India gold fact of the day

by on May 11, 2015 at 12:41 pm in Data Source, Economics, Religion | Permalink

Wealthy Hindu temples such as this one are repositories for much of the $1 trillion worth of privately held gold in India — about 22,000 tons, according to an estimate from the World Gold Council. In 2011, one temple in south India was found to have more than $22 billion in gold hidden away in locked rooms rumored to be filled with snakes. Another has enough gold to rival the riches stashed at the Vatican, experts say.

There is more here, the main theme of the article is that some are calling for the gold reserves to be mobilized, a running theme in economic debate since Keynes and earlier in the nineteenth century as well.

1 T. Shaw May 11, 2015 at 1:10 pm

Reminds me of the 1930’s “Gunga Din” movie and its temple of gold.

“East is East . . . ”

In other news, the Dow is overpriced to gold at 15:1 (10:1 historic average) and gold is overpriced to oil at 20:1 (12:1 historic average). What does that tell us?

2 ibaien May 11, 2015 at 1:19 pm

long on snakes?

3 T. Shaw May 11, 2015 at 1:29 pm

Long on snake oil!

Drink (gin and beer) heavily.

4 Rich Berger May 11, 2015 at 4:50 pm

Hear, hear.

5 Brian May 11, 2015 at 1:25 pm

It tells us that historic averages are not very predictive.

6 IVV May 11, 2015 at 1:59 pm

Everyone is desperate for a positive risk-free real rate of return when it doesn’t exist?

7 louis May 11, 2015 at 3:18 pm

Also the ratio of gold to the number of eggs I had for breakfast plummeted on Sunday relative to historical averages. Buy gold!

8 Bernard Yomtov May 11, 2015 at 8:26 pm

What does that tell us?

Nothing useful or interesting.

9 dan1111 May 12, 2015 at 7:27 am

I bet your next comment won’t have such an open-ended question at the end.

10 gbz May 14, 2015 at 9:39 am

And western racism is western racism. Indian gold hordes were a natural product of at least 2 factors: (a) that india was the world’s largest economy (by far) from before the coming of Jesus Christ to at least the 1600s. And (b), the world hadn’t yet invented a better more fungible and value dense store of value. India couldn’t exactly buy bonds and hold its surplus in the form of fixed income sovereigns.

As for your comparison, it tells you nothing. Dow is not a commodity and is largely a manipulated index that will always and always rise in the long term (it is designed to always increase). Comparing gold with crude is positively dumb for too many reasons for me to waste time explaining.

11 Cooper May 11, 2015 at 2:28 pm

All this gold is wasted. It’s wealth that’s being sequestered away in vaults, collecting dust.

I wonder how many businesses don’t get funded in India because that scarce capital is locked away in shiny metal?

12 JC May 11, 2015 at 3:15 pm

Wealth gets locked away in buried gold in India because business and government in India are endemically corrupt. If India had trustworthy institutions, they could better mobilize the savings of the nation.

13 Brad Jones May 11, 2015 at 3:26 pm

Very very true.

14 mulp May 11, 2015 at 3:34 pm

No, its in gold for the same reasons that motivated Adam Smith to write the Wealth of Nations.

Labor is seen as a burden, cost, something to be eliminated.

If your savings were stored in labor, you would be building productive assets that have value because they generate revenue as they decay, using the revenues to hire labor to build more productive assets that offset the decay and increase total assets. For a nation like India, these productive assets would be electric power distribution, transportation, water and sewer, education.

The temples represent an ancient asset, the source of social welfare in times of need. Just the construction of temples provides for the welfare of those who do the work, but the care for the sick, etc.

15 dan1111 May 12, 2015 at 7:40 am

Labor is a cost. You can’t “store” savings in labor, because any money you spend on labor goes away. Unlike a pile of gold.

Investing the money in labor might be productive. However, there is no guarantee. You don’t just throw money into labor and have functional infrastructure magically appear.

16 Rahul May 11, 2015 at 8:37 pm

Why is it wasted? Maybe it is a safety hedge. Is every reserve axiomatically a waste?

What exactly do people mean when the demand “mobilization”? It is a private asset (ok, co-opratively owned). Investment vs reserves is a private descision.

Perhaps if they had “mobilized” it prior to the 2008 they could have burnt it like so many pension funds.

What is scary is how the Indian Govt. has been trying to overreach its authority. In many cases the motivating factor being beaurocratic greed. A Govt. appointed temple administrator is a plum, cushy assignment.

17 Brad Jones May 12, 2015 at 5:22 pm

” A Govt. appointed temple administrator is a plum, cushy assignment. – See more at: http://marginalrevolution.com/marginalrevolution/2015/05/india-gold-fact-of-the-day.html#comments

Absolutely true…not just a decently paid one but one which has enormous potential for raking in corrupt money considering India’s corruption level.

