at a depreciation of its currency or at least at avoiding an appreciation: Japan with unilateral foreign exchange intervention; the U.S. and the U.K. through large-scale purchase of government bonds; China through keeping an almost fixed link vis-à-vis a depreciating U.S. dollar; and emerging countries all over the world through an array of techniques to discourage capital inflows or to ward off their effects on the exchange rate. Only the euro area seems to be bucking this trend, as the European Central Bank has taken the first steps toward an exit from exceptional crisis measures and has allowed a rise in the short-term interest rate. But even it cannot be indifferent to the risks of appreciation; a persistently strong euro would seriously complicate the economic adjustment under way in countries under stress like Spain, Portugal and Ireland..."

[Mrt: Under freegold the aim should be to have a well managed stable currency. No need for currency wars of this type.]

"...This looks familiar. Indeed, it took two years after the crash of the 1930s, from October 1929 to September 1931, for Britain to sever the pound’s link to gold and set in motion a currency war..."

[Mrt: so we are some time from LB collapse, how long will the two-tier market hold? The asymmetry between the physical only and paper gold can not and will never hold for too long.]

Source: The G-20 and the currency war

Monday, July 11, 2011

IAS2 notes


"As a result of the meeting of the Central Bank Accounting and Budget Committee held between July 11 and 13, 2005 in Brazil, the representatives of the Central Banks of Argentina, Brazil, Chile, Guatemala, Peru and Uruguay, with the representative of Banco de España attending as a guest, agreed to thoroughly analyze the application of some International Accounting Standards which have been reviewed and are currently contained in the International Financial Reporting Standards (IFRS), in order to prepare technical notes that contribute to the improvement of the position of central banks as regards the application of the IFRS when difficulties are encountered for said purpose..."

Gold as a reserve asset
"For years the old gold standard used to force central banks to support the issuance of circulating money with gold holdings. Paper money was convertible into gold according to a fixed rate. The development of the banking and credit system, as well as the need for circulating money during the First World War led to having amounts of money in circulation that were higher than the gold stock, which resulted in the gradual abandonment of the standard, to such an extent that no nation in the world uses said standard now. (~wiki)

However, gold is still an important part of the reserve assets of most central banks in the world as a way to diversify their portfolios or as a hedging against the United States Dollar..."

"...In Latin America, the average gold holdings as of December 2005 amounted
to 34 tonnes, with a relative average weight of 5.4% of total international


[Mrt: A good sum, good points in this paper. ...and Those lines one can never find in newspapers. :o); Note that Venezuela had 357,4 t]

CBs - Guardian of financial stability

Guardian of financial stability
December 2008

"The financial world in which DNB operates is changing faster each day. Some developments have been set in motion; others will surprise up tomorrow, the day after tomorrow or next year...

...And we prepare ourselves for future developments...

...All these developments greatly influence DNB´s future. The financial world is rapidly changing and our activities and priorities change accordingly. But our mission will not change. Stability to us is worth its weight in gold."

Source: Guardian of financial stability

[Mrt: Yes, lets see how it looks in a nice graph e.g. here: Featured statistic: 54 tonnes; 2007]