Germany Must Repatriate ALL of Its Gold

The Greatest Threat to Worldwide Prosperity

The greatest threat to worldwide prosperity is the collapse of what remains of free market capitalism.  Not war.  Not depletion of scarce natural resources.  Not environmental degradation.  Not global warming (or is it “climate change” now?)  No, the greatest threat to worldwide prosperity is the complete collapse of what little remains of free market capitalism.  Throughout the world, and not just in totalitarian countries, the state has been advancing at the expense of economic liberty.  The indispensible tool that enables the modern state to usurp our liberties is its access to unlimited amounts of fiat money controlled by central banks; i.e., the unholy alliance of the state with the central bank.

Fiat money expansion has made the advance of statism possible through its ability to thwart the wishes of the people as the final arbiters of state spending.  The state can obtain an almost limitless amount of fiat money from its central bank.  It need not increase taxes or borrow honestly in the bond market, so it need not fear a tax revolt or high interest rates respectively.  All it needs to do is convince the central bank to buy its debt.  The state then takes control over more and more resources, squandering them on war and welfare, depriving the free market economy of its capital base.  Once the capital base has been depleted, the economy will go into a steady decline.

The poster child of this phenomenon is the (former) Soviet Union.  Yes, total collapse is a real possibility–for us too.  The Russian people may have believed that economic decline would reach a plateau, stop, and then reverse.  As explained in stark terms by Dr. Yuri Maltsev, former economic advisor to Mikhail Gorbachev, in Requiem for Marx, the Soviet economy deteriorated into one of subsistence.  The capital base of Russia had been destroyed, and collapse soon followed.

The monetary printing press is seen as an alternative to saving and investing as the means to grow the capital base.  Monetary stimulus attempts to generate economic recovery mainly through exports.

If a nation can increase its exports, so the logic goes, it can increase employment, pay off debts, etc.  So, rather than properly reforming the economy, monetary authorities engage in a destructive “race to the bottom” through competitive debasement of their currencies.  First one country then another intervenes into its own currency markets to cheapen its currency against all others.  But currency devaluation will not work, as explained in this article.

What is desperately needed is for one country to break from this failing and ultimately disastrous model of fiat money expansion and its horrific effects.  This one country must be in a special position whereby it is readily apparent that it is being harmed by currency debasement over which it has no control.  Fortunately for the world there exists such a country–Germany.

The Intolerable Monetary Position of Germany Creates a Unique Opportunity

Germany is the fourth largest economy in the world, behind only the US, China, and Japan.  Amazingly, it does not control its own money supply, because it is a member of the European Monetary Union (EMU), composed of seventeen nations using a common currency–the euro.  Each member, regardless of size, has an equal vote over monetary policy, administered by the European Central Bank (ECB).  Increasingly Germany’s is the lone voice for monetary restraint–recently it was outvoted sixteen to one over an ECB plan to print euros in greater numbers in order to bail out bankrupt members of the EMU.  This is a situation that would be intolerable for any other country; however, due to Germany’s history, it is reluctant to be seen as “anti-Europe” and instead has tried to work within the EMU framework to force bankrupt countries to reform their economies.  But this is a hopeless exercise, as explained by Dr. Philipp Bagus of King Juan Carlos University, Madrid in his brilliant book Tragedy of the Euro.  All the benefits flow to the irresponsible countries, so there is little incentive and no enforcement mechanism for meaningful reform.  Therefore, in a previous essay your authors have called for Germany to leave the EMU, reinstate the deutsche mark, and anchor it to gold.

Most recently there have been calls within Germany to repatriate substantial gold reserves held overseas.  The Bundestag–federal Germany’s legislature and, as such, representing all diverse elements and factions in the country–is the impetuous behind this movement.  The Bundesbank, Germany’s still extant central bank, has agreed to repatriate about one-tenth of its vast overseas gold deposits over the next three years.

But this is inadequate for the real task at hand.  Germany must repatriate ALL of its gold.  There is only one reason that a central bank would wish to repatriate its gold–to serve as reserves in a gold backed monetary system.  The market must be assured that the gold actually exists, that it is under the total control of its rightful owner, and that it is not leased or part of a swap arrangement.  Furthermore, the central bank must be willing to honor demands to deliver gold in the quantity specified in exchange for its paper money certificates and the commercial bank book entry deposits.

Delivery of Gold upon Demand is Crucial

If Germany is to back the deutsche mark with its own gold, markets must be certain that the Bundesbank can and will deliver the gold upon demand.  For under a gold-backed system the gold IS the money.  The pieces of paper that people carry in their wallets and keep in cookie jars and the book entry receipts at commercial banks are not money per se–these are money substitutes that can be exchanged for real money…gold.  The central bank can meet this requirement only if it has absolute control over its gold.

