Is Germany's gold safe in New York ?
dw.com122 points by KnuthIsGod 2 hours ago
122 points by KnuthIsGod 2 hours ago
The fact that this question needs asking tells a lot about how other countries see the current administration.
They've been asking this question since before 2013. The writing has been on the wall since the US started demonstrating that it thinks debt monetisation is an acceptable strategy.
Have outlets like Deutsche Welle been speaking like this since 2013? I don't really think so. Not to defend the past administrations, but that the question is starting to hit mainstream media does in fact tell a huge lot about this current one.
This has been a topic of continuous debate since at least ~2000 in Germany. The German Wikipedia has a whole section covering it¹. Obviously, the debate gets more intense every time the relationship between Germany and USA gets strained.
¹) https://de.wikipedia.org/wiki/Deutsche_Goldreserven#Diskussi...
France was back in 1971, though it was less about safety and more about whether we actually had enough gold to delivery.
It a little different now. POTUS may not be put to bed before the sundowners hits and decide to order his minions to seize the gold on truth social.
"Debt monetization" and "seizing other countries' gold" are somewhat orthogonal.
Well I can't speak for all the people who own gold, but I expect the order of actions they'd generally prefer is move the gold to a vault somewhere they think is financially stable first and then engage in a relaxed debate about the merits of storing gold here or there second. It doesn't cost that much to move a bit of metal around.
If countries enter the lunatic phase of money printing you never quite know what they're going to do next. But it probably isn't going to be good for asset owners and it may well already be too late to get things out of well known vaults. Better to be a bit early.
Debt monetization is not happening. There's been significant expansion of the money supply, which got the US through COVID at a one-off cost of about 10% inflation in one year, which I think was a reasonable cost of covering the crisis (especially compared to the GDP response in less generous countries!)
What's happening is a much simpler, more drastic concern: does the US respect its international commitments?
The US stopped respecting its international commitments in Trump's first term when it single-handedly withdrew from the JCPOA (singed by way more countries than just the US) without a single valid reason to do so.
Since then, it flip-flopped on the Paris Agreement, single-handedly put tariffs on goods imported from literally every single country in the world, withdrew from WHO and so on and so on.
Not only does the US not respect the commitments it already agreed to, it hasn't done so for the past 10 or years.
This question has needed asking since 1971, when Nixon "temporarily" ended USD gold convertibility, if not before.
Sorry, but I really have to call this out as pedantic and irrelevant at a time when the main risk is the US going fascist. The Germans in particular are sensitive to that trend.
They're not motivated by an abstract argument. Any moment you're going to see a comment about how they should've put their money in crypto or some foolishness like that. This is not about central banking or government issued currencies. This is about a specific risk of dictatorship and war.
I don’t think this is correct. This is about German politics. Their central bank has been attempting to repatriate gold since 2013 in an effort to centralize their holdings. It’s also not just about the US. In theory, Germany could move all its gold holdings to Switzerland. Where there is a major trading hub. The fact that they want it back in the country is domestic politics.
Everything that happens in politics happens because someone managed to assemble a powerful enough coalition. Maybe some people wanted to repatriate gold before, but not enough to make it happen. Now suddenly, there are enough people.
pedantic, adjective.
marked by a narrow focus on or display of learning especially its trivial aspects
> This is not about central banking or government issued currencies. This is about a specific risk of dictatorship and war.
It's about both things. And the parent comment you are dismissing was also about the power of the president to upend the established order.
I want America to go back to being as it was before
Back when it used military power to commit war crimes the world over, and gained or maintained financial capital supremacy from it? As compared to now, when it can only use military power to commit war crimes on a smaller scale, and is throwing away American hegemony in the process?
> compared to now, when it can only use military power to commit war crimes on a smaller scale
The fact that the US is not as powerful as it used to be may actually make it dangerous. "On a smaller scale" doesn't mean it cannot destroy the world's economy, as we are seeing now.
It's notable how little effort they've put into legitimacy for the Iran war, compared to the "coalition of the willing".
Yeah actually that was preferable. Go look at the fuel prices around the world if you want to analyse why.
I don't mind paying more at the pump in the short term if it means the end of the American empire.
In a delicious irony, Trump is accelerating the transition to renewables he hates so much.
You sound like someone who learns all the memes about why the US is bad. Have you learned other memes, or maybe any history?
When it was stable and didn't do bad things blatantly like it's the norm.
That was a very narrow window of time, mostly the time between the fall of the USSR ending the Cold War up to 9/11, so about a 10 years period since the end of WW2.
