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Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

274 points by akrymski 9y ago

patrickk 9y ago
Bloomberg has a very interesting article on this topic also: https://www.bloomberg.com/news/features/2015-02-05/germany-s-gold-repatriation-activist-peter-boehringer-gets-results 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.
- phyalow 9y ago
  I'll just leave this here: http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-vault-largest-world-located-next-new-york-fed http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-...
  - owenversteeg 9y ago
    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.
    - dualogy 9y ago
      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 $100k, whatever the world perceives will be equally valid and equally workable. Doubly so since "you can't eat it", it's in the final consequence not broadly "needed at any price" for industry, and the actual supply for its prime purpose (preserve some proxy of wealth through the generations) need not be increased, and every physical ounce above or below ground is in extremis already owned by someone.
      - Zigurd 9y ago
        Yes, it's about the symbolism. The value of gold does not track the total value of other assets, making it unable to be use as a currency substitute because you would need too much of it to do anything meaningful. Revealing a "problem" with US-held gold would be a blow to US currency dominance. The value of such a shift in global power is vastly more than the total value of gold on the planet, which is about 8-9 trillion US$. In other words, gold is nowhere near able to become a currency substitute, but it is potentially a bomb that can damage the dollar.
        deleted 9y ago
        [deleted]
        NotSammyHagar 9y ago
        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?
        xyzzyz 9y ago
        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.
        9y ago
    - mannykannot 9y ago
      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?
      - tonfa 9y ago
        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?
        pas 9y ago
        20% of what? Most central banks have foreign reserves ( https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_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.
    - joering2 9y ago
      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.
      - NotSammyHagar 9y ago
        Uhm, there will be other problems if someone nukes nyc.
    - iamben 9y ago
      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).
      - avar 9y ago
        Which is around $280 billion, or about 1.5% of us GDP.
        nickjarboe 9y ago
        If the world decides to leave fiat currencies and return to gold, the value of gold will be much (10x?, 100x?) higher.
    - panarky 9y ago
      Exactly this. What is it about gold that triggers wild conspiracy theories from seemingly rational people?
  - oxryly1 9y ago
    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.
    - gumby 9y ago
      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.
      - pyvpx 9y ago
        it was slightly more useful in 2010 and before.
- the_mitsuhiko 9y ago
  > 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.
  - Theodores 9y ago
    "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 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.
    - slv77 9y ago
      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.
- erikb 9y ago
  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.
  - brianwawok 9y ago
    Wasn't that movie only? I read book longer before but I never remembered the empty vault thing...
    - ciroduran 9y ago
      In the TV show there is Xaro Xhoan Daxos http://gameofthrones.wikia.com/wiki/Xaro_Xhoan_Daxos http://gameofthrones.wikia.com/wiki/Xaro_Xhoan_Daxos
      - brianwawok 9y ago
        Xaro was in the books, but his plot was totally different. At no point did he open a giant empty vault.
        erikb 9y ago
        I seem to have forgotten that. Thanks for clearing it up!
  - mannykannot 9y ago
    There have been some recent analogs in real life. Mostly in the tech. industry, but also in luxury real estate.
    - aswanson 9y ago
      I read that as theranos on the tech side. What real estate scam are you referencing?
- mannykannot 9y ago
  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/RaiOfYap.htm http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...
  - mattnewton 9y ago
    I read about this in Felix Martin's Money: The Unauthorized Biography, which was quite good (in my uninformed opinion).
  - slv77 9y ago
    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.
Kenji 9y ago
"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.
- RandomBookmarks 9y ago
  Yeah. Can anyone comment on the trustworthiness of this blog post? I also do not understand what is there to negotiate (except storage fees).
  - tonfa 9y ago
    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.
  - the_mitsuhiko 9y ago
    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.
- jtc331 9y ago
  > 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.
pyvpx 9y ago
if you're into reading about gold, you can do a lot worse than reading the archives of http://fofoa.blogspot.com/ http://fofoa.blogspot.com/
darkhorn 9y ago
The gold is stolen.
- pyvpx 9y ago
  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.
- mamon 9y ago
  You mean from Jews, during World War II? Then you're probably right :)
  - darkhorn 9y ago
    No. By the civil servants in the USA.
    - deleted 9y ago
      [deleted]
    - reitanqild 9y ago
      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.
      - darkhorn 9y ago
        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.
f_allwein 9y ago
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.
- tonfa 9y ago
  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)
  - mannykannot 9y ago
    That argument is countered in the article. I will leave it as an exercise for the reader to read it.
    - ar0 9y ago
      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.
rwmj 9y ago
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)
- stupidhn 9y ago
  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.
  - rwmj 9y ago
    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.
    - pyvpx 9y ago
      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.
      - uncle_d 9y ago
        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?
        9y ago
chinathrow 9y ago
" 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
- late2part 9y ago
  Because "possession is 9/10ths of the law."
- VLM 9y ago
  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.
jbmorgado 9y ago
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.
- the_mitsuhiko 9y ago
  > 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.
- deleted 9y ago
  [deleted]
- erikb 9y ago
  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.
mariuolo 9y ago
If not stolen, what's the advantage for the USG in keeping it there?
- mtempm 9y ago
  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).
- saalweachter 9y ago
  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 http://www.bbc.com/news/business-15748696
  - tonfa 9y ago
    And according to that site, the US owes Germany over $400B, so not sure what the point would be.
tomohawk 9y ago
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.
- throwanem 9y ago
  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.
