from Hacker News

Where Is Germany's Gold?

by coreymgilmore on 2/5/15, 5:49 PM with 88 comments

• by tdees40 on 2/5/15, 10:36 PM

  So here's how this works. Gold bugs are big fans of buying gold. They have lots of gold. Their narrative of the financial system is that gold is the uber-asset that all other assets must be denominated in, and that fiat currency is doomed to collapse. The massive run-up of gold prices during the financial crisis played into this narrative, and despite the fact that mainstream economists, politicians, bankers, etc. still thought of it as a "barbarous relic" (Keynes), gold-bugs saw it as the key to a prosperous economy.

  So now, gold prices have been weak for a few years, so they have to come up with a new narrative. And that narrative is global conspiracy. So you get groups like GATA [1] and Zero Hedge [2] pushing various stories about how gold is being squirreled away somewhere mysterious, or prices are being suppressed by faceless multinationals or what-have-you. Maybe it's true! I don't know, but there's never really been any evidence, and it just sounds like someone justifying a failed investment thesis.

  [1] www.gata.org [2] zerohedge.com

• by bayesianhorse on 2/5/15, 10:55 PM

  It's hard to judge what is more secure... a promise of essentially the U.S. government that the gold belongs to us (Germans), and would be available for sale, or storing the gold in Germany, where it can be seized by an invader, and maybe even ordinary criminals or corruptions. And it would have to be moved again to be sold in bulk, because once Germany needs to sell vast amounts of gold, nobody would trust Germany to just write IOUs.

  Times have changed. Invasion has become unlikely, despite Germany having borders to several foreign countries, with a history of centuries of conflict in Europe. Even corruption is unlikely today to take away significant portions of such a gold depot.

  Still, the only purpose of this gold is as a currency, and as such it doesn't matter that much if it is stored in Germany or in some country you would probably have to trust anyway to make use of it.

• by ceejayoz on 2/5/15, 10:32 PM

  The recent Bloomberg redesign is truly bizarre. Microsoft WordArt-esque text popping out as you scroll...

• by im2w1l on 2/5/15, 10:54 PM

  To be extremely cynical and pessimist: I guess it makes sense to bring the gold home in time for WW 3

  (not only Germany is bringing their gold home, from the article France, Netherlands are doing the same)

• by mtmail on 2/5/15, 11:12 PM

  A nice Bill Nye science geek type video from inside the gold vault of the Bank of England. https://www.youtube.com/watch?v=CTtf5s2HFkA

• by raintrees on 2/5/15, 11:00 PM

  So if they are melting down bars and reforming them, that should put to rest the theory that The Federal Reserve's bars have been tampered with and are just gold-plated tungsten... right?

  The tungsten substitutes are just part of "normal" dodgy street counterfeiting? http://www.businessinsider.com/tungsten-filled-gold-bars-fou...

• by mschuster91 on 2/5/15, 11:37 PM

  Serious question: what exactly is the value of gold? I mean, with other rare metals as palladium or titanium their value can be inferred from industrial consumption, but what is the actual usage of gold and silver other than for filling teeth, making jewelry (we have had artificial "prices" with the diamond cartels) and trace amounts used in electronics?

• by felipeerias on 2/5/15, 10:56 PM

  Here is how gold works: it doesn't matter if it is really there, as long as everybody agrees that it is there.

• by JacobAldridge on 2/5/15, 10:54 PM

  I don't see the benefit in having all of your country's gold reserves stored in your country?

  Firstly, there's the the invasion risk the article referenced, to which I'll add internal political division (talking generally, not just about Germany, although 1989 was not that long ago in geopolitical time). Having all of your gold in the central bank sounds to me like having all of your eggs in one basket, waiting to be plundered.

  But there's also the functional use of the gold. While I can't imagine these reserves being spent anytime soon, in the wider 50-100 year timeframe it's more likely that they may be needed for emergency purchases or as security. In that situation, having at least some of your reserves offshore, particularly in the US which is likely to be your wartime creditor based on history, makes more sense than having to ship it back in a time of crisis.

  Repatriating it all just sounds like paranoia or nationalism to me.

  TLDR: A good backup plan for your data involves an offsite copy. Why not the same with backup gold reserves?

• by umsm on 2/5/15, 11:03 PM

  This story reminded me of an NPR story about the gold standard:

  http://www.npr.org/blogs/money/2015/01/16/376967946/episode-...

• by sjwright on 2/5/15, 10:56 PM

  The purpose of money is to facilitate trade and represent a relatively stable yardstick for valuation, not to be an investment. You don't need a gold-backed currency in order to invest in gold -- just invest in gold.

• by dikaiosune on 2/5/15, 10:58 PM

  I thought all of the German gold was in the Philippines.

  Disclaimer: I'm currently reading Cryptonomicon. It's a history book, right?

• by Htsthbjig on 2/5/15, 11:17 PM

  qui tenet teneat, qui dolet doleat: "he who holds may go on holding, and he who complains may go on complaining".

  "possession is nine tenths of the law" as is currently said."

• by oafitupa on 2/5/15, 10:39 PM

  Time for plan Bitcoin.

• by jwcacces on 2/5/15, 11:25 PM

  Holy pop-out words Batman!

• by lisa_henderson on 2/5/15, 11:03 PM

  Whenever I find myself in a conversation with a goldbug, and they complain about something like "the craziness of unbacked monetary systems" I say "I like your shirt. I will give you $500 for that shirt." (This assumes the shirt is clearly worth less than $500.) If they ask why I make such an offer, I ask if they would accept such an offer. If they suggest they would, then I ask why they would accept such an offer. If they think my "unbacked" $500 is crazy, why would they take the deal? The shirt is a real physical object, and the fact that it has value to them is demonstrated by the fact that they are wearing it. The $500 in paper money is to them "a fiction", as it says in the article. So why would they take a fiction over a real shirt that that gives them real value?

  This rarely changes anyone's mind (few people ever change their minds about issues regarding money) but I hope I can at least raise the contradiction to the top of their minds. All currencies are backed by our willingness to accept them, and that is the only backing that any currency ever needs.