Total Pageviews

Sunday, December 30, 2012

Happy New Year to the 1 percent

  • “The money power preys upon the nation in times of peace and conspires against it in times of adversity. I see in the near future a crisis approaching that causes me to tremble for the safety of my country. The money power of the country will endeavor to work upon the people, until the wealth is aggregated in a few hands, and the republic is destroyed.”
    Abraham Lincoln

  • On average, the richest 400 Americans saw their wealth go up by an astounding $500 million each in only one year (2012) -- a bad year, no less, for the economy.  
  • Just this one year's increase in wealth for the richest 400 is enough to hire approximately 5 million entry level teachers!
  • All totaled, the 400 richest Americans have the same amount of wealth as approximately 25.5 million middle class families in the center of the wealth distribution.
  • This is the new math of plutocracy: 400 super-rich = 25.5 million middle class.      
  • The median family -- that family exactly at the mid-point of the wealth ladder  --- saw its net worth collapse. In 2005, the median family's wealth was valued at $102,844 (in inflation adjusted dollars.)  By 2011, the latest Census figures showed a drop of 35 percent to $66,740.  

The CEO of an S&P 500 Index company made, on average, 380 times the average wages of U.S. workers in 2011.

McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap

Tyree Johnson scrubs himself with a bar of soap in a McDonald’s (MCD) bathroom and puts on fresh deodorant. He stashes his toiletries in a Kenneth Cole bag, a gift from his mother who works the counter at Macy’s, and hops on an El train. His destination: another McDonald’s.
Burger Flipper’s Double Duty Reveals Hidden Cost of Dollar Menu Johnson isn’t one of Chicago’s many homeless people who seek shelter in fast-food joints. He’s a McDonald’s employee, at both stores -- one in the Loop, the other about a mile away in the shadow of Holy Name Cathedral.
 He needs the makeshift baths because hygiene and appearance are part of his annual compensation reviews. Even with frequent scrubbings, he said before a recent shift, it’s hard to remove the essence of the greasy food he works around. “I hate when my boss tells me she won’t give me a raise because she can smell me,” he said.
Johnson, 44, needs the two paychecks to pay rent for his apartment at a single-room occupancy hotel on the city’s north side. While he’s worked at McDonald’s stores for two decades, he still doesn’t get 40 hours a week and makes $8.25 an hour, minimum wage in Illinois.
This is life in one of America’s premier growth industries. Fast-food restaurants have added positions more than twice as fast as the U.S. average during the recovery that began in June 2009. The jobs created by companies including Burger King Worldwide Inc. and Yum (YUM)! Brands Inc., which owns the Pizza Hut, Taco Bell and KFC brands, are among the lowest-paid in the U.S. -- except in the C suite.

Pay Disparity

The pay gap separating fast-food workers from their chief executive officers is growing at each of those companies. The disparity has doubled at McDonald’s Corp. in the last 10 years, according to data compiled by Bloomberg. At the same time, the company helped pay for lobbying against minimum-wage increases and sought to quash the kind of unionization efforts that erupted recently on the streets of Chicago and New York.
Older workers like Johnson are staffing fast-food grills and fryers more often, according to data from the U.S. Census Bureau’s Current Population Survey. In 2010, 16- to 19-year-olds made up 17 percent of food preparation and serving workers, down from almost a quarter in 2000, as older, underemployed Americans took those jobs.
“The sheer number of adults in the industry has just exploded” because fast-food restaurants “not only survived, but thrived during the economic recession,” said Saru Jayaraman, director of the Food Labor Research Center at the University of California at Berkeley.

Million Hours

Johnson would need about a million hours of work -- or more than a century on the clock -- to earn the $8.75 million that McDonald’s, based in the Chicago suburb of Oak Brook, paid then- CEO Jim Skinner last year. Johnson’s work flipping burgers and hoisting boxes of french fries, like millions of other jobs in low-wage industries, helps explain why income inequality grew after the 2007-2009 recession ended.

Thursday, December 27, 2012

Idiocy - or arbitrage?

