Fed has no gold

Supposedly, the Federal Reserve has mountain of gold, seven thousand tonnes stashed in various places in the US.  By an astonishing coincidence, it owes banks in other nations seven thousand tonnes of gold.

The Fed owes the German government fifteen hundred tonnes of gold.  Germany asked for its gold back.  The  Fed did not want to give it.  So Germany asked for three hundred tonnes of gold back.  The fed agreed, in principle, to return three hundred tonnes of Germany’s gold – over seven years.

Why so long?

This only makes sense is the fed has considerably less than three hundred tonnes left and they hope to quietly purchase three hundred tonnes over the next  seven years using freshly printed money.  Stalling is going to create fear.  If the fed is stalling, it can only be because it has absolutely no alternative but to stall.

Recall the bank run scene in “It’s a wonderful life”.  Imagine if the bankers had said, “No problem, we have your money, but, alas, due to postal delays and that our clerks a bit slow counting it is going to take seven years.”

13 Responses to “Fed has no gold”

  1. Erik says:

    This is the sort of post where it would really be convenient with quotes/links/etc, so that those of us seeking to pass it on don’t have to independently rediscover references. Here are some I’ve found on the topic:

    http://www.businessinsider.com/germany-wants-its-gold-back-2012-10
    http://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-will-deutsches-gold-zurueckholen/v_detail_tab_print/7629600.html
    http://www.spiegel.de/international/germany/german-politicians-demand-to-see-gold-in-us-federal-reserve-a-864068.html
    http://hosted.ap.org/dynamic/stories/E/EU_GERMANY_GOLD_RESERVES?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT

    None of them seem to fully support what you’re saying. Can you please point me at better sources, or show more explicitly how you get from such articles to your post? The jump is a bit more than I can follow.

  2. Z says:

    A reason for the fed to stall even if they do have the gold is that they deem it risky to let their physical gold reserves drop below the current level, which could still be exactly what they say it is. Of course this is only marginally better than stalling because they don’t have enough gold.

    • jim says:

      If their physical gold reserves are exactly what they say they are, then no risk. They can pay off all debts with physical gold that is sitting in their vaults gathering dust. The moment it becomes obvious that it is hard to get your gold back from the fed, everyone wants to get their gold back from the fed, everyone wants physical gold.

  3. Dan says:

    Consider the amounts. This is $14 billion give or take. A large sum to be sure but less than 1/1000 of annual US GDP. Massive natgas and agriculture production are examples of US commodity output that is far in excess of these sums. US oil production too has been excellent lately.

    I think the real explanation is plain old American hegemony and bullying.

    The Obama administration:

    (a) Does not like Germany for many reasons (strength, conservatism, history, direction it is taking Europe)

    (b) Feels personally afronted and insulted at an action which makes the adminstration look bad.

    So what does the adminstration do? They act as any offended bureaucrat would. Do the job real slow-like.

    Germany has no proper army and has no ability to speed things up. Germany is frustrated and feels powerless. Bureaucratic mission accomplished.

    • jim says:

      If the US buys that amount of gold on the open market in order to repay Germany, the price shoots way up, which could trigger the remonetization of gold and the demonetization of the US dollar as the international medium of settlements.

      If the US buys that amount of gold on the open market over a short period, it will be obvious that it is buying gold, which sends as big a signal that it has no gold as stone walling Germany does.

  4. Dan says:

    Note that Germany was able to get 1000 tons out of London in 1-2 years around 2001.

    http://www.telegraph.co.uk/finance/financialcrisis/9631962/Bundesbank-slashed-London-gold-holdings-in-mystery-move.html

    America has way more than 300 tons of gold… 4500 tons of its own in Ft. Knox alone. Its total reserves are close to twice that.

    This is pure bureaucratic slow walking because Obama is offended in his bones by a Germany which prospers while America declines, and he is offended by Germany’s lack of blessed diversity.

    • jim says:

      Slow walking runs a big risk of producing a storm of requests by other nations for their gold back, probably is producing a big storm, but no one is announcing it because they hope to withdraw their gold before the others do. If he wants to piss of Germany, there are safer ways of doing so.

  5. Thales says:

    Plenty of Tungsten, though…

  6. Jehu says:

    Apparently the Swiss are about to ask for their gold back too. They’re near the 100k signatures that are needed to put it to a general vote.

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