As Germany Prepares To Repatriate Its Gold, We Hope They Have Learned From The "Monetary Sins Of The Past"

Tyler Durden's picture

As initially reported here yesterday, in what is the biggest news of the week, and possibly the year, the Bundesbank has broken away from its "all is well" posturing exhibited as recently as three months ago, and in a dramatic reversal of its diplomatic position, has demanded repatriation of some of its NY Fed and all of its Paris-domiciled gold. We applaud Herr Wiedmann for this move, although we hope that the German people are allowed to witness, and verify, the arrival of the actual gold as opposed to simply empty crates. Of course, at the end of the day the actual delivery is irrelevant: what matters is this first shot across the bow of the current monetary system - one which juxtaposes sound money versus infinitely dilutable electronic fiat more than ever before - by a major conservative central bank, one in possession of the second largest official gold reserve, second only to the Fed itself. That said, we can only hope that the German request for gold repatriation is not met with the same enthusiastic response that France encountered when it too attempted to repatriate its gold held by London back in the 1930s, just before a whole lot of things in the global economy went horribly wrong...

Specifically, in 1965 The Economist interviewed Jacques Rueff, a French economist and advisor to the French Government. In the following exchange (caught on pages 84-85 of the pdf "Monetary Sins of the Past", which are required reading to anyone who thinks what is going on now is in any way new or different), the Economist blames France for exerting pressure on London during the 1930s, through the withdrawal of sterling balances held at the Bank of England. We thank Martin Sibileau for the reminder about this key exchange.

What is disclosed is enlightening and entertaining, and may well serve as the basis for what the response Buba may encounter today.

Jacques Rueff: In 1930 I was financial attache in the French Embassy in London, and in that capacity I was responsible for the deposits of the French Treasury with British banks. They were the direct result of eight years of the gold-exchange standard, because we had kept the pounds sterling in London, as my colleagues in New York had kept in the American market the dollars that had been pouring into the French Treasury from 1927 onward. Then, in 1931, the failure of the Austrian Creditanstalt caused successive waves of repatriations; and it was this collapse of the gold-exchange standard that, without any possible doubt, transformed the depression of 1929 into the Great Depression of 1931.

The Economist: While you are on this historical episode, what would your comments be on the very widespread view that it was to a substantial extent French pressure on London at that time, through the withdrawal of sterling balances, that was in part responsible for the general collapse later on?

Jacques Rueff: Let me tell you that, unhappily for the world, the French pressure did not exist, or was so mild that it had no effect. There is a very interesting document from this period, a letter from Sir Austen Chamberlain, who was then Foreign Secretary in London, to M. Poincaré, who was Prime Minister and Finance Minister in France; it must be of 1928. Sir Austen said, "We know that you are entitled to ask gold for your sterling, but in the frame of the close friendship between Britain and France we ask you, so as to avoid trouble for the City of London, not to do that." And we were, I must say, weak enough to comply with this request and not ask for gold. The fact that I had such important sterling deposits in London shows that we did not use this right to ask for gold. The adjustment, which would hardly have been felt if carried out on a day-to-day basis, was not made, and we had the fantastic boom of 1927, 1928, and 1929. This explains the depth of the collapse and of the depression, because the adjustment was so long delayed. We were too gentle in complying with official appeals not to convert our sterling balances into gold.

Fast forward to today, and we can't help but wonder if some 30 years from today, an advisor to the Bundesbank will not rewrite the above to something as follows:

BUBA Advisor: ...There is a very interesting document from this period, a letter from William Dudley, who was then Head Of The NY Fed, to Herr Weidmann, who was Head of the Bundesbank; it must be of 2013. Dudley said, "We know that you are entitled to ask gold for your sterling, but in the frame of the close friendship between the United States and Germany we ask you, so as to avoid trouble for the Wall Street, not to do that." And we were, I must say, weak enough to comply with this request and not ask for gold. The fact that I had such important sterling deposits in New York shows that we did not use this right to ask for gold. The adjustment, which would hardly have been felt if carried out on a day-to-day basis, was not made, and we had the fantastic boom of 2013, 2014, and 2015. This explains the depth of the collapse and of the depression, because the adjustment was so long delayed. We were too gentle in complying with official appeals not to convert our USD balances into gold.

