Economy

Bet You Didn't Know “Insolvent” Greece And Portugal Are Sitting On Tons Of Gold

Op-Ed: Deeply indebted euro zone countries are hoarding significant quantities of gold reserves: Greece has 4 million ounces, Portugal's stash is worth 13 billion. But instead of selling it to pay off their creditors, they'd rather ask t

(goldmoney news)
(goldmoney news)
Daniel Eckert and Holger Zschäpitz

The first thing any insolvent private person is forced to do is relinquish the family silver. But other rules seem to apply to governments. Whether they've been living above their means for a few years or for decades, certain countries hold on tight to their assets, declare themselves unable to pay back their debts and turn to other countries for help.

The European Union (EU) has seen many an example of this. Right now, Greece is negotiating with the EU-European Central Bank-International Monetary Fund troika for a new rescue package — all the while Athens sits on an impressive four-million-ounce (125 U.S. tons) stash of gold, about what four large, fully-loaded trucks could carry.

The gleaming bars in the vaults of the Greek National Bank are worth 4 billion euros. If Athens were to sell that gold, the Greek state would theoretically be able to meet at least part of the debt payments due soon without any outside help.

Another country in crisis, Portugal, also holds significant amounts of precious metal dating back to the days of António de Oliveira Salazar's regime. Instead of aid, Lisbon could have converted its 13 billion euro's worth of gold into cash.

Nick Moore, chief commodities strategist at the Royal Bank of Scotland (RBS) in London, reports that a question often asked by bank clients is why these governments don't sell some of their gold. It is after all recognized worldwide as an asset that can be sold even in tough economic times. The gold in the central banks of Eurozone members together is worth some 375 billion euros.

With that, 4.5% of Euroland's 8.3 trillion euros public debt could be paid off in one fell swoop. In relation to its debt, Portugal is particularly gold-rich. Lisbon could put 383 tons of it on the market and at present rates make 13.3 billion euros.

And if Europe sold off all its gold?

The issue is particularly volatile because the Portuguese just squeezed an 80-billion-euro aid package out of the EU. The reason given for the aid request was that the country wouldn't get fair conditions from capital markets, but needed money to pay back outstanding loans. With the money they would have gotten from selling gold, they would have been able to pay back a large part of an older debt they've been carrying which is due this year.

By comparison with the rest of Europe, Lisbon is hoarding disproportionately large quantities of gold. No other country has that much precious metal in their foreign exchange reserves. During the Euro's early years, the National Bank wasn't shy about selling, reducing its gold reserves from 20 to 12 million ounces and raising liquidities of about 2.8 billion euros.

But Portugal stopped selling in 2007 and so did Greece. At the start of the new millennium, Greeks sold substantial amounts of metal, but when the crisis hit, they left supplies untouched and asked Europeans for help.

This may, however, not be entirely due to the unwillingness of government's to use their gold reserves to pay back debt. There are institutional hurdles: finance ministers do not have direct access to gold reserves. Central banks are independent institutions not subject to government orders — a requirement of European currency union contracts. Still, those same contracts contain other passages that the Europeans have not respected, such as Article 125, known as the "no bailout clause.""

Article 123 forbids financing state budgets through the European Central Bank, but de facto that happened when the ECB bought Greek bonds in May 2010. Then there's Article 126, which regulates policy for dealing with excessive deficits in member states. These procedures have been invoked pro forma but never actively implemented. Before the financial crisis, 13 cases were opened then closed.

There is an excellent opportunity to put gold on the market now. The price of the precious metal is only just below record highs. There is also enough leeway as regards the Washington Central Bank Gold Agreement (CBGA), to which a number of central banks are signatories, agreeing not to bring more than a specific amount of the metal onto the market per year.

Of the 400 tons allowed, only 53 tons have been sold during the present accounting period out of which 52 tons came from the reserves of the International Monetary Fund. If the central banks want to sell within the framework of the agreement, they are free to do so until September 26, when sales quotas expire. Many central banks around the world are doing just the opposite, and gold continues to be stockpiled.

Read the original article in German

photo - goldmoneynews

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Paying tribute to the victims of the attack in Kongsberg

Terje Bendiksby/NTB Scanpix/ZUMA
Carl-Johan Karlsson

The bow-and-arrow murder of five people in the small Norwegian city of Kongsberg this week was particularly chilling for the primitive choice of weapon. And police are now saying the attack Wednesday night is likely to be labeled an act of terrorism.

