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

Professor: Reason Itself Is A White Male Construct
2015-07-04 3:55
A philosophy and religion professor at Syracuse University gave an interview to The New York Times Thursday in which he critiqued the notion of pure reason as simply being a “white male Euro-Christian construction.” Prof. John Caputo was being interviewed by fellow philosophy professor George Yancy for the 13th installment of an interview series Yancy conducts with philosophers regarding racial topics. Given its emphasis on first principles ...
The Broken Window Fallacy
2015-07-04 3:48
Youtube description: This short video explains one of the most persistent economic fallacies of our day. Source: youtube.com
Jenji Kohan and the Jewish Hyper-Sexualization of Western Culture
2015-07-04 3:33
As detailed in The Culture of Critique, Freud and his followers regarded anti-Semitism was a universal pathology which had its roots in sexual repression. The theoretical basis for this can be found in Freud’s Three Essays on the Theory of Sexuality where he linked aggression to the frustration of human drives — especially the sex drive. Kevin MacDonald notes that: ...
Confederate History - Dispelling the Myths
2015-07-03 3:28
History books, the media, the school systems, etc abound in falsehoods and inaccuracies of Confederate and Southern history. This fact sheet will help to clarify and dispell some of these rampant inaccuracies. MYTH - The War of 1861 - 1865 was fought over slavery. FACT - Terribly untrue. The North fought the war over money. Plain ...
Gays Rights May Open Door for Pedophile Rights
2015-07-03 3:31
Democrats have attempted to normalize pedophilia as a sexual orientation. A recent Supreme Court ruling on same-sex marriage may soon allow pedophiles to argue they are suffering discrimination. “Using the same tactics used by ‘gay’ rights activists, pedophiles have begun to seek similar status arguing their desire for children is a sexual orientation no different than heterosexual or homosexuals,” writes Jack Minor ...
More News »