18 Ray Lopez May 12, 2015 at 3:45 am

Yeah, melt down that artisan hand-poured gold and turn it into industrial sized bricks of gold. Ruin the artwork inherent in old gold and turn it into shiny new bricks that can be stored in a Swiss bank. Makes about as much sense as tearing down the Old Town of any Indian city and replacing it with modernist glass and concrete boxes.

19 dan1111 May 12, 2015 at 7:42 am

The world does not need 22,000 tons of artisinal hand-poured gold.

20 Affe May 11, 2015 at 2:28 pm

Sounds like a job for… THE FRENCH REVOLUTION !

21 Govco May 11, 2015 at 11:59 pm

Or FDR, he’d know how to get that gold

22 prior_approval May 12, 2015 at 3:42 am

And look at the horrible results of that a generation later – why, the America of the 1960s was a socialist hellhole, infested with unions, manufacturing industries, and unbearably high marginal tax rates.

Though oddly, it was considered at the time by the rest of the world to be far and away the wealthiest nation, one whose citizens assumed that the next generation would be even better off than the previous one.

Thankfully, at least in the eyes of some, we left that nightmare behind.

23 dan1111 May 12, 2015 at 7:43 am

Yeah, America being the wealthiest nation in the 1960s was totally due to FDR’s policies and not due to WWII and communism destroying much of the world.

24 Anoop May 12, 2015 at 1:37 am

A war of the people against the abodes of god? Slim chance it could happen anywhere, nonexistent in India.

25 athEIst May 11, 2015 at 3:07 pm

All religions are the same…pass the plate. All you need for religion are stupid people and pass the plate. The plates are passed up to the front where the “holy men” popes, mullah, bishops, ministers and clerics of all kinds take the money.

26 mulp May 11, 2015 at 3:24 pm

“the main theme of the article is that some are calling for the gold reserves to be mobilized”

Ok. let’s say all this trillion in gold in India were sold on the world market to fund building capital assets like power generation and power grids, water and sewer, transportation, how much of this could you buy by selling the trillion in gold building all the infrastructure as fast as possible (which would generate millions of jobs in India that could be restricted to Indian citizens)?

Half a trillion, two hundred billon?

How much would the price of gold fall if India converted the trillion in unproductive assets into productive assets?

27 Adrian Ratnapala May 11, 2015 at 3:40 pm

Another way is to think of this as a symptom rather than a cause. The cost to count is not that of the unspent gold, but that of the political economy that make lending gold at negative interest rates to temples seem rational.

My gut instinct is that this is voluntary and therefore unwise to scond guess. Indians with connections can make huge profits by investing in companies, bonds and such. But ordinary savers are more likely to be victims of some corrupt conspiracy. Hence the temple snakes.

28 Rahul May 11, 2015 at 8:38 pm

+1. It is a voluntary accumlation of an asset. The last thing we need is stupid Government interference.

29 Cooper May 11, 2015 at 5:41 pm

You don’t sell it all at once, you do a gradual liquidation.

India’s gold imports in the 2009-2013 period were equivalent to around 10% of its total imports and are a major factor in its ongoing trade deficits. The situation got so bad that the government slapped a huge tariff on gold in 2014, prompting a wave of smuggling.

Stop hoarding useless gold and invest those savings in capital goods. India’s economy could be growing a lot faster. At the very least, trade the gold for Chinese-built power stations and put a dent in the chronic electricity shortages plaguing the sub continent.

30 Rahul May 11, 2015 at 8:48 pm

Aren’t you ignoring ownership? I’d agree with you if this was treasury gold.

It is like demanding Manhattan millionaires assets be “mobilized” till Bronx poverty disappears.

31 dan1111 May 12, 2015 at 7:45 am

“It is like demanding Manhattan millionaires assets be “mobilized” till Bronx poverty disappears.”

The problem with your reductio ad absurdum is that many people actually advocate for precisely this!

32 Michael May 11, 2015 at 5:47 pm

How much would the price of gold fall if India converted the trillion in unproductive assets into productive assets?

Reading between the lines of the article, it seems suppressing the price (and hence, allure) of gold is at least a part of the government’s goals on the topic.

33 8 May 12, 2015 at 2:06 am

If Indians like to buy gold, how the is selling gold to increase GDP growth a solution? Higher incomes in India translates into higher gold demand. On top of that, they’re going to pay interest in gold, so the government will need to import gold to make interest payments if this scheme even worked. It would be good for the economy, but I suspect the end result would be a massive influx of gold into India, especially if it succeeded in knocking the price down.

34 Adrian Ratnapala May 11, 2015 at 3:32 pm

Time for Indiana Jones 6 — The Temple of Serpents.

