Bloomberg has published a feature-length article about the history of the German gold repatriation movement partly led by Peter Boehringer. The piece is unusual for the mainstream American media in that it actively entertains the possibility that foreign gold stored in the New York Federal Reserve may not be the same gold originally deposited. Even worse, some of the gold could be missing, which might be the reason so many European central banks have begun to show interest in repatriation.
We live in an era of unprecedented sovereign debts and extraordinary monetary manipulation by central banks. There’s never been a more important time for both individuals and governments to protect themselves with gold reserves. However, it appears that Germany has always been a bit blasé about its reserves:
Boehringer cites an anecdote from almost a century ago to argue that Germany has failed to zealously protect its gold holdings. In the 1920s the president of the German central bank, Hjalmar Schacht, paid a visit to the New York Fed and its founding president, Benjamin Strong. In an episode recounted in his 1955 autobiography, Schacht wrote, “Strong was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked: ‘Now, Herr Schacht, you shall see where the Reichsbank gold is kept.’ “
“The two bankers waited as New York Fed staff sought the German stash. “At length we were told: ‘Mr. Strong, we can’t find the Reichsbank gold.’ †Schacht comforted the flabbergasted Fed banker: “Never mind; I believe you when you say the gold is there. Even if it weren’t you are good for its replacement.†The men left without the German seeing his bars, instead accepting their existence as a matter of trust.â€
It’s no wonder Boehringer is so concerned about Germany’s gold reserves today. If German central bankers were willing to overlook a physical audit of their gold mere years after World War I, why would they suddenly make it a priority after decades of peace?
