Guest Post: Is Germany Preparing For Future Capital Controls?

Tyler Durden's picture

Submitted by Jeff Clark via Casey Research,

The best indicator of a chess player's form is his ability to sense the climax of the game.

–Boris Spassky, World Chess Champion, 1969-1972

You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany.

Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits?

You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on?

Pawn to A3

On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. Some observers note that since Russia isn't likely to be invading Germany anytime soon – one of the original reasons Germany had for storing its gold outside the country – the move is only natural and no big deal. But Germany's gold stash represents roughly 10% of the world's gold reserves, and the cost of moving it is not trivial, so we see greater import in the move.

The Bundesbank said the purpose of the move was to "build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold-trading centers abroad within a short space of time." It's just satisfying the worries of the commoners, in the mainstream view, as well as giving themselves the ability to complete transactions faster. As evidence that it's nothing more than this, Bundesbank points out that half of Germany's gold will remain in New York and London (the US portion of reserves will only be reduced from 45% to 37%).

Sounds reasonable. But these economists remind me of the analysts who every year claim the price of gold will fall – they can't see the bigger implications and frequently miss the forest for the trees.

Check

What your friendly government economist doesn't reveal and the mainstream journalist doesn't report (or doesn't understand) is that in the event of a US bankruptcy, euro implosion, or similar financial catastrophe, access to gold would almost certainly be limited. If Germany were to actually need its gold, regardless of the reason, any request for transfer or sale would be… difficult. There would be, at the very least, delays. At worst such requests could be denied, depending on the circumstances at the time. That's not just bad – it defeats the purpose of owning gold.

But this still doesn't capture the greater significance of this action. First, it reinforces the growing recognition that gold is money. Physical bullion isn't just a commodity, a day-trading vehicle, or even an investment. It's a store of value, a physical hedge against monetary dislocations. In the ultimate extreme, it's something you can use to pay for goods or services when all other means fail. It is precisely those who don't recognize this historical fact who stand to lose the most in an adverse monetary event. (Hello, government economist.)

Second, here's the quote that reveals the ultimate, backstop reason for the move: Bundesbank stated it is a "pre-emptive" measure "in case of a currency crisis."

Germany's central bank thinks a currency crisis is really possible. That's a very sobering fact.

We agree, of course: history is very clear on this. No fiat currency has lasted forever. Eventually they all fail. Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the root cause for failure is universal and inevitable: continual and perpetual dilution of the currency.

Some level of currency crisis is inescapable at this point because absolutely nothing has changed with worldwide debt levels, deficit spending, and currency printing, except that they all continue to increase. While many economists and politicians claim these actions are necessary and are leading us to recovery, it's clear we have yet to experience the fallout from spending more than we have and printing the difference. There will be serious and painful consequences, sooner or later of an inflationary nature, and the average person's standard of living will be greatly reduced.

And now there are rumblings that the Netherlands and Azerbaijan may move their gold back home. If this trend gathers steam, we could easily see a "gold run" in the same manner history has seen bank runs. Add in high inflation or a major currency event and a very ugly vicious cycle could ignite.

Checkmate

If other countries follow Germany's path or the mistrust between central bankers grows, the next logical step would be to clamp down on gold exports. It would be the beginning of the kind of stringent capital controls Doug Casey and a few others have warned about for years. Think about it: is it really so far-fetched to think politicians wouldn't somehow restrict the movement of gold if their currencies and/or economies were failing?

Remember, India keeps tinkering with ideas like this already.

What this means for you and me is that moving gold outside your country – especially if you're a US citizen – could be banned. Fuel would be added to the fire by blaming gold for the dollar's ongoing weakness. Don't think you need to store gold outside your country? The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment. You'd have easier access to foreign-held bullion, depending on the country and the specific events.

None of this would take place in a vacuum. Transferring dollars internationally would certainly be tightly restricted as well. Moving almost any asset across borders could be declared illegal. Even your movement outside your country could come under increased scrutiny and restriction.

The hint that all this is about to take place would be when politicians publicly declare they would do no such a thing. You could quite literally have 24 hours to make a move. If your resources were not already in place, even the most nimble of us would have a very hard time making arrangements.

Once the door is closed, attempting to move restricted assets across international borders would come with serious penalties, almost certainly including jail time. In such a tense atmosphere, you could easily be labeled an enemy of the state just for trying to remove yourself from harm's way.

The message is clear: storing some gold outside your country of residence is critical at this point, and the window of time for doing so is getting smaller. Don't just hope for the best; do something about it while you still can. The minor effort made now could pay major dividends in the future. Besides, you won't be any worse off for having some precious metals stored elsewhere.

