Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York(norberthaering.de)
norberthaering.de
Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York
http://norberthaering.de/en/home/32-english/news/787-bundesbank-gold
237 comments
Gold is no longer tied to power. Real estate now defines who is to be king. Look to the wealth funds of the middle east. They dont trade oil for gold these days. They buy land, the real international currency. The man with the most diversified land across many countries is king.
In the past, diversified land holdings across many countries haven't been a great strategy, because they're too difficult for the foreign owner to hold on to politically and military. Land is expensive to protect.
>> Land is expensive to protect.
So you use your wealth to ensure that local authorities protect your interests. You setup people in power, vassal kings, to protect land interests above all others. Who is in charge now? Who are their friends? Do they own property scattered all over the globe? Do any of them care about a box of gold?
So you use your wealth to ensure that local authorities protect your interests. You setup people in power, vassal kings, to protect land interests above all others. Who is in charge now? Who are their friends? Do they own property scattered all over the globe? Do any of them care about a box of gold?
Again, as the previous poster suggested, in the past it didn't work so well. The local authorities might want to own your land too, and you will clearly not pay more for its protection than it is worth. There's no need to theorize when the history provides so many examples of wealthy people losing their vast land holdings as a result of change in the political climate.
So... McDonalds and the Pope?
I wouldn't agree with what you say completely. I wouldn't say gold is replaced by real estate. That doesn't mean that real estate can't be a source of power, though.
I wouldn't agree with what you say completely. I wouldn't say gold is replaced by real estate. That doesn't mean that real estate can't be a source of power, though.
Land may be valuable at the moment, but that will likely change in the future when fresh, clean water will be more scarce and climate changes will render parts of Earth uninhabitable.
I'd recommend you reading this interview with M. Burry (guy who foresaw the real-estate crises in '08): http://nymag.com/daily/intelligencer/2015/12/big-short-geniu...
I'd recommend you reading this interview with M. Burry (guy who foresaw the real-estate crises in '08): http://nymag.com/daily/intelligencer/2015/12/big-short-geniu...
That's still a real estate issue; you're just saying that the three important factors in real estate are "location, location, and location" and that those factors aren't stable over time. Tell that to the Carthaginians.
>> fresh, clean water will be more scarce and climate changes will render parts of Earth uninhabitable.
If one wants to get all conspiracy-minded: Vancouver, Toronto ... not the warmest of cities. Neither are they in red zones for rising sea levels. And, being in Canada, have more fresh water per person than most anywhere on the planet.
If one wants to get all conspiracy-minded: Vancouver, Toronto ... not the warmest of cities. Neither are they in red zones for rising sea levels. And, being in Canada, have more fresh water per person than most anywhere on the planet.
As long as you can protect it when challenged.
Gold sort of works for sovereigns. It's crap for individuals. Any situation where you need to rely on physical gold is a situation where someone else will take it from you by force.
Yes, the value is much smaller since your power to keep it is smaller. But the amount will also be smaller. And I would say there are still quite a few situations where having something of trade value is better than having nothing.
> there are still quite a few situations where having something of trade value is better than having nothing
I struggle to think of ones where physically-held gold is better than cash. It only happens when your government fails. In that case (e.g. a Communist revolution or civil war) it's easier to kill you and take everything than negotiate. Where it might have had value, e.g. an American holding pounds sterling during the American Revolution, the old money held value. Selling gold to paranoid individuals is so profitable for a reason.
(The only time it may be useful is if you can tell someone about to harm you that you can pay them with something offsite. At that point, however, wired dollars are an easier sell than waiting for a gold shipment that may or may not be accompanied by Marines.)
I struggle to think of ones where physically-held gold is better than cash. It only happens when your government fails. In that case (e.g. a Communist revolution or civil war) it's easier to kill you and take everything than negotiate. Where it might have had value, e.g. an American holding pounds sterling during the American Revolution, the old money held value. Selling gold to paranoid individuals is so profitable for a reason.
(The only time it may be useful is if you can tell someone about to harm you that you can pay them with something offsite. At that point, however, wired dollars are an easier sell than waiting for a gold shipment that may or may not be accompanied by Marines.)
It's not necessarily negotiating, it's likely fleeing your home country to some other place and having an asset you can easily turn into the local currency wherever you wind up. And at $1,200/oz you can carry/conceal a sizable amount on the "personal money" scale.
Qaddafi paid his mercenaries in gold near the end of his reign.
If we're in the kind of crisis where all fiat money is useless, gold will be useless too. The only kind of thing that will have value are things that help you survive. A crate full of gauze pads and bandaids would be better than a whole stack of gold bullion in that situation.
There is quite a continuum between fiat currency collapsing and the sort of zombie apocalypse you describe.
Fiat currency has become worthless many times in many countries without a total breakdown of civilization to the extent that gold no longer has any value (e.g., Argentina, Yugoslavia, Brazil, Weimar Germany, post-revolution France, ...)
Fiat currency has become worthless many times in many countries without a total breakdown of civilization to the extent that gold no longer has any value (e.g., Argentina, Yugoslavia, Brazil, Weimar Germany, post-revolution France, ...)
I always imagined that if you were stockpiling large amounts of gold in your home it was more of a survivalist thing than a risk management thing.
You've never been through a country scale crisis.
In a country scale crisis people would be selling all their valuables for fire sale prices to pay for essentials, including gold. A fiat reserve currency, like the Swiss Franc or the Pound would be easier to use, less likely to be stolen and more valuable then gold shavings.
Gold isn't going to save you from a zombie apocalypse, nor can you eat it.
It will however transport your wealth from one side of a currency crisis to the other while retaining value - as opposed to plastic notes with arbitrary numbers of zeros printed on them.
There is plenty of physical gold in Germany's vaults: https://www.google.de/amp/www.wsj.com/amp/articles/germany-p...
The same principal applies to states, and that's why they shipped the gold to USA to begin with...to save it from the Russians.
Gold is for when that stuff hits the fan: no one will take your paper money or if they do, you'll need 50lbs of trillion billion dollar bills to buy a loaf of bread. By noon the price will double.
If you're net liquid worth is well into millions, why not have a few hundred gold coins laying around? You might lose money (compared to the stock market returns) but so what. Peace of mind. Never know. All eggs in one basket and all.
Gold is for when that stuff hits the fan: no one will take your paper money or if they do, you'll need 50lbs of trillion billion dollar bills to buy a loaf of bread. By noon the price will double.
If you're net liquid worth is well into millions, why not have a few hundred gold coins laying around? You might lose money (compared to the stock market returns) but so what. Peace of mind. Never know. All eggs in one basket and all.
What I mean is that it doesn't really matter if the Russians or the Americans have it, at least from a German perspective. Whoever has it has quite some power over Germany. That we might consider US or RU the bad guys is more based on propaganda than on actual facts. Both can be quite bad as well as helpful allys. And both probably have smart enough leadership to use this kind of chip for bargain rather than total exploitation. So it's not like the Russian would have stolen it, it's more like that the cold war might have had a different winner and Germany would be a semi-independent partner as it is now, just to the Russians rather than the Americans.
Gold coins so people can steal them from you in this doomsday scenario? Gold is about as useful as monopoly money when facing a gang of people that will just kill you and take whatever they can.
Still, better to have them than not. Of course you're not going to walk around with 3 kilo gold chains around or tell people how much gold you got.
With gold, you will be the gang.
Only if you can persuade the gang they can't get more gold from killing you than working for you.
To build the gang you must recruit where `new-recruit-power < total-gang-power`. Since to start you are the only gang member, you can only recruit one dude who is 0.75 your strength. Now the gang is 1.75 strength, so you can go after another dude who's really strong, say 1.25. Now your gang has a strength of 3. Eventually you will be able to swallow up whole other gangs.
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Eventually, hyperinflation causes money to be measured in a logarithmic scale... And it's fun to imagine the value if a dollar falling below the plank length.
It seems the author is smart enough to know all this, so seriously: What's he attempting to achieve here?
Telling the truth. If there's a doomsday scenario USA might refuse to hand you the gold. He's saying that gold not in your hand is not really gold, because when you might need it everyone else will and they have it.
Telling the truth. If there's a doomsday scenario USA might refuse to hand you the gold. He's saying that gold not in your hand is not really gold, because when you might need it everyone else will and they have it.
My read on it was that the Author is saying that maybe there is more truth to the conspiracy theories that America has looted everyone's gold out of the Fed for its own purposes than you might think.
His reasoning appears to be, "If the world is, as the Fed presents it, then we should be able get our gold back. But we can't." and then notes agencies that the auditing agency that was aggressively pushing even an accounting of the available gold has gone silent implying they have been made complicit somehow in the conspiracy.
Here on the outside we can't really know what is going on of course. And frankly if it got out that 1200 tons of gold was on the move I could imagine that would be a tasty target even for nation-state level thieves. But I also found it interesting when the Economist and others reported that the Fed was refusing to let auditors verify their gold deposits. That is a question that really needs an answer and we haven't gotten it yet.
His reasoning appears to be, "If the world is, as the Fed presents it, then we should be able get our gold back. But we can't." and then notes agencies that the auditing agency that was aggressively pushing even an accounting of the available gold has gone silent implying they have been made complicit somehow in the conspiracy.
Here on the outside we can't really know what is going on of course. And frankly if it got out that 1200 tons of gold was on the move I could imagine that would be a tasty target even for nation-state level thieves. But I also found it interesting when the Economist and others reported that the Fed was refusing to let auditors verify their gold deposits. That is a question that really needs an answer and we haven't gotten it yet.
Even if the Fed "lost" some of the gold (which would be a hilarious story), does it really matter? There has to be some liability clause in whatever agreement put the gold in the Fed's hands to begin with- if they lose track of Germany's property (or claim to have, or whatever), they're obligated to pay Germany back for it. Revealing that would be a gigantic embarrassment, sure, but primarily only concerning the American financial system's competence in running vaults. The U.S. budget could handle the payout in dollars, and Germany could take their payment and use it to buy another pile of gold if they like. Contrary to the ideas of the article author, ownership isn't a physical process, so all the speculation as to where some particular collection of element 79 resides should be irrelevant to the economic situation.
1200 tons of gold is worth around 44 Billion, a trivial amount of money as far the US government is worth. So the idea that it would be stolen by the government is ludicrous.
You can't just try to buy 1200 tons of gold and expect to get the current "exchange rate" for all of it. You will be paying massively more as you buy out the cheapest offers.
NASDAQ claims a gold market volume of barely 5 tons at this time. Good luck buying 1200 tons at a decent price.
