>However, an operation to repatriate its gold holdings began in the 1960s leading up to the US termination of the Bretton Woods system, which effectively stopped foreign governments from exchanging dollars for gold.
French-US monetary history after WWII:
Under the Bretton Woods agreement (1944-1971), the US dollar was the world’s reserve currency, and it was pegged to gold at $35 per ounce. Other countries pegged their currencies to the dollar.
around 1965, De Gaulle initiated a systematic, aggressive policy where they converted USD into physical gold every time French acquired USD from trade, then French Navy picked those gold bullions from NY. By 1971, the US gold reserves had decreased so much that they did not cover the dollars circulating globally and Nixon "closed the gold window,"
You seem to imply that Charles de Gaulle and his policy of converting dollars to gold caused the collapse of the Bretton Woods system. That was a myopic view. The whole Bretton Woods system was doomed from the beginning due to design defects.
The system was conceived with the primary goal of maintaining balance of payments equilibrium for all countries at the expense of economic growth and liquidity. It had become clear that if a country wanted its currency to be the world reserve currency it had to run a balance of payment deficit. And the United States clearly wanted its dollar to be the reserve currency unbridled by any balance of payment constraints.
If the United States had balance of payment surpluses as it had in the early years, the system lost liquidity (other countries wanted to buy U.S. exports but had neither gold nor dollars to do so), reducing the surplus. And if the United States had balance of payment deficits, well, gold would flow out of the United States, and the United States could not meaningfully increase public debt or spending.
Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars? Then your argument of "gold would flow out" would not hold - so the only reason for it to flow out was that the gold standard was fake - the lax money policy of the US was the issue, not the gold standard itself.
> what if the US would use actual physical gold coins instead of dollars?
The problem here is, what if the demand for dollars increases?
In principle the US would get more gold and mint more currency, but gold is a finite resource. "All the gold ever mined" is around 200,000 metric tons, ~32k troy ounces per metric ton is ~6.4B troy ounces.
In 2022 (just before the recent gold rally) the price was ~$2000 per troy ounce, i.e. "all the gold" was worth ~$13T. Meanwhile the M3 money supply in the same year was ~$20T. What happens if you try to buy $20T worth of gold to mint currency when only $13T worth has ever been mined, and not all of that is even on the market? The answer is that you can't, so instead the result is deflation, which is bad.
Or to put it a different way, what do you think the economic effect of the recent gold rally would be for a country whose currency was still pegged to gold? It just got way cheaper to import foreign products than buy domestic ones, and way more expensive for foreign countries to buy your exports, so how's the unemployment rate looking? The amount everyone owes on their mortgage hasn't changed but the nominal value of their houses just got cut in half so now they've lost their jobs and are underwater. What happens when they start to default and foreclosures don't allow the banks to recover the principal?
The primary function of money is its trade value, to "lubricate" the real economy to let goods and services flow. When the value is unstable, people are inclined to not spend or not accept that currency, which contradicts the free flow of it and in severe cases harms the economy.
Crypto'currencies' have the same problem. By nature, they are no currency but investment for which instability is required. No crypto bro would hype their 'currency' because there would be no pumping. Arbitrage trades are considered being for fools or insiders.
Bitcoin has the same problem. There is no inherent reason you can't have a cryptocurrency where there is no maximum number of coins to ever be mined and instead the limit is that mining them requires a fixed amount of computation.
That would give you the characteristics you want from a medium of exchange, because there is a rate limit on how much can be created (doing so requires e.g. electricity). Then the value is relatively stable, if you accept it as payment on Monday it would still be worth around the same amount on Friday, but the long-term result is a slow reduction in value on multi-year timescales as compute gets cheaper, so you don't get the speculation that results in high volatility and it doesn't strongly compete with real economic activity for investment resources.
The argument you'll get from goldbugs and whatever is that nobody would want a currency which is inherently inflationary like that, but that's clearly contrary to evidence. Most government currencies are inflationary, even on purpose, and it doesn't matter as long as the rate of inflation isn't so high that people holding it transiently for use as a medium of exchange are losing a significant amount in that short period of time. Especially when the rate of inflation is predictable (the rate at which computers get faster is reasonably consistent) so that anyone entering into a long-term contract denominated in that currency can reasonably predict its future value on the delivery date. Or people could just use it as a medium of exchange and denominate their contracts in something else.
Gold is silly as a measure of value. It's just a piece of shiny metal. The amount of value in the world is increasing so you want to exchange medium to grow with it else you're pulling breaks on the actual economy.
Just because a social construct is silly when you think about it doesn't make it any less real or useful.
A national border is silly as a physical reality; it is just a cartographic whim. These invisible lines, drawn by long-dead men, pretend that the lithosphere is fundamentally different on one side of a coordinate than the other.
Fiat currency is silly as a store of value; it is just a digital ledger or a piece of cotton-linen blend. Its "worth" is derived entirely from the collective hallucination that a central bank’s promise is more substantial than the paper it is printed on.
Yes. And we should never forget that these ideas are just that: useful ideas. They may seem without alternative to most people, but that doesn't mean they necessarily are.
In effect, some of them are. Look how many decry the death Breton Woods. They don't want to necessarily have good coins on them, but they want them to be tethered as a proxy. Why?
No, not in effect, no one is talking about physically exchanging gold coins, so it doesn't make sense to say "there isn't enough".
but they want them to be tethered as a proxy. Why?
That's a completely separate issue. People want to not have to deal with inflation where they are on a treadmill of needing to get paid more to support the fact that companies can raise their prices easily.
> No, not in effect, no one is talking about physically exchanging gold coins, so it doesn't make sense to say "there isn't enough".
I think my point still stands. If you can't create more gold [1] and you say - I am pegging 35 dollars to an ounce of gold. Then you are limiting the amount of dollars to the mass of gold[2]. The money works as an IOU for gold. You aren't exchanging pieces of gold, but the idea that you have 35$ is as if you have 1 ounce of gold, _that is what people pine for_. It's effectively, an IOU for 1 ounce of gold that you keep in a safe. Yes. I think the point still stands that in effect, that's what people are asking for.
[1] - You can, but it's a much slower process, deff rate limited, it's actually what people really seem to like about gold.
[2] - Yes, I am aware about the concept of fractional reserve, but that's exactly the part that goldbugs want to avoid.
I think my point still stands.I think the point still stands
I'm not sure what point you are making, it seems like you're just describing a gold backed currency and repeating the same things multiple times.
If you aren't using gold directly how would there ever be "not enough" unless a penny became worth too much? People did this for hundreds of years, this isn't some theory or experiment, it's basically how the world worked for most of human history.
Mild inflation is a good thing, at least according to modern economists. In a deflationary environment, money is worth more when you don’t spend them. And when people don’t spend them, there’s no economic growth. It’s just like having very high interest rates but the central bank cannot act to lower them.
This thread was someone saying you can't peg a currency to something else because "there isn't enough of it" which is nonsense.
there’s no economic growth
Printing money doesn't create economic growth, it just inflates assets and depresses nominal wages.
money is worth more when you don’t spend them
People say this stuff like it's gospel, but if someone understands currency dynamics in the first place they would have their money in investments, which already should appreciate and act like a deflationary currency. People can already buy stocks and leave money there to get more valuable, so why does anyone spend money now?
You also have to figure out why it already worked for hundreds of years. People act like it would be an experiment. Floating currency is the experiment and it has lasted 50 years so far. Currency has lost almost all of it's value from before the 70s and minimum wage is a fraction of what it was nominally while asset prices are sky high, then people wonder why people can't afford a house or beef or gas or just to live alone.
Economic growth comes from spending. Households must be incentivized to spend either through inflation or low interest rates.
Buying stocks hoping that it would appreciate doesn’t work when there is no economic growth. So we are back to square one.
And for hundreds of years we didn’t have the same kind of international trade, or the same financial markets. One must wonder whether a new kind of currency must accompany a new era of economy and trade.
Currency losing almost all its value is by design. Modern economists target a 2% inflation rate. This means currency is supposed to lose value. It’s another mechanism to encourage spending to increase economic growth.
> Buying stocks hoping that it would appreciate doesn’t work when there is no economic growth
Why? If you and I earn $100 per year, every year, that means there is no economic growth. We spend half of it on food, clothes, and other necessities and buy stocks with the other half, stocks will go up in value.
An non-growing economy has aspects of a zero-sum game. Speculation can still occur, and can continue unbounded. Stocks, gold, bitcoin, have historically all been deflationary.
Says who? What about governments and companies? People are already incentivized to spend because they need things.
Buying stocks hoping that it would appreciate doesn’t work when there is no economic growth.
You're contradicting yourself and going around in circles. If there is "economic growth" according to you, then stocks will go up, which means they end up being a deflationary currency, which means people will put there money there and not spend it.
They already go up due to inflation, people do buy stocks and other liquid assets, people still spend money anyway.
Also, gold still exists. By your own logic, because anyone can still buy gold or gold futures they should park their money there and never spend it.
Currency losing almost all its value is by design.
It is by design by governments and for governments. No person wants an inflationary currency, governments want it because they can they can borrow and print money they don't have and hand it out to people who in turn help with political power.
People don't want their currency to inflate away unless they own a business that can raise prices while their employees make less nominally.
Gold is actually really good at transferring and measuring value. Think about what a "good" measure of value would be have. It needs to last over time, not corrode or dissolve to the forces. It needs to be distributable, Divisible.. to be ubiquitous. Hard to create/refine, hard to find, so supply can't easily be inflated.
It doesn't matter what the object that is being used for exchange of value or holding value, that's why you can trade and barter random objects. But if you condensate down the properties that make a GOOD money, then gold is more than just a shiny metal.
"The amount of value in the world is increasing so you want to exchange medium to grow with it.." we find more gold every day, so there is an easing already happening naturally. And even if there wasn't, imagine having an exchange currency that literally never inflated... that's GOOD. We have been hoodwinked into thinking that we need inflation to keep up with goods and services, literal stockholm syndrome taught by the FED.
Hold on - you say "we find more gold every day" and then go on to suggest that the money supply doesn't actually need to keep up with economic growth?
If we had the technology to maintain 0% inflation, we would do that. We can't, and rather than risk deflation we instead target low positive inflation. This is because deflation leads to nightmare spirals where people start stuffing money into their mattresses instead of investing in useful things because holding has risk-free guaranteed returns that the unpredictable real world can't match.
The amount of gold being mined is not sufficient to keep up with economic growth and gold is therefore inherently deflationary. It's not a good way to store value, because a coin that's going to double in value over two years or whatever is obviously not a stable store of value.
You can argue about corrosion resistance or whatever other physical properties gold might have, but unless the civilization collapses you will find just as much luck storing your wealth in the database of a major bank. Needless to say, designing a civilization around the idea that it could collapse at any moment is unnecessary and expensive.
> If we had the technology to maintain 0% inflation, we would do that. We can't, and rather than risk deflation we instead target low positive inflation.
I don't think this is quite right. My understanding is that a low positive inflation would be targeted anyway, because it stimulates the velocity of money; i.e. there's a downside to hoarding, since you need to beat inflation to come out on top. So people will be willing to invest to at least some extent in risk assets, or to buy things now rather than later.
Which, yes, makes inflationary spirals possible, but they've proven less damaging. The inflation numbers seen in regimes that actually collapsed as a result are absolutely dizzying; whereas the deflation seen in the Great Depression was... significant, but not nearly comparable.
The main advantage to keeping inflation as low as possible but positive is also that it makes interest rates cheaper. Individuals are incentivized to spend when there's inflation, but banks have a harder time writing loans because the interest rate on the loan is the product of inflation and the bank's desired ROI.
Low interest rates are a good thing because they allow people to explore new ideas and new businesses - the entire modern tech industry would not exist without ZIRP because the scale of investments has only gone up as technology has advanced.
> the entire modern tech industry would not exist without ZIRP
The problem with zero interest rate is that it doesn't incentivize better ideas. Why would you work to increase productivity if capital has no cost?
The period 2016-2021 was one where interest rates were the lowest, sometimes even negative, and you saw companies hiring endlessly, and acquiring competitors with no intention of doing anything their their products.
