Vietnam Suspends Gold Imports, Follows FDR's Great Depression Lead

by Eric Roseman

It seems Vietnam just borrowed a page from the U.S. financial-history books - by suspending all gold imports in June.

This marks the first time a Southeast Asian country has ever barred gold imports during skyrocketing inflation, soaring interest rates and an overvalued currency - the Vietnamese dong.

Seventy-five years ago, Franklin Delano Roosevelt [FDR] issued Executive Order number 6102 and confiscated all gold privately held in the United States on April 5, 1933. But unlike FDR's edict, the Vietnamese can still hold or own physical gold. They just can't import any more.

This shocking development was just revealed to me by my good friend in Zurich - Swiss Asset Manager, Robert Vrijhof of WHVP. It illustrates a new trend popping up in emerging market economies to stop gold hoarding.

By restricting gold purchases, the Vietnamese Communist Authorities are trying to hold down the local skyrocketing inflation. But inflation is already heading for Weimar Germany-style double-digit or possibly, triple-digit consumer prices.

Gold's Success is Fiat Money's Failure

Asian Inflation Out of Control

It comes as no surprise to me that another dollar-linked or semi-pegged currency has collapsed vis-à-vis gold. Gold prices have been rising against all currencies since 2005, including the euro.

Spot gold prices have averaged US$910 an ounce in 2008 compared to US$659 just 12 months ago. From an average price of US$295 an ounce in 1998, gold prices have gained a cumulative 214%. But compared to its peak in January 1980 at US$850 an ounce, spot prices are up just 8.8%.

Asian inflation just hit a 9 ½ year high and averaged 7.5% in April. So it's no wonder dollar-pegged currencies are coming undone. Other peripheral currencies in the region that follow the Federal Reserve's monetary policy are also sinking under the pressure of inflation. This phenomenon is also happening throughout the Gulf region where dollar-pegged units are unraveling amid rising inflation.

Vietnam's Biggest Challenge: Wrestling 25% Inflation

Introduced in 1978, the Vietnamese dong is another example of fiat money gone wrong.

Inflation is now clearly out of control. Inflation soared 27% over the last 12 months through June. And inflation is still climbing as crude oil and other commodities prices continue to hit new highs.

The dong is down just 3.7% this year versus the dollar, but it still remains severely overvalued. Also, recently the dong breached its government-imposed trading band.

I visited the Vietnamese economy in early 2007. So I saw firsthand how Vietnam is overheating. It's a natural consequence of this country's strong economic growth is inflation and high interest rates.

High rates and inflation always threaten financial assets like stocks. The VIN Index, the country's largest stock exchange in Ho Chi Minh City has collapsed more than 60% since hitting an all-time high last year. Also, real estate prices are now in a downtrend following a big boom since 2005.

The Vietnamese economic miracle averaged a stunning 7.3% GDP (gross domestic product) growth rate this decade. And now Vietnam risks coming undone if the State Bank of Vietnam can't stop surging consumer prices.

The World's #1 Gold Importer

The Vietnamese government's decision to ban gold imports follows an unprecedented surge in gold ownership. The locals have lunged for gold bullion lately. In fact, they even surpassed India and China as the world's largest source of demand.

Gold production is already approaching net supply deficit. The largest gold exporters, South Africa and Australia continue to struggle to bring new supply to the market this decade.

Demand destruction is the code-word for declining consumption when commodity prices rise exponentially. So far, this has NOT happened in Vietnam. Fabrication demand has fallen sharply in India as gold prices raced through US$750 an ounce last fall. But despite a surging price since last August, the Vietnamese continue to absorb imports at a record clip - until now.

According to the World Gold Council, Vietnam's first quarter gold imports were 36.8 tons. That's up an astounding 71% from the first quarter in 2007. And gold-hungry consumers purchased 31.5 tons of that total supply or 86% as investments. In other words, they're buying gold to protect their wealth against rising inflation and a weak currency. Sound familiar?

No One in Vietnam Can Afford Gold Anymore

Since June, the Vietnamese can no longer buy gold. Officially, the government claims this new policy is to temper booming imports, which resulted in a record trade deficit for the first half of 2008. First-half imports surged 64% to US$45 billion while exports rose only 27% or US$28.6 billion.