Henry VII (1485-1509) gold Angel ND, S-2187, Pheon (arrow) mm, struck 1505-09, MS65 PCGS

Great Britain, Great Britain: Henry VII (1485-1509) gold Angel ND,... Image #1

This coin is selling in the current Heritage Auction with a reserve of $17,625 including the buyer's feeIt is the single most common gold angel in "As Struck" condition - unfortunately the strike is absolutely atrocious. The surfaces are granular and unpleasant, the devices barely visible.  Altogether this is a coin that in a British Auction like Spink of DNW could be expected to realize somewhere around $3000.  

However, it is very shiny and sports a very high Slabbed Grade.  US Collectors like that.  And it will certainly be interesting to see if some US Collector buys the holder.

If so it will be the classic Greater Fool's game Henry VII Angels are quite common, and the Mint Mark Pheon is the most common mint mark.  Most every British Auction will have a few specimens far nicer than this.  And even very rare angels in AS struck condition - for example a Henry VI - might not be expected to quite bring the listed reserve for this coin.

It is intersting that NGC in its Ancients Dept has nagivated this problem by listing grades for the strike and surface as well as the state of preservation.  At NGC ancients this might be an MS Strike 2/5 Surface 2/5 - which would not be considered a premium coin.

Why hammered coins from other eras are not treated similarly by the grading companies is a mystery.

This is a wonderful example of the dangers of simply buying a grade in a market you might not be very familiar with.  

Know your markets.  Buy what you know.

Wednesday, December 26, 2012

5 reasons why the gold bull is alive and healthy:

1 Bloomberg: Gold, [enjoying] its longest winning streak in at least nine decades, is poised to enter a bear market..."

2) Interactive Investor: "Is gold's bull market over? Market commentators [are] citing a tumultuous economic environment. Others say it has simply been over-bought, and as with each bull market, inevitably reach[ed] a point of resistance..."

3) MARKETWATCH: "Gold bugs are finally throwing in the towel. Over the last two weeks [they] have become even more discouraged than they were at the end of November. And that’s saying something..."

 4) CNBC : Even Gold Bull Jim Rogers Is Turning Cautious  Published: Wednesday, 19 Dec 2012 | 2:16 AM ET  

 (PS Jim Rogers is very bullish on gold.)

5) FORBES: Gold's Decade-Long Bull Run Is Dead, Gartman Says

French torero Marco Leal performs a pass to a ...
(Image credit: AFP via @daylife)
Bernanke delivered the fatal blow to gold’s ten year bull market, according to Dennis Gartman.   Gold has been in bear territory since the summer of 2011, when it topped out above $1,900 an ounce, with the latest post-FOMC sell-off inflicting irreparable technical damage, he says.  UBS’ Edel Tully adds that markets’ no-QE-for-now realization will push gold even lower, probably down to $1,550 an ounce over the next month.

Monday, December 24, 2012

Gold Coins: Patterns, Essais, Medals

A "pattern" or "essai" is a coin that was submitted to the official state mint whose images were to be considered for general release as coins.

A Medal comes from the old Italian word "medalia" which means "Metal" or "coin"  Originally - in the early Renaissance - it was a coin produced by a mint other than the official state mint.  And it generally glorified Individuals of Means - while coins glorified images of Christ or Christ's representative on earth: the King.

As such Medals were the first Modern Artform - or the first Modern Coins - if we take Modern to mean "A conception of Individual Achievement as remarkable" - as opposed to the Medieval Conception of Man and his Achievement  as simply element and reflection of God's Collective.

It was not long (17th century) before top engravers (and families of engravers such were the Roettiers) were hired by official state mints where they produced both coins for general distribution and medals to commemorate individual and state achievement.

There are virtually no "patterns" or "essais" from this period.  And gold strike medals from this period are so very rare that they command prices easily comparable to the most valuable coins of the period.

But by the late 18th century the explosion of populations and world trade and the introduction of the steam engine had it made the use and quantity of coinage such that mints sprung up to produce coinage and medals in support of the Central Mint.