It is very hard to compete on talent and good ideas in such an environment when your all competitors are burning through loaned and venture capital (which itself is also largely loaned at some point).
> Individuals are incentivized to spend when there's inflation
That's not what's happening currently. Inflation has driven up prices to the point where people can't afford to spend. They're forced to cut back on spending just to keep a roof over their head and food on the table. Inflation promises that things are cheaper now than they ever will be, but that just means that anything you can't afford you either have to go without or take an even bigger hit to your wallet after trying to save money at a rate faster than prices are increasing. That sort of thing leads to less spending.
Credit cards were the solution for many Americans for a very long time, but that was never sustainable and now the US has record amounts of household debt and homelessness.
Deflation makes things more affordable and so people buy more. Yes, they could horde all their wealth, but you can't eat money and it isn't much fun. When times are good why would anyone bother going without when they can easily get what they want today. Consumerism is strong enough to keep people buying things. Decreasing prices gives consumers confidence that they can make risky purchases and investments.
> And even if there wasn't, imagine having an exchange currency that literally never inflated... that's GOOD.
I fundamentally disagree. Value comes from building stuff not from hoarding. I maintain my intense dislike for gold. And I grant that it had the property of having most people on this earth consider it the peak of value. Sure common belief is a useful property. But I disagree that it's a positive outcome or that there couldn't be many many other variations except gold.
> that's why you can trade and barter random objects...imagine having an exchange currency that literally never inflated... that's GOOD. We have been hoodwinked into thinking that we need inflation to keep up with goods and services, literal stockholm syndrome
Gahhh. Stop taking your economics advice from bitcoin bros and goldbug weirdos. They don't know how anything works and don't want to learn. It's like taking legal advice from sovereign citizens. It's not even that difficult to understand why it's a terrible idea!
High inflation is bad, sure. Deflation is an economic nuke. You know those people who spent like a whole bitcoin buying pizza way back when? "If I'd just held onto it, I'd have $HUGE_NUMBER now".
Yeah. If your money goes up in value, you have a huge incentive to stockpile it and not buy pizza. It's not just Dominos that loses out. All of the people and suppliers that go into pizza do, too. You need people to spend and lend to have liquidity and money flow.
> we find more gold every day, so there is an easing already happening naturally
That's not how that works. You're tying your entire country's economic growth to the production output of a single mining industry. Gold is not distributed evenly across the globe, either.
And yeah, we did all that in the past, and it caused deflation, which caused numerous financial panics [0], broke the British economy [1] and after two world wars, the US ended up with like 70% of the world's gold [2].
TL;DR: Tying your entire country's economic growth to the production output of a single mining industry is stupid and we don't do it for very good reasons. Everything is a conspiracy if you don't know how anything works.
> If your money goes up in value, you have a huge incentive to stockpile it and not buy pizza
A lot hinges on this being true, but being deflationary is not unique to gold. It is also true for a lot of other things, including stocks. Yet we think it is good that regular people spend their earnings on stock, and it is generally considered to be one of the things which made American economy uniquely strong. So much so that other countries seek to mimic it.
The argument should cut both ways: A strong stock market which is deflationary should lead to economic stagnation. Why buy a pizza today when you can buy S&P500 and buy two pizzas tomorrow?
Reality seems to disagree here. People buy what they need and want, today, and whether the rest is stored in fiat currency, stocks, or gold seems to matter very little for economic productivity.
> Yet we think it is good that regular people spend their earnings on stock, and it is generally considered to be one of the things which made American economy uniquely strong
I...don't think you know what stocks actually are. Your argument doesn't make sense because stocks are the literal exact opposite of a deflationary good lol.
Companies issue stock to raise money. If you buy stock from a company, you're giving them that money in exchange for a small stake in ownership.
It gets more complicated with stock markets and all the other stuff, but the heart of it is taking money that would normally sit for decades doing nothing and giving it to those who can use it right now.
> Reality seems to disagree here.
It only does if you don't know how things work and don't want to learn lol
There is certainly some misunderstanding here, and I am unsure about where it is. Perhaps another example could have been more clear.
When you "buy the S&P500" you do not buy stock from companies. No S&P ETF takes part in private placements or IPOs. They buy "used" shares on the open market, with the single intention of selling it on the open market to someone else.
When you buy the S&P, at no point do you give money to any of the S&P companies (except perhaps a small fee to the ETF issuer, most of which are public companies, but let's not split hairs about that).
There are of course other methods of buying the S&P500, such as tracker certificates, but they only add layers of indirection to the above, they do not change the fundamental facts about it.
> you don't know how things work and don't want to learn
I do find it rather ironic that economists can pretty much universally agree on this concept. And yet when you point out the very existence of the billionaire class inherently causes the exact same issue you're suddenly a communits.
How is it good for an economy to have a small subset of individuals hoarding wealth through property, artwork, and offshore bank accounts - not spending it in the economy from which they extracted it? "Job creators" is a farse, the subset who you can point to who ACTUALLY create(d) jobs a-la Page and Brin have long since stepped away from that job creation and have joined the ranks of: number go up.
Yes, it's just a shiny piece of metal. However, it is a pure element and there is a limited amount of it, unlike pretty much anything else except maybe silver.
This is the origin of the entire white collar world and all of its odd bedfellows, and it will die in our lifetime. All of our jobs will go with it, unfortunately.
So as trade increases, and the need for dollars increases, gold and the dollar increase in value together.
That sounds benign until you realize that is: deflation. It incentivizes everyone to hold their dollars instead of spending them, and parasitically gain from gold's increasing utility use as currency by others.
This further decreases dollars available on the market to use in trade, further increasing their value. Which ... yes this can be an economic death spiral. Or at least, a strongly growth conflicted world.
A world in which you can make 5-10% a year by avoiding economic activity or investment is not a healthy world.
(And you can't increase gold supply to counteract this, because gold supply is also always balanced against the cost of extracting gold. Unless everyone else on the planet except the US government is prohibited from mining gold, there is no play there.)
Can you make the same arguments for holding land and activity that requires land? Or holding any other valuable, limited commodity vs activity that requires that commodity, copper for example?
Investors in those things haven't caused an economic death spiral. It's considered shrewd and good business to buy and hold things that are seeing increasing demand.
> This further decreases dollars available on the market to use in trade, further increasing their value.
... thereby reducing the amount of dollars required to trade a given amount of other things. Where does the spiral come from?
Holding land isn't as straightforward as you describe it. Every parcel of land is different. It takes a lot of knowledge of many kinds to be the one who makes money from real estate, instead of losing outright for overpaying, underselling, or simply being whittled down by taxes and other expense. And its lack of liquidity creates high situation risk, for anyone who doesn't have a large enough csh buffer to weather life's turns, unscathed by any immediate needs.
But yes, sophisticated investors do make money on under utilized land. Parasitically.
And it is an economy damper. Under utilized land is poor economic optimization by definition. Not to mention the undertow it creates, in terms of unproductive scarcity, for people who actually need to utilize land - whether that is for homes or businesses.
The solution, as economist Henry George pointed out, is to tax land, but not the property on it. Tax the exlcusionalry holding of a limited resource, don't tax productive value created by people.
Taxing land and not property isn't as simple as taxing both, but it isn't rocket science either. There are lots of standards and practices, because distinguishing between the two is important for many reasons.
The irony of taxing property, the stuff that makes land productive, is that it is a wealth tax that hurts rich and poor alike. A poor person, unemployed, who spends their time bereft of reliable income improving their own home will now be taxed on the value added - every year for the rest of their lives or until they sell or lose their home. That is a very perverse situation.
So yes, the taxation situation that subsidizes under utilized property, which is also parasitically rewarded by gains in value far exceeding the lower taxes they pay (for having no development to tax), is continually damaging the economy.
I didn't describe anything as straightforward, the fact remains that there are limited goods/properties/commodities that are in demand, not just money. It's not up to me to show why it's exactly like money because that was the only property of money used to describe this detrimental problem, it's up to the person who says that is a problem with deflationary money. Money can also be taxed too, so that also is insufficient to make the case for why it is different than land. Or alternatively you could take a limited non-renewable commodity (say, copper) that is in demand but not taxed. Also you have still not addressed that increasing value of money naturally reduces the required amount of it necessary for making a particular trade. A fairly striking omission when claiming there are feedback spirals in such a system.
That doesn't make any sense to me. Under Bretton Woods, a "dollar" was a contractual equivalent to a fixed amount of gold. There's no difference. When people are talking about "flow out" they're not talking about literally motion of currency[1], just who owns it.
[1] Which is backwards in your reasoning anyway. If you're a foreign power wanting to hold dollars, and dollars are physical gold coins, then you quite literally need to move them physically out of the country, right?
> Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars?
You'll get a bear economy, leading to the eventual deflation and collapse.
Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
Fake economics to "stable money causes hitler" in two sentences.
Countries used gold or metals either directly as currency or to back paper currency for hundreds of years. If their governments overspent they collapsed.
Saying you need inflation or you get hitler is pretty wild.
Your proof that the economic system that worked for hundreds of years doesn't actually work is a small town that issued their own currency, which allowed them to nominally pay people less and there were more jobs?
That's what inflation does, everyone gets paid less, but they don't realize it because they just see the same number coming in and more going out.
And then because of that, somehow noninflationary currency results in hitler in 8 years (even though it was used for hundreds of years).
I think you should look at the other end, which is governments going broke and not being able to inflate their way out of it.
> Your proof that the economic system that worked for hundreds of years
It did not. The economic system that was in place for hundreds of years kept the population in a permanent state of depression. Most people had barely enough money to buy necessities.
The economic growth exploded, surpassing _millenia_ of innovation within mere _decades_ once we got rid of the golden chains.
But I guess that you fancy yourself being landed gentry and not a landless serf?
kept the population in a permanent state of depression.
Says who?
people had barely enough money to buy necessities.
Where are you getting that? I think you're confusing and conflating all sorts of things like human advancements with inflationary money. I'm sure what you're saying makes sense if you think every invention, discovery and gain of knowledge was from people having their money inflated, but there isn't any evidence of this, it's just you restating it.
The economic growth exploded, surpassing _millenia_ of innovation within mere _decades_ once we got rid of the golden chains.
That really only happened in the 70s, it wasn't exactly the dark ages before that.
From learning the basics of history? Before 1900-s famines were common, and most people were illiterate.
> That really only happened in the 70s, it wasn't exactly the dark ages before that.
Got it. You live in an imaginary world.
In reality, the first inflation happened when the European civilization established contact with South America. It rapidly expanded the monetary base and provided an impetus to economic development.
Then paper money (and equivalent debt-based mechanisms) were invented and became popular, and this turbocharged everything.
I just explained history to you, you realize being patronizing and repeating yourself isn't evidence right?
From learning the basics of history? Before 1900-s famines were common, and most people were illiterate.
Do you think the printing press, the engine and large scale agriculture might have more to do with food and literacy than inflation?
All those problems were solved before the US went off the gold standard anyway.
In reality, the first inflation happened when the European civilization established contact with South America. It rapidly expanded the monetary base and provided an impetus to economic development.
You realize this doesn't make sense right? This idea that printing money somehow leads to all human advancement is bizarre, even for someone who is ignoring all the things I said before. If two cultures crossed oceans do you think the advancement might come from international trade or do you think some tribe in the jungle could make up a currency, start printing it off, then go straight on to skyscrapers and video games?
All this is just a gish gallop anyway, you never bothered to explain how not having inflation "causes hitler in 8 years" even though it's only been the last 50 years that we have been off of backed currency.
You also didn't confront the fact that anyone can put their money in stocks, bond or gold and essentially have a deflationary currency but they still spend money anyway.
> Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
"Hyperinflation caused Hitler" is one of the common narratives that "everyone knows". But German economy was actually growing during the hyperinflation era and by the time of Hitler's ascension, the hyperinflation had long been in the past.
I personally edited this very Wikipedia article several times, but my changes got reverted by goldbugs who want to memory-hole it.
Thanks for sharing. I can corroborate some of the unemployment numbers in Lords of Finance and have no doubt there was some deflation. I do think the seeds of the Third Reich were sown well before this period mostly due to the insistence of France wanting full reparations and Germany borrowing in foreign currencies.
