Why Are Germany Repatriating Their Gold?
The Real Asset Company
This week few
will have missed reports that Germany is getting closer to bringing
investment reserves home. Following questions asked in Parliament
in 2012 regarding the 3,396 tonnes of gold bullion, the Bundesbank
are set to announce tomorrow a new concept in how they store Germanys
an exclusive by German newspaper Handelsblatt, Buba intends to remove
some of its gold held in New York, and all of the gold held by the
Banque de France. Considering various representatives of the German
central bank denied claims that they would be looking into repatriating
bullion investments, one has to wonder whats made them
take such a decision.
When the repatriation
issue raised its head late last year, the mainstream media coverage
of Germanys actions regarding their gold reserves seems to
have an underlying accusatory tone to it. Its almost as if
by the Bundesbank openly admitting it is looking out for its own
finances, for its own country and its citizens, it is being unpatriotic
to the global cause of pretending that a highly leveraged, fiat
money, banker-centric, government-spending driven economy is exactly
how things work best.
the first country to ask questions about its gold bars, let alone
repatriate it. Switzerland is also raising plenty of questions and
Venezuela finished repatriating their gold earlier this year. So
what does repatriating the countrys gold say about the sovereignty?
There are two
geopolitical reasons for a country taking custody of anothers
gold; the first is for ease of transport for payment purposes, the
second is to protect the gold from geopolitical risk.
The ease of
transport for payment purposes can be argued to still be a relevant
reason, particularly given moves by China, India, Russia and Iran
to make gold payments for oil and wheat. However, the chances of
the US, UK and France demanding payments in gold in the near future
as they desperately try to prop up their own currencies is unlikely,
particularly as Germany is a successful export nation to these countries.
This was one of the reasons for Venezuelas movement of gold
into Brazilian and Chinese custody theyre trading partners
with useful exports and are more likely to accept gold.
gold was primarily kept in the US on account of the physical threat
from Russia. This seemed reasonable at the time; the US was the
bigger and lesser of two evils. The big guy in the playground can
be an allay, for a time.
Much of Germanys
gold held in the US has never made it to Germany; it started life
as German gold reserves in a US vault somewhere. This was on account
of the European country running trade surpluses between the 1950s
and the end of the Bretton Woods. German gold reserves between 1950
and 1971 went from zero to 3,600 metric tonnes, in the same period
US reserves fell by 11,000 tonnes.
But the threat
no longer remains, so why hasnt the gold been moved back to
Germany? Handelsblatt reports that no gold will be kept in France
by Germany. Presently 11% of the 3,396 tonnes is held there. As
Bundesbank board member Carl-Ludwig Thiele said last year there
was no compelling reason for storage in the French capital given
the current geo-political landscape.
2. Do not
trust the custodian country to keep track of it when lending it
Back in the
mid-1920s, the head of the German Central Bank, Herr Hjalmar Schacht,
went to New York to see Germanys gold. However the NY Fed
officials were unable to find the palette of Germanys gold
bullion. The Chairman of the Federal Reserve, Benjamin Strong was
mortified, but to put him at ease Herr Schacht turned to him and
said Never mind, I believe you when you when you say the gold
is there. Even if it werent you are good for its replacement.
Both GATA and
Bring Back Our Gold argue that central banks have either loaned
or sold short the majority of the countrys gold.
As GATA found out between 2008 and 2009 the Fed has gold-swap arrangements
with foreign banks but keeps them secret. This practice of loaning
out gold is not uncommon; its the worst kept secret ever.
However as Zerohedge point out this can lead to the eventual problem
that no ones sure whose gold is whose anymore having been
a sort of pass-the-parcel for many years. There is now a debate
as to whether Germany, or anyone else storing gold in a central
bank abroad, owns allocated gold or is merely a creditor
on a metal statement.
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© 2013 The
Real Asset Company