The Miraculous Gold Multiplication

Dimitri Speck

Chapter Chapter 15 in The Gold Cartel, 2013, pp 56-60 from Palgrave Macmillan

Abstract: Abstract What medieval alchemists were unable to do, modern central banks achieve without breaking a sweat: they multiply gold! This is not a joke, and this is how it works. The central bank of ‘Lending Land’ lends 100 tons to a bullion bank, which then sells them to the central bank of ‘Purchasing Land’. According to established central bank practice, these 100 tons now continue to be recorded as an asset in the balance sheet of Lending Land’s central bank, in the line item ‘gold and gold receivables’. However, there now also 100 tons on the balance sheet of the central bank of Purchasing Land, since it has duly bought them. Et voilà! Out of 100 tons, 200 tons were created. In the balance sheets of both central banks there now 100 tons each listed under assets, which adds up to 200 tons. In this manner our hypothetical example would lead to 200 tons of reserves being declared in the statistics of the IMF, although only 100 tons exist.

Keywords: Central Bank; Balance Sheet; Storage Facility; Demand Deposit; Line Item (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-28643-7_15

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DOI: 10.1057/9781137286437_15

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