Yet the value of gold imports prior to the June suspension was US$1.7 billion or 3.8% of total imports. That's hardly a dent compared to heavy industrial machinery and machine tool imports used for manufacturing. That suggests the government is targeting gold to stop demand.

Thus far, the Vietnamese Communist government has not confiscated gold. FDR made gold ownership illegal in the 1930s when the United States was suffering a devastating deflation. The U.S. also revalued gold to US$35 an ounce during this period.

If Vietnam continues to lose control of inflation, and possibly, the economy, gold confiscation becomes a real possibility in a country with a short history of fiat money.

All paper money, including the euro, the yen and even the resource currencies, continue to buy less gold compared to just three years ago.

I imagine gold prices will benefit enormously from the new global inflation spike the latter half of this decade. I see gold breaking through its inflation-adjusted high of US$2,200 an ounce set back in 1980 in the not-too-distant future.

Comments

[NOWHEREMAN:]

The question is what happens if other Asian countries follow suit?

What happened in the US to inflation after FDR's decision?

2008 Jul 04 10:58 AM

[jt:]

I'm sure you know what happened to inflation after that...and esp after Nixon completed the coup and took us off the gold standard. The destruction of the US greenpaper accelerated dramatically. Over 75% of the 96% loss of value of the dollar that has occurred since the Fed was given (actually more like TOOK, thanx to the collusion of certain bankers, the Secy of Treas and certain members of Congress) control of the money supply in 1913 has occurred since 1971, and the dollar has lost 60% of that in the last 6+ years alone. And that's just nominal...in comparison with other fiat currencies...not in real value. To figure that out, you'd have to divide the amount of gold we actually have in this country that was supposedly backing out currency by the total of FRNs floating around. And even then that wouldn't tell you the whole story. You'd really have to look at the total derivative debt of the dollar and divide that into the amount of gold we have...and derivative debt, as you probably know, recently flew past $1 Quadrillion!!! with no slowdown in sight.

Now...consider that many analysts and other interested parties who have followed this saga for decades do not believe that it is even remotely likely that we have the amt in Fort Knox and elsewhere that we are told by the govt that we have...at least not unencumbered...ie, not already lent out, swapped, etc. with some other central bank or bullion bank elsewhere. Gold could easily be valued at $50,000 dollars / oz of official gold and still probably be cheap when all the chickens (ie, dollars) come home to roost. I don't think 99+% of the American public has a clue just how bad inflation really is and just what kind of a price inflation tsunami is about to hit them.

Then throw in the shadow govt's somehow convincing the US Congressional Sheeple to actually create a North American Union and the Amero. Imagine the executive order...then seconded by the elected Sheeple ("the baaaahhhhs have it, motion passed")...forcing the american public sheeple people, along with Mexico and Canada, to accept one Amero for two American dollars (and some ratio for pesos and loonies)...but then the sheep go to the stores and find that the prices haven't changed much, they're just in ameros now...immediate 100% price inflation. Can't happen here??...you bet your cheshire cat it can.... As a matter of fact, unless MANY more Americans wake up and support people like Ron Paul and get vocal and active, that is EXACTLY what is going to happen...or some version of it.

Confiscation here?...can it happen again?...don't know...but don't know why not. Any thots? Where would one be safe...and how would one get his/her wealth out of here and get it there? Is goldmoney safe from the greedy fingers of UncleMafiosoFed and Cousin Treasury, even across the pond? Will S. American govts kneel before the Western Central Bankers and accept their bribes by also criminalizing gold importation or even ownership?? So hard to know these things. So much happening so fast...so many questions...so few anwers.

2008 Jul 04 12:17 PM

[GMiki1:]

No place is 100 percent safe, which is why you have to diversify within gold itself (and silver): physical held a couple of places, holdings outside the country, GLD, and gold equities. How bad will it get? No one knows because no one can know the future. How bad can it get? Well, that we know by looking at the past. It can get bad. But it can get even worse because we live in a time in which a great deal has become more volatile and exaggerated.

