8 ms·

Where Is Germany's Gold?

63 points by coreymgilmore 12y ago

ceejayoz 12y ago
The recent Bloomberg redesign is truly bizarre. Microsoft WordArt-esque text popping out as you scroll...
- tomwalker 12y ago
  I found it strange as well - sometimes the images popped up again and covered some text.
- Grazester 12y ago
  It's terrible is what is it. I have started keeping away from the site because of it unfortunately. On a smaller screen laptop I find that I have to scroll more to catch roughly the same number of headline I use to previously
  - dragontamer 12y ago
    Despite your downvotes, I agree with you.
tdees40 12y ago
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
- carsongross 12y ago
  It's always good to think about what evidence would convince you that the other side has a point. I lean towards the side that thinks that the central and money center banks (not faceless multinationals) are suppressing the price of gold via fractionally-reserved lending of physical gold. What would convince me that this is not the case would be a comprehensive audit of the Federal Reserve's books and gold holdings. You?
  - tdees40 12y ago
    I think a dinosaur lives in the subways under Manhattan. I would be convinced otherwise only by a full audit of all subway tunnels conducted using a dinosaur scanner (which someone will need to invent). But seriously, there are lots of things that are hard to prove wrong, but that's hardly a good reason to believe them. In your case, what motive would the Fed have? Has an employee of the Fed (or any other central bank) ever blown the whistle on this massive international conspiracy? If there's no good reason to think something, there really isn't much good reason to spend time proving it wrong.
    - nosuchthing 12y ago
      I have an anti-dinosaur stone I'm willing to sell for the right price, it's very effective. Notice there are no dinosaurs around the vicinity of my stone.
      - tdees40 12y ago
        Is it made of....GOLD?
    - sopooneo 12y ago
      Proving that something does exist is much more straightforward than proving it doesn't.
    - DennisP 12y ago
      I tend to lean toward everything being fine, but motive seems obvious. It's an extremely valuable pile of stuff being held by a custodian for many decades with no external audits. I can't think of many cases of people being okay with that situation.
oafitupa 12y ago
Time for plan Bitcoin.
im2w1l 12y ago
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)
JacobAldridge 12y ago
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?
- geofft 12y ago
  The offsite copy involves trustworthy people, and unlike with data, there's no client-side encryption for gold. If you do believe that the NY Fed, the Bank of England, and the Bank of France are "above reproach," then your argument is absolutely correct. But if you can't be sure of that—and this article is definitely attempting to cast doubt on that—then there's the usual argument about self-hosting. Amazon's probably a better sysadmin than most people are, but you're the only sysadmin that you have meaningful control over the competence of.
bayesianhorse 12y ago
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.
sjwright 12y ago
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.
felipeerias 12y ago
Here is how gold works: it doesn't matter if it is really there, as long as everybody agrees that it is there.
dikaiosune 12y ago
I thought all of the German gold was in the Philippines. Disclaimer: I'm currently reading Cryptonomicon. It's a history book, right?
- ovi256 12y ago
  Yes, but not of our universe. Amazing book, by the way. I would also highly recommend the whole Baroque cycle.
  - groby_b 12y ago
    The Baroque cycle? Only if you thought Cryptonomicon was regretfully short, and the final chapter was the crowning achievement of Stephensons writing. Otherwise, I'd read pre-Cryptonomicon Stephenson.
    - dredmorbius 12y ago
      The Baroque Cycle was a lot of heavy chewing, but it was ultimately a pretty good story, and I was sad to come to the end of it. It's also, along with Cryptonomicon, one of the more interesting explorations of the world of money and finance I've found. You might also enjoy REAMDE which it a bit faster-paced. I happened to enjoy Anathem as well, though that was also a bit of a slog. It did have a resolution though. And protractor.
      - groby_b 12y ago
        Read all but Anathem. I'm still convinced Cryptonomicon is the pinnacle of his writing, and it's downhill from there. The story in Baroque Cycle was great, but good god, that thing needed an editor to do some serious cutting. REAMDE was quick and entertaining, but it was the equivalent of a Tom Clancy novel. Or, fine, Michael Crichton.
  - zrail 12y ago
    After years of letting QUICKSILVER lie unread on my shelf I finally picked it up. It's amazing!
raintrees 12y ago
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-found-in-new-york-2012-9 http://www.businessinsider.com/tungsten-filled-gold-bars-fou...
umsm 12y ago
This story reminded me of an NPR story about the gold standard: http://www.npr.org/blogs/money/2015/01/16/376967946/episode-253-gold-standard-r-i-p http://www.npr.org/blogs/money/2015/01/16/376967946/episode-...
lisa_henderson 12y ago
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.
- wolfgke 12y ago
  I'm not a goldbug, but I'd answer to > So why would they take a fiction over a real shirt that that gives them real value? Because they can nearly immediately exchange the $500 (fiction) into something of real value (gold).
  - shard972 12y ago
    Thanks for raising this to the top of his mind.
  - geofft 12y ago
    But that would then imply that the five-hundred-dollar bill has value, because it can be exchanged reliably and easily for value. The goldbugs, as far as I know, don't favor gold because it's shiny; they favor it because it's physical and it's historically been popular in so many cultures as a medium of exchange for things of real, inherent value (food, labor, housing, etc.). I think a definition of "value" that roots gold as having value because it's gold would be so self-referential as to be useless.
    - 12y ago
mtmail 12y ago
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 https://www.youtube.com/watch?v=CTtf5s2HFkA
Htsthbjig 12y ago
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."
jwcacces 12y ago
Holy pop-out words Batman!
- scott_karana 12y ago
  Yes, and I wish they popped out earlier... I kept having to scroll back to read them after I'd passed the gap.
mschuster91 12y ago
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?
- joosters 12y ago
  Serious answer: go read wikipedia's entry on 'gold'.
- AnimalMuppet 12y ago
  It's an alternative to paper currencies. How much that's worth to you depends on how much you distrust paper currencies. How much that's worth to the global economy depends on how much the global economy collectively distrusts the money supply (and the central bankers and/or politicians that control the money supply). This is a big part of why the price of gold moves the way it does. It's not that the value of currencies changes compared to gold, which is the unmoving reference point. Instead, what's going on is that peoples' trust in paper currencies fluctuates, which changes their desire to hold gold as an alternative.
  - oafitupa 12y ago
    It's not an "alternative", it's a store of value by its own merit, and has been so for thousands of years, while paper money is pretty recent and is by no means a good store of value or even a good medium of exchange, with the surge of digital money.
    - AnimalMuppet 12y ago
      Paper money, in most countries in modern times, has been a more stable store of value than gold. Consider, for example, the price of gold over the last 10 years - the run up to $1700, the fall below $1200, the small recent recovery. Has that been because of the change in value of the dollar? No, most of that change is in the value of gold, not in the value of the dollar. That's not a very stable store of value. Even the Swiss Franc has been more stable, despite the recent shock. Paper money has mostly been a more stable store of value than gold... except when it hasn't. When the paper currency becomes toilet paper, gold looks like the perfect store of value. The modern role of gold, then, is more insurance than it is a store of value. (Or you could think of it as a short on currency.)