Hyperinflation undoubtedly left a huge psychological scar, especially because it happened right after the loss in WWI. But it did not cause a long protracted unemployment period that directly resulted in mass disgruntlement.
And most importantly, the deflation was directly caused by Germany's insistence on staying on the gold standard. And this has been an almost ironclad law: large countries that insist on gold standard end up with stagnating economy.
I always thought it was the musical energy of Bertold Brechts "Die Dreigroschenoper" that lead Hitler to power. /s
Just because two things are correlated in time, doesn't mean they are necessarily causally linked. Surely there are multiple factors at the same time behind the rise of a demagogue. In the case of Hitler the grievances of WWI played probably a much bigger role than economic problems.
Fair, but at the very least "hyperinflation caused Hitler" is a significantly weaker statement than "deflation caused Hitler", given that the former was replaced by the latter like 8+ years before Hitler's takeover.
Economic problems was a big part though, the 1929-33 great depression. It features heavily in political literature pushed by the Nazi party leading up to takeover. You know, like "Arbeit und Brot", etc.
All the facts are true here, but "design defect" is silly. The entire purpose was to keep a country like the US from exploiting its position, and becoming the "world's reserve currency" which is just a euphemism for running up massive debts to poorer states.
Bretton Woods was sabotaged by the US and the USSR through the single vehicle of https://en.wikipedia.org/wiki/Harry_Dexter_White. Without a Bancor, the entire system simply became a mechanism to exploit the poor.
I agree with you that Bretton Woods was doomed from the beginning, both Keynes and Friedman said so, and this should be a better known POV. Economists are not historians though, and historians write human-driven stories (i.e., it was Nixon who ended Bretton Woods, it's not that it was going to inevitably collapse as an econometric question).
All that said, Bretton Woods matters because people look at the gold standard as a time when wages in the United States rose. Like that's why Bernie Bros on HN care. It's the same reason they oppose globalization: me me me. So it's worth knowing why it was flawed. They don't comprehend that before and after Bretton Woods, hourly wage charts measured a fundamentally different thing.
I think it's better to attack the charts - I mean, you're responding to a Charts Guy, a guy who's like, look at this Gold Denominated Chart guy - because that's what their brains work on. Don't worry about economics. These guys are not economists. They are Charts. The real attack on their worldview is that, well, just because the year in the X axis is an increasing, doesn't mean that you can compare a bigger year to a smaller year. They would really like the world to be ordered that way, but it's not, and taking leadership on convincing them of that is very hard.
> The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
see, i don't want to generalize about left and right. it's much simpler than that. look at what this thread is actually about: "chart for $/GLD is going up and to the right, therefore, gold good." okay? it's not complicated. it's not left vs right as much as it is, for every 1 person who's like, "things are complicated, economics are interesting, let's talk about it" there are 19 who live day to day in a relentless grind, and get-rich-quick is literally their only apparent salvation. they want the world to be ordered where they are a Green Wojack, where some random bet or gamble makes them a ton of money. that's why we're talking about it, not to figure out economic policy. same reason we talk about cryptocurrencies and startups. to most regular people - and programmers are regular people - it's about, $$$.
it is a totally valid complaint to say, "floating exchange rates do not produce charts that go up and to the right." I mean, that's their problem! They made the wages per hour chart stop going up and to the right! It's not that they are bad policy!
Do people on HN care about joe schmoe hourly worker? No. You can certainly make tons of money trading currencies, but look, these people are not trading. They're gambling. This class of get-rich-quick person likes: real estate, cryptocurrency, gold, startup stock... are you getting it?
You are making it about, "neoliberal dogmas" and "gold bugs" or whatever. Trust me, those people are not the morons. The gamblers are 10x as stupid. They are the antagonists.
government policy definitely has the greatest power to create (or destroy) wealth, there are a lot of things wrong with economic policy in this country, but floating currency exchange is not one of those problems.
And you'd be wrong. It's not even difficult to understand why. Uncontrolled inflation is bad. Deflation is much, much worse. You do not want deflation. It rots your economy and nukes lend and spend. We trade a small amount of inflation to avoid the nuke that is deflation.
This is, like, one of the few things economists -- even most of the crazy ones -- agree on.
That's an oversimplification. Demand-side deflation can be bad for the economy, but it's also because our modern economies are basically reliant on inflation to manage our insane debts. Typically, critique of inflationary principles is coupled with a broader critique of MMT and how our economies are run. Deflation is fine or even beneficial when it comes from increased productivity (supply-side). Heck, we have deflation in some sectors of our economy (eg. technology) and consumers greatly benefit from it. Unfortunately the good type of deflation we see in our economies is overshadowed by the money printer going brrrrrrr.
Deflation is bad for the elites and politicians, and good for consumers. When the former are running the show, of course they will claim that deflation is the worst thing ever, despite the immense harm inflation inflicts on the average person. And if you spend like 5 minutes pondering the justification for why that is, you'll see it's mostly BS.
> Deflation is bad for the elites and politicians, and good for consumers.
Hahahaha no. Other way around. I assume you meant "consumers" as a short hand for "normal people" and not its actual meaning of "people who need to buy things on a regular basis" because you do not want to be a consumer in a deflationary market. You're constantly having to piddle your wealth away because you're forced to exchange money for goods and services. Like food and shelter.
Deflation means no access to modern lending because there's no incentive to do anything with money except hold it. That's fine if you're already wealthy, because either you have it on hand, have assets for collateral, or can call in a favor. If you're not wealthy, you're just fucked.
Having easy access to debt is, overall, a phenomenal thing for the non-wealthy. Can you abuse it? Yup. Can it be predatory? Sure. Does it mean the average person gets access to capital without access to generational wealth or decades of saving? Absolutely. The middle class kind of doesn't exist without it. See also: The Ability to File For Bankruptcy is Good, Actually.
> And if you spend like 5 minutes pondering the justification for why that is, you'll see it's mostly BS.
I'm always a fan of examining things, but there's a prerequisite. You need enough education, critical thinking skills, and maturity to understand why you start at the null hypothesis: any "Secret Knowledge They Don't Want You To Know" theory is conspiracy bullshit.
And enough cynicism to know when people start talking about "elites and politicians" like they're one homogenous lump of evil agenda, it's usually a shibboleth for other, ah, less socially acceptable beliefs.
the best way to expand your worldview is to consider that time series charts do not tell a whole, or even accurate, story, a lot of the time. for example, looking at a chart of a line going up and to the right for money supply isn't as meaningful as you think it is.
> trade, then French Navy picked those gold bullions from NY
I couldn’t find any clear news source or academic reference to that event. I see a lot of references on gold buying/selling sites mostly. I would imagine a Fench Navy ship docked NY and loading tons of gold would make quite a stir.
Gold is very dense. 10 Tonnes of gold takes up less than a cubic meter of volume.
Moving tonnes of gold doesn’t look like huge pallets of gold with tarps over them like a James Bond movie. It looks like a handful of supply crates.
I imagine that the French Navy visits NY ports of a regular basis. Pretty normal for Navy’s to sail into the ports of allies during peace time. There would be nothing unusual about a French Navy vessel sailing into NY loading up with some supplies and leaving.
For a country like France it would be on the order of hundreds or a thousand tons. So that’s maybe on the order of hundred trips by delivery trucks at most. Yeah I suppose spread out over a few years it wouldn’t be noticed. At least not by the general public. But since the claim is that this triggered the collapse of the Bretton Woods system it would be documented and referenced a lot more, still.
The gold would be moved by cash-in-transit trucks which have relatively modest payload capacities of 5000-9000lbs today, a bit less in the 60s. 3 tons per truck is probably on the high end.
Was that the case in the 60s as well? I know trucks of that era had much lower capacity than today, even when comparing across class like "half-ton" trucks.
The Federal-Aid Highway Act of 1956 set the gross vehicle weight limit for trucks at 73,280lbs. I imagine trucks of the day probably at least came close to that limit?
Yes I understand, that's why I was asking about box trucks of the day. I'll dig into it myself as I am curious now, I've only ever really looked into cab-over bread trucks from that era and those aren't a great comparison either. I was just curious if the GP already knew what 60s era box trucks would have been rated for.
I seem to be having more luck with French language sources, mostly the Bank of France records. From what I can tell the shipping was done mostly commercially with some later by air[1]. Reportedly De Gaulle was frustrated with the speed of change wanted to use the Colbert warship but was dissuaded by the minister of finance.[2]
What happened is the gold got repatriated. I was looking for a source that a French warship docked and started loading thousands of tons of gold.
Your source confirms it as well:
> Involving the French Navy was considered, but that would have blown the operation’s cover. Instead, BdF used ocean liners from the Compagnie Générale Transatlantique
So it was multiple trips and in commercial liners.
It was also by warship that De Gaulle planned to conduct "Operation Empty-the-purse" in 1963, the code name for the repatriation of French gold deposited at Fort Knox in the United States (1). More than 1,150 tons—the result of converting French dollars into gold, a decision made by De Gaulle in response to the lax monetary policy of the United States—were being used to finance a growing trade deficit through the printing of money.
Valéry Giscard d'Estaing, then Minister of Finance, recounts (2): "De Gaulle was getting impatient and asked me at every meeting: 'So, has that gold finally come back?' One day, he told me: 'We need to move much faster: we're going to send the navy cruiser 'Colbert' which will bring back all the gold that's still there.'" “I told him that if we did that, we would alienate American public opinion forever.” Ultimately, De Gaulle abandoned the Colbert plan, and French gold returned from the United States in small quantities. Not for very long, it's true. The events of May 1968 and the ensuing monetary crisis depleted the reserves, which fell from 4,650 tons to 3,150 – 1,500 tons had crossed the Atlantic again to defend the franc, which De Gaulle refused to devalue.
Thank you, this helps and clears up my confusion. I just couldn't imagine this kind of an event, a warship loading this much gold, not triggering some media commentary, even mockery or criticism to defend the US establishment.
> Ultimately, De Gaulle abandoned the Colbert plan, and French gold returned from the United States in small quantities.
So I think the story about the warship got twisted from a plan or threat to "it actually happened". Doing it in small quantities over a few years was the right way, indeed. Looking back it seems like it didn't make many waves in the news at the time, so Giscard was absolutely right.
Historically, if a ship carrying gold sinks, whoever salvages the gold/loot gets ownership of it. However, if the ship is a warship, the loot belongs - FOREVER - as the property of the nation-state (or their descendants). This has led to some legal battles over nautical salvage in the Atlantic (were those "Spanish Galleons" military or non-military? Hundreds of millions of dollars depends on that answer during some lawsuits in the 1990s) or nautical salvage in South East Asia where artifacts from long gone kingdoms (that didn't reflect borders created centuries after they collapsed) end up in court over what country gets to show them in museums.
So yes, if you need to move national quantities of gold/silver across the ocean, then for legal reasons, it is best to ship it via your navy.
One armored car can carry a ton of gold. If they left and drove to the closest US Navy port, where the French ship would dock. it wouldn't raise eyebrows.
It’s just that they repatriated close to 3000 tons. That’s one long convoy of armored cars, all going to a French warship docked in New York.
Based on some sibling discussion it seems it just never happened. It was multiple shipments, over many years, going over commercial liners. It may have well been armored trucks but they just didn’t all do it at once. It worked well that it didn’t create much of a media uproar.
Just like the majority of the classical economists and policymakers, you would call him a blithering idiot and overzealous nationalist two decades ago. It was thought that this kind of behavior caused world-wars. I mean it did cause them. It is just we're speed running the next one that changed the narrative.
I think many academics are often specialized in one area of their expertise and overfit in that dimension. Journalists pick this up and promote those views a bit too much. This results in non-optimal decisions due to skewed public perceptions.
We need to promote holistic thinking considering multiple dimensions and not just one where academics are proficient in.
> many academics are often specialized in one area of their expertise and overfit in that dimension
An economist saying a national-security measure costs this much is fine. Where it goes off the rails is in turning costs into damnation without accounting for what one gets in return. In an attention-driven media environment, that sells.
