It Begins: Ecuador Demands Repatriation Of One Third Of Its Gold Holdings

Tyler Durden's picture

One week ago, when we reported the news that the Bundesbank had secretly pulled two thirds of its gold from London years ago, we said the following:

... Germany has done nothing wrong! It simply demanded a reclamation of what is rightfully Germany's to demand.


And here is the crux of the issue: in a globalized system, in which every sovereign is increasingly subjugated to the credit-creating power of the globalized "whole", one must leave all thoughts of sovereign independence at the door and embrace the "new world order." After all this is the only way that the globalized system can create the shadow cloud of infinite repoable liabilities, in which we currently all float light as a binary feather, which permits instantaeous capital flows and monetary fungibility, and which guarantees that there will be no sovereign bond issue failure as long as nobody dares to defect from the system in which all collateral is cross pledge and ultra-rehypothecated... for the greater good. Until the Buba secretly defected that is.


And this is the whole story. Because by doing what it has every right to do, the German Central Bank implicitly broke the cardinal rule of true modern monetary system (never to be confused with that socialist acronym fad MMT, MMR or some such comparable mumbo-jumbo). And the rule is that a sovereign can never put its own people above the global corporatist-cum-banking oligarchy, which needs to have access to all hard (and otherwise) assets at any given moment, on a moment's notice, as the system's explicit leverage at last check inclusive of the nearly $1 quadrillion in derivatives, is about 20 times greater than global GDP. This also happens to be the reason why the entire world is always at most a few keystrokes away from a complete monetary (and trade) paralysis, as the Lehman aftermath and the Reserve Fund breaking the buck so aptly showed.


We are confident that little if anything will be made of the Buba's action, because dwelling on it too much may expose just who the first country will be (or  already has been) when the tide finally breaks, and when it will be every sovereign for themselves. Because at that point, which will come eventually, not only Buba, but every other bank, corporation, and individual will scramble to recover their own gold located in some vault in London, New York, or Paris, or at your friendly bank vault down the street, and instead will merely find a recently emptied storage room with humorously written I.O.U. letters in the place of 1 kilo gold bricks.

It appears that the story, which has refused to go away, was not covered sufficiently fast, and precisely the worst case scenario - at least for the "asset-lite" status quo - is slowly but surely starting to materialize. From Bloomberg:

Ecuador’s government wants the nation’s banks to repatriate about one third of their foreign holdings to support national growth, the head of the country’s tax agency said.


Carlos Carrasco, director of the tax agency known as the SRI, said today that Ecuador’s lenders could repatriate about $1.7 billion and still fulfill obligations to international clients. Carrasco spoke at a congressional hearing in Quito on a government proposal to raise taxes on banks to finance cash subsidies to the South American nation’s poor.

So yesterday: Germany... today: Ecuador... tomorrow: the World?

Because while Ecuador, with its 26.3 tonnes of gold, may be small in the grand scheme of gold things, all it takes is for more and more banks to join the bandwagon and demand delivery in kind from official repositories (i.e., New York and London), and the myth that is the overcollateralization of hard money by central banks will promptly come to an abrupt, bitter and, likely, quite violent end.

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RSDallas's picture

Why am I all of the sudden getting all of these f$&@?!g pop up ads on my iPad on this site. Don't follow the crowd Tyler!

akak's picture


Why am I all of the sudden getting all of these f$&@?!g pop up ads on my iPad on this site. Don't follow the crowd Tyler!

Humorous irony, or ironical humor?

unrulian's picture

An ipad user accusing someone of following the crowd? is yours 7" or 7.89"? bastard..beat me to it..and better

css1971's picture

So in a fractional reserve, rehypothecated system when people start demanding actual delivery, isn't that.... like... a run on the bank?

And in this case a run on the central bank? Which can print any amount of currency.......... but not gold of course... You need a nuclear reactor for that, and then it comes out radioactive[1].

Dearie me. 400 years and people still never learn.



Atlas Shrieked's picture

the author forgot Venezuela already repatriated most of theirs, and the Netherlands is also seeking theirs.

Let's get physical.

natty light's picture

The Bank of Mauritius will begin selling minted gold bars to the public in November, in a bid to promote a savings culture in the country.

The Duke of New York A No.1's picture

Oh Ben Shalom, what have you and your pals been up to;

Bogdog's picture

Since Ecuador's offsite gold is probably vapor already, the holder(s) of the vapor will instead pledge them better loan rates/storage fees/debt forgiveness (pick two) in lieu of repatriation. And that's the last you'll hear out of Ecuador.

toomanyfakeconservatives's picture

Better get in line... the FED and BIS are getting slapped with countless lawsuits and liens over their stolen gold.

honestann's picture

One thing is for sure.  JPM and the other major paper gold and silver manipulators/shorts are doing a bang-up job lately, to hold down the price of gold and silver with the constant pressure of "gold bullish" stories lately.  Of course, that's not difficult when you can create unlimited fiat, fake, fraud, fiction, fantasy, fractional-reserve debt toilet-paper out of thin air at zero cost.  But still.