Here is Part 1 of our summary breaking down  IGWT’s Zoltan Pozsar interview by Niko Jilch, and Ronnie Stöferle. The original IGWT report pdf should be downloaded here (it's good) and is also included at bottom. Part 2 will be sent tomorrow covering Pozsar’s Bitcoin commentary and include the usual reports.

Contents: (1200 words)

1. Introduction
2. The Legacy of Hyperinflation
3. Geopolitics and Reserve Management
4. Why do Central Banks Hold Reserves again?
5. The Significance of Gold
6. Motivations for Gold Accumulation
7. Anticipated Changes in Reserve Management
8. Implications for Investors
9. Gold as a Safe Haven
10. The Role of Gold in a Multipolar World
11. Conclusion

Introduction:

Authored by GoldFix

In this interview, Zoltan Pozsar delves into the intricate relationship between geopolitics, reserve management practices, and the role of gold in the evolving global landscape. Pozsar's astute observations offer valuable insights into the changing dynamics of central bank policies and the potential implications for the future of the global monetary system.

Hungary’s Legacy of Hyperinflation:

Reflecting on Hungary's history of hyperinflation, Pozsar dismisses the notion that Hungarians' concerns about inflation and their interest in gold are driven solely by past experiences.

 

While acknowledging the hyperinflationary episode of the Hungarian Pengő after World War II, Pozsar suggests that both the general population and policymakers in Hungary have moved beyond this traumatic event.

Drawing parallels with Germany, he highlights that such historical episodes serve as distinct phases in history from which valuable lessons have been learned.

Geopolitics and Reserve Management:

Pozsar underscores the profound impact of geopolitics on the transformation of reserve management practices. As "great power" conflicts involving major players such as China, the United States, and Russia intensify, countries are reevaluating their reliance on the US dollar as the dominant reserve currency.

He also highlights the growing inclination of certain regions to seek alternatives to the dollar, driven by legal risks, sanctions, and geopolitical considerations.

Why do Central Banks Hold Reserves:

There’s only three real reasons why banks hold FX reserves. Here they are.

1- TO BUY STUFF

You need to import oil and wheat and whatever you don’t
produce at home, and the price of commodities is
denominated in US dollars, and it’s invoiced in US dollars.
There’s no way around it. Essentials that you import are priced
in dollars. Global Exchanges pricing in dollars reinforces the GRC hegemony that is used for indexing and negotiations, even if only as a reference point.

2- TO PAY DOLLAR DENOMINATED DEBTS

When the local banking system has dollar liabilities and there’s
some crisis, you have to provide some backstop to that; or if
your corporations borrow too much offshore in US dollars,
and they run into problems, you will have to cover that.

3- TO DIVERSIFY GEOPOLITICAL RISK

There is a new theme where, in addition to gold, foreign central banks
are going to start accumulating currencies other than just the
dollar because there will be more oil that’s going to be invoiced
in renminbi and other currencies. Prior to this the diversification *into* dollars was a hedge against potential EU and ME instability. The US is a protected island and a safe haven of stability. But recent sanctions and Russian reserve confiscation have created uncertainty offsetting that positive attribute. 

Motivations for Gold Accumulation:

Pozsar identifies several compelling reasons behind the surge in central banks' gold accumulation. Firstly, gold serves as a hedge against potential currency devaluation, offering stability during times of uncertainty. Secondly, in an increasingly multipolar world, countries seek to diversify their reserve portfolios and reduce their reliance on a single currency. Gold's time-tested reputation as a reliable store of value positions it as a crucial means of wealth preservation. Lastly, as alternative currency invoicing gains momentum, central banks recognize the need to hold reserves in currencies beyond the dollar to facilitate essential imports.