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Have You Heard Of India’s Newest Gold Ponzi Scheme?
An interesting fact has recently crossed the newswires, as India’s banking system is ready to start paying its clients interest on physical gold.
The Indian Minister of Finance, Arun Jaitley, has revealed new guidelines for the financial system, and the proposed new rules are somewhat surprising, even though the minister had already hinted in an earlier speech that 'gold could become an even more important asset during his tenure'.
Banks would not only be allowed to count the gold as part of their cash reserve ratio, it would also count as an integral part of the liquidity ratio of the banks which is now based on bonds rather than hard assets. That’s an important step forward which should pave the way for gold to become a much more important asset in India’s financial system.
This shouldn’t really come as a huge surprise as the Indians have always been a little bit crazy about gold. India is one of the largest gold-importing countries and the yellow metal is used as a gift on traditionally important days such as weddings. As India doesn’t have a mature gold mining sector at all, the vast majority of the gold will have to be imported and this incentivizes smugglers to bring gold into the country without declaring it to the proper authorities.
Source: GoldchartsRus.com
It’s unheard of in this modern world that gold will effectively be earning an interest when deposited at the bank. By this move, the Indian banking sector implicitly confirms it considers physical gold to be a currency above anything else.
If gold would indeed be widely accepted in the banking system, it would activate a part of the 20,000 unused tonnes of gold and this would reduce the pressure on the Indians to import gold.
Source: Goldprice.org
But there’s one critical flaw in this idea.
If one ounce of gold owned by family X is deposited at the bank, and the bank subsequently lends it out to family Y which was looking to buy gold for a wedding, where will the bank get the gold from to repay family X when it wants to withdraw its gold from the banking system?
Indeed, the bank will very likely use the gold deposited by family Z to ‘repay’ family X’s deposit. This system will work great in the beginning, but can you imagine what would happen if the majority of the clients are demanding their gold back from the banks? The bank will not be able to refund everybody and that’s the exact moment where this Ponzi scheme (and yes, this is a Ponzi pyramid) will come to a screeching halt.
It’s great to see banks will be allowed to count the gold as a part of their reserves but this idea definitely needs to be worked out before it gets instated as a system that would facilitate a Ponzi scheme in gold.
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I PITY THE FOOL!!!
This is a great plan. When the gold shortage is revealed and everyone scrambles to convert their paper gold into real physical, this plan will have created an even bigger deficit in physical - meaning sharper price increases when gold starts to go higher! What's better than a gold Ponzi scheme collapsing? -- Two gold Ponzi schemes collapsing!
The Rothschilds are above all else, thieves. Regular, plain old thieves. Allow them to start securitizing your assets and the assets will fucking disappear.
Gold is in a bear market rally which should last a few more months. But longer term the price of the yellow metal will continue to fall. Gold is an important asset to own but not as an investment right now. Safe storage against government's war on cash is a better reason. As an investment, the metal will lose value against the dollar which will skyrocket over the next couple of years.
Gold
http://www.globaldeflationnews.com/gold-elliott-wave-update-for-week-end...
USD
http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...
It'll be hard pressed to make it that high, imo. Here's why;
http://www.nowandfutures.com/images/cot/GC.png
Gonna be the best sale on gold since '76 or '99.
I love idiots who not only have a flawed opinion but they offer it as though it is a matter of fact- pretending to know the future- and telling people on this site that the value of the dollar will skyrocket in the coming years.
Thanks for the laughs this morning, Nostradamus.
Repeated attempts to acquire privately held Indian gold have failed.
The latest scheme will fair no better.
The scheme is intended to be temporary. The banks will be accepting only one year deposits under the scheme, with a provision to roll over (which requires agreement from both the parties). Like most knowledgeable people, the Indian finance minister too seems to be expecting supply disruptions to the physical metal in the international markets. The objective of the scheme is to have enough physical metal to meet internal jewellery demand when there is a supply disruption in the international gold markets. The international gold markets are expected to resume after the disruptions once a significant correction in the price of the metal in terms of paper currencies. Disruption in the physical supply can cause a chaos in a country like India where huge volume of gold is traded as jewellery on a daily basis.
Inability to find the price of gold in paper currencies (reason for supply disruptions) won't be a serious problem in India as long as there is metal available to convert to jewellery. Almost all gold jewellery sold in India is priced according to the gold content (any studded gems are priced separately). Of course the value of gold in jewellery is set higher than gold bullion. For example 20 grammes of gold bullion may purchase jewellery with a gold content only of 18 grammes, the rest being the jeweller's cost and profit margin. People can exchange gold bullion (or gold in old jewellery from) for new jewellery with practically no currency transaction. This may be the only form of jewellery sales happening when the price of the physical starts fluctuating wildly in the bullion markets when physical supply disruptions take place in the world market. However this too might become limited if the only gold with the jewellers is gold they get for recycling. If India had a stock of physical which can be lent to the jewellers at a small interest in gold, they will be better placed during the supply disruptions in the world markets.
