Dateline: Frankfurt, Germany
It’s nice to be back in Europe, even if most of the western half of it is falling apart.
But Germany is also the world’s second largest institutional owner of gold. The central bank has racked up over 1,000 tons of gold funded by trade surpluses after World War II.
While there’s little doubt that Germany has become another humorless police state, they do know their history when it comes to money. Many Germans are still concerned about the hyperinflation of the Weimar Republic and the devastation that experiment caused.
I was easily able to find more than one place selling gold and silver of all kinds to the retail public today. One outlet was Degussa, which is located in a beautiful old home on a side street near the Frankfurt train station. I haven’t done any due diligence on them, but they offer prices that — while higher than those in the US — are somewhat reasonable for the EU; and you can buy or sell gold and silver on the spot.
Plus, they had a decent supply of Austrian Philharmonics, one of my best gold coins to buy.
A slow response
However, the real story about gold in Germany is the fact that the country’s central bank, Bundesbank, is having quite a hard time getting their gold back from the New York Federal Reserve.
As recently as fifteen years ago, all but about two per cent of Germany’s vast gold holdings were held underground in New York, London, and Paris. Governments like the United States still had a scrap of credibility left and moving all that gold back to Germany sounded like a real chore.
German banks have recently spoken out, however, about widespread gold price manipulation by other western banks, saying it’s one of the biggest current financial scandals.
Perhaps as a consequence, Bundesbank announced three years ago their plans to bring a large share of its gold to Germany. Call it a political move, but Germany figured they should be storing their own gold and not leaving so much of their gold holdings in other bankers’ vaults.
After all, would you trust the US central bank to store YOUR gold?
Last month, the German press reported that a paltry 37 tons of gold were brought to Frankfurt. Of those 37 tons, only five came from the New York Federal Reserve; the rest came from Paris.
To put it kindly, the German people were a bit upset. Rumors have long swirled that the US government doesn’t even own its own gold in Fort Knox, let alone have the gold it holds as an offshore custodian for other governments.
While thieving central bankers are all too happy to trust each other, the citizens of their respective countries are a bit more skeptical. Considering that the US is a deeply indebted nation promoting its military and political agenda around the world, it’s not inconceivable that the US government leased out or sold off other countries’ gold in its possession.
The fact that Germany was rebuffed the opportunity to audit its gold at the New York Fed didn’t exactly put any minds at ease. You would think someone with billions of dollars in your custodianship would be allowed a look every few decades, but no. “Security” was among the reasons German officials were denied an audit of their gold holdings in New York.
Only after Germany demanded 300 tons of gold back from the New York Fed were they allowed to peek their heads into one of the rooms where their largesse was allegedly stored.
A questionable history
As if being denied access to your holdings isn’t enough to cause a stir, the Federal Reserve actually sent “bad delivery” gold bars to Bundesbank’s gold cage at the Bank of England in 1968 as repayment for gold swaps. The Fed literally sent lesser quality gold to be held for the Germans… and the Bank of England agreed to keep it quiet.
So much for “trust” among central banks.
In an effort to save face, Bundesbank has mouthed the American line full of excuses as to why so little of its gold has been returned to it.
But the fact remains that not only does the Fed have a poor history of being above board with German gold, it has repeatedly refused to return all of Germany’s gold at once, saying it’s not possible.
Should it take eight years to send a few boatloads of gold to Frankfurt? Surely you or I could do it a lot faster than that.
Unless, of course, the gold doesn’t exist. It wouldn’t be unreasonable to think that the US has lent out or sold Germany’s gold and is now scrambling to send back whatever it can.
Hedge fund manager William Kaye created a stir recently when he said that “Germany won´t ever see its gold again” because central banks “lent the gold to U.S. Banks such as Goldman Sachs and JP Morgan” to lower the price of gold.
Of course, Germany has every right to get its own gold back. The US has postured that the gold is in an older form not up to modern standards, meaning it needs to be melted down. How convenient when German gold is being returned to its borders at a trickling pace.
Even if Germany does get all of its gold back eventually, the fact that the US has taken so long to get it there brings up many questions, including whether the gold being returned didn’t exist before and was purchased solely to return to the Germans.
If so, where is the rest of the gold held for foreign nations? The track record of the US for returning gold to other sovereign nations is weak at best.
Now that The Land of the Free is losing its luster as an economic powerhouse, even other thieving governments are coming to the realization that it can’t be trusted.
If one of the most influential nations on the planet can’t get satisfaction from the bankrupt United States, what makes you think you will either? This gold fiasco is just another ticking time bomb waiting to explode.
Latest posts by Andrew Henderson (see all)
- “Hell Yes!”: 2 hard lessons I learned while going offshore - June 21, 2017
- Five US Tax Myths about expats, nomads, and renunciation - June 16, 2017
- How Portugal’s Golden Visa program became so inefficient - June 12, 2017