The best chess players in the world aren't that way because they can see the next move. They're champions because they can see the next 14 moves.

You only have to see the government's next two moves to "win" this game. I suggest learning what countermoves you can take now are, before your government declares checkmate.

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knukles's picture

That's a bloody insult.
Can't eat tungsten

At least creamy chocolate filled nougat centers.

JOYFUL's picture

...But these economists[can't see the bigger implications and frequently miss the forest for the trees]...

Right out of the gate, Clark implicates himself in the same errors he ascribes to others, and then piles on more to ice the cake. If you want to build a case for holding pm offshore, OK, go right ahead, but do it with logic and more than cherry-picked quotes and misleading factoids...

Germany's announcement re gold repatriation was pure window-dressing, designed more to serve the interests of the "Federal Reserve" than challenge it...the timelines and quantities mentioned exclude any possiibility of serious intent on Germany's part to 'prepare for a currency war'...just another 'limited hangout' of the kind which now fully replaces 'real' news stories, and Clark should be in a position to know the difference...were he a credible source of analysis rather than salesman for something called "the Casey Report."

On the topic of holding your gold\silver offshore, presumably the point of this info-mercial,

The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment.

This is true enough, and deserves serious attention...much more serious than what the author follows up with:

You'd have easier access to foreign-held bullion, depending on the country and the specific events.

But that's nothing compared to the follow up howler -

Besides, you won't be any worse off for having some precious metals stored elsewhere.

and you could put all your savings on the exactor in the next race and hope to get lucky too!

Outfits like Bullion Vault\GoldMoney are great vehicles for storing pms offshore, and, next to saddlebags which you sleep and ride on 24\7, probably the best thing going for the serious candidate for financial survival...but even they can be(and have been)tampered with by governmental interference, and their utility impeded or removed. Outside of that, any attempt to keep your stash somewhere other than where you keep yourself is a recipe for big disappointment. And if you insist on keeping yourself inside of Femaville, be prepared for double trouble!

Step 1) get outta Dodge, and when you find a new nest, move your loot to an allocated storage.The  BV\GM thing will allow you to move some of your assets to an account in the new location where you can buy local physical and the requisite saddlebags and fourlegged friends to place them on.  As cattle and sheep are cheap right now, buy up stock at low low prices, and get cracking on finding that irrigable pasture land or start up the barley fodder project(25 acres worth of feed in 300sq ft of space!) Sleep under the starry sky whenever possible, make coffee in battered smoke-blackened containers, keep an eye out for rustlers(same as you would for financial hustlers!), and the other one out for like-minded drifters...with whom to form up into loose nomadic bands of free livin folk, just like our happy forebears, afore we ran into the moneychangers and wormtongues!

That's the forest and the trees, and I don't need to charge a dime for that two cents of common sense!


 

Fred C Dobbs's picture

I agree with Jeff Clark.  If gold became illegal to hold/buy/sell in the USA and doing so will put in in prison, a lot of people are going to wish their gold was stored in a foreign country.  It is easy to leave with it now.  You only need to file a US Customs form at the airport.  It is a little more difficult to find a safe place to store it but it can be done. 

All Risk No Reward's picture

Ah, but you get put into that "freedom database."  They know you have the gold and how much.

They could tell you to get it or you go to jail.

The only solution is to stop the tyranny altogether, not try to squeeze a few goodies between its fingers as its velvet gloved hand clenches into a fist.

Spread the word:

Debt Money Tyranny

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

That chart is 100% proof beyond all doubt of a conspiracy to bankrupt entire nation states.

A coworker who pretends I'm a 'conspiracy theorist" told me "I choose not to look at that chart, I don't feel good talking about those things."

That chump already looked at the chart, knew there was no answer to it, tucked his tail between his legs and decide to play some "make believe."

Another coworker who told me I was a loon for thinking the economy wasn't doing just fine was laid off at the beginning of the year.In the good ole days, we used to hire people inbetween layoffs...  no more.

Red alert, people - the government just pretends to be soft silk...  they are the noose being used by Big Finance Capital con men and women to destroy the Republic.

