Interesting Article "The Disappearing Gold"

[nbruno322]

http://www.gata.org/node/12177

[DamianTV]

What gold?

[Brian4Liberty]

Very interesting article!

http://www.internationalman.com/glob...appearing-gold

Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.

The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.

Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.

To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?

The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.

The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.

In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”

Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

[Zippyjuan]

The Fed doesn't own any gold. They do store it for the US Treasury and some other governments though.

[Michigan11]

The Fed doesn't own any gold. They do store it for the US Treasury and some other governments though.

This makes me wonder though, why does the FED store it though? They have an extra sized vault? Not really an issue if they are leasing it out obviously, so what is the deal with this arrangement?

[Zippyjuan]

From Wiki:

The Federal Reserve Bank of New York maintains a vault that lies 80 feet (24 m) below street level and 50 feet (15 m) below sea level,[8] resting on Manhattan bedrock. By 1927, the vault contained 10% of the world's official gold reserves.[6] Currently, it is reputedly the largest gold repository in the world (though this cannot be confirmed as Swiss banks do not report their gold stocks) and holds approximately 7,000 tonnes (7,700 short tons) of gold bullion ($415 billion as of October 2011), more than Fort Knox. Nearly 98% of the gold at the Federal Reserve Bank of New York is owned by the central banks of foreign nations.[9] The rest is owned by the United States and international organizations such as the IMF. The Federal Reserve Bank does not own the gold but serves as guardian of the precious metal, which it stores at no charge to the owners, but charging a $1.75 fee (in 2008) per bar to move the gold. Moving the bars requires special footwear for the staff, to protect their feet in the case that they drop a 28 pound bar on their feet. The vault is open to tourists.[10]

http://en.wikipedia.org/wiki/Federal...nk_of_New_York

When gold in the vaults is sold, it is usually just moved to a different part of the vault with a sign indicating who it belongs to (in addition to other record keeping).

[Danke]

By Jeff Thomas
January 28, 2013

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany. It was assumed at that time that the US would be a safer storage location, and of course, they could always ask to have it returned if they wished.

But German citizens have become increasingly worried about the security of the 1,536 tonnes of German gold reputedly held at the Federal Reserve in New York. This has resulted in the Bundesbank pursuing repatriation of the gold, beginning with a request to view it in the basement of the Federal Reserve Building, where it is claimed to reside.

Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.

The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.

Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.

To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?
The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.

The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.

In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”

Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.
The New Risks

But even if it became generally known that the Fed (and others) are holding paper, rather than physical gold, couldn’t we carry on as before? What could go wrong? Here are some immediate possibilities:

If there were a dramatic rise in the price of gold and the lessor were to call in the return of the gold by the bullion bank, the bullion bank could easily lose far more than the small two to three percent margin it had been enjoying.

If there were a crash in the bond market and hyperinflation set in, the bonds that the bullion bank had purchased could become worthless.

If the nations who shipped their gold to London and New York for safekeeping were to request their return, the storage banks could only deliver if they were to purchase gold at the current rate. If that rate were significantly above the rate at which the gold had been leased to the bullion banks, the storage banks would sustain a significant, possibly unsustainable, loss.

That’s quite a bit of risk.

In the present market, there are any number of possible triggers that could cause the people of Germany, Austria, or a host of other nations to demand that their gold be returned home. Indeed, pressure is on the increase. The governments who have shipped out their gold for “safekeeping” would have a lot of explaining to do to their constituents, if the storage banks are not forthcoming.

So, is it time for the odiferous effluvium to hit the fan? Not quite yet. Before that occurs, there will still be some dancing around by the Fed and others.

The Fed has already stated, in so many words, “We’re sorry, but we can’t let you have all your gold at one time, but we’d be prepared to send it to you over a period of years.”

For many observers, the present situation should be well beyond the point of the raised eyebrow. It should be glaringly apparent that the amount of gold presently claimed to be in storage in the world’s banks is, to a greater or lesser extent, overstated.
Continuing the Charade

The Bundesbank should, of course, now say, “I’m afraid that’s not good enough. It’s our gold. We’ve advised you how much of it we want back now, and we must insist that you produce it immediately.”

