The Strange Case of German Gold - An Interview with Peter Boehringer

y: Andrew Schiff, Director of Communications and Marketing

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A June 23 Bloomberg News story entitled "German Gold Stays in New York in Rebuff to Euro Doubters" made the seemingly straight-forward case that the German authorities had decided to reverse course on a plan announced in 2012 to bring home some 300 tonnes of German gold that had been on deposit at the New York Federal Reserve since the 1960s. According to the article, German representatives had gone to New York, saw their gold, were convinced that it was in good hands, and decided that the hassle of putting it on a plane and sending it back to Germany was simply unnecessary. The article quoted a spokesman for Chancellor Merkel who said "the Americans are taking good care of our gold" and even quoted Peter Boehringer, one of the leading private advocates of the repatriation movement, as saying their campaign to pressure German authorities "is on hold."

When the Germans originally asked for their gold back, the Federal Reserve had countered with a painfully slow eight-year delivery period. This struck many as strange given that the total request only represented 5% of the gold reportedly held at the Fed's New York vaults. The delay severely whipped up concerns that long-held theories about imaginary gold were actually true. The Bloomberg article appeared to dismiss all these concerns and bring the case to a close. Or did it? Almost immediately,people close to the matter cried foul.

I caught up with none other than Peter Boehringer of the German Precious Metals Society for this exclusive interview.  

AS - The apparent reversal by the German government to no longer look to repatriate its gold from the United States failed to raise any interest in the American press or the financial establishment. Did the move create much of a stir in Germany? Are any mainstream politicians there actively picking up the issue.

PB - The "reversal" has indeed been only apparent - the Bundesbank has not in any way officially changed its repatriation plan that was announced in January 2013 (a plan that I believe was too slow and too little anyway-- 700 tonnes by end 2020 - of which. 300 tonnes from the New York Fed). The primary source for the confusion, especially in the non-German media, came from a factually wrong Bloomberg story. That story began with a completely unfounded headline "German gold stays in NY." I tried to set the record straight in the English-language press, but it is hard to fully "call back" wrong mainstream reports like that one.(via Bloomberg BusinessWeek on June 23, 2014)

Having said this, it is quite possible that the politicians cited in the story (such as Mr. Barthle, a Merkel spokesman) actually intended to "test the waters" of how the German public would react. In that respect, statements like "The Americans are taking good care of our gold. Objectively, there's absolutely no reason for mistrust." could indeed have some significance, as they might be intended as a first step towards stopping even the already painfully slow repatriation process of gold from the Fed. Still, Barthle, or Merkel for that matter, are not in charge of the gold, the Bundesbank is, and they have said nothing.

It is noteworthy that in 2013, a mere 5 tonnes were actually delivered from NY to Frankfurt. And even for these miniscule volumes there is no evidence, either by an external auditor or by video documentation, that real gold bars (allegedly untouched in the Fed´s vaults since the 1960s) have been moved across the Atlantic. Bundesbank has even melted down and allegedly re-cast these bars for no apparent reason! We have not received any audit report of this process, no report from the (unknown) performing smelter, and no bar lists from "old" or newly cast bars.

But to date, no mainstream politician has publicly questioned this strange behavior. It has been left to concerned private organizations like ours to press these concerns. Fortunately our national media has picked up on some of this which may have prompted Mr Barthle´s blind and unfounded "pledge of allegiance" to the U.S.

AS - Is the issue something that is discussed or understood by the average German?

PB - These details are of course not being discussed by the "average German" - soccer seems to be far more important these days. But both the gold community, the financial community, and the international media are taking ever more notice of our continued struggle. A full two and a half years after the initiation of our campaign, I receive at least two interview requests per week.

The Fed´s unwillingness to provide information, Bundesbank's obvious evasions and obfuscations, and Bloomberg´s misleading article are leading to completely unintended reactions by the general public and the independent media: Rather than putting this issue to bed as these authorities may have hoped, we are seeing ever MORE questions being raised.

AS - Officially, at least, what was responsible for convincing German officials that their gold is safely stored and accounted for by the Federal Reserve?

PB - I can of course only speculate here. Given the decade-long mis-information by the Fed and the Bundesbank regarding our national gold, there is no apparent reason for these officials to now call this case "closed" - quite the opposite would be logical. We must therefore assume that the Fed is unwilling or unable to quickly put Germany´s gold at the Fed (1,500 tonnes) on a few planes, thereby sending our property to where it belongs (Frankfurt). It's become harder to not reach the conclusion that  our officials are not complicit in some kind of U.S. led cover-up. So far, due to our public responses, this approach has not worked but rather increased the pressure on Bundesbank to repatriate.

One reason that the gold was unavailable for quick delivery could be multiple ownerships of our bars at the Fed. Given today´s global fractional gold banking scheme, an (allegedly physically existing) bar in a central bank vault could have 10+ owners - and could thereby show up in 10+ central bank balance sheets as either "physical gold" or "gold claim". These two (completely different!) balance sheet items have not been properly differentiated for many decades now. We are potentially talking about non-existent physical bars at a magnitude of tens of thousands of tonnes!

