Jan 17, 2013 by Keith Weiner

Germany has announced that it plans to take home all 374 tonnes of its gold stored at the Banque de France, and 300 out of 1,500 tonnes held at the Federal Reserve Bank of New York (http://www.ft.com/intl/cms/s/0/97970542-5fd2-11e2-b128-00144feab49a.html#axzz2I9UZ7iGA).

Bill Gross of PIMCO tweeted:

“Report claims Germany moving gold from NY/Paris back to Frankfurt. Central banks don’t trust each other?”

In this article, I consider some popular reactions to the news and then present my own analysis and some ideas about what I think could happen.

Declining trust is a global megatrend. It is impossible to ignore. I proposed trying to measure it as one indicator for financial Armageddon in my dissertation (http://keithweiner.posterous.com/a-free-market-for-goods-services-and-money).

I am sure distrust for the US government, or more likely, responding to the German voter’s distrust is among their concerns. But, I doubt that this is the primary motivation. The Bundesbank is not acting as if they are in any hurry, planning to have the gold moved over a period of 8 years (yes, I know, it all “fits”, the delay is because the Fed hasn’t got the gold, etc.) A lot can and will happen in 8 years (including the end of the current monetary system). The distrust theory has to answer: why would Germany leave 1,200 tonnes of gold in New York and 447 tonnes in London?

The above says 8 years but the completion date is 2020 either way. One reason given for the delay is that you can only insure 3 tonnes of gold at a time for shipment on an airplane. That is all the insurance companies are willing to insure at any one time. It still does not explain why it takes so long making one assume New York does not have it.

Bob