The problem is that there isn't simply an efficient solution for everything. At one point every problem has solutions with pros and cons
France could do it as it is a rich and big country but smaller countries do not have a viable choice. This reasoning could have been applied to France too in another universe.
It's a balance impossible to totally tilt one way or another.
So no amount of extra information could help when it's matter of opinion at the end of the day
De Gaulle was ahead of his time. He was very skeptical of the control that the US had over Europe through NATO. He left the alliance to build an independent French nuclear program which is paying dividends today amid the current leadership situation in the US.
Sarkozy, who renamed what descended from De Gaulle's party into "Les Républicains" because of his obsession for the US. Who also got sponsored by Gaddafi, and invited him to pitch his tent in the Elysée's garden. And who ten years ago was still spewing climate change denial crap. He probably still would, but he's too busy talking about how his 10 days in prison was the most atrocious experience a human being had to endure.
Funny how much his pathetic 5 years in office keep on giving.
IIRC, De Gaulle & Churchill proposed a UK-FR union at one point (1940?) but it didn't get sufficient support within the French government. Interesting to ponder what the war and later EU trajectories might have looked like if that had happened.
That union was a last ditch effort to try and keep France in the war. If they had implemented it, it would have been undone once the nazis were beaten you can be sure.
That was also a last-ditch effort to maintain pre-WW2 geopolitical structures rather than a bipolar US-sphere vs Soviet-sphere world. Note that this was basically the nail in the coffin that led to their full-fledged decolonization in the following years. At the time the UK still held very significant military and political sway over the middle east, east africa, and asia
From my recollection, the plan was to grant French citizenship to every British citizen and vice versa, in effect "forcing" the governments to defend their citizens to the end. This was very ambitious, hence why it probably did not happen.
But if it had happen, I have a hard time seeing how it could be undone, stripping people of their citizenship, even if they have a second one is no trivial matter.
France is currently contacting selected partners to build a collective nuclear weapon coalition, probably focusing on Norway due to their location and recent oil wealth. Given recent events, reasonable people may disagree strongly on the directions that is leading.
The problem is that Europe does not spend enough on US weaponry. Bulding nukes domestically does not help with that.
NATO was explicitly built to keep Europe in line. That worked to the benefit of everyone, until national security intrests and land expansion put a stop to it.
Let’s not get carried away. He was also wrong about many things. He was a good strategist, which was useful during WWII and helped France massively in the post-war years. His domestic policies were very much a mixed bag. He was not exactly authoritarian, but built himself a strong presidential political system. Which would have been fine if he had been right all the time, but he was not.
De Gaulle started this 'policy' in 1965 and it's mainly the current leadership situation that's been a problem—60 years later. So to a certain extent the policy in question was 'wrong' for decades. How "right" can you really consider them when it was a problem year after year, decade after decade:
It reminds me of the folks that keep saying there will be a major crash on Wall Street year after year after year… and then it just happens to be occur.
In what sense was the policy wrong? Emphasizing independence when it comes to security doesn't strike me as self-evidently wrong. Curious to hear your arguments. "They were very happy about it 60 years later" alone isn't evidence of it being wrong.
I disagree. It was a right policy in the sense that it bought France an insurance policy that essentially no other Western country has. Like all insurance policies, you hope to be wrong, but when the time comes, you are protected from some of the worse case scenarios.
Yes, this is the debatable part: the policy is "wrong" for 60 years and extracted a cost to France over those years (at least when it came to nuclear weapons?).
There just happened to be a whacko that got into the White House, but if ~70k (out of >100M) had gone the other way in 2016, Hillary Clinton would have won and the world would be a different place. (See also ~500 votes in Bush versus Gore.)
I'd be curious to know the 'insurance premium' that was paid by France every year and the total.
> There just happened to be a whacko that got into the White House
My counter to this is that such an occurrence was increasingly likely starting around the time the massive US Evangelical base was essentially fully captured by (and became a wing of) the Republican party. It was more and more obvious over a period of at least 40 of those 60 years you mention.
If you prepare for a crash to happen on September 23rd, you're a fool. You can't point to a crash that happens a year later and say you got it right.
But if you prepare for a crash to happen at some point, that's just good sense. Only a fool would think that there would never be a crash. If you arrange your finances to withstand a crash, and there's eventually a crash, then that was the right thing to do even if it took a long time.
Ensuring the independence of your nation is more of the second kind. And it pays off even when there isn't an outright crisis. The policy wasn't "wrong" for decades. It was fine the whole time.
This is not gain at all. At least in theory: You own some tons of gold at the start of the process, you have the same tons of gold at the end of the process.
The only real gain is that you have gold in the US custody and the US can be tempted to just use it without telling you anything.
In other words, you had "paper gold" or "virtual gold" that the US can confiscate anytime, for example after invading Greenland, blackmailing France to do nothing.
"In 2025 and at the start of 2026, while the volume of gold reserves remained
unchanged, the Banque de France had to align a residual portion (5%) with technical guidelines, resulting in a significant realised currency gain. This exceptional foreign exchange income totalled EUR 11 billion for 2025."
If you buy $100,000 of RAM and just hoard them, and a shortage happens, you won't update their value according to their market price, until you sell them.
That's it. It has nothing to do with whether your RAM is stored in New York or Paris.
If you're a retail business that sells RAM then yes, this is the way.
If you're a fund that holds RAM in some indirect manner (like you hold hypothetical RAM futures) then it depends on whether your country's laws ask for market-to-market value for that specific kind of security.
Bank of France "transported" their reserve by selling the gold held in New York, and subsequently buying the same amount in European market.
They opted to do so because it's just more efficient. It takes a lot of efforts to physically move 129 tonnes of gold after all. And as a side effect of this relocation project, they ended up recording a capital gain. It's nothing-burger.
For context, in 2025H1, 480 tons where moved from CH to the US (I assume originating from UK after being recast).
My guess is that the choice to sell rather than transport was also due to using the (at the time) price divergence between US and European markets. (arbitrage + not having to pay transport + refining)
Let's say I bought a 100-ounce gold bar in 1965, when gold was $35/oz, for a total price of $3500. Let's say I sold it today at $4700/oz, for a total price of $470,000. That gives me a gain of $466,500.
And let's say that I regret it. I decide that I really want to hold some gold, so I take the $470,000 and buy another 100-ounce gold bar.
The situation was that I had a gold bar worth $470,000 with a taxable basis of $3500. Now the situation is that I have a gold bar worth $470,000 with a taxable basis of $470,000, and I owe the IRS taxes on $466,500 of capital gains.
TL;DR: Selling and re-buying the same asset gives you the accumulated gains, and resets the price basis.
They had gold worth X to the market but X minus 11 billion on paper. So when France accounted for its gold in euro terms they would say they have X minus 11 billion Euros worth of gold.
Now they still have the same amount of gold but they "realized" a gain of 11 billion. They don't have that much cash left after the repurchase but now they say they have X Euros worth of gold which is 11 billion more than before.
So no they didn't make a profit from this as gold is higher on both sides of the Atlantic than last time they did their accounting updates.
It's just accounting terms. They have to show it in their annual reports (afaiu they have to take into accounts unrealized losses, and realized gains, it's the case for many companies as well -- eg it came up with some Bitcoin treasury companies).
No, it becomes realized when it is sold. They held a bunch of gold that appreciated in value. On paper, they became richer. By selling it that became realized. After that, they bought gold again (different type elsewhere but it doesn't matter). That did not make them any poorer; they just converted cash to gold.
No. Firstly the gain is to a certain extent a matter of accounting. The most accurate method of accounting is “mark to market”. So if you have some gold and you think in dollars, then every day you look at how much gold you have and you look at the price of gold in dollars, you multiply the two and the difference between that value and the value you got to the previous day is your “mark to market pnl”.[1] This means you have a very accurate valuation for your asset but the downside of this approach is that your pnl is very volatile as the gold price moves around. This is the approach taken for most assets by most wall st firms. In fact at JPMC and Goldman it’s not stretching a point too far to say mark to market is nearly a religion. In this methodology there is no such thing as “unrealised” pnl.
Another approach is “historical cost” or “cost basis” accounting. In this approach you officially hold assets at the price you bought them, and only realise pnl when you dispose of them. This means you don’t get pnl volatility from marking to market and then you get a big lump of pnl when you sell.[2] Until you sell or otherwise crystalize the pnl, the profit is “unrealised”, which is just an imaginary amount that you may or may not get but you look at in your brokerage statement and smile if it’s green or frown if it’s red. The advantage of this method is you don’t get the pnl volatility and you can wait until an advantageous moment to take the profits. The downside is if you want to, you can deceive yourself by holding these assets at a valuation that is unrealistic and store up pnl pain for the future. This methodology caused a lot of problems in the 2008 crisis with institutions holding bonds at prices that they could never hope to sell them.[3]
“Moving” the gold from NYC to Paris may not (for practical reasons) have involved actually physically taking the bars from one place to another. They may have found a buyer in NYC and then bought some bars on the IME in London and had them delivered to Paris. (This would clearly have required crystalizing the profit if they were holding them at historical cost). It sounds from a brief read of the article as if the bars were in some non-standard format so they may have had them melted down and recast, which would have required an assay and so would have triggered a new valuation, realising the profit. Assuming they were holding them at historical cost, which it sounds like they were.
[1] Technically, if you sell some gold during the day, then the pnl on the portion you sold is “trading pnl” and the pnl on the remainder is “mark to market” but whatever. It’s pretty much the same for the French reserve bank which has gold and thinks in EUR, except they not only have gold MTM pnl but also FX pnl in the EUR/USD rate (because gold prices in USD but they think in EUR).
[2] Or do some other event which requires valuation. There are rules about this kind of thing.
[3] When Lehman collapsed they had bonds marked at 100 that were trading at less than 40 cents. One weekend I’ll never forget I got a call from a very senior partner and was asked to value the European part of that portfolio as part of the US regulators frantic attempts to find a buyer for Lehman before the market opened.
Assets like this are one of the complexities in calculating national import and export figures.
For example, imagine there's some German-owned gold in a UK bank vault, the owners sell it to a UK broker who sells it to a Chinese investor? The physical bars don't move, but on paper it's been imported to the UK then exported.
But a lot of people looking at export figures are expecting to learn things about the manufacturing industry, and picturing exports as washing machines, cars and computer chips - which imply lots of well paid jobs for skilled labour. So the UK reports import/export figures with 'non-monetary gold' listed separately.
(The fact flows of gold are highly volatile allows a classic bit of political sleight-of-hand - if you include gold, UK exports are both up and down since Brexit, depending on the pair of dates you choose)
It's probably just a technical accounting update. Old assets are often kept valued at their buy price and not reevaluated every year to avoid taxes (Banque de France is not exempt from taxes). As they swap a type of gold by another and do a sell/buy action, the new gold is valued to current market price while the old one was valued in accounting at an old value.
They had a deficit last year, so they can probably avoid to pay tax this year by balancing last year loss with this year profit.
The concept of "paper" assets isn't specifically about whether you hold physical custody of the asset, its whether the asset exists at all.
If the US holds 100 tons of gold on behalf of another country and possesses that full amount, it isn't paper gold.
Derivatives are where paper assets come into play. You buy the right to own 100 tons, for example, and whoever owes you that either owns only a fraction of their total liability or plans to buy it when delivery is requested. That's an over simplification of a much more complex market, but the key is that "paper gold" owed doesn't exist in the full amount.
[] they sold their 'non-standard' (seems to be bars below the modern purity standards) US reserves, and replaced them with new reserves purchased elsewhere which are now stored in France. As the price of gold continued to rise as they did this, they ended up making a bunch of dinero while also centralizing their reserves.
A gain of $15b? That's roughly the value of 100 metric tons of gold, remarkably close to the 129 tons that the article says was moved... did they double the value of their gold?
When something is "realized" is a matter of accounting. It means to make the change, they sold the gold fo currrency, then bought it back. For many of us, realizing a gain is when taxes happen, though I'm not sure what it means for a nation state.
> This is not gain at all. At least in theory: You own some tons of gold at the start of the process, you have the same tons of gold at the end of the process.
