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

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

Illegal Aliens Cleared For U.S. Military Service
2014 10 18
The Pentagon announced a new policy allowing illegal immigrants the opportunity to enlist in the armed forces, Thursday. USA Today reports that the new recruitment policies will focus on people with "high-demand skills" like foreign language acumen and health care training: "For the first time, the program — known as Military Accessions in the National Interest, or MAVNI — will ...
Bronze Age Sundial-Moondial Discovered in Russia
2014 10 16
A strange slab of rock discovered in Russia more than 20 years ago appears to be a combination sundial and moondial from the Bronze Age, a new study finds. The slab is marked with round divots arranged in a circle, and an astronomical analysis suggests that these markings coincide with heavenly events, including sunrises and moonrises. The sundial might be "evidence of ...
Humans may only survive 68 days on Mars
2014 10 15
Space enthusiasts planning a move to Mars may have to wait to relocate: conditions on the Red Planet are such that humans would likely begin dying within 68 days, a new study says. Oxygen levels would start to deplete after about two months and scientists said new technologies are required before humans can permanently settle on Mars, according to the study ...
Tom Sunic’s letter to the US Ambassador to Hungary
2014 10 14
October 11, 2014 Mr. André Goodfriend Chargé d’Affaires Embassy of the United States of America Szabadság tér 12 H-1054 Budapest Dear Mr. Goodfriend, As an American citizen I would hereby like to express my concern over the recent decision by the Hungarian government to ban the National Policy Institute (NPI) conference which had been scheduled to take place in Budapest from October 3 to October 5, 2014. ...
"Vampire grave" found in Bulgaria
2014 10 14
A "vampire grave" containing a skeleton with a stake driven through its chest has been unearthed by a man known as "Bulgaria’s Indiana Jones". Professor Nikolai Ovcharov – a crusading archaeologist who has dedicated his life to unearthing mysteries of ancient civilisations – said that he had made the discovery while excavating the ruins of Perperikon, an ancient Thracian city ...
More News »