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IPFS News Link • Gold and Silver

India's Failing Gold Monetization Scheme: Seizure Imminent?

• http://www.zerohedge.com, by Paul-Martin Foss

 After one month, it has netted only one kilogram (2.2 pounds avoirdupois) out of an estimated 20,000 tonnes (44 million pounds avdp) of privately-held gold. Why is that? Well, let's look at how the program works.

Gold-holders turn their gold over to a bank. The banks melt the metal down and provide it to the central bank to loan to jewellers.

In exchange, the central bank provides gold accounts to the banks on behalf of the gold depositors and pays interest on those deposits.

The interest rate on those deposits is a little over 2%, while the inflation rate in India right now is over 5%.

The deposits are time deposits, meaning that depositors receive their principal repaid at the end of the term; short-term depositors receive gold or rupees back, while medium- and long-term depositors receive only rupees.


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