Tag Archives: bitcoin

Koos Jansen & Tuur Demeester About The Gold Repatriation Movement

Today I was interviewed, together with Tuur Demeester, by Paul Buitink about the global gold repatriation movement that is taking place right now. Additionally we discussed Bitcoin and the future of the monetary system.

Something I try to limit as much as I can in my writings is to speculate. However, the conversation led me to speak freely about all possible scenarios regarding central banks gold policy and geo-politics. To provide more background information for the topics discussed I made a list with supplementary articles and data.

3:00 – Russia has 1,151 tonnes in official gold reserves currently, not “nearly 1,100 tonnes”, according to latest data from the IMF.

Russian Official Gold Reserves

5:00 – Analysis Dutch Gold Repatriation: Why, How And WhenEurosystem Increasing Allocated Official Gold Reserves & Why Austria Is Likely To Repatriate Its Gold From London

8:00 – Belgium Investigating To Repatriate All Gold Reserves

9:20 – German Gold Repatriation Accelerating

12:10 Analysis Dutch Gold Repatriation: Why, How And When

12:50 – Dutch had euro-exit plan at height of crisis

14:35 – Why Did European Central Banks Sell Gold?

17:40 – Guest Post: Australia Audits Gold Reserves At BOE

22:00 – Is Russia selling gold to support the ruble?

23:11 – Wikileaks: US Knew Exactly How To Provoke Russia

38:25 – Tuur was right, there is a Malca-Amit vault in the Singapore Freeport. (I’m probably too much focussed on China)

Citibank Releases Anti-Gold Report Before Swiss Gold Referendum

Below a screen shot from a report by Citibank its global chief economist Willem Buiter, released on November 26, aimed at clarifying why gold has no value whatsoever.

Screen Shot 2014-11-27 at 10.52.56 AM

Although I can agree with his last point, I surely can’t with the rest. From my perspective these are some weird statements. A few more quotes:

…Gold is unlike any other commodity. The only things that come close to it are Bitcoin and similar digital peer-to-peer currencies. Gold is costly to extract from the earth and to refine to a reasonable degree of purity. There is an (unknown) upper limit to the total amount that is recoverable at any cost. It is costly to store. It has no significant remaining uses as a producer good – equivalent or superior alternatives exist for all its industrial uses.

…Like paper currency and Bitcoin, Gold is ‘irredeemable’.

…John Maynard Keynes once described the Gold Standard as a “barbarous relic”. From a social perspective, gold held by central banks as part of their foreign exchange reserves merits the same label, in our view.

…Because to a reasonable first approximation gold has no intrinsic value as a consumption good or a producer good, it is an example of what I call a fiat (physical) commodity. You will be familiar with fiat currency. Unlike what Wikipedia says on the subject, we argue that the essence of fiat money is not that it is money declared by a government to be legal tender. It need not derive its value from the government demanding it in payment of taxes or insisting it should be accepted within the national jurisdiction in settlement of debt. Instead the defining property of fiat money is that it has no intrinsic value; it derives any value it has only from the shared belief by a sufficient number of economic actors that it has that value.

…Gold has become a fiat commodity or a fiat commodity currency, just as the US dollar, the euro, the pound sterling and the yen (and a couple of hundred other currencies) are fiat paper currencies and as Bitcoin is a fiat virtual currency. The main differences between them are that gold, like Bitcoin, is very costly to produce, while the production of additional paper money has an extremely low marginal cost. If we count the deposits of commercial banks with the central banks, which together with currency in circulation make up the monetary base, as fiat money, then the incremental cost of fiat base money creation is zero.

…Remember, fiat money, including gold or Bitcoin, is intrinsically useless.

WOW, I’m speechless (and I’m going on vacation in 15 minutes). I’ll leave the comments up to you. Click here to read the full report.

Smuggling Gold Into The Mainland

While I’m still researching all the other ways of how the Chinese may be smuggling gold from Hong Kong into the mainland, I came across an interesting video from CCTV in which is exposed how smugglers dig tunnels underneath Honk Kong borders in order to transport “goods” to places where there is demand for “goods”.

