Germany to Fed: give us our gold back
Ben Bernanke and the rest of the US Federal Reserve bet the farm that they could engage in countless monetary interventions, keep interest rates at zero, and print over $2 trillion in new money without damaging the US’s credibility.
They were wrong. Indeed, Germany just fired a major warning shot to the US Federal Reserve.
On Monday, Germany announced that it will be moving a significant portion of its Gold reserves out of storage with the New York Fed and moving them back to Germany.
A few background details.
- Germany has the second largest Gold reserves in the world behind the US.
- Since the early ‘80s, Germany has stored the largest portion of its Gold reserves with the New York Fed (45% vs. 13% in London, 11% in Paris and the remaining 31% in Frankfurt).
- In the fall of last year, German officials began raising the issue of auditing its reserves at the NY Fed.
Why would Germany suddenly decide that it wants to change a policy it has had in place for over 30 years?
More importantly, how did it go from wanting to audit its reserves to actually removing them from the NY Fed’s care?
In simple terms, Germany has just announced that it doesn’t trust the US Fed.
Forbes quotes the German bank as making a “preemptive” move “in case of a currency crisis” in the Eurozone.