Friday, March 24, 2006
The Vietnamese central bank has been creating too many Dong out of thin air so that the Dong has been losing its value rather fast. This creates a problem in Vietnam for Vietnamese who need to buy gold to pay their mortgage payments. Just another example of government central banks screwing up an economy and stealing stored value from people who have in their possession government fiat tokens. No wonder so many important transactions in Vietnam are done using gold as smart Vietnamese know not to trust their central bank and its Dong.
"Gold price rise pressures house loans
Skyrocketing global gold prices have boosted prices in Vietnam, causing concern for those who took out gold loans to buy houses as their debt rises.
Sharp climbs in the price of gold, which is widely used in housing transactions in Vietnam, threaten thousands of households as they face losing homes if they cannot handle the increased debt.
The price of pure gold currently stand at VND10.6 million (US$666) per tael (1.25 oz), while that in 1999 was only VND4.9 million.
Mrs. Anh from District 1 who bought an apartment on gold loan in May 2002 told Thanh Nien she had seen her debt in Vietnamese dong almost double.
She borrowed 27.5 taels of gold in May 2002, priced at VND5.9 million per tael, or VND162 million in total.
The loan was to be paid in installments over 10 years to buy an apartment in a building on Cong Quynh Street.
After four years of paying down the debt, her loan later was now VND288 million, an increase of VND126 million due to surging gold prices.
The worst case scenario is having to leave her house, after failing to pay the housing company contract after 10 years due to rising gold prices.
In another case, Mr. Luy from the Hiep Binh Chanh building, the Thu Duc District, said he bought the apartment worth VND122 million on a rent to own contract in 1999.
In the first months he had to pay VND400,000 per month to the bank but the sum later climbed over VND1 million, fueled by rising gold prices.
No solution yet
Real estate companies said thousands of households belonging to site clearance for projects and purchasing re-settle houses in the city fall into a situation like Anh’s.
The city’s District 1 housing management company has managed nine apartment buildings with the majority of house owners paying in installments.
Failure to pay house loans is common situation among households located in the building, according to Luy. Many had to sell their houses to pay off the debt.
Nguyen Quang Van, deputy director of the District 1 housing management company, said the company has submitted to the authorized offices solution on changing loans in gold into loans in dong, helping households escape the financial burden.
However the solution has yet to be approved.
The domestic market saw gold price hikes mirroring global prices towards the end of 2005 as demand outstripped supply – pushing the metal to a 24-year high of $541 an ounce Dec. 12.
Vietnamese gold rates have scaled to fresh new highs several times recently, peaking at VND10.9-10.91 million ($688) early this month.
Experts predict gold could climb as high as $600 per ounce this year, driven by fund hoarding, a weakening US dollar, and geopolitical tensions.
Reported by Thanh Xuan – Translated by Ha Viet"
"At any given moment there is an orthodoxy, a body of ideas which it is assumed all right-thinking people will accept without question. It is not exactly forbidden to state this or that or the other, but it is 'not done'... Anyone who challenges the prevailing orthodoxy finds himself silenced with surprising effectiveness." -- George Orwell