Without proper physical audits, repatriations and allocated storage, no gold "owner" today can be certain that "his" bar in one of these unallocated gold storage vehicles is actually his exclusive property! Our campaign is therefore not only a "German" one - but could have international repercussions of unknown scale.

It is not by accident that since the launch of the first two campaigns in 2011/12 (Germany and Switzerland) - more than ten similar national initiatives have been launched all over the world. The responses of the arrogant central bankers are the same everywhere: Ignore them, call them "conspiracy theorists", insist that "everything is in order with the gold", but give not a shred of evidence (bar lists, audit reports, bar transport to owners). And act only if public pressure forces you to...

AS - How did the Bloomberg article, which is really the only story published by a mainstream American outlet about the reversal, quote you incorrectly or out of context? Has the reporter explained his actions?

PB - I had a friendly 30+ minute conversation with the Bloomberg reporter, explaining all I could. But the only so-called "quotation" of mine which was ultimately used (published months later!) was "Right now, our campaign is on hold". Of course, I never said this sentence. All I did is (truthfully) explain that, unfortunately, nobody in Germany -including our campaign- can legally ENFORCE the dissemination of information from Bundesbank or a quicker repatriation of our gold. When the interview was conducted in May, we had no opportunity for putting even more pressure on BuBa (which we had done several times opportunistically and partly successfully since 2011). The Bloomberg hack somehow twisted this to mean that we were satisfied and that we were no longer pressing the issue.

In hindsight, I however have to THANK  the reporter for involuntarily opening up this new and great opportunity for spreading our message. Since the Bloomberg piece, I am giving interviews on a daily basis - now even to international radio and TV broadcasters with millions of listeners. This gold issue will not go away.

Gold is money. And central bank gold is a potential cornerstone of future currencies which might well HAVE TO be (partially) gold-backed, especially if there is a crash of today´s un-backed paper-currencies. The central banks all over the world therefore have to quickly become much more transparent and have to audit and repatriate their / OUR gold!

Peter Boehringer is the founder and president of "German Precious Metal Society" (est. 2006) - an NGO dedicated to spreading independent information on the relevance of gold and silver as both investment vehicles and as basis for sound money and in turn a sound society. Mr. Boehringer is one of the main initiators of the German public's "Repatriate our Gold" campaign, which is being supported by many prominent signatories as well as by 15,000+ national and international activists. Peter has been writing Germany´s most popular (German language) gold blog since 2003 with a focus both on economic and political implications of gold and silver prices. He is a book author, speaker at liberal and economic conferences, and a frequent writer of articles critical towards the current, credit-based monetary system and its negative implications. He is a fellow of the liberal "Hayek-Society".

Neither Mr. Boehringer nor German Precious Metal Society is affiliated with Euro Pacific Capital or any of its affiliates.  The opinions expressed above are those of the writer and may or may not reflect those held by Euro Pacific Capital.

http://www.europac.net/research_analysis/newsletters/global_investor_newsletter_summer_2014

The dollar's 70-year dominance is coming to an end

http://www.telegraph.co.uk/finance/comment/liamhalligan/10978178/The-dollars-70-year-dominance-is-coming-to-an-end.html

Within a decade, greenback's could be replaced as the world's reserve currency

By Liam Halligan5:30PM BST 19 Jul 2014

In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.

The US was already the world’s commercial powerhouse, having eclipsed the British Empire several decades earlier. America was also on course to be among the victors of “Europe’s conflict”, even though its economy was largely unscathed by war. As such, Bretton Woods was US-dominated and produced a settlement largely on US terms.

Seventy years ago this week, that fateful summit ended. Its close marked the moment the dollar’s unquestionable supremacy was secured. Since then, global commerce has been conducted largely in dollars and leading economies have held the greenback as their primary reserve currency.

The same system remains intact today, with the lion’s share of commercial settlements worldwide still clearing the US banking system – even if the parties involved have nothing to do with the States.

The dollar’s hegemony continues to be cemented, meanwhile, by the operations of the International Monetary Fund and World Bank. Founded at Bretton Woods, they’re both Washington based, of course, and controlled by America, despite some Francophone window-dressing.

The advantages this system bestows on the US are enormous. “Reserve currency status” generates huge demand for dollars from governments and companies around the world, as they’re needed for reserves and trade. This has allowed successive American administrations to spend far more, year-in year-out, than is raised in tax and export revenue.

By the early Seventies, US economic dominance was so assured that even after President Nixon reneged on the dollar’s previously unshakeable convertibility into gold, amounting to a massive default, dollar demand kept growing.

So America doesn’t worry about balance of payments crises, as it can pay for imports in dollars the Federal Reserve can just print. And Washington keeps spending willy-nilly, as the world buys ever more Treasuries on the strength of regulatory imperative and the vast liquidity and size of the market for US sovereign debt.