2008 Jul 04 01:09 PM

[Garimpiero:]

Taking his cue from Keynes, who had advised that to relieve unemployment, the money supply could be secretly increased before people would realize the full inflationary effect, FDR increased the money in a thoroughly immoral fashion- he said that Americans were "hoarding" their money (after all, they were paid in gold, or receipts for same so how could they be accused of "hoarding" anything? For his part, FDR had adopted the Democrat Party's plank to preserve the gold standard during his 1932 election campaign) demanded that Americans turn in their gold for 20 fiat dollars to the ounce and immediately boosted the money supply (his version of Helo Ben)by changing the exchange rate to $35 to the ounce(the exchange privilege now extended only to foreign dollar holders Imagine- selectively screwing your own people.
It is interesting that Communist Vietnam has not so far tried to confiscate the people's gold, though they too have resorted to the false charge of "hoarding" (what is one supposed to do- sit there as the Central Bank inflates its ass off?) Perhaps the government realizes that people who so recently threw off the yoke of imperialism may not take kindly to such transparent trickery and take up arms again. Americans, who have even allowed their firecrackers to be confiscated on the Fourth of July, appear pretty tame!

2008 Jul 04 01:26 PM

[Garimpiero:]

As hypocritical as what FDR did- promising during the 1932 election to preserve the gold standard and then only doing so for foreign dollar holders (!), at least it can be said that some link between the production of dollars and gold in Fort Knox WAS preserved. What is happening today is not only completely immoral but amazing- now the government reserves the right to pull "money" out of its ass with no link to anything- and to keep things from getting really awful really soon, the Fed is keeping interest rates low (for their banker friends, meaning they get to pay you 2% a year while charging you 20% on your VISA card.
As for "helping" with low interest rates, the road to hell may, as it is said, be paved with good intentions, but there is no reason to assume that the Fed's intentions are anything but self serving- do you think they are extending credit for free? In exchange for their largesse, they, and not the "people" now own, through SDR's what we like to think of as "the nation's gold in Fort Knox- or wherever it is now being- what is the word- hoarded (!!!). What they are really after is controlling every significant aspect of the economy.

2008 Jul 04 01:50 PM

[Garimpiero:]

Being in a thoroughly Revolutionary mood, and just back from a trip to Boston- where last weekend's newspaper featured a story that 125,000 households statewide (that would be at least a quarter of a million people (!!!!) now face the prospect of freezing to death this winter (if they do not starve first) as their power has been shut off already for nonpayment. This is due to to soaring fuel costs (NG has doubled in less than a year and home heating oil not far behind) which are directly linked to the Fed's printing presses(associated with deficit spending) and much less the "new demand from India and China"- Indian automobile sales, for example are less than 1.5 million a year. $30 billion a month in deficit spending-money going largely abroad, is equivalent to over 200 million barrels of oil A MONTH- is it any wonder that prices are soaring- and what would stop them from soaring further?- and this $30 billion a month for Iraq and Afghanistan, lining the pockets of the arms merchants- to "protect" us? 250,000 people in Massachusetts beg to differ, but they are in a "Blue" state (as in blue with cold) so their opinions do not count.

2008 Jul 04 02:17 PM

[ussmls7:]

If you read the local news papers,people are clueless of what is coming,all they do is blame the oil companys for high fuel prices accross the board.They are in belief that Obama will save them by wealth redistribution,sociall... medical care,getting Cap & Trade Passed,Green renewable fuel & just about any promise you can think of,and when you confront these people,to view facts from Followthemoney.org,the... slash back at you,calling me any name you can think of, all I ask of them was to think for them selfs, & stop relying on the MSM for truth in all matters! I also find it interesting that older folks would come to my defence,because many were young when FDR took from thier Mother & Dads savings,recalling how what had been wealth from working hard,had left them,replaced by years of server hardship! This one Gent,reply with a list of campain donars from Goldmans Sachs,His quote said,the illeagle Federal Reserve is a servant to Goldmans & other Shadow Banks,& you can blame the Fed & Goldmans for current fuel prices,he also hit out of the park when he said,when the Enviormental Protection Act of 1965 was passed,it open the doors of mass courption,from leftest tree huggers & universities that have no interest in teaching true Monetary History & Policiey! We need more like him to speak to our youth!!
Inflation has been increaseing fast,if shit hits the fan,what forms of Gold will be safe from the G-men? The Patriot Act has list of what is listed in the internet at the Federal Registery,3rd collume page 33716! All Gold Bullion,Coins,Silver Bullion & Collectors ,Dealers,Jewelry Retailers are Regulated by the Treasurey Dept!! So what does that mean to all the Gold that has made its way into private hands,Jan 1,2006 all Gold sold,be it with cash,check,credit card, the Treasurey has a record of it! What it all the debt is called in by piss off Nations,wanting payed in Gold? Where would it come from? No longer can you use off shore to pack away your savings,the Swiss are part of that Shadow group of eleits that have funded the Fed & Congress never ending quest for funds from the Treasurey,its coming,when,no one can see the furture,but history has a way to give you clues!! Are we smart enough to read them? Time will tell,but most Americans will be so unready,the Great Depression will be nothing to the mass melt down of all financeing institutes!
Ron Paul has a list of people that are running for election,that are like mind when it comes to Constitution Law, and with help,these folks are a step in the right direction to take back our Nation from the like of Goldmans,JP Morgan & the others that back the Shadow Bankers of the World.

