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The Real Story Behind Germany's Gold Recall

Did you hear the news? Germany, the world’s second largest gold-holding nation, is recalling some of its gold. The Germans are bringing the physical metal – once on hold outside its borders – back in country.

This is a huge development in the world gold market. But more importantly may portend a life-changing trend that gold buyers like you and I can take to the bank.

Today let’s connect a few more dots, and talk gold

Germany, Russia, Ronald Reagan, Clausewitz, this story has it all. Let’s start by covering a distant memory, the Cold War.

Indeed, the Cold War is not just over, it’s REALLY over. Get over it. The world is REALLY changing, and I mean in ways that you can scarcely begin to comprehend.

Yes, I know. The Soviet Union fell apart in 1991. Germany reunified – expensive as that was – and the Red Army went home to Mother Russia in the mid-1990s. (I was in Berlin, in 1991, right after I did my thing in Operation Desert Storm. Wow, I could tell you some stories about the Group of Soviet Forces in Germany, headquartered at Potsdam. Another time, perhaps.)

But now? In 2013? What’s happening? There’s big news, which the mainstream media evidently fails to comprehend, while they fixate on the wrong sorts of shiny stuff – “gun control,” for instance, and what Hollywood celebrities think about it.

Here’s the real news. Long-term, this will change your life. You paying attention?

Germany is recalling some of its central bank-owned gold from the Federal Reserve Bank in New York, as well as all “German” gold on deposit in France. It’s back to der Heimat.

Let’s back up. Why was German gold not in Germany? It’s a monetary relic of the Cold War. Back in the 1950s-1980s, the “Federal Republic of Germany” (the Bundes Republik Deutschland, or BRD – “West” Germany) was basically a potential nuclear battlefield. So part of the monetary preparation for fighting World War III in Europe was to keep West Germany’s gold away from the Russian tanks and nuclear fallout.

There was also something of a “conqueror’s legacy” about it. Post-World War II, the immediate challenge to U.S.-British-French policymakers was to keep Germany tame, considering the horrible memories of the late unpleasantness of 1939-1945. As Nobel laureate Francois Mauriac once quipped, “I love Germany so dearly that I hope there will always be two of them.”

One way for the U.S., Britain and France to keep a leash on Germany was to keep “German” gold under control outside of that country’s borders. The West German “mark” – the national currency that predated today’s euro – was thus, to a significant extent, at the mercy of people in Washington, London and Paris.

Indeed, the German gold in New York, London and Paris was a form of conquerors’ deference to maintaining “gold backing” for the mark. It’s a much longer story than this, but the point is that the policy lasted three generations.

Now, however, that issue of outside control over the German currency has come to a new turn of events. The Germans are burying the last of their grandparents who lived through World War II. And they are revisiting the rationale for storing their gold under the jurisdiction of conquering powers of World War II. There are all manner of policy implications – immediate and long term.

What will Germany do with its gold after it is back inside the traditional national boundaries? Well, we’re going to find out, aren’t we?

Germany is removing all of its gold from France. The publicly-stated reasoning is that there’s no further reason for the French to store German gold, in that both nations are part of the “euro” monetary union. Of course, just a glance at the past 200 years of history tells you that there’s likely much more to the underlying rationale.

Germany will still keep some gold in New York and London, but only after conducting a complete inventory of every bar – by weight and assay, for each serial number. (Remember what Ronald Reagan said? “Trust, but verify.”)

The monetary rationale, here, is that – despite what some banker-types want you to believe – gold plays a role in balancing terms of trade between Germany and the U.S. and Britain. In other words, the dollar-euro and pound-euro exchange system works better with gold in the gearbox.

It’s accurate to say that as history shows, gold goes to where it’s respected. As I see things, just the idea that Germany is assaying its gold, and wants some of it back, speaks volumes. The gold will boost the credibility of the German government and its central bank, and generally strengthen the German economy for all manner of reasons.

