Excerpt from Q&A period:
Question: Why did the Bundesbank announce proposed gold sales?
What we’ve got here is the demographics of central bankers. Those gold hordes were put together by the generation of central bankers who came out of World War II and the Bretton Woods agreement and that inflation was the inevitable fate for democratic countries because they always promise more than they can deliver. And the Germans in particular of course had a deeply-rooted, visceral fear of inflation because of the Weimar Republic. In France it was Jacques Rueff(?) who convinced deGaulle about making sure their foreign exchange reserves were in gold. And the Germans just accumulated reserves on the basis to make the signal to their own people that the Deutschemark could be counted on.
And this was part of making the German miracle occur, was convincing people that the Germans could actually produce the strongest currency in the world. As a matter of fact, by the late 70’s, it was about the only institution in Germany that Germans believed in was the Deutschmark. They were very skeptical about their government, very skeptical about their companies, skeptical about their unions. The military had been virtually neutered. And so the big institution there was the DM. When they agreed to put that into the Euro, that was no longer something that had to be kept sacrosanct, backed by gold.
But now we move on to the demographic change. The people who are running central banks these days, with the exception of Alan Greenspan, are of a new generation. They’ve grown up having learned modern economics, which is dating from Keynes, that gold is the barbarous relic and gold is a terrible investment, they were stuck with it as they watched it go down through the triple waterfall crash era. And these central bankers are eager to be able to improve returns for the foreign exchange fund.
As I’ve put it before, today’s breed of central bankers looks on gold the way a manufacturer of artificial Christmas trees looks on the real thing. He looks on the fact that the pine needles shed, that you’ve got to cut down the forest for it, it’s a nuisance to move in and out in the halls of buildings and so his attitude is I can do better than God.
That is something that is part of what makes central bankers able to get together for brandy in Basel. Is that they really feel that they’ve liberated themselves from gold. That they know how to manage each others pieces of paper.
So, in order to prevent the central bankers of Europe from selling too much gold, the gold industry was able on behalf of countries in Africa who are getting hurt by gold sales to get them to cut down their sales under an agreement to 400 tons a year. That agreement is going to be extended but what it shows you is there’s been a gigantic change. So what you can say is they’ve been wrong about gold for most of the time. And they’re wrong about gold again. They were enthusiastic about it, they’d built up their reserves in the 70’s because of the idea that inflation would never calm down they lost money on those acquisitions and now they’re saying we’ve repealed gold we finally made it obsolete because of their ability to fight inflation. We shall see."
the whole article by Don Coxe is here:
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