On January 16, Germany’s central bank made a startling announcement. It asked America and France to return its gold. Seven hundred and forty-three gleaming tons will be relocated to vaults in Frankfurt.
The statement by the second-biggest gold holder in the world sent a shudder through global markets. Newspapers went into speculation overdrive. Why is Germany asking for its gold back now?
It is big news, but few know what it really means. And you need to know because this announcement will eventually affect you.
Why Store Gold Elsewhere?
But first, why is Germany’s gold held in New York, London and Paris anyway? Why doesn’t it hold its own gold? According to the Bundesbank, the reason is twofold.
First, storing gold in America makes it easier to sell, or pledge, in case of an economic emergency. It is easier to trade to others who can then quickly take ownership.
The second reason is that it was deemed safer to spread Germany’s gold out during the Cold War to protect it from the Soviets. According to the Bundesbank, that is no longer a concern. That Germany feels safe enough to bring it home speaks volumes about Germany’s changing relationship with Russia.
But there is a third, unmentioned—and far more important—reason Germany doesn’t keep its gold at home.
It goes back to World War ii. When the Allies finally stopped the German death machine in 1945—for the second time in 27 years, they purposed to ensure that Germany could never again destroy world peace. Forcing Germany to store its gold overseas was the primary financial mechanism preventing Germany from ever starting another war. As analyst Byron King notes, “One way for the U.S., Britain and France to keep a leash on Germany was to keep ‘German’ gold under control outside of that country’s borders” (Daily Resource Hunter, January 22).
As long as the Allies controlled Germany’s gold, the Allies had a conqueror’s insurance policy that ensured Berlin would not again disturb the peace. Without its gold, Germany’s currency, and thus its economy, could be destroyed virtually overnight.
But now America, Britain and France appear to think that they no longer need that insurance policy.
That is a tragic mistake.
Bringing the Gold Home
Germany’s Bundesbank noted that it has already repatriated most of its gold from London. Frankfurt has retaken possession of 937 out of 1,433 tons stored across the Channel. Now it is repatriating 330 tons of gold from America, which equates to about 20 percent of its holdings in the U.S.
Interestingly, the German central bank says it will take seven years to get its gold from America. Is America still hesitating at relinquishing control over Germany?
The most important part of Germany’s announcement, though, may be that it is taking full custody of all of its gold held in Paris. All 412 tons will be transferred home—and you can be sure it won’t take seven years. It took less than three years for Germany to remove more than twice that much from Britain.
This is a sign that Germany is about to stop playing Mr. Nice Guy with France.
A big battle is raging over control of Europe’s economic destiny. Northern Europe, led by Germany, is fighting for control of the European Central Bank against a group of mostly southern nations, led by France. The outcome will impact euro exchange rates, debt markets, employment, social stability—and ultimately, which countries will even remain part of the eurozone.
“The Germans kind of feel like they’ve been overrun in this decision-making process,” says Michael C. Burda, an economist at the Humboldt University of Berlin. Bringing the gold home, he said, “is just a signal that Germany is not going to take this much longer.”
Germany is getting ready to deal emphatically, and once and for all, with France. France is about to find out who the true financial power of Europe is. And Germany is signaling to the world that the days of its apologizing for its World War ii past are over. No longer will it weakly submit to Paris’s demands.
But after Berlin silences Paris, what will its next move be?
Germany’s Next Move
Here is what Trumpet editor in chief Gerald Flurry wrote after Russia invaded Georgia in 2008: “I believe it is very likely Germany and Russia have already cut a deal. … The presence of a deal between these two nations is not a sign of peace. Like the Molotov-Ribbentrop pact, and so many others before it, it is a sign of exactly the opposite. Both of these nations are looking to secure their shared border—so they can pursue their imperialistic aims elsewhere! It is a precursor to war! That is the way they operate! And the U.S. has no clue.”
Germany has largely secured its border with Russia. Its willingness to store its gold in Frankfurt again is evidence it no longer fears Moscow like it did in the Soviet Union days. With its eastern flank now fairly secure, Germany is going after Paris for unchallenged control of Europe.
Then, once it is done subduing its only major counterweight in Europe, it will turn on America and Britain.
Germany’s old World War ii foes will soon regret turning Germany loose. The world is about to see a much stronger Bundesbank—and consequently, a more aggressive German nation. German confidence and power grows with the clink of each brick it adds to its towering stack of gold.