Ecuador Transfers Half Its Gold Reserves To Goldman Sachs In Exchange For "Liquidity"

Tyler Durden's picture

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

This is a great example of how the game works. In a world in which every government on earth needs “liquidity” to survive, and the primary goal of every government is and always has been survival (the retention of arbitrary power at all costs), the provider of liquidity is king. So what is liquidity and who provides it?

In the current financial system (post Bretton Woods), the primary engine of global liquidity is the U.S. dollar and dollar based assets generally as a result of  its reserve currency status. Ever since Nixon defaulted on the U.S. dollar’s gold backing in 1971, the creation of this “liquidity” has zero restrictions whatsoever and is merely based on the whims and desires of the central planners in chief, i.e., the Federal Reserve. As the primary creator of the liquidity that every government on earth needs to survive, the Federal Reserve is thus the most powerful player globally in not only economic, but also geopolitical affairs.

The example of the so-called sovereign nation of Ecuador relinquishing its gold reserves to Goldman Sachs for “liquidity” which can be conjured up by the Fed on a whim and at zero cost tells you all you need to know about how the world works (read my post: Why Fiat Money is Immoral).

Now from Bloomberg:

Ecuador agreed to transfer more than half its gold reserves to Goldman Sachs Group Inc. for three years as the government seeks to bolster liquidity.


The central bank said it will send 466,000 ounces of gold to Goldman Sachs, worth about $580 million at current prices, and get the same amount back three years from now. In return, Ecuador will get “instruments of high security and liquidity” and expects to earn a profit of $16 million to $20 million over the term of the accord.


“Gold that was not generating any returns in vaults, causing storage costs, now becomes a productive asset that will generate profits,” the central bank said in the statement. “These interventions in the gold market represent the beginning of a new and permanent strategy of active participation by the bank, through purchases, sales and financial operations, that will contribute to the creation of new financial investment opportunities.”

This isn’t the first South American country we’ve heard about sending their gold to Goldman. Recall my post from late last year: Is Venezuela Selling Gold to Goldman Sachs?

This gold is headed straight to China or Russia. Good luck every getting that back amigos. Just ask Germany.

Full article here.

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Stoploss's picture

" gold reserves to Goldman Sachs for three years"


It won't take that long.

insanelysane's picture

What is Goldman going to do with all of that worthless yellow metal???

Arius's picture

Smart decision i must say ... as another American investor Icon once pointed out we spent money to dig it from the ground, then we spent money to put in another hole and pay people to protect ... complete nonsense!

hopefully more central banks will realize it and do the same!

strannick's picture

Yes Ecuador paying the wolves -fedres, BOE- to guard their golden hehouse, can be quite pricey. Often, they will charge you storage fees even long after the gold is gone. i.e Morgan Stanley.

WhyDoesItHurtWhen iPee's picture

Once again "send us your scrap gold" you know, "barbaric relic" and all that.

Stuck on Zero's picture

Am I mistaken but isn't that what the Spanish were telling the Incan Kings in the 1500s?


ParkAveFlasher's picture

"Yes, and give us your daughters too.  You don't need those."

Pladizow's picture

Aye Dios mio. Correa es muy stupido!

ParkAveFlasher's picture

No, just the latest in a long line of colonialist looters heading Ecuador.  He had everyone fooled with his quechua shirts and nationalistic gasbagging.

Pladizow's picture

How do you say, "Brown's Bottom" in spanish?

Ahmeexnal's picture

Venezuela has done the same. False opposition.
Ecuador uses the US dollah as national currency. Venezuela is about to do the same. They just give the banksters a much needed air tank to survive.

ParkAveFlasher's picture

Well put.  Ecuador is an expansion reservoir for dollar transactions or oil-driven price offset mechanism for likewise.  That makes me wonder why gold and not oil as is typical.

The peasants are too uneducated to realize the finance trap they are in, they think that they can use dollars because they are so rich, you see?  So they all have two cars now (financed, of course) and make a quarter of what we make in the USD although their cost basis is the same.  Default, dead ahead!

Pinto Currency's picture



The Reserve Bank of India says the LBMA is levered 92:1 paper (vapor) to gold.

The LBMA can create 43,000,000 million oz. in trading positions with this gold from Ecuador.

Jabba just ate Ecuador's gold, burped and rolled over.


THX 1178's picture

Liquidity crisis dead ahead.

knukles's picture

Well, they gotta borrow it from somewhere since the CHineee are hoarding it and making the Fed's life difficult....
All confirmed, officially via a Chinee report


It's sweeter than sucre

nope-1004's picture

I love the phrase "wasn't generating any returns".  The statement is so self serving, because it was the corrupt reserve currency Fed that devised a system to ignore gold, so of course it's "not going to generate any returns" under the umbrella of the US foreign petro-dollar policy.

Get rid of the Fed and this idiotic notion of one nation controlling all financial transactions, and that gold will generate returns because it will be the only tangible asset that carries inherent trust.


BaBaBouy's picture

Wooopiiii ...

