Bundesbank Official Statement On Gold Repatriation
When we first heard about it, we thought Handelsblatt had gotten something very wrong. The implications were just so staggering. Turns out the news was spot on. Here is the official announcement from the Bundesbank, which roundly refutes all the spin the Frankfurt bank spoon-fed the people in October and November when it repeated time after time that there is nothing wrong with keeping German gold in NY and Paris, and on the contrary, it was better for everyone involved.
From the Bundesbank:
By 2020, the Bundesbank intends to store half of Germany’s gold reserves in its own vaults in Germany. The other half will remain in storage at its partner central banks in New York and London. With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centres abroad within a short space of time.
The following table shows the current and the envisaged future allocation of Germany’s gold reserves across the various storage locations:
|31 December 2012||31 December 2020|
|Frankfurt am Main||31 %||50 %|
|New York||45 %||37 %|
|London||13 %||13 %|
|Paris||11 %||0 %|
To this end, the Bundesbank is planning a phased relocation of 300 tonnes of gold from New York to Frankfurt as well as an additional 374 tonnes from Paris to Frankfurt by 2020.
The withdrawal of the reserves from the storage location in Paris reflects the change in the framework conditions since the introduction of the euro. Given that France, like Germany, also has the euro as its national currency, the Bundesbank is no longer dependent on Paris as a financial centre in which to exchange gold for an international reserve currency should the need arise. As capacity has now become available in the Bundesbank’s own vaults in Germany, the gold stocks can now be relocated from Paris to Frankfurt.
* * *
So it took the Bundesbank over 10 years to figure out that "the Bundesbank is no longer dependent on Paris as a financial centre in which to exchange gold for an international reserve currency should the need arise."
Well, as long as it has nothing to do with the recent political schism between socialist beggar France and the only country left in Europe that is not an all out parasite, all is well.
Finally, compare the above statement with the following from November:
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.
Until we don't, three months later, and decide to repatriate said gold after all...
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