35 Mark Thorson May 11, 2015 at 4:13 pm

Where’s Blane David Nordahl when you really need him?

36 Michael May 11, 2015 at 5:23 pm

In 2011, one temple in south India was found to have more than $22 billion in gold hidden away in locked rooms rumored to be filled with snakes. Another has enough gold to rival the riches stashed at the Vatican, experts say.
Hmm, I don’t know this for a fact, but I would assume that the Vatican has way less than $22B in gold tucked away. What is up with the Anglo-centrism? And, notice the implicit anti-Catholic or anti-Christian message of that statement?

37 ibaien May 11, 2015 at 5:33 pm

how is the statement that a nearly two thousand year old religious sect, one influential enough to own its own ~country~, might be sitting on some serious assets ‘anti-catholic’?

38 Michael May 11, 2015 at 5:53 pm

Ummm, the idea that the Catholic church has tons of money that it isn’t using to help the poor has long been an anti-Catholic shibboleth.

Meanwhile, this article seems to say that the Vatican has a mere 10 million Euros of gold, which places it a good three orders of magnitude below the wealth of these Hindu temples (of which there are apparently, many). Why isn’t there pressure on them to spend their money directly on the poor?

http://www.catholicherald.co.uk/news/2014/07/15/where-does-the-vatican-store-its-gold-financial-report-reveals-all/

What wealth the Catholic church does have is mostly illiquid.

39 Cooper May 11, 2015 at 6:11 pm

Many Catholic don’t believe in the mystic power of the Church anymore. Italians are more willing to criticize the Church than they would have been in the 1500s (or 1950s for that matter).

Maybe the Hindu temples can hoard gold because the pressure to spend doesn’t exist yet. Who dares question the high caste Brahmins?

40 Bernard Yomtov May 11, 2015 at 8:29 pm

You mean the Catholic Church doesn’t have tons of money, or extremely valuable assets?

Been to the Vatican Museum lately?

41 josh May 12, 2015 at 8:25 am

“You mean the Catholic Church doesn’t have tons of money”

correct.

“extremely valuable assets?”

You want the hierarchy to sell the Sistine Chapel to someones private collection? That wealth belongs to the Church, the hierarchy are trustees.

42 louis May 12, 2015 at 8:59 am

Not to mention global real estate holdings.

43 Bernard Yomtov May 12, 2015 at 3:51 pm

“You want the hierarchy to sell the Sistine Chapel to someones private collection?

Not the Sistine Chapel, but I bet there are a few paintings that would fetch a pretty penny, as would a lot of the real estate the Church owns.

That wealth belongs to the Church, the hierarchy are trustees.

So would the proceeds of the sales. I’m not suggesting the hierarchy confiscate the money for personal use.

44 Adrian Ratnapala May 12, 2015 at 12:31 am

Forgive me for being anglocentric, but I am one of the millions of tourists who spent good money visiting Rome partly so that I can trudge over to the Vatican and see their spectacular buildings, paintings, decorationation etc. Naive Anglo-Saxon that I persumably am, I concluded that “these guys have a lot of stuff”.

45 Axa May 12, 2015 at 6:53 am

I remember the “Anglos” parted ways from the Catholics long time ago. Anyway, talking about the Vatican is Anglo-centrism =)

46 chuck martel May 11, 2015 at 5:39 pm

The difference between “saving” and “investment” seems to escape the western hyper-capitalist mentality. Of course with designed inflation, the saver is penalized while the investor is, potentially, rewarded. Which is why inflation is created, so saving is discouraged in favor of investment resulting in capital growth that maybe keeps the investor one step ahead of inflation but rewards management immensely.

47 Rahul May 11, 2015 at 8:41 pm

Aren’t you ignoring ownership? I’d agree with you if this was treasury gold.

48 Tom Warner May 11, 2015 at 9:59 pm

We Americans are sure in a good position to mock the Indians with our 20,000+ tons at Fort Knox. Nearly every major civilization throughout history has had a big centralized gold hoard, including the pre-Columbian Americans.

49 Prakash May 12, 2015 at 1:11 am

Indian temples had great stashes of land as well. It was the produce of this land that used to feed the priests and perform ceremonies in temples. These lands went to various other sources after independence. A lot to the government, a fair bit to local landlords, thus leaving the gold as the main asset.

For those who wonder why Indian temples are so rich in midst of such poverty and aren’t doing more fashionable charitable activities, these are my 2 cents.

There were/are huge restrictions on temples from diversifying their charity work into schools, hospitals or universities. There are still many regulatory barriers to creating any of the above listed institutions in India. This may have been due to the socialist policies of the congress party which ruled India for majority of independence, which effectively ended up being anti-hindu. As far as we could see, churches and missionaries could still create schools and colleges, as they were protected minorities.

