India hopes to wean citizens from gold

This appears to be similar to what FDR did (although the proposal is not to confiscate) to replenish American gold supplies, and the general idea, from my understanding seems to be the same really, as they seem to want to implement the 'fractional reserve' system on the gold.

Do you guys think this is a good idea for India? Should they do it? According to the article there is more than $2 billion worth of privately owned gold in India. That's a lot!

But the basic proposal is for funds traded on gold exchanges that allow "gold units" to be bought and sold without physical possession - much like buying shares in Coca-Cola without having to stash the beverage at home.

Initially, the metal itself would be retained by the bank, as the seller of a paper gold certificate, and the buyer could at any time trade in the paper to receive the current market value of the quantity of gold originally bought - not just the amount of money originally spent.

The long-range vision, experts say, is to put the value of the gold to work, perhaps by allowing banks to "sublet" gold deposits, just as they lend out deposited cash. Doing so could inject more capital into the economy than top multinationals have done: Indians last year poured about twice as much money into gold - about $10 billion - as foreign direct investors poured into India.

It sounds like a good idea and that India could benefit from this, but I can also understand the following sentiments:

"What is the reason I'm buying gold?" said Pinank Mehta, an asset manager. "The reason for my purchase is a lack of trust in the present institutions. Now why would I buy physical gold and give it back to the same guys who are the cause of my not trusting the present system?"

Gold is also, many say, the surest way to keep money safe, both from the reach of thieves and the gaze of the tax man.

India Hopes to Wean Citizens From Gold

This strikes me as a singularly bad idea. The entire idea of buying gold is that it is physically in your posession. In the event of a financial crisis the people who have gold certificates will be the proud owners of some of the most expensive toilet paper on the planet.

Originally posted by Sugarlump
This strikes me as a singularly bad idea. The entire idea of buying gold is that it is physically in your posession. In the event of a financial crisis the people who have gold certificates will be the proud owners of some of the most expensive toilet paper on the planet.

Exactly!

But the way this is being described, it's being made out to be something that could greatly benefit the people of India. Will they go for it? Or will distrust of the institution result in them keeping their gold where it's safe - in their own hands?