For example the Soho Mint of Mathew Boulton was founded in 1797 with a contract from the Central Mint to mint pennies and two-pennies.  But it soon began to mint Medals and tokens, and it produced a plethora of trial pieces, off metal strikes, and restrikes for collectors that have come to be called "patterns."  And many of these were created for export to British colonies such as India, Ceylon, Honduras, Australia etc.

At the time, of course, a Medal in Gold from the Royal Mint was far more expensive than a "pattern in gold" from a regional mint.

But as the sale of "Patterns, off metal strikes, restrikes" became lucrative for these regional mints the Royal mints followed suit and produced many such "Pattern strikes" that were never meant to be considered for general release coinage but simply used to raise money for the mints.  Some were commemorative - like the French essais of 1848, some were promotional like the various private mint "Pattern Shillings" and "Gold Strike Thalers" while some were simply minted to sate collector demand - like many of the British Indian restrikes.

As such, most of these non - circulating coins were functionally identical in purpose and nature to Medals. 

Now, because of the wiles of some very clever coin dealers there is a tremendous premium placed on "Off metal strikes, presentation pieces etc" that can be termed as "Patterns" instead of "Medals."  The word pattern or essai has lost all meaning other than to indicate a piece that "Should Command a tremendous premium."

And, like sheep, many collectors will shell out fantastic sums for these "Patterns" though they are often of little or no historical relevance and not nearly as rare or beautiful medals from the same mints and periods.

Of course true "patterns" that were submitted for consideration as general circulation pieces do exist.  Sometimes they are quite rare.  But these are certainly but a tiny percentage of all that has now come to be classified by wily dealers as such.

Wednesday, December 19, 2012

How to buy gold: winter auction preview

During the tenth year of a massive bull market, gold is still the object of ridicule and scorn.  To gold bulls this is the most reassuring sign that the bull market is alive and well.

Nowhere is this scorn so intense as with the gold numismatic market.  Even the main stream analysts who recommend gold vehemently warn their clients against numismatic gold.

And with good reason.  It is a market that takes considerable expertise.  If you don't know what you're doing you'll get skinned - almost as badly as you will in the stock market, the futures market, and the insurance markets - not to mention the education markets, the health care market, and at your own garage.

The sad fact of modern US economic life is that where ever you rely on the advise of brokers, experts, managers, you'll get skinned.  Because skinning people is viewed in modern US economic life as a sign of virility and intelligence.

There's a sucker born every minute, and if you're not out there taking advantage of them - then you're the sucker.

And that's precisely why our economic system is collapsing.

But for those with some vision and expertise the Gold Numismatic market is a vibrant treasure trove.  And the winter auctions are filled with exciting offerings.

To help out, here is a short stater of the market summary of the various numismatic markets.

The market to steer clear of at all costs are those you hear about in radio and tv.  Morgan dollars, state quarters, stuff just found in caches in European vaults - stuff issued by shills like the New York Mint etc etc.  (there is not New York Mint - it's just a private company.)

Real numismatics are issued by the Central Mint of a particular country.  And they are issued - or now exist - in true limited supply (let's say 2000 pieces or less.)  And they are issued once - or at a single point in history.

Hot markets:

China.  Chinese gold is still hot.  However, those modern China Mint issues that are so limited do appeal to Chinese and World collectors - and they are often truly limited - however - they are issued yearly.  So every year there are new limited Chinese gold issues.  Every year.  You figure out what that means.

Greek and Roman.  Ancient Greek gold in high grade is now nearly on par with ancient Roman gold in high grade - which is to say it has become the provenance of the very wealthy.  Get help when approaching these areas.  There are many fakes and doctored coins.  But real ones - untouched - in high grade will appreciate forever - as they are true treasures of antiquity.  And very very rare.  Be careful with middle to lower end items.  They are still expensive, but wealthy collectors won't touch them.  They'll wait patiently for high end items.  Still, there are bargains if you know what you're looking for as everyone tends to chase the same things at the same time.