The Bundesbank has significant portions of its overseas gold deposits at the Federal Reserve Bank in New York and the Bank of England in London.   At one time it may have made sense to deposit gold in these countries in order to protect it from the possibility that the Red Army would overrun Germany.  Fortunately that threat is no more.  But the Federal Reserve Bank has been very circumspect about displaying Germany’s gold to its rightful owners.  Now, I ask you, is this not very suspicious behavior?  Why would the Fed refuse to show the actual gold to Germany or any other nation with gold deposits?  The reason usually given is one of security, but what does the Fed think is going to happen? Does it think that armed robbers will be able to abscond with some bars?  This is preposterous!  The gold is the property of Germany.  Germany should insist on viewing its gold, counting its gold, testing its gold for fineness, and making quick arrangements for moving its gold to its own vaults in Germany.

Let Justice Be Done…

Either the gold is all there, and rumors to the contrary are baseless, or some portion of the gold is not there or is encumbered in some way.  If the former, all is well.  If the latter, then let’s learn about it now, so that we can stop any further theft and so that we can establish a financial crimes tribunal to try all who had a part in the theft.  If that means prosecuting central bank officials in the US and/or the UK, so be it.  If that means that the exchange rates for the dollar and/or the pound sterling fall in relation to other currencies, so be it.

Let’s learn the truth, whatever that may be, so we can get on with the important work of placing the world’s finances on the solid foundation of sound money and not on promises of confidence men.  Let us adopt the Latin legal concept fiat justitia ruat caelum, “Let justice be done though the heavens fall”, and not lose sight of the goal of saving what remains of free market capitalism and beginning the difficult process of restoring our liberties.

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24 Responses to “Germany Must Repatriate ALL of Its Gold”

  1. James says:

    "[Democracy] can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury." -A. Tyler
    http://wealthandwant.com/docs/ajo_slavery.html

  2. Jerry says:

    "So, while these postings are fun, and interesting, they probably will do little to change the way people think about the issues discussed."

    I would totally agree with that. The vast majority stick to their beliefs and concept like glue until presented with irrefutable emperical evidence. In my own case I believed in all this socialism we've lived with for decades, had no understanding what inflation was for perhaps 15+ years of my adult life. I voted in many elections, nothing changed other than increased taxation and then inflation and high interst rates hit us. That's when I began the long journey of self education. Read book followed by another. The one book that changed my mind was Mises "Human Action". This man was on to something I new by the time I had struggled through half of it. You out to try it. It's free on the net.

  3. James says:

    Guggzie, to answer your question, read Dr. Alexander Tytler's the Athenian Republic. Called the "Tytler Cycle", Tytler pointed out that every democracy has had about a 200 year life cycle before self destructing.. Reading his words in light of recent history is rather interesting.

    "From bondage to spiritual faith;
    from spiritual faith to great courage;
    from courage to liberty;
    from liberty to abundance;
    from abundance to selfishness;
    from selfishness to apathy;
    from apathy to dependence;
    from dependency back again into bondage."

    • Jerry says:

      Don't know where I read that theory on life cycle but I believe it quite true. Another part of that is generational wealth. Look at families in your circle. The founding parents usually start out poor, work hard and save all their lives. The second generation MAY continue the business (or farm) but often squables develop between siblings often influencent by spouses and children and by the third generation it most often has been disolved into pieces. No generation has the same drive and objectives as a preceeding generation.

    • Guggzie says:

      I'd be inclined to agree with that analysis – but who was it that said,"If we don't learn from our history, we are bound to repeat it" – or words to that effect?
      I'm an optimist by nature and do believe we can learn from our past, and thereby, map out a different and better route for our future.
      Whether such a road map can be implemented is another question.

      • Redmond says:

        "I'm an optimist by nature and do believe we can learn from our past, and thereby, map out a different and better route for our future."

        So why do you want to go down the tired old route of totalitarian government?