There are a little more than 7 million people living in Hong Kong, though this special administrative region of the People’s Republic Of China has net imported 510 tons of gold year to date.

Hong Kong gold trade 10-2013

I think everybody who has just one IQ point more than Ben Bernanke can figure out that the Hong Kong population can never “consume” this immense amount of gold by itself. The main reason for these mass net imports is because Hong Kong is used to store gold for bullion dealers from all over the world. Another reason is that half of all jewelry sold in Hong Kong is bought by mainland tourist that bring it home undeclared simply by wearing the jewelry on their bodies.

But now it seems there are other ways to bring gold to where gold is in demand. If we look at the video we can see a tunnel of 80 cm high and 100 cm wide. Not particularly big enough for cars and boats to pass through, but excellent for small valuable goods like gold (and drugs). So maybe, just maybe, a small part of the 510 tons was exported to the mainland through tunnels like these by people that were not so fortunate to have a PBOC gold trading license.

In Gold We Trust


China Embraces Bitcoin

Bitcoins can vanish, gold can not. That’s the bottom line for me. Like most people I’m not a software engineer, for me it’s nearly impossible to ever be sure about the safety of Bitcoin. My trust in the virtual currency can only be based on my trust in software engineers. If I deposit one troy ounce of gold in a vault, I’m positive it will be there the next day having roughly the same exchange rate against goods and services. Gold is immortal and has proven to maintain it purchasing power over thousands of years. Bitcoin is not immortal and still has a lot to prove.

Money is always a matter of trust

As an Austrian I believe in free markets and little interference in the economy from governments. For thousands of years the free market has chosen gold and silver as money because they were to most marketable things. However, technological development can change this. In the end, money is whatever the free market chooses it to be.

Bitcoin has no intrinsic value? No, but money never has intrinsic value (or use value I would say), because money is never the end goal of a participant in the economy.  Money is a generally accepted medium used for indirect exchange, the end goal is always a sandwich, a sweater, a house, a bike, etc. You can’t eat gold, nor can you eat dollars, Bitcoins or tally sticks.

Through technological advancement Bitcoin is suited as money and has advantages over all other currencies not be missed out. It’s decentralized, scarce and it can be used 24 hours a day to send unlimited amounts of value to the other side of the planet without a bank or government being able to interfere. In a global economy destroyed by central banks Bitcoin is a technological reaction of the free market, and thus I fully support the Bitcoin experiment.

It’s fate, though, will most likely be determined in the east. China has a leading role on the world stage of economics and it’s not averse to Bitcoin. The Chinese exchanges have already surpassed the ones in the west in terms of BTC volume, and they have only just begun. Note the BTC Volumes on the left axis of the charts:

Mt. Gox USD bitcoin

BTC China

It all started after CCTV, the predominant network in the mainland, broadcasted this in May:

This documentary gives a fair few of Bitcoin. Nothing like the lies that are being spread by mainstream economists in the Netherlands, who don’t understand anything of Bitcoin or economic theory so it seems. Rejecting it because governments can’t control it, expressing their eternal discord with free markets.

In August the Chinese central bank mentioned Bitcoin as a potential “international monetary anchor”, in a press release about the need for a new Bretton Woods System. Google Translate:

In the international financial crisis, “Bitcoin” In the generation algorithm, it has been restricted in mathematics Bitcoin within the next 100 years the largest stock of money is 21 million, thus forming the “anchor” recently popular. “Bitcoin” can prove to the international monetary States “anchor” desire. The current international monetary system problems inherent in addition to the “Triffin Dilemma”, but its core defect is not credible “anchor”. 

And then in October China’s Google, Baidu, started accepting Bitcoin after which the price skyrocketed from $200 to over $1000, strengthening Bitcoin’s position in global finance. Let’s see where this experiment is going.

In Gold We Trust