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India might solve its gold 'problem' by remonetizing the metal
4:31p ET Tuesday, July 1, 2014
Dear Friend of GATA and Gold:
MineWeb's Shivom Seth reports from Mumbai that India's government may be starting to figure out a solution to what it supposes to be the country's gold problem -- that is, to recognize gold as money again. The idea, so far, would be to allow gold held by banks to count toward cash and liquidity reserve requirements.
The chairwoman of the State Bank of India, Arundhati Bhattacharya, is quoted as saying: "Gold is after all a store of value," adding that there is a need "to make use of gold available in the country, and make it more liquid."
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It's not hard to think of ways to accomplish that.
Not so long ago, gold was money itself and was minted into coins with the sovereign's seal on them, certifying their weight and measure, and government currencies were redeemable in a fixed amount of gold.
Of course there's no need to go completely back to the future. A fixed weight of gold could always be recognized as an independent currency in itself, priced at market against the domestic currency and other currencies and held on bank, corporate, and personal balance sheets in both its own weight and the equivalents of those other currencies. Loans could be issued in gold and require repayment in gold. (Not so long ago they used to do that sort of thing too.)
Such policies might not do much for the rupee, but then if, as their huge inventories of gold suggest, Indians would prefer a metallic currency, that may be the price of fully mobilizing their enormous savings and bringing their country into the rank of the great powers.
If gold as money ever had the full support of a government and central bank and was priced in a free and transparent market, liberated from the price suppression of the infinite unbacked claims of the futures markets and the fractional-reserve gold banking system, its price would explode and India might transform itself from a struggling, developing country into another Switzerland as quickly and you could say, "Goodbye, International Monetary Fund."
Seth's report is headlined "India Looking at Ways to Monetize its Citizens' Gold" and it's posted at MineWeb here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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