Friday, September 11, 2015

Some Friday news: hotel occupancy and the silly Indian gold bond scheme


Calculated Risk - record hotel occupancy for 2015. Is that a sign of an imminent recession? No?

FT Alphaville - gold monetization in India. It'll never work. The depositor gives up jewelry's premium to melt, and in return earns an interest rate below Indian government bonds which won't compensate him for the policy risk, taxation risk and counterparty risk that he's taking on. Meanwhile it puts banks short gold in rupees: who's going to pay for this? And how do the banks pay "interest" on a deposit that isn't lent? If you say "the government", well okay they've been that stupid before, but in that case it ends up as a massive government gold subsidy.

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