 

Ropingdown's picture

I don't really follow why the Germans' move is about gold, per se.  It's about reserves.  They aren't taking much from the US, so that's just a head fake.  It's about getting gold out of France, period.  The motivation is obvious.  Leaving the Euro?  Don't want a desperate France claiming it in payment for baloney Germany Euro-debt liabilities.  France has been screwing Germany non-stop, building BS coalitions of peripheral Latins to gang up on Germany.  Time for Germany to get its A game together.  They'll need flexible foreign reserves instantly if they go Deutchmark or NordEuro, and there is no way to know where reserves will be needed. 

goldenbuddha454's picture

You could have a point as the Egyptian's Morsi is in Germany right now asking for a debt-forgiveness deal from Merkel for the 100's of millions they owe Germany.  Cyprus is doing the same, but asking for new money to bail them out.  Greece is has a fulltime job trying to convince Germany to forgive their debt and then there's the ubiquitous PIIGS always feeding at the German trough.  Oink, Oink!  What's that you say Ben, there's not actually AU in the bottom of the Ny Fed, its PB?  Well no wonder its going to take 7 years to transfer!

nicoacademia's picture

this is good. its like the little vines that leak out through the walls. just like when BNP Paribas closed those MBS/CDO funds. no one knew jackshit....

nicoacademia's picture

this is good. its like the little vines that leak out through the walls. just like when BNP Paribas closed those MBS/CDO funds. no one knew jackshit....

knukles's picture

What the Fuck?

Some of you people are plum fucking crazy!

If TSHTF as some here profess to be the future, why the fuck would you want your gold somewhere offshore?
If the banks are closed, travel has ceased, the shelves are bare and people are raping pillaging and looting, what the fuck good is your gold going to do you in some cave in the Hinterlands or wherever?
If you live in Cleveland, what good'll it do you even in Arkansas for that matter?

Some people really need to Get A Grip and Serious Professional Help.

newengland's picture

Portugal lost 7 tons of its gold when Drexel Lambert went bust. Portugal held a claim on its gold which was held 'safely' by that bank.

Where is that gold now? No one knows. Portugal is without it. Someone has it. Kind of reminds me of MFGlobal. Where is Corzine now, and where is his client's gold?

Meanwhile, the gangster bankster head of JP Morgue is said to be the next head of the U.S. Treasury. CONgress is full of willing thieves, it seems.

 

dr.charlemagne's picture

It is very easy for an American to set up a physical precious metals account with UBS. Physical, allocated, off balance sheet, not hypothecated. Why not do what all of the elites do... keep your stuff in Switzerland. Even at the height of WWII, the elites of enemy nations rubbed elbows in Swiss vaults while they visited their stuff. Prolly wont be different this time. See ya in Switzerland!

Mark123's picture

It was not that long ago that the UK and most of Europe had currency controls....so I would not be surprised to see them again.  The big problem would be that the banking cartel controls amost all countries so where do you hide?  Venezuela or North Korea?

gwar5's picture

If I have a place in another country gold goes in the ground nearby some coconut tree. Never in a bank. 

 

 

TheGardener's picture

"Coconut Tree Bank" on some sand ridge with a palm and a shack called bank with some smiling monkeys and a bad mouthed Brit for a boss never cut with me . Despite the bullet-proof legislation signed by the local chieftain...

q99x2's picture

Once the tungsten bars are plated and all the gold has left the country the US Gov't will place capital controls on gold. We have some time.

We might have a push for solar and capital controls on silver in the name of subsidizing photovoltaics.

Nothing's safe. I'm going back to writing.

pain_and_soros's picture

If Germany were getting all of its gold back from US & UK over a short time frame instead of small portion of it over 7 years, then there might be something more to it than simple message sending to the US govt/Fed (& UK & France) that they need to get their deficits & printing under control.

What better way to "enforce" some discipline, than start talking very publicly about (& moving) some of your gold out of the countries (US & UK) that are devaluing their currencies (at the expense of the Euro & German exports)?

 

AUD's picture

the root cause for failure is universal and inevitable: continual and perpetual dilution of the currency.

Bullshit. The currency was junk a long time ago. It makes no difference whether the central bank prints a lot more, or no more.

The currency has been an out & out Ponzi scheme, a colossal credit bubble, for decades. It could unravel at any time.

ebworthen's picture

Well, I'll sew it into my luggage with a couple of dildos or a suitcase full of $100 dollar bills or a box of New YorK Times issues - sure to be ignored by the TSA.

DosZap's picture

If you are not shortly following your deposits outside the CONUS, then I would keep my ducks within my hands reach.

NO storage facilities are safe havens ANYMORE.

Except you and GOD know where it's stashed.

FunkyOldGeezer's picture

Currency controls are naturally going to be applied if and when TSHTF. I well remember not being able to go abroad with adequate funds to enjoy a holiday. It wasn't that long agao and the troubles then weren't anything like as bad as they have the potential to be, in the near future.

dunce's picture

 Financial collapse is often followed by gold confiscation, but i am not sure any govt, with ample stocks of gold has ever had a financiasl collapse. Examples anyone?

