On December 24,
we
posted an update on Germany's gold repatriation process: a year
after
the Bundesbank announced its stunning decision, driven by
Zero
Hedge revelations, to repatriate 674 tons of gold from the New York Fed and
the French Central Bank, it had managed to transfer a paltry 37 tons. This
amount represents just 5% of the stated target, and was well below the 84 tons
that the Bundesbank would need to transport each year to collect the 674 tons
ratably over the 8 year interval between 2013 and 2020. The release of these
numbers promptly angered Germans, and led to the rise of numerous allegations
that the reason why the transfer is taking so long is that the gold simply is
not in the possession of the offshore custodians, having been leased, or worse,
sold without any formal or informal announcement. However, what will certainly
not help mute "conspiracy theorists" is today's update from
today's
edition of Die Welt,
in which we learn that only a tiny 5 tons of
gold were sent from the NY Fed. The rest came from Paris.
As
Welt
states, "
Konnten die Amerikaner nicht mehr liefern, weil sie die bei der
Federal Reserve of New York eingelagerten gut 1500 Tonnen längst verscherbelt
haben?" Or, in English, did the US sell Germany's gold? Maybe. The official
explanation was as follows: "
The Bundesbank explained [the low amount of
US gold] by saying that the transports from Paris are simpler and therefore were
able to start quickly." Additionally, the Bundesbank had the "support"
of the BIS "which has organized more gold shifts already for other central banks
and has appropriate experience - only after months of preparation and safety
could transports start with truck and plane." That would be the same BIS that in
2011
lent
out a record 632 tons of gold...
Going back to the main explanation, we wonder: how exactly is a gold
transport "simpler" because it originates in Paris and not in New York? Or does
the NY Fed gold travel by car along the bottom of the Atlantic, and is French
gold transported by a Vespa scooter out of the country?
Supposedly, there was another reason: "The bullion stored in Paris already
has the elongated shape with beveled edges of the "London Good Delivery"
standard. The bars in the basement of the Fed on the other hand have a
previously common form. They will need to be remelted [to LGD standard]. And the
capacity of smelters are just limited."
So... New York Fed-held gold is not London Good Delivery, and there is a
bottleneck in remelting capacity? You don't say...
Furthermore, Welt goes on to "debunk" various "conspiracy websites" that the
reason why the gold is being melted is not to cover up some shortage (and to
scrap serial numbers), but that the gold is exactly the same gold as before.
Finally, to silences all skeptics, the Bundesbank says that "there is no reason
for complaint - the weight and purity of the gold bars were consistent with the
books match." In conclusion, Welt reports that in 2014 "larger transport
volumes" can be expected from New York: between 30 and 50 tons.
Here we would be remiss to not point out that the reason why the German
people and the Bundesbank have every reason to be skeptical is that as Zero
Hedge reported exclusively in November 2012, before the Buba's shocking
repatriation announcement and was the reason for the escalation in lack of faith
between central banks, it was the Fed and the Bank of England who in 1968
knowingly sent Germany "bad delivery" gold. Which is why we have a feeling that
the pace of gold transportation will certainly not accelerate until such time as
the German people much more vocally demand an immediate transit of all their
gold held at the New York Fed: after all, it's there right - surely the
Bundesbank can be trusted to melt the gold (if any exists of course) into London
Good Delivery or whatever format it wants.
Unless of course, the gold isn't there...
From
November 9, 2012:
Bank Of England To The Fed: "No Indication Should, Of Course, Be
Given To The Bundesbank..."
Over the past several years, the German people, for a variety of justified
reasons, have expressed a pressing desire to have their central bank perform a
test, verification, validation or any other assay, of the
official
German gold inventory, which at 3,395 tonnes is the second highest in the
world, second only to the US. We have italicized the word
official
because this representation is merely on paper: the problem arises because
no member of the general population, or even elected individuals, have been
given access to observe this gold. The problem is exacerbated when one considers
that a majority of the German gold is held offshore, primarily in the vaults of
the New York Fed, and at the Bank of England - the two historic centers of
central banking activity in the post World War 2 world.
Recently, the topic of German gold resurfaced following the disclosure that
early on in the Eurozone creation process, the Bundesbank secretly withdrew
two-thirds of its gold, or 940 tons, from London in 2000, leaving just 500 tons
with the Bank of England. As
we
made it very clear, what was most odd about this event, is that the
Bundesbank did something it had
every right to do fully in the open:
i.e., repatriate what belongs to it for any number of its own reasons - after
all the German central bank is only accountable to its people (or so the myth
goes), in deep secrecy. The question was why it opted for this stealthy
transfer.
