Where Dong Is Weak, Gold Rules - In Vietnam They Will Pay You To Store Your Gold

Tyler Durden's picture




 

Submitted by Simon Black of Sovereign Man

They Will Actually Pay You To Store Your Gold

Here’s something you don’t see every day: Banks in Vietnam will actually pay YOU to store your gold in one of their safe deposit boxes. I was pretty surprised to find this out for myself; neither Simon nor I have seen it anywhere else in the world except here.

This is actually how banking used to be. The original bankers were goldsmiths– big burly guys who worked with gold on a daily basis. They had the security systems already established, and, for a fee, they were willing to let you park your gold in their safes.

Eventually, goldsmiths got into the moneylending business; instead of charging a security fee, they would pay depositors a rate of interest for the right to loan out the gold at a higher rate of interest.

Goldsmiths’ reputations lived and died based on the quality of their loan portfolios, and their consistency of paying back depositor savings.

Today that’s all but a footnote in history. Except in Vietnam.

Vietnam’s economy enjoyed a strong boom in the mid-2000s thanks to economic liberalization and foreign capital inflows. Within a few years, the economy overheated and inflation became rampant.  Then came the global financial crisis.

The Vietnamese government’s response, as it has been with governments all over the world, was to print more money.  This further exacerbated the inflation problem and undermined confidence in the currency.

The unfortunately named Vietnamese dong has been devalued to the point where it now has an absurd number of zeros.  Over the past 3 years it has lost some 30% of its value against the US dollar– it now takes about 21,000 dong to buy just one US dollar.

Against stronger currencies such as the Aussie dollar and Canadian dollar, the dong has plunged even further.

As such, it comes as no surprise that the Vietnamese people don’t trust their government’s paper money.  They prefer to earn dollars and keep their savings in gold. Banks have jumped on board, encouraging gold deposits by offering attractive interest rates.

Property prices are frequently quoted in gold as well. It’s cultural– the average guy on the street is very aware of gold and probably knows the price.

The government doesn’t like this at all because it can’t print dollars or gold.  So, it is discouraging their use, forcing non-tourist business owners to exclusively use the dong.

The government has also introduced regulations to discourage gold hoarding.  Technically, it’s not permissible now for Vietnamese banks to pay interest on gold deposits anymore, but it still happens in practice.

So much for Warren Buffet’s assertion that gold is just a silly cube that doesn’t pay any yield.

It’s ironic that places like Vietnam are considered poor, backward, and undeveloped by the West… and yet it’s precisely these same people who are smart enough to culturally reject worthless government-issued paper currency in favor of something that is naturally scarce and lacks counterparty risk.

We should all be so wise…

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Wed, 04/11/2012 - 17:44 | 2336054 transaccountin
transaccountin's picture

Curious but how much do they exactly pay? Thx

Wed, 04/11/2012 - 17:48 | 2336069 The Alarmist
The Alarmist's picture

So, turns out we won the war after all.

Wed, 04/11/2012 - 17:47 | 2336072 Chupacabra-322
Chupacabra-322's picture

Off Topic:

National Level Exercise 2012 Will Focus on Cyber Attacks Against Critical Infrastructure

Public Intelligence

Rather than combating natural disasters or a nuclear detonation in a major U.S. city, this year’s National Level Exercise will focus on cyber threats to critical infrastructure and the “real world” implications for government and law enforcement of large-scale cyber attacks. National Level Exercise 2012 (NLE 2012) is scheduled to take place in June and will involve emergency response personnel from at least thirteen states, four countries, nearly every major governmental department as well as a number of private companies, non-governmental organizations, institutions of higher education and local fusion centers. The exercise will span four FEMA regions and will include scenarios affecting the National Capital Region.

Past NLEs have focused primarily on threats related to terrorism or catastrophic natural disasters. NLE 2010 focused on the hypothetical detonation of an improvised nuclear device (IND) in Las Vegas. NLE 2011 concerned a massive earthquake occurring in the New Madrid Seismic Zone. NLE 2012 will be the first exercise in the series to concern itself primarily with cyber threats. A private sector participant guide released by FEMA states that NLE 2012 “will address cyber and physical response coordination, including resource allocation . . . emergency assistance and disaster relief resources, relative to a cyber event with physical effects.” Another presentation from FEMA adds that the exercise will evaluate government “roles and responsibilities in coordinating national cyber response efforts and their nexus with physical response efforts.”

