Tag Archives: Euro

The Real Reason Belgium Sold 1,098 Tonnes Of Gold

Belgium sold 1,098 tonnes of its official gold reserves since 1978. 

For our global investigation how much physical gold central banks have stored at what location and how much is leased out, I decided to submit the local equivalent of a Freedom Of Information Act (FOIA) request at the central bank of Belgium, de Nationale Bank van België (NBB), to obtain information about the amount of Belgian official gold reserves, the exact location of all gold bars, the type of gold accounts NBB holds at the Bank Of England (BOE) and how much is leased out and to whom. The outcome of this research was not what I had expected.

History Of The Official Gold Reserves Of Belgium

Some of the questions I directed at the NBB I used a stepping stone, as this information is publicly available in part. At the end of August 2015 NBB was holding 227.4 tonnes of gold, down 0.04 tonnes from 227.44 tonnes in July, according to data from the Bundesbank that publishes the gold holdings of 19 European central banks and the ECB in compliance with the IMF’s most recent version of the Balance of Payments and International Investment Position Manual (BPM6). The Bundesbank (BuBa) publishes the fine troy ounces of the official gold reserves in ‘Gold bullion’ and ‘Unallocated gold accounts’. If we add up both categories the outcome for all countries equals the reserves disclosed by the World Gold Council.

From BuBa:

The balance of payments statistics will … be consistent with the framework set out in the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). The application of the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) is binding for EU member states by virtue of a regulation adopted by the European Commission. 

Back in 1965 NBB was holding over 1,300 tonnes of gold. Since 1978 it has sold a whopping 1,098 tonnes, or 83 %.

Belgium official gold reserves

Belgium was one of the eight participating countries in the London Gold Pool, together with the US, Germany, the UK, France, Italy, the Netherlands and Switzerland, that operated from 1961 until 1968 to stabilize the gold price at $35 an ounce by selling/buying gold in the London bullion market. Eventually the pool collapsed in 1968 because the US had printed too many dollars and France was not willing to sell any more gold to defend the gold price at $35. Remarkably, Belgian official gold reserves dropped significantly after the Pool collapsed, from 1978 until 1999. Likely, NBB was partially seeking to diversify its reserves into higher yielding assets or to lower the national debt, in addition it could have sold metal to lower the price or to “equalize its holdings relative to other gold holding nations”. Let me explain that last quote. Belgium was not the only European country that has sold vast amounts of gold in the nineties and before. When the Dutch Minister Of Finance in 2011, J.C. De Jager, was questioned about the gold sales of the central bank of the Netherlands in the nineties he answered:

Question 6:  Can you confirm that since 1991 DNB [central bank of the Netherlands] has sold 1,100 tonnes of the 1,700 tonnes it owned…

Answer 6: Since 1991 DNB sold 1,100 tonnes. At the time DNB determined that from an international perspective it owned a lot of gold proportionally. It decided to equalize its gold holdings relative to other important gold holding nations.

So, the independent central bank of the Netherlands (DNB) had decided to sell gold because “from an international perspective it owned a lot of gold proportionally”. Clearly DNB was considering the amount of gold reserves of other central banks and weighed these against its own holdings before it decided to make a downward adjustment. Was this a unilateral decision for the sake of balanced gold reserves among central banks? I don’t think so.

In 1999 the Central Bank Gold Agreement (CBGA, also called the Washington Agreement On Gold) was signed by 14 European central banks, inter alia NBB, to jointly manage gold sales. This demonstrates central banks are not unfamiliar with managing their gold reserves in concert. First there was the London Gold Pool, then the Dutch sold gold to equalize their holdings relative to other central banks and then CBGA was signed.

Maybe NBB has sold part of its reserves prior to 1999 for the same reason De Jager mentioned; to equalize the chips. Allegedly this was the idea behind the euro. GoldCore wrote on 28 May 2013:

Belgium announced another sale of 203 tons of gold on March 27, 1996, stating that the sale had reduced the share of gold in total reserves to a level which would facilitate the participation of the National Bank of Belgium [NBB] in the process of European unification and which, corresponded to the proportion of gold in the total reserves of the Member States of the European Union.