Byzantine.  The byzantine market is byzantine.  Be careful with the expensive Irene issues and "rarities" from the period.  Very pricey and a large hoard has hit the market so prices will suffer over time

Medieval.  Medieval gold is very very rare in high grade.  Graded specimens of more common issues in high grade have been steadily moving up in price.  But rarer issues are still very cheap compared to other periods - because, frankly,  very little is known about the period, as there is not much contemporary writing.  But be careful about grading - for example there is an MS example of a Double D'or of Philip VI in the Bowers, and they're asking  $15-20,000.  It has a horrible crease in the flan.  Someone will get stuck with a clunker.  Don't just buy the grade.

 India.  India is hot.  British India is especially hot: mintage numbers are known and most of it has been thoroughly cataloged so you know what you're getting .  Older issues are hot, but the islamic issues are the provenance of true experts because the coins have no images - only writing which is very hard to read.  Ancient India is hot - but be careful.  NGC won't grade it - because of authenticity concerns.  A lot of this stuff is coming out, and the provenance is very sketchy.  Be careful with it.  Just because it appears in a major auction doesn't mean it's real.

England.  Hammered gold is still very hot - at the high end.  Be very careful though with graded issues.  NGC is lousy with hammered gold.  High end buyers care about strike and the flan - as well as state of preservation.  Graders care only how shiny a coin looks.  You can buy an NGC MS 65 Angel for a lot of money - and find out later that no high end collector's will touch it - because the strike is lousy.  You can also buy an NGC MS 65 with a great strike and find it is worth every penny that you paid.  Know what you're doing.

EUROPE.  There are obviously many European gold markets - as many as there are countries - throughout history.  And at the high end they're all still hot - despite the problems in Europe.  High end Hammered is hot.  And Europeans and English are avidly collecting Historical Medals of their countries - and certain medals have been fetching very high prices.  At the recent Maison Palombo Auction in Geneva a very rare Loos medal of Louis XVI sold for $20,000 though it was only 13 grams.  And at NAC a very rare Napoleonic Medal of 60 grams sold for $55,000.  Another rare Napoleonic medal of 60 grams sold at Kuenker for $45,000. 

South America.  Rare 8 escudo pieces and patterns are always hot.  Heritage has a few in January.  They will bring good money.  Brazil has been especially hot.  Those heavy Minas Gerai gold pieces have been selling in high grade for as much as $20,000 dollars.  And smaller pieces in very high grade have been going crazy.  Stacks sold a 1733 12,800 Reis in MS 65 for 47,000.

The picture of economic health

Tuesday, December 18, 2012

Stocks soar, gold stalls

Yes, stocks soar, gold stalls out at 1700.


Well, in a market economy it would have to be because the crisis is over, and world economies are on their way back to productive  efficiency, and therefor paper currencies are strong, and consumer confidence his high.

After all, Europe is holding together; the US economy is still growing at over 2 percent, unemployment figures are coming down, and the US government is hammering out a deal on the fiscal cliff.

All of the above is what everyone hears day after day on all the financial television channels.

So it must be true.

Then there are those crazy gold bugs out there - like the WWII Japanese fighters up the in the palm trees after the armistice - clutching pathetically to their gold bars and their guns and insisting that things are still deteriorating.

And what are those crazy gold bugs saying - in case anybody still cares?

Well, the same things that lunatics like George Soros, John Paulsen, David Stockman, George Shulz, Nassim Taleb, Robert Shiller, Marc Faber, Richard Duncan, Axel Merk, Kyle Bass, Hugh Hendry, Nouriel Roubini, David Walker etc etc etc are saying.

All these crazies claim that the markets are managed by the Fed to give the appearance that their zero interest rate policy is stabilizing the world economy.

All the crazies claim that the debt crisis is worsening here and in Europe, and the China's growth is not nearly sufficient to prevent a global debt implosion.

All the crazies are warning everyone who will listen that Crisis is being very temporarily deferred by a lunatic Fed that is flooding the world with dollars.

So somebody's crazy here.  That's for sure.

