Dear Monetary Policy Observer,
The Wall Street Journal just reported that the European Parliament's Committee on Economic and Monetary Affairs voted unanimously on Tuesday to allow gold to be accepted as collateral by European clearing houses. The passage sets the stage for votes by the European Parliament and the Council of the European Union this July and could accelerate an already ongoing shift toward gold, as evidenced by the decisions of the Intercontinental Exchange and others over the past year, to allow gold to be used in financial exchanges as a supplement or even alternative to currency. The changes have been seen by many as a response to the weakening of reserve currencies due to inflation and the effects their instability has had on international trade and pricing, coupled with deterioration in value of other traditional collateral, such as government bonds, which have suffered in the unfolding of Europe’s sovereign debt crises.
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