Here’s a future scenario on which to chew. Perhaps Germany might look at its gold, smile and then back out of the euro as we know it. The effect will be to ditch the southern countries – certainly Greece, Spain and Portugal – from a “European” currency.

Then Germany will do what we all know it wants to do anyhow – that is, form a “new” euro including the economies of northern European countries. Think in terms of an expanded version of the old Hanseatic League, perhaps, with Germany as the center of gravity. Very Clausewitz, no? And there’s the possibility of offering membership to Italy (or perhaps just “northern” Italy).

Oh, and don’t dismiss the possibility of a German-Russian monetary alliance. They already have a strong, and growing energy alliance. Why not start coordinating things in terms of currency as well. We’ll see, right?

Best wishes…

Byron W. King
Original article posted on Daily Resource Hunter

9 Comments

  1. hidflect says:

    The Germans are reputed for running their economy like a corner store. And now they want to count the coins in the till.

  2. Ross says:

    I was in Germany 1989-91. Talk to me.

    The Swedes, the Fins, and the Norwegians are now way out of step with German thinking.

    The Baltics are basket cases in every sense of the phrase. The Poles do the radical red and white thing and throw in the blue any time anyone talks sense.

    It ain’t a good time for Germany-Russia.

    Germany is still doing stupid things further south with NATO fearing the Ottamans as ever.

  3. shortchanged says:

    If you had a few billion dollars in gold, euros, whatever, would you just leave it there gathering dust in your bank or would would you be a ‘good’ banker and ‘borrow’ it, by lending it out, for a fee of course. I bet the Yanks and the French aren’t happy bunnies right now. Why are the Germans repatriating only half, from the US, can’t they find the rest?

  4. Lachlan says:

    I’d like to know if these other countries bother to occasionally show their gold to the public like the USA doesn’t. Is there a patsy at this currency war table?

  5. shortchanged says:

    I think we are the ‘patsies’ Lachlan, we, the little people, as we are known by the arrogant banksters and fellow travellers, cop the the brown stuff no matter who throws it. I smell a rat in all these currency shenanigans, which is allied to Gold deposits in banks. Buy physical gold, but the problem is Julia knows you have it, and the ATO, and centrelink and just about everyone else, whereas here in dear old Blighty no one knows or cares. Its nice to be free from government snooping, ‘cept its cold outside, and the snow lays all around’. Warm inside, but.

  6. Lachlan says:

    SC …yes anybody who is productive becomes the Patsy of a global inflation campaign. Lets get real, many governments are in cahoots.

  7. shortchanged says:

    Inflation is the key Lachlan, together with deliberate manipulation by governments , being retired with a pension, I was able to eek out a living by investing the few pounds I have saved. Now it’s not safe to do so, with all the frauds and scams going on you can’t trust your money anywhere. The once solid companies like, Comet, blockbuster, Jessups, all gone bust since Xmas plus a few last year, makes it very dodgy indeed. There must be hundreds of millions of ££ stuffed under mattresses as you can’t trust the banks either. Lucky I still have some gold coins.

  8. Lachlan says:

    Good luck SC. At least you know what’s going on and can look out for yourself. I meet a lot of people who don’t yet but I believe that there is an increase in awareness happening…bit by bit.

    I have some gold and silver but I understand the big end of town can mess with it.

  9. shortchanged says:

    That’s the problem Lachlan, the big end of town, and I’m afraid its going to get worse. I spent 44 years in Australia and hated to leave, it was that or forgo any kind of freedom. I’m by no means wealthy, but I get by. Get another passport, google it, read the customs act on taking money, valuables out of Australia, don’t do anything illegal, (as if you would). I met another Australian whom has a EU passport, he travels to Australia every year, NOT using his Aus. passport, you have to get a visa though but that’s no problem. I have been in the Law most of my working life, and I have learned to try and box clever, be inventive, consider all the angles, play the devils advocate. Most of all, look after your self and family, every thing and every one is secondary. More if you need it.

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