Thursday, December 13, 2012

Former Reagan Officials all agree: The Fed has rigged all the markets

David Alan Stockman: former director of the Office of Budget and Management in the Reagan administration:

The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

 The budget deficit isn't going to be addressed, and we have not had a two-way market of supply and demand. We now have what I call a "monetary roach motel," where the bonds come in and never come out.  I think we're at the last days of the artificial interlude and we're going to be entering the real days.

We're basically following the same path as the Greeks and the rest of Europe, and there's going to be a great day of reckoning, of reawakening. Once that starts, there could be a rapid, severe and even violent adjustment.

Dr. Paul Craig Roberts, former assistant U.S. treasury secretary in the Reagan administration

All markets, not only bonds, but also equity and bullion markets, are rigged in order to maintain the Fed’s low interest policy.   

Consider, for example, the bullion market. If gold and silver prices had been permitted to continue their 2011 rise, the corresponding decline in the value of the dollar would have affected the price of debt instruments, and the Fed would not have been able to keep bond prices high in the face of dollar decline. All indications of moves away from the dollar, whether stock market declines or rise in gold and silver prices, are offset by purchases of stock index futures or by shorts of bullion.
  George Shultz, former secretary of the Treasury in the Reagan Administration:
The next Treasury secretary will confront problems so daunting that even Alexander Hamilton would have trouble preserving the full faith and credit of the United States.
The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself. It determines the interest rate by declaring what it will pay on reserve balances at the Fed without regard for the supply and demand of money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended economic consequences.
Did you know that the Federal Reserve is now giving money to banks, effectively circumventing the appropriations process? To pay for quantitative easing—the purchase of government debt, mortgage-backed securities, etc.—the Fed credits banks with electronic deposits that are reserve balances at the Federal Reserve. These reserve balances have exploded to $1.5 trillion from $8 billion in September 2008.
The Fed now pays 0.25% interest on reserves it holds. So the Fed is paying the banks almost $4 billion a year. If interest rates rise to 2%, and the Federal Reserve raises the rate it pays on reserves correspondingly, the payment rises to $30 billion a year. Would Congress appropriate that kind of money to give—not lend—to banks?
The Fed's policy of keeping interest rates so low for so long means that the real rate (after accounting for inflation) is negative, thereby cutting significantly the real income of those who have saved for retirement over their lifetime.

Wednesday, December 12, 2012

Waiting for Godot:

DIY: construct your own rosy scenario:

 At some point these deficits, one way or another, will be reduced.
At some point the Fed will have to reverse course and sell "assets" off its balance sheet.

At some point The Fed will have to  remove some of the excess liquidity from the economy.

At some point the world economies will start to organically expand and grow their way out of the current slowdown.

At some point new technologies will be developed that will lead to a boom in employment and investment.

At some point  the US will develope its shale oil fields - or alternative energy industries - and become energy independent, thus giving the US economy a tremendous boost.

At some point the ingenuity of the American Entrepreneur will spark this economy.

At some point the genius of the free market will prevail and market forces will reassert themselves.

If only the Democrats...

If only the Republicans...

If only the Politicians in Washington...

If only the wealthy....

If only the unions....

If only the environmentalists....

If only the banking cartel...

If only the World Bank....

If only the Liberals...

If only the Conservatives...

If only the Socialists...

Sunday, December 9, 2012

Get this

Treasury Scarcity to Grow as Fed Buys 90% of New Bonds

Even as U.S. government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds. 


The government will reduce net sales by $250 billion from the $1.2 trillion of bills, notes and bonds issued in fiscal 2012 ended Sept. 30, a survey of 18 primary dealers found.


At the same time, the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co. 


What does this mean?  


It means that as the US steadily increases its QE program to 85 Billion Dollars of New Debt Per month - thus adding to the pace of the unsustainable Debt Load - it is buying nearly all of its own new debt.


 Bernanke explained that this would actually shrink the debt as the debt interest payments we pay ourselves can be used to retire the debt.


 I'm not kidding. 


Get it?  


I don't.


I don't get this either: How does the paper currency survive this over time?