I see a lot of comments like this but I just can't get my head around what you are trying to prove (or disprove).
Every definition of gain (or loss for that matter) implies that the same amount of _something_ is now worth more (or less) than when you bought it.
Following you logic, if I buy a share of MSFT at $10, sell it for $100, there is no gain because I still have 1 share of MSFT?
Even if you rebuy it at $100 it's the same, your profit didn't change, you just exchanged cash for an asset.
Before you sold it you had unrealized gains, after you sold it you had realized gains, after you bought it again you have the same gains but materialized as shares.
Paper/virtual gold perhaps bought ages ago at a far lower price point, now turned into real, solid gold in parity with today's price point. To me this sounds like the implied gain.
> The only real gain is that you have gold in the US custody and the US can be tempted to just use it without telling you anything.
What if you're at war, you can't risk to get your gold out and the US doesn't sell you anything because.. you can't pay?
If your solution is to "write France's debt on a piece of paper and hope they honor it", I've got some news to tell you about the system you just "invented."
It's more of a loss for the USA, which IMO is the unwritten point of the article.
France upgraded their gold bars to a new standard and as they were doing that, gold has appreciated massively in price, so France has the new shiny easier to trade bars, and the USA has the old harder to trade bars.
They can be melted and brought to the modern standard, which is what they did with the rest of their holdings on the old continent. They sold these only because it was cheaper than transporting it.
> This is not gain at all. At least in theory: You own some tons of gold at the start of the process, you have the same tons of gold at the end of the process.
Correct. A better way to put it is you shorted the USD. Which is a smart move at any rate. So a gain indeed.
which can be the difference between losing that entire amount or gaining it, and in this situation with this America, this is a big win if they manage to get it back in fact, if it hasn't been stolen or sold already
Is anyone here actually reading the article? Yes, they really made a gain of $15B:
> But instead of refining and transporting the gold, it opted to sell the bars and purchase new bullion in Europe. […] Due to rising gold prices, the move helped the bank to generate a capital gain of 13 billion euros ($15 billion),
This doesn't make sense. If they first sold the bars held in the US, then the gold prices rose, then they bought gold in Europe, how the hell did that amount to a capital gain of $15b? How exactly do prices rising over the course of the process lead to these $15b?
First thought: Maybe they bought the gold first? Or the gold price was at a temporary high when they sold it?
Second thought: The numbers don't seem to check out: 129t are 4,147,456.307 troy ounces (1 troy ounce = 31.1034768 g). The total gains of 15e9 USD would thus correspond to gains of $3,616.68 per troy ounce, which seems excessively high, given that today's gold price is at ~$4,712. Even if they sold everything at the current all-time high of $5,589.38 on January 28 (and that's a big if), they would have had to buy for not more than $1,972.70, a price we last had in fall 2023.
Imagine they bought the gold in the US for 1b and sold for 16b. Yes they turned around and purchased 16b of order gold immediately but there's was still a transaction where they sold an asset for more than they bought it.
If you bought your house for $500k 20 years ago, sold it today for a million, then bought it again tomorrow for a million, would you describe that to your friends as having just made $500k? Like yes in the most pedantic technical accounting way it's a gain. In spirit I would call this an unrealized gain
No, you’d remark that your house has appreciated in value over the past 20 years. But you wouldn’t have realized any of that gain until you sold the house - the point being that the realization is the actual taxable event, which is why it matters from the pedantic technical accounting POV. The fact that you turned around and bought another house just means you’re doing something new with your realized gains. Now you have a new cost basis. Maybe that’s what you’re saying with “unrealized gain” though.
Sure in the spirit it's an unrealized gain but wouldn't the tax man consider it a realized $500K capital gain? seemingly this is would be the more appropriate way of categorizing it?
It's more that the english ain't parsing, for some at least.
The mining.com quote is classic weasel phrasing, seemingly meaningful yet disturbingly ambiguous:
Due to rising gold prices, the move helped the bank to generate a capital gain of 13 billion euros ($15 billion), bringing it to a net profit of 8.1 billion euros for the 2025 financial year after a net loss of 7.7 billion euros in 2024.
So, the move helped the bank generate ...
Just as, say, one guy helped four others push a car back up on the road.
We've been given, accurately or not .. likely true, figures on how the bank did over a period, we've also been told the gold movements helped with that ... so they almost certainly kicked in at least $1.
The claim is that rising gold prices lead to gains of $15b. As in they started with 129 tons of gold in the US, then they sold that and bought gold in Europe, and in the end, due to rising gold prices, they had 129 tons of gold in Paris plus $15b extra cash. Please explain a hypothetical course of events which makes this plausible.
Keep in mind that 129 tons of gold is worth just a bit more than $15b, so small market fluctuations on the scale of 10% isn't enough by itself.
They purchased 129 tons of gold in Europe. Their asset position did not change: they converted cash to gold of the same value.
They then sold the 129 tons gold in the US vaults for $16 billion. That gold was originally purchased I'm guessing many decades ago for $1 billion. The have a book profit of $15 billion and still have 129 tons of gold.
They captured some of the appreciation in gold value as a realised profit on their books.
Their balance sheet did not change, just their income statement
The US gold would have been on the books at the original purchase price, so something like US$35 from 1910 (when a penny had a purchasing power of 38 cents now). Having deemed it more efficient to sell that gold and buy the same amount to replace it, the new gold is on the books at the 2026 purchase price. As the 2026 money price is far higher than the 1910 price, the value on the books shows a dramatic realized capital gain.
No gain would have shown for the gold that was simply moved, even though in this case the buying and selling was simply a more efficient way of doing the equivalent of moving the gold.
Gold that was simply moved wouldn't show the same gain.
That makes more sense, thank you! Though do gold assets on the books really never get adjusted? I guess that's up the central bank to decide but I would find it surprising.
It's the rules of how they must account for the value of the gold they have. Gold is valued at the price paid. Then, it is valued at the price sold. If there is no sale for more than a century, it stays on the books at the price paid. Once a transaction happens, the numbers update. Then, the gain that everyone knows is there is 'realized'. It's like if you mined Bitcoin in the early days. Your gain is only 'realized' when you actually sell it. Until then, it is only theoretical.
Mark-to-market accounting systems are one way to deal with this quirk, but they create their own issues.
What I was trying to get at is that there are other ways to update asset valuations besides daily (market-to-market) and once (price paid) – those are just the extreme ends of a spectrum. What makes sense really depends on the asset class and how long you're holding the positions. As for "It's the rules", I'm aware that there are strict accounting rules for companies and regular banks, but do those really apply to the central bank in the exact same way? (A central bank typically operates on a much longer time scales.)
If the central bank doesn't follow rules, who would trust it? The central bank's entire purpose is to put national trust into individual banks; both assuring investments (accounts) and establishing base (prime) loan rates.
A central bank answers directly to the government, not the judiciary. But it still answers to power, and follows established rules.
This article is poorly written. No new wealth was created.
They monetized an existing accounting/revaluation gain by selling older, non-standard bars and replacing them with compliant bars, while keeping the overall gold quantity unchanged. That is not the same as "we moved gold home and earned $15B on the move."
In simple terms:
- You buy x of gold at $10
- You sell it much later for $100
- You made a profit of $90, and you hold $100 of cash
- You rebuy x of gold for $100, back to the same gold exposure, but on the books, you have $90 of profit
I don't get your point. Gold price increased, the gains were unrealized, now they realized when they rolled to a new position. The only nitpick would be that they did not mention the benchmark rate, so it's hard to guess the absolute gain.
"Due to rising gold prices, the move helped the bank to generate a capital gain of 13 billion euros ($15 billion), bringing it to a net profit of 8.1 billion euros for the 2025 financial year after a net loss of 7.7 billion euros in 2024."
I would have thought the audience here would understand something as straight forward as a capital gain.
Capital gain and losses are when you need to pay taxes. If you sold 100K of SPY that you bought for 10K actually, and bought it back (It is a gain so there is no wash sale) immediately, you need to pay taxes for $90K. This is just an exchange based on the comments I am reading.
No, capital gains are simply the amount you earn when selling capital for profit. They may be taxed, or may not be taxed, depending on the country or location they occurred in.
I don't think they cared about realizing the gains. They just wanted to roll to a new position on higher standard ingots. It just so happen that it meant selling/buying, which realizes the gains.
I think the GP was saying that there was no gain. France has the same amount of gold they did last week. The whole article is like saying "holy shit, france has the exact same amount of wealth they did last week!"
Did you read the article at all? Or just the title? The article is about bringing gold back to France by selling US bars and buying new bars in Europe. The alternative would be melting the bars down and recasting them to the new standard.
The capital gain is just a by-product, standard financial stuff, but apparently broke HN readers brains.
>> The article is about bringing gold back to France by selling US bars and buying new bars in Europe. The alternative would be melting the bars down and recasting them to the new standard.
> Sounds like you agree with me, France has the same amount of wealth in gold that they had last week.
Good for France to relocate gold back to their own territory, but, uh, how can this result in a 15 B gain?
"The overall size of France’s gold reserves still remained unchanged at roughly 2,437 tonnes, which are now entirely held at the BdF’s underground vault in La Souterraine."
Is this some special form of French accounting, where the gold becomes more valuable when it returns to French soil?
The French part in that sentence should be the name of the region (eg Doré(e) ), not "région", and if you wanted to use the French spelling of "région", you'd have to say "région Dore".
Using the French spelling of région but the wrong word order doesn't make sense.
Over about a year they sold their 'non-standard' (seems to be bars below the modern purity standards) US reserves, and replaced them with new reserves purchased elsewhere which are now stored in France. As the price of gold continued to rise as they did this, they ended up making a bunch of dinero while also centralizing their reserves.
The French gold originally deposited by France in US reserves in the 1950s was of the exact same purity as the French gold now, what is meant by "non-standard" just means "not stored in France".
If it was a lower purity, then when they sold the 129 tons, they would not have obtained 129 tons of "higher purity" gold and still turned a profit. They would have gotten fewer tons of gold. Your logic has the wrong sign.
Also, the fact that gold prices are rising means when France sold the gold and then purchased it later, the higher price to obtain the same quantity of gold would mean they incurred a loss, not a profit. Here, too, your sign is wrong.
Finally, at current prices, 129 tons of gold is worth $19 Billion dollars in total. It seems hard to believe that short term price declines (which is what is needed to turn a profit) would be such that gold fell over 80% in value, which is what would be needed to sell 129 tons of gold, then wait a while and buy 129 tons of gold, and end up with a profit equal to over 80% of the price of gold in question.
Moreover, rising gold prices would cause the French to earn a loss, not a profit
> As the price of gold continued to rise as they did this,
Seems counterintuitive to me. This would only make gains when they bought the new gold before selling the old, or when there's some arbitrage going on between Gold/USD, Gold/EUR and USD/EUR.
If they first sold the old for USD, then bought the new for USD, with a rising gold price, they'd miss the price-gain during the time between the trades, when they held the USD. It'd be a loss, not a gain.
If there's some arbitrage going on, then I highly doubt that brings $15B gain. The differences would have to be huge.
I think the (author (AI)) writing that article is simply mixing up stuff. I think this gain is not a cause-effect of the conversion, merely the gains from rising gold prices on the gold it holds over that period.
The source is a press conference where they state the total amount and total value of gold stored hasn't changed. In le figaro they report the profit is due to variation in price between the different transactions. Which seems to be a polite way to say they took exceptional risk.
> In le figaro they report the profit is due to variation in price between the different transactions. Which seems to be a polite way to say they took exceptional risk.
Nah it's just regular realized gain (delta between acquisition price and selling price).
They repatriated 129 tonnes in total, its was absolutely impossible to make $15B from that since that’s what 129 tonnes are worth in total more or less.
They didn't repatriate the gold in the sense of physically moving it from the US to France. Instead, they sold the gold that was held in the US and used the money raised to buy gold from other sources, which is held in France.
Different gold, and two financial transactions, accounts for the financial gain.
a) they bought the gold long time ago for basically nothing and had it on their books valued at basically nothing
b) they sold it now (in the US) for around $15b and thus for accounting purposes realised a $15b gain
c) they bought it back (in France) for around $15b and will have it on the book now valued at $15b.