More information about the Belgian gold reserves that was perviously known: most of it is stored at the BOE in London, the heart of the global gold lease market, hence my question at the NBB regarding the type of gold accounts it has with the BOE. From searching the internet and the website of NBB I could read Belgium had leased out 84 tonnes of its gold reserves in 2011, this decreased to 37 tonnes in 2012 (lent to 5 commercial banks) and 25 tonnes in 2013 (lent to 5 commercial banks).

Data from the Bundesbank shows Belgium has a steady 17 tonnes of ‘unallocated gold’ since January 2013 and 210 tonnes of ‘gold bullion’. Apparently reserves qualified as ‘gold bullion’ (allocated gold) can be leased out, as in 2013 NBB had leased out more than was unallocated (25 tonnes versus 17 tonnes). This makes me wonder why Belgium still has any unallocated gold. (It also makes me wonder how much of the allocated gold held by other central banks is leased out.)

Belgium official gold reserves unallocated

The Verdict

In response to my FOIA, the NBB notified me it is exempt from any such requests regarding its gold reserves – click here to read the reply from NBB in Dutch. This response was similar to that of a FOIA request I submitted to DNB in 2013 in order to obtain the list of bar numbers of the Dutch official gold reserves, which bounced as well.

NBB wrote me that aside from the rules they aim to be as transparent as possible by disclosing all information to the public about their official gold reserves that is not sensitive. NBB wrote me (my translation):

- Total NBB gold reserves amount to 227.4 tonnes (7,311,955.9 fine ounces).

- The majority of this stock is stored at the Bank or England [BOE]. The remainder is at the Bank of Canada and the Bank for International Settlements. A very tiny amount is stored at the NBB.

- The storage and safekeeping abroad happens according to standards and practices that are common among central banks.

- Against a guarantee covering 101.5 % of the credit NBB had an average of 15.7 tons of gold leased out in 2014. The counterparties are commercial banks with high creditworthiness. The NBB will not enter into any new gold leases and leave the existing book until it’s fully unwound in February 2018.

Because I sensed to be in touch with an employee from NBB that knew all about the Belgian gold, I asked why they had sold 1,098 tonnes of gold since 1978? Was it to diversify reserve assets, reduce the national debt or to be accepted to the Eurosystem. NBB replied (my translation):

The sales in question took place in the context of a more balanced composition of the reserves of NBB with regard to its integration into the European System of Central Banks, although it was not the result of a legal obligation.

Next I asked what the reason was to sell the gold if there was no legal obligation, was there a verbal agreement among central banks? NBB replied (my translation):

The aspects of the management of the foreign reserves that have not been communicated by the NBB through its annual reports and press releases constitute confidential information that can not be disclosed on the grounds of professional secrecy laid down in Article 35 of the law of 22 February 1998 establishing the Statute of the NBB.

So indeed there was a secret agreement among central banks to sell gold and balance reserves, but NBB is not required to disclose this information based on “Article 35 of the law of 22 February 1998 establishing the Statute of the NBB” – a law that was passed right before CBGA was signed and the euro was launched. Actually, the details of the agreement are secondary because NBB’s statement “the sales in question took place in the context of a more balanced composition of the reserves of NBB with regard to its integration into the European System of Central Banks”, is very clear to me. Especially when we add De Jager’s statement from 2011, “DNB determined that from an international perspective it owned a lot of gold proportionally. It decided to equalize its gold holdings relative to other important gold holding nations.”

I can’t be a coincidence both central banks sold gold prior to 1999 for “more balanced reserves” while the sales would not have been executed in conjunction of each other. My conclusion is that the gold sales of European central banks prior to CBGA have been jointly managed in secret.

Here you can read the full email exchange between me and NBB in Dutch. 

1973 EU CB’s Traded Gold In Secret At Free Market Price

Another piece of the puzzle

The more I read about it the more clear it becomes that the euro, at first a monetary block in Europe, was spawned right after the US abandoned gold in 1971. The European Community (EC) block was the biggest threat for the US hegemony in the seventies, if Europe would unite it could break the USD. Europe’s aggregated gold reserves were (and still are) greater than US holdings, a crucial reserve asset when fully utilized.

