The Mugambo Guru is (in)famous for consistently advising investors to ‘buy lots of gold, silver and oil’ as a hedge against the disasters and mishaps that are bound to occur in economies that run on fiat money, like all of the economies of the West. That seems to be utterly sound advice. But what if the state won’t let you?
Via Zerohedge we learn that the Dutch central bank, De Nederlandse Bank (DNB) has ordered a pension fund to sell its gold. Zerohedge calls it ‘perhaps the most stunning example of what may be in store for asset managers and pension funds (and possibly retail holders) who dare to challenge central bank monetary authority’.
The story in a nutshell: the glassworkers pension fund (SPVG) was ordered by De Nederlandsche Bank (DNB, or the equivalent of the Dutch central bank), that it has to sell the bulk of its gold assets. After the SPVG refused to comply with the order, the DNB went to court and the decision has come out, siding with the central bank, ordering the SPVG to sell the required gold within two months.
The pension fund, which invests for 1142 employees, in late 2009 had gold bars worth 34.6 million euros, or about 1400 kilograms. The total fund assets amounted to 288 million euros at that time. The DNB argued gold is a commodity and holding 13 percent was overweight in comparison to the 2.7% average that pension funds are invested in commodities. DNB has found that such a large proportion of gold is inconsistent with the interests of the participants. SPVG sees gold as a medium of exchange, such as euros, but DNB believes that the price of gold fluctuates too much for it to be classified as an investment.
Tyler Durden of ZH puts things in more plain language:
The central bank has now directly ordered a fund how to allocate its gold assets, because it explicitly disagreed with the fund’s statement that gold is money, claiming instead that it is nothing but a very volatile commodity. Very soon no pension funds in the Netherlands will be allowed to hold any amount of gold more than the merely nominal. This latest gold confiscation equivalent event is most certainly coming to a banana republic near you.
The ruling is up on page II of KV (NL).
This is not just some arcane bit of economic news. This is a rather draconian intervention by the state in the private dealings and investments of a private pension fund. This should be all over the the news. But the only Dutch outlet carrying the news is RTL-Z quoting Het Financieele Dagblad (NL). Where the hell is out media?
And what, pray tell, is the point, the real point of the DNB seeking this ruling?
[Instant Update] On a related note, could this be why the government is making such a flap about the aging population: Dutch Politicians Plundered ABP State Pension Fund To Pay For Their Promises.