Log in
Login
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesHot NewsMost Read NewsRecomm.Business LeadersCalendar 

World Gold Council : Gold-backed bonds offer an alternative to austerity, confirms new white paper

share with twitter share with LinkedIn share with facebook
share via e-mail
0
11/11/2012 | 02:17pm CEST
11 Nov, 2012

Download this document (0.1 MB)

A report published by leading monetary and Eurozone academic Professor Ansgar Belke, suggests that those Eurozone Member States worst affected by the sovereign debt crisis, with sufficient gold reserves, could use their gold as collateral to reduce debt servicing costs.

Gold-backed sovereign debt or a 'gold-backed bond' is debt, which is partially secured by gold. Using a portion of a nation's gold reserves in this way would be a temporary step to recovery for Eurozone Member States, enabling them to borrow more cheaply through bridge-financing.

Professor Belke is a Monetary Expert Panellist for the Economic and Monetary Affairs Committee of the European Parliament and is the Jean Monnet Professor at the University of Duisberg-Essen. Commenting on the report Professor Belke said:

"Using gold as collateral for new sovereign debt issues would alleviate some pressure in the short term and facilitate a return to growth. Gold-backed bonds would have an advantage over the existing non-conventional monetary policy tools, such as Outright Monetary Transactions (OMT), introduced by the European Central Bank (ECB) to tackle the Eurozone debt crisis to date. The ECB's balance sheet would be largely unaffected in the end, as the gold that sits within national central bank reserves would be more than sufficient to collateralise the bonds. It would lower sovereign debt yields without increasing inflation and would give some of the Eurozone's most distressed countries additional time to work on economic reform and recovery."

The report notes that not all Eurozone countries have enough gold in their reserves for this to be a viable solution. However, for those with significant holdings, relative to their short-term financing requirements, such as Italy and Portugal, this represents a real alternative.

Italy and Portugal hold gold reserves of 24 and 30 per cent of their two year funding requirements respectively. In the case of Portugal, the paper demonstrates that a sovereign bond backed by one-third gold could reduce yields on sovereign debt by around one third.

Natalie Dempster, Director, Government Affairs at the World Gold Council, adds:

"While there are clearly important political and legal considerations that need to be addressed, gold has been used in the past to secure loans in Portugal, Italy and India and such a measure would certainly offer a partial solution to Europe's current woes and an alternative to austerity measures."

The report entitled 'A more effective Eurozone monetary policy - gold-backed sovereign debt', was commissioned by the World Gold Council to independently evaluate and test its proposals on the use of gold as collateral for Eurozone sovereign debt.

For more information and to download the white paper

Brenda Bates
World Gold Council
T: +44 20 7826 4706
E: brenda.bates@gold.org 

Claire Maloney
Capital MSL
T: +44 20 7307 5341
E: claire.maloney@capitalmsl.com 

Download this document (0.1 MB)

distributed by
share with twitter share with LinkedIn share with facebook
share via e-mail
0
React to this article
Latest news
Date Title
06:41p Significant Upsurge in Demand from Organizations to Create Opportunities for the ELT Market in Europe Through 2020, Reports Technavio
06:39p FITCH : Ohio Supreme Court Order Could Pressure DPL and DP&L's Ratings
06:38p SAIPEM : Board of Directors approves launch of non-convertible bond issuance programme for a maximum amount of €1.6 billion
06:38p CALIFORNIA POULTRY FEDERATION : New CDC report links salmonella outbreaks with backyard flocks
06:38p CALIFORNIA POULTRY FEDERATION : Organic industry fights for better animal welfare
06:38p COMMENTARY : International trade pacts mean more U.S. ag dollars
06:38p SURGICAL INNOVATIONS : Result of Annual General Meeting
06:38p DO DEUTSCHE OFFICE : Deutsche Office leases 2,500 sqm in Cologne
06:38p SURGICAL INNOVATIONS : Issue of Shares
06:38p UNIVERSITY OF MANCHESTER : 27 Jun 2016 - Global poverty expert says urgent action needed to help the world’s poorest
Latest news
Advertisement
Hot News 
SWEETT : The K2 Principal Fund L.P. - Public Opening Position Disclosure
HEARTWARE : Medtronic to Expand Heart Failure Portfolio with Acquisition of Heartware International
PEOPLE'S UNITED FINANCIAL, INC. : To Acquire Suffolk Bancorp
MORTGAGE ADVICE BUREAU : Expects Fewer Transactions After Brexit Vote
INTERQUEST : Trading Update
Most Read News
10:42a Oil down 2 percent as dollar strength, Brexit uncertainty continue
02:49aDJFRESENIUS SE KGAA : CEO Is Leaving His Post -- WSJ
Most recommended articles
12:37p UBS : French prosecutor seeks trial for UBS over client tax fraud-judicial source
12:35pDJNestlé Taps Ulf Mark Schneider as Next CEO
12:35pDJBrexit' Bookings Strong But Fares Lower, Says Ryanair
12:34p SUNOPTA : hires advisers after shareholder urges sale of company
12:33p Brexit vote wipes $130 billion off FTSE 100 in two days; banks slump