It is this “exorbitant privilege” – as French statesman Valéry Giscard d’Estaing once sourly observed – that has been the bedrock of America’s post-war hegemony. It is the status of the dollar, above all, that’s allowed Washington to get its way, putting the financial squeeze on recalcitrant countries via the IMF while funding foreign wars. To understand politics and power it pays to follow the money. And for the past 70 years, the dollar has ruled the roost.

This won’t change anytime soon. Something just took place, though, which illustrates that dollar reserve currency status won’t last forever and could be seriously diluted. Last week, seven decades on from Bretton Woods, the governments of Brazil, Russia, India and China led a conference in the Brazilian city of Fortaleza to mark the establishment of a new development bank that, whatever diplomatic niceties are put on it, is intent on competing with the IMF and World Bank.

It’s long been obvious the BRICs are coming. The total annual output of these four economies has spiralled in recent years, to an astonishing $29.6  trillion (£17.3 trillion) last year on a PPP-basis adjusted for living costs. That’s within spitting distance of the $34.2 trillion generated by the US and European Union combined.

America’s GDP, incidentally, was $16.8 trillion on World Bank numbers, and China’s was $16.2 trillion – within a whisker of knocking the US off its perch. The balance of global economic power is on a knife-edge. Tomorrow is almost today.

Consider also that the BRICs collectively hold sway over 50pc of global currency reserves, rising to almost three-quarters if you take the emerging markets as a whole. The G7 nations between them control only 20pc – and less than 8pc if you exclude Japan.

Based on such balance sheets, we’re now seeing institutional change. The new BRICs Development Bank, modelled on the IMF, will have a $100bn currency reserve available to lend around the world, giving distressed debtor nations an alternative to the “Washington consensus”.

For a long time, the BRICs have been paying in to the IMF, yet been denied additional influence over what happens to the money. Belgium has more votes than Brazil, Canada more than China.

The institutions governing the global economy have failed to keep pace with reality. Modest reforms giving the large emerging markets more power, agreed with much fanfare in 2007 and again in 2010, have been stalled by Washington lawmakers. The BRICs have now called time, setting up their own, rival institution based in Shanghai.

The key to the dollar’s future is petrocurrency status – whether it’s used for trading oil and other leading commodities. Here, too, change is afoot. China’s voracious energy appetite and America’s increased focus on domestic production mean the days of dollar-priced energy look numbered.

Beijing has struck numerous agreements with Brazil and India that bypass the dollar. China and Russia have also set up rouble-yuan swaps pushing America’s currency out of the picture. But if Beijing and Moscow – the word’s largest energy importer and producer respectively – drop dollar energy pricing, America’s reserve currency status could unravel.

That would undermine the US Treasury market and seriously complicate Washington’s ability to finance its vast and still fast-growing $17.5  trillion of dollar-denominated debt.

In May, Beijing and Moscow signed a huge multi-decade gas supply contract, to sit alongside a similar oil deal agreed in 2009. No one knows what share of this energy trade will be on a yuan-rouble basis – and the two governments aren’t saying. This question, seemingly inane, is among the most important diplomatic issues of our time.

At the moment, although Russia’s export partners do sometimes settle in roubles, most Sino-Russian trade is still in dollars. But the combination of this new gas deal, and western sanctions on Russia – has seen Moscow and Beijing step up bilateral efforts to facilitate large-scale non-dollar settlement.

With western anti-Russia sanctions likely to be tightened again after the tragic shooting of a Malaysian passenger plane over Ukrainian airspace, Beijing’s response will be closely scrutinised. I, for one, expect the Chinese to say little until it’s clearly established who grounded the plane and why.

Although the dollar’s reserve status won’t end overnight, the global payments system is now moving inexorably towards that outcome. The US currency accounted for just 33pc of all foreign exchange holdings in 2013, on IMF numbers, down from 55pc in 2001.

Within a decade or so, a “reserve currency basket” may emerge, with central banks storing wealth in a mix of dollars, yuan, rupee, reals and roubles, as well as precious metals. Perhaps some kind of synthetic bundle of the world’s leading currencies will be developed, with emphasis placed, after years of western money-printing, on assets backed by commodities and other tangibles.

I also believe central banks may include cyber-currencies (such as bitcoin) in their reserves. If you think that’s mad, consider that mankind has long sought scarcity – be it with shells, stones or metallic elements – to store wealth. Now the money-printing taboo has been broken by yet another generation, it makes sense to use complex computer algorithms to ensure that only a certain amount of a particular currency unit can ever exist.

The dollar’s status is a big question. Judging the outcome is more akin to star-gazing than scientific economics. But the establishment of this BRIC Development bank, timed to coincide with the anniversary of Bretton Woods, is an audacious and significant move. The world’s emerging giants now have thumbscrews on the West.

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