Still, even though the suspect is a Danish-born convert to Islam, police are still determining the motive. Espen Andersen Bråthen, a 37-year-old Danish national, is previously known to the police, both for reports of radicalization, as well as erratic behavior unrelated to religion.

Indeed, it remains unclear whether religious beliefs were behind the killings. In an interview with Swedish daily Dagens Nyheter, police attorney Ann Iren Svane Mathiassens said Bråthen has already confessed to the crimes, giving a detailed account of the events during a three-hour interrogation on Thursday, but motives are yet to be determined.

Investigated as terrorism 

Regardless, the murders are likely to be labeled an act of terror – mainly as the victims appear to have been randomly chosen, and were killed both in public places and inside their homes.

Mathiassens also said Bråthen will undergo a comprehensive forensic psychiatric examination, which is also a central aspect of the ongoing investigation, according to a police press conference on Friday afternoon. Bråthen will be held in custody for at least four weeks, two of which will be in isolation, and will according to a police spokesperson be moved to a psychiatric unit as soon as possible.

Witnesses have since described him as unstable and a loner.

Police received reports last year concerning potential radicalization. In 2017, Bråthen published two videos on Youtube, one in English and one in Norwegian, announcing that he's now a Muslim and describing himself as a "messenger." The year prior, he made several visits to the city's only mosque, where he said he'd received a message from above that he wished to share with the world.

Previous criminal history 

In 2012, he was convicted of aggravated theft and drug offenses, and in May last year, a restraining order was issued after Bråthen entered his parents house with a revolver, threatening to kill his father.

The mosque's chairman Oussama Tlili remembers Bråthen's first visit well, as it's rare to meet Scandinavian converts. Still, he didn't believe there was any danger and saw no reason to notify the police. Tlili's impression was rather that the man was unwell mentally, and needed help.

According to a former neighbor, Bråthen often acted erratically. During the two years she lived in the house next to him — only 50 meters from the grocery store where the attacks began — the man several times barked at her like a dog, threw trash in the streets to then pick it up, and spouted racist comments to her friend. Several other witnesses have since described him as unstable and a loner.

The man used a bow and arrow to carry the attack

Haykon Mosvold Larsen/NTB Scanpix/ZUMA

Police criticized

Norway, with one of the world's lowest crime rates, is still shaken from the attack — and also questioning what allowed the killer to hunt down and kill even after police were on the scene.

The first reports came around 6 p.m. on Wednesday that a man armed with bow and arrow was shooting inside a grocery store. Only minutes after, the police spotted the suspect; he fired several times against the patrol and then disappeared while reinforcements arrived.

The attack has also fueled a long-existing debate over whether Norwegian police should carry firearms

In the more than 30 minutes that followed before the arrest, four women and one man were killed by arrows and two other weapons — though police have yet to disclose the other arms, daily Aftenposten reports. The sleepy city's 27,000 inhabitants are left wondering how the man managed to evade a full 22 police patrols, and why reports of his radicalization weren't taken more seriously.

With five people killed and three more injured, Wednesday's killing spree is the worst attack in Norway since far-right extremist Anders Breivik massacred 77 people on the island of Utøya a decade ago.

Unarmed cops

As questions mount over the police response to the attack, with reports suggesting all five people died after law enforcement made first contact with the suspect, local police have said it's willing to submit the information needed to the Bureau of Investigation to start a probe into their conduct. Police confirmed they had fired warning shots in connection to the arrest which, under Norwegian law, often already provides a basis for an assessment.

Wednesday's bloodbath has also fueled a long-existing debate over whether Norwegian police should carry firearms — the small country being one of only 19 globally where law enforcement officers are typically unarmed, though may have access to guns and rifles in certain circumstances.

Magnus Ranstorp, a terrorism expert and professor at the Swedish Defence University, noted that police in similar neighboring countries like Sweden and Denmark carry firearms. "I struggle to understand why Norwegian police are not armed all the time," Ranstorp told Norwegian daily VG. "The lesson from Utøya is that the police must react quickly and directly respond to a perpetrator during a life-threatening incident."

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