Soon after the inception of the Bretton Woods system in 1944 the US needed to suppress the price of gold because they printed far more dollars than they had gold to back it up, finally the suppression failed in 1968 when the London Gold Pool collapsed. What followed was a two-tier system; monetary gold was valued at a fixed price far below the free market price of gold.

The two-tier system created by the American monetary wizards was anything but sustainable; foreign central banks could buy gold at the US Treasury for dollars at a discount, subsequently selling the gold on the free market for a higher price, though the agreement was central banks would not trade with the private market.

Because the dollar was overvalued (against gold) European central banks exchanged billions of dollars for thousands of tonnes of gold, draining US gold reserves.

US Official Gold Reserves

In 1958 the UK exchanged $900,000,000 dollars for 799 metric tonnes of gold at the US Treasury. From January to March 1965 France pulled 428 tonnes from the US, from April to June 1971 France got out 251 tonnes.

That’s when Nixon temporarily suspended convertibility of dollars into gold on August 15, 1971.

Next up for the US was to completely remove gold from the international monetary system. Having the dollar as the sole monetary anchor would ensure the US from world domination. Europe, on the other hand, tried to re-introduce gold into the system at the free market price.

In the next quotes we can read how Henry Kissinger, National Security Advisor and Secretary Of State at the time, was discussing the matter with his team.

Mr Enders to Mr Kissinger about the proposal (re-introduction of gold) from Europe (EC).

…Mr. Enders: Both parties [US and EC] have to agree to this. But it slides towards and would result, within two or three years, in putting gold back into the centerpiece of the system—one. Two—at a much higher price. Three—at a price that could be determined by a few central bankers in deals among themselves.

…They would determine the value of their reserves in a very small group.

Mr Kissinger: And we would be on the outside.

Mr. Enders: The policy we would suggest to you is that, (1), we refuse to go along with this—

Secondly, Mr. Secretary, it does present an opportunity though—and we should try to negotiate for this—to move towards a demonetization of gold, to begin to get gold moving out of the system.

…It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings—about 11 billion—a larger part of the official gold in the world is concentrated in Western Europe.This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control—

If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power.

I think we should look very hard … at very substantial sales of gold—U.S. gold on the market—to raid the gold market once and for all.

The US was against any form of European monetary cooperation. The next quotes are from a phone call between Kissinger and Under Secretary Simon:

K: … I’ve just been called to the President. Let me tell you — Shultz has sent me a copy of the cable that Volker gave him – that Volker sent him about the interventions, and he has asked for my views. I basically have only one view right now which is to do as much as we can to prevent a united European position without showing our hand.

S: Okay. Well, I interpret that as less intervention, which is a good idea, and I think George will be very happy with that comment. Do as much as we can to prevent a unified European position.

K: I don’t think a unified European monetary system is in our interest. I don’t know what you think for technical reasons, but these guys are now helping to put it to us.

In this political battle the US and Europe remained on speaking terms (both not showing their hand). But the EC was occasionally poking the US; if necessary they would trade gold in secret at the free market price.

Wikileaks logo black

From Wikileaks:

1973 November 21, 16:14

1. IN A CONVERSATION WITH ECON MIN, FREYCHE, ECONOMIC AND FINANCIAL ADVISOR TO PRESIDENT POMPIDOU, SAID GOF FULLY UNDERSTANDS OUR VIEWS ON PURCHASES OF GOLD BY CENTRAL BANKS AT A PRICE ABOVE THE MONETARY PRICE. FREYCHE SAID THAT, ALTHOUGH THERE ARE PRESSING TECHNICAL REASONS WHY THE CENTRAL BANKS OF THE EC MIGHT WANT TO BUY AND SELL GOLD AMONG THEMSELVES AT A PRICE ABOVE THE MONETARY PRICE, THE GOF AS WELL AS ITS EC PARTNERS WERE VERY RELUCTANT TO DO THIS, PRIMARILY BECAUSE THEY

