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Guest Post: Central Bank Snuffs Out Vietnam’s Thriving Gold Market

Tyler Durden's picture





 

Via Kel Kelly of the Ludwig von Mises Institute of Canada,

In recent years gold has become a sought-after currency in Vietnam. Why? The usual reason: its government has been printing too much money, causing prices to rise, and causing its currency, the Vietnamese dong, to plummet in value.

But by holding gold instead of the domestic currency, Vietnamese citizens know their wealth’s value will be kept constant while the local currency declines. In local currency terms, they will actually make money. The chart below shows how much gold has increased against the Vietnamese dong since 1995.

There is such a demand to hold gold in Vietnam that the public is now holding some 300 to 500 tons of gold, totaling U.S $30billion. Such large gold holdings led to gold being used as a common medium of exchange. Vietnamese citizens stored their gold holdings in banks, and opened deposit accounts denominated in gold. Banks have actually been paying customers to store their gold so that the banks can use it in loans, which have lower interest rates associated with them than do dong-based loans, presumably because of a lack of inflation risk.

Recently, however, the government-run Vietnamese central bank disallowed loans in gold. Now, it is preventing banks from paying interest to customers on their gold. Instead, it is forcing banks to charge customer to store their gold, and requiring banks to regularly report on their transactions with account holders.

What’s happening is that the government wants to prevent citizens from using alternatives to its own quickly devaluing currency. This, way, the government can continue to steal purchasing power from its citizens through inflation.

Offensive as this all is, it is not—yet—as offensive as steps the U.S. government took in 1933. The government made it outright illegal to own real money (gold) so that people would instead have to own the government’s rapidly depreciating paper currency.

 


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Mon, 02/04/2013 - 10:22 | Link to Comment NEOSERF
NEOSERF's picture

Forget gold...Long Dong Silver

Mon, 02/04/2013 - 10:25 | Link to Comment economics9698
economics9698's picture

Slowly the dam leaked at first, and then the dam broke, and so it will be with fiat currencies.  

Mon, 02/04/2013 - 10:31 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

You mean there are people stupid enough to put their Gold in a bank?

Mon, 02/04/2013 - 10:46 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Ohhhh...no more yanky the wanky....Donger need FOOD!

Mon, 02/04/2013 - 10:59 | Link to Comment Manthong
Manthong's picture

“causing its currency, the Vietnamese dong, to plummet in value.”

 “..and requiring banks to regularly report on their transactions with account holders.”

 That dong looks pretty limp.

I know what the government is trying to do with their dong, but the question is how long the people will take it.

Mon, 02/04/2013 - 11:19 | Link to Comment Ying-Yang
Ying-Yang's picture

I hate when my "Dong plummets" without good reason.

Mon, 02/04/2013 - 11:33 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

The Dong is hyperinflating, and no amount of toilet paper will clean up the coming mess.

Mon, 02/04/2013 - 12:31 | Link to Comment TheCanadianAustrian
TheCanadianAustrian's picture

Logged in specifically to +1 this.

Mon, 02/04/2013 - 11:03 | Link to Comment sotto
Mon, 02/04/2013 - 10:23 | Link to Comment achmachat
achmachat's picture

so now they openly admit that they regard gold as a danger to them? who would have thought that tradition can be this hazardous?!

Mon, 02/04/2013 - 10:24 | Link to Comment Temporalist
Temporalist's picture
Herbalife Drops After Report of Law-Enforcement Probe

http://www.bloomberg.com/news/2013-02-04/herbalife-drops-after-report-of...

 

Mon, 02/04/2013 - 10:25 | Link to Comment Irelevant
Irelevant's picture

Long „the Dong”?!

Mon, 02/04/2013 - 10:33 | Link to Comment fonzannoon
fonzannoon's picture

Gartman was ahead of his time with that trade.

Mon, 02/04/2013 - 10:42 | Link to Comment Jack Sheet
Jack Sheet's picture

Wong with the long schlong was wrong to be long the dong instead of a bong.

Mon, 02/04/2013 - 16:31 | Link to Comment Theosebes Goodfellow
Theosebes Goodfellow's picture

Jack Sheet?! JACK SHEET!?!?!!! Who are you? You don't know Jack Sheet!