This immediately prompted rampant speculation within various media outlets,
the most fanciful of which, of course, being that the Bundesbank never had any
gold to begin with and has been masking the absence all along. The problem with
such speculation is that, while it may be 100% correct and accurate, there has
been not a shred of hard evidence to prove it. As a
result, it is merely relegated to the echo chamber periphery of "serious media"
whose inhabitants are already by and large convinced that all gold in the world
is tungsten, lack of actual evidence to validate such a claim be damned (just
like a chart of gold spiking or plunging
is not evidence that a central
bank signed the trade ticket, ordering said move), and in the process
delegitimizing any
fact-based investigations that attempt to debunk,
using hard evidence, the traditional central banker narrative that the gold is
there and accounted for.
And
hard evidence,
or better yet a paper trail of inconsistencies, is
absolutely
paramount when juxtaposing the two most powerful forces of our times:
i) the central banking-led status quo (which is
de facto the banker-led
oligarchy whose primary purpose in the past several centuries has been to
accumulate as much as possible of the hard asset-based fruits of people's labor,
who toil in exchange for "money" created out of thin air - a process which could
be described as not quite voluntary slavery, but the phrase would certainly
suffice), and ii) "everyone else", especially when "everyone else" still
believes in the supremacy of democratic forces, accountability, and an impartial
legal system (three pillars of modern society which over the past 4 years we
have experienced time and again have been nothing but mirages). Because without
hard evidence, not only
is the case of
the people against central bankers non-existent, even if
conducted in a kangaroo court co-opted by the banker-controlled status quo, it
becomes laughable with every iteration of progressively more unsubstantiated
accusations against the central banking cartels.
Finally, when it comes to cold, hard facts, which expose central banks in
misdeed, even the great central banks have to be silent silent, as otherwise the
overt perversion of justice will blow up the mirage that modern society lives in
a democratic, laws-based world will be torn upside down.
And while others engage in click-baiting using grotesque hypotheses of
grandure without any actual investigation, reporting or error and proof-checking
to build up hype and speculation, which promptly fizzles and in the process
desensitizes the general public and those actually undecided and/or on the
fences about what truly goes on behind the scenes, Zero Hedge travelled
(metaphorically) in space - to London, or specifically the Bank
of
England Archives - and in time, to May 1968 to be precise.
While there we dug up a certain memo,
coded
C43/323 in the BOE archives, official title "GOLD AND FOREIGN EXCHANGE
OFFICE FILE: FEDERAL RESERVE BANK OF NEW YORK (FRBNY) - MISCELLANEOUS", dated
May 31, 1968, written by a certain Mr. Robeson addressed to the
BOE's
Roy Bridge as well as its Chief Cashier, and whose ultimate recipient is
Charles Coombs who at the time was the manager of the open market account at the
Fed, responsible for Fed operations in the gold and FX markets.
This memo, more than any of the other spurious and speculative accusation
about Buba's golden hoard, should disturb German citizens, and of course the
Bundesbank (assuming it was not already aware of its contents), as the memo lays
out, without any shadow of doubt, that the BOE and the Fed,
effectively
conspired to feed the Bundesbank due gold bars that were of substantially subpar
quality on at least one occasion in the period during the Bretton-Woods
semi-gold standard (which ended with Nixon in August 1971).
The facts:
At least two central banks have conspired on at least one occasion to
provide the Bundesbank with what both banks knew was "bad delivery" gold - the convertible reserve currency under
the Bretton Woods system, or in other words, to defraud - amounting to 172
bars.
The "bad delivery" occured even as official gold refiners
had warned that the quality of gold emanating from the US Assay Office was
consistently below standard, and which both the BOE and the Fed were aware of.
Instead of addressing the issue of declining gold quality and purity, the banks
merely covered up the refiners' complaints
It is this that the Bundesbank, the German government, and the German people
should be focusing on. If in the process this means completely ridiculing the
Buba's "
she doth protest too much" defense strategy that what is
happening in the media is a "phantom debate" as per
Andreas
Dobret's recent words, so be it. In fact, one may be well advised to ignore
anything Buba has said on this matter, because in attempting to hyperbolize the
matter out of irrelevancy, the Buba is now cornered and will have no choice now
but to explain just what the true gold content of the gold even in its
possession is, let alone that which is allocated to the Buba account 50 feet
below sea level, underneath the infamous building on Liberty 33.
