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Reviewing alternative reserve currencies, Bloomberg gets gold all wrong

Section: Daily Dispatches

1:22p ET Friday, July 31, 2020

Dear Friend of GATA and Gold:

Give Bloomberg News a little credit for a report today questioning the U.S. dollar's role as the world reserve currency and noting that other world reserve currencies have come and gone over the centuries:

But don't credit Bloomberg News for the section of the report dealing with gold, written by Eddie van der Walt, who repeats some of the often-discredited criticisms of gold's monetary capabilities.

... Dispatch continues below ...


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Van der Walt writes: "Gold's allure as a global reserve currency is that it can't be written into existence. That removes the risk that the government rolls its printing presses to fund spending, a practice that's brought on hyperinflation and destroyed currencies throughout history. The only way to increase the global supply of gold is to dig up more."

Oh, boy -- another journalist who has never heard of gold derivatives and "paper gold," who hasn't yet discovered that every ounce of real metal in the world financial system may be supporting as many as a hundred ounces of rehypothecated gold and that gold leasing by central banks was precisely their way of "printing" gold.

Van der Walt continues: "Gold's scarcity removes a key central bank policy tool."

No, it doesn't. Central banks can formally revalue their currencies in gold terms any time they want to, and often have done so. They hate doing that not because gold isn't a good form of money but because it is the best, having no counterparty risk, and because acknowledging gold as the best would diminish regard for government currencies and correspondingly diminish government and central bank power.

The "key central bank policy tool" in recent years -- never reported by Bloomberg News or any other mainstream financial news organization -- has been surreptitious intervention in the currency and commodity futures markets, something well documented by GATA.

Van der Walt concludes: "In the modern world, where money moves at the speed of light, sending shipments of gold to settle sovereign debt has become impractical."

And yet a remarkable thing about the gold trade in recent weeks has been the huge increase in gold being shipped from Europe to New York to supply the explosion of physical demand reported by the New York Commodities Exchange.

Yes, shipping gold takes a little time, but gold deliveries don't have to be made that way. For decades gold deliveries settling international trade balances were made simply by moving bars around among closets in the vault in the basement of the Bank of England in London, close enough to the speed of light.

It's not hard to get the impression that there is a reason why journalism is so inadequate about gold and currencies generally. After all, has Bloomberg News or any other mainstream financial news organization ever reported putting a critical question to a central bank, even though central banks, not elected governments, determine the value of all capital, labor, goods, and services in the world?

As von Mises and other big thinkers have observed over the years, gold is the great restraint on government and a guarantor of individual freedom. It is a rare news organization whose owners are not too scared of their government to identify its ultimate secret power.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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