While the exact scenario for NLE 2012 is not known, the “high level” goals include simulating a situation where there is an “ambiguous threat landscape with multiple adversary types” that produces “physical impacts resulting from cyber attack and cascading effects” that threaten “critical commercial logistics and data, industrial control systems, and associated operations.” NLE 2012 will be unique in that there “will be an emphasis on the shared responsibility among the Federal Government; state, local, tribal nations, and territories; the private sector; and international partners to manage risk in cyberspace and respond together to a cyber event with national consequences.” Due to the “sensitivity of the exercise scenario and the related private sector concerns in terms of media exposure” FEMA has made it clear that the names of private sector participants will not be publicly released.

The exercise will occur amidst a growing climate of panic in Washington regarding the state of U.S. cybersecurity. The FBI’s top cybersecurity official recently resigned stating that the U.S. is fighting a losing war against hackers: “I don’t see how we ever come out of this without changes in technology or changes in behavior, because with the status quo, it’s an unsustainable model. Unsustainable in that you never get ahead, never become secure, never have a reasonable expectation of privacy or security.” Former government officials are advocating U.S. Customs “inspect what enters and exits the United States in cyberspace” and calling for prompt action on multiple pieces of cybersecurity legislation passing through the House and Senate.

NLE 2012?s goal of examining physical effects of cyber attacks underscores a comment recently made by the director of the FBI that the “cyber threat” will soon replace terrorism as the country’s highest national security priority. In March, a multi-agency exercise that included the FBI and NSA simulated a cyber attack capable of crippling the New York power grid during a summer heat wave. Last September, the Department of Homeland Security issued a warning to members of the “critical infrastructure community” that the hacktivist group Anonymous had expressed interest in industrial control systems. Computer security researchers have also recently demonstrated a number of techniques for attacking computer systems used in critical infrastructure that reportedly resemble the Stuxnet virus responsible for disrupting Iran’s nuclear program in 2010.

http://www.oathkeepers.net/forum/new...newthread&f=10

My take,

nice opportunity for an inter-net False Flag don't you think?

Wed, 04/11/2012 - 21:57 | 2336661 Milestones
Milestones's picture

All this from a government that can't write a budget for 3 years running? Surely you jest!!          Milestones

Wed, 04/11/2012 - 17:50 | 2336075 EmileLargo
EmileLargo's picture

Strange. In countries where the fiat currency is being debased very rapidly and where gold prices are rising exponentially (in that fiat currency), you usually struggle get bank lockers where you can store your gold because there is a massive queue of people trying to get lockers and their supply is limited usually (at least in the short term). What this article describes is very weird. It can't be that the average Vietnamese doesn't "get" the fact that this is how you save your money. 

Wed, 04/11/2012 - 18:11 | 2336138 Ghordius
Ghordius's picture

Not in a country where gold is the traditional unit of account for important assets like land. In fact, for the Vietnamese it's fiat inflation as usual and slightly falling land prices.

Wed, 04/11/2012 - 17:51 | 2336077 Fix It Again Timmy
Fix It Again Timmy's picture

Send me your gold.  I will safeguard it and pay you 10% a year!

Wed, 04/11/2012 - 17:56 | 2336101 Larry Dallas
Larry Dallas's picture

Sounds like the Bank of Nicoli! Ha!!! Is this what our world banking systems have become?

http://www.youtube.com/watch?v=0o8XMlL8rqY

Wed, 04/11/2012 - 17:53 | 2336087 navy62802
navy62802's picture

Cool story about the old goldsmiths and the original bankers.

Wed, 04/11/2012 - 17:55 | 2336094 silvertrain
silvertrain's picture

I will let them hold a paper claim on my metals if they would like..

Wed, 04/11/2012 - 22:03 | 2336674 Milestones
Milestones's picture

Where do you think fiat money comes from.? People would use those receipts for gold to barrow upon in trades etc.       Milestones

Wed, 04/11/2012 - 17:56 | 2336098 quartshort
quartshort's picture

My thoughts too!