63 points by coreymgilmore 12y ago

ceejayoz 12y ago

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

tomwalker 12y ago
I found it strange as well - sometimes the images popped up again and covered some text.
Grazester 12y ago
It's terrible is what is it. I have started keeping away from the site because of it unfortunately. On a smaller screen laptop I find that I have to scroll more to catch roughly the same number of headline I use to previously
- dragontamer 12y ago
  Despite your downvotes, I agree with you.

tdees40 12y ago

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

carsongross 12y ago
It's always good to think about what evidence would convince you that the other side has a point. I lean towards the side that thinks that the central and money center banks (not faceless multinationals) are suppressing the price of gold via fractionally-reserved lending of physical gold. What would convince me that this is not the case would be a comprehensive audit of the Federal Reserve's books and gold holdings. You?
- tdees40 12y ago
  I think a dinosaur lives in the subways under Manhattan. I would be convinced otherwise only by a full audit of all subway tunnels conducted using a dinosaur scanner (which someone will need to invent). But seriously, there are lots of things that are hard to prove wrong, but that's hardly a good reason to believe them. In your case, what motive would the Fed have? Has an employee of the Fed (or any other central bank) ever blown the whistle on this massive international conspiracy? If there's no good reason to think something, there really isn't much good reason to spend time proving it wrong.
  - nosuchthing 12y ago
    I have an anti-dinosaur stone I'm willing to sell for the right price, it's very effective. Notice there are no dinosaurs around the vicinity of my stone.
    - tdees40 12y ago
      Is it made of....GOLD?
  - sopooneo 12y ago
    Proving that something does exist is much more straightforward than proving it doesn't.
  - DennisP 12y ago
    I tend to lean toward everything being fine, but motive seems obvious. It's an extremely valuable pile of stuff being held by a custodian for many decades with no external audits. I can't think of many cases of people being okay with that situation.

oafitupa 12y ago

Time for plan Bitcoin.

im2w1l 12y ago

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)

JacobAldridge 12y ago

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?

