Exclusive: Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."

Tyler Durden's picture

Over the past several years, the German people, for a variety of justified reasons, have expressed a pressing desire to have their central bank perform a test, verification, validation or any other assay, of the official German gold inventory, which at 3,395 tonnes is the second highest in the world, second only to the US. We have italicized the word official because this representation is merely on paper: the problem arises because no member of the general population, or even elected individuals, have been given access to observe this gold. The problem is exacerbated when one considers that a majority of the German gold is held offshore, primarily in the vaults of the New York Fed, and at the Bank of England - the two historic centers of central banking activity in the post World War 2 world.

Recently, the topic of German gold resurfaced following the disclosure that early on in the Eurozone creation process, the Bundesbank secretly withdrew two-thirds of its gold, or 940 tons, from London in 2000, leaving just 500 tons with the Bank of England. As we made it very clear, what was most odd about this event, is that the Bundesbank did something it had every right to do fully in the open: i.e., repatriate what belongs to it for any number of its own reasons - after all the German central bank is only accountable to its people (or so the myth goes), in deep secrecy. The question was why it opted for this stealthy transfer.

This immediately prompted rampant speculation within various media outlets, the most fanciful of which, of course, being that the Bundesbank never had any gold to begin with and has been masking the absence all along. The problem with such speculation is that, while it may be 100% correct and accurate, there has been not a shred of hard evidence to prove it. As a result, it is merely relegated to the echo chamber periphery of "serious media" whose inhabitants are already by and large convinced that all gold in the world is tungsten, lack of actual evidence to validate such a claim be damned (just like a chart of gold spiking or plunging is not evidence that a central bank signed the trade ticket, ordering said move), and in the process delegitimizing any fact-based investigations that attempt to debunk, using hard evidence, the traditional central banker narrative that the gold is there and accounted for.

And hard evidence, or better yet a paper trail of inconsistencies, is absolutely paramount when juxtaposing the two most powerful forces of our times: i) the central banking-led status quo (which is de facto the banker-led oligarchy whose primary purpose in the past several centuries has been to accumulate as much as possible of the hard asset-based fruits of people's labor, who toil in exchange for "money" created out of thin air - a process which could be described as not quite voluntary slavery, but the phrase would certainly suffice), and ii) "everyone else", especially when "everyone else" still believes in the supremacy of democratic forces, accountability, and an impartial legal system (three pillars of modern society which over the past 4 years we have experienced time and again have been nothing but mirages). Because without hard evidence, not only is the case of the people against central bankers non-existent, even if conducted in a kangaroo court co-opted by the banker-controlled status quo, it becomes laughable with every iteration of progressively more unsubstantiated accusations against the central banking cartels.

Finally, when it comes to cold, hard facts, which expose central banks in misdeed, even the great central banks have to be silent silent, as otherwise the overt perversion of justice will blow up the mirage that modern society lives in a democratic, laws-based world will be torn upside down.

And while others engage in click-baiting using grotesque hypotheses of grandure without any actual investigation, reporting or error and proof-checking to build up hype and speculation, which promptly fizzles and in the process desensitizes the general public and those actually undecided and/or on the fences about what truly goes on behind the scenes, Zero Hedge travelled (metaphorically) in space - to London, or specifically the Bank of England Archives - and in time, to May 1968 to be precise.

While there we dug up a certain memo, coded C43/323 in the BOE archives, official title "GOLD AND FOREIGN EXCHANGE OFFICE FILE: FEDERAL RESERVE BANK OF NEW YORK (FRBNY) - MISCELLANEOUS", dated May 31, 1968, written by a certain Mr. Robeson addressed to the BOE's Roy Bridge as well as its Chief Cashier, and whose ultimate recipient is Charles Coombs who at the time was the manager of the open market account at the Fed, responsible for Fed operations in the gold and FX markets.

This memo, more than any of the other spurious and speculative accusation about Buba's golden hoard, should disturb German citizens, and of course the Bundesbank (assuming it was not already aware of its contents), as the memo lays out, without any shadow of doubt, that the BOE and the Fed, effectively conspired to feed the Bundesbank due gold bars that were of substantially subpar quality on at least one occasion in the period during the Bretton-Woods semi-gold standard (which ended with Nixon in August 1971).

