Vietnamese Banks Who Paid Dividend On Stored Gold, Were Quietly Selling It To Appear Solvent

Tyler Durden's picture

Several months ago, we reported about a troubling development in Vietnam, happy inflationary host of one of the world's most rapidly devaluing and best named currencies, that in direct refutation of Ben "Gold is not money, it is tradition" Bernanke's claim that gold is just a trinket one can fondle with no inherent value, the local banks had gone as far as paying the local residents a dividend to "store" their gold (recall all those charges against gold that it never, ever pays a dividend....). However, as we subsequently warned, any time a bank, and especially an entire banking sector, is willing to pay you paper "dividends" for your gold, run, because all this kind of (s)quid pro quo usually ends up as a confiscation ploy. Sure enough, as Dow Jones reports today, the gold, which did not belong to the banks and was merely being warehoused there (or so the fine print said), was promptly sold by these same institutions to generate cash proceeds and to boost liquidity reserves using other people's gold, obtained under false pretenses.

And now, it is time for the forced sellers to become forced buyers, as "the State Bank of Vietnam, the country's central bank, may allow local banks to buy up to 20 metric tons of gold over the next two months to improve their liquidity ahead of a ban soon on their use of gold as a means of boosting their operating capital." What they mean is that having been caught engaging in an illegal reserve boosting operating, the banks are now "allowed" to undo their transgressions ahead of a "ban" on what inherently was not a permitted practice. What is left unsaid, of course, is that any gold anywhere in the world, that is not in one's physical possession, and has been handed over to an insolvent bank (virtually all of them) for "safekeeping", is currently being sold, lent out, rehypothecated and otherwise traded with, in a way that any demand for full delivery will generally be met with silence, blank stares and phone calls going straight to voicemail.

From Dow Jones:

Banks have bought more than 60 tons of gold during the past six months and still need to buy more to meet their liquidity needs, Deputy Central Bank Governor Le Minh Hung said in the statement, posted on the central bank's website.

 

Local banks received gold deposits from the public in previous years and sold the gold in the local market for cash. Now they will have to buy gold to pay back their depositors at a time when global gold prices have been rising sharply. The central bank wants to prevent banks from this kind of risky operation, so it plans to ban banks soon from being involved in gold trading operations.

This is called being "caught with your pants down" while you are selling gold bricks...

"Demand for capital is usually strong in the fourth quarter. It's risky for the banking system if banks are forced to buy gold to meet their needs," Mr. Hung said.

 

The central bank will closely monitor and stabilize the domestic gold market and will soon ban banks from using gold as a way to boost their operating capital, he added.

This however begs the question: if the local banks can't fool the gullible public into handing over truly valuable assets in exchange for a "dividend" that is literally being created out of thin air, and then monetize said assets to appear solvent, just how will they appear solvent? Crickets...

Finally:

Though the central bank's gold management policy is making retail gold prices in the local market higher than global prices, there has been no smuggling of gold and therefore no increased demand for the U.S. Dollar so far this year, Mr. Hung said, adding that this has helped keep the exchange rate between Vietnam's dong the U.S. Dollar stable so far.

In other words, not only is gold money, it is better than money. But first you need: i) inflation; ii) collapsing currency and iii) insolvent banks. Luckily, the developed world has neither of these...

In summary: this...

 

or this?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Pladizow's picture

But their fiat is sooooooo pretty!

How dare the viatnamese attempt to ban fraud!

walküre's picture

Nam Tram Ding Dong = 500,000

Sounds pretty fucked up but I'm not from there, so what do I know.

Is that Fu Man Chu?

zuuma's picture

I've always had just one DONG.

It's held its value well! It's worth just as much today as when I first got it - many years ago.

Even after it goes through cycles of inflation and is  heavily spent, I still end up with my original DONG.

 

What aperfect name for a currency!

Pladizow's picture

"I've always had just one DONG." - You are Barney Frank's protangonist!

idea_hamster's picture

I liked Jack Walsh's comment in the WSJ about the reaction to his claim that the BLS numbers are fudged:

"The Obama campaign and its supporters, including bigwigs like David Axelrod and Robert Gibbs, along with several cable TV anchors, would like you to believe that BLS data are handled like the gold in Fort Knox, with gun-carrying guards watching their every move, and highly trained, white-gloved super-agents counting and recounting hourly."

Uh, actually, Jack, the BLS data are, in fact, handled like the gold in Fort Knox:  unaccountable, unviewable, and totally falsified (probably).

Dr. Richard Head's picture

I don't know about any of you, but my dong has deflated my assets pretty heavily over the past 12 years.  I will, however, give up my dong for gold all day.

Pladizow's picture

I have used my dong to conquer many assets!

strannick's picture

India. You listening?? Remember the Dong when Financial advisors tell you to take that sterile asset and collateralize it into an income bearing bond.

