Bundesbank Continues Golden Damage Control: Invokes Ghosts Of Simon Gruber And Goldfinger

It appears that the Bundesbank has never heard of the saying: when in a hole, stop digging (neither has any Keynesian in the history of humanity, but that's a different story). For the full plotline on Germany and its tungsten gold, read here, here, here, here and here.

From Andreas Dobret, member of the Executive Board of the German Bundesbank, speech to FRBNY's Bill Dudley

Remarks on German gold reserves

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.

Let’s get back to facts and figures: I would like to remind you that our gold reserves are part of the German currency reserves. These were accumulated over time thanks, in part, to Germany’s economic boom in the 1950s and 1960s. Germany’s growing economic strength, especially its strong external position, resulted in rather large trade account surpluses, most of them acquired in US dollars. At that time, the International Monetary System, known as the Bretton Woods System, was dominated by the US currency. As long as this system was in force, which was up until 1971, the US Fed was obliged to exchange its currency for gold.

Any current account surplus thus resulted in an increase in Germany’s gold reserves. This gold was stored in US vaults for obvious reasons [ZH: sorry, we don't have an econ PhD: what are the "obvious reasons"?]. This was not only the case for the gold hold by the Bundesbank – it was, in fact, common practice. By the way: it was the only practical thing to do, since running a trade account deficit meant a decrease in gold stocks.

Thus, we are now looking back at sixty years not only of fruitful cooperation in many fields and international fora, but also of storing gold and trading via the New York Fed. As a matter of fact, it is sensible for us to do so in New York, as Frankfurt is not a gold trading venue.

Throughout these sixty years, we have never encountered the slightest problem, let alone had any doubts concerning the credibility of the Fed [ZH may, and likely will, soon provide a few historical facts which will cast some serious doubts on this claim. Very serious doubts]. 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.

At the same time, you can be assured that we are confident that our gold is in safe hands with you. The days in which Hollywood Germans such as Gerd Fröbe, better known as Goldfinger, and East German terrorist Simon Gruber, masterminded gold heists in US vaults are long gone. Nobody can seriously imagine scenarios like these, which are reminiscent of a James Bond movie with Goldfinger playing the role of a US Fed accounting clerk.

While gold is important, we have to combat a crisis of confidence in the euro area. This is the task we need to concentrate on. And we will do so.

Thank you for your attention.

And that was it for Herr Dombret's comments. Which is good: because really, when in a hole...

As for the full true story, there is much more here, which we hope to reveal soon in its entirety. We are confident our German readers (and not only) would find the complete, historically-documented details, quite stunning.

Comments

[Cap Matifou]

in goldfinger we learn something about the talisman of fear

http://swiss-bank-accounts.com/e/fiction/goldfinger/index.html

'The other and by far the major defect is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is dug out of one corner of the earth is at once buried again in another corner.'

[bubbleshooter]

why would the Bundersbank prefer to store the majority of their gold in America rather than the UK, which is home to the LBMA and far closer and easier to retrieve gold from by road transport if need be. The Bundersbank has already removed most of its gold from London back around 1999.

their argument about Frankfurt not being a gold trading centre, so leave it in America makes little sense.