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Xinhua: China And Germany Deepen Financial Cooperation, Germany Joins AIIB And Supports RMB Inclusion Into SDR

Guest Post

BERLIN, March 17 (Xinhua)China and Germany conducted their first high-level financial dialogue here on Tuesday and agreed to strengthen macro-economic policy coordination, develop policy dialogue and pragmatic cooperation in fiscal and financial areas.

Representing China at the first China-Germany High Level Financial Dialogue, Chinese Vice Premier Ma Kai said the dialogue was established after a decision reached by leaders from both countries during Chinese President Xi Jinping’s visit to Germany last year. The main task of this dialogue is to implement agreements reached by leaders of the two countries, he added.

Ma said that confronted with a complex and fragile global economic situation, China and Germany as important economies should strengthen policy coordination, coordinate strategic cooperation, deepen financial and fiscal cooperation, consolidate and develop the positive momentum of both economies to make further contributions to the steady growth of the world economy.

Representing Germany at the dialogue, German Finance Minister Wolfgang Schaeuble and Deutsche Bundesbank President Jens Weidmann said that Germany and China have been working together very well both bilaterally and multilaterally in financial and fiscal areas.

The formal launch of the high-level financial dialogue will help expand bilateral dialogue and avoid risks in this important area and promote bilateral relations, they said.

Both leaders also said that Germany is paying great attention to the huge success of the Chinese economy as well as the rising influence of Chinese currency renminbi (RMB) on the world market. They expressed hope that both sides could expand bilateral investment and keep deepening their comprehensive strategic partnership.

Both sides spoke of the dialogue mechanism as an important platform for bilateral communication and policy coordination on strategic, overarching and long-term issues in financial fields.

Leaders said they are committed to strengthening macro-economic policy coordination in the G20 context, developing policy dialogue and pragmatic cooperation in fiscal and financial areas in a bid to jointly support global economic growth and improve global economic governance.

According to a joint statement after the dialogue, the German side will actively support China in hosting the G20 summit in 2016 and supports China’s goal to add the RMB to the special drawing rights (SDR) currency basket based on existing criteria.

Germany also announced at the dialogue its intention to join the Asia Infrastructure Investment Bank (AIIB) as a prospective founding member. China welcomed this intention.

During the dialogue, both sides reached consensus on issues such as investment cooperation between China and Europe, China and Germany and in third countries.

Both sides welcomed each other’s banking institutions setting up establishments or developing business operations in their respective markets and plan to hold consultations on bank supervision.

China and Germany also support the establishment and development of an offshore RMB market and a local RMB clearing bank in Frankfurt and welcome German financial institutions using RMB qualified foreign institutional investors (RQFII) quota to invest in China’s markets.

The joint statement said that both sides would support Chinese securities and futures institutions in cooperating with German institutions to establish and conduct business in Germany, including the development, distribution and portfolio management of RQFII products.

China has approved Deutsche Asset & Wealth Management Investment GmbH’s application for RQFII qualification. Both sides supported the Shanghai Stock Exchange, the China Financial Futures Exchange and the Deutsche Boerse Group’s plan to co-establish a RMB offshore platform to trade financial instruments in Frankfurt.

Officials from China and Germany attending the financial dialogue reached consensus on the direction of future strategic cooperation and exchanged views on the macro-economic situation in China and Europe.

Ma and Schaeuble held a joint press conference after the dialogue and later attended a working lunch with Chinese and German business leaders.

Ma also attended a discussion on Industry 4.0 at the Fraunhofer Institute for Production Systems and Design Technology in Berlin on Tuesday.

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. 

[youtube https://www.youtube.com/watch?v=9nZD2fX4n3U]


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.


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.


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)

[youtube https://www.youtube.com/watch?v=G1j7UFA__Yk]

Gold Price Manipulation Goes Mainstream On German TV

Public TV channel 3sat, which is a cooperation between Germany, Austria and Switzerland, broadcasted a short documentary on gold price manipulation on May 9, 2014. More and more mainstream news outlets are covering the allegedly gold price manipulation, after evidence is pilling up and many other market manipulations, like LIBOR, are coming out. From the Financial Times February 23, 2014:

Global gold prices may have been manipulated on 50 per cent of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy.