Accumulating that supply is the objective of this scheme. Allowing the banks to treat gold as reserves is to ensure the banks have some incentive to hold the gold before there are jewellers willing to borrow at an interest denominated in gold. It will be a scheme backed by the government, so the risk of the terms of deposit being unilaterally altered by the banks to the detriment of the depositors is zero for the near future.
Thank you for taking the time to post this comment. I arrowed ya up for the effort- not that I agree with any banking scheme to take gold away from individuals.
Indians know what third party risk is and your zero risk scenario is laughable.
Wealth is possession. If you don't have it then you are at the mercy of another. When times get tough is when your wealth will be most needed.
"According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India. "
For all the times I've read about India's love of gold, I've never seen any mention of how much gold they hold. I've seen some crazy-thin (basically FOIL) indian gold, and I know that at least in America... Indians buy some rather crappy gold product at rather crappy pricing. I wonder if its the same in India, and again, how much gold the typical person holds. 1 oz? I doubt its fair to simply divide 23,000 tons by the number of Indians (1.3billion) = 0.566 ounces per person
Half an ounce per persons is a helluva lot more gold than Americans have.
Just further proof that banksters REALLY do think the public is stupid.
what people need to be able to do is to use the gold as a currency of settlement. and the price will have to rise considerably to even begin that step.
It exists as of two weeks ago. It's called Bit Gold.
And the truth is that the majority of the public is REALLY stupid.
hm.... is it stupidity or just plain old laziness? I think (mainly) the latter and the PTB know that. I am always amazed how much time people spend online looking for info and deals for a washingmachine, while handing over a multifold amount to 'informed' people for safekeeping without even blinking.
I started questioning 'informed' people everywhere a decade ago, and I do not have many friends left... Better stay in the group modus and don't rock any boats. That way i seems that people are dumb, but in the back of their heads i'm sure they are wary. Wariness wares you down too... Laziness is easier - on all fronts
"The cost of sanity in our society is a certain level of alienation."
The great part about all of the dumb fucks in this country is that they don't think they're dumb. They don't know they are stupid. They think they're smart. They vote enmasse- that's why we have this idiot in the WH.
Being stupid is only hard on the others.
I fully agree. And stupidity has its price - in the long run. De l'intelligence, c'est un repas qui se mange froid. So does revenge.
What is not mentioned is that the banks will be able to and will just sell that gold in the market , thus reducing net demand, for cash and than panic buy when the price rises in the global market place. Certainly a ponzi scheme in all but name.
The whole idea behind holding gold is to have nothing to do with banks.
I lost my gold and silver in a tragic boating accident.
I lost my gold and silver in a tragic boating accident.
the average Indian will not fall for this shit.
mama is not stupid
and mama owns it
western b*llshit banking ideas.
lmao
Don't be so sure about that.
When greed surfaces, any ponzi scheme can be thrust upon any race, including the Indians. You only need to look at what's happening in China. I'll eat my hat, if the vast working class masses, who are dabbling in Chinese shares don't lose their shirts in the near future. Greed has turned Chinese savers into gamblers. Same thing will happen or is happening in India.
Give gold to banks for fiat. (Non-violent confiscation)
Banks lend out gold. (Rehypothication)
Music stops. (Liquidity crisis)
You have no gold. You have fiat. You lose.
Yes bring your gold into our "open vaults" (come in the front & out the back) and we will pay you fiat interest, but remember your gold deposit is akin to an unsecured loan to our "banking facility"...no do not tell them that you fool.
Perfect acquistion mechanism. A fool and his gold are soon parted.
I quit reading when it said, Give your Gold to a bank...
If you put wealth in a fraudulent-reserve bank, you deserve the nothing you will get back.
Liberty is a demand. Tyranny is submission.
"And, it's gone."
Why didn't the article mention paying interest in gold to all fiat deposits at the bank?
I could see once a month, or year, going down to the bank and collecting a small portion of gold that would equal the interest paid on my cash deposits.
Eventually when the customer accumulates a good amount of gold, he may decide to deposit that gold (for security's sake), and continue to earn interest.