  - tomohawk 9y ago
    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.
21 9y ago
> 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.
- erikb 9y ago
  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.
  - ekianjo 9y ago
    > 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.
  - 21 9y ago
    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
    - Iv 9y ago
      I think that if Germany tries again to invade a neighbor, EU is over.
    - 9y ago
erikb 9y ago
> Gold is money, which is based on physical ownership, not on trust in the willingness and ability of another party to honor their promises. If you have gold, but you do not have it under your control, it is almost pointless to have gold. 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?
- dualogy 9y ago
  Well, for one he has some books to sell ;)
  - erikb 9y ago
    Yeah after reading more from his side, that's also what I'm guessing.
- sandworm101 9y ago
  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.
  - b5u 9y ago
    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-genius-says-another-crisis-is-coming.html http://nymag.com/daily/intelligencer/2015/12/big-short-geniu...
mdekkers 9y ago
...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?
- erikb 9y ago
  Try to take the gold from someone with a bigger stick. You know how that'll end, right?
  - mdekkers 9y ago
    Indeed. FYI, I'm Dutch, not German, and am just wondering about the whole "the world needs permission" kind of thing.
- VarFarYonder 9y ago
  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.
krona 9y ago
> 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.
- dualogy 9y ago
  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 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 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)
chvid 9y ago
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.
joosters 9y ago
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?
- pg314 9y ago
  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.
  - tonfa 9y ago
    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.
haddr 9y ago
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.
- prodmerc 9y ago
  Yeah, they have a history of keeping other countries' gold "safe", forever...
tmaly 9y ago
It could have been just swapped out for gold coated lead bars. Hard to tell without any transparency.
- secfirstmd 9y ago
  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
- tmaly 9y ago
  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.
perlgeek 9y ago
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?
- SFJulie 9y ago
  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.
- throwanem 9y ago
  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.
- rdl 9y ago
  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-12-billion-of-gold-to-venezuela/ http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...
deleted 9y ago
[deleted]
remind_me_again 9y ago
Democractic rule demands more explanation why I can not get back the property I own let alone I had to negotiate but fail. Is democracy only about voting every four years but know nothing what goes on?
mamon 9y ago
There's no need for Germany to invade other EU members, because the ultimate goal of EU was to give the Germans control over the Europe without using military force, and that's working pretty well for them - they can keep other countries in check just because they provide most of the money to EU budget. But, Switzerland is NOT an EU member, so that's a different story :)
- reitanqild 9y ago
  because the ultimate goal of EU was to give the Germans control over the Europe without using military force That sounds extremely fishy. Why would UK and France want to support a project like that? But, Switzerland is NOT an EU member, so that's a different story :) GP didn't say another EU member but rather a neighbour.
  - mamon 9y ago
    >>Why would UK and France want to support a project like that? They wouldn't, hence the Brexit :) Also, in the beginning it wasn't sole German domination, rather, it was German-French duopoly [1][2]. But now French economy got weaker, so that they are not equal partner to Germany anymore, and guess what? There are some politicians in France talking about Frexit [3], or at least giving up Euro as currency (which would result in EU collapse anyway). EDIT: as usual, HN is obsessed with references, even for things that are a) common knowledge b) mostly based on hundreds of facts, that are not so important in isolation, but are meaningful when seen as a trend. [1] http://www.nytimes.com/2011/12/09/opinion/can-merkozy-save-the-day.html http://www.nytimes.com/2011/12/09/opinion/can-merkozy-save-t... [2] http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721/Why-do-France-and-Germany-keep-breaking-EU-rules.html http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721... [3] http://www.express.co.uk/news/world/790846/marine-le-pen-promises-eu-referendum-frexit-within-six-months-french-presidential-election http://www.express.co.uk/news/world/790846/marine-le-pen-pro...
    - reitanqild 9y ago
      Something about extraordinary claims and extraordinary evidence. I see only the first.
sgt101 9y ago
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 $.
- mamon 9y ago
  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)
  - JumpCrisscross 9y ago
    Fine, 6x. $300bn. Considerable amount of money, but still comparable to the value of a handful of neighbourhoods' real estate in Manhattan.
  - adventured 9y ago
    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.
  - ars 9y ago
    > 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.
lemonsqueeze 9y ago
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.
maehwasu 9y ago
The article really dances around the obvious answer to the question in the title: "because Germany is a conquered puppet state of the US."
- mschuster91 9y ago
  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.
  - maehwasu 9y ago
    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.
  - ScottBurson 9y ago
    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.
  - _0ffh 9y ago
    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.
joosters 9y ago
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 https://www.bullionvault.com/gold-guide/ready-to-buy-gold
powera 9y ago
"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.
mercurialshark 9y ago
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.
- raverbashing 9y ago
  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
  - mcv 9y ago
    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?
    - tmsldd 9y ago
      "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...
JackFr 9y ago
Best reason NOT to repatriate it: https://www.washingtonpost.com/news/morning-mix/wp/2017/03/28/record-220-pound-gold-coin-stolen-from-german-museum-in-mysterious-heist/?utm_term=.44a89a7374c7 https://www.washingtonpost.com/news/morning-mix/wp/2017/03/2... Record 220-pound gold coin stolen from German museum in mysterious heist
kelvin0 9y ago
The opposite of this is 'Gold repatriation' https://en.wikipedia.org/wiki/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 http://www.bbc.com/news/world-latin-america-15900885
micahgoulart 9y ago
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.
mercurialshark 9y ago
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/2017/2017_02_09_transfer_gold.html http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK...