The facts:  

At least two central banks have conspired on at least one occasion to provide the Bundesbank with what both banks knew was "bad delivery" gold - the convertible reserve currency under the Bretton Woods system, or in other words, to defraud - amounting to 172 bars. The "bad delivery" occured even as official gold refiners had warned that the quality of gold emanating from the US Assay Office was consistently below standard, and which both the BOE and the Fed were aware of. Instead of addressing the issue of declining gold quality and purity, the banks merely covered up the refiners' complaints 

It is this that the Bundesbank, the German government, and the German people should be focusing on. If in the process this means completely ridiculing the Buba's "she doth protest too much" defense strategy that what is happening in the media is a "phantom debate" as per Andreas Dobret's recent words, so be it. In fact, one may be well advised to ignore anything Buba has said on this matter, because in attempting to hyperbolize the matter out of irrelevancy, the Buba is now cornered and will have no choice now but to explain just what the true gold content of the gold even in its possession is, let alone that which is allocated to the Buba account 50 feet below sea level, underneath the infamous building on Liberty 33.

Full May 1968 memo from the BOE to the NY Fed: highlights ours:




U.S. Assay Office Gold Bars


1.  We have from time to time had occasion to draw the Americans’ attention of the poor standards of finish of U.S. Assay Office bars. In addition in 1961 we passed on to them comments from Johnson Matthey to the effect that spectrographic examination did not support the claimed assay on one bar they had so tested (although they would not by normal processes have challenged the assay) and that impurities in the bar included iron which caused some material to be retained on the sides of crucible after pouring.


2. Recently, Johnson Matthey have put 172 “bad delivery” U.S. Assay Office bars into good delivery form for account of the Deutsche Bundesbank. These bars formed part of recent shipments by the Federal Reserve Bank to provide gold in London in repayment of swaps with the Bundesbank. The out-turn of the re-melting showed a loss in fine ounces terms four times greater than the gross weight loss. Asked to comment Johnson Matthey have indicated verbally that:-


(a) the mixing of “melt” bars of differing assays in one “pot” could produce a result which might be a contributing factor to a heavier loss in fine weight but they did not think this would be substantial ;


(b) a variation of .0001 in assay between different assayers is an extremely common phenomenon;


(c) over a long period of years they had had experience of unsatisfactory U.S. assays


3. It is not, however, possible to say that the U.S. assays were at fault because Johnson Matthey did not test any of the individual bars before putting them into the pot.


4. The Federal Reserve Bank have informed the Bundesbank that adjustments for differences in weight and refining charges will be reimbursed by the U.S.Treasury.


5. No indication should, of course, be given to the Bundesbank, or any other central bank holder of U.S. bars, as to the refiner’s views on them. The peculiarity of the out-turn will be known to the Bundesbank: it has so far occasioned no comment.


6. We should draw the attention of the Federal to the discrepancy in this (and any similar subsequent such) result and add simply that the refiners have made no formal comment but have indicate that, although very small differences in assay are not uncommon, their experience with U.S. Assay Office bars has not been satisfactory.


7. We hold 3,909 U.S. Assay Office bars for H.M.T. in London (in addition to the New York holding of 8,630 bars). After the London gold market was reopened in 1954 we test assayed the bars of certain assayers to ensure that pre-war standards were being maintained. It might be premature to set up arrangements now for sample test assays of U.S. Assay Office bars but if it appeared likely that the present discontent of the refiners might crystalise into formal complain we should certainly need to do this.  In the meantime I would recommend no further action.


31st May 1968



To summarize: Bank of England discovers discrepancies with US Assay Office gold bars, notifies the NY Fed that its gold bars have major "bad delivery" issues, but, and this is the punchline, on this occasion, we'll keep it quiet, because the Bundesbank got these bars. This is merely one documented assay occasion: one can imagine that of the hundreds of thousands of gold bars in official circulation, the "good delivery" quality of bars outside of the US, and perhaps BOE, official holdings has progressively declined over the decades of Bretton Woods. One can also only imagine what has happened to all those "good delivery" bars currently held by the Fed as custodian at the NY Fed. Literally: imagine. Because there is no way to check what the real gold consistency of these gold bars is, and whether the refiners found ongoing future inconsistencies with "good delivery" standards of bars handed off to other "non-core" central banks. And, yes, without further evidence the above is merely speculation.

As to the remaining relevant facts: the US ran out of good delivery gold in March 1968 and only had coin bars remaining. Which is why it closed the gold pool and went to a two-tier price system. The Bundesbank went on to cover some of the outstanding gold debts of the Fed to the gold pool. Subsequently, the US then did several deals with the BOC to get a substantial amount of gold to pay back the Bundesbank which was sent over to England from March until June 1968. One can, again, only speculate on the quality of said gold. The Fed then created unsettled accounts to account for these transfers between itself and the Buba.

