Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  News  >  Economy & Forex  >  All News

News : Economy & Forex

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance ProfessionalsCalendarSectors 
All NewsEconomyCurrencies / ForexEconomic EventsPress releases

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 CET
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: [email protected] 

Claire Maloney
Capital MSL
T: +44 20 7307 5341
E: [email protected] 

Download this document (0.1 MB)

distributed by
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news "Economy & Forex"
02:54p SMS GMBH : group supplies three tandem cold mills for lead rolling to Johnson Controls Power Solutions
02:54p PERSTORP : How we guarantee sustainable sourcing with ISCC
02:54p MATT GAETZ : Congressman Matt Gaetz Demands AG Sessions Appoint a Special Counsel to Investigate Uranium One & Obama-Clinton Era Scandals
02:49p OSFI OFFICE OF SUPERINTENDENT OF FINANCIAL I : confirms Royal Bank of Canada designation as a global systemically important bank
02:49p NFU NATIONAL FARMERS UNION : Farmers Receive 11 Cents of Thanksgiving Retail Food Dollar, NFU Farmer’s Share Shows
02:48p Canada September wholesale trade unexpectedly drops on personal goods
02:44p NORTHERN IRELAND EXECUTIVE : £200,000 resurfacing works in the Greencastle area (external link opens in a new window / tab)
02:44p MINISTRY OF DEFENSE OF RUSSIAN FEDERATION : Russian, Iranian and Turkish Chiefs of general staffs agreed on measures to eradicate terrorists in Syria
02:44p BEA BUREAU OF ECONOMIC ANALYSIS : Gross Domestic Product by State, 2nd quarter 2017
02:39p NARODNA SKUPSTINA REPUBLIKE SRBIJE : 36th Sitting of the Committee on Administrative, Budgetary, Mandate and Immunity Issues
Latest news "Economy & Forex"
Advertisement