Edit: Whoops. I meant to reply to your parent.
NASDAQ claims a gold market volume of barely 5 tons at this time. Good luck buying 1200 tons at a decent price.
Edit: Whoops. I meant to reply to your parent.
$44 billion current US dollars worth of gold can back 10 to 100 times that amount of "money" (depending on how far you stretch the definition of money) in a fractional reserve banking system. It's no trivial amount.
That's already built into our understanding of what "$44b" is. If not, then all values should be inflated by 10x, which would keep the $44b at the same ratio of the total pie - which is to say nothing.
No, in fact it is not. To help you understand why, if the US were to switch back to a gold-backed currency and somehow do it relatively seamlessly, it would need to find enough gold to back a money supply of about $7 trillion dollars (or $20+ trillion, depending...). All the gold in the world is currently "worth" less than $7 trillion dollars, and the US would be lucky to land 15% of that, or about 25,000 tonnes. In this scenario, that 1,200 tonnes would be worth $336 billion, and probably a lot more because "seamlessly" is a huge assumption.
That's completely irrelevant. The issue at hand is whether the US is able to pony up 1200 tons of gold, not whether they can back their whole currency base with gold at current exchange rate.
It's relevant to the hypothetical state stealing enormous quantities of gold from other states. They wouldn't do it to give all the citizens fancy necklaces and dental implants. The reason would be to shore up their currency. The economics of gold changes under that hypothetical scenario, and it's the current market price of gold that is completely irrelevant.
Replace "gold" in your statement by any other physical asset (silver, shells, rubies, ...) and you realize that this doesn't make much sense. If the world were to switch to a water-based currency and all other uses for gold would disappear 1200 tons of gold would be worthless
Of course, but it's highly nontrivial for the individual humans who are responsible for it.
I have been to the NY Federal Reserve Building and seen much of the gold - from the outside of the open door of the vault. This is the highlight of the public tour of the FRB in lower Manhattan. There are many different cages inside the vault - some containing just a handful of bars, and some with gold stacked near to the roof. But we are not told which cage corresponds to which country - that information is secret.
All the bars look identical, to me anyway - there are no stacks of coins or goblets etc. that I could see. (Not all the cages are visible from the vault entrance).
The Fed states in the tour that sovereign nations can keep their gold in the vault, virtually free of charge. And take it back at any time. This is basically a service to the world that the US has provided since the second world war, when much of Europe wanted - for obvious reasons - to move their gold to a safe haven.
As the Federal Reserve is a very secure place, and great value for money, I think most nations have been fine to use that - much cheaper and easier than building a facility that is equally secure.
So personally I'm not sure about the conspiracy theories saying that the Fed refuses to release the gold; to me that is easy for any nation to test - just ask for it, it could be done publicly except that you signal to any thief the date/time of when to attack :-)
All the bars look identical, to me anyway - there are no stacks of coins or goblets etc. that I could see. (Not all the cages are visible from the vault entrance).
The Fed states in the tour that sovereign nations can keep their gold in the vault, virtually free of charge. And take it back at any time. This is basically a service to the world that the US has provided since the second world war, when much of Europe wanted - for obvious reasons - to move their gold to a safe haven.
As the Federal Reserve is a very secure place, and great value for money, I think most nations have been fine to use that - much cheaper and easier than building a facility that is equally secure.
So personally I'm not sure about the conspiracy theories saying that the Fed refuses to release the gold; to me that is easy for any nation to test - just ask for it, it could be done publicly except that you signal to any thief the date/time of when to attack :-)
> the Federal Reserve is a very secure place
Until Simon Gruber shows up
Until Simon Gruber shows up
Bloomberg has a very interesting article on this topic also:
https://www.bloomberg.com/news/features/2015-02-05/germany-s...
Reading in between the lines, it seems as if a good chunk of gold has gone missing and there is an attempt by both sides to save face.
Reading in between the lines, it seems as if a good chunk of gold has gone missing and there is an attempt by both sides to save face.
This puts me in mind of the rai stones of Yap, and particularly of one that was lost at sea, but which continued to be used in transactions because of a general agreement that it still existed and so its ownership could be recognized.
I have lost track of the clearest version of this story that I have seen, but it is mentioned in the 'Transfers by Clearing' section here: http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...
I have lost track of the clearest version of this story that I have seen, but it is mentioned in the 'Transfers by Clearing' section here: http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...
One funny thought down these lines is that after 50+ years the gold in the vaults has been cold welded together. Gold is soft, malleable and heavy and after years maybe it's effectively a solid chunk of metal.
Would explain the logistic challenges and the need to re-melt the bars if they had robbed chiseled apart.
Would explain the logistic challenges and the need to re-melt the bars if they had robbed chiseled apart.
I read about this in Felix Martin's
Money: The Unauthorized Biography, which was quite good (in my uninformed opinion).
I'll just leave this here: http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-...
As fascinating as that is, what I find to be even more interesting is that the total wealth in that insane concrete-bubble structure built to withstand atomic attack... is just over a billion USD. That's nothing in the scale of global wealth. And that's the largest gold vault on Earth.
Pretty disappointing if you ask me. The entire gold vault (one million ounces of gold) is worth about a third of one percent of JPMorgan Chase's entire market capitalization.
Pretty disappointing if you ask me. The entire gold vault (one million ounces of gold) is worth about a third of one percent of JPMorgan Chase's entire market capitalization.
Well, that's a telling finding. It's just "telling" different conclusions about "global wealth", "JPMorgan's market capitalization", and gold's "fair" value to different minds ;)
The only thing that's safe to assess about that bullion is that for all human intents and purposes, it'll outlast infinite numbers of generations, and the other stuff --- won't. That alone tells of the impossibility and futility of putting any sort of currency number on it, in fact, any figure will do --- $100 or $100k, whatever the world perceives will be equally valid and equally workable. Doubly so since "you can't eat it", it's in the final consequence not broadly "needed at any price" for industry, and the actual supply for its prime purpose (preserve some proxy of wealth through the generations) need not be increased, and every physical ounce above or below ground is in extremis already owned by someone.
The only thing that's safe to assess about that bullion is that for all human intents and purposes, it'll outlast infinite numbers of generations, and the other stuff --- won't. That alone tells of the impossibility and futility of putting any sort of currency number on it, in fact, any figure will do --- $100 or $100k, whatever the world perceives will be equally valid and equally workable. Doubly so since "you can't eat it", it's in the final consequence not broadly "needed at any price" for industry, and the actual supply for its prime purpose (preserve some proxy of wealth through the generations) need not be increased, and every physical ounce above or below ground is in extremis already owned by someone.
Yes, it's about the symbolism. The value of gold does not track the total value of other assets, making it unable to be use as a currency substitute because you would need too much of it to do anything meaningful.
Revealing a "problem" with US-held gold would be a blow to US currency dominance. The value of such a shift in global power is vastly more than the total value of gold on the planet, which is about 8-9 trillion US$.
In other words, gold is nowhere near able to become a currency substitute, but it is potentially a bomb that can damage the dollar.
Revealing a "problem" with US-held gold would be a blow to US currency dominance. The value of such a shift in global power is vastly more than the total value of gold on the planet, which is about 8-9 trillion US$.
In other words, gold is nowhere near able to become a currency substitute, but it is potentially a bomb that can damage the dollar.
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Eventually there will be asteroid mining, and like we already have a sense of 1 trillion dollars worth of palladium in an asteroid, there will be 1 trillion dollars worth of new gold - which did cost a lot to get. Google claims the entire mined gold in the world's history is 8 trillion, but tons (ha) have been lost over time. Anyway, you get 12.5% more in that first shipment. Maybe it will be a 100 years from now. And then we find another and so forth. Will that cause a panic? Will anyone care?
If we find vast amounts of gold in asteroid, the price of gold will fall to just above the marginal cost of recovering that gold as long as it's lower than its current price -- this is some very basic economics.
A good example to consider is aluminium. In early 1880s, the price of aluminium was around $10000 of today's dollars for kilogram -- actually the price of ounce made more sense, as you very rarely saw pieces of aluminium so large to weigh a kilogram back then. For example, the capstone for Washington Monument, weighing 9 kilograms, was the largest single piece of aluminium ever cast at that time.
Then, in 1888, the modern process of aluminium was invented, and soon its price rapidly fell by orders of magnitude.
A good example to consider is aluminium. In early 1880s, the price of aluminium was around $10000 of today's dollars for kilogram -- actually the price of ounce made more sense, as you very rarely saw pieces of aluminium so large to weigh a kilogram back then. For example, the capstone for Washington Monument, weighing 9 kilograms, was the largest single piece of aluminium ever cast at that time.
Then, in 1888, the modern process of aluminium was invented, and soon its price rapidly fell by orders of magnitude.
I agree with you. My point was that gold and all other elements and minerals on earth should likely go down in price tremendously in the next few 100 years, as we mine asteroids.
The same thing could be said about a chunk of any element. "It's worth whatever you imagine because it will last a long time."
The largest _private_ gold vault. The Federal Reserve Bank of New York is meant to be the largest (there may be more in Swiss banks) holding about 7000 metric tons (apparently).
Which is around $280 billion, or about 1.5% of us GDP.
If the world decides to leave fiat currencies and return to gold, the value of gold will be much (10x?, 100x?) higher.
Exactly this.
What is it about gold that triggers wild conspiracy theories from seemingly rational people?
What is it about gold that triggers wild conspiracy theories from seemingly rational people?
It certainly underscores the fact that gold is now a historical anachronism, economically speaking. Maybe what is going on here is just a step in the slow termination of that relationship, that has to be kept secret to stop it unraveling in a rush?
I've always wondered: what would happen when most nations central bank's gold holding drop below say 20%? or 10%?
Is there a cliff where gold as a store of value just starts crashing? Or would the fantasy continue for the non-institutional holders for a while?
Is there a cliff where gold as a store of value just starts crashing? Or would the fantasy continue for the non-institutional holders for a while?
20% of what?
Most central banks have foreign reserves ( https://en.wikipedia.org/wiki/List_of_countries_by_foreign-e... ) and and central banks' gold reserves are typically less than 1% of their reserves. So gold backing any currency is just a small part of all gold in existence (about 170 000 000 kg ~ 7T USD)
For "all currency", the money supply is a lot (converted to USD): US M0 is 10T, UK 2.85T USD, Eurozone ~8T, Australia ~1.8T. And China, Japan, India and so on also has big monetary bases.
