Where is Germany's gold? And does it matter?
August 28, 2013 9:25 PM   Subscribe

A friend mentioned something to me about the U.S. "losing Germany's gold," and I hadn't heard anything about this story. I did some research online and read about Germany's gold holdings in the Federal Reserve Bank, and how the Fed has refused to allow Germany to audit its holdings in the Fed vaults in New York City.

Germany has apparently asked to repatriate some of its gold from the Fed back to Germany, and the Fed said that won't be possible until 2020. Apparently German policymakers have voiced doubts about whether Germany's 122,597 high-quality gold bars supposedly stored in the NYC Fed vault are actually there.

There's little written about the U.S. holding onto the gold until 2020, and what's out there is from publications of dubious merit. What is the real story here? Is there any excuse for the Fed not to have Germany's gold? Is this actually a scandal? Why would it take until 2020 for us to give Germany any of their gold back?
posted by Unified Theory to Law & Government (9 answers total) 1 user marked this as a favorite
Any reason you don't think this article is correct? Let's assume the worst and that the US spent the gold -- ultimately it doesn't matter as long as Germany can get the same amount of gold when they want to withdraw it. That's how fractional reserve banking works. Gold is gold, they don't need to get literally the same gold bars back.
posted by empath at 9:35 PM on August 28, 2013 [2 favorites]

Response by poster: Hmm. I thought I linked to two articles from Slate and the Washington Post. They were showing as good links on preview. Weird.

Slate article
Washington Post article

Anyway, the Slate and Washington Post articles, and the NYT article you linked, are all from January 2013, when Germany first made the request. Apparently, since then, the U.S. has told Germany it will not get its gold until 2020, and has refused to let Germany actually audit its holdings.
posted by Unified Theory at 9:40 PM on August 28, 2013

Where are you getting the information that they can't get it until 2020? All of the articles you linked include the 2020 date as a consequence of the difficulties of moving and storing that much gold. It's not like you can just get UPS to drop it off at the front gate of the Bundesbank. Storage facilities need to be built, etc.
posted by empath at 9:46 PM on August 28, 2013 [1 favorite]

I don't know about this particular story but zerohedge.com has been covering "is the gold really there" stories for some time. Zerohedge gets placed in the conspiracy category but they've been right on a lot of things and they were way ahead of the curve in 2008 when the financial shocks occurred. The site does need to be taken with some salt but I like to poke my head in once in a while.

The broad theme, which does not require conspiracies or coverups, is that repatriation of precious metals has been ongoing for several years now (both sovereign and private) given the declining faith in the world financial system.
posted by MillMan at 11:07 PM on August 28, 2013 [1 favorite]

Germany's 122,597 high-quality gold bars

A standard gold bar is 400 troy ounces (12,44 kg.) The contract price for a troy ounce of gold on the NY Mercantile exchange is about $1400.

If I've done my math correctly, the value of Germany's 122,597 high-quality gold bars is about $68b which although a great deal of money is peanuts to a country whose GNP is almost $3.5 trillion.

Is there any excuse for the Fed not to have Germany's gold?

This would not seem to give rise to a big issue between the national governments of the US and Germany. Keeping the gold or releasing it would not give rise to inflation nor would it have any influence on the Euro or dollar. Perhaps some bondholder somewhere has a finger in the pie and enough political influence to keep it there?
posted by three blind mice at 12:43 AM on August 29, 2013

Yeah, I don't get the conspiracy vibe here. Philipp Missfelder wasn't allowed to see the gold, but he's only "the parliamentary foreign policy spokesman of the ruling Christian Democratic Union", a position perhaps roughly equivalent to the chairman of the House Foreign Affairs Committee -- not a banking official. The WaPo also unconcernedly cites Germany's "plans to repatriate its gold over seven years", taking us to 2020.

The gold is not considered fungible and should be the actual physical bars that Germany previously placed on deposit.

There are those who believe that the US is so paranoid about protecting the dollar-as-reserve-currency that it was the motive for invading Iraq. I think there is some obviously touchiness here -- bruised reputation level -- but it doesn't make a whole lot of sense that the gold would go missing. If that were the case -- that somehow members of the Bundesbank felt the gold wasn't there, versus some squirrelly politician -- the outcry would be unmistakeable.

But even the act of storing the gold is a bit of an anachronistic historicism, in this currency era. It's just hard for banks to let go of the idea that they don't store physical money, much, anymore.
posted by dhartung at 3:52 AM on August 29, 2013 [2 favorites]

If you have access, the New Yorker from January 2, 1989 has an account from a reporter who visited the vaults in NYC:
None of this gold belongs to the United States. The Federal Reserve Bank of New York has been keeping gold for foreign governments since before the Second World War, we learned. ... "Any time Brazil buys kangaroos, say, from Australia and can't pay in Australian or U.S. dollars, instead of sending a hundred million dollars in gold halfway aroudn the globe on a plane it moves a hundred million dollars in gold a few feet, to Australia's pile."
posted by 1970s Antihero at 6:17 AM on August 29, 2013 [4 favorites]

Germany had a bad experience with its 1920's governments trying to defeat its relatively minor reparations payments through mass inflation, which destroyed its middle-class savings. The most conservative party, the CDU-CSU, has been upset with the fact that it has to bail out governments which it eagerly welcomed into the Euro when they represented an untapped market to them.

This sort of noise appeals to a certain class of conservative South and Central German voter. It doesn't represent fact.

If Zerohedge really thinks the gold bars are missing, what do they think happened, Simon Gruber stole $140 billion in gold from the Fed and we took Germany's gold to pay for it? It would be quite hard to move even a fraction of that gold. Zerohedge is run by guys who think Tyler Durden was pro-capitalist.
posted by Ironmouth at 10:24 AM on August 29, 2013

The NY Fed actually gives free tours (however, you have to sign up several weeks in advance). During the tour, you take an elevator into the basement and get to see the room where all the gold is stored. However the gold is stored in numbered vaults, so the identities of the account holders are kept confidential.
posted by dcjd at 11:01 AM on August 29, 2013

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