2008 Jul 04 06:38 PM

[Nate C:]

FDR was a criminal who robbed people of their wealth (gold siezure, social security) and then created the welfare/slave state we have today. People have become so dependent on the government that they are no longer free, but instead slaves to the almighty state which gives things to people.

2008 Jul 05 01:37 AM

[marxbites:]

Nate - that nails it - FDR WAS a criminal traitor, as was Lincoln, TR, Hoover, Wilson, LBJ, Nixon, Carter, Clinton & the Bush's.

What IKE and JFK warned of, we have full blown.

Note that since non-court historians and journalists exposed Wilson's heinous actions of signing the FED & Fed'l Inc Tax in time for fiat financing of our entry into WW1 he promised he wouldn't, was yet another unconstitutional sham for elites to profit and aggrandize power from, like the CW, SpanAm, WW's 1&2, and all the rest. They founded the CFR to counter a like scenario of exposure of the charlatans for the coming planned WW2. Every war was ALWAYS aggitated for by the progressives of BOTH parties, mostly bankers and their shipbuilders and merchants of death cronies. Prohibitionist reformer Jingos ramming democracy down the throats of new markets at bayonet point via the "open door" policy.

If every Republican utterance of praise for a Hamilton, TR, FDR or Wilson isn't enough proof to reveal the game is rigged, and that BOTH parties are in criminal collusion again and again, well then, we're toast unless we wake up and re-elect no more incumbents - a brutal system enema is waaaaaay overdue - 100years of impaction in the making can be eliminated in just a few election cycles!

Wouldn't TEA be the perfect symbolic liquid! Flush ALL the bastards out!

The WHOLE concept of America was freedom FROM Govt - WTF have we done, eh?

Time to get our limited and nearly cost free govt back so we can once again pursue our happinesses by keeping ALL we earn instead of half, aint it?

Our soldiers are murdered for corp profits, not for American freedom. The elite ruled overbearing offensive violent empire the founders did their all to warn us against becoming, they use as their own commerce protection racket. Monarchically bent Hamilton was the demon seed statists love to praise too, another banker's boy to do that bastard Morris' bidding, who left gapping holes in our constitution for the purpose of exploiting them. He and his elite Federalists would have had America as just another England & they were in the minority. Jefferson and his majority were ALL against the Constitution of, by and for elites privilege.

Freedom vs statism is the true battle - not Dem vs Rep cuz their bosses are the same CFR/NWO criminals

2008 Jul 05 09:29 AM

[jackntx:]

Sorry for appearing as a novice here, but I have a 'big picture' basic supply-demand question implicated by this article . . .
Wouldn't the elimination of Vietnamese buyers of gold act as a reduction of demand (from a worldwide point of view), thereby putting downward pressure on the price of gold? In other words, if a class of buyers is removed from a market, thereby reducing overall demand, and supply remains unchanged, wouldn't that (in classical economic terms) work to reduce the price (at least on a short term basis and assuming all other price determinants remain equal)?

Don't get me wrong, I'm all for a continuing bull market in gold, I'm just wondering how on a macroeconomic scale the Vietnamese prohibition will likely affect the current world gold market.

Thank you for any help !!!