Most central banks have foreign reserves ( https://en.wikipedia.org/wiki/List_of_countries_by_foreign-e... ) and and central banks' gold reserves are typically less than 1% of their reserves. So gold backing any currency is just a small part of all gold in existence (about 170 000 000 kg ~ 7T USD)
For "all currency", the money supply is a lot (converted to USD): US M0 is 10T, UK 2.85T USD, Eurozone ~8T, Australia ~1.8T. And China, Japan, India and so on also has big monetary bases.
You miss the point.
You CONVERTING gold into USD on a current value. But rest assured if one million ounces are rendered untouchable for period of 100 years due to radioactivity, you can bet your bottom dollar the price of gold (remaining stock) will sky rocket.
You CONVERTING gold into USD on a current value. But rest assured if one million ounces are rendered untouchable for period of 100 years due to radioactivity, you can bet your bottom dollar the price of gold (remaining stock) will sky rocket.
Uhm, there will be other problems if someone nukes nyc.
Off topic, but what is up with comments on zerohedge.com? Not this article necessarily, but so many of the articles on that site it seems the comments are just ridiculous alt-right bot armies arguing back and forth, peppered with links to obviously newly-invented sites touting crackpot theories.
Despite (or because of?) the fact that quite a surprisingly high number of my friends read zero hedge, I've always referred to it as a "gold standard flat-earther conspiracy site."
I will say that, like a stopped clock, it generates something meaningful once in a while. But so does a Markov model.
I will say that, like a stopped clock, it generates something meaningful once in a while. But so does a Markov model.
it was slightly more useful in 2010 and before.
Ah that reminds me so much of Game of Thrones were this one dude builds all his power and businesses based on an empty vault and a promise of what is inside.
Wasn't that movie only? I read book longer before but I never remembered the empty vault thing...
In the TV show there is Xaro Xhoan Daxos http://gameofthrones.wikia.com/wiki/Xaro_Xhoan_Daxos
Xaro was in the books, but his plot was totally different. At no point did he open a giant empty vault.
I seem to have forgotten that. Thanks for clearing it up!
There have been some recent analogs in real life. Mostly in the tech. industry, but also in luxury real estate.
I read that as theranos on the tech side. What real estate scam are you referencing?
> Reading in between the lines, it seems as if a good chunk of gold has gone missing and there is an attempt by both sides to save face.
Or more likely: you do not want to cause any confusion in the markets. Ultimately the state of that gold has very little impact on the world as it moves. However any speculation about it, potentially can have impact (and most likely not positive one). When people in Europe started to question the state of that Gold Germany and other countries had to act in some form.
So for as long as the general population does not further dig into the issue (or we have some sort of cataclysmic event) the gold does not matter all that much.
Or more likely: you do not want to cause any confusion in the markets. Ultimately the state of that gold has very little impact on the world as it moves. However any speculation about it, potentially can have impact (and most likely not positive one). When people in Europe started to question the state of that Gold Germany and other countries had to act in some form.
So for as long as the general population does not further dig into the issue (or we have some sort of cataclysmic event) the gold does not matter all that much.
"The gold in the U.S. was earned by West Germany through trade surpluses in the 1950s and 1960s and was never moved out of the United States due to fear of invasion by the Soviet Union."
https://en.wikipedia.org/wiki/Gold_repatriation
So for a while the U.S. was saying to Germany 'thanks for those cars, machine tool and other goodies, have some gold, we will keep it in the vault safe until you need it...' and, after a while, got a bit lax about moving the piles of gold from one vault to the next.
So it is not as if this gold got there due to the Germans prudently shipping it across the Atlantic for safe keeping, it is money that should have been paid in gold for goods exported by Germany to the USA. I think they were promised to be paid and no physical gold was ever moved or paid.
https://en.wikipedia.org/wiki/Gold_repatriation
So for a while the U.S. was saying to Germany 'thanks for those cars, machine tool and other goodies, have some gold, we will keep it in the vault safe until you need it...' and, after a while, got a bit lax about moving the piles of gold from one vault to the next.
So it is not as if this gold got there due to the Germans prudently shipping it across the Atlantic for safe keeping, it is money that should have been paid in gold for goods exported by Germany to the USA. I think they were promised to be paid and no physical gold was ever moved or paid.
The US would be more than happy to pay back the Germans through exports of machine tools and cars and other goodies. I believe that German structural trade surpluses are an issue both inside and outside the Eurozone.
Also after WWII the US had accumulated essentially all the worlds gold reserves leaving their currencies without backing. The alternative to the Bretton Woods agreement was the US gifting gold reserves.
Also after WWII the US had accumulated essentially all the worlds gold reserves leaving their currencies without backing. The alternative to the Bretton Woods agreement was the US gifting gold reserves.
> The US had paid for its imports with pieces of paper on the promise, that these pieces of paper were as good as gold and would be exchanged for gold at a fixed rate upon request. In 1971 Nixon just said screw you, you can keep those papers and we will keep your commodities and the gold. We stayed friends anyway. We had to.
It's a bit more complicated, isn't it? Wasn't it West Germany, in May 1971, that said "screw you" to the US and the Bretton Woods system (the same system that helped them rebuild their economy after the war) and performed a competitive appreciation by floating the currency, contributing to the resulting Gold crisis? The Nixon shock happened in August 1971, when the game was up.
It's a bit more complicated, isn't it? Wasn't it West Germany, in May 1971, that said "screw you" to the US and the Bretton Woods system (the same system that helped them rebuild their economy after the war) and performed a competitive appreciation by floating the currency, contributing to the resulting Gold crisis? The Nixon shock happened in August 1971, when the game was up.
This Germany may have done, but "the gold crisis" / general Bretton-Woods-Exchange-Mechanism crisis brewed since the mid-late 60s and culminated visibly in France (de Gaulle I think) sending a tanker to collect their $ trade surpluses in physical bullion form, see the ending of the https://en.wikipedia.org/wiki/London_Gold_Pool --- all Nixon did in Aug 1971 was basically just confirming to the world the completion of a transition that had been in progress for years, at that point.
It all started with the emergence of "Eurodollars" in the City of London, in the late 50s --- in itself, and their consequences, an inevitably that only a few thinkers such as https://en.wikipedia.org/wiki/Jacques_Rueff foresaw with any kind of accuracy (even though his favouring a gold standard isn't something I personally buy into as a good idea for the modern globalized economy --- same goes for a dollar standard or Euro standard or crypto-standard or any such notion though)
It all started with the emergence of "Eurodollars" in the City of London, in the late 50s --- in itself, and their consequences, an inevitably that only a few thinkers such as https://en.wikipedia.org/wiki/Jacques_Rueff foresaw with any kind of accuracy (even though his favouring a gold standard isn't something I personally buy into as a good idea for the modern globalized economy --- same goes for a dollar standard or Euro standard or crypto-standard or any such notion though)
I think the background to this is that, during the Cold War, Germans were worried about a possible Soviet invasion, so storing gold in the US at the time made sense. As the article states, conditions have changed somewhat and there has been political pressure to return some of the gold in recent years.
Another reason is that a lot of gold trading is and was happening between central banks.
(and moving the gold physically is a pain, easier to have them all in the same location, that's what the FRBNY account is for)
(and moving the gold physically is a pain, easier to have them all in the same location, that's what the FRBNY account is for)
That argument is countered in the article. I will leave it as an exercise for the reader to read it.
No, not really. The "nothing is amiss" argument goes like this:
a) Until 1971, gold was regularly moved between central banks. The United States exchanged U.S. Dollars against gold and Germany made use of this. Obviously, it was easiest to just leave the gold where it was bought - in the United States. This was also where a lot of other central banks had (and still have) their gold, so it also made exchanges easier.
b) After 1971, trading gold might have become less frequent, and at the moment the Bundesbank states it does not sell or buy any gold at all. But still: Look at Switzerland who has sold a lot of their gold after they joined the IMF. By selling gold out of the US Fed vault, they could offer delivery at the US Fed, avoiding a lot of logistical hassle. Maybe the Bundesbank just wants to keep this option open, even though they don't use it right now. It would be stupid to ship all the gold to Frankfurt, then decide to sell it in a couple of years from now, and then having to ship it back to the U.S. for the buyer.
c) Until 1989, it made sense to store gold outside of Europe to avoid it falling into the hands of the Soviet Union should they decide to invade (as suggested elsewhere in this discussion).
d) After 1989 and until recently, no one really cared about this topic. So it was easiest to just leave the gold where it was. Moving gold is a complicated business. The Bloomberg article linked above really makes it seem easier than it is. Yes, gold doesn't take up much space, but because it is so valuable you can't just put tons of gold into one plane / ship / truck - no one will sell you insurance for such a huge risk. You need to transport it in smaller batches, organizing secure transport and insurance for them, keeping the transports as secret as possible for security reasons. Also, you need to have sufficient storage available at the location where you want the gold to end up. And - again - you don't want to store all of the stuff in a single space because you won't get insurance for too much gold in one building.
I am not sure which explanation is the right one. I also find it a bit strange that they seemed to go through a lot of effort in melting these bars to make sure no one can inspect the originals. But this doesn't mean that there is no innocent explanation for all of this.
a) Until 1971, gold was regularly moved between central banks. The United States exchanged U.S. Dollars against gold and Germany made use of this. Obviously, it was easiest to just leave the gold where it was bought - in the United States. This was also where a lot of other central banks had (and still have) their gold, so it also made exchanges easier.
b) After 1971, trading gold might have become less frequent, and at the moment the Bundesbank states it does not sell or buy any gold at all. But still: Look at Switzerland who has sold a lot of their gold after they joined the IMF. By selling gold out of the US Fed vault, they could offer delivery at the US Fed, avoiding a lot of logistical hassle. Maybe the Bundesbank just wants to keep this option open, even though they don't use it right now. It would be stupid to ship all the gold to Frankfurt, then decide to sell it in a couple of years from now, and then having to ship it back to the U.S. for the buyer.
c) Until 1989, it made sense to store gold outside of Europe to avoid it falling into the hands of the Soviet Union should they decide to invade (as suggested elsewhere in this discussion).
d) After 1989 and until recently, no one really cared about this topic. So it was easiest to just leave the gold where it was. Moving gold is a complicated business. The Bloomberg article linked above really makes it seem easier than it is. Yes, gold doesn't take up much space, but because it is so valuable you can't just put tons of gold into one plane / ship / truck - no one will sell you insurance for such a huge risk. You need to transport it in smaller batches, organizing secure transport and insurance for them, keeping the transports as secret as possible for security reasons. Also, you need to have sufficient storage available at the location where you want the gold to end up. And - again - you don't want to store all of the stuff in a single space because you won't get insurance for too much gold in one building.
