Tom: Re: ECB gold holdings.
To clarify my recent post and your reply regarding ECB gold, the following is taken from the Veneroso's conference call (thanks Tom Byron).
***I should comment a bit on this whole issue about the ECB and the gold reserve position in the ECB. The ECB will be a central organization, a central institution like the Federal Reserve Board of Governors. In
addition, there will be a set of country central banks that will be related to the ECB somewhat the way the district reserve banks in the United States are related to the Federal Reserve Board. However, the district reserve banks in the U.S. hold no reserves. The National European Central Banks will hold most of the System's reserves. Only 1/5 or 1/6 of the reserves of the European System of Central Banks will be transferred to the ECB. So what really matters regarding reserve management in the System of European Central Banks will be the composition of the reserves at the level of the country central banks, not at the level of the ECB. The ECB might be the first line of defense for any attacks on the Euro. Therefore, one would expect the ECB to have more liquid reserves than the national central banks. You could make a case that the share of gold, which is less liquid than US treasury bills, should be less in the ECB than it would be for the System as a whole and for the individual national central banks. So I've often regarded this issue of what will be the share of gold in the ECB as being a symbolic issue more than a real issue. What really
matters is what will be done with the gold reserves at the country central bank level.
Now, the management of the reserves at the country bank level will pass from the individual country central banks to the central organization - the ECB - with the creation of the ECB. The ECB will determine what the System's overall gold reserve position will be. The System's ratio of gold to total reserves could be much
higher than the ratio of the ECB itself. Fazio may be suggesting that the ECB should make a symbolic move by having a high ratio of gold, even if the ECB will only have 1/5 or 1/6 of the total reserves of the System. *********
I have read somewhere else, that each C.B. will be transferring about 15% of their reserves to the ECB. The ECB will take control of the remainder although the reserves are still lodged in the respective C.B.s. The deadline of independence for each Euro C.B. is fast approaching, that is why there has been a rush to sell their gold, as they are apparently not permitted after without the ECB concurrence.
This means that actual monetary control of the gold in C.B. reserves in effect resides in the E.C.B. That is why the amount of gold in the ECB is not that important, as they have control to each member's gold.
I disagree with your statement about vague agreements. Everything I have read points to very detailed programs. We may not be privy to all of them. They seem to have it all figured out to the smallest detail.
The member countries are on a time-table of not only monetary union, but also political union. Like the United States of America, they are attempting a European United States, and the EMU goes a long long way in this direction.
Momemtum is with Europe now, and should they succeed it will be another one of those great moments in history.
Phil |
