Dollar Collapse: Where is Germany’s Gold?
2013-02-07 0:00

By Peter Schiff | GlobalResearch.ca

The financial world was shocked this month by a demand from Germany’s Bundesbank to repatriate a large portion of its gold reserves held abroad. By 2020, Germany wants 50% of its total gold reserves back in Frankfurt – including 300 tons from the Federal Reserve. The Bundesbank’s announcement comes just three months after the Fed refused to submit to an audit of its holdings on Germany’s behalf. One cannot help but wonder if the refusal triggered the demand.

Either way, Germany appears to be waking up to a reality for which central banks around the world have been preparing: the dollar is no longer the world’s safe-haven asset and the US government is no longer a trustworthy banker for foreign nations. It looks like their fears are well-grounded, given the Fed’s seeming inability to return what is legally Germany’s gold in a timely manner. Germany is a developed and powerful nation with the second largest gold reserves in the world. If they can’t rely on Washington to keep its promises, who can?

Where is Germany’s Gold?

The impact of Germany’s repatriation on the dollar revolves around an unanswered question: why will it take seven years to complete the transfer?

The popular explanation is that the Fed has already rehypothecated all of its gold holdings in the name of other countries. That is, the same mound of bullion is earmarked as collateral for a host of different lenders. Since the Fed depends on a fractional-reserve banking system for its very existence, it would not come as a surprise that it has become a fractional-reserve bank itself. If so, then perhaps Germany politely asked for a seven-year timeline in order to allow the Fed to save face, and to prevent other depositors from clamoring for their own gold back – a ‘run’ on the Fed.

Now, the Fed can always print more dollars and buy gold on the open market to make up for any shortfall, but such a move could substantially increase the price of gold. The last thing the Fed needs is another gold price spike reminding the world of the dollar’s decline.

Speculation Aside

None of these theories are substantiated, but no matter how you slice it, Germany’s request for its gold does not bode well for the future of the dollar. In fact, the Bundesbank’s official statements are all you need to confirm the Germans’ waning faith in the US.

Last October, after the Bundesbank had requested an audit of its Fed holdings, Executive Board Member Carl-Ludwig Thiele was asked in an interview why the bank kept so much of Germany’s gold overseas. His response emphasized the importance of the dollar as the world’s reserve currency:

Thiele’s statement can lead us to only one conclusion: by keeping fewer reserves in the US, Germany foresees less future need for “US dollar-denominated liquidity.”"Gold stored in your home safe is not immediately available as collateral in case you need foreign currency. Take, for instance, the key role that the US dollar plays as a reserve currency in the global financial system. The gold held with the New York Fed can, in a crisis, be pledged with the Federal Reserve Bank as collateral against US dollar-denominated liquidity.”

History Repeats

The whole situation mirrors the late 1960s, during a period that led up to the “Nixon Shock.” Back then, the world was on the Bretton Woods System – an attempt on the part of Western central bankers to pin the dollar to gold at a fixed rate, while still allowing the metal to trade privately as a commodity. This led to a gap between the market price of gold as a commodity and the official price available from the Treasury.

[...]

Read the full article at: globalresearch.ca



Related Articles
German Gold Claw Back Causes Concern
Uh Oh: Germany Wants to SEE its US Gold
Gold bars that can be used as emergency payment
Using insects to search for gold
Germany Repatriating Gold From NY, Paris ’In Case Of A Currency Crisis’


Latest News from our Front Page

Pressure from the United Patriots Front Stops Mosque Plan
2016-04-28 20:10
Pressure from the United Patriots Front appears to have killed off a mosque development in Narre Warren North. The City of Casey council now looks likely to withhold planning approval for the development in a special meeting set for Tuesday night. A council report, to be considered by councillors on Tuesday, recommends that the approval be blocked. The mosque opponents’ cause has been helped by councillor ...
Police face questions over the influence of the Freemasons
2016-04-28 20:48
South Yorkshire Police today face questions over whether powerful 'secret society' the Freemasons held sway over the force at the time of Hillsborough. Families of victims say that officers who were Masons were promoted into powerful positions despite being ill-equipped, including match commander David Duckenfield. Duckenfield told the fresh inquests he had been a Freemason since 1975 and became head of his ...
England Bans its Own Flag to Avoid Offending Muslims
2016-04-27 2:23
St. George's Cross "racist" towards immigrants Government officials said their city was ‘too multicultural’ to celebrate St George’s Day, England’s version of the 4th of July. The council said that displaying the English flag may have been seen as “racist” towards immigrants.
Half of Western European men descended from one Bronze Age ‘king’
2016-04-27 2:09
Half of Western European men are descended from one Bronze Age ‘king’ who sired a dynasty of elite nobles which spread throughout Europe, a new study has shown. The monarch, who lived around 4,000 years ago, is likely to have been one of the earliest chieftains to take power in the continent. He was part of a new order which emerged in ...
"Local Residents" Are Filmed Stealing Dozens of Bottles of Water at London Marathon Stop
2016-04-25 23:10
Editor's Comment: "Local" residents? Why bother blurring their faces? We know who they are. ... London marathon runners were robbed of dozens of bottled waters when thieves raided a refreshment area armed with trolleys during today's race. Nearby residents - including parents with children - were captured on camera piling up crates of free water handed out by volunteers during the 26-mile event. Marathon ...
More News »