Going for gold


This report in Spiegel is more than a bit bizarre:

“Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked.”

The practical difficulties of holding huge amounts of gold are pretty significant, it turns out – reminds me of that story from last year about Hugo Chavez wanting to repatriate Venezuela’s gold that was stored abroad, mostly in London. Never mind the risk of the stuff getting stolen, the logistics of transporting some 211 tons of gold are immense.

“Venezuela would need to transport the gold in several trips, traders said, since the high value of gold means it would be impossible to insure a single aircraft carrying 211 tonnes. It could take about 40 shipments to move the gold back to Caracas, traders estimated.“It’s going to be quite a task. Logistically, I’m not sure if the central bank realises the magnitude of the task ahead of them,” said one senior gold banker.”

Felix Salmon had a great post about how Chavez might go about such an endeavour, but the lessons haven’t been learned by some German campaigners, apparently.

“Some Germans even want to bring the gold reserves back to Germany. An initiative called “Gold Action” is campaigning under the slogan: “Repatriate Our Gold!” …But the Bundesbank wants to leave the gold where it is. Observers point out that apart from the high cost of transporting the gold back to Frankfurt, the symbolic effect of Germany repatriating its gold reserves might unsettle the nervous financial markets, who could see it as a sign of an impending collapse of the euro.”

Which all goes to show a primary benefit of fiat currencies – while many might find it problematic that money derives its value solely from the say-so of central banks, at least digital bank balances don’t weigh so much.

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