Jim Rickards Speculates About a Bank Run on the New York Fed’s Store of Gold
The classic image of this is the scene from the Christmas-season film It’s a Wonderful Life, with Jimmy Stewart. We’ve all seen it. Now, something similar is happening at the Federal Reserve Bank of New York. What’s different is that the run on the bank involves gold, not cash. The New York Fed will never run out of cash because they can print all they need. But they could run out of gold.”
The New York Fed has about 6,000 tons of gold stored in its vaults on Liberty Street in Lower Manhattan. Much of that gold belongs to countries around the world, as well as the International Monetary Fund. But over recent years, a lot of countries have been bringing their gold home.
Germany recently brought a lot of its gold back. Last summer, the country completed a gold repatriation project three years early. The Bundesbank said it made the decision to move the gold home “to build trust and confidence domestically.”
Turkey has been on a gold-buying spree and has also been bringing some of its hoard home in a quest for independence from the dollar. Rickards said Turkey has about 220 tons of gold stored in New York.
And it’s not just large gold holders repatriating their metal. Azerbaijan recently reclaimed some of its gold from New York. A US state is even getting into the act. The Texas legislature authorized a state Gold Bullion Depository a couple of years ago. One reason given for establishing the institution was to move the state university’s gold out of New York back home to the Lone Star State.
Could this movement of gold out of the Fed be the beginning of a full-fledged bank run? That remains to be seen, but Rickards said he thinks it’s at least a possibility.
The gold stash in New York is dwindling and global behavior is coming to resemble a run on the gold bank. Skeptics claim not all of the gold is there. My own view is that New York does have the gold, although a lot of it may be leased out to support gold price manipulation by the big banks and China. Either way, we may soon find out if New York has to shut its gold doors just like any other insolvent bank. And we may also find out how much patience the world has left with the dollar.”
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Photo by Michael Daddino via Flickr.