from Hacker News

How to get $12 billion of gold to Venezuela

by pathik on 8/23/11, 8:26 AM with 123 comments

  • by fabiandesimone on 8/23/11, 10:10 AM

    As a Venezuelan, this is terrible news. Forget economic consequences for a minute.

    The corruption levels in Venezuela are incredibly high. Is widely known that the Chavez government has been one of the most corrupt government in Venezuela history.

    What do you think is going to happen to this gold when it gets to Venezuela? (If it ever gets there)

    I mean, I don't know the dynamics of this, but which authority is going to weigh the incoming gold? Who are we supposed to trust when every institution in the country is in Chavez hands? They basically say what they are told.

    Also, our Central Bank does not have the physical capacity to store that much gold. Chavez already offered the basement of the Presidential Palace :S (which I have been to and is as a regular basement can be).

    What about the cost of moving that quantity of gold? They are already talking about 40 trips. Yeah, that's going to cost, 400 million according to the article. Money that could be very well spent in say, hospitals: http://www.noticias24.com/actualidad/noticia/302153/en-fotos... )

    As for the cash reserves: they are going to Russian and Chinese banks. Sorry to those that might be offended, but personally I have as much trust in these governments as I have in mine.

    We have an election in 2012. If Chavez looses (or if he evens runs... he might die from his cancer before that, dunno), that gold is going back. More gold will be lost along the way.

    What about the cash reserves? The new government will have to deal with Russians and Chinese institutions under a different premise, because the new government will be or will try to be very close with the US. I think we can expect things to get a bit rough and a lot of gold will go unaccounted for.

    Sad news for Venezuela, once again.

  • by glymor on 8/23/11, 9:39 AM

    He's moving the gold because:

    * He's worried that sanctions etc could freeze it

    * He want's to be able to sell it without being clear about it (so he can buy the next election or make a personal nest egg with it).

    Venezuela's bonds moved 50 basis points on this so the markets are obviously worried that the gold's going to start evaporating once it's under his control.

  • by ars on 8/23/11, 10:00 AM

    If ever there was a clear example of why gold makes a terrible monetary base this was it.

    And it seems to me that a lot of the reason for gold being worth a lot is countries just sitting on it. If they would sell it to people who would use it (for jewelry or active trading) the price would go down a lot.

    And what is the point of just having lots of gold and never using it? It's just a big pile of metal, if it wasn't there would anyone notice the difference? (i.e. could I borrow it, then return it 100 years later? Would anyone notice?)

  • by cpeterso on 8/23/11, 7:54 PM

    Facing a similar problem, the Pentagon used 21 C-130 Hercules cargo planes to haul $12B to Iraq. Admittedly, the Pentagon only had to ship pallets of $100 bills, not gold bars.

    Surprisingly, federal auditors are now suggesting that some or all of the cash may have been stolen, not just mislaid in an accounting error. U.S. officials claim often didn't have time or staff to keep strict financial controls, so millions of dollars were stuffed in gunnysacks and hauled on pickups to Iraqi agencies or contractors.

    http://articles.latimes.com/2011/jun/13/world/la-fg-missing-...

  • by kragen on 8/24/11, 6:47 AM

    Charles de Gaulle did something similar in 1965, but he was importing gold from the US, not from England.

    Argentina had a similar problem in 1946: its central bank "reserves" were actually held in trust by the Bank of England, in large part as a result of Argentina feeding England through the war, and England (as I understand it) couldn't come up with the cash. The eventual solution was to exchange the reserves for the British-owned railways of Argentina, which unfortunately couldn't be exported in trade to import the things Argentina needed.

    I could be naïve, but I think keeping your central bank's reserves overseas in a possibly hostile country is a dumb idea. Chávez doesn't seem to have done a very good job at New-Dealing his country, but he does get some things right.

  • by usedtolurk on 8/23/11, 12:40 PM

    Actually, the logistics (which the article focuses on) isn't as unique a problem as one might think. Australia alone produces about 300 tons of gold each year and I would expect most of it is exported.

  • by chollida1 on 8/23/11, 11:49 AM

    > It would take a little while, but eventually the gold would start trickling in: if you’re willing to pay a constant premium of 2% over the market price for a good, you can be sure that the good in question will ultimately find its way to your door

    I'm not sure about the authors qualifications but why would I ever risk bringing a bar of gold to a Venezualan bank to earn 2% on my money?

    I can get better rates in the bond market with much less risk.

    Now if your willing to pay a 50% premium the I can see something working here

  • by sek on 8/23/11, 10:18 AM

    You can't eat gold, all this rant on gold is so stupid, the monetary value is merely historical. In modern economy only counts the real application of resources and nothing else. Nobody will ever introduce a new Gold standard, a resource is a bad idea for a currency. What if someone finds a gigantic Deposit or a way to cheaply produce Gold? The additional value over the real industrial utilization is a bubble, nothing else.

  • by joelthelion on 8/23/11, 9:41 AM

    Use bitcoins? :-p