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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francis_sawyer's picture

bully 4 them ~ chilly 4 u

~David Bowie

mayhem_korner's picture

 

 

So now I'm both a terrorist and a "defector"?  Thanks a lot.

fonzannoon's picture

Fantastic boom of 2013 2014 and 2015 LOL

y3maxx's picture

Question...slightly OT

....Why would Obama move his home to Hawaii considering Fukushima continues to spew Radiation aimed right at the Hawaiin Islands?

tia

mayhem_korner's picture

 

 

Why are you tipping him off???

francis_sawyer's picture

Shush goddammit!...

~~~

The upside would be that you can play [night golf] with glow in the dark balls & have the honor of Mitch Cumstein being in your foursome...

Getting Old Sucks's picture

Yes, You are correct.  Very sad.  This year will be our final visit to Hawaii for that very reason.  Not going the the NW US or Canada either.  We're gonna get it here in the NE eventually and it's said to have affected the entire Northern Hemisphere already.  Surprised TPTB haven't bought up all of Southern Brazil and Argentina yet.

francis_sawyer's picture

The fucking Bush criminal cartel has had it's Argentina plot staked out for quite some time now... How NAZI of them... 

Not Too Important's picture

Don't cry for me, Patagonia . . .

Freddie's picture

Why would the Germans leave anything in Hope & Changey Amerika with Ob-Mao? 

The country is a police state joke now....Aaron Swartz suicided plus the two gun guys.   

Jackie Chan was right about the insane corruption.

jplotinus's picture

Nobody panic, bitchez ;-p

Mad Mohel's picture

Bundesbank: Gutenmorgen Herr Bernanke. Ven can ve expect our gold?

Bernanke: 'click'

Bundesbank: Herr Bernanke? Herr? ........ Klaus you vere correct, the Bernank ist eine MUTTER FICKER!

Martin T's picture

The Monetary Sins of the West is a fantastic book by Jacques Rueff.

Jacques Rueff learned from this and with his arrival in the French government of 1958 in Antoine Pinay's team in De Gaulle's new government, when France was in a very difficult situation, led to the implementation of the drastic Pinay-Rueff plan. With the help of Switzerland, Rueff and the French government were responsible for the final breakdown of the dollar/gold convertibility given that France and Switzerland in the 1960's agressively exchanged their dollars against gold which created a lot of concerns in the US, which eventually led to the USA giving up the convertibility in that fateful moment of 1971 under Nixon.

So, Rueff's complacency in the 20's was not repeated and he learnt from it. This is very well described in his book (linked above).

Martin Sibileau is very right in pointing out again the fantastic book from Rueff and that particular passage quoted above.

Best,

M.

 

 

 

 

Shameful's picture

This is huge, but what happens if the Fed just doesn't comply?  About all the Germans could do is say "They took our gold!"  or worse the Fed sends counterfeit bars (Tungsten Standard) then the Germans get them, they can claim fakes to which the Fed can act outraged "We would never send fake bars, the Germans are merely attempting to shake us down!"

Granted talk of counterfeit gold from the Bundesbank should be enough to shatter confidence in currencies and central banks worldwide.

Mad Mohel's picture

They are both foxes in the same chicken coop. They will come to some kind of agreement. You can bet your ass on that. None of the TPTB want the jig to be up yet.

ForWhomTheTollBuilds's picture

The problem is, what sense do you and I really have of how long the "jig" can continue?  I remember reading back in 08 that the central banks wouldnt be able to keep the plates spinning much longer.

 

The truth is all the important data and important political relationships are kept secret.  We could be 10 years or 10 days from collapse and we'd never know it.  We only know enough about the size of national debts and the rate of money printing and the size of the derivatives market to know that an avalanche must start at some point.  But we still spend our days on the futility of betting on which snowflake is gonna start it.

Mad Mohel's picture

"10 years or 10 days"  That is as good a guess as any, and you're exactly right, no one really knows. I have a feeling the higher ups don't even know wtf is really happening. They all seem to be putting fingers in the dike and hoping not to run out of fingers.