CONFIDENTIAL CONFIDENTIAL PAGE 02 PARIS 30004 211932Z

HAD NO DESIRE TO TAKE A STEP WHICH MIGHT BE INTERPRETED AS AN ATTEMPT TO CREATE A MONETARY BLOCK IN OPPOSITION TO OR RIVALRY WITH THE U.S. IN OTHER WORDS, HE SAID, FRANCE WAS HOLDING BACK FROM SUCH A DECISION BECAUSE OF A DESIRE TO DEMONSTRATE GOODWILL TOWARD THE U.S. NONETHELESS, HE CONTINUED, THE EC MIGHT EVENTUALLY BE FORCED TOTAKE THIS STEP. SIXTY-FIVE PERCENT OF ITALY’S RESERVES AND 40 PERCENT OF FRANCE’S WERE IN GOLD. IT WAS WELL KNOWN THAT NEITHER ITALY NOR FRANCE WAS WILLING TO PART WITH ANY OF THIS GOLD AT THE MONETARY PRICE WHEN THIS PRICE WAS SO MUCH LOWER THAN THE FREE MARKET PRICE. THUS, A LARGE PART OF THE RESERVES OF THESE TWO COUNTRIES WAS IN EFFECT FROZEN AND COULD NOT BE USED IN THE SETTLEMENTS AMONG THE “SNAKE” COUNTRIES REQUIRED TO MAINTAIN THE SNAKE. THIS, OF COURSE, WAS ONE OF THE REASONS WHY ITALY HAD SO FAR BEEN UNWILLING TO ENTER THE SNAKE. IF THIS PROBLEM BECAME SERIOUS ENOUGH SO THAT THE EUROPEAN CENTRAL BANKS FELT OBLIGED TO BEGIN EXCHANGING GOLD AMONG THEMSELVES AT A PRICE ABOVE THE MONETARY PRICE, FREYCHE SAID THAT THIS DECISION WOULD NOT BE TAKEN WITHOUT FULL PRIOR CONSULTATION WITH THE U.S. AUTHORITIES. HE ALSO SAID THAT EXCHANGES OF GOLD AT SUCH A PRICE WOULD BE RESTRICTED TO EC CENTRAL BANKS AND IT WAS POSSIBLE THAT THE PRICE AT WHICH THESE TRANSACTIONS WOULD BE CARRIED OUT WOULD BE KEPT SECRET.

2. COMMENT: FREYCHE’S CONCILIATORY ATTITUDE ON THIS MATTER IS WELCOME. NONETHELESS, WE BELIEVE, PARTICULARLY IN VIEW OF THE MANY PUBLIC STATEMENTS BY SENIOR FRENCH OFFICIALS ON RIGHT TO BUY AS WELL AS SELL GOLD AT MARKET PRICE, THAT FRANCE’S OBJECTIVE CONTINUES TO BE PRESERVATION OF SIGNIFICANT ROLE FOR GOLD IN MONETARY SYSTEM AND, IN THAT PERSPECTIVE, TO OBTAIN AGREEMENT WITH EUROPEAN PARTNERS TO SELL GOLD IN INTRA-EUROPEAN SETTLEMENTS AT VALUE NEAR TO MARKET PRICE. THIS BEING THE CASE, FREYCHE’S ASSURANCE NO SUCH DECISION WOULD BE REACHED WITHOUT PRIOR CONSULTATION WITH U.S. IS IMPORTANT AND USEFUL. IRWIN

CONFIDENTIAL NNN

(h/t @mortymer001)

Previously released historic documents

1970 February 24, Washington DC, US. Pompidou and Nixon

1971, October 28. Phone call between Nixon and Kissinger on gold

1971, December 13 & 14, Azores. Negotiations between Kissinger and Pompidou about the value of currencies and gold

1971, December 13, negotiations between Nixon, Pompidou and Kissinger about the value of currencies and gold

1973, March 14, Kissinger and Simon telephone conversation

1973, May 18, Paris, France. Meeting Kissinger And Pompidou on value of gold

1974, March 6, Washington, US. Note From the Deputy Assistant Secretary of State for International Finance and Development (Weintraub) to the Under Secretary of the Treasury for Monetary Affairs (Volcker): GOLD AND THE MONETARY SYSTEM: POTENTIAL US–EU CONFLICT

