Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (65 page)

On the last day of February 1946, almost a year after the war ended, the French navy sent out the message: ORDER TO THE MONTCALM TO MAKE DIRECT ROUTE TO CHERBOURG STOP. The 350 tons of gold that had arrived in Martinique in June 1940 finally set out from the Caribbean on its way home. There were 9,766 wooden boxes aboard, each weighing just over one hundred pounds. When the cargo arrived in France, most of the bullion, which consisted largely of coins, was smelted and turned into bars. Once again the country’s gold, one of the world’s largest holdings of the precious metal, was home. It was the biggest return of World War II gold.
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Humankind never seems to lose its fascination for gold. Some people love it; some hate it. Few are indifferent. Perhaps that has something to do with the price, which has had lots of volatility in recent times but has risen sharply in value. In the last eighty years, the price of the metal has gone from $35 an ounce to nearly $2,000. The world’s two most populous countries, China and India, have millions of gold bugs, which means the metal is likely to remain popular. Many academics, though, still mutter about it being a barbaric relic.

World War II did not end gold’s role in the international economy. Bullion remained paramount for the world’s political and financial leaders, and it would play an important role in rebuilding the world economy. The international monetary system that Harry Dexter White pushed through at the Bretton Woods Conference of 1944 reaffirmed the primacy of gold as an instrument of international debt payments between nations. It also raised the U.S. dollar to the honored position of being on a parity with gold. It was the only currency with that status. During the initial years after the war, Bretton Woods worked fairly well. Countries wanted dollars to buy American cars, steel, machinery, and more for their economic recovery. In November 1961, eight major countries attempted to maintain the gold standard by setting up the London Gold Pool. They defended the price at $35 per troy ounce by interventions in London, the largest bullion market. In March 1968, though, that collapsed. America’s predominance in gold holdings continued slipping, and foreigners soon held more than the U.S.
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Starting in the 1960s, the U.S. was spending heavily on both the Great Society social programs and the Vietnam War without any appropriate tax increases, which caused serious balance of payments problems. The results were large deficits and a weakening American currency. The dollar eventually became overvalued, and the global monetary system ran into trouble. The post-war financial system was really only operational from 1959 to 1968.

Critics complained that Bretton Woods gave the U.S. an unfair advantage in global business. Charles de Gaulle, the president of France, became the leader of the anti-Bretton Woods offensive. At a press conference in 1965, he launched the first attack. He also strongly endorsed bullion, saying, “In truth, one does not see how one could really have any standard criterion other than gold.” Starting three years earlier, France had begun converting its surplus dollars into gold, buying as much as $150 million a month and having it shipped to Paris. U.S. gold holdings were soon only about half what they had been at the end of the war. Jacques Rueff, a long-time Banque de France official, provided the intellectual firepower for the French attack.
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The U.S. successfully fought off the French assault, but the American currency continued to be weak, especially against the post-war economic powers, Germany and Japan. Washington continued to lose more and more gold to countries such as Portugal and Spain who began following the French lead. Finally on August 15, 1971, President Nixon closed the gold window and refused to sell the metal, thus essentially ending Bretton Woods, although it limped along for a while. It was a traumatic episode for the world economy and became known as the Nixon Shock. The price of bullion on the world market began rising, and by the end of the 1970s was more than $800 an ounce. It then fell to less than $300 for several years before roaring back in the late 1980s to $500. It took another long slide in the 1990s, but has come back strong in the new millennium.
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Many economists, central bankers, and finance ministers would be happy for gold to just go away as a global system of value and be no different than other metals such as copper or iron. At the turn of the new century, gold was down to about $270 an ounce and falling. Gordon Brown, the British Chancellor of the Exchequer, thought he saw the handwriting on the wall and announced that he would sell fifty-eight percent of his country’s gold reserves. Between 1999 and 2001, he sold off four hundred tons at about $275 an ounce. That turned out to be one of history’s greatest financial blunders. The price was soon once again rising. The chancellor had sold at the bottom of the market, and that period became known as Brown’s Bottom.
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In more recent times, the price of gold has fluctuated widely on international markets, but has been generally rising. There have been several spikes, which were usually concurrent with inflation or political unrest. Gold continues to retain its allure as a safe haven in times of trouble. The historic high closing London fixed price was on September 5, 2011, when it reached $1,896.50 an ounce.
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According to experts, less than 200,000 tons of bullion have been mined in history. Current world production is about 2,500 tons per year, and the four largest producers are China, Australia, the United States, and Russia. Together they mine nearly half of new global output.

Central banks still hold about twenty percent of the world’s gold. Since 1999, some two-dozen nations, including the U.S., have had an agreement not to sell more than four hundred tons per year. They have also stated as their policy was that “gold will remain an important element of global monetary reserves.” A few countries such as Holland and Belgium have nonetheless quietly sold off bullion. Switzerland was the last major country in the world to go off the gold standard, which it did only in 2000.