El Hosel's picture

...Uhm, what if the Fed "can't" comply don' have enough of the real or fake gold.   The whole world will be looking at that, this better get swept under the rug pronto. Better call in DSK and the girls for some party favors.

From Germany With Love's picture

If that happens, it will take down global trade because mutual distrust will go RAMPANT. And again I have to say: who is the world going to believe - the US or Germany? Everyone will try to repatriate their gold immediately, not taking any chances. If the Fed can't deliver ALL OF IT, its reputation will be shot and a lot of angry governments will be around.

That wouldn't be good for the US economy. If there is one thing to be learned from Greece: don't squander your reputation completely.

Not Too Important's picture

We're long past that now. The sheeple may be stupid, but no one with any sense of money doesn't understand what's up.

Small business owners and up. They all know.

ForWhomTheTollBuilds's picture

I have long thought that you and I have absolutely no impact on the price of gold.  It's entirely a product of the machinations of the big players both on the paper and physical sides.  They will determine where and when the price makes a move.  We are just along for the ride because we sense certain "big picture" issues must come to a head someday.

 

So if the Fed flips Uncle Fritz the bird, then they have to contend with the reactions of the other central banks and creditor nations who have only a trust relationship with the Fed.  The average iphone addled westerner won't be running to the coin store over the news, thats for sure. 

 

One day they will run to the coin store, but not until they've see gold double in four months.  Suddenly they will be the "experts" who know that gold can never fall in price.  They will lecture you about it at parties.

Jam Akin's picture

There will be a big transfer of "gold" (plated tungsten).  The delivery or immediate aftermath photo op will be attended by Frau Merkel.  This "gold" will be put into locked and sealed storage in Frankfurt and never again see the light of day.

Demand for tungsten and related fab services is going up.  Fast.  What was the name of that outfit in China again?

JustPrintMoreDuh's picture

Whats all this fuss over a pile of a barbaric relic that CB's only keep for sake of tradition anyhow?

alangreedspank's picture

Thanks for your input, Mr Bernanke.

ForWhomTheTollBuilds's picture

He's right though.

 

Either central banks have gold as a result of historic monetary misadventure or they have it because of its "good money qualities".

 

If its the former, then there is no reason for anyone to have theirs stored abroad and there can be no harm in repatriation. 

 

If its the later, then, well, thats been well discussed here.

 

But the Keynsians cannot have it both ways.  Gold bugs can't be insane tinfoil hatters who at the same time don't understand how a simple repatriation will "destroy the entire earf".  They have to pick a side.

 

For all the arguments about whether the gold is in the vault and unencumbered, I find it interesting that the elite commentators and the media are almost all behaving as if it is not there.  They constantly talk about how the gold is obviously there, but if hypothetically it wasn't then so much mutual damage would be done that its best not to ask the question.

 

Modern finance is the most intricate of long cons, no?

tuttisaluti's picture

Finally the germans found out that their gold is living the us towards china?

Titus Flavius Caesar Vespasianus Augustus's picture

I'm sure they'll get it.  I mean, they'll likely get Libya's gold, but what the hell - gold is fungible, ain't it?

 

From Germany With Love's picture

Repost from yesterday's thread:

A motion by (among others) the German version of Ron Paul, MdB Frank Schäffler (the dude who instigated a vote within the German co-ruling liberal party to change its Euro course and only narrowly failed), insists on a 'complete and independently certified physical full-audit of german gold stock at all storage locations'. The argument? If every guy with even the smallest of business has to take inventory once per year - why would the BuBa be exempted? Why would they not lead by example?

http://www.fr-online.de/wirtschaft/goldreserven-die-bundesbank-im-goldra...

Yeah, I wanna see that happen.

Its_the_economy_stupid's picture