I am not sure which explanation is the right one. I also find it a bit strange that they seemed to go through a lot of effort in melting these bars to make sure no one can inspect the originals. But this doesn't mean that there is no innocent explanation for all of this.
> I also find it a bit strange that they seemed to go through a lot of effort in melting these bars to make sure no one can inspect the originals.
You're inferring a motive. The stated reason is that those bars didn't conform to the London Good Delivery specification.
You're inferring a motive. The stated reason is that those bars didn't conform to the London Good Delivery specification.
You're correct, I wasn't precise there. Good call! In fact, now that I think about it, there's also another potential and innocent explanation for this (pure speculation, though): Maybe the insurance companies for the transport only accepted to insure LGD bars, as otherwise they would have to value each and every individual bar prior to shipment to determine the insurance value.
(Opens up new questions for speculation, though: If that was the case, why didn't the Bundesbank disclose that as the reason for melting them?)
(Opens up new questions for speculation, though: If that was the case, why didn't the Bundesbank disclose that as the reason for melting them?)
These may be reasonable propositions (or were when they applied, especially in the cases of a) and c)), but if and only if one assumes the deposits are effectively on call, and apparently they are not.
Your last sentence gets close to the key issue: if there is an innocent explanation, why have the parties who could remove the doubt over that explanation stopped talking about the issue?
Your last sentence gets close to the key issue: if there is an innocent explanation, why have the parties who could remove the doubt over that explanation stopped talking about the issue?
> the deposits are effectively on call, and apparently they are not
IMO you need more than speculation to claim that. Besides, it is known that US gold bars are of poor quality (a lot of the Banque de France gold is being recast because of it).
"buyers don’t want the beat-up American gold" and “American gold,” the official says. “It is the ugliest.” https://www.bullionstar.com/gold-university/banque-de-france...
IMO you need more than speculation to claim that. Besides, it is known that US gold bars are of poor quality (a lot of the Banque de France gold is being recast because of it).
"buyers don’t want the beat-up American gold" and “American gold,” the official says. “It is the ugliest.” https://www.bullionstar.com/gold-university/banque-de-france...
You say it needs more than speculation, but you are speculating about an alternative explanation (to be clear: I am not calling the Banque de France statement you quote as speculation, but the implication that it is the explanation for the stalled transfer appears to be so. Note that the Banque de France is itself performing the recasting of its American bars.)
Speculating here, but as a defeated and occupied WW2 power - indeed still hosting U.S. troops to this day - Germany might not have had very much say in where its gold got stored.
Compare and contrast with speculation about what happened to Ukraine's gold: http://www.zerohedge.com/news/2014-11-18/ukraine-admits-its-...
Compare and contrast with speculation about what happened to Ukraine's gold: http://www.zerohedge.com/news/2014-11-18/ukraine-admits-its-...
You read the news "Robberies in <your area> have increased by 30%". Would that make you more willing to redirect half your savings to my account? If so, I'm happy to discuss further via email.
In principle if you are know to be a honest person and there is big enough stick (contract plus state justice system) to threaten you then it could make sense.
I hate to admit but that's true. As long as you both are under the same government and put the contracts in a form that is can be proven to a judge you probably don't have to worry as much.
Sadly that's hardly the case for the most powerful countries.
Sadly that's hardly the case for the most powerful countries.
If the alternative was keeping it under my mattress, and you were known to be a respectable citizen, then I don't see why not. Isn't this basically what a bank does already?
A bank is bound by more rules than the US.
It's difficult to take this article seriously.
> the New York Fed, an institution that is owned and controlled by Wall-Street-banks
No, it isn't.
> In a country, whose current president considers it an imposition that the law and so-called judges tell him what he is allowed to do and not allowed to do.
His rhetoric doesn't prevent the judiciary from acting or render the other two branches moot.
> The way in which the official gold of the US, and the gold held in custody for other countries, is guarded against public scrutiny and shielded from its owners, gives fodder to any number of conspiracy theories.
You can bet the largest repository of gold is off-fucking-limits. And, no, it doesn't.
> Had the New York Fed refused to let a foreign central bank, which was under such obvious pressure, retrieve some of their gold, these conspiracy theories around official gold might very well have become intense enough to damage trust in the dollar.
What? How? Negative.
> the New York Fed, an institution that is owned and controlled by Wall-Street-banks
No, it isn't.
> In a country, whose current president considers it an imposition that the law and so-called judges tell him what he is allowed to do and not allowed to do.
His rhetoric doesn't prevent the judiciary from acting or render the other two branches moot.
> The way in which the official gold of the US, and the gold held in custody for other countries, is guarded against public scrutiny and shielded from its owners, gives fodder to any number of conspiracy theories.
You can bet the largest repository of gold is off-fucking-limits. And, no, it doesn't.
> Had the New York Fed refused to let a foreign central bank, which was under such obvious pressure, retrieve some of their gold, these conspiracy theories around official gold might very well have become intense enough to damage trust in the dollar.
What? How? Negative.
Can you really say with a straight face that if they can't produce what they say they are storing for a third party that their reputation is not going to go down the drain?
If any bank prevents anyone from getting their deposited money, for reasons other than legal, there would be serious questions about their trust
If any bank prevents anyone from getting their deposited money, for reasons other than legal, there would be serious questions about their trust
Absolutely. If countries want their gold, and the US refuses to give it to them, what does that mean? Has the US stolen it? Has someone else stolen it? If this is true, it suggests that all those countries were wrong to trust the US, as the US is untrustworthy one way or another.
Of course those countries having lost their gold is not good for them either, so it seems everybody has agreed to continue the lie.
This stuff sounds bad enough that it might turn me into a conspiracy theorist. But how is any of this even remotely acceptable?
Of course those countries having lost their gold is not good for them either, so it seems everybody has agreed to continue the lie.
This stuff sounds bad enough that it might turn me into a conspiracy theorist. But how is any of this even remotely acceptable?
"Has the US stolen it? Has someone else stolen it?"... to complete your line of thought I would make one more question: Has it ever existed?
The whole thing about gold lies in the impossibility of speculation. Of course, it doesn't hold if one single institution controls of all of it...
It appears to be just another one of these fluff pieces gold bugs keep on sharing. Full of allegations and semi-truths in order to suggest that gold is all that matters.
> It consisted in the promise that in exchange for getting those 300 tons, they would leave four times as much in New York and stop forever fussing about it. This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
No factual evidence is provided to back up those claims. And other news outlets about the same event (eg. https://www.nytimes.com/2017/02/09/business/germany-gold-res... ) don't feature any similar interpretations.
> It consisted in the promise that in exchange for getting those 300 tons, they would leave four times as much in New York and stop forever fussing about it. This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
No factual evidence is provided to back up those claims. And other news outlets about the same event (eg. https://www.nytimes.com/2017/02/09/business/germany-gold-res... ) don't feature any similar interpretations.
That reminds me of the history of Spanish gold. In summary: the republican government made an arrangement with Russia to send their gold reserves to not let Franco capture it.
Suddenly the russian military help became quite expensive. Paid in gold of course. All of it.
Suddenly the russian military help became quite expensive. Paid in gold of course. All of it.
Yeah, they have a history of keeping other countries' gold "safe", forever...
"In 2013 and 2014 they melted 55 of the 90 tons they retrieved in these two years, destroying all evidence if anything should have been wrong, like some of that gold being inferior "coin-gold", for example." - and I'm done.
Melting bullion is the standard way to determine that it is in fact gold. If it were "inferior coin-gold" (which I assume he means some form of alloy), that would have been detected through the process of melting.
This man is too far into conspiracy theories to present a neutral view of anything.
Melting bullion is the standard way to determine that it is in fact gold. If it were "inferior coin-gold" (which I assume he means some form of alloy), that would have been detected through the process of melting.
This man is too far into conspiracy theories to present a neutral view of anything.
I think that at 41k per kilo one tonne of gold is worth $41m.
1300 tonnes of gold is therefore worth a bit more than $51bn, which is a lot, but approximately 1 year of the UK's defence budget, so in the scale of things not really all that much.
Now, this would mean that (given that Germany is a big economy) there would be what... 20 times that amount of gold available to back a gold currency - so about $1trn. I think that the world economy is about $80trn which leaves a big problem with the assertion that a gold backed currency could challenge the $.
1300 tonnes of gold is therefore worth a bit more than $51bn, which is a lot, but approximately 1 year of the UK's defence budget, so in the scale of things not really all that much.
Now, this would mean that (given that Germany is a big economy) there would be what... 20 times that amount of gold available to back a gold currency - so about $1trn. I think that the world economy is about $80trn which leaves a big problem with the assertion that a gold backed currency could challenge the $.
Gold is valued at only $41k per kilo because central banks managed to convince us that we don't need it to back up our currency.
If China really created gold-backed currency then gold price would skyrocket, increasing at lest 6 times (that's how much inflation we had since 1971, when the gold standard was abandoned)
If China really created gold-backed currency then gold price would skyrocket, increasing at lest 6 times (that's how much inflation we had since 1971, when the gold standard was abandoned)
China is about the last nation that is going to attempt to create a gold-backed currency.
They've accumulated an extraordinary amount of debt in a very short amount of time. Easily the greatest debt boom in world history. $40 to $50 trillion in new debt in about 13 years. Their combined debt to GDP ratio is now among the worst; counting the low estimates on shadow banking, it is the worst.
China needs to be able to abuse its currency going forward, for the exact same reason Japan is down to devaluing the Yen to keep the budget lights on. Low debt nations don't need to debase their currencies for such reasons - China will never be a low debt nation again (at least not this century); high debt nations get strangled to death by affixing their currencies to eg gold.
They've accumulated an extraordinary amount of debt in a very short amount of time. Easily the greatest debt boom in world history. $40 to $50 trillion in new debt in about 13 years. Their combined debt to GDP ratio is now among the worst; counting the low estimates on shadow banking, it is the worst.
China needs to be able to abuse its currency going forward, for the exact same reason Japan is down to devaluing the Yen to keep the budget lights on. Low debt nations don't need to debase their currencies for such reasons - China will never be a low debt nation again (at least not this century); high debt nations get strangled to death by affixing their currencies to eg gold.
> because central banks managed to convince us that we don't need it to back up our currency.
No, it's because we switched to much more productive things to back up our currency. Our currency is backed by the willingness of our citizens to work and the value of the land and other possessions.
