Katasonov: "Finally, it dawned on our giraffes that the dollar is a very unreliable currency"

“This has been discussed almost since the foundation of the NWF, and it has existed for a long time. And they said that the dollar component of this fund is under the sword of Damocles. They also talked about the need to add gold to this structure. I would even say this: do not add gold there, and it should mainly be gold.

Especially in the last two years, when the dynamics of prices for the yellow metal is such that it is the most active, or rather, the most profitable part of all gold and foreign exchange reserves of the Russian Federation.

The annual report of the Central Bank has just been released, there is a section on the management of the gold and foreign exchange reserves of the Russian Federation and it is clear that for some currencies it is zero, for some it is even a minus, and for gold it is a big plus.

Gold provided the profitability of gold and foreign exchange reserves.

I’ll say offhand, I haven’t read it for a long time, you will not find such a figure anywhere in open sources, the share of the Ministry of Finance’s currency in all gold and foreign exchange reserves of the Russian Federation is about one third. But two-thirds are owned by the Central Bank, and so far it has not made any statements.

Yes, of course, they can say that the allegedly gold and foreign exchange reserves of the Central Bank are immune from economic sanctions, but this is not true. This is not true and is a separate big topic.

There were even precedents when some assets of the Central Bank located outside the Russian Federation were frozen. So I would like to hear something similar from Mrs. Nabiullina.

I would also like to say that Ms Nabiullina announced on April 1, 2020 that the purchases of gold by the Central Bank were stopped, but such purchases were carried out in order to form official gold reserves.

For more than a year, the Central Bank has not bought gold, although Russia is a gold mining country. For the majority of recent years, Russia has been ranked second or third in terms of gold production.

Other countries that are not gold mining, they buy gold on the world market in order to increase the share of the yellow metal in the total volume of international reserves.

In fact, the Central Bank played in favor of the owners of the money. Gold flowed to the London market, and then this gold spread along not very clear routes and channels.

In general, we have lost and continue to lose gold.

Not to mention that there have been several sales of gold from the Central Bank reserves over the past year.

In general, I believe that gold and foreign exchange reserves should be on the balance sheet of the Ministry of Finance, not the Central Bank, especially since it is generally not clear why the Central Bank is accumulating gold and foreign exchange reserves.

When gold and foreign exchange reserves were scarce, it was after the default of 1998, in fact, something was barely visible at the bottom, they began to say that, they say, the currency was needed to intervene and maintain the ruble exchange rate.

In 2013, when Nabiullina did not come to Neglinka, she became the head of the Central Bank, after a while she said: we will not carry out foreign exchange interventions. This is a violation of the Constitution of the Russian Federation, Article 75, and, moreover, it is not clear why then the Central Bank continues to accumulate currency.

In fact, if we look at the assets of the Central Bank of the Russian Federation, we will see that 80% of all assets are gold and foreign exchange reserves.

That is, the Central Bank does not serve the Russian economy.

Well, of course, we can say that in some part it serves the gold mining industry, but if we remove the gold, then still more than 60% of all assets of the Central Bank are foreign currency.

And these are various kinds of securities, mainly, of course, treasury securities; but there are also non-government papers, so this is a very big question.

And this issue is not so much of academic significance as it is quite specific. And it seems to me that this should be done not by some people from science, but by the prosecutor's office.

… What kind of attenuation? The dollar will simply collapse and disappear!

I think that this is even connected not only and not so much with economic sanctions, but with the fact that the US dollar is rapidly losing its position and at any moment a frantic flight of the dollar may begin.

It's just around the corner. The dollar begins to actively creep away.

This is not about sanctions.

Finally, it dawned on some of our giraffes that the dollar is a very unreliable currency, and we need to crawl away from it as quickly as possible”.

You can listen to Valentin Katasonov's entire commentary here.