Skip to comments.EU: Italy should use its gold reserves to force a change in EMU policy
Posted on 05/03/2013 11:41:22 PM PDT by bruinbirdman
The World Gold Council has advised Italy to deploy its 2,000 tonnes of gold to break free of EMU austerity dictates.
By using the reserves the world's fourth largest to collateralise the first chunk of any losses for bondholders, Italy could raise 400bn or so on the capital markets and determine its own future for a while.
Italy did this in 1974 when it borrowed $2bn from the Bundesbank, using gold as collateral.
Portugal did the same thing to borrow $1bn from the BIS in the 1975-1977, and India used its gold to borrow from Japan in 1991.
A joint WGC-Ipsos survey found that 61pc of Italian business leaders, and 52pc of the general public would support the idea, with only a small minority opposed.
The report said:
With Italy still facing significant financial challenges, national assets such as gold reserves present an opportunity to buy some vital breathing space.
Gold-backed sovereign debt, or gold-backed bonds, is issued debt that is underpinned by gold collateral. By using a portion of their gold reserves in this way, sovereign states could borrow more cheaply, without selling an ounce.
This use of gold would help sovereign governments to regain the confidence of the bond markets and lower funding costs. Nations could raise between four and five times the value of their gold reserves a bond 20% collateralised by gold could raise around 80% of Italys two year refinancing needs.
This would buy time for growth to take hold. It would lower sovereign debt yields without increasing inflation and would give Italy time and resources to work on economic reform and recovery. Using gold for the purposes of sovereign debt issuance would allow greater flexibility beyond austerity.
This is exactly the sort of thinking that
(Excerpt) Read more at blogs.telegraph.co.uk ...
Yet according to Bernanke, gold is not money!
Specie ping. Thanks bruinbirdman.
Evans-Pritchard does not seem to realize that Italy’s new PM, Letta, is a europhile and won’t cross the EU’s elites any more than his appointed predecessor did.
And can you eat it? ;-)
Next: EU confiscates Italian gold holdings.
Assuming the gold isn’t already used as collateral elsewhere.
Actually Italy should do one better and leave the Euro altogether and issue a new Lira backed by its gold.
Name one time in history you couldn’t buy a meal with it.