We can only hope that the Bundesbank is not quite as "gentle" as Paris was some 80 years ago in complying with London's equally as gentle denial to comply with the French repatriation request. In fact, quite the opposite: we hope Bundesbank pulls all of its gold, as do all other nations because in the aftermath of the "collapse and depression" that will soon follow, he who defected first, will have defected best.

Everyone else will be left with paper promises of repayment by a broke and insolvent government which went as far as suggesting the minting of a trillion dollar coin to absolve it of its own particular monetary sins. Seriously.

h/t Martin Sibileau

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knukles's picture

Fuck 'em.
Deliver shares of GLD

Titus Flavius Caesar Vespasianus Augustus's picture

More when, effectively NATO, locks down Mali's gold...  80% of so of their exports, apparently, and surely, they weren't getting it out of the ground as fast/effectively as they could.

 

Be very interesting to learn more about Mali's gold and the non-Malians who are and will be reaping the golden benefits thereof...

trav777's picture

how would who is producing it affect the output?

Mali is producing what they can; NATO takeover won't get blood from a turnip.

Production rose; simple as that.  2001 peak exceeded.  No sinister conspiracy necessary.

IF this whole thing is part of some master plot, these people sure are doing a great job convincing everyone that they're total idiots.

WTFUD's picture

The Caaanadian leaching companies are the most prominant gold miners in mali and west africa in general ( niger burkina faso etc ). Not to mention almost every other part of the world.
The french prefer Uranium as in Niger ( 3 mines, 2 producing ). With the CFA currency steady link to the euro the frenchies screw everyone in west africa and for sure unlike the chinese who build infrastructure and towns for the long term. Ask anyone in the countries mentioned above plus ivory coast etc etc the french find it beneath them to mix with lesser species BUT are the masters of Division amongst tribes.
Uprisings from touraugs / rebels in niger and mali in particular are esculating all over ( the pie smaller for sharing ) kust like in greece or spain or anywhere more local autonomy is the order of day goal as much as anything else.
With Khaddafi gone and former libya usually brokering peace deals the even greater fragmentation in the region including chad and the sahel corridor opening a line for rebels militants drug slave trade a lot more difficulties lie ahead.
If nigeria sticks nose in expect them to face even more attacks from growing militancy ( boco ).
Parties are over soon for France who if had engaged in conduct befitting the chinese and not just bribing a few generals emirs or presidents then that assimulation and intent rather than divide and rule mentality could have counted.

Supposedly the usa were sending troops to the region so something was up a while back.

Looks to me like another Iraq but with 50 different groups. Frenchie could not hold his own border for 10 minutes so wr could be looking at 20 borders soon.

last am sure the canadians are sucking and leaching that Gold like no tomorrow while it lasts.

WTFUD's picture

The Caaanadian leaching companies are the most prominant gold miners in mali and west africa in general ( niger burkina faso etc ). Not to mention almost every other part of the world.
The french prefer Uranium as in Niger ( 3 mines, 2 producing ). With the CFA currency steady link to the euro the frenchies screw everyone in west africa and for sure unlike the chinese who build infrastructure and towns for the long term. Ask anyone in the countries mentioned above plus ivory coast etc etc the french find it beneath them to mix with lesser species BUT are the masters of Division amongst tribes.
Uprisings from touraugs / rebels in niger and mali in particular are esculating all over ( the pie smaller for sharing ) kust like in greece or spain or anywhere more local autonomy is the order of day goal as much as anything else.
With Khaddafi gone and former libya usually brokering peace deals the even greater fragmentation in the region including chad and the sahel corridor opening a line for rebels militants drug slave trade a lot more difficulties lie ahead.
If nigeria sticks nose in expect them to face even more attacks from growing militancy ( boco ).
Parties are over soon for France who if had engaged in conduct befitting the chinese and not just bribing a few generals emirs or presidents then that assimulation and intent rather than divide and rule mentality could have counted.

Supposedly the usa were sending troops to the region so something was up a while back.

Looks to me like another Iraq but with 50 different groups. Frenchie could not hold his own border for 10 minutes so wr could be looking at 20 borders soon.

last am sure the canadians are sucking and leaching that Gold like no tomorrow while it lasts.

Broomer's picture

"fortunately, there is still ample gold production; it hit a new peak in 2011, exceeding 2001."

Not according to the USGS.

