Can Gold Reserves Rescue the World?

 The world is in financial crisis and the economies including developed, developing and underdeveloped are struggling to survive the recessionary conditions. Except perhaps Gold, the prices of all other assets have nosedived creating panicky situation and leading to erosion in the confidence of investors to find alternate avenues of tangible investment. Gold is emerging as the safest and dependable investment to hedge against inflation and erosion of confidence in the whole system and values in every sense. There is an unusual rush to invest in gold and the price of  the yellow metal has been skyrocketing. Investments in gold beyond some prudential limits either at individual levels or national levels or central bank levels in the present day crisis conditions only takes the situation from bad to worse.  Is it justifiable or warranted in the present world economic conditions is a billion dollar question to fiscal and monetary authorities of all countries that are expected to provide the much needed confidence and reliefs through appropriate measures to revive the sagging economies. Even there are reports that some of the leading Central Banks are accumulating gold instead of liquidating gold and providing monetary liquidity to support the liquidity starved economies.

 

 As per the data  at the end of 2004, Central Banks and official organizations held 19% of US $ 4.39 trillion  of gold ever mined as  a reserve asset  (http://en.wikipedia.org/wiki/official_gold_reserves). This is the time for Central Bankers to come together and do an introspection on the need to keep so much of gold reserves when the real economies are in doldrums and  are badly in need of liquidity for both short and long term investments.  No doubt gold serves as a hedge against high inflation and other intangible assets but too much of attachment to gold in these times of crises is neither economically desirable nor socially acceptable. These investments in gold by those who can afford help only to widen the chasm between the haves and have nots.  Unfortunately even the poorer countries try to amass gold at any cost irrespective of their capacity and the need for the same from the economic, social and cultural angle. The love for gold needs to be reviewed and it is time for all central bankers to review their gold reserves and liquidate part of the reserves and improve monetary liquidity in the system. The heavy fiscal deficit incurred by various Governments and monetary concessions offered by Central bankers can be to a great extent offset / adjusted by liquidating part of the gold. Gold reserves any where should be viewed on par with Non Performing assets as far as the economies are concerned and there should be a prudential limit fixed on such assets. The approach of countries, their central banks, IMF and the World Bank should  be to review the position of Gold in the fast changing global scenario and take away the excess glitter it enjoys and use it to provide the much sought after happiness and welfare in society through creation of employment opportunities.

 

  

 What the world requires badly today is  a golden age and not gold reserves. The build-up of gold needs to be discouraged and concerted  efforts have to be put to convert gold into liquid monetary resources and utilize  them for  productive investments in avenues capable of creating massive employment leading to massive consumption. It is time for various governments and central bank authorities to think differently in respect of investments in gold and initiate appropriate measures to liquidate part of the gold, improve liquidity in the system and encourage productive investments. What the world is facing today is an unusual situation and this has to be countered only with an  unusual solution. May be the gold reserves can rescue the situation. International Monetary Fund can take the initiative in the matter.  The wisdom lies in converting the gold reserves into social good for the welfare of humanity.