"We should all be so wise". Wise? As in let the banks hold our gold for us? Wise. Really? Really, really?

Go right a head and let them "hold" yours for you. The strong box covered in rubble idea above sounds much more wise on my end.

Epic Fail.

Wed, 04/11/2012 - 17:58 | 2336104 vegas
vegas's picture

Warren Buffet would be a big fat loser if not for crony capitalism. The guy is a vulture, just like his buddy George One-Good-Trade-In-My-Life Soros. Without the protection of government and sweetheart deals these guys couldn't find their ass with both hands if they had a roadmap.

5,000 years of civilisation and only one thing remains constant - gold baby; the rest is all bullshit.

 

http://vegasxau.blogspot.com

Wed, 04/11/2012 - 18:06 | 2336105 Yen Cross
Yen Cross's picture

Open Google Earth, lock into the South China Sea/ Indian Ocean!  There aren't any defended/defined borders. They are all YELLOW/Pending resource discovery!/ sarc

 Hell, Myanmar is still Burma!

Thu, 04/12/2012 - 01:48 | 2336937 Non Passaran
Non Passaran's picture

YC half of your comments are good, half are total crap.
This one is of course crap. I feel sorry for you.

Wed, 04/11/2012 - 17:58 | 2336106 xPat
xPat's picture

Simon/Tim are such retards. Tim is referring to an unallocated account. Of course they are willing to pay interest - you give them gold, and deposit it on a fractional reserve basis. You would have to be a complete moron to actually do this, as it subverts the whole purpose of owning physical bullion on the first place. Oh yeah, forgot, complete morons are Simon's principal audience. Never mind...

xPat

Wed, 04/11/2012 - 18:10 | 2336133 Dr Benway
Dr Benway's picture

Yeah this article is very weird.

 

Haven't seen too many other articles on ZH arguing how "wise" it is to open an unallocated paper gold account with a Vietnamese bank. LOL!

 

or maybe it is some kind of joke

Wed, 04/11/2012 - 19:54 | 2336427 Tyler Durden
Tyler Durden's picture

Article is not telling anyone to give their physical to a bank. It is merely showing how, like in the case of Turkey recently, when stripped of propaganda, gold does in fact, pay a "dividend"... if one were so inclined.

Wed, 04/11/2012 - 20:17 | 2336476 Dr Benway
Dr Benway's picture

Fair enough. But unallocated gold accounts everywhere already pay interest, in the form of subsidized storage fees.

Wed, 04/11/2012 - 20:18 | 2336478 Tom of the Missouri
Tom of the Missouri's picture

Good point Tyler.  I subscribe to the free version of Simon's letter just for ideas and kicks.  He is not completely looney tunes. Not sure about his sidekick that wrote this though.  I agree with your point though. The article does makes a good point about the value of gold.  For it to work though one would have to assume there is a trustworthy banker in a country with the rule of law and not ruled by a bunch of thieving murderouis Vietcoms who at any second can nationalize all gold holding institutions and grab your gold.  An analogy would be like having a deposit in an interest bearing commodity trading account controlled by John Corzine and overseen by the CFTC with the legal system ran by Eric Holder, but only worse.  Someone said possession is 9/10ths of the law.  Jamie Dimon understands that point well just like a good loyal Vietcom party member.

Wed, 04/11/2012 - 21:53 | 2336649 CrazyCooter
CrazyCooter's picture

Well stated good sir! I bothered to log in just to say so.

I have a friend in VN, so I know first hand about the inflation and what people are doing to protect themselves. My impression is this; most people understand they need to get out of fiat, but they don't understand what money is or how it works. Banks pay high interest rates, so some keep it in dong. Banks also have this gold set up, so some people pile into this (not thinking). I advised to buy small jewelry trinkets of gold (e.g. rings, link necklaces, etc) and put them in a safe deposit box. I then had to explain, to my amazement what a safe deposit box is and then convince them that they do exist. I was proven right (they do exist), but I was surprised no one knew about them (I have used them for tax documents, etc for years).

