Tuesday, January 7, 2014

Gold for Cash!

Also available at mises.ca

Need to balance the books? Why not sell your gold? This is the route the federal government is taking. The Conservatives plan to sell and/or melt over 200,000 gold coins. A majority of these coins date from 1912 to 1914. Rampant inflation during World War 1 caused a gold-run on Canada’s finances, so Ottawa closed the window and took these coins out of circulation. Since then they’ve been sitting in a vault at the Bank of Canada.

The sell-off began last year when the BoC announced it was selling 30,000 coins. Reportedly, $10 coins sold from $1000 up to $1750 each, hinting at how much the Canadian dollar has lost its value over the last 100 years (thanks to central bank money printing). The final tally on the number of coins sold and the money made won’t be known until the Spring. In the meantime, collectors are cashing in on the opportunities.

But not all collectors are impressed. “They should have melted them back in 1912, 1913 and 1914,” said Frank Rossi, owner of Universal Coins in Ottawa. “A market had been established, then all of a sudden all of these coins start appearing. … This has diluted the market. I don’t even think those coins that they did issue were in that great of a shape anyway. The coins were way overvalued. … They sold the sizzle, they didn’t sell the steak.”

The Globe and Mail reports,
A copy of the private agreement between the Department of Finance, the Royal Canadian Mint and the Bank of Canada offers some insight into the government’s motivation for the sale. The agreement, which was obtained through Access to Information by Ottawa researcher Ken Rubin, said the objective was to improve the liquidity of the government’s assets, provide a piece of Canadian history to coin collectors and to “extract value from coin sales for the government and taxpayers.”
While I’m all for diminishing the power of the central state and putting gold back into the hands of individual citizens, this rationalization seems a little half-baked. Gold is money after all, and the Bank of Canada would be smart to hang onto it. Economic growth can line government coffers if they let the market work and keep taxes minimal. But this assumes that the bureaucrats in charge are looking at long-term strategies. For re-election purposes, it makes sense to balance the budget now by selling off assets that, in the long run, would be good things to keep. A spokesperson for Finance Canada said the government expects to make a “modest” profit from the gold sale. Selling real money to balance the books when reduced spending would have suffice. Obviously, Ottawa is gearing up for another election cycle and no one at the Bank of Canada thinks gold is money anyway. But hey, at least they're selling the coins to individual Canadians instead of foreign central banks….

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