274 points by akrymski 9y ago

Bloomberg has a very interesting article on this topic also: https://www.bloomberg.com/news/features/2015-02-05/germany-s-gold-repatriation-activist-peter-boehringer-gets-results 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.

phyalow 9y ago
I'll just leave this here: http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-vault-largest-world-located-next-new-york-fed http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-...
- owenversteeg 9y ago
  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.
  - dualogy 9y ago
    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 $100k, whatever the world perceives will be equally valid and equally workable. Doubly so since "you can't eat it", it's in the final consequence not broadly "needed at any price" for industry, and the actual supply for its prime purpose (preserve some proxy of wealth through the generations) need not be increased, and every physical ounce above or below ground is in extremis already owned by someone.
    - Zigurd 9y ago
      Yes, it's about the symbolism. The value of gold does not track the total value of other assets, making it unable to be use as a currency substitute because you would need too much of it to do anything meaningful. Revealing a "problem" with US-held gold would be a blow to US currency dominance. The value of such a shift in global power is vastly more than the total value of gold on the planet, which is about 8-9 trillion US$. In other words, gold is nowhere near able to become a currency substitute, but it is potentially a bomb that can damage the dollar.
      - deleted 9y ago
        [deleted]
      - NotSammyHagar 9y ago
        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?
        xyzzyz 9y ago
        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.
        9y ago
  - mannykannot 9y ago
    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?
    - tonfa 9y ago
      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?
      - pas 9y ago
        20% of what? Most central banks have foreign reserves ( https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_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.
  - joering2 9y ago
    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.
    - NotSammyHagar 9y ago
      Uhm, there will be other problems if someone nukes nyc.
  - iamben 9y ago
    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).
    - avar 9y ago
      Which is around $280 billion, or about 1.5% of us GDP.
      - nickjarboe 9y ago
        If the world decides to leave fiat currencies and return to gold, the value of gold will be much (10x?, 100x?) higher.
  - panarky 9y ago
    Exactly this. What is it about gold that triggers wild conspiracy theories from seemingly rational people?
- oxryly1 9y ago
  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.
  - gumby 9y ago
    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.
    - pyvpx 9y ago
      it was slightly more useful in 2010 and before.
the_mitsuhiko 9y ago
> 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.
- Theodores 9y ago
  "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 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.
  - slv77 9y ago
    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.
erikb 9y ago
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.
- brianwawok 9y ago
  Wasn't that movie only? I read book longer before but I never remembered the empty vault thing...
  - ciroduran 9y ago
    In the TV show there is Xaro Xhoan Daxos http://gameofthrones.wikia.com/wiki/Xaro_Xhoan_Daxos http://gameofthrones.wikia.com/wiki/Xaro_Xhoan_Daxos
    - brianwawok 9y ago
      Xaro was in the books, but his plot was totally different. At no point did he open a giant empty vault.
      - erikb 9y ago
        I seem to have forgotten that. Thanks for clearing it up!
- mannykannot 9y ago
  There have been some recent analogs in real life. Mostly in the tech. industry, but also in luxury real estate.
  - aswanson 9y ago
    I read that as theranos on the tech side. What real estate scam are you referencing?
mannykannot 9y ago
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/RaiOfYap.htm http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...
- mattnewton 9y ago
  I read about this in Felix Martin's Money: The Unauthorized Biography, which was quite good (in my uninformed opinion).
- slv77 9y ago
  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.

