PIIGS on the WINGS...?Will they sell? Can they sell?
Portugal has the greatest percentage share held in gold of total foreign reserves.Portugal has 81% of its total foreign reserves in gold, at 382.5 metric tons.By tonnage, Italy has the most reserves of the PIIGS, at 2,451.8 tons,which is 69.2% of its reserves, and is the fourth-largest holder ofgold globally, behind the U.S., the IMF and Germany. Greece has 111.5tons of gold, which is 79.3% of its reserves and Ireland has 6 tons,which is 13.3% of its reserves.
USA? ................
the U.S. borrows $125 billion per month, assets sold would only buy a limited amount of time.
According to WGC data, the U.S. possesses the most goldglobally in terms of percentage of foreign reserves and tonnage. Nearlyseventy-five percent of its reserves are in gold, and it has 8,133.5tons of gold.
“If we(USA) sold all of our gold, that would be $375 billion.
Yepper....that will pay interest for awhile. 3 months of " credit card " payments?
Article....
Renewed worries about Eurozone sovereign debt has inspireddiscussions that nations at risk of defaulting should consider sellingsome of their gold or other assets as part of bailout packages tostabilize their economies.
This idea arose when some German politicians suggested a fewweeks ago that Portugal should sell some of its gold reserves as partof a financial aid package for the beleaguered nation. Portugaleventually received aid without having to pledge any gold, but thenotion for countries to sell metal reserves or other assets continuesto reverberate.
After all, gold prices are just off nominal all-time recordsand selling reserves would be one way to pay down mounting debtlevels. But to do so would not solve the problem and could leavecountries in a worse shape than before, said George Milling-Stanley,managing director, government affairs, for the World Gold Council. Aspart of its mission, the council works with central banks and otherpolicymakers regarding the role of gold in risk management.
“It’s like selling your house to pay down your debt. You can do that, but where would you live?” he said.
Of all the troubled southern-tier European countries, Portugalhas the greatest percentage share held in gold of total foreignreserves. According to the most recent calculation of world goldholdings, Portugal has 81% of its total foreign reserves in gold, at382.5 metric tons. That figure is calculated by the World Gold Councilusing International Monetary Fund's International Financial Statistics.
By tonnage, Italy has the most reserves of the PIIGS, at2,451.8 tons, which is 69.2% of its reserves, and is the fourth-largestholder of gold globally, behind the U.S., the IMF and Germany. Greecehas 111.5 tons of gold, which is 79.3% of its reserves and Ireland has 6tons, which is 13.3% of its reserves.
Milling-Stanley pointed out that when looking at the officialgold holdings of a particular country, it’s the central bank thatusually owns the gold, not the government itself, and most central banksare independent of the government. That means it’s not an automaticdecision governments can make to sell metal.
The idea of using gold reserves to payment has come up in thepast for other situations and many times the idea pits governmentagainst central bank. There are a few examples, he said.
“Back when the German government … wanted to sell or revaluatetheir gold to pay for reunification, the Bundesbank said you’re notusing the gold to do that. It caused a holy row that eventually calmeddown,” he said.
The question to use gold to pay down debt specifically isunclear for the European Union, Milling-Stanley said. “This is justmemory, but I think there’s been a fuss about selling assets to pay downdebt,” he said.
He said Belgium and the Netherlands wanted to do sales beforethe European Monetary Union was set up. At the time, even before theEuropean Central Bank was established, there was a lot of discussionamong the European authorities about selling gold assets to pay offdebt.
“I don’t know the strict legal definition – it could be legalbut there could be restraint,” he said, adding that those who do knowthe legality of such a situation have stayed mum.
Milling-Stanley said one issue that European countries wouldhave to deal with when taking into consideration any gold sales is theCentral Bank Gold Agreement, which limits how much gold they can sellannually. “Even though European banks have not sold anything near theceiling, it’s still there,” he said.
WHERE WOULD PROCEEDS GO?
Even if a country’s central bank sold gold, there’s noguarantee who would get the profits, he said. It wouldn’t automaticallygo to the government. Since the gold belongs to the central bank, theycould very well keep it.
The Eurozone’s debt obligations have been at the forefront ofdiscussion, but there’s been some talk that perhaps the U.S., with itssignificant reserves of gold, should sell some of its assets. MaryMiller, assistant secretary of the Treasury for Financial Markets,wrote in a post on the U.S. Treasury website that “this idea is not aviable option.”
Miller said that this idea has been rejected by TreasurySecretaries and U.S. Presidents of both political parties for manyyears. Miller referred specifically to selling gold to postpone raisingthe debt limit, but pointed out the folly to sell assets to raiseshort-term cash needs.
“A ‘fire sale’ of financial assets would be damaging to theeconomy, taxpayers, and financial markets. It would harm the interestsof taxpayers, and would undermine confidence in the United States. Norwould such sales postpone reaching the debt limit for a meaningfulamount of time. Congress would still need to raise the debt limit,”Miller wrote in a posting dated May 6.
(For the full essay, see: https://www.treasury.gov/connect/blog/Pages/Federal-Asset-Sales-Cannot-Avoid-Need-for-Increase-in-Debt-Limit.aspx)
At most, she said, considering the U.S. borrows $125 billion per month, assets sold would only buy a limited amount of time.
According to WGC data, the U.S. possesses the most goldglobally in terms of percentage of foreign reserves and tonnage. Nearlyseventy-five percent of its reserves are in gold, and it has 8,133.5tons of gold.
“If we sold all of our gold, that would be $375 billion. Sowe’d run out of money in August and we’d have no asset to borrowagainst. It’s just a drop in the bucket. The problem is the debts are inthe trillions. The basic point is it’s not a smart thing to do,” hesaid.
Furthermore, while other countries can diversify their totalforeign reserve holdings with such assets like U.S. Treasury bonds andnotes or U.S. dollars, obviously the U.S. cannot, which is one reasonwhy the U.S. has high reserves in gold.
Does a sale of assets make sense at any time? Milling-Stanleysaid there are ways to use gold to help in fixing debt problems.
“What they (countries with debt problems) need to look at is along-term, major structural reforms needed. Look at long-term structuralreforms, then come up with the idea to not sell, but to use it ascollateral to borrow from, but only once you get the reforms in place,”he said.
If the country used its gold as collateral without fixing thestructural issues, then using the gold as collateral would justcompound the problems, he said.
NOT DIFFICULT TO SELL GOLD
Right now, central banks are buying gold, not selling it. If acentral bank and the country’s government came up with a plan to sellgold, it would not be difficult to do. But discretion would beparamount because the last thing a central bank would want is to haveprices fall just as they were selling. He gave the example ofSwitzerland’s sale of 1,300 tons of gold in 2000-2005 as a proper wayto sell, versus Britain’s gold sales which took place between1999-2002. The advance notice of the sale drove down prices.
Most banks have a relationship with bullion banks so the salescan be handled quietly. But in the case of the U.K., an auction washeld “so all the fund managers picked them off,” he said.
The Swiss sales were done quietly. “The Swiss sought out theirin-house expertise – they sold 1,300 tons which is not small - but didit with maximum profit where they were buying and selling all the timeso you couldn’t pick them off. They did it over a couple of years,” hesaid.