1974, April 22 & 23, Zeist, The Netherlands. Meeting European Ministers Of Finance On Gold

1974, April 25. Minutes of Secretary of State Kissinger’s Principals and Regionals Staff Meeting on gold

1976, October 29, Wikileaks: PBOC focused on gold & SDR’s

The Netherlands Planned To Introduce New Currency In 2012

The Netherlands (and likely Germany as well) made concrete plans in 2012 to switch to a new currency in case the euro would crash. Not long after the emergency currency was ready the Dutch began repatriating 122.5 tonnes of gold from New York. This can be very important as there is a possibility the Eurocrisis will ignite again. Monday we learned Greece will have new elections on January 25 that could bring the anti-bailout Syriza party to power, risking Greece’s membership of the Eurozone.

What Do We Know?

Researchers from Argos Medialogica, a Dutch TV documentary about Greece and the Eurocrisis 2010-2012 (broadcasted November 18, 2014), were told the Dutch emergency currency was called the Florijn. The voice over in the documentary states:

One of the emergency scenarios, according to anonymous sources, is the introduction of a new Dutch currency, the Florijn.

A spokesperson from the Dutch Ministry Of Finance couldn’t confirm nor deny the Florijn back-up plan. “We were prepared for everything, but our main goal was to keep the euro together”, said the spokesperson. Klaas Knot, Governor of the Dutch Central Bank since July 2011, stated the following in an interview in March 2014:

Interviewer: Were there moments on which you thought, it’s going to collapse? The euro will collapse in 2012; we’re going to lose it?

Klaas Knot: There certainly have been moments that I thought about this. There were also moments that we started to think, within the central bank, about emergency scenarios, we made preparations.

Interviewer: You made those preparations, back to the guilder? [the guilder was the Dutch currency before the euro]

Klaas Knot: If it would have been the guilder is not sure, but yes, we were prepared for scenarios in which we were confronted with the collapse of the euro. And then you must think of course, what are we going to do? No matter how much we didn’t want this scenario to happen. You must, as a central banker, always be prepared for all possible outcomes.  

Interviewer: If I would ask you in ten years, or perhaps you can answer this question now; were we, at that moment, dangerously close to a financial meltdown in Europe? And when was this? 

Klaas Knot: It was in the summer of 2012, also previously in late 2011. There were two occasions on which we had to act. We had to do something that was within our mandate. We had the feeling we were in trapped a situation that we didn’t cause. We had to act, we were the only ones that could act, and we did act. It was a situation I never want to be in again.

To watch the interview with Klaas Knot, make sure captions are on. 

 

Knot confirmed The Netherlands could switch to a new currency in 2012 if the euro would crash. Jeroen Dijsselbloem, current Minister Of Finance of The Netherlands, confirmed the same in an interview by RTL Z (November 18, 2014).

jeroen dijsselbloem

Dutch website Geenstijl.nl has submitted a WOB request (the Dutch equivalent of a FOIA request), to Dijsselbloem asking for access to all documents regarding the back-up currency. Dutch law forces the government to reply to a WOB request within four weeks, but the delivery of documents can be prorogued by the government by another four weeks. In December government officials plead to postpone access to the documents until January 18, 2015.

In the past I have submitted several WOB requests to the Dutch central bank (DNB) regarding correspondence between DNB and the Federal Reserve Bank of New York (FRBNY) and the bar numbers of all Dutch official gold reserves. DNB replied WOB request can be submitted for just about anything, except matters regarding gold.  

The Dutch-German Alliance

Most statements of Dutch politicians and the Dutch central bank at the height of the Eurocrisis were exactly the same, “We are prepared for everything, but our main goal is to keep the euro together”. Apparently, this was clearly communicated among all policy makers in The Netherlands and Germany. The next quotes are from Wolfgang Schäuble, German Minister of Finance in 2012:

We want Greece to remain in the Eurozone. But it also has to want this and to fulfill its obligations. We cannot force anyone. Europe will not sink that easily…

The idea that we would not be able to react quickly to something unforeseen is wrong. We have learned a lot and built defenses.