The currency is stabilized by not printing more than what there is to back it up, nor less.
Gold is a terrible thing to use because you can't create more of it as the economy grows.
Don't think fiat money is not backed by something - it most definitely is.
No, it's because we switched to much more productive things to back up our currency. Our currency is backed by the willingness of our citizens to work and the value of the land and other possessions.
The currency is stabilized by not printing more than what there is to back it up, nor less.
Gold is a terrible thing to use because you can't create more of it as the economy grows.
Don't think fiat money is not backed by something - it most definitely is.
Gold is a pretty silly thing to base your currency on. It's shiny metal; it's not something productive like land, labour or production.
Fine, 6x. $300bn. Considerable amount of money, but still comparable to the value of a handful of neighbourhoods' real estate in Manhattan.
" It seems clear that they negotiated hard with the US and acted rather shrewdly."
I do not even understand why one country would need to negotiate about their properties held abroad.
There are two reasons I can come up with right now:
- Country A holding assets of Country B wants leverage over Country B or
- Country A does not hold 100% of these assets any longer
I do not even understand why one country would need to negotiate about their properties held abroad.
There are two reasons I can come up with right now:
- Country A holding assets of Country B wants leverage over Country B or
- Country A does not hold 100% of these assets any longer
Because "possession is 9/10ths of the law."
Centuries ago countries, or strongmen anyway, used to formalize allegiances by trading human hostages. We're friends for all eternity because your cousin is a valued "guest" of my court and vice versa. We do that with central banks and gold now a days.
So keeping a relationship of balanced trust, yanking assets from one location will have an equal and opposite reaction probably in a completely different form somewhere else. The manipulated currency exchange rates will wiggle. Imported black forest cuckoo clocks will get a different tariff. The ratio of central bank interest rates will wiggle. Sometimes 3rd parties get roped into the deal so perhaps the GBP-USD ratio will wiggle in some manner. Something is gonna happen to balance it and you can either control what happens, influence what happens, or toss hands in air and hope the free market does the right thing. A lot of people are paid a lot of money to not do the later, so you can generally assume that politician-like or IT consultant-like, the strongly advised reaction by the people is never for their paycheck writing organization to do nothing.
So something of equal and opposite reaction, probably agreed upon ahead of time, is about to happen.
Ideally in some sort of pacifistic utopia it would be illegal for citizens to store movable assets in-country or invest locally. We're rather unlikely to bomb Germany again anytime soon, or unrestricted submarine warfare in the Atlantic, but it is sad to see the old (by my human lifespan standards) relationship on shakier grounds. Oh well.
So keeping a relationship of balanced trust, yanking assets from one location will have an equal and opposite reaction probably in a completely different form somewhere else. The manipulated currency exchange rates will wiggle. Imported black forest cuckoo clocks will get a different tariff. The ratio of central bank interest rates will wiggle. Sometimes 3rd parties get roped into the deal so perhaps the GBP-USD ratio will wiggle in some manner. Something is gonna happen to balance it and you can either control what happens, influence what happens, or toss hands in air and hope the free market does the right thing. A lot of people are paid a lot of money to not do the later, so you can generally assume that politician-like or IT consultant-like, the strongly advised reaction by the people is never for their paycheck writing organization to do nothing.
So something of equal and opposite reaction, probably agreed upon ahead of time, is about to happen.
Ideally in some sort of pacifistic utopia it would be illegal for citizens to store movable assets in-country or invest locally. We're rather unlikely to bomb Germany again anytime soon, or unrestricted submarine warfare in the Atlantic, but it is sad to see the old (by my human lifespan standards) relationship on shakier grounds. Oh well.
Why do countries bother to hold gold? Wouldn't it be sensible to sell as much of it off as possible? (I'm asking like "ELI5" because I'm sure there is a reason)
Diversification of "hard assets" because the value of sovereign currency is illusory and often fleeting.
I agree that mining, storing and transporting gold around the planet is a waste of resources, but there are only so many places to store wealth in a physical manner. The fact that gold has historically been useless in industry probably adds to its value.
I agree that mining, storing and transporting gold around the planet is a waste of resources, but there are only so many places to store wealth in a physical manner. The fact that gold has historically been useless in industry probably adds to its value.
Given that you want an asset which is difficult to move, wouldn't it be better to build infrastructure instead (eg. roads). At least you can use that asset. I don't understand why gold would be preferable.
roads require maintenance and are only valuable between two points people wish to traverse. gold doesn't deteriorate, is trivially divisible, and can be moved when you want to -- stays put when you don't. gold has been a store of value for millennia, so I personally find it ignorant to ignore the historical significance. hopefully we can rope an asteroid with a few billion tons of gold (and other precious metals) and make them all less precious indeed.
If diamonds are anything to go by, it is perhaps unlikely that the asteroid miners would dump the whole lot on the market in one go. It would be in their interests to maintain prices in order to maximise their profits, would it not?
Depends on if they're using the Bond villian playbook or not. I'm sure there's some convoluted plot you could cook up, given the threat to depress the world gold market.
Infrastructure is both less durable as well as less liquid. It also returns diminishingly as you engage projects on your opportunity cost frontier. Also likely to be less secure to military or political threats.
The problem is that roads are too usable. They can be used by your political enemies just as they can your friends.
You can give your gold to other countries in exchange for stuff (eg weapons) but you can't do the same with roads
Gold is not useless in industry. It is used to conduct electricity in many industrial settings. It also has other uses - dentists use it as a tooth crown etc. That it is useful is why it has value.
Yes, storing and transporting gold for financial purposes may be a waste of resources. But gold is easier to store than most commodities - put it in a vault for several centuries and forget about it. You can't do that with strawberries. You can transport a lot of value in several ounces of gold without much space needed.
Yes, storing and transporting gold for financial purposes may be a waste of resources. But gold is easier to store than most commodities - put it in a vault for several centuries and forget about it. You can't do that with strawberries. You can transport a lot of value in several ounces of gold without much space needed.
When was the last time gold was used in dentistry?
Every day?
Gold fillings are significantly more durable than amalgams.
http://www.webmd.com/oral-health/guide/dental-health-filling...
https://en.wikipedia.org/wiki/Dental_material#Gold
http://www.webmd.com/oral-health/guide/dental-health-filling...
https://en.wikipedia.org/wiki/Dental_material#Gold
They do. Switzerland sold more than half of their gold in the past 20 years, including all their holdings at the Federal Reserve in New York (that's like 1300 tons of gold that was sold, in comparison the hundreds of tons that are mentioned on the article for germany and netherlands).
Not sure why the article doesn't mention that fact, maybe it doesn't feed into the FUD/conspiracy theory?
Not sure why the article doesn't mention that fact, maybe it doesn't feed into the FUD/conspiracy theory?
Absolutely. If people don't trust that the fed has all its gold, people would be wary of buying gold in there. But Switzerland managed to sell 1300 tons of it, presumably at reasonable prices for the time. That's a lot of buyers who don't worry about their purchases not existing.
it is mentioned in other circles where this is widely and passionately discussed. and the "conspiracy theory" burns on as it is suspected China is buying the worlds gold at an "alarming" rate...with the theory being a gold backed currency is in the works.
until the world stops needing oil to function, no one is going to care much.
until the world stops needing oil to function, no one is going to care much.
Did Switzerland sell them themselves, i.e. were they flown back to Switzerland first or was the sale done by the Fed?
I would assume the gold is typically never traded by moving it physically between location, but just brought into a vault where both parties have an account (like the Fed, or London)
They didn't say how much gold they had at the Fed, just that they used to and that they no longer have any.
https://www.bullionstar.com/gold-university/central-bank-gol... has a bunch of data.
For example with the sell via the BIS, I assume they just transferred the gold within the Berne vault to BIS (BIS has an account there), and then let the BIS handle the sale. The London gold was likely already there.
They didn't say how much gold they had at the Fed, just that they used to and that they no longer have any.
https://www.bullionstar.com/gold-university/central-bank-gol... has a bunch of data.
For example with the sell via the BIS, I assume they just transferred the gold within the Berne vault to BIS (BIS has an account there), and then let the BIS handle the sale. The London gold was likely already there.
Currencies actually fail quite regularly (hints: Zimbabwe, Venezuela) - it makes a lot of sense to hold wealth in a form that will survive that. Maybe someone wants to claim that any individual country "will never" suffer from a currency crisis. I'll just point out that America went from Barack Obama to Donald Trump in one election then agree to disagree.
Countries want an asset that can hold wealth through a crisis where the way things work radically changes. This asset needs to be:
* As indestructible as possible
* Easy to transport if an adversary is approaching (see also, European history :P)
* Hard to create
Gold satisfies these requirements really well; and as an added bonus it is nearly useless so hoarding it doesn't risk the real economy (see also; the US helium reserves and the risk to medical imaging or such when they run out).
EDIT I'll add that the 'easy to transport' part is what makes this Fed-Bundesbank business so completely weird - this quantity of gold is physically quite small and should be easy to inspect and audit.
Countries want an asset that can hold wealth through a crisis where the way things work radically changes. This asset needs to be:
* As indestructible as possible
* Easy to transport if an adversary is approaching (see also, European history :P)
* Hard to create
Gold satisfies these requirements really well; and as an added bonus it is nearly useless so hoarding it doesn't risk the real economy (see also; the US helium reserves and the risk to medical imaging or such when they run out).
EDIT I'll add that the 'easy to transport' part is what makes this Fed-Bundesbank business so completely weird - this quantity of gold is physically quite small and should be easy to inspect and audit.
But where currencies fail (as in Zimbabwe, Venezuela, Iraq, etc), gold never became a backup currency. No-one was trading gold coins for goods and services, and anyone trying to leave these countries carrying gold was at serious risk. Gold isn't going to help you here, at worst it'll put you in more danger.
Bluntly said:
The gold of the central banks is not for saving the asses of the common folk but for saving the ass of the government and to have at least the tiniest sliver of hope of being able to somehow rebuild an economy after the whole failing state business is over and done with.
The gold of the central banks is not for saving the asses of the common folk but for saving the ass of the government and to have at least the tiniest sliver of hope of being able to somehow rebuild an economy after the whole failing state business is over and done with.
If you make the money, i.e., print the paper and convince people to associate it with value, then money has no value in itself to you. But gold is nothing you produce. It's already there and people already associate value to it. Even another country who doesn't like you is willing to listen to your demands if you promise them gold in return. Therefore having as much gold as possible is one of the things that grand you power as a country. Other things are valuabe trade goods like oil, high tech, cars, etc. Again other sources of power are technology&science, knowledge, military, lots of people.