2001, 2570t (data from http://minerals.usgs.gov/minerals/pubs/commodity/gold/300303.pdf )
2010, 2560t (data from http://minerals.usgs.gov/minerals/pubs/commodity/gold/mcs-2012-gold.pdf)

Production in 2011 is still not available; it was estimated to be 2700t; the real number will be published before the end of this month in the new Mineral Commodity Summaries. Then, we will see.

Ying-Yang's picture

Just tell them "Tough Tungsten Titties"

Tungsten-Filled 10 Oz Gold Bar Found In The Middle Of Manhattan's Jewelry District - http://www.zerohedge.com/news/tungsten-filled-10-oz-gold-bar-found-middle-manhattans-jewelry-district

Divided States of America's picture

The Germans better do some forensic tests on the gold bars. I am positively sure they have been 'tampered' with.

Freddie's picture

I would not be suprised if the $1 trillion Platinum coin was the final straw for Germany.  They know O is Mugabe.

He_Who Carried The Sun's picture

Look, this is just about accountability in a year full of elections in Germany. No politician wants to be held responsible for the big sum the Bundesbank has to pay every year for renting these vaults in London and NYC....  That's why they get it home now. The old argument that in state of crisis its faster to sell it when its already in situ in London and/or NYC is essentially an obsolete 1950ies argument... ;-)

Relentless's picture

Actually I think that Germany is repatriating its gold prior to exiting the euro. They want to make sure that they have the hard stuff on hand when they launch the new dmark. They especially don't want the French or the US to have their hands on it when they do, as launching the dmark will proably be the final nail in the USD coffin too.

nope-1004's picture

+1.  Financial system is changing before our very eyes, and you know that backroom discussions are not just about "repatriation".

 

Getting Old Sucks's picture

Could be very interesting, like the last country using Euros has to redeem everthing floating around in FX funds.  That's probably why they're saving Greece, LOL.

chaartist's picture

And that is exactly why it will not happen before we have bigger distraction. And then suddenly, there will be never the right time when the collapse in EU begins. They hold Grece central bank, same ECB, if the want they can start to sink their markerts in few minutes. With todays technology they can change interest rates only by pushing negative shit into the news ticker for algomachines scanning news buzz. I still don't know what is the play here.

Ghordius's picture

The DM would be shooting upwards without gold's help, the German problem was always keeping it down, not up
And the Germans have not forgotten their deals and commitments, nor do they have a reputation of being opportunistic and unprincipled, remember?

Ah, all this EUR breakup whishing, where does it come from?

akak's picture

 

Ah, all this EUR breakup whishing, where does it come from?

It comes from the desire to see (increasingly sociopathic and abused) financial and political power decentralized and thereby hopefully weakened, or at least put closer to local and individual hands, instead of being ever-more centralized, consolidated and strengthened in unaccountable oligarchic hands as it has been for the last 60+ years.

The fact that you apparently support that continual centralization of power is sad, and perhaps speaks to a naivete and willingness to bow ever lower to central authority which is unfortunately widespread if not almost ubiquitous in the Western World.  Our rulers are truly winning the war for the hearts and minds of their subjects, er, citizens through their refined art of propaganda and fearmongering, relying on the intellectual laziness and moral spinelessness of the serfs to convince themselves that that which is in the best interests of the rulers is also in their own best interest, when the reality is quite the opposite.

 

PS: I did not downarrow your post, Ghordius.

He_Who Carried The Sun's picture

Exiting the Euro?

You're not listening to 'Mama Merkel' you will be spanked!

Tompooz's picture

Rule number one: nobody talks about exiting the Euro.

kliguy38's picture

hehehehe.....of course its that simple......just accountability and after all, we all know that "accountability" is foremost in the minds of our banks and Pols.....the Germans already know their gold is leased MULTIPLES and they also know the Chinese et al. are taking the remaining scraps quickly.....This is more about pressuring the Ponzi to give them what scraps they will spare before the window closes for good........and they know that could be quickly

Bay of Pigs's picture

"Whose tag is on that pile over there?"

Timmah Jeethner

Jam Akin's picture

"Guten Tag Timmah"

Frau Merkel

ForWhomTheTollBuilds's picture

I always thought that the official Fed/Treasury dismissal of the idea came about as a result of external pressure. 