The GERMANS Can Now Get A Bit More Of Their GOLD Back...

And ECUADOR???       Suckers................

12ToothAssassin's picture

All your gold are belong to us gs

Troll Magnet's picture

This is why Ecuador is, well, Ecuador.


Rusty Shorts's picture

Here's Andy, a guy I follow online. He travels all over and just happens to be in Ecuador right now, very interesting report...apparently it's a great place to hang out.

remain calm's picture

You have to ask yourself why would GS give Dollars for gold which they think is worth less than $1000/oz. Things that make you go hmmm. FU GS

Not My Real Name's picture

Is it just me, or does it feel like the walls are rapidly closing in on us?

Crawdaddy's picture

Gracias Rusty - good link. I like this Andy.

MeMadMax's picture

Ecuador is about as lefty loon as they come.

They make deals with drug dealers.

They have the strictist gun control laws on the books.

They have more "homemade" guns than most other countries.

They have more cops killed for their weapons.

They have a sky high murder rate that is near the top of the world.

The UN has stepped in on ecuadors "human rights" policies.



The only thing that keeps the place alive???



CheapBastard's picture

Well, it's easier to siphon off "liquidity" to ones secret Swiss bank account then it is to 'disappear' kilo bars of the barbaric metal.


Just say'n.

disabledvet's picture

Best comment...and only non worthless one on the thread.

"If the Government folks are ready to loot the country before they flee...get a half billion DOLARES for the Government's gold first."

The story obviously is that Goldman Sachs has the half of course "all looters are welcome here."

Ecuador has a lot more than just oil...and what little of that they have they can't get out of the ground right now.

They should have hundreds of billions in shale gas and oil right now...but instead they rolled the dice on the dumbest lawsuit in history and look like they're about to flee the country.

gonetogalt's picture

The thing about these banana republics is that the big guys only fuck with other big guys, and because their gov'ts are mainly disfunctional, there just isn't enough energy in the system to fuck with the rest of us proles...So ignore the laws on the books, just take the most fucked up, lawless country you can find, there you'll find the closest approximation of the libertarian ideal, free from being fucked with. 


(Until USAid gets here with a 'grant' to improve something)

gonetogalt's picture

Nice link, knuckles, that's it in a deadpan nutshell.

Manthong's picture

I know GS is that evil.

I did not know that Ecuador was that stupid.

Three years… LOL.. Hey Ecuador, ask Germany how that works.

Even Chavez had some smarts.

ParkAveFlasher's picture

Chavez had enough sense to die from cancer that he acquired at around the same time as his "countrymen's" gold.

zerozulu's picture

We don't know the real story behind. Once a gringo printed fake dollars and by mistake printed 55 dollar bill. He thought it is difficult to sell it to Americans so he took it to a Mexican. Mexican said I only can give you 45 dollar for this. American said OK. Mexican when in side his house and came back with a 45 dollar bill.

Kirk2NCC1701's picture

Well, there was this blonde in the B4alphaQ Constellation, to whom Kirk pledged Liquidity if she opened her gold vaults for a "robust audit".

;-)  Kirk out.

Silky Johnson's picture

Great deal! Here take this stuff of great value and give us some paper that has been shat out by Mr. Yellen.

And how come GS is so kind as to accept some worthless yellow rocks for a handfull of the almighty Dollah?

TeamDepends's picture

Liquid Paper = Krugmanian Physics

hoos bin pharteen's picture

Now we know why gold was slammed the past few days.  It's a classic pawn shop play - Drive down the gold price to reduce Ecuador's "loan," and then wait for Ecuador to default.  

ebear's picture

Ecuador uses dollars because a previous government destroyed the national currency by issuing too much.  Sound familiar?

THX 1178's picture

Damn. Ecuador basically short-sold their stash. 

Jafo's picture

Almost right.  I reckon that Goldman is going to short sell that gold into a falling market and slam gold good and propper to US$1,104 or even lower then buy it back.  They may do this several times.  However, this will put in the absolute bottom for gold and it will only go up from there.  Gold equities are going to take it even harder than phys and they will be massively good buying near that bottom.

Herd Redirection Committee's picture

My take from this is... Ecuador didn't have the physical.  They had some receipts for gold.

Instead of demanding delivery (which they were implicitly told "Not gonna happen") they 'cut a deal' to accept USD in place of their paper gold.  To make it palpable to the people they have to say its for 3 years, and that its only been leased.

They never possessed it in the first place.

ParkAveFlasher's picture

Ecuador has real gold and real need for dollars as they are dollarized, and thus import at an international cost basis without the "benefit" of salary/productivity "par" (or even "bogie", for that matter).  Are they on an over-extended credit card and getting gut-punched by GS?  I wonder why their go-to of petroleum production is not bailing them out, if that is indeed the case.

gonetogalt's picture

Equador mines quite a bit of gold, it's certainly physical and their own production. Stupid fucks, except for the probabilityof the bosses bailing out, then smart.

ebear's picture

"Equador mines quite a bit of gold"

Not really, compared to what they have in the ground.