Central Bank Snuffs Out Vietnam’s Thriving Gold Market

In recent years gold has become a sought-after currency in Vietnam. Why? The usual reason: its government has been printing too much money, causing prices to rise, and causing its currency, the Vietnamese dong, to plummet in value.

But by holding gold instead of the domestic currency, Vietnamese citizens know their wealth’s value will be kept constant while the local currency declines. In local currency terms, they will actually make money. The chart below shows how much gold has increased against the Vietnamese dong since 1995.

There is such a demand to hold gold in Vietnam that the public is now holding some 300 to 500 tons of gold, totaling U.S $30billion. Such large gold holdings led to gold being used as a common medium of exchange. Vietnamese citizens stored their gold holdings in banks, and opened deposit accounts denominated in gold. Banks have actually been paying customers to store their gold so that the banks can use it in loans, which have lower interest rates associated with them than do dong-based loans, presumably because of a lack of inflation risk.

Recently, however, the government-run Vietnamese central bank disallowed loans in gold. Now, it is preventing banks from paying interest to customers on their gold. Instead, it is forcing banks to charge customer to store their gold, and requiring banks to regularly report on their transactions with account holders.

What’s happening is that the government wants to prevent citizens from using alternatives to its own quickly devaluing currency. This, way, the government can continue to steal purchasing power from its citizens through inflation.

Offensive as this all is, it is not—yet—as offensive as steps the U.S. government took in 1933. The government made it outright illegal to own real money (gold) so that people would instead have to own the government’s rapidly depreciating paper currency.

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3 Responses to “Central Bank Snuffs Out Vietnam’s Thriving Gold Market”

  1. I still feel bitter that Gordon Brown the worst prime minister the UK has seen for some time sold our gold at 2005 rates…

  2. anarchobuddy says:

    It's very interesting that the USA didn't allow Americans to hold gold at the time it went to war against Vietnam, the communist country that allows the people to own gold (and hopefully earn interest upon it openly once again).

  3. tim says:

    controll , controll , controll , so there told what they can trade with and what they cant . just print enough for everyone and we can all have what we want . you must subscribe or they lose controll.

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