The fact that the gold price rose over the course of b) selling and c) buying doesn't matter (despite what the article implies). That the gold price rose between a) the original purchase and now b)c), that's what resulted in the profit.
Well they has 129 tonnes in US which happens to be wroth around $15B or so. Probably the author has no clue what they are talking about and grossly misinterpreted..
From the annual report, it looks like the headline number (XXB gain) is just because it's realized capital gain (which due to their reporting requirement appears in their annual report, unlike unrealized gains).
They have ~same amount of gold between both years and it doesn't look like they took extra market risk.
Would be good to not depend on the US that much any longer, since they have proven to be such an unreliable "partner". Even in a non-Trump future one cannot rely upon some future election not resulting in some similar disaster. Better to pull out, before some hothead gets weird ideas about that gold.
Maybe the fact that US soldiers and military bases exist inside Germany's borders is slightly more important than where the gold is. First regain your sovereignty, I'd say.
I am guessing that these bases are one of the last things to go. Would be a major diplomatic incident. But then again Trump creates those for breakfast, so who knows when we finally have had enough.
I’m pretty sure Trump thought or heard mention of Minchin (first Trump Treasury Secretary) visit to Fort Knox in 2017 recent to that comment and just blurted out the first thing that came to his mind - like most of his off the cuff remarks, it doesn’t make any sense on close examination but appeals to MAGA supporters.
Like most off the cuff Trump remarks - it made headlines for a while but nothing came of it, it’s not in Project 2025 and Musk fell out of favor with Trump for whatever reason. The combo of Musk and Trump was just dry kindling for the forest fire of baseless conspiracy theories with no founding in reality - like “omg, government incompetence lost the gold, Biden stole the gold after Trump didn’t lose in 2020” since Minchin told Trump what he saw in 2017 and Minchin posted interior photos of Knox with his wife at the time on social media. Since it disappeared from news after the remark and there is no one in current Trump admin who would pass up an opportunity for internet karma, a reasonable person can conclude it was just another bit of flooding the zone with information - credit where credit is due - several strategies executed by Trump that were outlined in Jacques Ellul seminal book - Propaganda.
The funny thing about this is that since 1945, France keeps and uses the majority of the gold reserves of 14 former French colonies in West and Central Africa and uses that power to make them use the CFA Franc, a currency pegged formerly to the French Franc but now of course to the Euro [1].
It's worth noting that the stated reason here isn't because of, say, US instability but rather "standardizing" the gold. It doesn't say what that means but I assume France is basically selling some New York held nonstandard gold to "standard" gold held in France. "Standard" here probably means a given size and purity. Yes, there are different purity levels to gold. So think the heavy bullion bars you see on movies.
It's a trust issue. And trust and competence are inextricably linked.
Most of us with career-track jobs use electronic deposit to an account at a bank, and keep things there. The account is "yours", and the trust is established over time--most people using most banks continue having access to their deposit of record most of the time. When that fails, you get a bank run--which is systemically undesirable, but also ends with people not having "their" money. They thought it was theirs, but it turned out not to be.
If your bank started publishing poorly-written notices about how they'd terminate accounts and retain holdings for certain customers based on arbitrary behavior, and kept changing that definition, would you leave "your" money there--even if the only alternative were to purchase precious metals and lock them up yourself?
> 2. Improvement in income from non-monetary activities
> Net income from assets denominated in euro rose by EUR 2 billion, driven by an increase in outstandings. Income from assets held for own account rose by EUR 12.2 billion as a result of an exceptional item. In 2025 and at the start of 2026, while the volume of gold reserves remained unchanged, the Banque de France had to align a residual portion (5%) with technical guidelines, resulting in a significant realised currency gain. This exceptional foreign exchange income totalled EUR 11 billion for 2025.
> Net operating expenditure remained under control, falling to EUR 831 million from EUR 888 million in 2024. Since 2015, net operating expenditure has fallen by an average of 4.1% in volume terms.
> Overall, after transferring EUR 5 billion from reserves and booking a corporation tax charge of EUR 1.5 billion, net profit for 2025 totalled EUR 8.1 billion.
> A total of EUR 0.4 billion of this amount has been allocated to the special reserve, in accordance with regulations, while the remainder has been used to clear the deficit in retained earnings (EUR 7.7 billion) that was left after the allocation of the net loss in 2024
> After clearing these past losses in their entirety, the Banque de France’s net equity – comprised of own funds plus unrealised capital gains on asset holdings – is now extremely solid at EUR 283.4 billion, up from EUR 202.7 billion in 2024. The Banque de France’s net equity includes a revaluation reserve of state gold and foreign exchange reserves (RRRODE) of EUR 11.4 billion, to cover future monetary expenses
I assume that this increased equity makes selling bonds a bit easier?
I doubt the claim, honestly. Such an institution would never buy and sell to trade the market, they probably never stopped being exposed to gold by buying and selling simultaneously and the 15b is the realized gain of the sold gold, which is only in paper as they still hold the gold.
$15 B gains... Just to put things in perspective: France has a GDP of about 3.5 trillion USD and a public debt of 117% of that amount. $15 B is not even a drop in the bucket.
To add to France's problem: in 2024 the PIB growth was 1.2%, which doesn't even counter inflation. And it's been like that since 2008: inflation adjusted in USD, no growth (while both the US and China's GDP inflation-adjusted skyrocketed).
The EU, and the eurozone in particular, is totally losing the plot: 1 company in the top 50 companies by market cap, ASML (and it's not french).
Yes and no. Even though the use of USD as reserve has been falling globally over time, there are a lot of news articles showing up on this site lately about divestment in USD.
So on the surface level this is politics in the sense that it marks the end of a long process between two countries.
Deeper, it is very political in that some entity wants to normalize and for us to be thinking a lot about the future of American isolationism.
It’s exactly the opposite. Last time France was trying to exchange USD to gold. This time France was selling gold presumably exchanging gold to USD in New York.
And winning athletes and sports teams don't go to the white house due to 'scheduling conflicts'. And Amazon paid $75m for a Melania documentary because they saw real profit and need there. And Qatar bought Trump an airplane because it was important for his work. And everyone nominates him for a nobel prize because he ends wars and doesn't get into wars (we're just in a special military operation atm).
Would it count as a "political reason" if their risk management calculations crossed a threshold where it's worth it to move the gold back? I imagine such calculations are done and revised all the time and account for the perceived stability and reliability of a country.
It appears that the gain mentioned is a realization of their asset value. I would also speculate that what happened is that they wanted LBMA bars because those are a standard variety and therefore easily tradable. An arbitrary LBMA bar is generally fungible. I would also speculate that they held many bars in the US from ancient times. After 2008, they repatriated 200-ish tonnes and 'upgraded' them (which I would speculate again is 'ensured they were LBMA-standard').
These articles all have the flavour of the game of telephone common in this style of article where the currency that the gain is in changes wording, the motivation seems to shift, and phrasing lacks real detail instead relying on 'upgrading' and 'refining'.
I wish there were a good LLM agent that were capable of tracing all this back to the real original source that spawned all these things, but the information environment is currently full of smoke and getting real news is quite hard.
I can't realistically conclude whether this was politically motivated or not. The original motivation is sufficiently strong on its own, but it is completely normal for governments to move something to be earlier, or to do a marginal thing if there is other gain.
They started the process in 2005 [1]. The goal has been to upgrade all their goal to modern purity standards (99.999% purity). The repatriation to France may have been done for national security reasons, but not political as in ideological.
> BdF Governor Francois Villeroy de Galhau said the decision to keep the new bars in Paris is “not politically motivated,” as the higher-standard gold bars it bought were traded on a European market.
To be fair, it's an ongoing process started in 2005 and which should finish in 2028. I doubt there was much political (tho the whole tariffs stuff probably made their job/decision easier when the gold price started diverging between NY and European markets). At this point it was cheaper than flying the gold to CH for recasting.
(1784 tons moved to standardized holding over the years, 134 tons are now left to convert -- all stored in Paris)
I obviously don't have a horse in this race, but this seems... more correct this way? And with Holland being a region (or two) and not the majority of the territory, how do the Dutch not living in Holland feel about it? It would seem like referring to Canada as "Québec", way to piss-off the non quebecers...
We don't really see it that way. I mean some people do, but not the overwhelming majority. For most Dutch people "Holland" is totally fine even if they're from Brabant or Limburg. In fact until recently the country 'marketed' itself as Holland internationally.
The Quebecians also inherited the chauvinism of the French (similar to the Wallonians in Belgium) so for them it's a huuuuge issue. But we don't really have that kind of nationalism.
I'm curious about this too. I thought saying "we in Holland" was equivalent to "we in England" rather than "we in the UK". Is it acceptable in the Netherlands? (Or maybe just in Holland proper?)
Considering how Project2025 declared Europeans as enemy, it really is time to focus on more reliable partners than the current (and most likely future) USA version. Trump is a war-president - when he babbles about what Project2025 tells him to say, he stumbles over his own lies increasingly so, most likely because his brain no longer works that well. The recent "we can not extend health care and social care because we must wage wars" was kind of a slip-up of the real agenda - not that this is a real secret either, but even folks who voted for Trump thinking he cares about him (as if billionaires care about other people ever), should now realise the path the USA has decided to walk. ICE shooting down US citizens also show this - you protest, you get shot.
It has more to do with Putin than any of that. Trump says he and Putin “went through a hell of a lot” together. Values inverted at last year’s Munich security conference, and the US advised Europe to just lay back and take it. Then, Greenland.
>However, an operation to repatriate its gold holdings began in the 1960s leading up to the US termination of the Bretton Woods system, which effectively stopped foreign governments from exchanging dollars for gold.
French-US monetary history after WWII:
Under the Bretton Woods agreement (1944-1971), the US dollar was the world’s reserve currency, and it was pegged to gold at $35 per ounce. Other countries pegged their currencies to the dollar.
around 1965, De Gaulle initiated a systematic, aggressive policy where they converted USD into physical gold every time French acquired USD from trade, then French Navy picked those gold bullions from NY. By 1971, the US gold reserves had decreased so much that they did not cover the dollars circulating globally and Nixon "closed the gold window,"
You seem to imply that Charles de Gaulle and his policy of converting dollars to gold caused the collapse of the Bretton Woods system. That was a myopic view. The whole Bretton Woods system was doomed from the beginning due to design defects.
The system was conceived with the primary goal of maintaining balance of payments equilibrium for all countries at the expense of economic growth and liquidity. It had become clear that if a country wanted its currency to be the world reserve currency it had to run a balance of payment deficit. And the United States clearly wanted its dollar to be the reserve currency unbridled by any balance of payment constraints.
If the United States had balance of payment surpluses as it had in the early years, the system lost liquidity (other countries wanted to buy U.S. exports but had neither gold nor dollars to do so), reducing the surplus. And if the United States had balance of payment deficits, well, gold would flow out of the United States, and the United States could not meaningfully increase public debt or spending.
Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars? Then your argument of "gold would flow out" would not hold - so the only reason for it to flow out was that the gold standard was fake - the lax money policy of the US was the issue, not the gold standard itself.
> what if the US would use actual physical gold coins instead of dollars?
The problem here is, what if the demand for dollars increases?
In principle the US would get more gold and mint more currency, but gold is a finite resource. "All the gold ever mined" is around 200,000 metric tons, ~32k troy ounces per metric ton is ~6.4B troy ounces.
In 2022 (just before the recent gold rally) the price was ~$2000 per troy ounce, i.e. "all the gold" was worth ~$13T. Meanwhile the M3 money supply in the same year was ~$20T. What happens if you try to buy $20T worth of gold to mint currency when only $13T worth has ever been mined, and not all of that is even on the market? The answer is that you can't, so instead the result is deflation, which is bad.
Or to put it a different way, what do you think the economic effect of the recent gold rally would be for a country whose currency was still pegged to gold? It just got way cheaper to import foreign products than buy domestic ones, and way more expensive for foreign countries to buy your exports, so how's the unemployment rate looking? The amount everyone owes on their mortgage hasn't changed but the nominal value of their houses just got cut in half so now they've lost their jobs and are underwater. What happens when they start to default and foreclosures don't allow the banks to recover the principal?