(Sorry dude, you had that coming.) ;-)

Mon, 02/04/2013 - 10:58 | Link to Comment kliguy38
kliguy38's picture

NO gold for the peeps.......just the "dong"

Mon, 02/04/2013 - 10:26 | Link to Comment Zero Debt
Zero Debt's picture

Printing money increases prices? Shocking.

Mon, 02/04/2013 - 10:29 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Gold is the anti-fiat, the Kryptonite of the Ponzi. It diminishes the faith and belief the Ponzi priests must capture in order to legitimize their fake fiat.

Chapter Two of "Perhaps a Crumble Rather than a Collapse" was posted last night. Please stop by and take a look.

"When only a few dozen claim they understand how an economic system works we have crossed over from examining and describing a complex economic entity and into a religious cult based solely upon faith and belief."

Mon, 02/04/2013 - 10:39 | Link to Comment AlaricBalth
AlaricBalth's picture

Had an opportunity to read it last night while everyone else in the house was fixated on the Stupor Bowl. I thought it was an excellent read. I plan on giving it a more thorough perusal this morning.
Thanks CD.
When is the book coming out?

Mon, 02/04/2013 - 11:51 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Thank you for your kind words.

The collected writings of CD.

<"It went straight to DVD." Cosmo Kramer>  :)

I try to pack my articles with great depth, which unfortunately does not make them an easy read. I do this to try and convey nuance and subtlety. So if you were to return for a second or third read you will continue to find hidden gems.

BTW it does not look like I will be able to post Chapter Three this afternoon. I had forgoten about a prior obligation that will take me away most of the late afternoon and evening. It will probably be Tuesday after the market close before I can post. Sorry about that.

Mon, 02/04/2013 - 10:31 | Link to Comment Never One Roach
Never One Roach's picture

Vietnam black/grey market must be huge.

Mon, 02/04/2013 - 10:32 | Link to Comment toady
toady's picture

He said dong.

Mon, 02/04/2013 - 10:43 | Link to Comment Never One Roach
Never One Roach's picture

I thought we weren't allowed to say "dong" on this board ?

Mon, 02/04/2013 - 10:51 | Link to Comment forwardho
forwardho's picture

Let alone refer to an inflated Dong!

Mon, 02/04/2013 - 11:52 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Tyler meant (bankrupt) Hostess Ding Dongs.

Mon, 02/04/2013 - 10:33 | Link to Comment caimen garou
caimen garou's picture

gold is'nt money right, bernake? you fucking POG! I guess the world is flat and if a frog pisses on you you get warts! may 1000000000000 frogs piss on you!

Mon, 02/04/2013 - 10:33 | Link to Comment Quinvarius
Quinvarius's picture

Bullish.  The VC don't leave gold in banks unless they get paid to.  Charlie's no serf!

Mon, 02/04/2013 - 10:34 | Link to Comment Pool Shark
Pool Shark's picture

 

 

"Now, it is preventing banks from paying interest to customers on their gold. Instead, it is forcing banks to charge customer to store their gold, and requiring banks to regularly report on their transactions with account holders."

Oh, so you mean that now Vietnam bankers are treating bullion holders the same way US bankers do.

Meh.

Mon, 02/04/2013 - 10:34 | Link to Comment buzzsaw99
buzzsaw99's picture

they don't trust the bank system so they keep their gold at the, er, banks?

Mon, 02/04/2013 - 11:11 | Link to Comment tarsubil
tarsubil's picture

They don't trust the currency. The lesson is to go long vault makers.

Mon, 02/04/2013 - 10:38 | Link to Comment Dr. Engali
Dr. Engali's picture

On one hand they keep gold because they don't trust the fiat currency, on the other hand they will store it in the bank because they trust them. Go figure that logic.

Mon, 02/04/2013 - 10:49 | Link to Comment Tod E. Tosspot
Tod E. Tosspot's picture

I think this article is about the uber wealthy and corporate customers. Other Vietnamese no doubt are putting their money in gold jewelry. Large jewelry displays dot the landscape in places where no tourists venture (my wife is Vietnamese, and she takes me to places where I'm the only round eye in the county). Average Vietnamese tend not to trust banks with cash; I can't imagine them putting their gold there.

Mon, 02/04/2013 - 10:40 | Link to Comment Sudden Debt
Sudden Debt's picture

VIETNAM... they eat dogs for breakfast...

