National Gold Reserves: Who's Got Gold and Who Doesn't?

As a person that would be classified as a "gold bug", albeit, not one that wears a tinfoil hat, I am always interested to see how far nations have strayed from the original concept of a precious metals-backed currency.  Thanks to the World Gold Council, we can access up-to-date information on national gold reserves, which nations are increasing their reserves and which are falling further and further into the "fiat currency/paper money world".  In this posting, we'll look at several nations, their gold reserves in tonnes (one tonne of gold contains 32150 troy ounces) going back to the first quarter of 2000.

1.) United States: Since 2000, the United States' gold reserves have held more-or-less steady in a range from a low of 8133.5 tonnes (current level) to a high of 8149 tonnes.

2.) Canada: Since 2000, Canada's gold reserves have dropped from a high of 38.7 tonnes to their current level of zero tonnes:

3.) United Kingdom: Since 2000, the United Kingdom's gold reserves have dropped from a high of 562.9 tonnes to their current level of 310.3 tonnes where they have been stable since 2002:

4.) France: Since 2000, France's gold reserves have dropped from a high of 3024.7 tonnes to a low of 2535.4 tonnes, just off their current level of 2436 tonnes:

5.) Germany: Since 2000, Germany's gold reserves have remained in a fairly small range, between a high of 3468.6 tonnes to its current level of 3373.6 tonnes:

6.) Japan: Since 2000, Japan's gold reserves have remained at 765.2 tonnes:

7.) Australia: Between 2000 and 2014, Australia's gold reserves were steady at 79.9 tonnes, falling to their current level of 72.8 tonnes beginning in Q2 2015:

As you can see, most of the larger developed economies of the world (other than the United States and Germany) have divested of at least some of their gold reserves with Canada being a standout, having divested of all of its gold reserves.

Now, let's look at the gold reserves held by some of the world's largest developing economies:

8.) China: Since 2000, China's gold reserves have grown from 395 tonnes to their current level of 1842.6 tonnes:

9.) Russia:  Since 2000, Russia's gold reserves have grown from 343.4 tonnes to their current level of 1838.8 tonnes:

10.) India: Since 2000, India's gold reserves have grown from 357.8 tonnes to their current level of 558.1 tonnes with all of that growth taking place in 2009:

11.) Brazil: In 2000, Brazil began to divest its gold reserves which dropped from 118.9 tonnes in Q2 2000 to 34.8 tonnes in Q2 2001.  In 2012, Brazil added to its gold reserves, bringing its holdings to 67.3 tonnes:

As you can see, both China and Russia have added substantially to their gold reserves since 2000; in China's case, it now holds 4.7 times more gold than it did in 2000 and in Russia's case, it now holds 5.4 times more gold than it did in 2000.

Let's close with a look at the world's largest gold producers.  Here is a map from the World Gold Council showing the world's largest gold producing nations in 2016:

Obviously, China and Russia are buying at least some of their domestically produced gold whereas Australia, Canada and the United States have added none of their domestically produced gold to their gold reserves.  This is particularly shocking in the case of Canada where 162.1 tonnes of gold were produced in 2016 and yet, Canada has no gold reserves whatsoever.

Let's look at one last graphic showing the total net sales and net purchases of gold by central banks around the world to 2015:

According to the World Gold Council, in April 2018, the world's central banks held 33,827.8 tonnes of gold, approximately 18 percent of the total amount of gold ever mined.  Here is a table showing the top 50 gold holding nations:

Given that central bankers will be forced to use unconventional (and perhaps even more imaginative) monetary policies during the next recession, largely because interest rates are still very close to zero, it is interesting to see that at least some central bankers are hedging their bets when it comes to their abilities to shut down the next global economic contraction...and then, there's Canada.

Saudi Arabia: Ignoring Its Human Rights Issues

Updated October 2018

While the western media focuses on the changes that have taken place in Saudi Arabian society as control in the royal family morphs, a recent press release by Human Rights Watch shows us that "the more things change, the more they stay the same" in the world's largest oil producer.

