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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Ramsey Su who wrote (5242)	1/16/2004 1:24:38 PM
From: Louis V. Lambrecht	Read Replies (1) of 110194

If I may interfere. ECB carries a coverage of 15% of Euro value of gold, not a weight. Those 15% are callable reserves on the local European national banks. Part of the Maestricht treaty, central banks are not allowed to sell gold to cover budget deficts. So, ECB does not trades gold, gold could be traded by national CBs. Washington Agreement limits the sales of gold by the national CBs to 400 tons/year (sales are mostly a result of the change in coverage of the Swiss National bank, which is not part of the ECB). Some countries as Portugal have been caught in "bad deals" and had to cover by selling gold, reducing the allocation of the SNB. ECB has a limited charter: price stability. Trading gold assets (she does not holds) to buy USD is not part of the charter. If we would compare the European system to the FED, you would have to take two bodies: the ECB (stability of the Euro, balance of the assets in foreign currencies and debts) and the Councel of Finance Ministers (the economic/employment policy/budgeting part of the equation).

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