Why Germany Wants To See Its US Gold
Sven Böll and Anne Seith
almost half of Germany's gold has been stored deep below the Federal
Reserve Bank of New York. Now, with the euro crisis swirling, German
politicians are asking their central bankers to take stock of the
reserves. Some even say that the gold should be shipped home.
President Jens Weidmann wanted to personally convince Peter Gauweiler
that the German gold was still where it should be. Early this summer,
the head of Germany's central bank took the obstinate politician
from the conservative Christian Social Union (CSU), a party that
is a member of the government coalition in Berlin, and a number
of his colleagues into the Bundesbank's inner sanctum: the gold
gold bars are stacked on industrial-strength shelves in a purpose-built
building in Frankfurt. An additional 76,000 bars of bullion are
stored in four safe boxes, in sealed containers.
But even this
personal inspection wasn't enough to reassure the visiting member
of parliament on the contrary: "The Bundesbank monitors
its domestic gold in an exemplary fashion," Gauweiler says,
"and this makes it all the more incomprehensible that the bank
doesn't look after its reserves abroad."
For quite some
time now, Gauweiler has been pestering the government and the Bundesbank
with questions concerning where and how the country's reserves are
stored, and how often they are checked. He has submitted requests
and commissioned reports on the topic.
Gauweiler celebrated his greatest triumph to date in his gold campaign,
which has been a source of some amusement for many fellow German
politicians: A secret report by the Federal Audit Office had been
made public and it contained stern criticism of the German central
bank in Frankfurt. The Bonn-based auditors urged a better inventory
system, including quality checks.
which even the bank's inspectors saw as nothing more than routine,
alarmed the Berlin political establishment. Indeed, the partially
blacked-out report read like the prologue to an espionage thriller
in which the stunned central bankers could end up standing in front
of empty vaults in the US.
German central bankers have contented themselves with written affirmations
from their American colleagues that the gold still remains where
it is said to be stored. According to the report, the bar list from
New York stems from "1979/1980." The report also noted
that the Federal Reserve Bank of New York refuses to allow the gold's
owners to view their own reserves.
this prompted strong reactions in Berlin: The relevant Bundesbank
board member Carl-Ludwig Thiele was summoned to Berlin to provide
an explanation to the parliamentary budget committee. Heinz-Peter
Haustein of the business-friendly Free Democratic Party (FDP) was
even quoted by Germany's mass-circulation Bild newspaper
as saying that "all the gold has to be shipped back."
otherwise reserved Thiele said that he found at least "part
of the debate" to be "rather grotesque." His financial
institution currently has more pressing problems. Bundesbank head
Weidmann, for example, is desperately fighting the European Central
Bank (ECB) decision to buy unlimited quantities of sovereign bonds
from crisis-ridden countries as a way of lowering their borrowing
costs. In addition, the Bundesbank has already pumped nearly €700
billion ($906 billion) into primarily southern European countries
as part of the euro-zone central bank transfers known as Target
reserves are currently worth some €144 billion and are not
stored "with dubious business partners," as Thiele stresses,
but rather with "highly respected central bankers."
There is in
fact nothing unusual about how Germany deals with the precious metal.
Many other central banks store a portion of their gold reserves
abroad. The Netherlands, for example, places its trust in its colleagues
in Ottawa, New York and London.
But the relationship
Germans have with their gold is a special one. Germany hoards nearly
3,600 metric tons of the precious metal only the US has more.
Much of this gold treasure was amassed under the Bretton Woods international
monetary system, in which the dollar served as the world's key currency
and was directly convertible to fixed quantities of gold.
gold standard was terminated in 1971, the current account surpluses
generated by Germany's "economic miracle" were partially
balanced out in gold. Thousands of US bars of gold alone were transferred
to German ownership.
But since the
euro is not backed by gold, such vast reserves are actually no longer
necessary. Nevertheless, the Germans continue to resolutely defend
them and every attempt to use this treasure has been met with
There has been
no lack of proposals: Former German President Roman Herzog wanted
to sell the gold to form the basis for a capital-based nursing care
insurance scheme. In 2002, FDP parliamentary floor leader Rainer
Brüderle proposed a fund for natural disasters. Former Bundesbank
head Ernst Welteke added to the debate by suggesting the foundation
of a national educational fund. But none of these ideas were ever
German Chancellor Angela Merkel of the conservative Christian Democratic
Union (CDU) shot down an idea by the euro partners to use the reserves
as collateral for euro bonds.
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© 2012 Spiegel Online