Friday, December 7, 2012

Institutionalized stupidity

As we approach the "fiscal cliff" - which is shorthand for enforced austerity - you are hearing a chorus of institutionalized stupidity in regards to the effect that Taxes and Spending have on the broad economy.  Every argument is one that claims: "If you do X  then Y will ensue."  Every single argument confuses Correlation with Causation.

Q.  If we know that when we did X at some point in the past, Y ensued - what do we know about the effect of X on Y?

A.  Nothing.  All we know is the correlation between X and Y at that time.

Q.  If you flush the toilet and the phone rings what do you know about the effect that flushing the toilet has on making the pone ring?

A.  Nothing.

But wait - what if you flushed the toilet 5 times in a row, and each time the phone rang?  Sorry, even then that tells you nothing about causation between the toilet and phone.

The same is true with the effect of raising taxes or lowering taxes on GDP and Tax Receipts, Debt levels etc.

The same is true with the effect of Increasing Spending or Decreasing spending on GDP, Tax Receipts,  Debt levels etc.

This does not mean these things do not have effects.  It means you can not accurately measure them without taking 1000 other variables into account.  And these variables change from day to day, and year to year, and decade to decade.

What do we know?

We know roughly the size of the Debt Levels - and we know roughly the size of GDP.

We know that the Debt is now so large it will never be repaid.

We know that because of Compounding  - which is to say the Interest Levels of Debt - that the Debt grows ever larger, while GDP does not.

We know that Debt is now denominated in Paper that can be printed at will by Governments.

We know that this Paper must be printed in large and larger quantities to service this debt and to fund the institutions that control the debt.

We know that this destroys the notional value of the paper.

This is the situation.  No amount of Austerity or Taxation will solve this problem.  It is a problem that is endemic to the institutions of Centrally Planned Paper Money creation and distribution, Fractional Reserve Banking, and Deficit Spending.

The Institutions must be reformed to change the output which results from the institutions.  No amount of tinkering with the output levels will have any real effect on the institutions.

Tuesday, December 4, 2012

China passes US

IMPACT: China passes US as top trade partner for much of world, changing lives globally

TRADING TITANS: In just five years, China has surpassed the United States as a trading partner for much of the world, including U.S. allies such as South Korea and Australia, according to an Associated Press analysis of trade data.

As recently as 2006, the U.S. was the larger trading partner for 127 countries, versus just 70 for China. By last year the two had clearly traded places: 124 countries for China, 76 for the U.S.

CULTURAL SHIFT: In the most abrupt global shift of its kind since World War II, the trend is changing the way people live and do business from Africa to Arizona, as farmers plant more soybeans to sell to China and students sign up to learn Mandarin. AP findings show how fast China has ascended to challenge America’s century-old status as the globe’s dominant trader, a change that is gradually translating into political influence. They highlight how pervasive China’s impact has been, spreading from neighboring Asia to Africa and now emerging in Latin America, the traditional U.S. backyard.

Monday, December 3, 2012

Precious Metal Abroad Why Germany Wants to See its US Gold

Photo Gallery: Gold Rush
For decades, almost half of Germany's gold has been stored deep below the Federal Reserve Bank of New York. Now, with the euro crisis swirling, German politicians are asking their central bankers to take stock of the reserves. Some even say that the gold should be shipped home.
Bundesbank President Jens Weidmann wanted to personally convince Peter Gauweiler that the German gold was still where it should be. Early this summer, the head of Germany's central bank took the obstinate politician from the conservative Christian Social Union (CSU), a party that is a member of the government coalition in Berlin, and a number of his colleagues into the Bundesbank's inner sanctum: the gold vault.
There, 6,000 gold bars are stacked on industrial-strength shelves in a purpose-built building in Frankfurt. An additional 76,000 bars of bullion are stored in four safe boxes, in sealed containers. But even this personal inspection wasn't enough to reassure the visiting member of parliament -- on the contrary: "The Bundesbank monitors its domestic gold in an exemplary fashion," Gauweiler says, "and this makes it all the more incomprehensible that the bank doesn't look after its reserves abroad."

