How do you say “goldbug” in Spanish?

There is no one word that I know of.

Anyway, the big news from Venezuela is that President Maduro has announced that he will grant asylum to Edward Snowden. I think that calling the move “illegal” is too much: there is nothing wrong with a government pre-emptively announcing that it will give asylum to somebody once they legally qualify for it. More problematic is that Mr. Snowden is a terrible candidate for asylum.

Some seem to think the action is a reaction to the way American allies stopped Evo Morales’ jet, but I doubt that. I have been waiting for Cuba or Venezuela to make a move ever since President Correa decided that there was no gain in tweaking the United States. My guess is that Putin is sick of the problem and asked Maduro to announce.

Of course, the question now is: how does Mr. Snowden get to Caracas?

And what does this have to do with goldbuggery?

Well, back in 2011 the Venezuelan government decided to transfer 211 tons of gold reserves from outside the country (47% was held in London). The move did not really make much sense. Central bank reserves are immune under international law, so there was no reason to fear foreign legal actions. But hey, it sounded good and on January 31, 2012, the central bank declared “Mission Accomplished.” (They only moved about 150 tons, but close enough.)

It was pretty stupid to physically move the gold to Caracas. After all, if you wanted to use it to pay for something you would now have to either move it out or trust that your counterparty would accept a paper claim to gold located in Venezuela.

But Chávez did not seem to be playing an economic game. The move was for show. President Chávez wanted the central bank to go long on gold. So it moved gold to Venezuela and moved more than 70% of reserves to the metal.

Unfortunately, economics comes back to bite you. The recent slide in gold prices is creating major headaches for the government. It comes at a bad time. As predicted here, the major threat to the Venezuelan economy is a sudden stop of foreign capital inflows. With reserves both illiquid and falling in value, that is becoming ever more likely.

Taking Snowden feels similar. A political move, intended purely for show, but with serious logistical issues, no practical current gain and a potential future liability. The revolution continues in form, I guess.

Comments

[shah8]

Venezuela wasn't actually alone in repatriating gold.

http://finance.yahoo.com/blogs/daily-ticker/central-banks-repatriate-gold-affect-investors-170006263.html

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/16/why-germany-wants-its-674-tons-of-gold-back/

Moreover, I'm pretty sure that one of the, if not the motivation for Chavez' repatriation had to do with the whole standard international immunities for some countries but not for others. Libya and Iran's reserves were certainly not immune to being frozen.

To tell you the truth, I think the amount of trust has gotten very thin out in there anarchic world system, and many countries are dealing with problematic gold flows independent of what national policies are, let alone what central bankers do.

I always read any article about Venezuela with a dyspeptic eye, as you well know, and my first question is always, well, are other countries like Venezuela suffering from dollar squeezes as well? Yes? Well, is Venezuela suffering more than most? Perhaps so, given just how much of their reserves are in gold--as a long term result of accumulating gold reserves, not repatriation, per se. You know, I kinda have to read Isabella K's columns about what people actually were doing with gold as it went up, and it's late right now...Oh, I couldn't help myself...Hmmmm, gold prices declined as a proportion to carry trades, collateral, etc, and it declined as the US dollar rose. What's interesting is that she notes that the central banks as a whole, are buying more gold, theoretically to keep the markets stable by preventing further declines.

Eeeehh, not really sure what to make of V's strategy, as usual, and with the usual guess that Chávez was being excessively conservative and security-minded, like those grannies buying utility stocks and low coupon bonds.

[Noel Maurer]

Re Germany: Sweet Mary mother of God. I knew that the German response to the eurocrisis has not been entirely driven by rational self-interest; I did not know that the irrationality was that deep.

Thing is, that doesn't make Venezuela look any better; it just makes Germany look worse.

Doug, do you what was going on with that bit of German goldbuggery?

[shah8]

I have had the sneaky thought that there perhaps was a quiet scandal with individuals involving central banking reserve gold in trades when they should not have.