The findings come amid a probe by German and UK regulators into alleged manipulation of the gold price, which is set twice a day by Deutsche Bank, HSBC, Barclays, Bank of Nova Scotia and Société Générale in a process known as the “London gold fixing”.

Fideres’ research found the gold price frequently climbs (or falls) once a twice-daily conference call between the five banks begins, peaks (or troughs) almost exactly as the call ends and then experiences a sharp reversal, a pattern it alleged may be evidence of “collusive behaviour”.

“The behaviour of the gold price is very suspicious in 50 per cent of the cases. This is not something you would expect to see if you take into account normal market factors,“ said Alberto Thomas, a partner at Fideres.

Oddly enough this article from the Financial Times was removed from their website two days after publication.

One of the most extensive researches that has been done on gold price manipulation is by Dimitri Speck in his book “The Gold Cartel”. On his website there is a chart that illustrates what Fideres’ found about the London gold fix. Dimitri Speck was, amongst others, interviewed by 3sat for the documentary.

London Gold Price Fix Manipulation Chart, By Dimitri Speck

I do not agree with everything that’s being said in the video, for example they state Chinese gold demand was 1066 tonnes in 2013, which is based upon numbers from the World Gold Council I happen to disagree with, or that it’s not necessary to invest in physical gold stored outside the banking system, though I thought it was worth sharing this clip with subtitles for the English speaking world. Germany is one of the few Western countries where there is a broad consensus about the importance of gold and sound money.

Press the captions button and choose English. Translated by Behfar Bastani.


Presenter: Good evening and welcome to the business magazine Makro. For many people, the purchase of gold represents a safe reserve for bad times. No wonder that, at the height of the financial crisis savers were queuing up at gold dealers. Throughout history, gold has served as a promise of reliability and stability. But today there are considerable doubts as to whether that promise remains valid, because an examination of gold prices reveals machinations fit for a financial thriller.

Narrator: London, the most important gold market in the world. Whether the price of gold rises or falls is determined here. Twice a day, a handful of bankers confer on the phone to fix the daily price of the precious metal. Thus arises the most important reference value for physical gold, used by businesses ranging from jewellers to gold mines. There is no public oversight for the “Fixing”. Apparently, this lack of restraint has led to serious manipulations of the gold price, as pointed out by a current investigation which has detected strange price movements spanning a number of years.

Rosa Abrantes-Metz: The setting of the gold fixing is, in my view, problematic. It opens the door for abuse and manipulation. There is absolutely no transparency in the arrangements made during the private phone conversations of this small group of participants as they decide what the price of gold should be.


Narrator: Experts have long complained that this system is particularly susceptible to manipulation. Only five banks participate in the London gold fix, thus far including the Deutsche Bank. In the more extreme futures markets, where bets are made on gold price developments in future months, the quantities that exchange hands are of quite different magnitudes.

Folker Hellmeyer: We have a situation where this market is dominated by three essential players, three banks, in the USA. These banks have a market share on the order of 80 percent. In other words, we are talking about an almost monopolistic structure which of course also provides the power to manipulate the market.

Narrator: And which power is apparently being abundantly used. The futures market, intended to provide predictability and stability for future prices, is controlled by the following three banks: HSBC, Citibank, and JP Morgan. Their tool: paper gold securities.

Thorsten Schulte: It is possible to simply sell scraps of paper, thereby creating fear, especially fear among those who possess gold in its physical form, and who may then arrange to sell their metal, eventually resulting in such a a wave of fear …

Narrator: The gold price has been attacked in this fashion time and again, often with massive price declines within a matter of a few minutes. Yet, there is quite a bit more to the story.

Dimitri Speck: Gold is the opponent of debt based moneys, i.e. currencies, and in particular the US Dollar. Therefore, the US Federal Reserve has an interest in a weak gold price, and the US government protects the manipulation of the gold price by the private banks.