You miss the point. The value of money is based on trust and belief. Hence the word fiducial (fiduceo) money.
One part of a market is holding your promises. If you don't all your current transactions are considered shady (standards& poors, ...), hence the notation agency on currency: it measures how likely you are to reimburse your debt.
USA being one of the largest emitter of bound on the market, the word they are being crooks on an important topic would damage on the long term reputation hence the value of their currency, hence triggering a strong recession + hyper-inflation.
In the case trust in USA Feb bank (which is private) is broken, USA may turn abruptly in Venezuela.
Since most notation agencies are in the USA, it might have a domino effect creating major chaotic fluctuations between currencies, hence automatically triggering a safe backing off from every hedge fund out of their countries ...
If USA lose the trust of the market since globalisation is labelled in US$ it means either people are going to diversify to Swiss Francs, Euro, CAD, Pounds ... and a big loss for USA.
No one want this. Not the big european, asian groups.
Workers and modests people would be totally glad, but it would mean a 1929 situation in the USA for sure, and in a lot of connected economies.
So no one wants this.
One part of a market is holding your promises. If you don't all your current transactions are considered shady (standards& poors, ...), hence the notation agency on currency: it measures how likely you are to reimburse your debt.
USA being one of the largest emitter of bound on the market, the word they are being crooks on an important topic would damage on the long term reputation hence the value of their currency, hence triggering a strong recession + hyper-inflation.
In the case trust in USA Feb bank (which is private) is broken, USA may turn abruptly in Venezuela.
Since most notation agencies are in the USA, it might have a domino effect creating major chaotic fluctuations between currencies, hence automatically triggering a safe backing off from every hedge fund out of their countries ...
If USA lose the trust of the market since globalisation is labelled in US$ it means either people are going to diversify to Swiss Francs, Euro, CAD, Pounds ... and a big loss for USA.
No one want this. Not the big european, asian groups.
Workers and modests people would be totally glad, but it would mean a 1929 situation in the USA for sure, and in a lot of connected economies.
So no one wants this.
> Why do countries bother to hold gold?
Nowadays, a chief reason is "because the others do, too" ;) it is also a brilliant instrument to stabilize/tweak currency fluctuations without buying/selling "too much" of another country's currency/debt or more generally, any third party's nominal promises/future obligations. It may prove exceptionally useful in future defence of a given currency's (global) purchasing power. Gold is the only asset that can accept any currency valuation (in both directions) without some broad group or other of real people, producers or consumers, complaining loudly (other than a tiny group of hobbyist speculators) while also showing a multi-millenium track record of durability, also in value, on a planetary scale and immunity to EMP or endless forks or Nixons. It need not perform any specific role 99% of the time, it need not even "perform" nominally at all, on the country scale (CB scale / oil wealth scale / giant old-family-wealth scale) it just needs to sit, tight and guarded, through changing times and the rare geopolitical/monetary transition or other.
Nowadays, a chief reason is "because the others do, too" ;) it is also a brilliant instrument to stabilize/tweak currency fluctuations without buying/selling "too much" of another country's currency/debt or more generally, any third party's nominal promises/future obligations. It may prove exceptionally useful in future defence of a given currency's (global) purchasing power. Gold is the only asset that can accept any currency valuation (in both directions) without some broad group or other of real people, producers or consumers, complaining loudly (other than a tiny group of hobbyist speculators) while also showing a multi-millenium track record of durability, also in value, on a planetary scale and immunity to EMP or endless forks or Nixons. It need not perform any specific role 99% of the time, it need not even "perform" nominally at all, on the country scale (CB scale / oil wealth scale / giant old-family-wealth scale) it just needs to sit, tight and guarded, through changing times and the rare geopolitical/monetary transition or other.
Gold is extremely rare on Earth, because it is extremely rare in the universe - it comes from neutron star collisions. [1] To underline the scarcity on Earth, there are thoughts that we are reaching 'peak gold.' [2] You can read here the lengths we go to to get at small seams of gold: http://gizmodo.com/terrifying-facts-about-the-worlds-deepest... Asteroid mining may be a check on this.
Most of the gold in the world is used for jewelery approx 68-78% depending on the estimate. It does have its uses as an industrial metal, but if there wasn't gold tomorrow, the sun would still rise.
In the US, we don't have the same cultural relationship with gold that exists in India, China and elsewhere, where most of the demand is. Keynes called gold a 'barbarous relic,' and I think that's been adopted to some degree in our culture. Central banks hold many currencies, and in some cases baskets of currency. Gold is another that can't be printed, and has a multi-thousand year track record (what currency can claim that?).
More immediately, if I was in the shoes of a central banker, I would be looking to participate in the future gold-backed currency markets. Gaddhafi tried to start a gold-backed Dinar as a pan-African currency and to settle oil trades that would have competed with the petrodollar system. A bayonet and several bullets put these plans on hold. There has been talk of Russia, the top oil producer [3][4], and China moving to gold backed currencies [4].
I have exposure to gold mining stocks. For me, I'm thinking about the reasons above. I'm also thinking about the next financial crisis with the backdrop of rates barely above 0%, a massively leveraged derivatives market that will eventually be looking for real assets at the end of all of the complex chained structures, a massive debt overhang, and looking at what Moody's thinks about our pension system, Social Security, and Medicare [5]. Trying to stay hedged.
[1] https://www.cfa.harvard.edu/news/2013-19 [2] https://en.wikipedia.org/wiki/Peak_gold [3] https://www.bloomberg.com/news/articles/2017-02-20/russia-ov... [4] https://www.forbes.com/sites/nathanlewis/2016/05/05/china-is... (note: commentary piece) [5] https://www.moodys.com/research/Moodys-US-government-pension...
Most of the gold in the world is used for jewelery approx 68-78% depending on the estimate. It does have its uses as an industrial metal, but if there wasn't gold tomorrow, the sun would still rise.
In the US, we don't have the same cultural relationship with gold that exists in India, China and elsewhere, where most of the demand is. Keynes called gold a 'barbarous relic,' and I think that's been adopted to some degree in our culture. Central banks hold many currencies, and in some cases baskets of currency. Gold is another that can't be printed, and has a multi-thousand year track record (what currency can claim that?).
More immediately, if I was in the shoes of a central banker, I would be looking to participate in the future gold-backed currency markets. Gaddhafi tried to start a gold-backed Dinar as a pan-African currency and to settle oil trades that would have competed with the petrodollar system. A bayonet and several bullets put these plans on hold. There has been talk of Russia, the top oil producer [3][4], and China moving to gold backed currencies [4].
I have exposure to gold mining stocks. For me, I'm thinking about the reasons above. I'm also thinking about the next financial crisis with the backdrop of rates barely above 0%, a massively leveraged derivatives market that will eventually be looking for real assets at the end of all of the complex chained structures, a massive debt overhang, and looking at what Moody's thinks about our pension system, Social Security, and Medicare [5]. Trying to stay hedged.
[1] https://www.cfa.harvard.edu/news/2013-19 [2] https://en.wikipedia.org/wiki/Peak_gold [3] https://www.bloomberg.com/news/articles/2017-02-20/russia-ov... [4] https://www.forbes.com/sites/nathanlewis/2016/05/05/china-is... (note: commentary piece) [5] https://www.moodys.com/research/Moodys-US-government-pension...
...the US will allow central banks to repatriate as much gold from New York as is absolutely necessary to allow them to have half of their gold at home....
What the actual fuck? Why do we need permission from the US to have our own gold?
What the actual fuck? Why do we need permission from the US to have our own gold?
States tend to act like psychopaths. It should come as no surprise that the US doesn't honor the original agreement if it's in their self-interest to not honor that agreement.
I'd be interested to know how the US came to hold the gold for Germany in the first place. Because it seems to me that Germany's mistake was to swap the gold for a promise.
I'd be interested to know how the US came to hold the gold for Germany in the first place. Because it seems to me that Germany's mistake was to swap the gold for a promise.
Everyone, stop. This guy is literally batshit insane.
Germany isn't being stiffed, strong-armed or muzzled. They are distributing assets amongst the world's soundest systems at will - at home in Germany, the UK, US and France. This guy isn't just speculating, he's making stuff up with absolutely no basis for it.
http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK...
Germany isn't being stiffed, strong-armed or muzzled. They are distributing assets amongst the world's soundest systems at will - at home in Germany, the UK, US and France. This guy isn't just speculating, he's making stuff up with absolutely no basis for it.
http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK...
Germany or Europe is no threat to the US dollar dominance; if anything the euro and the usd are "same" currency thru central bank arrangements.
The real threat to the US dollar system comes from China; slowly thru many decades.
The real threat to the US dollar system comes from China; slowly thru many decades.
If there really is a doubt that the US holds less gold than it claims, surely this would be reflected in the pricing of US-held gold? Yet I've never heard that such a price gap exists. What am I missing?
You're not missing anything. It's just another conspiracy theory. They'll claim that the gold price is being kept at an artificial level.
Also all that gold is not in open market, just in central banks and international institutions (e.g. IMF) balance sheets. So I assume the argument is that they're covering it up.
For anyone interested in reading more about the standards of gold storage and exchange, the company BuillionVault has some good information on their help/FAQ pages, such as explaining what 'good delivery' bars of gold mean, and how professional gold vaulting works. (Naturally, the pages also promote their own services, but you can ignore all of that)
e.g. https://www.bullionvault.com/gold-guide/ready-to-buy-gold
e.g. https://www.bullionvault.com/gold-guide/ready-to-buy-gold
If not stolen, what's the advantage for the USG in keeping it there?
Unfortunately, all of the people of this world are not always as virtuous and honest as I would hope, especially those people in positions of great power.
Why did we drop 26,000 bombs on Muslim countries last year? Why is Snowden in Russia? Why did no one go to jail when evidence leaked of CIA torture, except the whistle blower? Why do the people of this planet produce a surplus of food and watch as some starve? Why did evidence the Bush admin lied about Iraq WMDs go unpunished?
The point is the leaders that exist dont mind cheating, and they usually get away with it. The advantage is that if they decide to take it, they can easily do so (and in the meantime it's significant bargaining leverage).
Why did we drop 26,000 bombs on Muslim countries last year? Why is Snowden in Russia? Why did no one go to jail when evidence leaked of CIA torture, except the whistle blower? Why do the people of this planet produce a surplus of food and watch as some starve? Why did evidence the Bush admin lied about Iraq WMDs go unpunished?
