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.