I mean IF the 'idea' is to begin to bring the gold standard into the daily economy, for both customers and banks. It would be a shame to have a fiat cash customer (of which they all are at this point in time) and they are somehow left out of the scheme. IF the idea is to engage all of your fiat money with the gold standard, then engage all of it.
The way this article reads it seems they are only directed at current horders of gold to do all the work.
wwxx
This is a scheme to shake some loose gold out of peoples' hands, at the expense of Rupee holders and Indian taxpayers.
Forget about "bank interest"...Just don't forget where you hide it!
interest, will be paid in time
Looks like one of Barry's bath-house-bitchez from Pakistan
gold shirt guys
http://www.businessinsider.com/indian-mans-dazzling-gold-shirt-2013-1
and another.
http://www.businessinsider.com/indian-man-gold-shirt-worth-213000-2014-8
take it to the bank? the cleaners? same thing?
Presumably people will be willing to lend gold metal to a bank if they think the bank is sufficiently creditworthy.
The questions then become
1. Can the bank find customers who are able willing to borrow gold metal and repay over time in gold metal with interest and who are creditworthy in normal circumstances so as to be able and willing to repay the bank, with interest.
2. Will normal circumstances continue very long.
My guess is that the answer to 1. is YES and the answer to 2. is NO.
The bottom line is that if you keep your gold in a bank then eventually you are sure to lose some or all of it. No different from keeping your cash in a bank. You can profit from investing in a Ponzi scheme provided you get out ahead of the crash. And if you don't get out in time your investment is toast.
I think this is without a doubt POSITIVE for gold demand and, therefore, for the gold price, for this reason:
Buffett and other "classically trained" money managers keep saying they can't put value on gold becasue it doesn't have earnings or yield. If the banks will pay interst on gold, that's YIELD, isn't it? Doesn't this make the investors and the invetment funds that kept their "rainy day" or "insurance" funds in cash (earning interset - or zero interest over last 6+ years) convert them into gold and deposit into India's banks? Can't Buffetts of this world do that?
Unless, of course, they're questioning the prospect of getting the gold back from the banks. But if you believe that, then you already distrust the paper money and already have as much physical stashed away as you can, and congrats to you!
From the linked article above;
According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India. The annual imports amount to between 850-1,000 tonnes, valued at $35 billion to $45 billion.
They actually kill 2 birds with one gold brick. They slow down Indian imports, allowing more gold into international demand leading to weaker prices, temporarily. It also allows India to amass more collateral for the BRICS bank. They're gonna make it hard to resist, even to the Buffets of the world.I suspect there's a fine print somewhere about cash settlement.
Since a deposit of cash, or gold, is technically a loan to the bank, upon which they pay interest, effectively people are surrendering their gold into the hands of the Indian Banking system.
That makes it subject to confiscation in any "Bail in" that may occur.
Scrutinizer
Scrutinizer
Zappa, Joe's Garage, right? Cool stuff.
If you click through to the BizStd article, you'll see that these are two of the 'highlights'
"Highlights of the scheme:
- Customers bring their idle gold, get it verified and melted, and are provided with a receipt."
- Similarly, upon maturity, customers get back physical gold, cash or dematerialised gold.
A receipt for dematerialized gold! BWHAHAHA!
Also, love how the Brits refer to these as schemes.
"dematerialized" as in "poof its gone"?
I know Indian culture since I was married to an Indian for 20 years. I fully expect Indians to laugh this scheme off for the ponzi that it is.
Seriously. The point of physical gold as a way of passing on a family's wealth was precisely because Indians were never impressed with bank statements. Banks were a British thing - you can't trust anything those bastards run. An Indian would trust an Indian Bank even less. The whole idea is preposterous. Are you actually going to do an assay on Mr. Chunky Necklace's bling if he walks into a bank to deposit a couple of ropes?
I suppose it would amount to a good hedge on Rupee devaluation. But the weak link in that scheme is the 1.3 billion people of India who would all be trying to pull their gold out if the Rupee crashed. The closest they could get to a workable scheme is to allow you to denominate your cash deposits as gold, but never allow you to withdraw it in that form. Big deal.
I think the Indians would have been a lot happier just not having gold imports artificially restricted the last three years for no good reason at the behest of the U.S. - I would kill to know what was behind that scheme.
Ahh, you already know.
http://www.zerohedge.com/news/2014-01-19/germany-has-recovered-paltry-5-...
You assumed the banks will not import gold to meet rising demand. If banks import gold for financial use, it doesn't go into the trade balance, but instead it's a currency swap. India's plan, if fully carried to the logical conclusion, is a fully functional gold finance market.
Just a way to get more supply for repothication games.
Financialization is the problem, not the solution.