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Wednesday, March 07, 2012 3:02 PM


Concerns in Germany About Its Gold at the NY Fed, London, and Paris; German Gold Off Limits, Greek Gold Subject to Confiscation


GoldCore has a pair of interesting articles on German concerns about its gold reserves. The most recent article regards gold held outside Germany.

Please consider Germany to Review Bundesbank Gold Reserves in Frankfurt, Paris, London and Federal Reserve Bank of New York

German lawmakers are to review Bundesbank controls of and management of Germany’s gold reserves. Parliament’s Budget Committee will assess how the central bank manages its inventory of Germany’s gold bullion bars that are believed to be stored in Frankfurt, Paris, London and the Federal Reserve Bank of New York, according to German newspaper Bild.

The German Federal Audit Office has criticised the Bundesbank’s lax auditing and inventory controls regarding Germany’s sizeable gold reserves – 3,396.3 tonnes of gold or some 73.7% of Germany’s national foreign exchange reserves.

There is increasing nervousness amongst the German public, German politicians and indeed the Bundesbank itself regarding the gigantic risk on the balance sheet of Germany's central bank and this is leading some in Germany to voice concerns about the location and exact amount of Germany’s gold reserves.

The eurozone's central bank system is massively imbalanced after the ECB’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31% bigger than the German economy, after a second tranche of three-year loans.

The concern is that were the eurozone to collapse, Bundesbank's losses could be half a trillion euros - more than one-and-a-half times the size of the Germany's annual budget.

In that scenario, Germany’s national patrimony of gold bullion reserves would be needed to support the currency – whether that be a new euro or a return to the Deutsche mark.

Jim Rickards has outlined possible plans by the Federal Reserve to commandeer Germany’s and all foreign depositors of sovereign gold at the New York Federal Reserve in the event of a dollar and monetary crisis leading to intensified “currency wars” and the ‘nuclear option’ of a drastic upward revision of the price of gold and a return to a quasi gold standard is contemplated by embattled central banks to prevent debt deflation.
Currency Wars

It is difficult to separate fact from fantasy, and speculation from reality in such stories, but those wishing to learn more about Jim Rickards' ideas, might be interested in his book, “Currency Wars: The Making of the Next Global Crisis

In January, Eric King had an Interview with Jim Rickard on King World News.

Rickards' Biography

James G. Rickards is a writer, lawyer and economist with over 30 years experience in global capital markets. He is Senior Managing Director at Omnis, Inc., a consulting firm in McLean, VA and is the leading practitioner at the intersection of global capital markets and national security. His advice to clients from 2002 to 2006 included early warning of impending financial collapse, the rise of sovereign wealth funds, the decline of the dollar and the sharp rise in gold prices years in advance of these events. He has held senior executive positions at Citibank, Long-Term Capital Management and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve Bank of New York.

German Gold Off Limits, Greek Gold Subject to Confiscation

The other article of note on GoldCore regarding German gold reserves was back in November when various proposals for Germany to backstop Greece and the EFSF with its gold surfaced.

Please see Germany to G20: German Gold “Must Remain Off Limits”; Italian Gold Sale Again Proposed in Germany for details.

Those proposals were shot down quickly. However, Germany did make Greek gold subject to confiscation in the latest bailout proposal by the Troika.

Greece is foolish to accept this parasitic offer of "help". Greek gold reserves may be the only thing that prevents all-out hyperinflation and complete destruction of currency when Greece returns to the drachma.

Please see Pact With the Devil Over Gold for further discussion as to sad state of affairs that may befall Greece.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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