Germany’s Gold Delusion

WASHINGTON, DC – Germany’s gold is on the move. For the first time since official gold transactions became more transparent, the Bundesbank has given notice that a significant portion of its holdings will be transferred home from France and the United States. Ostensibly, this is just a matter of monetary housekeeping. But why now?

One possibility is that German policymakers believe that we are approaching an every-country-for-itself scenario – and only gold guarded by one’s own police is worth anything.

But this is more than far-fetched. The world in which financial trust breaks down completely between Germany and France or Germany and the US is one in which we have much bigger problems than where a country’s gold is located. International trade would collapse, and major global companies would struggle to sell their products. Having more gold at home, rather than in the vaults of the New York Fed, would be neither here nor there in such a situation.

Does Germany think that its gold will be subject to sanctions or some form of confiscation – as sometimes happens to rogue nations? Again, this is hardly plausible. Countries like Iran and Venezuela work long and hard to become international pariahs. Germany, by contrast, is a mainstay of the democratic world. That is not going to change.