Narrator: For years, the US Federal Reserve has served as the lender of last resort. Gold must be weak if a loss of confidence in the US Dollar is to be averted. It has been difficult to prove that this is a rigged game with a stacked deck, but if the gold market manipulations are indeed encouraged in addition to being condoned, that would explain why oversight bodies have thus far turned a blind eye to it, despite years of massive conspicuous activities in the futures markets, as with the gold fixing in London.

Presenter: Incidentally, the Deutsche Bank intends to withdraw from the gold fix. As of now, no other bank has expressed an interest
in filling that spot. Too many banks are scared to damage their good reputation in London. Gold is a speculation commodity with a high symbolic power. Its price is therefore strongly influenced by many fears and hopes. Here are a few facts about that from our Makroskop.

Narrator: 31.1 grams, the weight of one ounce of refined gold. The precious metal is regarded foremost as protection in times of crisis. Gold climbed rapidly during the financial and economic crisis. Currently gold trades for about USD $1300 per ounce. Yet the more hopes grow for an end to the international economic slowdown, the more the price of gold declines. The US government continues to hold the largest governmental gold reserves at 261.6 million ounces, over 8100 metric tonnes. The US is followed by Germany, Italy, France, and China. But the largest demand comes from the Middle Kingdom. From gold coins to gold bars, the Chinese are accumulating large quantities. In 2013 the Chinese acquired 1065.8 tonnes, moving for the first time ahead of the Indians who purchased 974.8 tonnes in 2013. Jewellery accounts for the highest portion of the demand. In China, jewellery sales have tripled since 2004. They represent about 30 percent of worldwide demand. About 400 tonnes was purchased by businesses. In particular, China’s electronic manufacturers need industrial gold for production. Meanwhile, in the mining sector, China has risen from being a small player to become the number one gold producing country. In the past tens years, Chinese gold production has more than doubled from 217 to 437 tonnes.

Presenter: Today, the course of the gold market is being set by China. What are the worldwide consequences of this? Let’s talk about that with the chief editor of the Frankfurter Börsenbrief.

Presenter: A very good evening to you, Mr. Bernhard Klinzing. These days the flow of gold seems to be from the west to the east, as we have just seen. There are considerably more buyers in Asia than in the developed western countries. What do you attribute this to?

Klinzing: The reason is that India and China, which together make up half the gold market, do not have state provided elder care, which is valued differently there. Inflation fears are another factor. “The Chinese are the Germans of Asia”, it is said, and so they sit on gold.

Presenter: We have seen that the price of gold is heavily manipulated. There are manipulators that are apparently backed
from the highest places. Do you believe that, or do you regard it as a conspiracy theory?

Klinzing: I don’t believe that based on the Deutsche Bank and the London fix, but based on what we just saw from the Americans I absolutely do see that danger, because there is a quasi “Edward Snowden”. His name is Paul Roberts and he worked at the US treasury department and he has confirmed that the Fed, together with a number of banks, are preventing gold from rising above $1400 per ounce by continually providing gold bids which put downward pressure on the price.

Presenter: Given the unsound loans that came to light in the Libor scandal or the forex markets, do you believe that this is only the tip of the iceberg in the gold trade?

Klinzing: I would say that we are only seeing a snow ball from the iceberg while a lot more is hidden at the bottom. The banks earn a hefty sum whenever they fix the gold price by as little as 1/10th of a US Dollar upwards or downwards. You can see that with Goldman Sachs who published studies predicting gold’s decline to $950 per ounce while at the same time increasing their own gold positions by 20%. That does not match up. Presenter: What are some consequences for other market participants? You stated that the banks are lining their pockets, but what are some of the consequences?

Klinzing: Yes, there is a hedge fund manager by the name of William Kaye who has said that the German gold is no longer stored in the vaults of the Fed in New York, but has already found its way to China because the Fed needed the gold in order to carry out its market manipulations. This is as yet only a suspicion, and it may even be a conspiracy theory, but the Germans were denied an opportunity to touch or take samples of their own gold in New York.

