By Lars Schall
Monday, October 10, 2011
The last duty of a central banker is to tell the public the truth.
-- Alan Blinder, vice chairman of the U.S. Federal Reserve, on the PBS "Nightly Business Report," 1994.
In recent months I have written to the Deutsche Bundesbank, the Federal Reserve Bank of New York, and the Board of Governors of the Federal Reserve System in Washington to ask questions about the gold reserves of Germany.
A critical problem with Germany's gold reserves, the second largest gold holdings in the world, is noted by Peter Boehringer of the German Precious Metals Society: "The bulk of Germany´s national gold is not in Germany and has not been since the 1960s, when Germany earned most of the gold through its trade surpluses, but is kept in New York and London and a little bit in Paris too. Even the Bundesbank itself has confirmed this part of the story several times -- and defended that storage policy with 'reasons of trading convenience and historical storage custom.'"
In fact, when asked about it, the Bundesbank has stated that it "needs to hold gold at the various trading centers in order to conduct its gold activities." (See http://www.gata.org/node/7713.)
After the Bundesbank brushed off some specific questions of mine (see
http://www.gata.org/node/9363) and refused to communicate with me any further when I replied that its way of answering was largely a recycling of old phrases that had very little to do with my questions, I also endured silence from the Fed (see
http://www.larsschall.com/2011/05/02/the-sound-of-silence-from-the-fed/). Thus I did the last two things that were left for me to do in this matter: I wrote to the Bank of England and to the U.S. Treasury.
Let's see if my questions were legitimate.
But first let me tell you why Germany should have its gold at its own disposal on German soil. The reason is two-fold and involves a time frame of the present to 2025:
-- The future of Germany lies in eastern Eurasia. (Whether we like it or not is irrelevant.) Take a look at the energy situation from a German perspective and you'll see. Among the G20 nations, export powerhouse Germany should be one of the biggest energy-deficit nations, enormously dependent on ever-increasing imports of Russian energy. But Russia as an energy exporter will focus more on the Pacific region in the years to come (especially via the East Siberia-Pacific Ocean pipeline and the ultramodern Kozmino oil terminal).
By doing so, Russia can demonstrate both its growing independence from Europe and its growing ability to use its oil and natural gas muscle in a way that soon won't be a bluff anymore. My friend Max Keiser described the context well: "To fight the currency war the Germans will have to buy physical gold in the open market or strike deals with countries like China, Russia, and Iran."
Keep in mind here not only that the region of the members of the Shanghai Cooperation Organization (SCO) and the Association of Southeast Asian Nations (ASEAN) "account for a significant share of global gold production," as Vienna-based commodities analyst Ronald Stoeferle points out, (see Footnote 1) but also that the central banks of Russia and China are big buyers of gold, while Western central banks are not, even though the latter are selling less gold these days. And the members of SCO and ASEAN won't pay forever for what Peter Dale Scott calls the "American war machine." (See Footnote 2.)
... Dispatch continues here ...