 

Mon, 02/04/2013 - 10:54 | Link to Comment Oldrepublic
Oldrepublic's picture

I am in Vietnam right now, did not have "dogs," for breakfast, nor did I see it on the menu!

Saw some dogs as pets

Mon, 02/04/2013 - 11:58 | Link to Comment Tod E. Tosspot
Tod E. Tosspot's picture

I've never seen it on a menu, but I'm told you can find it if you know where to go. Much less common in the south. Reminds of an English language mag I read over there announcing the opening of a pet store: featuring Saigon's largest selection of dogs and cats...for nurturing, not consumption.

Mon, 02/04/2013 - 11:00 | Link to Comment Aegelis
Aegelis's picture

Pardon my fellow Americans who need a geography and social studies lesson.

Mon, 02/04/2013 - 11:13 | Link to Comment Crime of the Century
Crime of the Century's picture

Nice try, he's Belgian. You know, the guys who invented Hutu's and Tutsi's?

Mon, 02/04/2013 - 12:22 | Link to Comment darkpool2
darkpool2's picture

And you have a problem with that ? Just another form of protein.....what makes a dog sacred, but a chicken edible????? Get real.....westerners have lost all perspective.

Mon, 02/04/2013 - 23:29 | Link to Comment hoos bin pharteen
hoos bin pharteen's picture

Dogs got personality. Personality goes a long way.

Mon, 02/04/2013 - 10:40 | Link to Comment fonzannoon
fonzannoon's picture

Speaking of dong can I at least get some enjoyment thinking that Tepper is taking it in the dong today with that european debt?

Mon, 02/04/2013 - 10:42 | Link to Comment Inthemix96
Inthemix96's picture

Be a fucking shame if bernank was found dead with the handle off a spade stuck up his arse.

Now I could definatley "Dig" that like.

:-)

Mon, 02/04/2013 - 11:16 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Like one of the drummers for Spinal Tap, the report would say "he died as the result of an unfortunate gardening accident".

Mon, 02/04/2013 - 11:23 | Link to Comment Inthemix96
Inthemix96's picture

Hehehe, nice one stooge.

Peronally though, I wouldnt mind seeing spade, very fucking sharp mind, stuck in cranium moment.  He could have slipped while burying his gold and accidently tarnished his head with it.

Mon, 02/04/2013 - 10:42 | Link to Comment Quinvarius
Quinvarius's picture

Dong for Gold shops leaving customers feeling confused and violated.

Mon, 02/04/2013 - 10:47 | Link to Comment fonzannoon
fonzannoon's picture

I knew there was a dong for gold joke out there but I could not put it together. Nice job.

Mon, 02/04/2013 - 11:17 | Link to Comment BeerBrewer09
BeerBrewer09's picture

genius.

Mon, 02/04/2013 - 10:44 | Link to Comment ITrustMyGut
ITrustMyGut's picture

heh.. I bought a couple "mil" vnd a few years ago.. cheap hopium of a reval.. sadly.. its only rv'd lower.. least it was a cheap bet..

Mon, 02/04/2013 - 10:50 | Link to Comment Pool Shark
Pool Shark's picture

 

 

Still holding your Iraqi dinars?

 

 

Mon, 02/04/2013 - 13:34 | Link to Comment ITrustMyGut
ITrustMyGut's picture

yes sadly.. lol.. its money spent.. so.. Ill hang onto them til something happens.. again.. a cheap investment ( err.. bet ) certainly not too hopeful on either of them anymore though...

 

/sigh

Mon, 02/04/2013 - 10:52 | Link to Comment tradewithdave
tradewithdave's picture

When something is complicated.... simply "songify" it.  Futures market too complex... try swapification.  Now, everyone,... in the key of C (for Chilton)... "Row, row, row your swaps, gently up the stream..."

http://tradewithdave.com/?p=15275

Tue, 02/05/2013 - 01:25 | Link to Comment WTFUD
WTFUD's picture

i heard you get your forecasts from joe the plumber or was it bob the builder? anyway probably a safer bet than a trader.

Mon, 02/04/2013 - 11:06 | Link to Comment FubarNation
FubarNation's picture

Long Duck Dong.

Mon, 02/04/2013 - 11:07 | Link to Comment Bastiat
Bastiat's picture

There was a time when slandering the French Assignat was punishable by death.  This is the ultimate meaning of "fiat."

