🎬 Die Hard 3 and German Gold
Just like in "Die Hard 3" where they steal gold from the New York Fed vault, Germany is actually demanding the return of gold they entrusted to the US.
This is largely due to growing distrust of the US in Germany after Donald Trump took office.
Why Did Germany Entrust its Gold to the US?
After World War II, Germany had no gold, but thanks to the Marshall Plan and an economic boom, they started accumulating it.
During the Cold War, West Germany, being on the front line with East Germany, began storing its gold in the New York Fed's underground vault for asset diversification and security.
💰 The New York Fed's Vault
The New York Fed's underground vault holds 6,331 tons of gold, mostly in the form of over 500,000 gold bars.
The bedrock geology of Manhattan allows it to support such an immense weight.
🔄 Germany's Efforts to Repatriate Gold
Starting in 2010, Peter Boehringer began advocating for the return of overseas gold, which gained support from German politicians.
In 2013, Germany decided to bring half of its gold reserves back home, successfully repatriating a total of 674 tons from the US and France by 2017.
During this process, about 5% of the retrieved gold bars had unclear purity or origin.
🥇 Germany's Special 'Love for Gold'
Germany is the world's second-largest holder of central bank gold (3,352 tons), significantly more than Italy or France.
They hold about 70% of their central bank assets in gold, showing a strong preference for tangible gold.
This stems from their historical experience with hyperinflation, leading them to view gold as a crucial hedge against currency devaluation.
Germany also ranks first globally in gold holdings per capita, with 40g per person.
🌍 Central Banks Increasing Gold Holdings
Since the 2008 global financial crisis, many central banks have been increasing their gold reserves.
Gold is seen as a good hedge for stable monetary system operations.
The IMF also recommends that central banks hold about 10% of their gold in various locations.
📍 Current Location of German Gold
Half of Germany's gold is in Frankfurt, 37% (1,236 tons) is in the New York Fed, and 13% is in the Bank of England in London.
😟 Dissatisfaction with the US and Repatriation Costs
Germany is unhappy that the New York Fed doesn't allow unannounced inspections of the vault or provide detailed historical information about the gold.
If Germany were to repatriate all 1,236 tons of gold from the US, it's estimated to cost over 100 million euros in transportation and security.
Nevertheless, their experience during the 2020 pandemic reinforced the importance of having "gold in hand" for Germany.
💸 Ripple Effects of Gold Repatriation
Germany's gold repatriation could lead to a long-term decline in dollar confidence and increased speculative activity in the gold market.
Furthermore, other countries like Italy and the Netherlands might follow suit, which is an unwelcome development for the US.
It's fascinating to see how Germany's gold repatriation story, almost like a movie, will unfold!
