Exclusive: German Auditor Opens Door For Gold to Recapitalize ECB
PET ROCK TO SAVE CIVILIZATION AGAIN?
Background
There are others who have done the nitty gritty work. We’re pretty comfortable with our opinion as risk managers and Finance folks. This piece is intended to give readers some perspective on the effects of a GRA change and a basis for processing the event if it were to happen. At the margin: if it were to happen, risk of the EURO dying in its Fiat form would be on the table.
The focus below is on the Gold Revaluation Account. What that really means is: if used, gold will recapitalize the EU. Gold will “invest” in the EURO if they do this.
Subtitles:
Intro
The GRA
What’s the Difference?
Nice Piggy Bank You Got There
Gold is Responsible When You Can’t Be
EURO Death Watch
“German Central Bank May Need Bailout"- ZH
1- Intro
Over the last few months there has been chatter out of Europe centered on the possibility of revaluing their Gold reserves to offset losses incurred by central banks from their ill-advised NIRP buying frenzy. A couple points should be made here given an article re just read. This is developing and the facts are good to know before this thing unlikely1 but possible disaster gets going.
2- The GRA
The name Gold Revaluation Account (GRA) is not a “Gold Revaluation” event but it has the same effect as far as us mortals are concerned. Most of the difference is accounting terminology that unintentionally obfuscates intent of behavior to those unfamiliar with that terminology.
The GRA account is not permitted to be netted into CB income statement due to it being non-realized and out of their jurisdictional control. Here’s the rule saying so.
The Central Bank accounting rule
The following rules shall apply to income recognition:
(e) there shall be no netting of unrealised losses in any one security, or in any currency or in gold holdings against unrealised gains in other securities or currencies or gold. - pdf and HT here2 h/t Gainesville