The only hindu temples that escaped these clutches were places that had a highly charismatic guru who would for a time, have been worshipped as a living god. eg. Puttaparthi, where Sathya sai lived, has a heart hospital that is considered one of the best in India. It treats poor patients for a very nominal charge. I think the reason these escaped was that politicians would have been too scared of placing regulatory obstacles in front of any such work when even a stray word from the Guru could destroy their careers.

50 Adrian Ratnpala May 12, 2015 at 5:19 pm

This is interesting and plausible. I expect most of what you say is true. But I think it leaves out something very important.

The main reason why Christian and Muslim charities are more significant than those of other religions, is that those two were the only religions that actually made a big deal of giving to the poor. In Buddhist parlance “alms” means giving to monks or other holy men, and I dare you to claim that Brahmins were much less willing to take stuff for themselves than were the ascetics.

51 Prakash May 13, 2015 at 1:55 am

Many large temples had temple kitchens and anna-danams, literally meaning donations of food, where people were fed. This may not have happened very regularly, but it did happen. The Sikh gurudwaras do a way better job on this, no denying that.

But your point does not extend to universities. Why didn’t Brahmins set themselves up in comfortable tenures in Hindu universities? They couldn’t, due to the regulatory environment for creating new Hindu institutions.

52 Kris May 13, 2015 at 5:03 am

Christian churches may, doctrinally, make a big deal about giving to the poor, but they were quite corrupt themselves in the Middle Ages. The Catholic Church (the one that Martin Luther attacked) seemed to grow similarly rich through tithes and indulgences, based on my reading.

Also, the Muslim (Central and West Asian) raiders and invaders of the subcontinent during medieval times primarily targeted Hindu temples for plunder. Who knows what effect that had on the operations of these temples! It definitely created a culture of aggressiveness, low-trust society, short-term thinking, and a reduction in charity towards non-kin in the Indian northwest (including Pakistan today).

53 Asher May 12, 2015 at 3:37 am

“Found” to conceal gold but “rumored” to be filled with snakes. Well did they visit the rooms or didn’t they? If they didn’t, then the Temple wasn’t “found” to have a gold stash, and if they did, then the rumors are either confirmed or dispelled.

54 JohansenIndustries May 12, 2015 at 4:15 am

I think one can infer that the rumors are false, but they were rumored the be filled with snakes before they were found to have a gold stash; and possibly after, since I doubt the rumor-mongers are, to a man, avid readers of the Washington Post.

55 Axa May 12, 2015 at 7:20 am

It means that a devotee produced something, sold it, then bought gold and deposited in the temple vault. That money/gold, instead of making the furniture workshop bigger and hire more people or making the education of a child possible is collecting dust in a temple vault.

For sure, it’s not the most efficient way to use resources if you want to maximize income and make life quality better for everybody. If the rule to measure is income generation, the stashed gold is a mistake. However, the gold does not accumulated in the last 10 years, not even in the last 100 years. So, even if the situation is acknowledged as a mistake, it is a mistake from the past, people that is already dead. India’s situation is not special at all. Every useless big building you see, from Mayan pyramids to Versailles (before being a museum), means that a lot of resources that could be used for making people’s life better went into piling rocks. We can’t judge dead people’s decisions. They decided to live that way, fine. However, the government of India is doing precisely that, judging dead people’s decisions.

What matters is what living people does. If living devotees, instead of saving to buy gold to donate to the temple, used those resources for their needs their life would be better. The biggest charity work from temple leaders would be stop accepting donations in the present. However, as long as the temple-government collaborations is voluntary, what’s the problem?

56 dan1111 May 12, 2015 at 9:51 am

Why can’t we judge dead people’s decisions? Don’t we do that all the time?

57 Adrian Ratnpala May 12, 2015 at 5:23 pm

Versailles as a museum is worse than useless. It wastes the effort of hordes of tourists who come to see a fairly unimpressive, ugly mansion with decent but tedious grounds. The only interesting thing there is that you learn how dull and wobbly mirrors were in the 17th century.

58 Yasha May 13, 2015 at 12:32 pm

Asps – very dangerous.

You go first.

59 allan May 13, 2015 at 9:57 pm

“…calling for the gold reserves to be ‘mobilized.'” Best econo-junk speak of the day. Dear Hindus, we are from Wall Street and we are here to help you mobilize your gold.

60 Jaaniya May 20, 2015 at 4:19 pm

Wow unbelievable, it looks a massive thing to be having, it should be used correct to make life easier for all. One thing I always feel worry about greed people knowing about this. At the moment I am doing Forex trading and we need to always be in control to be successful, if we trade without any proper control then we are certain to lose, but lucky able to earn 15 dollars on every lot size trade with OctaFX broker, it does make my task all so much easier.

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