US Refuses Inspection Gold Reserves Of Germany-May Be Tungsten
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2012-11-11 04:44:10 UTC
Why Germany Wants to See its US Gold

By Sven Böll and Anne Seith

For decades, almost half of Germany's gold has been stored deep below the
Federal Reserve Bank of New York. Now, with the euro crisis swirling, German
politicians are asking their central bankers to take stock of the reserves.
Some even say that the gold should be shipped home.

Bundesbank President Jens Weidmann wanted to personally convince Peter
Gauweiler that the German gold was still where it should be. Early this
summer, the head of Germany's central bank took the obstinate politician from
the conservative Christian Social Union (CSU), a party that is a member of the
government coalition in Berlin, and a number of his colleagues into the
Bundesbank's inner sanctum: the gold vault.

There, 6,000 gold bars are stacked on industrial-strength shelves in a
purpose-built building in Frankfurt. An additional 76,000 bars of bullion are
stored in four safe boxes, in sealed containers.

But even this personal inspection wasn't enough to reassure the visiting
member of parliament -- on the contrary: "The Bundesbank monitors its domestic
gold in an exemplary fashion," Gauweiler says, "and this makes it all the more
incomprehensible that the bank doesn't look after its reserves abroad."

For quite some time now, Gauweiler has been pestering the government and the
Bundesbank with questions concerning where and how the country's reserves are
stored, and how often they are checked. He has submitted requests and
commissioned reports on the topic.

Last week, Gauweiler celebrated his greatest triumph to date in his gold
campaign, which has been a source of some amusement for many fellow German
politicians: A secret report by the Federal Audit Office had been made public
-- and it contained stern criticism of the German central bank in Frankfurt.
The Bonn-based auditors urged a better inventory system, including quality

This demand, which even the bank's inspectors saw as nothing more than
routine, alarmed the Berlin political establishment. Indeed, the partially
blacked-out report read like the prologue to an espionage thriller in which
the stunned central bankers could end up standing in front of empty vaults in
the US.

'Grotesque Debate'

For decades, German central bankers have contented themselves with written
affirmations from their American colleagues that the gold still remains where
it is said to be stored. According to the report, the bar list from New York
stems from "1979/1980." The report also noted that the Federal Reserve Bank of
New York refuses to allow the gold's owners to view their own reserves.

Not surprisingly, this prompted strong reactions in Berlin: The relevant
Bundesbank board member Carl-Ludwig Thiele was summoned to Berlin to provide
an explanation to the parliamentary budget committee. Heinz-Peter Haustein of
the business-friendly Free Democratic Party (FDP) was even quoted by Germany's
mass-circulation Bild newspaper as saying that "all the gold has to be shipped

The Bundesbank's otherwise reserved Thiele said that he found at least "part
of the debate" to be "rather grotesque." His financial institution currently
has more pressing problems. Bundesbank head Weidmann, for example, is
desperately fighting the European Central Bank (ECB) decision to buy unlimited
quantities of sovereign bonds from crisis-ridden countries as a way of
lowering their borrowing costs. In addition, the Bundesbank has already pumped
nearly €700 billion ($906 billion) into primarily southern European countries
as part of the euro-zone central bank transfers known as Target II.

Germany's gold reserves are currently worth some €144 billion and are not
stored "with dubious business partners," as Thiele stresses, but rather with
"highly respected central bankers."

Special Connection

There is in fact nothing unusual about how Germany deals with the precious
metal. Many other central banks store a portion of their gold reserves abroad.
The Netherlands, for example, places its trust in its colleagues in Ottawa,
New York and London.

But the relationship Germans have with their gold is a special one. Germany
hoards nearly 3,600 metric tons of the precious metal -- only the US has more.
Much of this gold treasure was amassed under the Bretton Woods international
monetary system, in which the dollar served as the world's key currency and
was directly convertible to fixed quantities of gold.

Before the gold standard was terminated in 1971, the current account surpluses
generated by Germany's "economic miracle" were partially balanced out in gold.
Thousands of US bars of gold alone were transferred to German ownership.

But since the euro is not backed by gold, such vast reserves are actually no
longer necessary. Nevertheless, the Germans continue to resolutely defend them
-- and every attempt to use this treasure has been met with dismay.

There has been no lack of proposals: Former German President Roman Herzog
wanted to sell the gold to form the basis for a capital-based nursing care
insurance scheme. In 2002, FDP parliamentary floor leader Rainer Brüderle
proposed a fund for natural disasters. Former Bundesbank head Ernst Welteke
added to the debate by suggesting the foundation of a national educational
fund. But none of these ideas were ever taken seriously.

Most recently, German Chancellor Angela Merkel of the conservative Christian
Democratic Union (CDU) shot down an idea by the euro partners to use the
reserves as collateral for euro bonds.

Strict Security

As a result, in addition to safeguarding the reserves of over 60 countries,
the Federal Reserve Bank of New York continues to hold 1,536 metric tons of
German gold -- or nearly half of Berlin's reserves. This enormous hoard of
gold is stored in the fifth subfloor of the bank's building on Liberty Street,
25 meters (80 feet) below street level, and 15 meters below sea level.
According to the bank's website, the vault rests on the bedrock of Manhattan

Tourists are allowed to venture below street level to see the vault. After
descending in an elevator, they stand in front of an enormous steel cylinder
that pivots like a door in a 140-ton steel-and-concrete frame. But not even
the owners are allowed to view their own gold. According to the Federal Audit
Office report, the Fed explained that "in the interest of security and of the
control process" no "viewings" are possible.