 

You can just see them picking up the phone and its Germany, China, Arab states, Brazil et al. saying "Jesus CHRIST, *this* is what you people are thinking about? REALLY?"

 

So they had to come out and in no uncertain terms quell the rumor that they started and allowed to persist over many days.  Its called a "trial balloon" for a reason.

Mr Pink's picture

I like that theory...

Think about it, if your cousin Eddie just told you that he was planning on winning Megabucks so he can pay his mortgage would you let him store your Rolex?

Harbanger's picture

Gib mir meine barbarische Relikt, Bitches!

Cap Matifou's picture

It is "das Relikt", not "die".

"mein barbarisches Relikt" are the correct words to use :)

http://www.duden.de/rechtschreibung/Relikt

rodocostarica's picture

harbanger, I do not speak any German but what you say sounds very barbaric. So up arrow Miene whatever bitch!

Likstane's picture

I pissed my depends as well.

Rapada's picture

Who put that together? It was fantastic lololol!!

krispkritter's picture

Guilty! CH1 mentioned it this AM, so, working with a hangover and one cup of coffee I put it together in about 15 minutes.

My bad, I didn't get one 'Fuck You Bernanke!' in there...

(thanks for the nod tekhneek and inspiration CH1)

francis_sawyer's picture

II AINATISUL... [some will get it, some won't ~ while others will reflexively junk because they're not only sheep ~ they're the new 'genetically modified' version of TRAINED CIRCUS SHEEP]...

fonzannoon's picture

I think this already happened. I think they used the filming of die hard three as a cover to actually move the real gold out of the vaults. I can prove this simply by pointing out how bad that movie sucked. There had to be another reason for making it.

"As they regroup with the police and have their wounds tended to, McClane theorizes that there was no gold on the ship, which ultimately proves correct as it was replaced with scrap metal, and Simon has likely escaped"

Kaiser Sousa's picture

aint it nice how over at the Crimex they attempted to whack both forms of real money of their intraday highs at the close...

so fucking obvious...

FAIL......

 

http://www.kitco.com/charts/livesilver.html

zorba THE GREEK's picture

Not to worry Germany, your gold is safe and sound in a Chinese vault.

It was used to manipulate the gold price down and the Chinese were

very happy to acquire your gold at a discount price.

I need more cowbell's picture

I would be very surprised if the gold has not already been returned. The big boys had their behind the scenes powwow before any of this "news" was allowed to break. Nothing this huge is left to chance, left to pre-announcement of intentions, left without all the major players having room to maneuver.

I'll wager this is an after-the-fact "news" item. BWDIK

knukles's picture

Uber-liberal gold are bling studs in tongues of men.
(Old Muzzie Proverb)

Pseudo Anonym's picture

pfft,

at the end of the day the actual delivery is irrelevant:

as if actual phyzz gold was the same as vapor in german vault. fail.

Paul Krugman's picture

I don't understand the problem. We have all the $1Trillion platinum coins we need. Right?

mayhem_korner's picture

 

 

Wake me up when the $1T platinum coin buys 1 oz of platinum.

(wonder if that would shut down the U.S. mint...)

Ying-Yang's picture

Personally I think they need to coin a trillion tungsten coins

Call them Fabulous Fiats with a picture of Obama smoking a dubbie

Nothing To See Here's picture

Now that I am thinking of it, I don't think Krugman realizes that there would be no difference between his 1 trillion platinum coin and any printed 1 trillion dollar bill similar to those issued by Mugabe...

knukles's picture

Let's cut to the chase. (Whatever that means)

Just have the Bernak give Timmah a old tattered $1 bill to be sent for destruction and a Sharpie, let him add a buncha 0's (about 20 doodles or so) sign the fucker and send it to the empty gold vaults at Ft Knox for safekeeping.

Solution!

 

 

 

ParkAveFlasher's picture

One trillion choom sterling.

francis_sawyer's picture

@Krug

~~~

Happiness is a bag full of $1T platinum coins & a building full of unbroken windows to toss them at with Randy Johnson velocity...

francis_sawyer's picture

...as well as 'Dr. Andrews' [on staff], paid by Obamacare, to fix your elbow if you throw your arm out...

knukles's picture

Whoa! 
The Oh, moochacho and the rugrats (probably not grandma, tho) are not eligible for ObamaDon'tCare.  They got their own Public Savant Program.