If they were to take this perfectly logical step and the Fed refused, there could be a run on the banks, and, very possibly, within as short a period as twenty-four hours, a worldwide bank holiday might be declared with regard to gold.

However, this is not what will transpire. Neither logic nor sound banking practices are the object here. The object is to maintain the charade that exists within the banking community. The Bundesbank is just as fearful of a run as the Fed and will be only too willing to accept the Fed’s terms.

What must be borne in mind is the root cause of the request. It was not the Bundesbank itself that originally wanted the transfer to take place; it was the German people who, quite rightly, have become distrustful of the fact that their gold has been in New York for so long and want to see it repatriated. It is not the banks who wish to correct the situation. Not one bank wishes to expose the inappropriate practices of any other bank. Their loyalty is to each other and not to their depositors.

So, is that it? Have we heard the last of this issue? I think not. The cat is out of the bag at this point, and the depositors’ distrust and uncertainty will not be quelled by the counter-offer. Tension will continue to mount amongst depositors, and, at some point, the situation will reach an impasse.

All those who presently have gold in a banking institution would be prudent to keep an eye on the present situation. We might consider taking delivery of any gold we have in a bank, wherever it may be. Regardless of what form it is in, from ETFs to allocated gold, we would do well to assess the degree to which we feel our gold is at risk. In doing so, we may determine that a gold account is more at risk in, say, a New York or London bank than a Swiss bank. (Not all banks will be equal in terms of risk.)

If we do resolve to divest ourselves of bank-related precious metal holdings, it would be prudent to take action soon. (Clearly, those who attempt to remove their wealth the day after a run has occurred tend to do less well than those who attempt to remove their wealth the day before the run.)

We might also consider whether a possible run may become systemic, causing a bank holiday on all the bank’s activities, thus freezing any currency that we may have on deposit. We may conclude that it is prudent to only retain in our bank enough money to allow cheques to clear – an amount sufficient to cover a few months’ expenses.

In the near future, we may well find that a significant amount of gold that is claimed to exist in the world will “disappear.” Whilst we cannot control this eventuality, we may be able to save the gold that is being held in our names from disappearing.

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Tags: Austria , Bundesbank , central bank , currency , federal reserve , fiat , Germany , gold
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Jake

Posted at 2013-01-28 14:10:38

how much longer can this charade go on? Its simply not believable that it would take 7 years to deliver the German gold.

Reply to comment

Froggy Wog

Posted at 2013-01-28 14:37:19

It seems Germany is a bit behind the power curve. Rick Perry, the governor of Texas, announced the state was moving $1 billion in gold bullion from New York back to Texas. I'm not sure if it was the $1 billion in gold owned by the University of Texas as an endowment, or another $1 billion held by the state itself. In any event, big gold owners seem very interested in having their PM "in hand" vs. letting it be boarded with someone in the Big Apple.

It ain't just Germany that's getting edgy.

Reply to comment

Froggy Wog

Posted at 2013-01-28 14:50:25

Sorry. Should have stated that Perry made this statement in September of 2012.

Reply to comment

Jake

Posted at 2013-01-28 19:19:38

here is the video where Rick Perry talks about bringing the gold back from NYC to Texas.

http://blog.chron.com/txpotomac/2012...ble-every-day/



Countries such as Austria, should renovate their embassy and store it there. The gold will be physically in London, but under the countries own sovereignty. Problems solved.

[HOLLYWOOD]

vault that lies 80 feet (24 m) below street level and 50 feet (15 m) below sea level,

Oh so the $60 Billion Sandy Aid package is to be used buy "New Gold" that downed in the flooding? Sounds about right for government work.

[Zippyjuan]

Good article from Der Speigel on the gold repatriation issue (kinda long to copy the whole thing) http://www.spiegel.de/international/...-a-864068.html

Selected exerpts:

Fuelling Legends

Such intense secrecy fuels legends. Many conspiracy theorists have suspected for decades that the German gold has long since disappeared. Others believe that it has been lent out. They contend that there are only promissory notes of little worth stored in the bank's vaults.

Another myth that has been making the rounds in nationalist-oriented German circles is that the US refused to hand over the treasure and threatened during the Cold War to withdraw its troops from Germany if the Germans demanded their gold back. Former Bundesbank head Karl Blessing, according to the theory, had to provide the US written confirmation that he would never do such a thing.