Bicycle Repairman's picture

Aren't Turks getting the same ridiculous message?

RafterManFMJ's picture

Oh come now! No one has taken the words Dong, Sterile and Assets and combined them in a ribald way?

TN Jed's picture

True, but I think Jack purposely loaded up that statement with that analogy for future reference.

jeff montanye's picture

and i think his name is welch not walsh: http://abcnews.go.com/blogs/politics/2012/10/pm-note-jack-welch-goes-rog...

and isn't it amazing how like the u.s. vietnam is becoming?  whatever did they win that old war for?

or we fight it?

zuuma's picture

Barny frank??

I just couldn't.

You see...   I'm a LESBIAN.

TRAPPED... in a man's body.

 

Barney is just wrong for me.

Tijuana Donkey Show's picture

Yea? When was the last time you fisted a chick then? You need to be elbow deep in love my lesbi-man......

Majere's picture

Some Dong's go up and some go down.  Some look like a head and shoulders.  But Zuuma's is golden!

fuu's picture

Pretty sure that is Ho Chi Minh; after all he did unify his country and kick the imperialists out...

I am more equal than others's picture

...boom boom number 10...boo koo bad...number 10 I say, number 10...

Tango in the Blight's picture

It is him:

http://en.wikipedia.org/wiki/Ho_Chi_Minh

My friend visited Vietnam a few years ago and went to the American War Crimes Museum in Saigon *cough* Ho Chi Minh City.

You should visit it when you are there.

NuckingFuts's picture

D.B.-  Nice to see you agian.  Last time was on that flight in the PNW... BTW you still owe me a few G's for that parachute.

F22's picture

I was there about three years ago...very interesting museum.  Just outside, there was a vendor selling local trinkets and in a tray of odds and ends I found several peace dollars 1923-1927 for around $12 each....They look legit....after having read recently about Chinese counterfitting of US coins though I'm wondering if maybe my deal was not so good.....

The Malamute Kid's picture

I have no desire to return to that shithole. I was in Nam in 1972.  Charlie is still a cunning little bastard.

RafterManFMJ's picture

The man in the black pajamas, Dude.

HeadintheGame's picture

It was sheer stupidity that you were there in the first place.  Another fucked up police action by the USSA.  Grind up people and war materials for ten years. Hooray for Boing, GE, Colt and others.

They whipped our ass.  It couldn't have happened to a nicer group of folks.  Present company excluded of course. 

The saddest part of that fucking mess:  Not that we lost 60,000 Americans (though that was tragic); or that we killed over a million or so Vietnamese (though that was disgusting).  The saddest part is the American people are still willing to be fucked by scumbags like GWB and BHO, with a big smile on our  faces. 

jekyll island's picture

In other words, not only is gold money, it is better than money.  Priceless! 

Turd Ferguson's picture

The gold, which did not belong to the banks and was merely being warehoused there (or so the fine print said), was promptly sold by these same institutions to generate cash proceeds and to boost liquidity reserves using other people's gold, obtained under false pretenses.

Uhhhh....isn't that pretty much modus operandi for a bullion bank? OK in London, bad in Ho Chi Minh City.

Bicycle Repairman's picture

The banks really duped the guys they sold it to.  It's just a rock, cannot be eaten and will be confiscated.

vast-dom's picture

--We are insolvent because we are insolvent.

kliguy38's picture

Hung Long Dhong will step in and take over for the Viet Central bankers and show them some real Merikan banker fraud.......How to lease gold 1000X and make it hurt baby

ACP's picture

So this would be the first high-profile gold ponzi?

DoChenRollingBearing's picture

Yet another reason to buy physical gold only, to be held in your own possession!

GubbermintWorker's picture

Just buy one ouncers and fractionals....its good!

The Navigator's picture

A story like this could run once a day on the front page and still the muppets will continue to buy paper GLD or buy physical and have someone else store it - they just don't get it.

The whole reason to buy physical is to HOLD it physically.

knukles's picture

Mrs. K asks me if our coins are real.
So I let her gnaw on the ones set in the pistol grip of my .45
Happy now, baby?

Tijuana Donkey Show's picture

But will she deep throat the .45? Inquiring minds want to know.....

F22's picture

I do have the majority of my 401K in PHYS.....which I've been careful to purchase whenever the premium takes a plunge.  I'm hopeful that this will be safe...er.

DosZap's picture

Those Banks had best pray, that the Gov is /was in collusion w/them on this scam.

Or they will ALL have a 7.62x25 Tok round in the back of their heads, asap.

Taint Boil's picture

 

 

Hmmm curious … didn’t catch that MSM (quick Google search only pulls up this Zero Hedge article). This will probably be how it starts something small but it will be the straw that breaks the camel’s back. Slowly but surely the sheep will start to see the wolf …… but then it will be too late.  I just hope that I’m around to see it unfold – history in the making.

EvlTheCat's picture

Bet it glows in the dark!