Oh, and if anyone wants a cheap vacation, might I suggest Vietnam. Da Lat (highlands - cooler temperatures - old colonial town) or Phan Tiet (beach resort). A good quality room at a nice tourist hotel will run you 50 USD a night and a good meal is maybe 5 to 7 USD. If you can afford the tickets, its very cost effective given the exchange rate.

Regards,

Cooter

Wed, 04/11/2012 - 21:31 | 2336605 xPat
xPat's picture

No Tyler, you're wrong. Gold does NOT pay a dividend anywhere on the planet. What you are mistaking for a dividend is the fact that fools who deposit physical bullion on an unallocated basis are paid a very small stipend to encourage their continuing stupidity. The reason it should not be viewed as a dividend or "return" on the investment is that the principal value of the investment is markedly reduced when the investor's stake in physical bullion is replaced with a dubious credit claim backed by a vietnamese counterparty.

xPat

Wed, 04/11/2012 - 21:49 | 2336643 Dr Benway
Dr Benway's picture

A gold producer can offer a small dividend on unallocated storage because it derives benefit from gold as working capital. Whether this is a foolish proposition or not depends on the producer. What seems to be happening here is fractional reserve banking with gold.

 

Depositing gold in fractional reserve banking is equivalent to getting a savings account and an at-the-money call option for gold with the bank. You no longer hold gold in any real sense, you hold a savings account and an option.

Wed, 04/11/2012 - 21:42 | 2336627 xPat
xPat's picture

p.s. Tyler, because you're special, I'm pleased to offer YOU an even better deal. Heck, why not... I'll even extend it to ALL ZH readers.

So here's the deal - I will personally pay you TWICE the rate the Vietnamese are offering to store your gold in my super-safe certified vault. Send it to: xPat Depository Services, c/o Fourth National Bank of Nigeria. Be sure to include your return address, and a cashier's check will be promptly mailed to you with your reverse storage fee credit. I promise. Really. If you act before midnight tonight, you will also receive a special Commemorative coin with pictures of the GATA principals etched in Platinum. Seriously.

xPat

Thu, 04/12/2012 - 01:34 | 2336928 SilverIsKing
SilverIsKing's picture

Is this one of those scams you hear about on the teevee?

Wed, 04/11/2012 - 21:43 | 2336633 Augustus
Augustus's picture

"Gold" does not and cannot pay a dividend.

If someone is allowed to steal your gold for a little while, that someone MAY give it back with a little extra.

Allowing yourself to be exposed the sucker deal is what yields the compensation.

There has never been Spawning Gold.

Wed, 04/11/2012 - 17:59 | 2336108 xela2200
xela2200's picture

In other words, we'll give you money to keep your gold where we can see it. That way , we now where to take it when we need to.

Sorry, I keep on loosing mine in boating accidents.

Wed, 04/11/2012 - 18:01 | 2336111 MGA_1
MGA_1's picture

Umm.. who can pay you to store something - looks to me like they are loaning it out.  You could be the holder of a ticket if not careful.

Wed, 04/11/2012 - 18:02 | 2336115 Pancho Villa
Pancho Villa's picture

It is rather deceptive for the bank to say the gold is stored in a safe-deposit box when in fact they are loaning it out. Since the Vietnamese government is trying to discourage gold use, good luck if your bank goes under or if your banker decides to leave town with the loot.

The fundamental business model of banking (borrowing short and lending long) is flawed. It works in prosperous times, but sooner or later anyone who does this will run into problems. And if the government isn't willing to bail them out, depositors will lose their money.

I would never trust anyone to loan out my gold. It simply isn't worth the risk.

Wed, 04/11/2012 - 18:06 | 2336123 Clint Liquor
Clint Liquor's picture

Gold is Money.

Many of you are too young to remember, but back in the old days Banks used to pay people interest for money on deposit. Seems rather silly now when they can just borrow it from the FED for 0.25%.

Wed, 04/11/2012 - 20:56 | 2336548 SHEEPFUKKER
SHEEPFUKKER's picture

Good point good sir.....shows you have far we have come, or not come.  You now get no interest for your cash deposits and in many cases get charged fees, or worst case, you money just vanishes into thin air. Now, they want to keep your gold for you(how nice of them!!) in exchange for a few debt notes that is probably your fiat anyway.  