Presenter: One could hardly think up a better plot for an economic thriller. I would like to talk about investors again. Is gold a good investment for the, let’s say, small investor?

Klinzing: One should not construct a portfolio with only gold, that much should be clear. But of course gold is a very attractive portfolio addition, whereby investors can insure the value of their portfolio against currency risks. Because if the Euro rises, the value of gold falls, so you can participate only less than possible, therefore invest always in a currency protected fashion.

Presenter: How can I do that as an investor?

Klinzing: There are certificates for doing this, there is no need for an investor to store gold in their own vault or under their pillow. For that there are very good solutions on the financial markets.

Presenter: Before we wrap up, what are your thoughts on how the gold price develops further from here?

Klinzing: We can see that in China the standard of living is rising, the middle class will grow from 300 million people to 500 million by 2020, and urbanization is accelerating. This means that there will be much more demand for gold from China, as well as from India. I don’t believe that gold will break $1400 per ounce this year, but we will see a new gold rally in the next few years.

Presenter: An overview of the gold price from Bernhard Klinzing of the Frankfurter Börsenbrief. Thank you for being on the show with us tonight. Dear viewers, if you have any questions for our studio guest, please visit the Makro blog where Mr. Klinzing will be available for a little while longer after the show. On our homepage you will also find additional background material on the topic of gold.

In Gold We Trust

BuBa: Half of German gold reserves will be stored in Germany by 2020

Interview with Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank, published in Handelsblatt on 19 February 2014.

Translation: Deutsche Bundesbank

Interview conducted by Norbert Häring and Jens Münchrath.

Mr Thiele, do you consider yourself a kind of psychotherapist of the German soul?

No, why should I?

Bundesbank President Jens Weidmann described the partial transfer of German gold from New York as a trust-building measure in Germany.You are the one responsible for organising this major logistical undertaking.

Indeed, we are inspiring trust by storing half of the 3,400 tonnes of gold in Frankfurt by 2020. Building trust also means being transparent. We were the first central bank to publish details of our storage facilities, including the respective quantities of gold stored there.

Is there a scenario in which gold could begin to be used in monetary policy?

A highly theoretical scenario would involve extreme turmoil on the foreign exchange markets. Germany safeguards its solvency through reserve assets. In addition to foreign currency, our reserve assets include gold reserves. This gold could be pledged or exchanged directly for foreign currency. That is also why we have left the other half of our gold reserves in New York and London. Although we thankfully do not envisage such a crisis scenario, central banks are designed for the long term.

In October 2012, you promised the German Bundestag that you would transfer a total of 150 tonnes of gold from New York to Frankfurt by 2015.In January 2013, you extended the time frame to 2020 and increased the amount to 300 tonnes. What time frame are you looking at now?

The plans are not contradictory. We specified our initial target in October 2012. In January 2013, we then presented a new gold storage plan and specified a new target that is considerably higher than the first. Instead of only 150 tonnes, we are now transferring 300 tonnes of gold from New York to Germany.

So both targets still apply?

We now consider ourselves bound to the new gold storage plan. But the three years have not yet passed. We shall wait and see. We are on the right track in any case.

But the members of the German Bundestag have acted on the assumption of the initial promise.The second has got a more long-term oriented time frame. Was your initial promise overly ambitious? In the first year, you only returned five tonnes from the USA.

It is not a question of “returning”. The gold is being transferred to Germany for the first time. Until 1998, only 2% of our gold, or thereabouts, was stored in Germany. In the first year, we transported five tonnes from New York. This year, we will transfer 30 to 50 tonnes, or perhaps even more, from New York to Frankfurt. And there is still next year to come.

Does that mean that the target of 150 tonnes is still attainable?

Since we are in the midst of an ongoing process, I would like you to ask me the question again in two years’ time. In any case, we will store half of the German gold reserves in Germany by 2020 at the latest.

Why are you content with such a low target for this year? Is the programme still experiencing teething problems in its second year?

No, it is not. We have planned the timing of the transfers in such a way as to ensure that 300 tonnes are transferred from New York to Germany by 2020 at the latest.