geofft 12y ago
The offsite copy involves trustworthy people, and unlike with data, there's no client-side encryption for gold. If you do believe that the NY Fed, the Bank of England, and the Bank of France are "above reproach," then your argument is absolutely correct. But if you can't be sure of that—and this article is definitely attempting to cast doubt on that—then there's the usual argument about self-hosting. Amazon's probably a better sysadmin than most people are, but you're the only sysadmin that you have meaningful control over the competence of.

bayesianhorse 12y ago

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.

sjwright 12y ago

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.

felipeerias 12y ago

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

dikaiosune 12y ago

I thought all of the German gold was in the Philippines. Disclaimer: I'm currently reading Cryptonomicon. It's a history book, right?

ovi256 12y ago
Yes, but not of our universe. Amazing book, by the way. I would also highly recommend the whole Baroque cycle.
- groby_b 12y ago
  The Baroque cycle? Only if you thought Cryptonomicon was regretfully short, and the final chapter was the crowning achievement of Stephensons writing. Otherwise, I'd read pre-Cryptonomicon Stephenson.
  - dredmorbius 12y ago
    The Baroque Cycle was a lot of heavy chewing, but it was ultimately a pretty good story, and I was sad to come to the end of it. It's also, along with Cryptonomicon, one of the more interesting explorations of the world of money and finance I've found. You might also enjoy REAMDE which it a bit faster-paced. I happened to enjoy Anathem as well, though that was also a bit of a slog. It did have a resolution though. And protractor.
    - groby_b 12y ago
      Read all but Anathem. I'm still convinced Cryptonomicon is the pinnacle of his writing, and it's downhill from there. The story in Baroque Cycle was great, but good god, that thing needed an editor to do some serious cutting. REAMDE was quick and entertaining, but it was the equivalent of a Tom Clancy novel. Or, fine, Michael Crichton.
- zrail 12y ago
  After years of letting QUICKSILVER lie unread on my shelf I finally picked it up. It's amazing!

raintrees 12y ago

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-found-in-new-york-2012-9 http://www.businessinsider.com/tungsten-filled-gold-bars-fou...

umsm 12y ago

This story reminded me of an NPR story about the gold standard: http://www.npr.org/blogs/money/2015/01/16/376967946/episode-253-gold-standard-r-i-p http://www.npr.org/blogs/money/2015/01/16/376967946/episode-...

lisa_henderson 12y ago

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.

wolfgke 12y ago
I'm not a goldbug, but I'd answer to > So why would they take a fiction over a real shirt that that gives them real value? Because they can nearly immediately exchange the $500 (fiction) into something of real value (gold).
- shard972 12y ago
  Thanks for raising this to the top of his mind.
- geofft 12y ago
  But that would then imply that the five-hundred-dollar bill has value, because it can be exchanged reliably and easily for value. The goldbugs, as far as I know, don't favor gold because it's shiny; they favor it because it's physical and it's historically been popular in so many cultures as a medium of exchange for things of real, inherent value (food, labor, housing, etc.). I think a definition of "value" that roots gold as having value because it's gold would be so self-referential as to be useless.
  - 12y ago

mtmail 12y ago

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 https://www.youtube.com/watch?v=CTtf5s2HFkA

Htsthbjig 12y ago

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."

jwcacces 12y ago

Holy pop-out words Batman!

scott_karana 12y ago
Yes, and I wish they popped out earlier... I kept having to scroll back to read them after I'd passed the gap.

mschuster91 12y ago

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?

joosters 12y ago
Serious answer: go read wikipedia's entry on 'gold'.
AnimalMuppet 12y ago
It's an alternative to paper currencies. How much that's worth to you depends on how much you distrust paper currencies. How much that's worth to the global economy depends on how much the global economy collectively distrusts the money supply (and the central bankers and/or politicians that control the money supply). This is a big part of why the price of gold moves the way it does. It's not that the value of currencies changes compared to gold, which is the unmoving reference point. Instead, what's going on is that peoples' trust in paper currencies fluctuates, which changes their desire to hold gold as an alternative.
- oafitupa 12y ago
  It's not an "alternative", it's a store of value by its own merit, and has been so for thousands of years, while paper money is pretty recent and is by no means a good store of value or even a good medium of exchange, with the surge of digital money.
  - AnimalMuppet 12y ago
    Paper money, in most countries in modern times, has been a more stable store of value than gold. Consider, for example, the price of gold over the last 10 years - the run up to $1700, the fall below $1200, the small recent recovery. Has that been because of the change in value of the dollar? No, most of that change is in the value of gold, not in the value of the dollar. That's not a very stable store of value. Even the Swiss Franc has been more stable, despite the recent shock. Paper money has mostly been a more stable store of value than gold... except when it hasn't. When the paper currency becomes toilet paper, gold looks like the perfect store of value. The modern role of gold, then, is more insurance than it is a store of value. (Or you could think of it as a short on currency.)