With Venezuela’s currency, the bolivar, nearly valueless, President Maduro is trying to encourage people to save by having the country’s central bank issue gold certificates. Maduro and his wife were seen purchasing gold certificates for 350 bolivars. This certificate is allegedly backed by 1.5 grams of gold and is numbered Certificate No. 1. First Lady Cilia Flores outdid her husband by purchasing a certificate for 2.5 grams. President Maduro made a point of telling the cameras, “If I had a little more savings in bolivars I would have invested more.”
He is urging citizens to follow suit and invest in gold, promoting the certificates as “fashionable Christmas presents.” This is a huge change in policy and the first time citizens have had the opportunity to invest directly in Venezuela’s gold.
Maduro, who has seen his economic policies plunge the country into chaos and who recently survived an assassination attempt, presents himself as a man of the people, hoping others will join him in purchasing gold certificates. However, a mere few hours after Maduro exited the central bank, certificate in hand, the bank was mostly empty. Only a few people were asking about the new savings certificates.
At a nearby bank, a pensioner waited in line for hours to withdraw some funds. She is not enthralled with the new policy. “This is a joke. How am I going to buy gold when my pension isn’t even enough to live on?”
The gold certificate is the last of Maduro’s plans to stabilize the country’s out-of-control hyperinflation and an economy that has essentially stopped functioning. The revenue is meant to rebuild the country’s dying oil industry, which is Venezuela main source of export and foreign revenues. In Venezuela’s socialist paradise, this is Maduro’s latest attempt at a free market strategy to boost the economy and encourage savings rather than consumerism. Maduro fails to mention that consumerism has become less of a problem with stores being devoid of goods and shelves remaining empty of most necessities.
Many economists denounce the plan, mostly because the central bank continues the print bolivars at a rapid rate to pay off some of the country’s debts. The problem is that the frantic printing of currency is what resulted in an annual hyperinflation of 1,000,000 percent in the first place. With Maduro’s decision to raise wages by 3000 percent, economists anticipate an increase in the country’s deficit and more inflation to come.
Maduro is grabbing at gold as a desperate solution because historically, gold has always held its value. His predecessor, Chavez, also embraced gold as an economic solution. However, Chavez’s spending sprees soon left the government without cash, and Chavez depleted Venezuela’s gold reserves to pay off the country’s debts. President Maduro appears to be in a similar position.
Due to hyperinflation and the devaluation of the bolivar, Venezuelans have been hesitant to save. Better to spend on whatever goods are available before the currency is worth even less and the price of commodities rise. This has resulted in shortages of goods and a general lack of savings.
Turkey is another country trying to launch gold-based certificates for investors. These certificates will be issued by the government-owned bank, Ziraat Bank, directly into individual bank accounts. Their certificates will have a two-year maturity, at which time the individual owner may request payment in physical gold. Like the Venezuelan bolivar, the Turkish lira has been greatly devaluated during the past decade, and President Ergodan is hoping that a return to gold will help revive Turkey’s struggling economy. Turkey has lost much of its foreign reserves, which have been replaced by the devaluated lira. Obviously, Ergodan is looking to gold to give the economy a much-needed boost.
At this time, the U.S. dollar enjoys global reserve status. This is being helped by the Federal Reserve, among other central banks, who have been actively suppressing gold prices and have allowed countries like China and Russia to increase their gold reserves at cheaper rates. If the price of gold were to rise, the value of the U.S. dollar would decrease, and the currency could lose its ranking as the world’s currency of choice. The Federal Reserve does not want that to happen. The artificial manipulation of gold prices has allowed both Russia and China to accumulate gold and put them farther up the list for countries with the most gold.
Their ultimate goal is the devalue the U.S. dollar and set up their own gold-backed currency in its place. The U.S. is doing little to stop them.
Global central banks know the value of gold, especially as a hedge against inflation. Still, they are unwilling to allow a free market to determine the price of the precious metal. This would put economic control in the hands of consumers instead of central banks.
According to the World Gold Council, the increase of gold purchases by central banks has almost doubled. Russia’s gold reserves have increased by 500 percent since 2000. It presently holds 18 percent of all available gold reserves. China holds 1,843 tons of gold in reserves.
Every country understands the power and value of gold. Not every country, however, understands how to use that power effectively.