        • Guggzie says:

          Hi Redmond, nice to catch up with you again. This is fun, having these discussions over the internet. I'm not sure why everyone has to be labeled and slotted into little boxes because, no I'm not a Keynesian, whatever that means, I'm much more in favour of limited government, freedom and respect of the individual and a democracy where the government is constitutionally controlled to serve the people. Governments are supposed to be formed to serve a public purpose, but if being in favour of an equitable society for everyone makes me a "socialist,", then yes, I guess I am.
          As for your comment that communism was forced on the people at the point of a gun, to a degree you are correct, it did develop that way, but that wasn't how it started out, certainly not in China or other nations that had to shed the cloak of colonial exploitation.
          You are also correct that people love slogans – ask any advertising man – but you shouldn't ignore the power of the idea behind the slogan. The Boy Scouts have long used the slogan, "Be Prepared" and it is a very powerful slogan which a great number of young people used to model their lives.
          If capitalism were able to come up with a genuine slogan that could encompass its fundamental ideals then it would have a powerful tool to influence the way people think. I have quoted the few slogans that most people relate to capitalism, and each of them are quite negative.
          Yes, I do read this website, but when I talk about "people" I am referring to the vast majority who don't read it and have almost no exposure to its philosophy.
          Somebody has to play the "Devil's Advocate" otherwise this website just continues preaching to the converted.
          As you may notice, I get a fair amount of criticism to some of the concepts I write about, but there is not a great deal of constructive criticism to support the alternative argument or actually refute what I write.
          Take the heading of this article for example – the title – "Germany MUST ….." – Who is it that is dictating what Germany MUST do – why do people think they have the authority to tell other people, or nations, how they have to act. This really isn't the concept of "freedom" being promoted by this website – or is it?
          As a retired Manager, gold mine manager at that, I have always found communication the most difficult aspect of management. especially written communication. Nothing beats face to face when each party can clarify, exactly, the meaning, intention and interpretation behind the purpose of the communication.
          So, while these postings are fun, and interesting, they probably will do little to change the way people think about the issues discussed.

  4. Jerry says:

    LOL

    Not many people wish to recall Karl Marx. Pretty much a forgotten figure today though granted he was a dominant figure for 100 years. Have you ever attempted his book Das Capital? How such a person could have had ANY influence is beyond me.

    • Guggzie says:

      The point is Jerry, whether we like him or not, whether we've read his book or not, the impact of his thinking virtually dictated the policies of the whole world. To an extent, they still do bearing in mind the Us's current aggressive stance toward China. The West is still paranoid about socialism and Karl Marx is far from a forgotten figure. The western capitalist world became totally obsessed with countering the Communist threat while the other part of the world embraced it. There was virtually no in-between – you were either for his ideas or you were against them.
      I have used him simply as an example of the power of ideas.
      In some ways, the simplicity of the concept, "To each according to his ability for each according to their need" is something a vast number of people can relate to. It didn't matter that it couldn't, or wasn't, ever applied in the way people imagined. When we try to relate capitalism to people, what do we get? "Survival of the fittest", "Dog eat dog", "user pays", "get big or get out".- these aren't really the objectives of a modern society. Most people who subscribe to this webpage view capitalism as relating to "freedom", but that is a nebulous connection when capitalism grows into huge conglomerated and/or monopolies where the only real concern is the bottom line.

      • Redmond says:

        "The West is still paranoid about socialism"

        It should be far more paranoid than it is Guggzie – I wonder how you can say something like that with a straight face when canadians consider the Eugenicist Tommy Douglas to be the "Greatest Canadian" and Socialist programs are bankrupting our nations.

        socialism in the 20th century was the most murderous ideology ever. period.

        "while the other part of the world embraced it."

        No – it was forced on them at the barrel of a gun.

        "To each according to his ability for each according to their need" is something a vast number of people can relate to."

        People just love slogans don't they,

        "When we try to relate capitalism to people, what do we get? "Survival of the fittest", "Dog eat dog", "user pays", "get big or get out".- these aren't really the objectives of a modern society"

        Do you read this website Guggzie? Seriously?

        "but that is a nebulous connection when capitalism grows into huge conglomerated and/or monopolies where the only real concern is the bottom line."

        Really, that is what you think? So not only are you a Keynesian, you are also a socialist.

        • Jerry says:

          You mentioned TC Douglas. Add Roosevelt and Lincoln to that list of people worship. Roosevelt and outright thief and Lincoln almost as bad as Stalin. Both were resonible for many unnessary deaths yet people hold them as their better presidents. Go figure. I don't know that Douglas was responsible for any deaths or an outright thief so he doesn't fit in thieir class but he certainly was a fountain head for a whole lot of stupid policies that are not workable or sustainable in real life.

  5. Guggzie says:

    The real question, James, is why do we have these 'debts' and why are they accepted as normal and inevitable?
    Surely, as the vast amount of today's "money" is simply a matter of a few keystrokes on a computer spreadsheet, we could find a better way to utilise this process than to create enormous ongoing debt that can never be repaid?

    • Redmond says:

      "The real question, James, is why do we have these 'debts' and why are they accepted as normal and inevitable?"

      Because the Government that purports to represent us is hopelessly addicted to the kind of keynesianism that you promote.

