Originally posted on Tuesday, February 12, 2013
A “world historical” move?
As The GATA Dispatch reports: “Lauren Lyster today interviewed fund manager and “Currency Wars” author James G. Rickards about the Bundesbank’s attempt to repatriate some of Germany’s gold, a move Rickards considers “world historical” in importance, confirming that gold is “the real base money, high-powered money.”
33 Liberty Street courtesy of Wikipedia
This commentator is in complete agreement with Rickards that gold is “the real base money, high-powered money” and agrees that there are many signs that the world monetary authorities are giving respectful consideration to restoring the role of gold to its historical status of the real money base. The physical transportation of gold by the Bundesbank from beneath The Federal Reserve Bank of New York, 33 Liberty Street in New York City, back to Germany, however, is more likely to be administrative in nature.
As the excellent Ambrose Evans-Pritchard wrote in the UK Telegraph:
[T]he Bundesbank will announce on Wednesday that it intends to relocate the gold to vaults in Frankfurt, said by insiders to include parts of the old archive library. Germany has 3,396 tons of gold worth roughly £115bn, the world’s second-largest holding after the US. Most of the reserves were stored abroad for safety during the Cold War.
The bank holds an estimated 45pc of its gold at the US Federal Reserve in New York, and 11pc at the Banque de France, lower than originally thought.
A report by Germany’s budget watchdog in October revealed that the bank halved its holding in London a decade ago, a period when the Bank of England was selling part of Britain’s gold at the bottom of the market to buy euros.
The gold was purportedly withdrawn because London was charging €500,000 a year in storage costs. The Bundesbank said part of 930 tonnes brought back was melted down for checks, and “not one gram was missing”. It currently holds just 13pc of its total holdings at the Bank of England.
The Bundesbank says there is little reason to keep gold in Paris now that Germany is reunified and at peace. The bank will retain some reserves in London and New York for trading and liquidity purposes.
Many analysts say the world is moving towards a de facto gold standard again as China, Russia and other reserve powers boost their holdings to diversify out of dollars and euros.
Unlike Britain, Spain, Switzerland, Holland and others, Germany did not sell any of its gold when bullion was out of fashion. Nor did Italy. The two countries are now sitting on very substantial reserves that are starting to take on political significance.
And it may have been hastened, or even triggered, by the vulnerability of the New York City infrastructure as demonstrated by Hurricane Sandy than by policy considerations. As breathlessly reported by the New York Post:
It’s the biggest mystery on Wall Street.
Hurricane Sandy floodwaters inundated a 10,000-square-foot underground vault downtown, soaking 1.3 million bond and stock certificates — including bearer bonds that function like cash — and putting them in danger of turning to mush.
A contractor working for the vault owner, the Depository Trust and Clearing Corp., is feverishly working to restore the paper.
But the value of the threatened notes under 55 Water St. remains unknown to all but the innermost circle of Wall Street bankers.
One source said $70 billion in bearer bonds were in jeopardy.
DTCC — a depository controlled by the biggest financial firms on Wall Street — won’t say exactly what was in its vaults, how much the notes are worth, and who owns what.
Most of its member firms, including Deutsche Bank, JP Morgan Chase, Bank of America, UBS and Citi did not return calls.
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