2008 Jul 05 12:29 PM

[DiverCity:]

It would, ceteris paribus, reduce demand, jackntx. But all things are not equal. Perhaps the global elites were hoping it would (and might have orchestrated it), but it has not yet had that effect. There likely is a huge black market for gold to Vietnam, what with all the small boats that have access there. Also, artificial demand reduction often has the opposite effect -- prices rise, as there is pent up demand that the market cannot satisfy. This truly was a desparate measure.

My question is this: if the USgovernment makes it illegal privately to own gold, and other lap-dog countries follow suit, what happens to the price of gold? I invest in gold primarily because I consider it money -- one that preserves wealth. Will it still have that attribute then?

2008 Jul 05 09:27 PM

[Slosis:]

It is indeed very disturbing to read this article. Vietnam was desparate, no questions about it. I would tend to think it would have the opposite effect on the price of the gold. Gold should go up higher, now that inflation is so out of control to the point that Vietnam has to do this.
When the price of gold indeed goes up a lot higher, I am worried that the first thing the US gov may do is to shut down GLD/IAU, because money will be fleeting the stock and bonds markets. That's very possible when gold skyrockets. Extreme times call for extreme measures. May be it is time to own physical gold.

2008 Jul 06 12:47 AM

[Garimpiero:]

DiverCity- The legal tender law in this country is an example of government declaring its monopoly and exerting unreasonable control over citizens- if you want to exchange your services or goods for gold, silver, or, for that matter, gas, there is nothing dishonest or immoral about it- but it is illegal- government wants everything transacted in dollars so that income taxes can be readily established. There was even, in recent hears a proposal by the Treasury Dept. that some sort of chip or other device be incorporated in the currency to render it worthless if not spent in the prescribed period of time. The idea went nowhere, but, having had several English pounds left over from a trip ther years ago was both chagrined and amused to learn that, despite the Queen's promise to exchange the
note for "pounds" (of what?) they had changed their currency and it was in fact now worthless (a market does exist on Ebay, however- the notes feature the inventor of the steam engine, who deserves a lot more credit than the Queen)
However, at the same time it is inconsistent in its application- the Federal Reserve Note is supposed to be legal tender for all debts public or private, and yet there are a number of areas, some under direct government control, such as at airports, where the use of cash is prohibited- try buying a ticket there with cash, for example- at least two airlines now refuse to accept cash for drinks on board- a credit card must be used. This fact would seem a legitimate defense if one were to demand other than cash for something owed:if government can decide capriciously when its own laws do or don't apply, the individual is entitled to the same - I recommend to anyone Andrew Dixon White's presentation before Congress, Fiat Money Inflation in France,* which mentions that very issue at the time of the French Revolution. Even as people tried to find ways to protect themselves against raging inflation (caused by deficit spending, just as in today's USA) the government imposed ever more Draconian measures, declaring in the end that requesting payment in other than the official currency subjected the individual to the death penalty.

2008 Jul 06 01:52 AM

[User 86999:]

An interesting thought from Woodrow Wilson:
quotes.liberty-tree.ca...

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men."

2008 Jul 06 10:45 AM

[CaptBob:]

What can I say??, it's all above.
Only soon just like the Dong waving your dollars in Public will result in arrest for "Indecent Exposure"!!!!

2008 Jul 06 11:20 AM

[curious cat:]

please! there is absolutely no reason to believe that we are that close to the end of time. if gold goes up, no one in our gov't will care. the dollar is not linked to it, is not backed by it and does not care whether anyone wants to buy gold and hoard it to the end of time. our money may be inflating or deflating, depending on what you buy. if the dollar becomes stronger for a year or two, you gold bugs will be losing value while you should be earning money. don't let these fanatics talk you into buying gold. you can't buy a burger with gold, you can't fill your tank with gold, you won't even find a dentist who uses it anymore, you can't wear it around your neck for fear that someone will yank it off, what stinking good is it? better to buy a share in an gasoline club or a farmer's market or a timeshare. for that matter, if you think that dollars are going to be flying around in wheelbarrows, buy some property and pay it off with much cheaper dollars as time goes on. oh, can't do that can you, well, that's because property values are going down. the time to buy gold was when property values were headed up. look out below!

2008 Jul 07 01:36 AM