EDITOR NOTE: When central banks and governments become more intertwined, such an arrangement can magnify the risk and vulnerability of a given country, especially when the debts of one party edges closer to default. Take the 326-year old Bank of England. For the first time in history, the BOE is unable to make its dividend payments to the Treasury. Perhaps the fact that the Bank of England is carrying more of the country’s economic burdens on its balance sheet than in any other point in its history, including both World Wars, has something to do with it. Nevertheless, this “minor” failure is a hairline crack in the levee--essentially, a prelude to a massive debt default. And considering that the BOE is not the only central bank straining under the weight of its own balance sheet, what we’re looking at is a potential series of systemic defaults that may trigger a global financial meltdown. Should such a disaster take place, most central banks have an option that may be something of a saving grace: they can open their vaults and pull out their gold reserves. But individual citizens don’t necessarily share in this “redemption.” So, if a global financial meltdown does take place, how much physical gold and silver might you be storing in a private vault for your own sake and your family’s?
The Bank of England will fail to pay a dividend to the Treasury this year for the first time in living memory after struggling to break even, posing a risk to its independence.
Minutes of the February meeting of the Court of Directors revealed that “the Treasury was not expecting to receive a dividend this year” after the Bank’s loss-absorbing capital fell below a minimum threshold.
Funding arrangements, agreed by the former governor Mark Carney, and rising project costs meant that the Bank “would be only just breaking even”. Andrew Bailey, 62, the current governor, is working on a new funding mechanism to rebuild the institution’s finances.
The 326-year-old Bank has made a profit every year since independence in 1997, and for as long as...
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