"Have We Reached The Breaking Point?", page-56

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slange

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13/09/15

07:24

Post #: 15982276
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Originally posted by Dazedandconfused ↑

It will be interesting to see if this scheme attracts many takers. I have my doubts ... it would be a very big turn around on custom.

If it did take off ... what the Indian govt is proposing would create, in effect, a fractional reserve gold banking system which would run in parallel with the Rupee. The Govt clearly proposes to sell the deposited gold back into the market.

Encouraging people to use the gold bonds as collateral for loans would offer all kinds of opportunities for small business entrepreneurs to fund themselves. BUT... it is a massive cultural change of attitude involved to abandon holding physical gold and accept Rupees instead. [It is also an opportunity for people to lose their wealth in failed business ventures]

Although I can see some benefits I wonder how inflationary the scheme might be if it was widely adopted. The gold is handed in by millions of people who begin to receive cash interest payments, some people go on to use the bonds for cash loans and the Government recycles the gold back into the market to replace imported gold. In the beginning the inflationary effect would be small but over several years it would slowly 'snowball' as the same gold cycles through the scheme over and over. Surely it ends up being something similar to the Comex where there are multiple paper claims for each oz of gold?

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The Indian populace is unlikely to trust its government with their laundry never mind their hard earned life savings.
The Indians trust Gold.
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"Have We Reached The Breaking Point?", page-56

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