In light of the above facts and evidence, one can see why the Buba is doing all in its power to avoid the spotlight being shone on the purity of its gold inventory: after all the last thing the German central banks would want is someone to go through the publicly available archived literature, to put two and two together, and figure out that it does not take one massive "rehypothecation" (see "to Corzine") event for German gold credibility to be impaired: all it takes is death from a thousand micro dilutions over the decades to get the same end result. Because chipping away one ounce here, one ounce there for years and years and years, ultimately adds up to a lot.

We eagerly look forward to the Buba's next iteration of self-defense. We can only hope that this one does not include a reference to a "phantom debate", to "East German terrorist Simon Gruber" or to Goldfinger, as it will merely further destroy any remaining credibility the Bundesbank may have left in this, or any other, matter.

* * *

Look forward to more archive-based disclosure ot what may have happened to Buba's, and not only, gold in the coming days and weeks.

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Peter Pan's picture

I didn't know there were international waters on the east German border.

Dr. Richard Head's picture

And Mitt didn't know Iran did. Do you think MIC cheerleaders care about the facts? Just bomb them, steal their gold, and steal their beer even if it because they talk funny.

In the words of Maynard, "Let's have a war and build a New Jersey. Let's have a war, so you can go and die. Let's have a war, crank up the Dow Jones. Let's have war and clean out this place."

knukles's picture

Doc, you forgot the oil.  Gotta steal their oil, too.  Best they have both gold and oil.  Then we can occupy for the long term and really fuck up the culture.

They hate us for our Feifdoms

Dr. Richard Head's picture

I want a beer girl in those big people leprechaun outfits

willwork4food's picture

I'll take two and a 6-pack to go please.

cowpieflapjack's picture

They hate us for our greedoms.

TheFourthStooge-ing's picture


I didn't know there were international waters on the east German border.

It's the other Strait of Hormuz. Just remember that the next time someone uses the term Straits of Hormuz.

jimijon's picture

Diluted Alchemy. What is real? What is matter? The delusion / illusion that only appointed alchemists can conjure authentic numbers.


DollarMenu's picture

Damn, this shit is better than any TV show.

Thanks TD & ZH.

mick_richfield's picture

True, but there was a movie with Brad Pitt that was based on this web site.
It was pretty good.

old naughty's picture

"...better than any TV show."

OMG, you are comparing this to them TV shows, still?

Who around here still hope to get reality from them?

saints51's picture

Mr. Panos intercepted delivery. Greeks have it stashed in their mattresses.

jmcadg's picture

Is Chavez melting down his hoard as we speak?

thecoloredsky's picture

depends if ghaddafi's gold was pure

Seasmoke's picture

Argo Fuck Yourself

Joebloinvestor's picture

The United States says to trust and obscure.

What a great system for a reserve currency.

Seize Mars's picture

Fraud. Theft. Lies. Threats. Invasion, murder.

Government is great!

Let's put them in charge of my fucking health care.

Oh, and by the way, they'd really, really like to disarm us as well.

Miffed Microbiologist's picture

Bought another gun yesterday. Gun store was doing great business , more than last election. There's many out there that are thinking along your lines of thought. People I now are either asleep and content or wide awake and prepping. We live in very interesting times.


Parrotile's picture

As an outsider I have this vision of a "Post Financial Apocalyptic" America where a large chunk of the population are indulging in the mother of all shootouts with each other - bullets (and larger ordnance) flying everywhere, probably pretty indiscriminately too.

Ever thought for one moment that this might be just what TPTB want to happen - the "Armed, therefore potentially troublesome" subset of the population conveniently running their own "mutual depopulation programme"?

If the "Armed and Dangeroous" subset get a-hold of the "really big stuff" from the hundreds of Military / National Guard depots it''' certainly become very interesting, very quickly.

It would make downtown Beirut at the height of the "troubles" look like a quiet afternoon in a Public Library . . . . .

knukles's picture

There is no reason whatsoever to buy a shit load of guns and ammo.

As my best friend MgySgt used to say; "there'll be plenty layin' 'round on the battlefield"

TheFourthStooge-ing's picture


As an outsider I have this vision of a "Post Financial Apocalyptic" America where a large chunk of the population are indulging in the mother of all shootouts with each other - bullets (and larger ordnance) flying everywhere, probably pretty indiscriminately too.