Fahrenheit451's picture

GBI now offers storage and delivery in Singpore, and it's not a FATCA required disclosure.

goldenbuddha454's picture

Of course there will be a move to control Gold, Silver.  Instead of the 'Gold Confiscation Act' they'll call it the 'Homeland Gold Trust Children's Act' as to garner trust with the public in a time of economic meltdown.  So when the politicians want to pull an unconstitutional maneuver, from this point forward they'll try to link the new 'Legislation' to women or children because how could something that has the intention of helping women or children be harmful?  Remember potus parading the kids for the AWB last week?  Additionally, Banks are already allowing for gold to be considered a tier 1 asset for collateral.  China is hoarding Gold and commodities to be able to show the rest of the world who's money really has value.  The farther we get away from the date at which the gold standard was abolished 1971?, the more worthless all currencies have become with exception of those countries like china who have stockpiled pm's for the eventual collapse.  Russia/China and China/Brazil already are dealing currency to currency avoiding the U.S. Dollar altogether.  Put a knife in it, fiat is done!

Volaille de Bresse's picture

Venezuela, "a third-world dictatorship"????

Ha ha 20 years from now we "rich" white people might beg for a visa given by one these South-American dictatorships!

 

Remember that in the 1920's, moving to Argentina was, for a European citizen, considered to be a blessing!

Sandmann's picture

Argentina was one of the top 5 economies when the Anglos ran it until the radical anarcho-leftists arrived from Europe in the 1930s.

Sandmann's picture

Gold is important for German to retain its wealth having had its assets and patents confiscated by British, US, USSR to develop new technologies and chemical proccesses in the postwar era. The likely outcome is to prop up the Euro until France buckles then form a North European Currency Union with Russia included to provide raw material backing for the value and lock in a major market straddling Eurasia. Without an energy source like Russia any currency is going to be weak even if backed by gold because of energy deficits

TheGardener's picture

Sandmann, Panslavic Empire is the nightmare of the anglo-west and the spectre thereoff might well had them concluding to go after Germany by all means to keep that from happening.

El's picture

Please. Someone should share with me a "safe" place outside the country. There aren't any "safe" places. The best you can hope for is perhaps safer for the moment...but who can say?

It seems ludicrous to me to believe that my gold would be safer outside of my custody and control given the world environment. It isn't just the U.S. in trouble here.

falak pema's picture

In the meantime the Euro is going bananas! 

Euro Surging, February 1 - Business Insider

What gives? 

goldenbuddha454's picture

What gives is that the EU has some actual experience with hyperinflation (Germany 1930's)  and has refused to join Japan and USA in a worldwide currency devaluation via money printing madness, however, don't count the EU out yet as there are still some PIIGS out there who would love to see a new round of QE eurostyle.

Ghordius's picture

you know that theory that

A) the ECB artificially pushes the EUR up and B) that the US Markets and algos wag the dog and take EURUSD strenght as "Risk Off" signal

can't subscribe to that but I have this irrational feeling that the EUR is just coming back in the range where it belongs, vs the USD

falak pema's picture

this ratcheting up of the currency war thingie by Japan Inc., according to a lot of pundits will exacerbate the FX roller coaster big time; do you see it affecting the Euro fluctuation much relative to the USD?

Germany and Japan are head to head in this shrinking world car segment of the global transactions; except of course in Bric type markets. 

I have a feeling 2013 will be a very rock and roll time in FX as in Asset quotes on WS; or it could be just the opposite, very inert! 

Should I toss a coin on that?

Ghordius's picture

yes, please, toss the coin - but I maintain that the big players like it choppy, zagged, full of energy (which they can skim)

it's my private pet churn theory

Volaille de Bresse's picture

"Germany's recall of US-stored gold is a sham, window dressing.  The real goal is to get their gold out of France"

 

Idiot! We French HAVE the German gold, we can deliver it within 2 weeks. What Merkel want is her gold "stored" in the US. 7 years? HA!

 

You might understand Germany's move as the first MAJOR act of deglobalization. 

 

http://en.wikipedia.org/wiki/Deglobalization

Downtoolong's picture

Look at the failures of corrupt dictatorships and similar regimes in just the last two years, i.e., Egypt, Libya, etc. Ask yourself, what form of money it was that the falling leaders were scrambling to position and hide for themselves before their inevitable demise. Hint, it wasn’t hordes of paper cash, securities, or account statements from their favorite fund manager. It was gold. Do you really think it will any different when a major government falls?

mendigo's picture

For Germany to have anounced a non-event such as this is suspect and somewhat reinforces the lack of trust.

The fact that they felt it necesary to allow 7 years to complete is less than reassuring - are they trying to freak us out?

They should be able to thier gold at will without advance notice - its not like your talking about relocating your armed forces or a national monument.

Stares straight ahead's picture

Not sure this is correct when they call for half of all of the American held gold.  Why not just 15%?