Gold remains a product that many people trust because they lack confidence in politicians, who seem all too ready to debase the currency so that they can operate irresponsible economic policies, steal the national treasury, or run it as a Ponzi scheme. The words of Herbert Hoover to Franklin Roosevelt in 1933 still ring true: “We have gold because we cannot trust governments.”
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As for my personal view of gold, dear reader, I follow the recommendation of my investment consultant Paul Koether, who has been a friend and watched over my money for many years. He advised me to put some of my retirement nest egg into gold. So I own gold coins. They might be useful in the next apocalypse.

G
ermany was historically a major holder of central bank gold, but just prior to the war the country had only a small amount because of its ongoing economic problems. Following orders from Reichsbank President Hjalmar Schacht, the holdings as early as 1933 were divided between published accounts and hidden ones, so that the world would not know how much the country actually had. Nazi leaders needed gold to buy critical war material on the international market. Before the world conflict began, Germany captured a large amount of bullion in Austria and a smaller cache in Czechoslovakia. Most of that, though, was soon spent on armaments, and the bullion holdings were again low when World War II began with the invasion of Poland. The Nazis captured much more after their invasion of Western Europe in 1940. Almost all of the gold seized during the war had been confiscated by the end of 1940. Although the world’s public was outraged by the theft of bullion as well as other valuables from private individuals, in particular concentration camp inmates, that was a relatively small amount when compared with what was stolen from central banks
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            Published

                     $28.6 million

            Hidden

                     $120.5 million

            Total

                     $149.1 million

            Austria

                     March 1938

                     $91 million

            Czechoslovakia

                     March 1939

                     $45 million

            Danzig

                     September 1939

                     $4.3 million

            Netherlands

                     May 1940

                     $137.2 million

            Belgium

                     May 1940

                     $204.9 million

            Luxembourg

                     May 1940

                     $4.8 million

            Yugoslavia

                     April 1941

                     $3.8 million

            Greece

                     April 1941

                     $7.4 million

            Italy

                     December 1943

                     $64.8 million

            Albania

                     September 1943

                     $2.6 million

            Hungary

                     March 1944

                     $32.2 million

                     Total

                     $598 million

S
witzerland was by far the most important way for Germany to unload its stolen gold and buy war goods. Nearly eighty percent of all the bullion shipments between the Reichsbank and other countries went through Switzerland. In the first two years of the war, Berlin dealt mainly with private Swiss banks, but the Berne government in October 1941 stopped that and demanded that business be done with the Swiss National Bank. That small country that was home to a major international central bank remained a good Nazi partner until late in the war, when the Allies announced the Gold Declaration of January 1944. The U.S., Britain, and the Soviet Union declared that they would not recognize the transfer of looted gold and would not buy it from any country that had not broken relations with Axis countries. Nonetheless, the Reichsbank’s Emil Puhl was still selling bullion to the Swiss in the spring of 1945. The Swiss government’s Bergier Report in 2002 confirmed that the Swiss knew by 1943 that the Nazi gold it was accepting was taken both from central banks and citizens of occupied countries
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            Swiss National Bank

                     $389.2 million

            Swiss Commercial Banks

                     $61.1 million

            Spain

                     $140 million

Sweden

                     $59.7 million

            Romania

                     $54.2 million

            Portugal

                     $43-$49 million

            Turkey

                     $10-15 million

            Bank for International Settlements

                     $ 12 million

            Swiss Bank Corporation

                     $36.3 million

            Bank Leu

                     $12 million

            Union Bank of Switzerland

                     $7.6 million

            Basler Handelsbank

                     $1.8 million

            Eidgenössische Bank

                     $0.1 million

            1940

                     222 million Swiss francs

            1941

                     349.9 million

            1942

                     493.2 million

            1943

                     609.3 million

            1944

                     257.4 million

            1945

                     15.7 million

            Total

                     1,947.8 million Swiss francs

            Soviet Union

                     $23 million

            Japan

                     $4.2 million

            Bank for International Settlements

                     $21.5 million

D
espite all the gold the Allies seized from defeated Germany, the Reichsbank ended the conflict with nearly twice as much as it had prior to the war. Ten countries made claims to the Tripartite Commission for the Restitution of Monetary Gold. Most of the cases were settled within two years after the commission started its deliberations in 1945. The organization, which had its headquarters in Brussels, existed for much longer largely because of the lack of a settlement for the Albanian claim. Britain blocked it because of three incidents involving British ships in Albanian waters just after World War II. After that dispute was finally settled, the Commission was dissolved on September 9, 1998. It was recognized from the beginning that no country would get total restitution since so much more gold was stolen than had been recovered. The victim countries received about two-thirds the amount that the commission recognized they had lost
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