The point is the leaders that exist dont mind cheating, and they usually get away with it. The advantage is that if they decide to take it, they can easily do so (and in the meantime it's significant bargaining leverage).
1200 tons of gold is worth $50B; Germany currently owes the US $175B. [1] Could it just be collateral?
[1] http://www.bbc.com/news/business-15748696
[1] http://www.bbc.com/news/business-15748696
And according to that site, the US owes Germany over $400B, so not sure what the point would be.
The opposite of this is 'Gold repatriation'
https://en.wikipedia.org/wiki/Gold_repatriation
Chavez was the one I remember who got his gold back onto Venezualian soil: http://www.bbc.com/news/world-latin-america-15900885
Chavez was the one I remember who got his gold back onto Venezualian soil: http://www.bbc.com/news/world-latin-america-15900885
I'm surprised to see on HN an article clearly written by a conspiracy theorist without any proof. As soon as he started adding in his own opinions of what might have been taking place, I checked out.
This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
Pass.
This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
Pass.
[deleted]
The article really dances around the obvious answer to the question in the title: "because Germany is a conquered puppet state of the US."
Good grace. In Germany, this opinion is considered to be in the militant right wing spectrum (aka sovereign citizens/Reichsbürger movement), I'm surprised and disgusted to see this here on HN as the top-rated comment.
The fact that Germany was conquered is an indisputable historical fact. Most people in the present day, myself included, are happy about that outcome. The fact, however, is clear.
I'll admit that speculating about US influence over Germany is more debatable, but I'm fairly amused that you're "disgusted" by that debate.
I'll admit that speculating about US influence over Germany is more debatable, but I'm fairly amused that you're "disgusted" by that debate.
It's not the top-rated comment; it's only 2 - 3 minutes older than your comment. HN puts new root comments at the top initially, so they have a chance to be seen. It might not have been upvoted at all before you saw it.
Is it really? By whom? I've been to Germany a lot and I've met quite a few people who hold similar, if less extremely formulated views.
How do you even transport 300 tons of gold? Load it onto a military ship, maybe in smaller batches, and hope the crew isn't too corrupt?
You can also when you are smart do it by swapping movement in compensation agencies.
When one ton of gold is supposed to leave germany for USA, it is accounted as leaving registered in accounting books as a +1 ton in USA fed reserv, but it actually stays on the territory and countend as -0 in germany... as long as the amount is not credited.
if flux of swap goes the wrong direction (more sell than buy from USA) then you also have to physically transport some gold.
When one ton of gold is supposed to leave germany for USA, it is accounted as leaving registered in accounting books as a +1 ton in USA fed reserv, but it actually stays on the territory and countend as -0 in germany... as long as the amount is not credited.
if flux of swap goes the wrong direction (more sell than buy from USA) then you also have to physically transport some gold.
Military transports, each with a strong marine detachment aboard, and escorted by at least equal numbers of fast frigates or destroyers. Even in the very unlikely case that someone's dumb enough to try it on and able to successfully suppress the counter-mutiny that'd be sure to arise among the embarked marine force, an unarmed ship that can't outrun an armed pursuer is in a hopeless situation.
In the case where exists a credible threat of attack by another power, you'd want to use a much stronger escort, ideally a carrier strike group and some attack submarines. Escorted aerial transport would be another option, requiring more flights and being more vulnerable in transit, but with each flight exposed to attack for a much shorter period, and significantly lowering the cost of a successful attack.
In any case, if you're concerned about perfidy among those entrusted with items of value, the classic response is to ensure that no one acting alone has sufficient leeway to steal, and ideally that massive collusion among many actors at all levels of your guard force is necessary to do so.
In the case where exists a credible threat of attack by another power, you'd want to use a much stronger escort, ideally a carrier strike group and some attack submarines. Escorted aerial transport would be another option, requiring more flights and being more vulnerable in transit, but with each flight exposed to attack for a much shorter period, and significantly lowering the cost of a successful attack.
In any case, if you're concerned about perfidy among those entrusted with items of value, the classic response is to ensure that no one acting alone has sufficient leeway to steal, and ideally that massive collusion among many actors at all levels of your guard force is necessary to do so.
Lots of smaller shipments, each secured. Potentially air or sea (probably would do 1-10 ton air shipments for JFK-FRA). Plenty of $100mm-1b items get shipped around the world routinely, although gold is pretty uniquely fungible. It is mostly determined by insurance or willingness to self-insure, though.
This is a great article about a similar problem: http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...
This is a great article about a similar problem: http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...
I have yet to hear about any modern western military being very corrupt.
When you phrase it like that you help build an understanding that this is common.
Unless you have sources for this I'd ask you to avoid spreading that idea.
When you phrase it like that you help build an understanding that this is common.
Unless you have sources for this I'd ask you to avoid spreading that idea.
if you're into reading about gold, you can do a lot worse than reading the archives of http://fofoa.blogspot.com/
> Switzerland is a small, neutral country without a serious army. They would hardly refuse to hand the gold back on request.
This guy is suggesting that Germany could invade Switzerland if they refuse to give back their gold, so this is a good reason to keep it there. I'm pretty sure such action would be illegal under UN rules, ie: you can't invade a country because they don't give you back your posession.
And Switzerland neutrality is highly debatable given that it's surrounded by NATO and part in a lot of EU mechanisms.
Also, an invasion would make no sense under the writers own assumption, that something is wrong in the gold market. A war in the heart of Europe will tank a lot of markets.
This guy is suggesting that Germany could invade Switzerland if they refuse to give back their gold, so this is a good reason to keep it there. I'm pretty sure such action would be illegal under UN rules, ie: you can't invade a country because they don't give you back your posession.
And Switzerland neutrality is highly debatable given that it's surrounded by NATO and part in a lot of EU mechanisms.
Also, an invasion would make no sense under the writers own assumption, that something is wrong in the gold market. A war in the heart of Europe will tank a lot of markets.
As Russia-Ukraine has shown you can take stuff by force without creating big scale war. And remember how Hitler just went state shopping before there was a war?
The thing about war is that most party's don't really want it. So sometimes it's possible to grab some advantage that theoretically should result in war.
The thing about war is that most party's don't really want it. So sometimes it's possible to grab some advantage that theoretically should result in war.
> And remember how Hitler just went state shopping before there was a war?
Hitler went state shopping because the regions he started to invade had a majority of German speaking folks. As soon as he started to do something else (i.e. Poland) it started a war.
Hitler went state shopping because the regions he started to invade had a majority of German speaking folks. As soon as he started to do something else (i.e. Poland) it started a war.
So you are saying that Germany would begin military action against Switzerland for $50 billion worth of gold (rough value of 1000 tons of gold).
How much damage to the Euro and to the European stock markets would such action cause? Not to mention other costs
How much damage to the Euro and to the European stock markets would such action cause? Not to mention other costs
Not 100% what I'm saying. I'm saying that if Switzerland holds a lot of Germanys gold and has promised to give access whenever and don't hold up to that promise, Germany just moving some tanks over, then taking the gold, then moving the tanks back, is quite a possible scenario.
Yes that would harm the EU in short term (1-5 years). But so would it get hurt if a powerful member of that alliance is not able to enforce rightful demands. Anyways if we include the EU into the discussion, it's very likely that a lot of other steps would convince Switzerland before the first tank needs to get manned.
Yes that would harm the EU in short term (1-5 years). But so would it get hurt if a powerful member of that alliance is not able to enforce rightful demands. Anyways if we include the EU into the discussion, it's very likely that a lot of other steps would convince Switzerland before the first tank needs to get manned.
Such an action would destroy trillions of dollars of wealth. For less than apple has in cash. It doesn't make sense, $50 billion of gold is still just $50 billion.
The point is, not really possible, given Swiss defense system. Have you been to Switzerland? That country is a fortress.
Switzerland don't have any German gold according to the article.
I think that if Germany tries again to invade a neighbor, EU is over.
Without a serious army? Are you kidding me?
Yes its not exactly the US military but bloody hell, you would have a very very hard time trying to take over Switzerland - even these days. Road tunnels designed to be blown up, hundreds of thousands of modern trained soldiers with guns at home - fighting on their own terrain, ammunition dumps in individual towns, strong points, bunkers in every apartment block, supplies of modern anti armour weapons, lots of people trained in the use of explosives, etc etc
Good luck getting in there.
Yes its not exactly the US military but bloody hell, you would have a very very hard time trying to take over Switzerland - even these days. Road tunnels designed to be blown up, hundreds of thousands of modern trained soldiers with guns at home - fighting on their own terrain, ammunition dumps in individual towns, strong points, bunkers in every apartment block, supplies of modern anti armour weapons, lots of people trained in the use of explosives, etc etc
Good luck getting in there.
How do airplanes work?
http://www.airspacemag.com/flight-today/dont-mess-with-switz...
Aircraft caverns :) F18/A Hornets and modern equipments.
Aircraft caverns :) F18/A Hornets and modern equipments.
That Switzerland is a landlocked country surrounded by Germany and its allies, who are also Switzerland's biggest trading partners is a stronger reason they wouldn't steal from Germany. The consequences of doing so would be devastating.
The US, on the other hand could get away with it, being too big to fail.
The US, on the other hand could get away with it, being too big to fail.
This. Switzerland depends heavily on Germany (and the rest of Europe) for imports.
Moreover, the one thing Switzerland has which is far more important than their pharmaceutical industry is trust. They are not in a strong-arm position like the USA, and any doubt in their solvency would cripple them back to the poverty they had in the 1950s.
Moreover, the one thing Switzerland has which is far more important than their pharmaceutical industry is trust. They are not in a strong-arm position like the USA, and any doubt in their solvency would cripple them back to the poverty they had in the 1950s.
> I'm pretty sure such action would be illegal under UN rules, ie: you can't invade a country because they don't give you back your posession.
So?
Since when would that make a difference to anyone?
The concept of UN "laws" or "illegal" just makes me laugh. The UN has treaties - countries agreeing to limits on their own behavior. The UN is not a government, and does not enforce any law.
So yes, you can just invade a country because they don't give you back your possession. Other countries might get mad at you, but the UN is quite irrelevant.
So?
Since when would that make a difference to anyone?
The concept of UN "laws" or "illegal" just makes me laugh. The UN has treaties - countries agreeing to limits on their own behavior. The UN is not a government, and does not enforce any law.
So yes, you can just invade a country because they don't give you back your possession. Other countries might get mad at you, but the UN is quite irrelevant.
"I am not criticizing the Bundesbank for storing 37 percent of Germany’s official gold in in a place there it has no control over it. It seems clear that they negotiated hard with the US and acted rather shrewdly."