Let's look at a bit of background on one of America's two best friends in the Middle East, a nation that was recently the beneficiary of a deal for $100 billion worth of U.S.-sourced military arms.  In January 2015, 79 year-old Prince Salman bin Adbul Aziz Al Saud acceded to the Saudi throne after the death of King Abdullah bin Abdul Aziz.  The new leader appointed his son, 29 year-old Muhammed bin Salman (MBS) as the country's Minister of Defense; one of his first acts as Minister was to start a war in Yemen in March 2015, a conflict that has ground on with little sign of resolution for three years, unless of course you call the starvation and deaths of thousands of Yemenis "a success".  In June 2017, after being appointed Crown Prince and heir to the Saudi throne by his father,  MBS spearheaded a regional move against Qatar, a nation that he accused of sponsoring terrorism and meddling in its neighbours' affairs.  

One of his most important actions took place in 2016 when Prince Muhammed bin Salman announced a plan to bring social and economic changes to the kingdom and end its addiction to oil.  Saudi Vision 2030 was introduced as follows:

The plan for Saudi Arabia's future includes three pillars:

While the Western media focussed on the privatization program, particularly the privatization of Saudi Aramco and the fact that Saudi Arabia is seeking to diversify its sources of revenue away from oil, there are underlying issues that show that the Saudi royal family is only willing to make changes that do not threaten their way of life, particularly through the nation's religious bedrock; Wahhabism:

The Saudi royal family is only too aware that when regime change takes place in the Middle East, it often results in painful and permanent changes to existing leadership.  While he may be proposing a move toward religious moderation, the nation is still firmly entrenched in a top-down ruling model backed by its Wahhabist faith.

While Muhammad bin Salman has been lauded by the Western media for his role in modest social changes in Saudi Arabia including ending the ban on women drivers starting in June 2018, it is pretty obvious to outsiders (those who also live outside of Washington, D.C.) that the nation has a significant human rights problem that gets little press time since it doesn't fit Washington's narrative about one of its key allies in the Middle East.  In an interesting interview on 60 Minutes, MBS stated the following when asked about human rights abuses in Saudi Arabia:

"Saudi Arabia believes in many of the principles of human rights. In fact, we believe in the notion of human rights, but ultimately Saudi standards are not the same as American standards. I don't want to say that we don't have shortcomings. We certainly do. But naturally, we are working to mend these shortcomings."

Now, let's go back to the beginning of this posting.  Human Rights Watch recently posted the following:

"Saudi Arabia has executed 48 people since the beginning of 2018, half of them for nonviolent drug crimes, Human Rights Watch said today. Many more people convicted of drug crimes remain on death row following convictions by Saudi Arabia’s notoriously unfair criminal justice system.

Saudi Arabia has carried out nearly 600 executions since the beginning of 2014, over 200 of them in drug cases. The vast majority of the remainder were for murder, but other offenses included rape, incest, terrorism, and “sorcery.”

In Saudi Arabia, death sentences for murder are usually based on the Islamic law principle qisas, or eye-for-an-eye retributive punishment, while judges hand down death sentences for drugs at their own discretion (the Islamic law principle ta’zir). Judges rely on a 1987 fatwa by the country’s Council of Senior Religious Scholars prescribing the death penalty for any “drug smuggler” who brings drugs into the country, as well as provisions of the 2005 Law on Combatting Narcotic Drugs and Psychotropic Substances, which prescribes the death penalty for drug smuggling. The law allows for mitigated sentences in limited circumstances.

International standards, including the Arab Charter on Human Rights, ratified by Saudi Arabia, require countries that retain the death penalty to use it only for the “most serious crimes,” and in exceptional circumstances. In 2012, the United Nations special rapporteur on extrajudicial, summary, or arbitrary executions stated that where used, the death penalty should be limited to cases in which a person is intentionally killed and not used to punish drug-related offenses." (my bold)

The Cornell Center on the Death Penalty Worldwide finds the following about Saudi Arabia and the methods it uses for execution and the types of crimes that can be punished on a permanent basis:

"Beheading: Sources indicate that public beheading is probably the common method of execution in Saudi Arabia. The condemned are sedated prior to execution.

