Realist News: Central Banks & Gold — A SEA CHANGE Is Coming
- Central Banks & Gold: A SEA CHANGE Is Coming
by The very near future is likely to see a sea-change in central bankers’ attitude to the gold allocation in their reserves. The failure of G20 monetary policy since the financial crisis is causing a general rethink, which may eventually lead to a new policy direction.
For now, that is undecided, beyond a growing acceptance that today’s monetary policy does not work and the assumptions of recent decades, that gold as money should be phased out, might have been a mistake.
The idea, that Western central banks could banish gold from the monetary scene over time, has been disrupted by the persistence of Asian demand, fuelled by the remarkable economic progress of ex-communist states embracing capitalist methods. Western financial markets have hardly begun to grasp the wider implications of the shift in economic power from the heavily-indebted welfare economies, to China, Russia and other members of the Shanghai Cooperation Organisation, and their consequences for gold.
The welfare-driven states rely on money and credit expansion to conceal the true costs of their escalating government spending. They have been motivated to deny gold’s fundamental role as sound money, because it is superior to their unsound money. The increasing prosperity of Asians of all races, who still value gold for its ability to retain its purchasing power, ultimately undermines Western monetary policy, as well as the propaganda that goes with it.
The shift of physical demand from West to East has been widely chronicled, ever since the Shanghai Gold Exchange became a conduit for escalating physical demand. Inevitably, the West’s desire to demonise gold has accelerated the process, and we are now at the point where control of the gold price could suddenly shift from Western capital markets, trading in futures, deferred settlements and unallocated accounts, to the markets supplying bullion in Asia.