I am sorry, but as a layperson, I do not know what's to negotiate. If I own something, I should be able to take it home whenever I want?? This is mind-boggling. What's the point of property that you cannot access? That's not property.
I am sorry, but as a layperson, I do not know what's to negotiate. If I own something, I should be able to take it home whenever I want?? This is mind-boggling. What's the point of property that you cannot access? That's not property.
Yeah. Can anyone comment on the trustworthiness of this blog post? I also do not understand what is there to negotiate (except storage fees).
It's a lot of "clearly that's how it happens" because from the author viewpoint (pro gold holdings), anything else would not make sense.
E.g.: "It seems clear that they negotiated hard with the US and acted rather shrewdly." does not provide any source for the statement, and it's the same for almost everything in the article, just speculations.
One could also imagine, that Germany plans on lowering their gold holdings and having them on account at the FRBNY would be a convenient thing to make that happen.
E.g.: "It seems clear that they negotiated hard with the US and acted rather shrewdly." does not provide any source for the statement, and it's the same for almost everything in the article, just speculations.
One could also imagine, that Germany plans on lowering their gold holdings and having them on account at the FRBNY would be a convenient thing to make that happen.
There is very litte content in the blog so very little to not trust. The situation as described is hardly news. Foreign countries have troubles repatriating gold and that is hardly surprising. The US are in a better position to negotiate here.
> that's not property
That's the whole point. The US government effectively treats other country's good reserves as their own.
It was shrewd negotiation because they got much more than zero, and then US government/Federal Reserve has significant negotiating ability on its side by virtue of having the world reserve currency and the ability to impact monetary policy and systems so heavily on a global scale.
That's the whole point. The US government effectively treats other country's good reserves as their own.
It was shrewd negotiation because they got much more than zero, and then US government/Federal Reserve has significant negotiating ability on its side by virtue of having the world reserve currency and the ability to impact monetary policy and systems so heavily on a global scale.
The blog post implies, without much proof, that it is the US Fed that is causing the gold to be moved slowly, which conforms to the blog posters political opinions.
It could of course also be that the German gold is not moving out of the US Fed quickly because the German central bank has promised it as collateral for something, or it is involved in some other financial deal. The Swiss for instance were able to move about this much gold out of the Fed during the same time period with no problems.
It could of course also be that the German gold is not moving out of the US Fed quickly because the German central bank has promised it as collateral for something, or it is involved in some other financial deal. The Swiss for instance were able to move about this much gold out of the Fed during the same time period with no problems.
Is there anything on record claiming that the Bundesbank tried to withdraw more than 300 tons but was denied (besides the speculations)?
Officially, they wanted to rebalance some of their holdings. The original plan was to remove 150 tons in 3 years, but due to undisclosed issues, that became a 300 tons withdrawal in 7 years, which was achieved three years ahead of schedule.
I'm also wondering why all those articles assume that moving tons of gold is trivial, is there any description at what is involved in X tons of gold transportation (insurance / planning / protection / etc.).
Officially, they wanted to rebalance some of their holdings. The original plan was to remove 150 tons in 3 years, but due to undisclosed issues, that became a 300 tons withdrawal in 7 years, which was achieved three years ahead of schedule.
I'm also wondering why all those articles assume that moving tons of gold is trivial, is there any description at what is involved in X tons of gold transportation (insurance / planning / protection / etc.).
"US government/Federal Reserve has significant negotiating ability"
Yeah about that, in public, the only lever we can pull against Germany is stalling. Not exactly a show of strength. If you take away our leverage over you by removing your gold, we'll... um... ah... we'll punish you by doing it really slowly, yeah that'll teach you a lesson. Like trying to cancel your cable TV or a gym membership, the only influence they can exert is to make the transaction as slow and painful as possible. Which has certain implications WRT perceived long term odds of reconciliation.
In private more interesting deals might be going on of course. Just pointing out in public its the opposite of a show of strength LOL.
Against the Swiss we can, and have, and will again, pull the privacy lever so holding their shiny yellow metal is unnecessary to retain leverage over them. You do what we say, because we have your computerized account records, not because we have your gold. I don't think we've powned the German financial system to the level we have the Swiss.
Yeah about that, in public, the only lever we can pull against Germany is stalling. Not exactly a show of strength. If you take away our leverage over you by removing your gold, we'll... um... ah... we'll punish you by doing it really slowly, yeah that'll teach you a lesson. Like trying to cancel your cable TV or a gym membership, the only influence they can exert is to make the transaction as slow and painful as possible. Which has certain implications WRT perceived long term odds of reconciliation.
In private more interesting deals might be going on of course. Just pointing out in public its the opposite of a show of strength LOL.
Against the Swiss we can, and have, and will again, pull the privacy lever so holding their shiny yellow metal is unnecessary to retain leverage over them. You do what we say, because we have your computerized account records, not because we have your gold. I don't think we've powned the German financial system to the level we have the Swiss.
And they ended up doing it slowly, just 3 years ahead of the 2020 schedule.
I wonder why there is only a conspiracy for the FED but not for e.g. the Banque de France. Just because the amounts held by Germany are smaller?
I wonder why there is only a conspiracy for the FED but not for e.g. the Banque de France. Just because the amounts held by Germany are smaller?
Well the article hints that there is not as much gold in the store as there should be. Or if the amount is there, it is not as high quality as it should be.
If this was the case and Germans could prove this, it might not be in their interest to call out the Americans for cheating. The article point out that this could destabilize the world economy and that could be very costly for the Germans. Think about local banks collapsing and industrial exports plummeting.
If this was the case and Germans could prove this, it might not be in their interest to call out the Americans for cheating. The article point out that this could destabilize the world economy and that could be very costly for the Germans. Think about local banks collapsing and industrial exports plummeting.
I'm not really understanding what is going on here and the article doesn't address that:
1 - Why do Germany and Netherlands even store their gold in the USA?
2 - Why shall the USA/FED have any saying about Germany wanting their property back anyway? It's like me having to negotiate with my bank weather I can or not withdrawal my money from there.
1 - Why do Germany and Netherlands even store their gold in the USA?
2 - Why shall the USA/FED have any saying about Germany wanting their property back anyway? It's like me having to negotiate with my bank weather I can or not withdrawal my money from there.
> 1 - Why do Germany and Netherlands even store their gold in the USA?
Today: because it turns out they cannot get it back. Originally because countries did not want that when they were invaded by others that the invader would also run off with the wealth. So keeping it on the other side of the world in a 'neutral' country looked reasonable.
Today: because it turns out they cannot get it back. Originally because countries did not want that when they were invaded by others that the invader would also run off with the wealth. So keeping it on the other side of the world in a 'neutral' country looked reasonable.
[deleted]
Just google "site:news.ycombinator.com paypal" and you'll read a lot of stories where people need to discuss with an annoying bank to get their money back.
The gold is long gone. There's nothing there.
Of course they had to work out a 'deal' otherwise both/all banking systems come down.
Of course they had to work out a 'deal' otherwise both/all banking systems come down.
mamon(4)
The gold is stolen.
more likely loaned, derived, and "synthesized" in the form of "paper gold"
yes. I spent too much time on goldbug blogs too. then I was reminded that cultures have used all kinds of objects as currency, and as stores of value. gold just happens to be the most historically relevant and widely understood, culturally.
yes. I spent too much time on goldbug blogs too. then I was reminded that cultures have used all kinds of objects as currency, and as stores of value. gold just happens to be the most historically relevant and widely understood, culturally.
You mean from Jews, during World War II? Then you're probably right :)
No. By the civil servants in the USA.
I also hear 9/11 was set up by the Americans, the moon landing was faked etc etc.
Yet as far as I know just making 3 people keep a secret for years is next to impossible.
If people wants me to believe in frauds so enourmous that you'll need hundreds of people to never mention anything - then I will need pretty solid evidence.
Yet as far as I know just making 3 people keep a secret for years is next to impossible.
If people wants me to believe in frauds so enourmous that you'll need hundreds of people to never mention anything - then I will need pretty solid evidence.
You mean just like NSA warrantless surveillance.
If it is done by the state you can keep it confidential, can't you?
And I don't think that you need hundrets of people to steal gold. Several people with state orders to delete and change regord will be enough.
If it is done by the state you can keep it confidential, can't you?
And I don't think that you need hundrets of people to steal gold. Several people with state orders to delete and change regord will be enough.
The NSA case however strengthens my argument:
Someone did come forward.
Someone did come forward.
[deleted]
It could have been just swapped out for gold coated lead bars.
Hard to tell without any transparency.
Hard to tell without any transparency.
The down vote is exactly why polls will continue to get it wrong. Every time I make a comment on economics or tax policy on HN, I get down voted. I will stick to tech, and everyone can keep getting surprised every election.
As far as I remember, some gold bars where discovered (in Australia I think) that had been cut open and they found lead or substandard gold in them. If that happened at the Fed you can only imagine the meltdown
When we build systems, we run tests to see if they actually work the way we think the should. We verify, as independently as possible, because it is important.
What would happen if we went to evidence based banking instead of just taking the word of people with obvious ulterior motives.
What would happen if we went to evidence based banking instead of just taking the word of people with obvious ulterior motives.
Somebody'd figure out how to game a blockchain, or just render it irrelevant. You cannot engineer around human ingenuity. But it's always so much fun to watch people try.
That's not the point I'm trying to make. A simple way to test this system would be to allow the 'owners' of the gold to count it once in a while. As it is, there's no verification of anything.
A system with no transparency or verifiability is just waiting for abuse.
A system with no transparency or verifiability is just waiting for abuse.
Best reason NOT to repatriate it:
https://www.washingtonpost.com/news/morning-mix/wp/2017/03/2...
Record 220-pound gold coin stolen from German museum in mysterious heist
https://www.washingtonpost.com/news/morning-mix/wp/2017/03/2...
Record 220-pound gold coin stolen from German museum in mysterious heist
Really digging this one. That's why I proactively not listen to investors/consultants who suggest to buy some gold derivates for savety purposes.
In other regards: What's the point of the author? That's how the "king's peace" works since forever. Having the biggest stick and control over the valuable stuff makes you the king. And as long as you provide a stable leadership live of people is mostly peaceful. That's why people are willing to accept this trade. It's unfair but we actually want it that way. And what should the others do? Say "yeah, we totally accept that he has us by the balls"? No they act like it would be their decision so that they also keep some of their own power.
It seems the author is smart enough to know all this, so seriously: What's he attempting to achieve here?