Posts Tagged ‘QE’

When the Bank of Canada decides to sell its gold coins in order to balance the books … or pay the public debt

Thursday, February 6th, 2014

According to the Globe and Mail, The Bank of Canada would have decided to melt down more than 200.000 gold coins from the years 1912 to 1914. Some collectors have been curious to find out what had happened to the $5 and $10 gold coins that Ottawa had pulled out of circulation. Finally, the Bank of Canada informed that they would be offering 30.000 of the bank’s 246.000 coins for sale to collectors.

This sale is just one of the recent moves of the federal government which has decided to unload public assets as it moves to balance the books by 2015, so they say ….

Just like many other foreign governments, they have decided to sell public assets at low prices so to pay off their debts. We are talking about public assets such as foreign embassies, port lands, gold or silver coins, paintings and so on … For example, the $10 dollar coins were sold for either $1,000 or $1,750 each, depending on their quality and premium. This sale created a kind of gold rush among the collectors.

Some buyers are very proud to hold gold coins that had been sitting at the Bank of Canada in Ottawa for several decades and were officially recorded as part of Canada’s gold holdings in the Exchange Fund Account of foreign currency.

On the other side, some collectors are quite unhappy about this public sale since it drove down the value of their collections.

So far the federal government has not published the official figure of the coins sold although the sale is closed at the present time. Needless to say that the Canadian government can expect to make some profit from the coin sales. The Canadian government will consider other options for the remaining gold coins either melting them down or plan any resale …

Let’s not forget the main explanation provided in a private agreement between the Department of Finance, the Royal Canadian Mint and the Bank of Canada  which objective was to improve the liquidity of the government’s assets, provide a piece of Canadian history to coin collectors and to “extract value from coin sales for the government and taxpayers.

Quantative Easing? Daylight Robbery

Friday, August 16th, 2013

The official justification for the Bank of England’s money-printing policy is that inspite of savers being impoverished, it is a price worth paying to rescue the economy. No mention of the redistribution of wealth from savers (you and me) to borrowers (banks, governments, other spivs).

So a price worth paying? These benefits which it has given us must be worthwhile. There is some measurable amount, some figure which is going to knock our socks off. Across the pond in the US, a new study has been released by senior economists. So ladies and gentlemen, I give you (cue drum roll, fanfare, firework display of Olympic opening ceremony proportions), the results of the latest study. Quantative Easing has boosted economic output by… 0.04%

Ah, that’s a typo, you mean 400%. No, right first time. 0.04%.

To put this into perspective, Vasco Curdia (Senior Economist – San Francisco Federal Reserve Service) and Andrea Ferrero (same job, New York branch) said that merely telling the markets that interest rates would remain low boosted that same output by 0.09%. Mark Carney at the BoE clearly learned this and did the same thing in his recent forward-looking statement.

Those experts did not of course calculate the figures for the British economy but it is fair to assume the story would be similar. If so, the huge amount of pain suffered by savers and pensioners at the hands of QE has been for nothing.

Annuity rates have fallen to record lows. Inflation is eating away at fixed incomes. Keeping interest rates at 0.5% has taken its toll. A scheme designed to encourage banks to lend called (unimaginatively) Funding for Lending, has taken away banks incentive to offer decent interest rates to savers. Banks can raise anything they need from the BoE at bargain basement rates.

Funding for Lending is not all bad. It was intended to boost the availability of cheap mortgages and judging by the upswing in the housing market, it has succeeded on that front.

Shame the same cannot be said for Quantative Easing.

What next? Money is worthless, so invest in Gold as a wealth preservation tool.