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The World Gold Council’s proposals state that Euro zone member States with significant gold holdings relative to their medium-term financing requirements (in particular Italy and Portugal) should consider gold a..

05 Oct 2012

LONDON (Commodity Online): The World Gold Council on Thursday made available a paper by Europe Economics, on the use of Gold as collateral for Euro zone sovereign debt. The paper is written by Dr. Andrew Lilico.

The paper assesses the council’s proposals on gold as collateral for Euro zone sovereign debt, especially in the case of Italy and Portugal, relative to current policies such as the Outright Monetary Transactions (OMT) scheme recently proposed by Mario Draghi.

Europe Economics was commissioned by the World Gold Council to challenge and assess the merits of its proposals relative to other suggested monetary policy tools, such as the European Central Bank’s (ECB) OMT programme.

The World Gold Council’s proposals state that Euro zone member States with significant gold holdings relative to their medium-term financing requirements (in particular Italy and Portugal) should consider gold as collateral for sovereign debt issuance to reduce bond yields.

National central bank-held gold reserves can address key market failures in the Euro zone, without the drawbacks that have made certain current ECB policies controversial.

Unlike alternative non-conventional monetary policy measures, such as the proposed OMT, the use of gold as collateral would not create fiscal transfers between Euro zone members.

The use of gold as collateral does not pose a medium-term inflation risk.

Using gold holdings in this way maintains strong incentives for relevant Member States to reform, and does so without those States submitting themselves to oversight from other countries or international agencies such as the IMF.

Europe Economics is an independent economics consultancy, specialising in the application of economics to public policy and business issues.

Dr. Andrew Lilico is a Director of Europe Economics and is a member of the IES/Sunday Times Shadow Monetary Policy Committee.

Natalie Dempster, Director of Government Affairs at the World Gold Council, is available for comment on the World Gold Council‘s proposal on the use of gold as collateral for the Eurozone.

The World Gold Council is the market development organisation for the gold industry. Working within the investment, jewellery and technology sectors, as well as engaging in government affairs.

The purpose of the World Gold is to provide industry leadership, whilst stimulating and sustaining demand for gold.

World Gold develops gold-backed solutions, services and markets, based on true market insight. As a result, we create structural shifts in demand for gold across key market sectors.

It is based in the UK, with operations in India, the Far East, Europe and the US, the World Gold Council is an association whose members include the world’s leading and most forward thinking gold mining companies.

 

 

 

 




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