How Germany got its gold back
It was kept abroad to escape the Soviet Union. But then Germany decided to bring it home
Claire Jones in Frankfurt
November 10 2017
When Carl-Ludwig Thiele was 11, his aunt gave him a 21-carat gold coin as a gift. “It was an incredible feeling to own it. I still have it now and can picture it. There is an image of Pope John XXIII on one side, and on the reverse an image of the Holy Ghost floating above the bishops.”
In the five decades since receiving that coin, Mr Thiele — tall and forthright with a liveliness in his face when the subject switches to bullion — has risen high in Germany’s state bureaucracy. He served 20 years in parliament before making the switch from Berlin to Frankfurt to sit on the executive board of the Bundesbank, the country’s central bank and custodian of its gold.
Today, Germany is one of the biggest holders of gold in the world: it owns 3,378 tonnes, worth €119bn, second only to the US. But until recently, most of that gold was stored in New York, London and Paris. When the country decided to bring half of its gold back home, Mr Thiele was put in charge.
Over the past five years, he has masterminded the transportation of almost 54,000 gold bars — each with a value of just under $510,000 — to Frankfurt, Germany’s financial capital, moving $27bn (in today’s prices) from the vaults of the US Federal Reserve and the Banque de France. The last bars arrived at the Bundesbank’s headquarters, a few kilometres north of Frankfurt’s city centre, in August. But how Germany’s gold came to be abroad is a story that goes back to the second world war and beyond.
Germany has a stronger relationship with gold than most nations. The country’s experience with hyperinflation between 1919 and 1923, during the years of the Weimar Republic, is ingrained in the national consciousness. Gold, above all, stands for stability.
Carl-Ludwig Thiele masterminded the transportation of almost 54,000 gold bars — worth $27bn — to Frankfurt © Martin Leissl for the FT
During the second world war, Nazi Germany looted gold from central banks across Europe. The Reichsbank stored more than 3,700kg (4.1t) of this stolen gold through the Bank for International Settlements in Switzerland. By the time the Allies, through the Tripartite Commission for the Restitution of Monetary Gold, recovered it in 1948, Germany’s state coffers were bare.
It was during the Wirtschaftswunder — the economic miracle of the 1950s and 1960s — that West Germany began to stockpile large amounts of gold. The country’s export surpluses meant businesses were flush with dollars, which were swapped at the central bank — initially the Bank deutscher Länder, then, from 1957, its successor the Bundesbank — in return for Deutschmarks. Under the Bretton Woods system of fixed exchange rates that then underpinned global finance, the Bundesbank could use the dollars to purchase gold at the rate of $35 an ounce, storing most of its holdings in the New York Fed’s underground stores on Liberty Street. In 2012, just before the move began, just over 1,500 tonnes of German gold was stored there.
Frankfurt was not much more than 100km from the border with Soviet-controlled East Germany, so with the threat of Russian invasion, West Germany kept bullion built up before the collapse of Bretton Woods in the early 1970s abroad. “During the cold war, the threat came from the east, so it made sense to store it further west, in Paris, London or New York,” says Mr Thiele. After the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991, that rationale disappeared.
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Poster Comment:
France sent its gold out of the country before the Nazis invaded. FDR sent the Navy to capture it and they did.