Before that the USA was aiding and fostering violent dictatorships, helping them to perform coups all around if they were amenable to the US's interests (aka: they were anti-commies) like in Latin America, Iran itself, etc.; bombing countries where their right-wing coups failed like in Vietnam during its independence period after French rule, for example.
> didn't do bad things blatantly like it's the norm.
Sorry to break it to you, but heads in sand doesn't make history not happen...
I totally agree. Just remember that current events also happen and become history. maybe you picked your side, that's your choice.
People only notice now because the “right” kind of people are suddenly affected.
Just like the invasion of Ukraine became the most important topic globally for years, and made everyone virtue signal about how important sovereignty supposedly is, whereas sovereignty somehow didn’t matter in Afghanistan, Iraq, Libya, Mali, South Sudan, Iran, Lebanon, and I don’t know where else.
Ukraine is a pre-existing ally of Europe and the US. Why are you making this about "the right kind of people".
> reposting a flagged and deleted comment to this comment (why?)
The big difference before was that america commit war crimes, but it did so in a socially acceptable way and was able to keep a polite face in important company. It's like how being a manager at tech companies is 95% speaking affluently and sounding like you know what you're doing (and also like 80% being white). We used to sound like we knew what we were doing. Now we don't.
Ironically, that is what MAGA wants as well.
The trouble is that everyone chooses their own favorite bits from the past and ignores the rest, plus succumbs to unrealistically positive stereotypes about the past.
17th century America would be ideal !
Then again as a Brit I am a bit biased
You can't go back. When Trump goes away, the conditions that let him rise to power are still there.
Back when we justified foreign wars with Domino theory and it must be true because Walter Cronkite would never repeat something that wasn't a rigorously validated fact?
Or maybe 20ish years before that when we violently restructured the government or Iran at the behest of supposed allies?
Or how about when we sold our industry overseas because a steel mill who's pollution we can't control on the other side of the world is better than one in Ohio?
It boggles the mind that people cannot grasp that the sum total of bad and shortsighted decisions of the past are what created the present conditions.
But it was like this before. Its just that now the sewer that was keeping it all hidden has now broken and it is spewing out all over the world.
Probably safe as long as Germany is amenable to supporting "American interests" which can be anything and everything as decided by a human RNG they choose to elect.
isnt the question more like: "Is it _still_ there?"
:-))
We don't even need to theorize how this can go wrong. We've got a real example: the French CFA system that is used to do economic colonialism in West Africa [1]. Basically, it works like this:
14 French-speaking Africian former colonies keep significant (>50%) of their gold reserves with the French treasury and use the CFA Franc as a currency, which is pegged to the Euro.
The colonial model is one of discouraging or even outright banning being self-sufficient. Crops that might otherwise feed the local populace are replaced to exportable cash crops. In particular, that's the World Bank/IMF model of "helping".
Anyway, Germany isn't a US imperial interest in the same way Cote d'Ivoire is for France... yet. Still, there are other mechanisms beyond gold that the US uses to influence or even control Germany (ie NATO).
[1]: https://www.brookings.edu/articles/how-the-france-backed-afr...
Charles de Gaulle sent French warships to recover French gold. That was decades ago.
I think the question is moot now.
No.
You could replace the word Germany with the US and this article would still make sense.
Of course not. That's why Charles de Gaulle repatriated French gold from the New York Fed in the 1960s. Before Trump, there was Nixon, the US has form in reneging on its commitments.
its the wrong question!
The question should why has not Germany pulled gold out to server two goals:
1. Financial gain 2. another step towards economic independence from USA
France already did the right thing....
Pay attention, as it does not hurt the world and economic system for multiple world reserve currencies to exist....EU might as be a reserve currency.
Not really "should Germany move it?", rather "can Germany move it?"
The other article on France's gold reserves mentioned that France sold their older gold bars in the US, and used the money to purchase higher-standard gold bars in Europe. In their case, they did that over many decades and just finished now.
> In their case, they did that over many decades and just finished now
They repatriated the remaining gold (5% of reserve) over 2y.
The bulk of the gold that was held in the US was moved back in 60s.
Of course, why not? Imagine anything blocking it would crash wall street.
Do you think Europeans are going to have a problem buying/selling US stonks any time soon?
Well, France did it, sixty years ago, didn't it?
And the US almost killed their president for it.
What are you talking about?
The unproven but persistent conspiracy theory that the US was behind one or more assassination attempts on Charles de Gaulle. Often brought up in connection with gold, the exorbitant privilege, and beer.
At today's prices, that's around 1400 tons of gold. It's made out of lots of individual gold bars, and they can certainly move it in increments, by road then air or sea, unless the American government stops them doing it.
People ship million-dollar assets all the time. It would be a huge task to make 160,000 such trips, though.