Kenji 9y ago

"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.

RandomBookmarks 9y ago
Yeah. Can anyone comment on the trustworthiness of this blog post? I also do not understand what is there to negotiate (except storage fees).
- tonfa 9y ago
  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.
- the_mitsuhiko 9y ago
  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.
jtc331 9y ago
> 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.

pyvpx 9y ago

if you're into reading about gold, you can do a lot worse than reading the archives of http://fofoa.blogspot.com/ http://fofoa.blogspot.com/

darkhorn 9y ago

The gold is stolen.

pyvpx 9y ago
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.
mamon 9y ago
You mean from Jews, during World War II? Then you're probably right :)
- darkhorn 9y ago
  No. By the civil servants in the USA.
  - deleted 9y ago
    [deleted]
  - reitanqild 9y ago
    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.
    - darkhorn 9y ago
      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.

f_allwein 9y ago

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.

tonfa 9y ago
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)
- mannykannot 9y ago
  That argument is countered in the article. I will leave it as an exercise for the reader to read it.
  - ar0 9y ago
    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.

rwmj 9y ago

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)

stupidhn 9y ago
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.
- rwmj 9y ago
  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.
  - pyvpx 9y ago
    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.
    - uncle_d 9y ago
      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?
      - 9y ago

chinathrow 9y ago

" 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

late2part 9y ago
Because "possession is 9/10ths of the law."
VLM 9y ago
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.

jbmorgado 9y ago

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.

the_mitsuhiko 9y ago
> 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.
deleted 9y ago
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erikb 9y ago
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.

mariuolo 9y ago

If not stolen, what's the advantage for the USG in keeping it there?

mtempm 9y ago
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).
saalweachter 9y ago
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 http://www.bbc.com/news/business-15748696
- tonfa 9y ago
  And according to that site, the US owes Germany over $400B, so not sure what the point would be.

tomohawk 9y ago

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.

throwanem 9y ago
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.
- tomohawk 9y ago
  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.

21 9y ago

> 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.

erikb 9y ago
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.
- ekianjo 9y ago
  > 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.
- 21 9y ago
  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
  - Iv 9y ago
    I think that if Germany tries again to invade a neighbor, EU is over.
  - 9y ago

erikb 9y ago

> Gold is money, which is based on physical ownership, not on trust in the willingness and ability of another party to honor their promises. If you have gold, but you do not have it under your control, it is almost pointless to have gold. 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?

dualogy 9y ago
Well, for one he has some books to sell ;)
- erikb 9y ago
  Yeah after reading more from his side, that's also what I'm guessing.
sandworm101 9y ago
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.
- b5u 9y ago
  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-genius-says-another-crisis-is-coming.html http://nymag.com/daily/intelligencer/2015/12/big-short-geniu...

mdekkers 9y ago

...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?

erikb 9y ago
Try to take the gold from someone with a bigger stick. You know how that'll end, right?
- mdekkers 9y ago
  Indeed. FYI, I'm Dutch, not German, and am just wondering about the whole "the world needs permission" kind of thing.
VarFarYonder 9y ago
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.

krona 9y ago

> 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.

dualogy 9y ago
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 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 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)

chvid 9y ago

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.

joosters 9y ago

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?

pg314 9y ago
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.
- tonfa 9y ago
  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.

haddr 9y ago

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.

prodmerc 9y ago
Yeah, they have a history of keeping other countries' gold "safe", forever...

tmaly 9y ago

It could have been just swapped out for gold coated lead bars. Hard to tell without any transparency.

secfirstmd 9y ago
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
tmaly 9y ago
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.

perlgeek 9y ago

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?