This letter, as it happens, actually exists, as Blessing confirmed in his last interview with SPIEGEL in 1971 -- except it doesn't concern the German gold, but rather US gold reserves. Until 1971, every dollar could be exchanged for the precious metal. Blessing thus promised the US Federal Reserve that he would no longer convert the colossal German dollar reserves to gold because this would have caused the currency's value to plummet.

Today, this historic document is even available online. But that hasn't silenced those who oppose stockpiling German gold abroad. Instead, the debate over a collapse of strictly paper-based currency is experiencing a renaissance -- as is the dispute over the gold reserves. Even Green Party financial expert Gerhard Schick has joined the fray: "I think the question of how much gold is available in an emergency is a valid concern."

Moving that gold will cost a lot of money- money Germany may need for the current economic crisis- not just for themselves but to help bail out other European countries.

From a purely logistical perspective, though, returning the reserves seems outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380 super-jumbo jet and fly it back to Germany.

The Bundesbank also objects to this notion for another reason. It says the gold is supposed to act as an emergency buffer. In the extreme situation of a currency collapse, the bankers say that the gold bars could easily and quickly be exchanged on location for pounds or dollars to pay urgent bills.


In a bid to calm the debate, the Bundesbank has pledged to bring back and inspect 150 tons of gold from abroad over the next three years. Furthermore, there are plans to count and weigh the gold bars stored in one of the nine chambers at the Fed in New York -- although no date has been set for this.

Bundesbank board member Thiele was also recently in New York where he took a look behind one of the vault doors. He had good news for the members of the parliamentary budget committee: "There was no paper in there, just gold."

[devil21]

The Fed doesn't own any gold. They do store it for the US Treasury and some other governments though.

Why is the Fed leasing out assets that it doesn't own?

[Zippyjuan]

Are they really doing that? GATA likes to promote gold conspiracies.

[nbruno322]

Very interesting article!

http://www.internationalman.com/glob...appearing-gold

www.internationalman.com , the site where the article came from, is very interesting site as well. Its from Doug Casey's Casey Research.

[Zippyjuan]

Why is the Fed leasing out assets that it doesn't own?

They can't.

[devil21]

Are they really doing that? GATA likes to promote gold conspiracies.

A lot more folks than just GATA seem to think they are. Quick Google search turned up a ton of links about it. Seeing how I don't trust bankers (well deserved too) to be honest, Id bet they do.

Same question/principle for gold swaps too. How do you swap something that's not yours?

[Michigan11]

Are they really doing that? GATA likes to promote gold conspiracies.

That's the problem with non-transparency. Which is the FED's fault if these really are just conspiracies. Another reason we need to open their doors up

[Danke]

"
From a purely logistical perspective, though, returning the reserves seems outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380 super-jumbo jet and fly it back to Germany."

Why not? One trip?

[Acala]

Are they really doing that? GATA likes to promote gold conspiracies.

Easy enough to disprove and ease everyone's minds, isn't it? And yet so much resistance.

[devil21]

"
From a purely logistical perspective, though, returning the reserves seems outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380 super-jumbo jet and fly it back to Germany."

Why not? One trip?

Cargo ships carry much larger weights all the time. Not many ports in Germany though.

[Danke]

Easy enough to disprove and ease everyone's minds, isn't it? And yet so much resistance.

Ya, I'm so glad I didn't listen to them over a decade ago and start buying PMs.

[Zippyjuan]

"
From a purely logistical perspective, though, returning the reserves seems outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380 super-jumbo jet and fly it back to Germany."

Why not? One trip?

At this point, they are talking about bringing home about 300 tonnes. Maximum structural payload for the A380 is 89,000 pounds. http://en.wikipedia.org/wiki/Airbus_A380 If they used that plane model to bring home 300 tonnes (661,000 pounds http://www.unitconversion.org/weight...onversion.html ) it could be done in about seven trips. But being a long flight requiring lots of fuel, the load it could carry would be smaller. Then you have the weight of whatever containers you are using to ship it plus restraints and any passengers. All 1500 tonnes would take over 20 flights.

[devil21]

Thanks for doing the math so the rest of us didn't have to.