  6. James says:

    If there is no GOLD to substantiate a Nations debt, then Land, or the servitude of its common people will have to do.

  7. Jerry says:

    Guggzie:
    Lets look at this from your prespective. If a consititution were established and money supply connected to the productive capacity of the nation I see two problems arising that perhaps you can address.

    1) How do you measure this "productive capacity"?

    2) If it's established that the productive capacity has increased year to year lets say for sake of argument, 10 %. Now the supply of money must be increased by an equal amount, 10%. How do you introduce this new larger amount of money into the economy? That increase MUST go to someone first. It's impossible to distribute the money equally and fairly to each individual of the nation simultaneously. It's obvious someone has an advantage here.
    3) If this system of yours were successful in eliminating the demon of inflation, how does it differ from gold has money. Are they not one and the same?

    IMHO, gold as money IS your desired consititution. No consitution, no matter of enforcement, no calculations, no adjustments required. It's automatic.

    • Guggzie says:

      In a sense, Jerry, we already measure the productivity through the GDP, although, as Skousen argues, this is a skewed figure and would need to be revised to take in the full range of productivity.
      Increased productivity is a natural occurrence in a growing economy with a growing population, and as such, requires a increase in the 'money' supply. As the common definition of inflation is too much money chasing too few goods, it seems obvious to me, despite all the nuances about inflation, that if the money supply can be linked to the productivity of a nation, inflation can be far more effectively controlled than relying on interest rate manipulation.
      As for the distribution of the money supply, currently the world relies mainly on the payment of wages as its primary system to widely distribute money to the population. C H Douglas addressed this issue back in 1920 with the suggestion that a nation should be viewed in the same way we view a corporation. When a corporation becomes more efficient it pays a higher dividend to its shareholders – when a nation becomes more efficient, it could pay a dividend to its shareholders, ie its citizens. And let's face it, most western nations have become far more efficient over the years to the extent they can produce all their needs with a fraction of the workforce or a reduced number of working hours. While this should have translated into greater prosperity for the nations, all it has done is result in a greatly increased burden of debt.
      For an understanding of how a fiat currency works you need to read Prof. Randall Way's book on Modern Monetary Theory or Warren Mosler's book on "The 7 Deadly Frauds of Economic Policy" http://www.warrenmosler.com/book
      As for your suggestion that gold is "constitution" – I find this a difficult concept to grasp – As I have often argued, a truly "free market", and freedom from government, could only exist in a society of totally honest people. As this society doesn't exist, never has and never will, some sort of "enforcement" becomes necessary to guarantee the weight and quality of this "gold" you refer to.
      Apart from that, gold is a limited commodity and I can't see how it can cope with a growing economy, let alone developing a fair and equitable way of distributing its purchasing power.
      Roosevelt sorted that out for the government back in the 1930's by confiscating the gold at $20 an oz and then revaluing it to $35 an oz to boost the government coffers. What's to stop any future government doing the same thing under any form of gold standard?
      Sorry for being long winded, but I don't think this subject can be dealt with by short "'tweets".

      • Jerry says:

        But my point is that gold as money automatically takes care of everything you wish to accomplish (through a cumbersome system still using fiat money and with some elements of the use of force I might add). Gold is so simple.

        • Guggzie says:

          I'm not sure how that works Jerry. Gold cannot be plucked off trees, it has to be mined, processed, and somehow, converted to "money". So, are you saying, that only the people who can mine and process gold have to "power" to "automatically take care of everything"?
          It seems to me there are a lot of intermediate steps involved in converting gold to "money", particularly when we are dealing with a society where 99% of the people have no access, or ability, to mine for gold.

          • Redmond says:

            "I'm not sure how that works Jerry. Gold cannot be plucked off trees, it has to be mined, processed, and somehow, converted to "money"."

            And? It worked perfectly well for thousands of years.

            "So, are you saying, that only the people who can mine and process gold have to "power" to "automatically take care of everything"?"

            There is plenty of gold in the world Guggzie, and the process of obtaining it is common knowledge.

            Here is my response to your plan

            So, are you saying, that only the people who have the monopoly power to produce fiat currency have the "power" to "automatically take care of everything"?

            "It seems to me there are a lot of intermediate steps involved in converting gold to "money"

            Talk about a straw man. There are a lot of intermediate steps in everything guggzie – we aren't hunter gatherers.

      • Redmond says:

        "we already measure the productivity through the GDP"

        GDP is basically useless Guggzie – you should know better than that.

        "and as such, requires a increase in the 'money' supply."

        No it doesn't, unless you don't want prices to fall, leading to increased prosperity for everyone – why are you against that exactly?

