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?

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Fri, 10/26/2012 - 15:45 | 2922477 Pladizow
Pladizow's picture

But their fiat is sooooooo pretty!

How dare the viatnamese attempt to ban fraud!

Fri, 10/26/2012 - 15:47 | 2922491 walküre
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?

Fri, 10/26/2012 - 15:52 | 2922514 zuuma
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!

Fri, 10/26/2012 - 15:55 | 2922525 Pladizow
Pladizow's picture

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

Fri, 10/26/2012 - 16:00 | 2922538 idea_hamster
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).

Fri, 10/26/2012 - 16:00 | 2922546 Dr. Richard Head
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.

Fri, 10/26/2012 - 16:02 | 2922552 Pladizow
Pladizow's picture

I have used my dong to conquer many assets!

Fri, 10/26/2012 - 16:09 | 2922566 pods
pods's picture

Dongs for gold!

Fri, 10/26/2012 - 16:29 | 2922605 strannick
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.

Fri, 10/26/2012 - 16:48 | 2922652 Manthong
Manthong's picture

Vonfram,  bitchez.

Fri, 10/26/2012 - 17:39 | 2922763 silverserfer
silverserfer's picture

shake and bake!

Fri, 10/26/2012 - 19:36 | 2922974 francis_sawyer
francis_sawyer's picture

Long Dongs...

Fri, 10/26/2012 - 21:04 | 2923175 homme
homme's picture

Ah.. it's the Dong Show. TGIF

Fri, 10/26/2012 - 21:00 | 2923167 Bicycle Repairman
Bicycle Repairman's picture

Aren't Turks getting the same ridiculous message?

Sat, 10/27/2012 - 01:56 | 2923491 RafterManFMJ
RafterManFMJ's picture

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

Fri, 10/26/2012 - 19:03 | 2922906 TN Jed
TN Jed's picture

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

Sat, 10/27/2012 - 05:18 | 2923564 jeff montanye
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?

Fri, 10/26/2012 - 22:32 | 2923318 zuuma
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.

Sat, 10/27/2012 - 00:21 | 2923423 Tijuana Donkey Show
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......

Fri, 10/26/2012 - 22:26 | 2923313 Majere
Majere's picture

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

Fri, 10/26/2012 - 15:56 | 2922517 fuu
fuu's picture

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

Fri, 10/26/2012 - 15:59 | 2922542 I am more equal...
I am more equal than others's picture

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

Fri, 10/26/2012 - 16:26 | 2922600 Tango in the Blight
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.

Fri, 10/26/2012 - 20:12 | 2923054 NuckingFuts
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.

Fri, 10/26/2012 - 20:56 | 2923163 F22
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.....

Sat, 10/27/2012 - 00:11 | 2923409 The Malamute Kid
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.

Sat, 10/27/2012 - 01:58 | 2923493 RafterManFMJ
RafterManFMJ's picture

The man in the black pajamas, Dude.

Sat, 10/27/2012 - 07:27 | 2923610 HeadintheGame
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. 

Fri, 10/26/2012 - 16:35 | 2922619 jekyll island
jekyll island's picture

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

Fri, 10/26/2012 - 16:40 | 2922631 Turd Ferguson
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.

Fri, 10/26/2012 - 21:02 | 2923172 Bicycle Repairman
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.

Sat, 10/27/2012 - 00:19 | 2923422 cynicalskeptic
cynicalskeptic's picture

A metal, not a 'rock'..... 

Fri, 10/26/2012 - 17:27 | 2922746 vast-dom
vast-dom's picture

--We are insolvent because we are insolvent.

Fri, 10/26/2012 - 17:41 | 2922767 Gimp
Gimp's picture

Ho Chi Min

Fri, 10/26/2012 - 18:59 | 2922898 kliguy38
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

Fri, 10/26/2012 - 15:50 | 2922506 ACP
ACP's picture

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

Fri, 10/26/2012 - 15:57 | 2922534 DoChenRollingBearing
DoChenRollingBearing's picture

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

Fri, 10/26/2012 - 16:29 | 2922608 Tango in the Blight
Tango in the Blight's picture

And make sure it isn't tungsten...

Fri, 10/26/2012 - 17:12 | 2922723 GubbermintWorker
GubbermintWorker's picture

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

Fri, 10/26/2012 - 17:52 | 2922780 The Navigator
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.

Fri, 10/26/2012 - 20:33 | 2923096 knukles
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?

Sat, 10/27/2012 - 00:25 | 2923428 Tijuana Donkey Show
Tijuana Donkey Show's picture

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

Fri, 10/26/2012 - 21:00 | 2923170 F22
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.

Fri, 10/26/2012 - 18:16 | 2922810 DosZap
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.

Fri, 10/26/2012 - 18:45 | 2922876 anomalous
anomalous's picture

What about Sprott Physical?

Fri, 10/26/2012 - 16:48 | 2922650 Taint Boil
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.

Fri, 10/26/2012 - 17:42 | 2922769 silverserfer
silverserfer's picture

no but you will find this article on cnbc

http://www.cnbc.com/id/49540593

Fri, 10/26/2012 - 15:50 | 2922507 EvlTheCat
EvlTheCat's picture

Bet it glows in the dark!

Fri, 10/26/2012 - 16:12 | 2922570 TPTB_r_TBTF
TPTB_r_TBTF's picture

 

 

Disclosure:  Long Dong

Fri, 10/26/2012 - 16:24 | 2922595 Manipulism
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