Full May 1968 memo from the BOE to the NY Fed: highlights ours:
MR. BRIDGE
THE CHIEF CASHIER
U.S. Assay Office Gold
Bars
1. We have from time to time had occasion to draw the Americans’ attention
of the poor standards of finish
of U.S. Assay Office bars. In addition in 1961 we passed on to
them comments from Johnson Matthey to the effect that spectrographic
examination did not support the claimed assay on one bar they had so tested
(although they would
not by normal processes have challenged the assay) and
that impurities in the bar included
iron which caused some material to be retained on the sides of crucible
after pouring.
2. Recently, Johnson
Matthey have put 172 “bad delivery” U.S. Assay Office bars into good delivery
form for account of the Deutsche Bundesbank. These bars
formed part of recent shipments by the Federal Reserve Bank to provide gold in
London in repayment of swaps with the Bundesbank. The out-turn of the
re-melting showed a loss in fine ounces terms four times greater than the gross
weight loss. Asked to comment Johnson Matthey have indicated verbally
that:-
(a) the mixing of “melt” bars of differing assays
in one “pot” could produce a result which might be a contributing factor to a
heavier loss in fine weight but they did not think this would be substantial
;
(b) a variation of .0001 in assay between
different assayers is an extremely common phenomenon;
(c) over a long period of years they had
had experience of unsatisfactory U.S. assays
3. It is not, however, possible to say that the U.S. assays were at fault
because Johnson Matthey did not test any of the individual bars before
putting them into the pot.
4. The Federal Reserve Bank have informed the Bundesbank that
adjustments for differences in weight and refining charges will be reimbursed by
the U.S.Treasury.
5. No indication should, of
course, be given to the Bundesbank, or any other central bank holder of U.S.
bars, as to the refiner’s views on them. The peculiarity of the
out-turn will be known to the Bundesbank: it has so far occasioned
no comment.
6. We should draw the attention of the Federal to the discrepancy in this
(and any similar subsequent such) result and add simply that the refiners have
made no formal comment but have indicate that, although very small differences
in assay are not uncommon, their experience with U.S. Assay
Office bars has not been satisfactory.
7. We hold 3,909 U.S. Assay Office bars for H.M.T. in London (in
addition to the New York holding of 8,630 bars). After the London gold
market was reopened in 1954 we test assayed the bars of certain assayers to
ensure that pre-war standards were being maintained. It might be premature to
set up arrangements now for sample test assays of U.S. Assay Office bars
but if it appeared likely that the present discontent of the refiners
might crystalise into formal complain we should certainly need to do
this. In the meantime I would recommend no further action.
31st May 1968
P.W.R.R.
To summarize: Bank of England discovers discrepancies with US Assay Office
gold bars, notifies the NY Fed that its gold bars have major "bad delivery"
issues, but, and this is the punchline, on this occasion, we'll keep it quiet,
because the Bundesbank got these bars. This is merely one documented assay
occasion: one can imagine that of the hundreds of thousands of gold bars in
official circulation, the "good delivery" quality of bars outside of the US, and
perhaps BOE, official holdings has progressively declined over the decades of
Bretton Woods. One can also only imagine what has happened to all those "good
delivery" bars currently held by the Fed as custodian at the NY Fed. Literally:
imagine. Because there is no way to check what the real gold
consistency of these gold bars is, and whether the refiners found ongoing future
inconsistencies with "good delivery" standards of bars handed off to other
"non-core" central banks. And, yes, without further evidence the above is merely
speculation.
As to the remaining relevant
facts: the US ran out
of good delivery gold in March 1968 and only had coin bars remaining. Which is
why it closed the gold pool and went to a two-tier price system. The Bundesbank
went on to cover some of the outstanding gold debts of the Fed to the gold pool.
Subsequently, the US then did several deals with the BOC to get a substantial
amount of gold to pay back the Bundesbank which was sent over to England from
March until June 1968. One can, again, only speculate on the quality of said
gold. The Fed then created unsettled accounts to account for these transfers
between itself and the Buba.
In light of the above
facts and
evidence,
one can see why the Buba is doing all in its power to avoid the spotlight being
shone on the purity of its gold inventory: after all the last thing the German
central banks would want is someone to go through the publicly available
archived literature, to put two and two together, and figure out that it does
not take one massive "rehypothecation" (see
"to Corzine") event for
German gold credibility to be impaired: all it takes is death from a thousand
micro dilutions over the decades to get the same end result. Because chipping
away one ounce here, one ounce there for years and years and years,
ultimately adds up to a lot.
We eagerly look forward to the Buba's next iteration of self-defense. We can
only hope that this one does not
include
a reference to a "
phantom debate", to "
East German terrorist
Simon Gruber" or to
Goldfinger, as it will merely further destroy
any remaining credibility the Bundesbank may have left in this, or any other,
matter.
