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Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

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Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#91

Post by mannykannot »

owenversteeg wrote: post #73
phyalow wrote: post #7

Earlier quoted context omitted.

I'll just leave this here: http://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-...

As fascinating as that is, what I find to be even more interesting is that the total wealth in that insane concrete-bubble structure built to withstand atomic attack... is just over a billion USD. That's nothing in the scale of global wealth. And that's the largest gold vault on Earth. Pretty disappointing if you ask me. The entire gold vault (one million ounces of gold) is worth about a third of one percent of JPMor…

It certainly underscores the fact that gold is now a historical anachronism, economically speaking. Maybe what is going on here is just a step in the slow termination of that relationship, that has to be kept secret to stop it unraveling in a rush?

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#92

Post by Zak »

21 wrote: post #35

> Switzerland is a small, neutral country without a serious army. They would hardly refuse to hand the gold back on request. This guy is suggesting that Germany could invade Switzerland if they refuse to give back their gold, so this is a good reason to keep it there. I'm pretty sure such action would be illegal under UN rules, ie: you can't invade a country because they don't give you back your posession. And Switze…

That Switzerland is a landlocked country surrounded by Germany and its allies, who are also Switzerland's biggest trading partners is a stronger reason they wouldn't steal from Germany. The consequences of doing so would be devastating.

The US, on the other hand could get away with it, being too big to fail.

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#93

Post by tonfa »

mannykannot wrote: post #91
owenversteeg wrote: post #73

Earlier quoted context omitted.

As fascinating as that is, what I find to be even more interesting is that the total wealth in that insane concrete-bubble structure built to withstand atomic attack... is just over a billion USD. That's nothing in the scale of global wealth. And that's the largest gold vault on Earth. Pretty disappointing if you ask me. The entire gold vault (one million ounces of gold) is worth about a third of one percent of JPMor…

It certainly underscores the fact that gold is now a historical anachronism, economically speaking. Maybe what is going on here is just a step in the slow termination of that relationship, that has to be kept secret to stop it unraveling in a rush?

I've always wondered: what would happen when most nations central bank's gold holding drop below say 20%? or 10%?

Is there a cliff where gold as a store of value just starts crashing? Or would the fantasy continue for the non-institutional holders for a while?

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#94

Post by tonfa »

ptaipale wrote: post #80
vapourismo wrote: post #61

Earlier quoted context omitted.

How do airplanes work?

Airplanes can do air superiority, but you can't take over a country without boots on the ground. The idea of Germany invading Switzerland is surreal.

That's said you only need to take over the Bundesplatz in Berne.

(Still I'm not sure what it would achieve to start an open war...)

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#95

Post by Ologn »

stupidhn wrote: post #12
rwmj wrote: post #10

Why do countries bother to hold gold? Wouldn't it be sensible to sell as much of it off as possible? (I'm asking like "ELI5" because I'm sure there is a reason)

Diversification of "hard assets" because the value of sovereign currency is illusory and often fleeting. I agree that mining, storing and transporting gold around the planet is a waste of resources, but there are only so many places to store wealth in a physical manner. The fact that gold has historically been useless in industry probably adds to its value.

Gold is not useless in industry. It is used to conduct electricity in many industrial settings. It also has other uses - dentists use it as a tooth crown etc. That it is useful is why it has value.

Yes, storing and transporting gold for financial purposes may be a waste of resources. But gold is easier to store than most commodities - put it in a vault for several centuries and forget about it. You can't do that with strawberries. You can transport a lot of value in several ounces of gold without much space needed.

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#96

Post by rdl »

perlgeek wrote: post #68

How do you even transport 300 tons of gold? Load it onto a military ship, maybe in smaller batches, and hope the crew isn't too corrupt?

Lots of smaller shipments, each secured. Potentially air or sea (probably would do 1-10 ton air shipments for JFK-FRA). Plenty of $100mm-1b items get shipped around the world routinely, although gold is pretty uniquely fungible. It is mostly determined by insurance or willingness to self-insure, though.

This is a great article about a similar problem: http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#97

Post by tonfa »

mannykannot wrote: post #83
ar0 wrote: post #41

Earlier quoted context omitted.

No, not really. The "nothing is amiss" argument goes like this: a) Until 1971, gold was regularly moved between central banks. The United States exchanged U.S. Dollars against gold and Germany made use of this. Obviously, it was easiest to just leave the gold where it was bought - in the United States. This was also where a lot of other central banks had (and still have) their gold, so it also made exchanges easier.…

These may be reasonable propositions (or were when they applied, especially in the cases of a) and c)), but if and only if one assumes the deposits are effectively on call, and apparently they are not. Your last sentence gets close to the key issue: if there is an innocent explanation, why have the parties who could remove the doubt over that explanation stopped talking about the issue?

> the deposits are effectively on call, and apparently they are not

IMO you need more than speculation to claim that. Besides, it is known that US gold bars are of poor quality (a lot of the Banque de France gold is being recast because of it).

"buyers don’t want the beat-up American gold" and “American gold,” the official says. “It is the ugliest.” https://www.bullionstar.com/gold-university/banque-de-france...

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#98

Post by tonfa »

pg314 wrote: post #88
joosters wrote: post #60

If there really is a doubt that the US holds less gold than it claims, surely this would be reflected in the pricing of US-held gold? Yet I've never heard that such a price gap exists. What am I missing?

You're not missing anything. It's just another conspiracy theory. They'll claim that the gold price is being kept at an artificial level.

Also all that gold is not in open market, just in central banks and international institutions (e.g. IMF) balance sheets. So I assume the argument is that they're covering it up.

Re: Why Deutsche Bundesbank had to promise to leave 1200 tons of gold in New York

#100

Post by zodiac »

rwmj wrote: post #13
stupidhn wrote: post #12

Earlier quoted context omitted.

Diversification of "hard assets" because the value of sovereign currency is illusory and often fleeting. I agree that mining, storing and transporting gold around the planet is a waste of resources, but there are only so many places to store wealth in a physical manner. The fact that gold has historically been useless in industry probably adds to its value.

Given that you want an asset which is difficult to move, wouldn't it be better to build infrastructure instead (eg. roads). At least you can use that asset. I don't understand why gold would be preferable.

You can give your gold to other countries in exchange for stuff (eg weapons) but you can't do the same with roads
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