The Dutch and the Germans are an alliance for decades – post WWII – and certainly were at the time of the Eurocrisis. The Medialogica documentary gives a unique insight of how this alliance works out at the highest level.

During the summits that were organized in the heat of the Eurocrisis, meant to reassure the markets all would be well, the Dutch Minister Of Finance at the time, Jan Kees De Jager, closely cooperated with Wolfgang Schäuble. They discussed their views prior to the summits; subsequently, during the negotiations De Jager would do the talking, knowing Schäuble backed him. The Dutch-German strategy was to make sure Greece was pressured to reform and did not get an easy bailout. From Medialogica:

(15:07) De Jager: If someone wanted to talk about this [a Greek exit], it was being silenced in the Eurogroup because they didn’t want to talk about it or didn’t dare to talk about it. There was the danger it could leak; there were a lot of people in the Eurogroup, even more in the ECOFIN, the council of the whole European Union that is even bigger, but solely from the Eurogroup things leaked in the press, sometimes while we were still in a meeting. 

(16:40)I called extensively with my colleague in Germany, but I also had correspondence on other levels. There was sort of an agreement between us that allowed us to be very tough in negotiations. And this helped Germany a lot. So we would have a common view, discussed in advance; what could we achieve, what would be our strategy, and usually I was the one who did the talking in the meetings [at the summits].

(37:45) Voice over: … the Dutch government makes drafts of emergency scenarios. A special multidisciplinary team, which consists of lawyers, foreign policy experts and economists, meets every Friday at the Ministry Of Finance. Every possible outcome is being discussed.

(38:00) De Jager: What would happen if…? What if Greece leaves the Eurozone, what consequences would that have? Would this actually be possible, juridical, economically, what would happen to money in Greece? Large amounts of cash, which can be transported by truck or car to The Netherlands or Germany and then deposited. We thought about all kinds of scenarios, so if something terrible would happen, we could promptly secure the core function of our payment system.

The close cooperation between the two nations and Schäuble’s statement (We have … built defenses) makes me think Germany had a similar back-up plan for a new currency (perhaps they even had a joint plan). The German Ministry Of Finance did not outright deny that it made similar plans as The Netherlands when contacted by the newswire EUobserver.

Because a lot of information was leaked to the press, many countries didn’t dare to discuss Greece leaving the euro in the Eurogroup, the council of 18 European Ministers Of Finance. Emergency plans were only discussed off the record, for example by The Netherlands and Germany. If other European countries prepared emergency currencies I don’t know. The ECB, IMF and EU (the Troika) did make plans for Greece to return to the Drachme.

Gold

According to my research DNB started its operation to repatriate 122.5 tonnes from the US in late 2012 (remember Knot’s statement:“You must, as a central banker, always be prepared for all possible outcomes.”), Germany started to repatriate approximately at the same time. Although Germany had an unexplainable slow start in repatriating, presumably both countries started to repatriate concurrently to preparing emergency currencies. It’s hard to see these events separated from each other.

Are the repatriations by Europe a lack of faith in the euro? That’s hard to tell, on one hand repatriations can be seen as a lack of trust in the custodian (US):

  1. If The Netherlands and Germany would fully trust the US why would they repatriate their gold? Obviously they don’t trust the US.
  2. We must not forget the euro in itself was created to move away from the US dollar (it was not created to fail a few years down the line).
  3. The Eurozone has shown to go to great lengths to hold the euro together. It could have kicked out Greece on many occasions, but it didn’t.
  4. Since 1999 nearly all European central banks collaborate in a program called  the Central Bank Gold Agreements (CBGA) to match gold policy.
  5. The Eurosystem is increasing its allocated official gold reserves, as published by the German central bank.

On the other hand the Eurozone still faces large obstacles, like democracy, that could throw a wrench in the whole project. Many European leaders have been willing to create a solid euro and allign their gold policy, but can the euro survive? Can it overcome its problems?