> The problem here is, what if the demand for dollars increases?
The price for gold and dollar would rise, until the worth of dollars is as high as the demand is?
> The price for gold and dollar would rise, until the worth of dollars is as high as the demand is?
The name for that is deflation.
To explain why de/inflation is bad:
The primary function of money is its trade value, to "lubricate" the real economy to let goods and services flow. When the value is unstable, people are inclined to not spend or not accept that currency, which contradicts the free flow of it and in severe cases harms the economy.
Crypto'currencies' have the same problem. By nature, they are no currency but investment for which instability is required. No crypto bro would hype their 'currency' because there would be no pumping. Arbitrage trades are considered being for fools or insiders.
> Crypto'currencies' have the same problem.
Bitcoin has the same problem. There is no inherent reason you can't have a cryptocurrency where there is no maximum number of coins to ever be mined and instead the limit is that mining them requires a fixed amount of computation.
That would give you the characteristics you want from a medium of exchange, because there is a rate limit on how much can be created (doing so requires e.g. electricity). Then the value is relatively stable, if you accept it as payment on Monday it would still be worth around the same amount on Friday, but the long-term result is a slow reduction in value on multi-year timescales as compute gets cheaper, so you don't get the speculation that results in high volatility and it doesn't strongly compete with real economic activity for investment resources.
The argument you'll get from goldbugs and whatever is that nobody would want a currency which is inherently inflationary like that, but that's clearly contrary to evidence. Most government currencies are inflationary, even on purpose, and it doesn't matter as long as the rate of inflation isn't so high that people holding it transiently for use as a medium of exchange are losing a significant amount in that short period of time. Especially when the rate of inflation is predictable (the rate at which computers get faster is reasonably consistent) so that anyone entering into a long-term contract denominated in that currency can reasonably predict its future value on the delivery date. Or people could just use it as a medium of exchange and denominate their contracts in something else.
Gold is silly as a measure of value. It's just a piece of shiny metal. The amount of value in the world is increasing so you want to exchange medium to grow with it else you're pulling breaks on the actual economy.
Just because a social construct is silly when you think about it doesn't make it any less real or useful.
A national border is silly as a physical reality; it is just a cartographic whim. These invisible lines, drawn by long-dead men, pretend that the lithosphere is fundamentally different on one side of a coordinate than the other.
Fiat currency is silly as a store of value; it is just a digital ledger or a piece of cotton-linen blend. Its "worth" is derived entirely from the collective hallucination that a central bank’s promise is more substantial than the paper it is printed on.
Yes. And we should never forget that these ideas are just that: useful ideas. They may seem without alternative to most people, but that doesn't mean they necessarily are.
Yeah I don't get why people don't understand this- there is not enough gold to base the entire global economy on it.
There is also not enough paper money to base the entire global economy in it, so I fail to see the problem.
That makes no sense, do you think people are talking about using gold coins instead of paper money in their wallet?
In effect, some of them are. Look how many decry the death Breton Woods. They don't want to necessarily have good coins on them, but they want them to be tethered as a proxy. Why?
In effect, some of them are.
No, not in effect, no one is talking about physically exchanging gold coins, so it doesn't make sense to say "there isn't enough".
but they want them to be tethered as a proxy. Why?
That's a completely separate issue. People want to not have to deal with inflation where they are on a treadmill of needing to get paid more to support the fact that companies can raise their prices easily.
> No, not in effect, no one is talking about physically exchanging gold coins, so it doesn't make sense to say "there isn't enough".
I think my point still stands. If you can't create more gold [1] and you say - I am pegging 35 dollars to an ounce of gold. Then you are limiting the amount of dollars to the mass of gold[2]. The money works as an IOU for gold. You aren't exchanging pieces of gold, but the idea that you have 35$ is as if you have 1 ounce of gold, _that is what people pine for_. It's effectively, an IOU for 1 ounce of gold that you keep in a safe. Yes. I think the point still stands that in effect, that's what people are asking for.
[1] - You can, but it's a much slower process, deff rate limited, it's actually what people really seem to like about gold.
[2] - Yes, I am aware about the concept of fractional reserve, but that's exactly the part that goldbugs want to avoid.
I think my point still stands. I think the point still stands
I'm not sure what point you are making, it seems like you're just describing a gold backed currency and repeating the same things multiple times.
If you aren't using gold directly how would there ever be "not enough" unless a penny became worth too much? People did this for hundreds of years, this isn't some theory or experiment, it's basically how the world worked for most of human history.
> If you aren't using gold directly how would there ever be "not enough" unless a penny became worth too much?
If you peg an amount of money to a mass of gold, would you or would you not limit the amount of money in existence?
It worked before, you do know money is divisible right?
There is already a quantifiable amount of money in existence, can we at least establish that?
Mild inflation is a good thing, at least according to modern economists. In a deflationary environment, money is worth more when you don’t spend them. And when people don’t spend them, there’s no economic growth. It’s just like having very high interest rates but the central bank cannot act to lower them.
This thread was someone saying you can't peg a currency to something else because "there isn't enough of it" which is nonsense.
there’s no economic growth
Printing money doesn't create economic growth, it just inflates assets and depresses nominal wages.
money is worth more when you don’t spend them
People say this stuff like it's gospel, but if someone understands currency dynamics in the first place they would have their money in investments, which already should appreciate and act like a deflationary currency. People can already buy stocks and leave money there to get more valuable, so why does anyone spend money now?
You also have to figure out why it already worked for hundreds of years. People act like it would be an experiment. Floating currency is the experiment and it has lasted 50 years so far. Currency has lost almost all of it's value from before the 70s and minimum wage is a fraction of what it was nominally while asset prices are sky high, then people wonder why people can't afford a house or beef or gas or just to live alone.
Economic growth comes from spending. Households must be incentivized to spend either through inflation or low interest rates.
Buying stocks hoping that it would appreciate doesn’t work when there is no economic growth. So we are back to square one.
And for hundreds of years we didn’t have the same kind of international trade, or the same financial markets. One must wonder whether a new kind of currency must accompany a new era of economy and trade.
Currency losing almost all its value is by design. Modern economists target a 2% inflation rate. This means currency is supposed to lose value. It’s another mechanism to encourage spending to increase economic growth.
> Buying stocks hoping that it would appreciate doesn’t work when there is no economic growth
Why? If you and I earn $100 per year, every year, that means there is no economic growth. We spend half of it on food, clothes, and other necessities and buy stocks with the other half, stocks will go up in value.
An non-growing economy has aspects of a zero-sum game. Speculation can still occur, and can continue unbounded. Stocks, gold, bitcoin, have historically all been deflationary.
Economic growth comes from spending.
Who told you that?
Households must be incentivized to spend
Says who? What about governments and companies? People are already incentivized to spend because they need things.
Buying stocks hoping that it would appreciate doesn’t work when there is no economic growth.
You're contradicting yourself and going around in circles. If there is "economic growth" according to you, then stocks will go up, which means they end up being a deflationary currency, which means people will put there money there and not spend it.
They already go up due to inflation, people do buy stocks and other liquid assets, people still spend money anyway.
Also, gold still exists. By your own logic, because anyone can still buy gold or gold futures they should park their money there and never spend it.
Currency losing almost all its value is by design.
It is by design by governments and for governments. No person wants an inflationary currency, governments want it because they can they can borrow and print money they don't have and hand it out to people who in turn help with political power.
People don't want their currency to inflate away unless they own a business that can raise prices while their employees make less nominally.
Gold is actually really good at transferring and measuring value. Think about what a "good" measure of value would be have. It needs to last over time, not corrode or dissolve to the forces. It needs to be distributable, Divisible.. to be ubiquitous. Hard to create/refine, hard to find, so supply can't easily be inflated. It doesn't matter what the object that is being used for exchange of value or holding value, that's why you can trade and barter random objects. But if you condensate down the properties that make a GOOD money, then gold is more than just a shiny metal. "The amount of value in the world is increasing so you want to exchange medium to grow with it.." we find more gold every day, so there is an easing already happening naturally. And even if there wasn't, imagine having an exchange currency that literally never inflated... that's GOOD. We have been hoodwinked into thinking that we need inflation to keep up with goods and services, literal stockholm syndrome taught by the FED.
Hold on - you say "we find more gold every day" and then go on to suggest that the money supply doesn't actually need to keep up with economic growth?
If we had the technology to maintain 0% inflation, we would do that. We can't, and rather than risk deflation we instead target low positive inflation. This is because deflation leads to nightmare spirals where people start stuffing money into their mattresses instead of investing in useful things because holding has risk-free guaranteed returns that the unpredictable real world can't match.
The amount of gold being mined is not sufficient to keep up with economic growth and gold is therefore inherently deflationary. It's not a good way to store value, because a coin that's going to double in value over two years or whatever is obviously not a stable store of value.
You can argue about corrosion resistance or whatever other physical properties gold might have, but unless the civilization collapses you will find just as much luck storing your wealth in the database of a major bank. Needless to say, designing a civilization around the idea that it could collapse at any moment is unnecessary and expensive.
> If we had the technology to maintain 0% inflation, we would do that. We can't, and rather than risk deflation we instead target low positive inflation.
I don't think this is quite right. My understanding is that a low positive inflation would be targeted anyway, because it stimulates the velocity of money; i.e. there's a downside to hoarding, since you need to beat inflation to come out on top. So people will be willing to invest to at least some extent in risk assets, or to buy things now rather than later.
Which, yes, makes inflationary spirals possible, but they've proven less damaging. The inflation numbers seen in regimes that actually collapsed as a result are absolutely dizzying; whereas the deflation seen in the Great Depression was... significant, but not nearly comparable.
The main advantage to keeping inflation as low as possible but positive is also that it makes interest rates cheaper. Individuals are incentivized to spend when there's inflation, but banks have a harder time writing loans because the interest rate on the loan is the product of inflation and the bank's desired ROI.
Low interest rates are a good thing because they allow people to explore new ideas and new businesses - the entire modern tech industry would not exist without ZIRP because the scale of investments has only gone up as technology has advanced.
> the entire modern tech industry would not exist without ZIRP
The problem with zero interest rate is that it doesn't incentivize better ideas. Why would you work to increase productivity if capital has no cost?
The period 2016-2021 was one where interest rates were the lowest, sometimes even negative, and you saw companies hiring endlessly, and acquiring competitors with no intention of doing anything their their products.
It is very hard to compete on talent and good ideas in such an environment when your all competitors are burning through loaned and venture capital (which itself is also largely loaned at some point).
> Individuals are incentivized to spend when there's inflation
That's not what's happening currently. Inflation has driven up prices to the point where people can't afford to spend. They're forced to cut back on spending just to keep a roof over their head and food on the table. Inflation promises that things are cheaper now than they ever will be, but that just means that anything you can't afford you either have to go without or take an even bigger hit to your wallet after trying to save money at a rate faster than prices are increasing. That sort of thing leads to less spending.
Credit cards were the solution for many Americans for a very long time, but that was never sustainable and now the US has record amounts of household debt and homelessness.
Deflation makes things more affordable and so people buy more. Yes, they could horde all their wealth, but you can't eat money and it isn't much fun. When times are good why would anyone bother going without when they can easily get what they want today. Consumerism is strong enough to keep people buying things. Decreasing prices gives consumers confidence that they can make risky purchases and investments.
> And even if there wasn't, imagine having an exchange currency that literally never inflated... that's GOOD.
I fundamentally disagree. Value comes from building stuff not from hoarding. I maintain my intense dislike for gold. And I grant that it had the property of having most people on this earth consider it the peak of value. Sure common belief is a useful property. But I disagree that it's a positive outcome or that there couldn't be many many other variations except gold.
Your dislike aside, is it part of your investment portfolio? If not, what did you replace it with?
