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Sanctions Busting, European Style

October 4, 2018

Sanctions Busting, European Style

U.S. officials were infuriated last week when Germany, the UK, and France unveiled plans to create a European payments channel to help Iran to avoid U.S. sanctions. Even more surprising was their chosen allies: in announcing their sanctions busting plan, the Europeans were joined by Russia and China.

There has been very little detail provided on the proposed payments channel. The press release describes it as “a Special Purpose Vehicle, to facilitate payments related to Iran’s exports (including oil) and imports.” Nor did EU High Representative Federica Mogherini’s comments after the press release contain much information about the special purpose vehicle’s technical specifications, other than to say that it would be “opened to other partners in the world.”

Despite the lack of particulars, I’ll make some educated guesses in this post about the intended role of the Special Purpose Vehicle (SPV) and how it will be designed. I think that the SPV will probably be able to carve out some space for the rest of the world to engage in Iranian trade, but we shouldn’t overestimate its power. The U.S., after all, wields an incredible amount of economic might and under Trump hasn’t been shy about deploying it.

Trump leaves the Nuclear Deal

The background for the creation of the new European payments channel is the Trump administration’s recent departure from the Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA). This was a deal signed by the France, UK, Germany, U.S., Russia, and China, or the E3+3, in 2015. The JCPOA promised to normalize Iran’s economic relations with the rest of the world in return for fully-audited limitations on Iran’s nuclear efforts.

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Interview Willem Middelkoop About The Big Reset

December 18, 2015

Interview Willem Middelkoop About The Big Reset

The very reason I became interested in gold after the financial crisis in 2008 was because of Dutch gold guru, author, journalist, entrepreneur, and fund manager Willem Middelkoop. When I started reading his books I was immediately obsessed with economics and the gold market – along with thousands of others across the world.  Who would have thought that I would become a precious metals analyst a few years later?

It was an honor to have contributed to Willem’s latest book The Big Reset with translations from Chinese policy makers that stimulate their citizenry to accumulate physical gold and my initial research into the Shanghai Gold Exchange that revealed Chinese gold demand was approximately twice a large as what was previously thought in the English-speaking world.

When The Big Reset was first released in January 2014 I’ve conducted an interview with its author about the inevitable reset of the international monetary system (the interview was published in two parts on this blog – one, two). Since then a lot has happened in the global realm of economics and at the same time The Big Reset became an international best seller. As we speak The Big Reset has been translated in Dutch, German and Chinese and is expected to appear in Portuguese, Arabic, Polish and Vietnamese.

To keep up with the most recent developments Willem has added 70 pages in the revised edition of The Big Reset. For me a reason to have another chat with him about what he saw has happened in the past two years:

The Big Reset

J: Is it a coincidence that after the financial crisis more tensions between the West and East emerged and is there a financial war played by the US?

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The Real Reason Belgium Sold 1,098 Tonnes Of Gold

October 10, 2015

The Real Reason Belgium Sold 1,098 Tonnes Of Gold

Belgium sold 1,098 tonnes of its official gold reserves since 1978. 

For our global investigation how much physical gold central banks have stored at what location and how much is leased out, I decided to submit the local equivalent of a Freedom Of Information Act (FOIA) request at the central bank of Belgium, de Nationale Bank van België (NBB), to obtain information about the amount of Belgian official gold reserves, the exact location of all gold bars, the type of gold accounts NBB holds at the Bank Of England (BOE) and how much is leased out and to whom. The outcome of this research was not what I had expected.

History Of The Official Gold Reserves Of Belgium

Some of the questions I directed at the NBB I used a stepping stone, as this information is publicly available in part. At the end of August 2015 NBB was holding 227.4 tonnes of gold, down 0.04 tonnes from 227.44 tonnes in July, according to data from the Bundesbank that publishes the gold holdings of 19 European central banks and the ECB in compliance with the IMF’s most recent version of the Balance of Payments and International Investment Position Manual (BPM6). The Bundesbank (BuBa) publishes the fine troy ounces of the official gold reserves in ‘Gold bullion’ and ‘Unallocated gold accounts’. If we add up both categories the outcome for all countries equals the reserves disclosed by the World Gold Council.

From BuBa:

The balance of payments statistics will … be consistent with the framework set out in the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). The application of the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) is binding for EU member states by virtue of a regulation adopted by the European Commission. 

Back in 1965 NBB was holding over 1,300 tonnes of gold. Since 1978 it has sold a whopping 1,098 tonnes, or 83 %.

Belgium official gold reserves

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Central Banks’ secrecy and silence on gold storage arrangements

October 2, 2015

Central Banks’ secrecy and silence on gold storage arrangements

Whereas some central banks have become more forthcoming on where they claim their official gold reserves are stored (see my recent blog post ‘Central bank gold at the Bank of England‘), many of the world’s central banks remain secretive in this regard, with some central bank staff saying that they are not allowed to provide this information, and some central banks just ignoring the question when asked.

In the ‘Central bank gold at the Bank of England’ article, I said that “A number of central banks refuse to confirm the location of their gold reserves. I will document this in a future posting.” As promised, this blog post explains what I meant by the above statement.

Some of those central banks may have made it into the Bank of England storage list if they had been more transparent in providing gold storage information. However, since they weren’t transparent, these banks make it into the alternative ‘non-cooperative’ list. One subset of this list is central banks, which to be fair to them, did actually respond and said that they cannot divulge gold storage information. The other subset is central banks which didn’t reply at all when I asked them about their official gold storage location details.

The below list, although not complete, highlights 7 central banks and 1 official sector financial institution (the BIS), which, when asked where do they store their gold reserves, responded with various similar phrases saying that they could not provide this information. Between them, these 7 central banks claim to hold 1,500 tonnes of gold. Adding in the BIS which represents another 900 tonnes, in total that’s 2,400 tonnes of gold where the central banks in charge of that gold will not provide any information as to its whereabouts. Much of this 2,400 tonnes is no doubt stored (at least in name) at the FRBNY and the Bank of England, with some stored in the home countries of some of the central banks.

 

 

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The Concept Of Money And The Money Illusion

September 6, 2015

The Concept Of Money And The Money Illusion

Awareness about the concept of money is making a comeback. Gone are the decades in which the global citizenry was fooled to leave this subject to economists, governments and banks – a setup that has proven to end in disaster. The crisis in 2008 has spawned debate about what money is, where it comes from and where it should come from. These developments inspired me to write a post on the concept of money and the money illusion. (All examples in this post are simplified.) The Concept Of Money

Money is a collective human inventionFirst, let us have a look at the fundamentals of money. How did Money evolve? Thousand and thousands of years ago before any trade occurred homo sapiens use to be self-sufficient; families or small communities grew that their own crops, fished the seas, raised cattle and made their own tools.When barter emerged the necessity to be self-sufficient ceased to exist. A farmer that grew tomatoes and carrots could exchange some of his production output for bananas or oranges if he wished to do so. There was no necessity for the farmer to grow all crops he wished to consume, when there was an option to trade.Farmers participating in a barter economy were incentivized to specialize in production, because they could escalate their wealth (gain more goods) by producing fewer crops on a greater scale. Through trade increased productivity (efficiency of production) could be converted into wealth, as the more efficient commodities were produced, the higher the exchange value of the labor put in to produce them. Consequently, barter economized production among its participants.

By exchanging, human beings discovered ‘the division of labor’, the specialization of efforts and talents for mutual gain… Exchange is to cultural evolution as sex is to biological evolution.    

From Matt Ridley.

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