SFJulie 9y ago
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.
throwanem 9y ago
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.
rdl 9y ago
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-12-billion-of-gold-to-venezuela/ http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...

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remind_me_again 9y ago

Democractic rule demands more explanation why I can not get back the property I own let alone I had to negotiate but fail. Is democracy only about voting every four years but know nothing what goes on?

mamon 9y ago

There's no need for Germany to invade other EU members, because the ultimate goal of EU was to give the Germans control over the Europe without using military force, and that's working pretty well for them - they can keep other countries in check just because they provide most of the money to EU budget. But, Switzerland is NOT an EU member, so that's a different story :)

reitanqild 9y ago
because the ultimate goal of EU was to give the Germans control over the Europe without using military force That sounds extremely fishy. Why would UK and France want to support a project like that? But, Switzerland is NOT an EU member, so that's a different story :) GP didn't say another EU member but rather a neighbour.
- mamon 9y ago
  >>Why would UK and France want to support a project like that? They wouldn't, hence the Brexit :) Also, in the beginning it wasn't sole German domination, rather, it was German-French duopoly [1][2]. But now French economy got weaker, so that they are not equal partner to Germany anymore, and guess what? There are some politicians in France talking about Frexit [3], or at least giving up Euro as currency (which would result in EU collapse anyway). EDIT: as usual, HN is obsessed with references, even for things that are a) common knowledge b) mostly based on hundreds of facts, that are not so important in isolation, but are meaningful when seen as a trend. [1] http://www.nytimes.com/2011/12/09/opinion/can-merkozy-save-the-day.html http://www.nytimes.com/2011/12/09/opinion/can-merkozy-save-t... [2] http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721/Why-do-France-and-Germany-keep-breaking-EU-rules.html http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721... [3] http://www.express.co.uk/news/world/790846/marine-le-pen-promises-eu-referendum-frexit-within-six-months-french-presidential-election http://www.express.co.uk/news/world/790846/marine-le-pen-pro...
  - reitanqild 9y ago
    Something about extraordinary claims and extraordinary evidence. I see only the first.

sgt101 9y ago

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 $.

mamon 9y ago
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)
- JumpCrisscross 9y ago
  Fine, 6x. $300bn. Considerable amount of money, but still comparable to the value of a handful of neighbourhoods' real estate in Manhattan.
- adventured 9y ago
  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.
- ars 9y ago
  > 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.

lemonsqueeze 9y ago

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.

maehwasu 9y ago

The article really dances around the obvious answer to the question in the title: "because Germany is a conquered puppet state of the US."

mschuster91 9y ago
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.
- maehwasu 9y ago
  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.
- ScottBurson 9y ago
  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.
- _0ffh 9y ago
  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.

joosters 9y ago

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 https://www.bullionvault.com/gold-guide/ready-to-buy-gold

powera 9y ago

"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.

mercurialshark 9y ago

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.

raverbashing 9y ago
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
- mcv 9y ago
  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?
  - tmsldd 9y ago
    "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...

JackFr 9y ago

Best reason NOT to repatriate it: https://www.washingtonpost.com/news/morning-mix/wp/2017/03/28/record-220-pound-gold-coin-stolen-from-german-museum-in-mysterious-heist/?utm_term=.44a89a7374c7 https://www.washingtonpost.com/news/morning-mix/wp/2017/03/2... Record 220-pound gold coin stolen from German museum in mysterious heist

kelvin0 9y ago

The opposite of this is 'Gold repatriation' https://en.wikipedia.org/wiki/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 http://www.bbc.com/news/world-latin-america-15900885

micahgoulart 9y ago

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.

mercurialshark 9y ago

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/2017/2017_02_09_transfer_gold.html http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK...