India’s Central Bank Will Sell Gold on the Market in Exchange for Gold at the Bank of England

Screen Shot 2014-07-02 at 3.50.34 PMIndia’s gold policy over the last several years is about as dysfunctional as any government policy I have ever seen, and that’s saying a lot. In case you need a reminder, here are a few posts I have written on the subject:

The Times of India: “Almost Every Passenger on a Flight from Dubai to Calicut Was Found Carrying 1kg of Gold”

Gold Smuggling Increases 7x in India and Surpasses Illegal Drug Trade

Indian Temples Fight Back Against Government Gold Grabbing Plot

In a nutshell, Indians were buying too much gold for their government’s comfort, so the “authorities” stepped in with duties and import restrictions in an attempt to stifle the trade. So smuggling soared.

Fast forward to today. It appears the government has finally realized they can’t stop their citizens penchant for gold, so they have decided to dump central bank gold onto the market. What is incredible to me is that they are justifying this with a so-called “swap” into phantom gold at the Bank of England. The favored global hub of shady, rent-seeking, banker oligarchs.

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The Times of India: “Almost Every Passenger on a Flight from Dubai to Calicut Was Found Carrying 1kg of Gold”

Watching Indian bureaucrats attempt to halt more than one billion human beings’ desire for gold has been one of the more entertaining and pathetic stories of all of 2013. It is one that I have covered on many occasions, the latest being my post from earlier this month:  Gold Smuggling Increases 7x in India and Surpasses Illegal Drug Trade.

Well it appears the trend continues, potentially at an accelerated rate, as we just learned that, incredibly, “almost every passenger on a flight from Dubai to Calicut was found carrying 1kg of gold.” As I have said many times in the past, if an Indian wants their gold, they will have their gold. 

CHENNAI: Faced with curbs on gold imports and crash in international prices leaving it cheaper in other countries, gold houses and smugglers are turning to NRIs to bring in the yellow metal legally after paying duty. Any NRI, who has stayed abroad for more than six months, is allowed to bring in 1kg gold.

It was evident last week when almost every passenger on a flight from Dubai to Calicut was found carrying 1kg of gold, totalling up to 80kg (worth about Rs 24 crore). At Chennai airport, 13 passengers brought the legally permitted quantity of gold in the past one week.

“It’s not illegal. But the 80kg gold that landed in Calicut surprised us. We soon got information that two smugglers in Dubai and their links in Calicut were behind this operation, offering free tickets to several passengers,” said an official. The passengers were mostly Indian labourers in Dubai, used as carriers by people who were otherwise looking at illegal means, he said. “We have started tracing the origin and route of gold after intelligence pointed to the role of smugglers,” he said.

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Indian Temples Fight Back Against Government Gold Grabbing Plot

The following article from Reuters is a follow up to a topic I have explored on various occasions in the past. Namely, how an inept Indian government is attempting to use the age old tactic of scapegoating in order to deflect attention away from its widespread policy failures. In the case of India, the target is gold. It’s a logical target for any crony Indian bureaucrat or Central Banker to go after. Wealth confiscation is a tried and true method historically used by corrupt elites to stay in power, and there is plenty of gold floating around the subcontinent. Easy pickings…or so they thought.

It appears some of the temples are now drawing a line in the sand, and are in fact refusing to provide details about their holdings. Other temples are a bit more compliant. From Reuters:

The central bank, which has already taken steps that have slowed to a trickle the incoming supplies that have exacerbated India’s current account deficit, has sent letters to some of the country’s richest temples asking for details of their gold.

It says the inquiries are simply data collection, but Hindu groups are up in arms.

“The gold stored in temples was contributed by devotees over thousands of years and we will not allow anyone to usurp it,” said V Mohanan, secretary of the Hindu nationalist Vishwa Hindu Parishad organisation in Kerala state, in a statement.

Guruvayur temple, in Kerala, one of the most sacred in India and boasting a 33.5-metre (110-ft) gold-plated flagstaff, has already told the Reserve Bank of India (RBI) it won’t divulge any details.

“The gold we have is mostly offered by the devotees. They would not like the details to be shared with anybody,” said V M Gopala Menon, commissioner of the temple’s administrative board.

The head of the Hindu nationalist main opposition Bharatiya Janata Party (BJP) in Kerala state, V Muralidharan, said the RBI wanted to “take possession” of the gold and maybe sell it for dollars.

Sounds like a brilliant plan. Take wealth that was accumulated over thousands of years and sell it for an electronic unit of exchange that Ben Bernanke can create in infinite quantities with a single keyboard stroke.  Can people possibly be this stupid?

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