Stoning: Public stoning can be used to execute individuals who have been convicted of acts such as adultery. The condemned are sedated prior to execution.

There are reports that at least one execution in January 2009 and two in 2008 may have taken place by shooting.  Over the past few years, reported executions have been almost exclusively by beheading, despite the prevalence of media discussion of the possibility of death by stoning. There are reports that Saudis have exposed the body (with head sewn back on) of the condemned to public indignity, including crucifixion, after execution for the crime of highway robbery resulting in death."

Saudi law allows for the death penalty in the following crimes:  aggravated murder, murder, killing without intent, terrorism-related offences resulting in death, terrorism-related offences not resulting in death, rape not resulting in death, robbery not resulting in death, arson not resulting in death, burglary not resulting in death, drug trafficking not resulting in death, drug trafficking resulting in death, drug possession, adultery, apostasy, consensual sexual relations between adults of the same sex, treason, espionage, recidivist consumption of intoxicants, sorcery and witchcraft.  

The death penalty is mandatory for cases of murder, aggravated murder, killing without intent, terrorism-related offences that result in death, terrorism-related offences not resulting in death, rape not resulting in death, drug trafficking resulting in death, adultery, consensual sexual relations between adults of the same sex and treason.

As you can see from this posting, despite the assurances of the Western media and Muhammad bin Salman, it looks like Saudi Arabia's relationship with the death penalty is unlikely to change any time soon given the close link between the nation's religious life and its legal system.  It is interesting to see that, despite Saudi Arabia's obvious abuse of the most basic of human rights, Washington is able to avert its eyes when it comes to the bad behaviour of its second-best friend in the Middle East at the same time that it criticizes other nations like Syria for human rights issues.

Improper Medical Payments

We all intuitively know that there is a significant amount of waste in government but one type of waste seems most egregious; improper government payments.  This is a direct payer to payee waste of tax dollars and the recent 2017 Annual Report from the U.S. Department of Health and Human Services shows the massive size of waste in the health care system, a system that all of us will need at one time or another.

Let's look at who the Department of Health and Human Services (HHS) is, in their own words:

"HHS is the U.S. government’s principal agency for protecting the health of all Americans, providing essential human services, and promoting economic and social well-being for individuals, families, and communities, including seniors and individuals with disabilities. HHS is responsible for more than a quarter of all federal outlays and administers more grant dollars than all other federal agencies combined. HHS’s Medicare program is the nation’s largest health insurer, handling more than one billion claims per year. Medicare and Medicaid together provide health care insurance for 1 in 3 Americans."

Note that HHS is responsible for more than 25 percent of all federal government outlays and administers more grant dollars than all other federal agencies combined.  Here is a graphic showing HHS budget for fiscal 2016 to 2018 and how those budget dollars are spent:

Being a bureaucracy, HHS and its massive budget are subject to payment errors, errors that cost all taxpayers.  Let's look at the HHS programs that are most susceptible to payment errors.  In the 2017 version of the Payment Integrity Report, we find that the following HHS programs are susceptible to improper payments:

1. Medicare FFS – A federal health insurance program for people age 65 or older, people younger than age 65 with certain disabilities, and people of all ages with End-Stage Renal Disease (ESRD).

2. Medicare Part C – A federal health insurance program that allows beneficiaries to receive their Medicare benefits through a private health plan.

3. Medicare Part D – A federal prescription drug benefit program for Medicare beneficiaries.

4. Medicaid – A joint federal/state program, administered by the states, that provides health insurance to qualifying low-income individuals.

5. CHIP – A joint federal/state program, administered by the states, that provides health insurance for qualifying children.

6. Advanced Premium Tax Credit (APTC) – A federal insurance affordability program, administered by HHS and/or the states, to support enrollees in purchasing Qualified Health Plan (QHP) coverage from state and federal insurance exchanges.