'Grotesque Debate'
For decades, German central bankers have contented themselves with written affirmations from their American colleagues that the gold still remains where it is said to be stored. According to the report, the bar list from New York stems from "1979/1980." The report also noted that the Federal Reserve Bank of New York refuses to allow the gold's owners to view their own reserves.

Not surprisingly, this prompted strong reactions in Berlin: The relevant Bundesbank board member Carl-Ludwig Thiele was summoned to Berlin to provide an explanation to the parliamentary budget committee. Heinz-Peter Haustein of the business-friendly Free Democratic Party (FDP) was even quoted by Germany's mass-circulation Bild newspaper as saying that "all the gold has to be shipped back."

The Bundesbank's otherwise reserved Thiele said that he found at least "part of the debate" to be "rather grotesque."  Germany's gold reserves are currently worth some €144 billion and are not stored "with dubious business partners," as Thiele stresses, but rather with "highly respected central bankers."

Special Connection

There has been no lack of proposals: Most recently, German Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) shot down an idea by the euro partners to use the reserves as collateral for euro bonds.

Strict Security
In addition to safeguarding the reserves of over 60 countries, the Federal Reserve Bank of New York continues to hold 1,536 metric tons of German gold -- or nearly half of Berlin's reserves. This enormous hoard of gold is stored in the fifth subfloor of the bank's building on Liberty Street, 25 meters (80 feet) below street level, and 15 meters below sea level.

Not even the owners are allowed to view their own gold. According to the Federal Audit Office report, the Fed explained that "in the interest of security and of the control process" no "viewings" are possible.
"I would like more transparency on the issue," says Bundesbank board member Thiele. The Americans are very sensitive, though, when it comes to security procedures in their gold storage facilities. In their second major depository, the legendary Fort Knox, practically no one in recent decades has been allowed to view the gold reserves.

Fuelling Legends
Such intense secrecy fuels legends. Many conspiracy theorists have suspected for decades that the German gold has long since disappeared. Others believe that it has been lent out. They contend that there are only promissory notes of little worth stored in the bank's vaults.

Another myth that has been making the rounds in nationalist-oriented German circles is that the US refused to hand over the treasure and threatened during the Cold War to withdraw its troops from Germany if the Germans demanded their gold back. Former Bundesbank head Karl Blessing, according to the theory, had to provide the US written confirmation that he would never do such a thing.

This letter, as it happens, actually exists, as Blessing confirmed in his last interview with SPIEGEL in 1971 -- except it doesn't concern the German gold, but rather US gold reserves. Until 1971, every dollar could be exchanged for the precious metal. Blessing thus promised the US Federal Reserve that he would no longer convert the colossal German dollar reserves to gold because this would have caused the currency's value to plummet.

Today, this historic document is even available online. But that hasn't silenced those who oppose stockpiling German gold abroad. Instead, the debate over a collapse of strictly paper-based currency is experiencing a renaissance -- as is the dispute over the gold reserves. Even Green Party financial expert Gerhard Schick has joined the fray: "I think the question of how much gold is available in an emergency is a valid concern."

Outlandish Idea
From a purely logistical perspective, though, returning the reserves seems outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380 super-jumbo jet and fly it back to Germany.
The Bundesbank also objects to this notion for another reason. It says the gold is supposed to act as an emergency buffer. In the extreme situation of a currency collapse, the bankers say that the gold bars could easily and quickly be exchanged on location for pounds or dollars to pay urgent bills.
In a bid to calm the debate, the Bundesbank has pledged to bring back and inspect 150 tons of gold from abroad over the next three years. Furthermore, there are plans to count and weigh the gold bars stored in one of the nine chambers at the Fed in New York -- although no date has been set for this. Bundesbank board member Thiele was also recently in New York where he took a look behind one of the vault doors. He had good news for the members of the parliamentary budget committee: "There was no paper in there, just gold."

But that's not enough for CSU politician Gauweiler. He's only prepared to put the matter to rest when the central bank has thoroughly inspected all the German reserves throughout the entire world. His credo: "The Bundesbank is independent, but it can't do what it wants."