There are these rumours that either the gold in New York is no longer there or you do not have unrestricted access to it. Why have you not called in auditors or other externals to oversee the transfers in response to such rumours?

It astounds me that Handelsblatt pays any attention to such absurd rumours. I was in New York myself in June 2012 with the colleagues responsible for managing the gold reserves and saw for myself how our money is stored in the vault there. The Americans have never stonewalled or hindered us in any way. On the contrary, their cooperation has been most constructive in every respect. Our internal audit team was present last year during the on-site removal of gold bars and closely monitored everything. The smelting process is also being monitored by independent experts.

Does this also apply to opportunities to inspect the stocks? You said a year ago that discussions on the matter with the Federal Reserve Bank of New York were making good progress.

That is correct. We have enjoyed an excellent relationship of trust with the New York Fed for many decades. As regards the details of the contracts, however, we are bound by confidentiality which we cannot unilaterally break. From my visit to New York, I can tell you that a number of bars selected by us were removed, inspected and reweighed even while I was there. The inspections conducted by our internal audit team, during which an external auditor was also present, were also completed to our utmost satisfaction.

Was an external auditor present during your visit to the New York Fed gold storage facility in June 2012?

No, not during my visit. However, an external auditor was present for part of the time during the internal audit team’s inspection of stocks.

Did the gold from New York have to be melted down immediately?

The gold was removed from the vault in the presence of the internal audit team and transported to Europe. Only once the gold had arrived in Europe was it melted down and brought to the current bar standard. Some of the bars in our stocks in New York were produced before the Second World War. It was confirmed after the melting process, as anticipated, that these bars were absolutely fine.

The Federal Court of Auditors (FCA) sparked the debate by calling for an inspection of Germany’s gold holdings abroad. When you announced in October 2012 that part of the holdings were to be transferred to Germany, the FCA responded that this was a first step, but not a comprehensive procedure. Is the FCA now satisfied?

The FCA never demanded that the Bundesbank transfer gold to Germany. It was more concerned with extending its rights with regard to inspecting gold reserves abroad. The Bundesbank’s internal audit department now has rights it never used to have. The Budget Committee has acknowledged the FCA’s report, which concludes this discussion. Incidentally, the FCA examined the Bundesbank’s annual accounts for 2012 and found no irregularities.

The FCA claims it has no knowledge of newly agreed audit rights.

The FCA has access to all information at all times. I am sure the President of the FCA will be able to confirm this for you.

If the intention was to build trust, would it not have been better to postpone the smelting process so that you would have been able to present the original bars to skeptics?

Prior to transportation, the original gold bars were handed over to us in New York. Our internal audit team checked the numbers of the bars there and then against its own lists. Thevery same gold arrived at the European gold smelters that we had commissioned. This ought to demonstrate to everyone that such conspiracy theories are completely unfounded.

Calling in external auditors or critics was not an option?

The Bundesbank’s internal audit department is involved in the process from start to finish. Independent experts were present during the smelting process.

Are there any advantages for the Americans in storing gold for other nations? After all, they are protecting our reserves free of charge.

To answer this question, you need to look at the historical context. As you may know, gold reserves were established during the Bretton Woods fixed exchange rate system. Given the threat from the East at the time, it seemed the safest option was to store German gold as far west as possible. The gold was therefore stored in New York from the outset.

So the Americans are taking on high storage costs for nothing in return?

No, why high storage costs? The gold has been stored there for decades. The storage rooms already exist.

Security guards cost money…

It is not just our gold that they protect, but also that of other central banks. But that is a matter for the New York Fed.

Just over a year ago, you were asked whether storing gold with the victors of the Second World War was not perhaps an echo of the old Bonn Republic when Germany was not yet a fully sovereign state. Back then, your answer was rather vague. What is your answer today?

To my knowledge, gold was stored in New York, London and Paris mainly for security policy reasons. We transferred 930 tonnes of gold from London more than ten years ago without experiencing any difficulties with the Bank of England or upsetting German-British relations.  The same applies to the Banque de France and the New York Fed.

In Gold We Trust