        "that if the money supply can be linked to the productivity of a nation"

        So you are a Keynesian.

        "when a nation becomes more efficient, it could pay a dividend to its shareholders, ie its citizens."

        Governments are not efficient. You should know that – in the west it has been one long exercise in Tax, Spend and engage in monumental deficit spending since 1971,

        "As I have often argued, a truly "free market", and freedom from government, could only exist in a society of totally honest people."

        Not at all guggzie – we had a much smaller federal government 100 years ago that operated on tariffs – were people somehow more honest back then? somehow I don't think so.

        In fact the more power that the government has, the more dishonest people become I would argue.

        "As this society doesn't exist, never has and never will, some sort of "enforcement" becomes necessary to guarantee the weight and quality of this "gold" you refer to."

        Again Guggzie, this has all been worked out – it functioned perfectly fine until the entire world went off gold in order to engage in the pointless slaughter of WW1.

        "Apart from that, gold is a limited commodity and I can't see how it can cope with a growing economy,"

        Well, I guess you haven't read about the 19th century, have you.

        "Roosevelt sorted that out for the government"

        Yeah – not for the people. Roosevelt was a criminal.

      • Jerry says:

        Why must the supply of money increase? What happens if it reamins constant. Money is not consumed. It only remains as property of someone. A greater supply isn't better like gasoline or wheat. A greater supply of either of those and the price per unit drops. The same law applys to money. A greater supply results in a lesser value per unit.

  8. Jerry says:

    If the money supply was related to the productive capacity of the nation then the amount of money created would equate to the amount of goods and services produced, thus eliminating inflation and the depreciation of the currency.

    IF. IF. A long winded comment which can be reduced to two letters. It's never happened in 6000+ years of the existance of money. So why should it be different today? Gold is what keeps governments honest. Precisely why governments hate gold so much and switch to fiat currencies..

    • Guggzie says:

      Yes Jerry, IF is the issue – in exactly that sam way that it applies to the article. It postulates a future action that may or may not occur – and can only occur IF there is the required amount of will to make it happen.
      Change the way people think and we change the future.
      And for the proof of that statement we need look no further than Karl Marx – whatever anyone thinks of his ideas – right or wrong – that one man has had an enormous impact on recent history.

  9. Guggzie says:

    It is quite unbelievable, this obsession with gold. Paper 'money' has been used for centuries in hundreds of countries around the world, because of its convenience, because of its acceptance, and in a monetary sovereign nation, because it is backed by the physical assets of that nation. It is a fallacy to claim that a nation can only have a monetary system if it has a store of gold. While you quite rightly place a lot of blame on the Central banking system for the depreciation of most currencies, most of the blame should be sheeted home to the government. And in a democracy, that means the people who elect the representatives to form the government.
    You also seem to ignore the fact that the Federal Reserve in the US is/was formed and "owned" by the private banking system which is at the pinnacle of this wonderful "free market capitalist system", which has never, in truth, existed, certainly never in the US.
    What is the practical point in converting your paper currency to a bit of gold unless the government is able to guarantee the size and quality of the bits of gold. In today's world, very little retail trade would be enacted using physical gold. On top of that, it would be a real pain having to cart gold around in your pocket if you wanted to buy a loaf of bread, or whatever.
    OK, so you say it doesn't work like that – it's just the psychological promise that a person can exchange their bits of paper for a lump of gold – if they want to? So, that takes us right back to the ponzi scheme set up by those early gold dealers – which evolved into the fraudulent fractional reserve banking system we have today – courtesy, the so-called "free market capitalist system".
    The major problem with the use of fiat currencies is the fact that governments, and central banks, have deliberately conspired to divorce the money supply from the production and consumption capacity of their societies. If the money supply was related to the productive capacity of the nation then the amount of money created would equate to the amount of goods and services produced, thus eliminating inflation and the depreciation of the currency.
    If you look at this problem in a rational manner, it becomes obvious that there needs to be some ability to enforce regulation on the governments and their entire banking system – and the judiciary, to ensure the regulations are, in fact, enforced.
    In a democracy, that regulation has to be in the nation's primary law – its Constitution.
    In your article, you speak about stopping the "theft" – about establishing a "financial crimes tribunal", but you omit to define who does the setting up, who administers this organisation, under what rules, or regulations, such a body would operate.
    Unless the criteria is spelled out in a Constitution, no lobby controlled government, or judiciary, would ever take the necessary action.
    Thus, in essence, your whole article is simply a rhetorical exercise that can achieve nothing except continue to promote the hoary myth of reverting to an outmoded gold standard that will only benefit the people who own and control the most amount of gold.

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