One less chair for when the music stops.

Was it Daimon that said, "When the music is playing, you gotta dance."?

NotApplicable's picture

Well, Dieter said: "Now is the time on "Sprockets" vhen ve dance!"

WmMcK's picture

Well, Jim Morrison sang: "When the music's over, turn out the lights."

gmrpeabody's picture

Well..., Dandy Don sang "Turn out the lights..., the party's over"

knukles's picture

Chas. Prince, the lawyer who ran Shitti Bunk.

stateside's picture

Time to raise the gold margin requirements in 3.....2......1.....

stateside

AL_SWEARENGEN's picture

Trust, hell of an idea..

caimen garou's picture

germans want their tradition back, tradition is a funny thing right bend us all over bernake?

Fix It Again Timmy's picture

Fed's response to Germany's request:

"Can't we all just get along?"....

koncaswatch's picture

Wasn't the first shot across the bow fired by Chavez/Venezuela? How was that transfer executed?

PaJoad's picture

The first shot may have been Kyle Bass asking for U.Texas's $1B in bullion

Not Too Important's picture

Most of us here have a secret mancrush on Kyle. At least the smart ones do.

AnAnonymous's picture

Ummmm, 'americans' run an extortion of the weak, farming of the poor business.

The highest security is to be found on the ganglord's turf.

Putting your eggs there keep them clean from the ganglord's appetite.

'Americans' in Germany might well engineer a coming back, knowing it will give the US ganglord an opportunity to invade and take back what the US considers theirs.

Welcome to an 'american' world. It is a cosy place, you'll see.

akak's picture

Ummmm, Chinese hypocritizens run an exportion of the weakly made, farming of the poor lead-tainted toy business.

The highest security while dropping brown baby Maos is to be found on the Communist Sharty's turf.

But putting your pets even there will not keep them clean from the Chinese blobbing-up, dog-wokking appetite.

Chinese hypocritizens might well engineer some pirated manufactured goods (poorly) and disseminate trollish online propaganda, knowing it will give the US citizen an opportunity to evade the crap and insanitation and take back what the US citizen considers theirs: freedom.

Welcome to a Chinese hypocritizen world. It is a nosy place.  You'll pee in public.

TheFourthStooge-ing's picture

AnAnonymous said:

Ummmm, 'americans' run an extortion of the weak, farming of the poor business.

Zzzzzzzz ...... Chinese citizenism failed academic repeatings a repeation of discredited thesis, as if repeation on end make it true somehow.

The highest security is to be found on the ganglord's turf.

Best. Buying in to Chinese citizenism is buying an entry pass to the commodity world market, to the Chinese citizenism citizen ganglord's turf.

Putting your eggs there keep them clean from the ganglord's appetite.

Nope. Not really. Chinese citizenist ganglord's appetite being multifaceted, eggs only clean while ganglord occupied eating pickled dog taint in hot mustard sauce.

'Americans' in Germany might well engineer a coming back, knowing it will give the US ganglord an opportunity to invade and take back what the US considers theirs.

Made me laugh, your ignorations of realities. Europeans are in a weak position. Europeans still have a turf in Africa but Chinese citizenism citizens are blobbing up through it like a dung pingo on the tundra. The Chinese citizenism ganglord cannot let a serious rival get its hands on resources and is stepping in, building roads, and crapping on the roadsides as a marking of Chinese Communautist gangturf territory.

No more turf for the faithful european lieutnants.

For Chinese citizenism citizen gangs, more turf, no squeezing the Charmin.

Welcome to an AnAnonymist world. It is a smelly place, so hold your nose, you'll see.

knukles's picture

What'd he say?

(Knuks, act like you're deaf dear, you don't want him to get upset over his broken Engrish.)

Colonial Intent's picture

http://secretcity-thefilm.com/

A film about the City of London, the Corporation that runs it, and its role in the economic crisis

 

Author and presenter of Secret City, Lee Salter, says that while London has always been a multicultural, diverse city, in contrast the City of London has “remained a monoculture, built around the interests of finance capital, and those who are in charge of [the] economic system”.

Downtoolong's picture

I swear Angela, call DHL, it must have been lost in transit.

Ben