Mon, 02/04/2013 - 11:17 | Link to Comment One World Mafia
One World Mafia's picture

Didn't anybody challenge the govts decree making gold illegal in 1933?

Mon, 02/04/2013 - 12:06 | Link to Comment Conax
Conax's picture

People were more easily herded about before the interwebzz.

They were threatened and they got paid the market price for their coins.

Then the USG (almost immediately) revalued the gold from 22 to 35. 

yuk yuk yuk.

Mon, 02/04/2013 - 12:50 | Link to Comment lasvegaspersona
lasvegaspersona's picture

That is just too cute.... a government thinks it has a greater power than the market place. A lot of governments go through this. It is just a phase though. Eventually they grow up and learn that the laws (the real laws) of economics apply to them just like they apply to the people. Right now they just need the presense of a mature adult in their life.

Mon, 02/04/2013 - 12:50 | Link to Comment Mr. Magniloquent
Mr. Magniloquent's picture

Dong, have you seen my gold bullion?

Mon, 02/04/2013 - 13:08 | Link to Comment orangegeek
orangegeek's picture

Dong. Where is my automobile?

 

Oto-mo-biiile?

Mon, 02/04/2013 - 13:31 | Link to Comment JOYFUL
JOYFUL's picture

This article is the sad result of what happens when blinkered ideology poses as front line observation...

What’s happening is that the government wants to prevent citizens from using alternatives to its own quickly devaluing currency. This, way, the government can continue to steal purchasing power from its citizens through inflation.

and runs roughshod over the truth unless and until stopped.

The rather staid politicos of the former people's socialist paradise were shy of getting twice burnt...after all, in the immediate aftermath of the pull out of the Japs from their "ECONOMIC CO-PROSPERITY ZONE*," the Paris trained partisans of the nationalist left had put their full faith n credit in the anti-imperialist Republic of the USA to help them get back on their feet.

Of course, at the time, nobody(certainly not Merikans!)knew that that country had been subjugated by means of a quiet coup to a clique of sio-nazi industrialists, bankers and munitions makers...who imported thousands of their dupes and henchmen from Europe to remake what had been the world's most successful industrial democracy into a mean, sly, bullying behemoth out for blood n lucre the world over...long story short - Ho, Giap and the rest of the gang were forced into the arms of the Bolshie Bandits, and the fake Cold War claimed another victim peoples...the Vietnamese. We'll skip what we call "the Vietnam War"(which the Viets call "the American War" -with perfect accuracy) and go straight to the present moment...

when, after spending 30 or so years picking up their country from it's moonscaped, agent-oranged nightmare, the people in charge decided to give "capitalism" a go:

set up the free trade\slave labor zones, give rich concessions to 'free market' freebooters, generally bend over backwards to become goodstanding members of corporate globalism...and... wait for it!....

get screwed over again. By the usual suspects!

http://english.vietnamnet.vn/fms/business/54108/foreign-firms-flee--leav...

The Central Bank of Vietnam, similar to other Central Banks outside the nexus of evil which ascribe to the religion of usury banking, is under tremendous pressure right now to give up the last shards of it's ability to intercede on behalf of it's citizens....gold is being used as a tennis ball in this deadly game...in which the Viets lack all the advantages that have accrued to the Chinese and the Persians...and this authors narrative has carefully packaged up the message desired by the globalist bullies and delivered it to the audience where it can do maximum dissimulationist damage...well meaning folk who believe in free markets but are inveigled into the talmudist net by sinners like KK and Jimbo Miller who take the von Mises name in vain!

I saw more hustle, free enterprise, and genuine goin out for business attitude on the street of Hanoi Jimmy M, than you are likely to ever see lookin out the window of your foundation financed corporate-lackey digs whilst penning the next pr message for the moneymasters and their manchurian candidate puppet princes.

*gee, that sounds kinda similar to the phoney pharaohs' friendly get on board our "china containment crusade" now, or we crush you... Partnership for Peace and Prosperity Initiatitve...how stupid do they think these slant eyes are!>!<??

Mon, 02/04/2013 - 15:14 | Link to Comment BigJim
BigJim's picture

WTF is your point? I just read the article you linked to... the majority of the companies they discuss that fled were based in Korea, Taiwan, Malasia... ie, not 'round eye' land at all.

