Former ECB Vice President Discovers Gold Is a Myth, History Is a Rumor
GoldRepublic sat former ECB vice president Vítor Constâncio down with Alexej Jordanov and let the man say the quiet part with a straight face. Gold is not money. Gold is not an anchor. Gold is “mythology.”
“No, there is no magic in gold. I mean, it’s really just because people believe in magic. It’s a myth.”
A revival of gold as the monetary base would be “a disaster.” Also, it “won’t happen.”
Comforting, coming from a profession that spent a decade inventing new acronyms so the euro would not fall over.
This is the same résumé that ran Banco de Portugal, then spent 2010 to 2018 as number two at the ECB while “unconventional” policy became the entire job description.
Europe, he says, is now resilient. The ESM is there. OMT is there. TPI is there, unless you are France, which is not respecting the stability pact, so TPI is “not appropriate.”
France is not in crisis yet, mind you. Just please do not look too hard. The euro’s original sin was that nobody planned for financial integration going that far, or for a recession that rate cuts could not fix, or for a fiscal tool that still is not there. Other than that, the design is fine!
They just had to build the fire department after the kitchen was already burning.
Then he got to the part SilverTrade cares about. Central banks stacking gold instead of dollars? Relax!
“The presence of more gold and less dollars in the reserves of those central banks has no consequences for the international monetary system.”
It is sitting there because people have “magic ideas.” “It’s mythology… it’s irrational.”
Asked what is rational, he delivered the punchline that should be framed in every vault:
“If everyone or most of people are irrational then it is rational that I also have that because it’s guaranteed that the value will go up.”
Translate that out of Frankfurt. The central bankers believe Gold is stupid. Also buy some, because the stupid people will bid it. You literally can’t make this stuff up!
Also the official sector should keep tons of the stupid metal for reasons he later tries to walk around as “safe assets” and tradition. The dollar stays entrenched. The euro should not try to be the global reserve. The renminbi is not ready. A new gold standard would be a catastrophe.
Stocks and bonds, over the long term, are the grown up trade. Gold is a speculative trinket that just happens to be the thing every nervous central bank cannot stop accumulating.
Jordanov at least asked why those banks keep buying if the metal is a fairy tale. Constâncio’s answer is the oldest central banker trick: the public is superstitious, the system is fine, and any price that does not fit the model is “valuation” that is “fundamentally speculative.”
He will not grant that a 5,000 year monetary good might be repricing the very fiat architecture he helped paper over. He will grant that if the herd is already running, even a vice president is allowed to jog along so the line goes up.
SilverTrade’s translation is shorter. When a man who printed through a sovereign debt crisis tells you gold is irrational, he is not describing the metal. He is describing the one asset his profession cannot issue with a press conference and a new facility name.
Call it myth if it helps you sleep. The bid from the official sector says they do not believe their own bedtime story.