Wed, 04/11/2012 - 18:08 | 2336128 FranSix
FranSix's picture

Simon might get his wish if central banks wanted to up the ante on their competetive devaluation practises, and starting heavily diversifying their foreign exchange holdings into gold.  They might have to if they absolutely insist that negative nominal rates are completely out of the question.

Wed, 04/11/2012 - 18:11 | 2336132 Hobbleknee
Hobbleknee's picture

So long, guys.  I'm off to Vietnam.  And I won't be going by boat this time!

Wed, 04/11/2012 - 18:12 | 2336135 Danielvr
Danielvr's picture

They're not paying you for the privilege of storing your gold. They're paying you for the privilege of leasing and potentially squandering your gold to speculators.

Wed, 04/11/2012 - 19:31 | 2336348 el Gallinazo
el Gallinazo's picture

"Banks in Vietnam will actually pay YOU to store your gold in one of their safe deposit boxes."

 

Sometimes I think Simon Black learned English in the same country that King George the Elder did.  They don't pay you to store your gold in their safety deposit boxes in any sense that "your safety deposit box" is defined in American English.  They pay you to store your gold in their vaults and it won't reside there for long.  They have to pay interest because any idiot would know that it is much safer to bury it in the back 40 on a moonless night.

Wed, 04/11/2012 - 18:17 | 2336150 Vlad Tepid
Vlad Tepid's picture

Vietnam will get my gold when they pry it from my cold, dead hands.  Just like everyone else who wants to get my gold.  Before the boating accident that is.

Wed, 04/11/2012 - 18:21 | 2336153 davinci7_gis
davinci7_gis's picture

Dongs suck and that's a fact jack!

Wed, 04/11/2012 - 18:23 | 2336162 Seasmoke
Seasmoke's picture

in 2012....if its not in your hands , you no longer OWN it

Wed, 04/11/2012 - 18:28 | 2336170 Yen Cross
Wed, 04/11/2012 - 18:32 | 2336174 EvlTheCat
EvlTheCat's picture

Anyone who allows their physical investment to be stored anywhere but in their possession is "poor, backward, and undeveloped".  This is a bullshit article as per Simon Black.

Make sure to take possession of your physical, and then arrange a "boat accident", for your own peace of mind!

Dumbshit!

Wed, 04/11/2012 - 18:29 | 2336176 Caviar Emptor
Caviar Emptor's picture

Vietnamese strategy is a good one: attract more gold deposits and watch the Dong rise and rise

Wed, 04/11/2012 - 18:36 | 2336199 EvlTheCat
EvlTheCat's picture

Normally, I love your posts. However, you really have to explain why this is a good idea, above and beyond a rising fiat currency?  No man may be an island, but a government/bank should never be trusted with ones own self interest.  They are mutually exclusive as far as I am concerned!

Wed, 04/11/2012 - 18:38 | 2336204 Caviar Emptor
Caviar Emptor's picture

Dunno bout you, if I were a Vietnamese I'd love to watch my Dong rise and rise. And thnx for the compliment :-)

Wed, 04/11/2012 - 18:41 | 2336214 EvlTheCat
EvlTheCat's picture

hahahahaha ok, ok I got it..  Now I know why I should not drink and rationalize!

Wed, 04/11/2012 - 18:52 | 2336242 slewie the pi-rat
slewie the pi-rat's picture

you buy saigon tea?

Wed, 04/11/2012 - 19:02 | 2336274 EvlTheCat
EvlTheCat's picture

Come on slewie, I make my own.  Buying booze is for chumps when you can amp the alcohol level with the right yeast.

You better be the real slewie or I am going to cry!

Wed, 04/11/2012 - 22:00 | 2336668 slewie the pi-rat
slewie the pi-rat's picture

well, good

yep, c'est moi  L0L!

Wed, 04/11/2012 - 18:33 | 2336183 hannah
hannah's picture

send me all your gold...i will store it for fucking free....! free....!

what a load of crap....the fed will store your gold for you also.....

 

Wed, 04/11/2012 - 19:01 | 2336269 Not Too Important
Not Too Important's picture

Sounds to me like Vietnamese rehypothication. Saves them from running the tunnels looking for it.

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