adrian douglas refutes adam hamilton's assertion that central banks are profit-maximizing investors:

Central banks run the world's biggest Ponzi scheme, issuing bits of paper that people will accept in return for real goods and services. If you enjoyed this privilege to the tune of a few trillion dollars that finance an empire, expending a few tonnes of gold to keep it going would be a no-brainer.

Central banks do not sell gold to get a few billion of their own fiat money in return, money they probably would throw on top of the stack of half a trillion freshly printed notes that rolled off their presses just that morning. No, central banks sell gold to make it appear that the paper stuff is more desirable than its true supply and demand fundamentals would allow. And when the game looks like it's coming to an end, the central banks can always buy back the gold.

It is not a problem to buy back the gold at even $50,000 per ounce when any amount of paper currency can be printed.

What is a big problem is if the currency loses its value so fast that no one will sell the central banks any gold for any amount of paper. (Try buying gold with Zimbabwean dollars.)

If that happens, the central banks lose and the people win, because when the music stops the people have the gold and the central banks are stuck with the depreciating paper.

Central banks have to use their gold to support their Ponzi paper creation, but they have to control the destruction of their currency's purchasing power so they can still buy their gold back with their own paper before the game ends and they have to start a new one.

http://www.gata.org/node/7697