Or like france did. Sell in the US, buy in london with delivery to your european vault of choice.
If they don't want to push down the prices with excess supply, they'd have to sell very slowly. Like France did.
Compared with the logistics of moving that much gold safely, "moving" it by selling it and buying the equivalent in less fraught location need not be that much slower.
If they're buying the same amount elsewhere then the buy pressure equals the sell pressure, might make an arb opportunity across the currencies
> the buy pressure equals the sell pressure, might make an arb opportunity across the currencies
The arb means you’re still suffering a price difference. You’re just paying “the market” to solve it for you.
Yes, you're paying arbitrage instead of shipping fees. Which is not unreasonable for commodity markets with different settlement locations.
They can also sell it in the US, buy it in Europe, as France did. It's also the preferable route because IIRC the Chinese have had suspicions about the quality of their gold holdings held in the US for sometime now. That is, US-stored gold is not of the same quality grade as in the rest of the world.
The usual claim, which is difficult to prove without physical access to the bars, is that some bars were made by melting and casting the confiscated gold coins that FDR gathered in the 1930s.
Such bars would not be to the 99.9 percent gold standard set by the London Bullion Market Association. They would instead be at about 90% purity, since American gold coins had 10% copper added, which makes the gold harder and more wear-resistant.
See https://www.bundesbank.de/en/press/press-releases/bundesbank... however, no explanation is given, only that the bars were melted, purified and then recast.
The Deutsche Bundesbank has a long list of every single gold bar in their possession (including those currently stored in GB and USA), including their weight (to 0.1 gram) and purity (at least 995/1000 as far as I can tell).
https://www.bundesbank.de/resource/blob/743058/9869caef634ce... - Federal Reserve Bank of New York starts at page 2016 (PDF:2019)
> US-stored gold is not of the same quality grade as in the rest of the world
... to put it mildly. Nobody has audited the gold in decades and even its owners (banks of foreign countries) are not allowed to inspect it.
> unless the American government stops them doing it.
Like they had any authority to dictate what Germany can do with their property, but hey
Yes, it's called the nuclear umbrella, Potsdam '45 and the fact that the Soviets are out of the equation. Even with the Soviets in place the Americans had no second thoughts about getting rid of Bretton Woods when it suited them.
Possession is 90% ownership. In this case, especially with Trump, it's 100%
or rather "move when?"
Moving 1,400 tonnes might take years. The window to act is closing.
It wasn’t safe in the 70s lol
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Not really Trump-specific is it, given Europe seized a ton of Russian assets. Maybe they just realized how easy that was and that nobody is going to war over it.
Freezing assets is simple. Seizing them is a huge pain. The EU has a hard time agreeing how to do it and who takes the liability for the Russian claims.
The EU has a hard time agreeing how to do anything, but the net effect for Russia seems about the same either way. If the 'freezing' lasts forever, what is the practical difference from the Russian perspective?
not committing now = keeping your options open. it's smart. usually who has more different available moves is in a better situation. money are not going anywhere and if EU doesn't urgently need them it's a nice bonus in future.
Unless Putin's scientists really discover a way to keep him alive forever, Russia will likely one day have a different leader and a different administration, which may be more amenable to diplomacy.
It sounds optimistic, but after Stalin came Khruschev, a much more "normal" person. Though it is true he didn't last even a decade. But there was a lot of political thaw in between, and some of this thaw survived.
Exactly this. There were thousands of warnings that the western order conducting arbitrary seizure of treaty-protected deposits held by the outgroup was always a slippery slope to everybody getting hurt, right back to confiscating insured Cypriot bank deposits a decade and a half ago.
But we live in a world where it is considered poor form to expect history qualifications in elected office, so this kind of crash, followed by the long descent, is baked in.
> insured Cypriot bank deposits
They were only insured up to something like 100kEuro, and it was values above that amount that got "bailed in" when the banks failed.
> arbitrary seizure of treaty-protected deposits
One, Russia’s stuff hasn’t been seized. Europe tried. But, in true form, failed to get its act together.
Two, is the argument really that Trump would be constrained by precedent if Europe and the U.S. got into a situation where seizing the former’s gold comes on the table?
Indeed, my stocks are still "frozen" by EuroClear and I can't use it - but somehow if you call it "not seizing" it is trustworthy behavior?
Europe didn't seize them, the EU and US froze them, and the dividends of those assets in the EU are being seized. There's a big difference, the US actually seizing any country's gold would be much more serious.
> given Europe seized a ton of Russian assets
Those assets are frozen, not seized.
