Germany Tells New York Fed: Give Us Our Gold

Germany Tells New York Fed: Give Us Our Gold
January 18, 2013

Germany's central bank plans to bring back to Germany almost 700 tons of gold reserves it keeps in New York and Paris.

By 2020, half of its gold bars will be in its vaults, the Deutsche Bundesbank said in its January 16 announcement. It currently keeps less than a third at home.

The bars were originally taken out of Germany in the 1950s as a precaution against an invasion from the Soviet Union.

The Bundesbank will no longer keep any of its reserves in Paris.

It will reduce the amount it holds in the New York Federal Reserve Bank from 45 percent to 37 percent of its reserves, by the end of the decade.

Leaving Gold in London

No gold will be moved out of the Bank of England's vaults, however. The Bundesbank will still keep 13 percent of its total reserves in London.

Curiously, just three months ago, the Bundesbank went out of its way to give the impression that it was just fine with having a good portion of its gold stored with the New York Fed. Bundesbank Executive Board Member Andreas Dombret delivered a speech in which he spoke about the gold and directly addressed New York Fed President Bill Dudley, who was in the audience:

    Please let me also comment on the bizarre public discussion we are currently facing in Germany on the safety of our gold deposits outside Germany – a discussion which is driven by irrational fears.

    In this context, I wish to warn against voluntarily adding fuel to the general sense of uncertainty among the German public in times like these by conducting a “phantom debate” on the safety of our gold reserves.

    The arguments raised are not really convincing. And I am glad that this is common sense for most Germans. Following the statement by the President of the Federal Court of Auditors in Germany, the discussion is now likely to come to an end – and it should do so before it causes harm to the excellent relationship between the Bundesbank and the US Fed.

    Throughout these sixty years, we have never encountered the slightest problem, let alone had any doubts concerning the credibility of the Fed. And for this, Bill, I would like to thank you personally. I am also grateful for your uncomplicated cooperation in so many matters. The Bundesbank will remain the Fed’s trusted partner in future, and we will continue to take advantage of the Fed’s services by storing some of our currency reserves as gold in New York.

Grassroots for Gold

The Bundesbank likely won't stop at keeping 37 percent of its gold supply at New York Fed. There is a major grassroots movement to bring all the gold home. MarketWatch reports:

     Under the slogan, “Repatriate our Gold!”, Gold Action has been gathering petitions for its campaign from a host of big names, such as Frank Schaeffler, a member of German parliament.

    “We believe it is essential to re-introduce a (partial) goldbacking for the world’s monetary system. And in order to back future national currencies, the gold needs to be physically present in the respective country,” says Gold Action.

There is a lesson for Americans here. If the Germans are spooked about gold held at the New York Fed, where things are relatively transparent, what should Americans think about US Treasury gold supposedly held at Fort Knox, but which no one is allowed to see?

Robert Wenzel (rw@economicpolicyjournal.com) is editor and publisher of EconomicPolicyJournal.com. Used with permission.