In these days there is a debate in Italy on the possible selling of gold reserves, to repay some of the public debt. In my opinion, there is quite a misunderstanding that often leads to sell off of public properties, that is partially caused by the balance sheet used by most Italian public bodies.
In fact, public bodies have a cash-flow based balance sheet, that nearly ignores assets. This is not a merely administrative issue, since it influences the way-of-thinking and objective of public officers and public managers.
Let’s look at the “privatization” issue. In the “private world” a person, if sells his car at 5.000 Euros, does not think only “I collected 5.000 Euros“, but also thinks “I do not have a car anymore“. This last consideration can get the deal a bad deal, even if the price collected was fair. This is a simple reasoning, that public bodies often don’t (or can’t) do.
Besides pushing to “superficial” privatization, a cash-flow balance restrain investments, for the simple reason that investment aren’t clearly shown off in the balance, and moreover because investment are difficult to conciliate with cash flow limits imposed by law.
Getting back to this post topic, gold reserve selling, in a private company the selling of gold means, in the balance sheet, only a switch in assets elements. That means that you can get your assets more liquid, not that you become anyhow richer.
Obviously, an asset evaluation is quite difficult for a public body, both for the extent and the difficulty of evaluation of owned assets. But if these difficulties were insurmountable a hundred years ago, today, in the XXI century, there are technologies and techniques to manage more effectively public property.
Italian translation of this post: Sulla (s)vendita delle riserve in oro, e non solo
Banche e Risparmio [http://www.banknoise.com]