Finally, in 2007, "following numerous enquiries," Bundesbank staff members
were allowed to see the facility, but they reportedly only made it to the
anteroom of the German reserves.

In fact, auditors from the Bundesbank made a second visit in May 2011. This
time one of the nine compartments was also opened, in which the German gold
bars are densely stacked. A few were pulled out and weighed. But this part of
the report has been blacked out -- out of consideration for the Federal
Reserve Bank of New York.

"I would like more transparency on the issue," says Bundesbank board member
Thiele. The Americans are very sensitive, though, when it comes to security
procedures in their gold storage facilities. In their second major depository,
the legendary Fort Knox, practically no one in recent decades has been allowed
to view the gold reserves.

Fuelling Legends

Such intense secrecy fuels legends. Many conspiracy theorists have suspected
for decades that the German gold has long since disappeared. Others believe
that it has been lent out. They contend that there are only promissory notes
of little worth stored in the bank's vaults.

Another myth that has been making the rounds in nationalist-oriented German
circles is that the US refused to hand over the treasure and threatened during
the Cold War to withdraw its troops from Germany if the Germans demanded their
gold back. Former Bundesbank head Karl Blessing, according to the theory, had
to provide the US written confirmation that he would never do such a thing.

This letter, as it happens, actually exists, as Blessing confirmed in his last
interview with SPIEGEL in 1971 -- except it doesn't concern the German gold,
but rather US gold reserves. Until 1971, every dollar could be exchanged for
the precious metal. Blessing thus promised the US Federal Reserve that he
would no longer convert the colossal German dollar reserves to gold because
this would have caused the currency's value to plummet.

Today, this historic document is even available online. But that hasn't
silenced those who oppose stockpiling German gold abroad. Instead, the debate
over a collapse of strictly paper-based currency is experiencing a renaissance
-- as is the dispute over the gold reserves. Even Green Party financial expert
Gerhard Schick has joined the fray: "I think the question of how much gold is
available in an emergency is a valid concern."

Outlandish Idea

From a purely logistical perspective, though, returning the reserves seems
outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380
super-jumbo jet and fly it back to Germany.

The Bundesbank also objects to this notion for another reason. It says the
gold is supposed to act as an emergency buffer. In the extreme situation of a
currency collapse, the bankers say that the gold bars could easily and quickly
be exchanged on location for pounds or dollars to pay urgent bills.

In a bid to calm the debate, the Bundesbank has pledged to bring back and
inspect 150 tons of gold from abroad over the next three years. Furthermore,
there are plans to count and weigh the gold bars stored in one of the nine
chambers at the Fed in New York -- although no date has been set for this.

Bundesbank board member Thiele was also recently in New York where he took a
look behind one of the vault doors. He had good news for the members of the
parliamentary budget committee: "There was no paper in there, just gold."

But that's not enough for CSU politician Gauweiler. He's only prepared to put
the matter to rest when the central bank has thoroughly inspected all the
German reserves throughout the entire world. His credo: "The Bundesbank is
independent, but it can't do what it wants."

Translated from the German by Paul Cohen

10 More Tungsten-Filled Gold Bars Discovered In Manhattan
September 23, 2012 By The Doc 21 Comments

In the aftermath of Wednesday’s report of a tungsten filled 10 oz PAMP gold
bar discovered in Manhattan, it appears we now have an epidemic on our hands,
as the NY Post has just reported that a total of at least 10 tungsten filled
gold bars have now been discovered in Manhattan.

The NY Post reports:

The Post has learned as many as 10 fake gold bars — made up mostly of
relatively worthless tungsten — were sold recently to unsuspecting dealers in
Manhattan’s Midtown Diamond District.

The price of gold has risen more than 600 percent since January 2000, while
the S&P 500 index is down 0.6 percent over the same period.

The 10-oz. gold bars are hugely popular with Main Street investors, and it is
not known how many of the fake gold bars were sold to dealers — or if any fake
bars were purchased by the public.

Ibrahim Fadl, the dealer who originally discovered the tungsten filled gold
bars apparently purchased 4 tainted bars:

One gold dealer discovered that four of the 3-inch-by-1-inch gold bars he
bought — worth about $72,000 retail — were counterfeit.

“It has the entire street on edge,” said Ibrahim Fadl, 62, who has been the
owner of Express Metal Refining, a Midtown gold-refinery business, for the
last 11 years. “I and the others on the street work off of trust; now that
trust is strained.”

Federal agents have discovered a 2nd dealer purchased 6 of the tungsten bars:
A second 47th Street refiner, who wished to remain anonymous, said he was
burned recently when he bought six gold bars that turned out to be mostly
tungsten, with just a gold veneer. He would not comment, though, on who sold
him the bogus bars.

For those who are not familiar with Rob Kirby’s 2009 work and fail to
understand the significance of a mere 100oz of small gold bars filled with
tungsten, the fact is that the discovery substantiates Kirby’s claim that over
William Gropevenor
2012-11-11 08:31:37 UTC
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