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Comment by JumpCrisscross

10 hours ago

> Banks can keep it in US and stay happy

If the Banque de France holds physical in New York and sells it to JPMorgan (nothing moves) and then in Paris buys contract for physical from UBS, there will probably need to be physical gold that moves.

In all likelihood, Swiss gold held by e.g. a Gulf customer might be sold to Paris (nothing moves) and JPMorgan may entice Venezuela to take those contracts on its balance sheet (nothing moves). But if it’s a big trade, the price of delivering physical in Paris (or Genève) will go above spot in New York at which point it’s profitable for JPMorgan to take delivery, load up planes and physically ship gold.

17 comments

JumpCrisscross

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Gravityloss  10 hours ago

I imagine a convoy of small but heavily armored ships leaving New York, with nervous sailors clutching machine guns on the decks.

  • jjk166  5 hours ago

    You wouldn't need many ships. The volume of a single shipping container is enough for 1300 tons of gold. Of course gold is extremely heavy, you'd need a specially built container to support that much gold, but the point is the storage space of any ocean going ship can comfortably carry the entire gold reserve of an entire country.

    If you actually loaded gold into shipping containers and obeyed the weight restrictions, all the gold in the world would take up less than 8400 TEU, which would be considered a mid size cargo ship.

  • monomania  7 hours ago

    This actually happened in 1965. De Gaulle, the president of France at the time, sent the French Navy over to America and took their reserve gold back home. This prompted other countries to do the same and by 1971 America had switched from a gold standard to a fiat currency.

    https://en.wikipedia.org/wiki/Exorbitant_privilege

    • somenameforme  3 hours ago

      You're leaving out some really interesting context there. After the Great Depression the economic equilibrium the world settled into, with the Bretton Woods treaty, is that participating countries, which was most of the non-Soviet aligned world, would agree to base their currency's value on the USD.

      That'd obviously give the US an immense amount of power, so in exchange the US would agree to make the USD convertible to gold at a fixed rate by other countries (as opposed to e.g. individuals). So the whole point here is that if the US tried to print a whole bunch of money to exploit our 'exorbitant privilege', countries would be able to take their now devaluing USD and exchange into a gold at a stable rate and make a whole bunch of money. So it was intended to be a self correcting system.

      The problem is that the US did print a whole bunch of money anyhow, and when France and other countries said 'hey we'd like to convert our USD to gold' we just said 'nah' and defaulted on our obligations, bringing Bretton Woods to an end in 1971. That signaled the beginning of the modern completely fiat economic system, and led to some wild quotes from the time. For instance the Secretary of the Treasury under Nixon (who was president in 71) has a great quote of, 'The dollar is our currency, but your problem.'

      ---

      It's critical to understand this history to understand what's happening today with countries increasingly seeking to replace the dollar. Many want something akin to Bretton Woods 2.0, but without any country being given a win button. And that's not so easy to devise!

  • RajuChacha108  2 hours ago

    India brought several tonnes back from London. Approximately 250T was brought back in 100% cases it was brought from totally ordinary cargo planes. From what I have heard, hardest part of securing customs exemptions at port of entry in India.

cobbzilla  5 hours ago

agree with one minor quibble:

> load up planes and physically ship gold.

they would not load planes, they’d load ships, because it’s much cheaper.