Gold is a barbarous relic, Keynes famously said. Keynesian economists repeat this . . . until they become central bankers. Then, it’s a different story.
Governments added 477.2 metric tons to their reserves [in 2014], the second-biggest increase in 50 years and 17 percent more than a year earlier, the World Gold Council said in a report Thursday. . . . .
Central banks have added to gold reserves for the past five years, a reversal from two decades of selling since the late 1980s. Purchases will be at least 400 tons this year, according to estimates from the London-based council, which represents 17 gold producers. Total demand for gold fell last year as Chinese consumers bought less jewelry, bars and coins.
So, central bankers, who create money to buy gold, bought more gold last year. Why is that? They aren’t saying.
“There is a lot of scope for emerging market central banks to expand their holdings as these are still significantly underweight,” Alistair Hewitt, head of market intelligence at the council, in a phone interview on Wednesday. “Demand from this sector is going to remain robust.”
Underweight? Why should there be any weight? Isn’t the barbarous relic barbarous? Central bankers don’t think so.
Central banks own far more IOU’s from the U.S. government than they own gold.
Russia’s gold stockpile has grown to the biggest since at least 1993 after purchases topped 173 tons last year. The country has been buying the metal to diversify its foreign reserves and solve problems related to ruble liquidity, central bank Governor Elvira Nabiullina said in an interview with Bloomberg Television in Moscow this month.
Gold accounts for about 12 percent of its total foreign reserves. That’s still less than the U.S. and Germany, the biggest holders, with the metal making up about 70 percent of reserves.
What’s this? The USA and Germany hold far more gold than IOU’s? Imagine that!
The barbarous relic isn’t barbarous any longer.
It never was.
Barbarous economists who promote state power don’t want the public to exercise a veto on central bank policy. The gold coin standard provided this. “Barbarous!” said Keynesians.
Then why do central banks own gold?