That's hardly a logistical problem. It's inconvenient and expensive but not a huge deal. If it were my 1500 tons of gold it would be a small price to pay!

[Danke]

At this point, they are talking about bringing home about 300 tonnes. Maximum structural payload for the A380 is 89,000 pounds. http://en.wikipedia.org/wiki/Airbus_A380 If they used that plane model to bring home 300 tonnes (661,000 pounds http://www.unitconversion.org/weight...onversion.html ) it could be done in about seven trips. But being a long flight requiring lots of fuel, the load it could carry would be smaller. Then you have the weight of whatever containers you are using to ship it plus restraints and any passengers. All 1500 tonnes would take over 20 flights.

Like I said, not in one trip, but less that you posted as any plan would be be a cargo version with no passengers.

149,800 kg (330,000 lb) is the payload limit.

10 flights.

[Danke]

Thanks for doing the math so the rest of us didn't have to.

That's hardly a logistical problem. It's inconvenient and expensive but not a huge deal. If it were my 1500 tons of gold it would be a small price to pay!

1500 tons, or 3,000,000 pounds, right?

[Zippyjuan]

Like I said, not in one trip, but less that you posted as any plan would be be a cargo version with no passengers.

149,800 kg (330,000 lb) is the payload limit.

10 flights.

That is for the A380F which is not in production yet but they are taking orders for it. The ones in current production models have the 89k pound limit.

A380F

Airbus originally accepted orders for the freighter version, offering the second largest payload capacity of any cargo aircraft, exceeded only by the Antonov An-225.[216] An aerospace consultant has estimated that the A380F would have 7% better payload and better range than the 747-8F, but also higher trip costs.[217] However, production has been suspended until the A380 production lines have settled with no firm availability date.[58

But this is also not the only plane available to transport- just the only one mentioned in our discussion. I would expect a military cargo plane to be used so that pallets could be driven directly on board. Can't do that with the A380s.

According to one article, http://www.nytimes.com/2013/01/17/bu...rves.html?_r=0

More than two-thirds of Germany’s gold reserves, valued at 137 billion euros, or $183 billion, is abroad, stored in vaults in New York, Paris and London.

The new policy will include the complete withdrawal of 374 tons of German gold stored at the Banque de France in Paris, about 11 percent of the total. Bundesbank officials were quick to note that the decision was not a reflection of French trustworthiness. Rather, because France and Germany now share the euro, there is no need for reserves as insurance against currency crises.

That would put the value of the gold to be sent back from the US (the 300 or so tonnes currently planned from both France and New York) at about $20 billion. What would be the cost of getting that $20 billion back (surely millions)?

[RickyJ]

The Fed doesn't own any gold. They do store it for the US Treasury and some other governments though.

How do you know? Do you work for the Federal Reserve and would they trust you with information like this?

[Zippyjuan]

1500 tons, or 3,000,000 pounds, right?

Metric tons or 3.3 million pounds actually. http://www.unitconversion.org/weight...onversion.html

If the A380 cargo weight max is 89,000 pounds, that would be 37 fully loaded flights (again not counting any containers for the gold).

[Zippyjuan]

How do you know? Do you work for the Federal Reserve and would they trust you with information like this?

How much gold do YOU think they have and can you prove it? (I can't prove a negative beyond official statements that the Fed does not own any gold).

US gold reserves are owned by the US Treasury- not the Federal Reserve. The Fed is the bank where the gold is stored.

[ghengis86]

Cargo ships carry much larger weights all the time. Not many ports in Germany though.

You only need one.

http://www.worldportsource.com/ports/DEU.php

[Danke]

Metric tons or 3.3 million pounds actually. http://www.unitconversion.org/weight...onversion.html

If the A380 cargo weight max is 89,000 pounds, that would be 37 fully loaded flights (again not counting any containers for the gold).

That is assuming full passenger load right? Anyway even an existing 747 could do it in 10 trips.

[Danke]

Metric tons or 3.3 million pounds actually. http://www.unitconversion.org/weight...onversion.html

If the A380 cargo weight max is 89,000 pounds, that would be 37 fully loaded flights (again not counting any containers for the gold).

I didn't see any mention of "metric" tons until your post.