To me frozen and seized are roughly interchangeable and mean, minimally, a temporary capture of control of an asset. Although maybe there's some strict legal difference I'm not aware of, I'm not sure there's much practical difference from the Russian PoV.
Confiscation would be e.g. definitively taking control and disposing of it, the proceeds going in to the general funds of the relevant country.
It’s brave to assume the gold is still there. Nobody checks it; last time they did, a bunch of bars were made of tungsten.
If you’re someone guarding the gold, you’d have to be stupid not to replace it with tungsten. A single bar is a lifetime of wages. It’s not like anyone will ever notice, it’s a reserve that will never be spent.
> Nobody checks it
The New York Fed’s gold is constantly being checked by bajillions of people.
> last time they did, a bunch of bars were made of tungsten
Source?
You can't just walk in and out carrying 12kg bars. Also I don't think you can just buy a bar of tungsten, you gotta smelt it, coat with gold, not trivial. That kind of operation would involve a lot of cooperating people. You also need to convert gold to dollars which might not be as trivial as you think.
So maybe that happens, but it's a lot more complicated. And, of course, there are measures against that happening.
Having your stuff stored in another country is ultimately a voucher of confidence, I can't see Trump or anyone else willingly misusing that trust. I do think the Western leaders need to temper their tendencies for isolationism these days, what's the alternative guys? And why even think that other people/cultures will want you in their swimming-pool if you can't keep your own one clean/functional?
(this comment also covers France recently bringing home their gold)
I do find the down votes odd, comment seem to contribute to the discussion, is it a reflex move because of intense dislike of the sitting US president?
> I can't see Trump or anyone else willingly misusing that trust.
I don't think many people share this sentiment.
> the Western leaders need to temper their tendencies for isolationism these days, what's the alternative guys?
Agreed, but tempering their tendencies for isolationism doesn't mean trusting a country that threatens to invade so-called allies. There are many other places, starting in the EU (since Germany is already in the EU, of course).
Western reflexes towards isolationism comes from two factors:
1. Long-term backlash against unchecked globalization. Every western country has to come to grips with the long-term impacts of the deindustrialization that globalization has enabled - this impacts their domestic societal stability, their long-term economic growth, and their ability to act internationally and independently.
2. One particular western leader (who happened to come to power, at least partly riding the wave of the backlash above) has accelerated this trend by taking the possibility of trans-Atlantic (+plus a few Pacific trends) tradebloc to form "globalization lite" as a middle ground solution (honestly, I have no idea how viable this would have actually been), and took it behind the shed and shot it, and then burned the corpse.
Globalization was bearable in part because America did infact run the game, and tended to run the game reasonably well. US aligned nations could all see China growing in strength, but they all figured that as long as they played their role and played nice, that when the time came, they could join the US in whatever new game it wanted to play, or join the US in helping push back. What they perhaps did not count on was just has careless America could be, or that America would want to stop playing with them at all.
Towards your point on confidence and trust. As others have pointed out, Trump has also violated trust in all sorts of ways. Trump delights in norm and trust breaking, as a form of dominance display - both as meat for the base, but also to satisfy his own impulses. But perhaps worse, I think a lot of people are now also calculating that Trump could easily misuse or violate trust without really knowing it. Iran should have clarified to everyone that the Trump administration is willing the act on deeply flawed (or perhaps absent) second order (or even move-countermove) planning.
> I can't see Trump or anyone else willingly misusing that trust
Does this demonstrate a lack of imagination or some kind of hermetically sealed alternative reality?
You really can’t see Trump abusing someone’s trust?
The guy only releases bad news when the markets are closed to avoid some minor corrections. I doubt he's about to crash the gold market.
He is not a trustworthy negotiating partner. This is a real estate developers approach to deals - they are only selling you a condo once, so they are going to screw you as badly as they can while still making the sale. They never plan to do business with you again.
Perversely, I’m not even sure that US seizing foreign owned gold would crash the gold market. Remember prices are set by incremental sales, not total held. So there would likely be a rush to buy gold domiciled outside the US, creating upwards price pressure if only temporary.
Sure he might want to do that, but I think his behavior shows he's still beholden to the markets to a large degree. A lot of his (self?) image is tied into 'economic performance', rightly or wrongly.
that's not why. https://en.wikipedia.org/wiki/Sundowning
Yes the increasing erratic behaviour and vulgar language are signs. This weekend was I believe the first F bomb dropped in writing by him.
He posted it at 8:03 AM though... (12:03 PM UTC, and he was in D.C.)
https://truthsocial.com/@realDonaldTrump/posts/1163519987825...
> I can't see Trump or anyone else willingly misusing that trust
Is this sarcasm? It’s hard to tell these days.