In November 2014 the Financial Times got hold of a transcript of interviews Timothy Geithner, former US Treasury Secretary, gave to assistants preparing his book, Stress Test: Reflections on Financial Crises. An interesting snippet from the transcript:

Geithner: To be sympathetic to them, the Germans’ experience has been every time they buy a little bit of calm [on the] markets and the Italian spreads start to come down, Berlusconi reneges on anything he committed to do. So they were just paranoid that every act of generosity was met by sort of a “fuck you” from the establishment of the weaker countries in Europe, political establishment of those weaker countries in Europe, and so the Germans were just apoplectic. Sarkozy, who is trying to navigate between the Germans’ view of the crisis and the fact that France was suffering a fair amount of collateral damage, too, because Europe’s getting somewhat weak, he’s in election [campaigning]. He’s trying to figure out how to bridge this difference…

There’s a G20 meeting in France that Sarkozy hosts which was really incredibly interesting, fascinating thing for us and for the president and I’ll tell you just a few quick things in passing so we can come back to those things. The Europeans actually approach us softly, indirectly before the thing saying: “We basically want you to join us in forcing Berlusconi out.” They wanted us to basically say that we wouldn’t support IMF money or any further escalation for Italy if they needed it if Berlusconi was prime minister. It was cool, interesting. I said no…

G20 cannes 2011

Silvio Berlusconi was replaced by Mario Monti in 2011, though Monti, a former EU commissioner, was not elected by the Italian people. This begs the question if the EU can circumvent democracy indefinitely.

The repatriation movement is foremost an act of distrust in fiat currencies in general. Whether it’s the dollar, euro, ruble or peso; they can all go to zero. Our international monetary system is detached from gold as an anchor since 1971, cracks in the system are appearing on all continents. Printing money can only buy time.

Conclusion

An improvised speech from Mario Draghi, Governor of the European central bank, led to the aversion of a financial meltdown in July 2012. Draghi stated in London:

Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.

Mario Draghi

According to Geithner the remarks were “off-the-cuff” and “totally impromptu”. Snippets from the transcript:

Geithner: Things deteriorated again dramatically in the summer which ultimately led to him saying in August, these things I would never write, but he off-the-cuff – he was in London at a meeting with a bunch of hedge funds and bankers. He was troubled by how direct they were in Europe, because at that point all the hedge fund community thought that Europe was coming to an end. I remember him telling me [about] this afterwards, he was just, he was alarmed by that and decided to add to his remarks, and off-the-cuff basically made a bunch of statements like ‘we’ll do whatever it takes’. Ridiculous.

Interviewer: This was just impromptu?

Geithner: Totally impromptu…. I went to see Draghi, and Draghi at that point, he had no plan. He had made this sort of naked statement of this stuff. But they stumbled into it.

As Jean-Claude Juncker, former Eurogroup leader, said in 2011 On Greece’s economic meltdown:

When it becomes serious, you have to lie.

It wouldn’t surprise me at all if Europe was saved by a firm lie. Global economics is increasingly influenced by speeches from central bankers; only words, true or false. Sometimes they don’t even have to take the effort to create billions in fiat currency units with the stroke of a keyboard; the threat to flood the system with money is sufficient to steer financial markets. These are the fundamentals of our global economy today, which are terribly weak. Some policy makers know this – the ones that buy or repatriate gold.

I present the Argos Medialogica documentary, a fascinating watch inside the Eurocrisis. Most of it is spoken in English, when you hear another language please read the English subtitles (make sure captions are turned on).

Starring (titles refer to 2011 or 2012):

  • Giorgos Papandreou (Greek Prime Minister)
  • Giorgos Papakonstantinou (Minister Of Finance of Greece)
  • Jan Kees de Jager (Minister Of Finance of The Netherlands)
  • Mario Monti (Italian Prime Minister)
  • Nout Wellink (Governor of the Dutch central bank)
  • Jean-Claude Trichet (Governor of the European central bank)
  • Jean-Claud Junker (Eurogroup leader)
  • Olli Rehn (European Commissioner)
  • Paul Mason (BBC, Newsnight)
  • John Fraher (Bloomberg)
  • Peter Spiegel (Financial Times)
  • Christoph Schult (Der Spiegel)