Did the Yanks fuck over VietNam? Indeed. Did the Brits? Yup, after the VietNamese had thrown out the Japs (who had expelled the previous French colonists), the Brits helped the French regain their old colony. The VC threw out the French, the rest is history.

The point of this artricle is that the government are trying to stop 'their' citizens protecting themselves from the government's attempts to tax them via inflation. You can put any spin you want on the Canadian Mises institute's funding, but that doesn't make the VN government 'good guys', does it? 

 

As for the 'free trade/slave labor' zones - the VN are earning wages now. They sure as shit weren't when the were working on communes.

Mon, 02/04/2013 - 23:55 | Link to Comment JOYFUL
JOYFUL's picture

Short of using caps whilst reiterating my "point" I'm at a loss as to how to get it through to you...

you read the link? Great. Was it supposed to give some kind of racialist overtone to the discussion? Not as far as I know....was it supposed to implicate Merikans as anything but co-victiims with the Viets in another megawar victory for the munitions industry? ahhh, nooooo...

so what is your point? Sensitivities about the Nam War? Ok, but that's your thing, not mine. Find a thread relating to that and plug yourself in!  This here article coughed up some phoney facts about gold and central banking in Vietnam, and got the appropriate slamdown, with reasons provided therein...

maybe the subject just isn't of much interest to you.

Mon, 02/04/2013 - 13:55 | Link to Comment Jay
Jay's picture

Strange take by the Mises Institute on the new regulations. To me, they make the gold deposits much more secure. If the banks are paying interest on gold deposits, then the gold on deposit doesn't really belong to the depositer. It's on loan and subject to multiple claims by fractional reserve lending. If I were to deposit gold in a bank, I would pay to have it stored, just as these regs require.

Mon, 02/04/2013 - 14:15 | Link to Comment JOYFUL
JOYFUL's picture

sssshhh now...you're not supposed to interrupt the show with troubling factual material...this is about ideology, not "truth tellin!"

Indeed, you are correct...the banks have taken in real gold from real people, and returned them paper, in the form of a ''gold account" with grams of XAU credited to their account...the author's attempt to imply otherwise was a jaundiced effort to support their storyline...and implicate the bad Central Bankers of Vietnam as the villains of the piece....

instead of the offshore banksters pushing and shoving to get in the door and ply their trade along with their Starmart\Walbucks partners in international corporate crime...and reduce the number of pesky 'free operators' who currently litter the streets of Nam with their small businesses and arcane hustling for a buck!

but hey, it's got "von Mises" name behind it, so the dummies are sure to buy the line, hook, n sinker.

Pavlov strike agin!

Mon, 02/04/2013 - 17:34 | Link to Comment darkpool2
darkpool2's picture

Stupid maybe to deposit your gold witha bank in exchange for a pittance of interest income......but, the banks ARE still returning gold to customers who request it back ( i know that for a fact !! ) . So all is not lost yet, but one day the music will stop , and there definitely will not be enough chairs. ( but at least one person i know no longer needs a chair )

Tue, 02/05/2013 - 00:01 | Link to Comment JOYFUL
JOYFUL's picture

While I do not choose to gainsay your personal experience in this matter, my own personal experience has proven that the banks I am in contact with are willing to return the gold only in one kilo amounts...I know that for a fact too...

that may not be a big problem for a high roller. but squashes most of us gold bugs under the bus. This issue may or may not depend upon geograhical location...what's your take on that?

Mon, 02/04/2013 - 15:10 | Link to Comment BigJim
BigJim's picture

Where does it say the VN banks are now obliged to regard the gold as being held as a deposit, as opposed to a loan? They'll probably still lend out the gold AND charge interest on it.

As it happens, I think this will backfire. The citizens will think 'screw this, I'll keep it at home in a hole in the ground', and withdraw their gold altogether... possibly leading to bank runs if it turns out the VN banks have been playing rehypothecatory games with it.

Mon, 02/04/2013 - 14:37 | Link to Comment DaveA
DaveA's picture

This policy will soon be reversed, because it's all pain and no gain for anyone. Many banks will fail as depositors take their gold home and bury it, and many businesses will go bankrupt when banks stop lending to them. Loan sharks will flourish, accepting thumbs and kneecaps as collateral. Tax and bribe revenue will drop, and the dong will fall faster than before.

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