7. Cost-sharing Reduction (CSR) – A federal insurance affordability program, administered by HHS and/or the states, operated on behalf of QHP enrollees to reduce the cost of deductibles, copayments, an coinsurance.

8. TANF – A joint federal/state program, administered by the states, that provides time-limited cash assistance as well as job preparation, work support, and other services to needy families with children to promote work, responsibility, and self-sufficiency.

9. Foster Care – A joint federal/state program, administered by the states, for children who need placement outside their homes in a foster family home or a child care facility.

10. CCDF – A joint federal/state program, administered by the states, that provides child care financial assistance to low-income working families.

11. Superstorm Sandy Head Start – A federal program that provides comprehensive developmental services for America’s low-income children from birth to 5 years of age and their families. Head Start received additional appropriations through the Disaster Relief Act to address the construction and other needs that arose from Superstorm Sandy.

12. Superstorm Sandy SSBG – A joint federal/state program, administered by the states, that supports programs designed to reduce dependency and promote self-sufficiency; to protect children, adults, and people with disabilities from neglect, abuse, and exploitation; and to help individuals who are unable to take care of themselves to stay in their homes or to find the best institutional arrangement. SSBG received additional appropriations through the Disaster Relief Act to address services for individuals and construction costs for facilities that arose from Superstorm Sandy.

Now, that we have that background, let's look at a table showing the percentage of improper payments for the past five fiscal years for Medicare, Medicaid and Children's Health Insurance Program (CHIP) p 18:

As you can see, the percentage of improper payments for Medicare has dropped over the past three fiscal years, however, the improper payment rate for Medicaid and CHIP are still significantly higher than they were five and three fiscal years ago respectively, despite government efforts to reign in its mistakes.  In fact, the improper payment rate for Medicaid is nearly double what it was in fiscal 2013, rising from 5.8 percent to 10.1 percent.  It is also interesting to note that for all three programs, the target rate for fiscal 2017 is significantly higher than it was in the past, particularly for Medicaid where it is up from 6.4 percent in fiscal 2013 to 9.57 percent in fiscal 2017.  I guess if you set the error rate target high enough, it is easier to meet or exceed!

Now, to the meat of the matter.  Here is a table showing the estimated and improper payments for the aforementioned twelve programs for fiscal 2016 to 2018 (in millions of dollars):

Here is a table showing the root causes for improper payments and the size of the over- or underpayments for each (in millions of dollars):

The overpayments for Medicare and Medicaid alone for fiscal 2018 hit $81.391 billion.  This payment error is larger than the entire 2018 budget requests for the the Department of Education ($59.0 billion), the Department of Energy ($28.0 billion), Department of the Interior ($17.988 billion) and the Department of Homeland Security ($70.692 billion).

In case you were curious, the government has legislation in place, ordering federal agencies to identify and act on activities that may be susceptible to errors as shown in this quote from the Report of the Independent Auditors for HHS:

"The Improper Payments Information Act of 2002 (IPIA) (P.L. 107-300) as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA) (P.L. 111-204) and the Improper Payments Elimination and Recovery Improvement Act of 2012 (P.L. 112-248) (hereinafter, the “Acts”) require federal agencies to identify the program and activities that may be susceptible to significant improper payments and estimate the amount of the improper payments."

Here's what the auditors have to say about Health and Human Services performance when it comes to improper payments:

"While the Department continues to make progress, HHS currently is not in full compliance with the requirements of the Acts. For example, HHS has reported improper payment error rates for each of its high-risk programs, or components of such programs, except for the Temporary Assistance for Needy Families (TANF)." (my bold)

From the data in this posting, I am hoping that you can see that Washington should be far more concerned about government waste in the health care system as opposed to how it deals with getting rid of Obamacare.  With an aging population, my suspicion is that the level of improper payments to both Medicare and Medicaid will increase as the Department of Health and Human Services Department bureaucracy is flooded with even more claims than it is currently.