You do know that television and movies aren't real, don't you? The American "wild west" was far more peaceful than indicated in pop culture, but peace is more difficult to market than lots of killin' and explosions.

Post financial apocalyptic America won't be a picnic, but after some stressful adjustments, most exchanges of bullets will probably be as barter items in trade for other goods.

PLira's picture

True that on the "Real" Old Western society being much less wild than portrayed.

An armed society is a polite society.

Dr. Engali's picture

Kill them all and let God sort them out.

I have considered this very point myself. Why go through the bother of disarming the populous? It's too much trouble. When the time comes they have us so divided we will take out each other and TPTB will come mop up the rest.

DosZap's picture

I have considered this very point myself. Why go through the bother of disarming the populous? It's too much trouble. When the time comes they have us so divided we will take out each other and TPTB will come mop up the rest.

Dr. won't work bro, just 10% of the RED side is enough to take out all the LEFT side.

The RED side were born, and teethed on weapons, and their use, and actually know how to use them, and very well,at MANY ranges.

most here do not have a clue that civilain shooters, and instructors taught (may be different now), to a HUGE degree taught the military many new tricks,and shooting skill sets.

Just as MOST real innovations come from the private sector, so it is/was with our troops.

Dr. Engali's picture

I hope you're right. Actually I'm counting on that fact.

knukles's picture

Sounds like good math to me....

dexter_morgan's picture

meh, whaddaya think the drones are for - will take the reds out in a new york minnit.

Lednbrass's picture

Yeah, thats been a spectacular success in the Middle East.

CrockettAlmanac.com's picture


just 10% of the RED side is enough to take out all the LEFT side.


So wild Indians are going to attack the liberals? That ought to be interesting.

John_Coltrane's picture

5 million experienced NRA members couldn't agree more.  I even like the odds of the NRA membership vs the US army-many of which likely have stronger alligience to the NRA than they do our current government.

CrockettAlmanac.com's picture


If the "Armed and Dangeroous" subset get a-hold of the "really big stuff" from the hundreds of Military / National Guard depots it''' certainly become very interesting, very quickly.


But government is the armed and dangerous crowd.

Wakanda's picture

"bad delivery"

When the Dominos guy hands you a cold pizza?

When the Chinese take out sends pork roll instead of shrimp roll?

When the US Federal Reserve shorts you 172 bars of gold?

Inquiring minds want to know.  -  Congrats Tylers!

Seize Mars's picture

By the way, this is Superior reporting, ZH. Well done.

DaveyJones's picture

good point, we don't tell him we love him enough

centerline's picture

The demise of the Roman empire comes to mind.  This time though is it a handful of central banks who have managed to wrap the globe in counterparty risk with neat little bow (actually looks more like a fuse I think).  Yeah... it's going to end well.

Burr's 2nd Shot's picture

or something.

willwork4food's picture

Actually it is a bit different. Didn't Jesus, mother Shipton, the Mayans and a few others comment on this age?

Naw, can't be.

Sweet Chicken's picture

Bares repeating.



American Eyes

American Eyes

View the world through American eyes

Bury the past

Rob us blind

And leave nothing behind

Dr. Engali's picture

This is why I live the Hedge.. Well this and the commentary. Great job Tyler's, and thank you.

tongue.stan's picture

the rabbit hole is deep and lined with tungsten


That' all folks!

GubbermintWorker's picture

Alas, am glad that I am but a poor slob who's gold consists of fractional ounces.

SillySalesmanQuestion's picture

Who has most of that 185,000 tons of gold? Why most of the readers here @ZH bitchez... :)

Of course, 99% of it has been lost due to unfortunate boating accidents...

HedgeCock's picture

What a coincidence, Hurricane Sandy took 99% of my gold out to sea...

divide_by_zero's picture

Gold was obviously lost thru the "Corzine's share" much like Angel's share with wine when it ages.

Intoxicologist's picture

In Intoxicologist lingo, this can be construed as short-shotting someones drink then, right?

Thecomingcollapse's picture

Mouth Agape!  I sure hope this hits the mainstream..preferably German media! 

Get your popcorn ready!

dwdollar's picture

Just think... we have even less information to draw conclusions about Fort Knox.

I'm sure Uncle Scam is saving the highest quality gold bars for US citizens. /sarc