> that's why you can trade and barter random objects...imagine having an exchange currency that literally never inflated... that's GOOD. We have been hoodwinked into thinking that we need inflation to keep up with goods and services, literal stockholm syndrome
Gahhh. Stop taking your economics advice from bitcoin bros and goldbug weirdos. They don't know how anything works and don't want to learn. It's like taking legal advice from sovereign citizens. It's not even that difficult to understand why it's a terrible idea!
High inflation is bad, sure. Deflation is an economic nuke. You know those people who spent like a whole bitcoin buying pizza way back when? "If I'd just held onto it, I'd have $HUGE_NUMBER now".
Yeah. If your money goes up in value, you have a huge incentive to stockpile it and not buy pizza. It's not just Dominos that loses out. All of the people and suppliers that go into pizza do, too. You need people to spend and lend to have liquidity and money flow.
> we find more gold every day, so there is an easing already happening naturally
That's not how that works. You're tying your entire country's economic growth to the production output of a single mining industry. Gold is not distributed evenly across the globe, either.
And yeah, we did all that in the past, and it caused deflation, which caused numerous financial panics [0], broke the British economy [1] and after two world wars, the US ended up with like 70% of the world's gold [2].
[0] https://www.federalreservehistory.org/essays/banking-panics-...
[1] https://en.wikipedia.org/wiki/Financial_crisis_of_1914
[2] https://www.imf.org/external/np/exr/center/mm/eng/mm_dr_01.h...
--
TL;DR: Tying your entire country's economic growth to the production output of a single mining industry is stupid and we don't do it for very good reasons. Everything is a conspiracy if you don't know how anything works.
> If your money goes up in value, you have a huge incentive to stockpile it and not buy pizza
A lot hinges on this being true, but being deflationary is not unique to gold. It is also true for a lot of other things, including stocks. Yet we think it is good that regular people spend their earnings on stock, and it is generally considered to be one of the things which made American economy uniquely strong. So much so that other countries seek to mimic it.
The argument should cut both ways: A strong stock market which is deflationary should lead to economic stagnation. Why buy a pizza today when you can buy S&P500 and buy two pizzas tomorrow?
Reality seems to disagree here. People buy what they need and want, today, and whether the rest is stored in fiat currency, stocks, or gold seems to matter very little for economic productivity.
> Yet we think it is good that regular people spend their earnings on stock, and it is generally considered to be one of the things which made American economy uniquely strong
I...don't think you know what stocks actually are. Your argument doesn't make sense because stocks are the literal exact opposite of a deflationary good lol.
Companies issue stock to raise money. If you buy stock from a company, you're giving them that money in exchange for a small stake in ownership.
It gets more complicated with stock markets and all the other stuff, but the heart of it is taking money that would normally sit for decades doing nothing and giving it to those who can use it right now.
> Reality seems to disagree here.
It only does if you don't know how things work and don't want to learn lol
> Companies issue stock to raise money
There is certainly some misunderstanding here, and I am unsure about where it is. Perhaps another example could have been more clear.
When you "buy the S&P500" you do not buy stock from companies. No S&P ETF takes part in private placements or IPOs. They buy "used" shares on the open market, with the single intention of selling it on the open market to someone else.
When you buy the S&P, at no point do you give money to any of the S&P companies (except perhaps a small fee to the ETF issuer, most of which are public companies, but let's not split hairs about that).
There are of course other methods of buying the S&P500, such as tracker certificates, but they only add layers of indirection to the above, they do not change the fundamental facts about it.
> you don't know how things work and don't want to learn
I am not sure how to respond to this.
I do find it rather ironic that economists can pretty much universally agree on this concept. And yet when you point out the very existence of the billionaire class inherently causes the exact same issue you're suddenly a communits.
How is it good for an economy to have a small subset of individuals hoarding wealth through property, artwork, and offshore bank accounts - not spending it in the economy from which they extracted it? "Job creators" is a farse, the subset who you can point to who ACTUALLY create(d) jobs a-la Page and Brin have long since stepped away from that job creation and have joined the ranks of: number go up.
Yes, it's just a shiny piece of metal. However, it is a pure element and there is a limited amount of it, unlike pretty much anything else except maybe silver.
Otherwise this happens.
https://fred.stlouisfed.org/series/M2SL
This is the origin of the entire white collar world and all of its odd bedfellows, and it will die in our lifetime. All of our jobs will go with it, unfortunately.
Well it's also soft, bacteriostatic, and conductive.
OMG, we should totally base our economic exchanges on copper instead!
So as trade increases, and the need for dollars increases, gold and the dollar increase in value together.
That sounds benign until you realize that is: deflation. It incentivizes everyone to hold their dollars instead of spending them, and parasitically gain from gold's increasing utility use as currency by others.
This further decreases dollars available on the market to use in trade, further increasing their value. Which ... yes this can be an economic death spiral. Or at least, a strongly growth conflicted world.
A world in which you can make 5-10% a year by avoiding economic activity or investment is not a healthy world.
(And you can't increase gold supply to counteract this, because gold supply is also always balanced against the cost of extracting gold. Unless everyone else on the planet except the US government is prohibited from mining gold, there is no play there.)
Can you make the same arguments for holding land and activity that requires land? Or holding any other valuable, limited commodity vs activity that requires that commodity, copper for example?
Investors in those things haven't caused an economic death spiral. It's considered shrewd and good business to buy and hold things that are seeing increasing demand.
> This further decreases dollars available on the market to use in trade, further increasing their value.
... thereby reducing the amount of dollars required to trade a given amount of other things. Where does the spiral come from?
Holding land isn't as straightforward as you describe it. Every parcel of land is different. It takes a lot of knowledge of many kinds to be the one who makes money from real estate, instead of losing outright for overpaying, underselling, or simply being whittled down by taxes and other expense. And its lack of liquidity creates high situation risk, for anyone who doesn't have a large enough csh buffer to weather life's turns, unscathed by any immediate needs.
But yes, sophisticated investors do make money on under utilized land. Parasitically.
And it is an economy damper. Under utilized land is poor economic optimization by definition. Not to mention the undertow it creates, in terms of unproductive scarcity, for people who actually need to utilize land - whether that is for homes or businesses.
The solution, as economist Henry George pointed out, is to tax land, but not the property on it. Tax the exlcusionalry holding of a limited resource, don't tax productive value created by people.
Taxing land and not property isn't as simple as taxing both, but it isn't rocket science either. There are lots of standards and practices, because distinguishing between the two is important for many reasons.
The irony of taxing property, the stuff that makes land productive, is that it is a wealth tax that hurts rich and poor alike. A poor person, unemployed, who spends their time bereft of reliable income improving their own home will now be taxed on the value added - every year for the rest of their lives or until they sell or lose their home. That is a very perverse situation.
So yes, the taxation situation that subsidizes under utilized property, which is also parasitically rewarded by gains in value far exceeding the lower taxes they pay (for having no development to tax), is continually damaging the economy.
I didn't describe anything as straightforward, the fact remains that there are limited goods/properties/commodities that are in demand, not just money. It's not up to me to show why it's exactly like money because that was the only property of money used to describe this detrimental problem, it's up to the person who says that is a problem with deflationary money. Money can also be taxed too, so that also is insufficient to make the case for why it is different than land. Or alternatively you could take a limited non-renewable commodity (say, copper) that is in demand but not taxed. Also you have still not addressed that increasing value of money naturally reduces the required amount of it necessary for making a particular trade. A fairly striking omission when claiming there are feedback spirals in such a system.
That doesn't make any sense to me. Under Bretton Woods, a "dollar" was a contractual equivalent to a fixed amount of gold. There's no difference. When people are talking about "flow out" they're not talking about literally motion of currency[1], just who owns it.
[1] Which is backwards in your reasoning anyway. If you're a foreign power wanting to hold dollars, and dollars are physical gold coins, then you quite literally need to move them physically out of the country, right?
> Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars?
You'll get a bear economy, leading to the eventual deflation and collapse.
Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
Fake economics to "stable money causes hitler" in two sentences.
Countries used gold or metals either directly as currency or to back paper currency for hundreds of years. If their governments overspent they collapsed.
Saying you need inflation or you get hitler is pretty wild.
> Saying you need inflation or you get hitler is pretty wild.
Not really. You need inflation, or you end up with stagnation.
https://en.wikipedia.org/wiki/W%C3%B6rgl#The_W%C3%B6rgl_Expe...
Your proof that the economic system that worked for hundreds of years doesn't actually work is a small town that issued their own currency, which allowed them to nominally pay people less and there were more jobs?
That's what inflation does, everyone gets paid less, but they don't realize it because they just see the same number coming in and more going out.
And then because of that, somehow noninflationary currency results in hitler in 8 years (even though it was used for hundreds of years).
I think you should look at the other end, which is governments going broke and not being able to inflate their way out of it.
> Your proof that the economic system that worked for hundreds of years
It did not. The economic system that was in place for hundreds of years kept the population in a permanent state of depression. Most people had barely enough money to buy necessities.
The economic growth exploded, surpassing _millenia_ of innovation within mere _decades_ once we got rid of the golden chains.
But I guess that you fancy yourself being landed gentry and not a landless serf?
kept the population in a permanent state of depression.
Says who?
people had barely enough money to buy necessities.
Where are you getting that? I think you're confusing and conflating all sorts of things like human advancements with inflationary money. I'm sure what you're saying makes sense if you think every invention, discovery and gain of knowledge was from people having their money inflated, but there isn't any evidence of this, it's just you restating it.
The economic growth exploded, surpassing _millenia_ of innovation within mere _decades_ once we got rid of the golden chains.
That really only happened in the 70s, it wasn't exactly the dark ages before that.
> Says who?
Err... Have you ever studied history?
> Where are you getting that?
From learning the basics of history? Before 1900-s famines were common, and most people were illiterate.
> That really only happened in the 70s, it wasn't exactly the dark ages before that.
Got it. You live in an imaginary world.
In reality, the first inflation happened when the European civilization established contact with South America. It rapidly expanded the monetary base and provided an impetus to economic development.
Then paper money (and equivalent debt-based mechanisms) were invented and became popular, and this turbocharged everything.
Err... Have you ever studied history?
I just explained history to you, you realize being patronizing and repeating yourself isn't evidence right?
From learning the basics of history? Before 1900-s famines were common, and most people were illiterate.
Do you think the printing press, the engine and large scale agriculture might have more to do with food and literacy than inflation?
All those problems were solved before the US went off the gold standard anyway.
In reality, the first inflation happened when the European civilization established contact with South America. It rapidly expanded the monetary base and provided an impetus to economic development.
You realize this doesn't make sense right? This idea that printing money somehow leads to all human advancement is bizarre, even for someone who is ignoring all the things I said before. If two cultures crossed oceans do you think the advancement might come from international trade or do you think some tribe in the jungle could make up a currency, start printing it off, then go straight on to skyscrapers and video games?
All this is just a gish gallop anyway, you never bothered to explain how not having inflation "causes hitler in 8 years" even though it's only been the last 50 years that we have been off of backed currency.
You also didn't confront the fact that anyone can put their money in stocks, bond or gold and essentially have a deflationary currency but they still spend money anyway.
those hundreds and thousands of years were basically before humanity learned that prosperity could exist.
no growth that whole time, other than when you go to war and expand your gold supply by taking somebody else's.
the positive sum present is much better than the zero sum past
those hundreds and thousands of years were basically before humanity learned that prosperity could exist.
No, it was pretty much up until the early 1900s
> Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
Do you have a source for this? AFAIK https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
"Hyperinflation caused Hitler" is one of the common narratives that "everyone knows". But German economy was actually growing during the hyperinflation era and by the time of Hitler's ascension, the hyperinflation had long been in the past.
I personally edited this very Wikipedia article several times, but my changes got reverted by goldbugs who want to memory-hole it.
This article has a nice explanation: https://www.hertie-school.org/fileadmin/user_upload/20191101...
If you don't believe the numbers from it, they can be corroborated easily.
Thanks for sharing. I can corroborate some of the unemployment numbers in Lords of Finance and have no doubt there was some deflation. I do think the seeds of the Third Reich were sown well before this period mostly due to the insistence of France wanting full reparations and Germany borrowing in foreign currencies.
https://en.wikipedia.org/wiki/Lords_of_Finance
Hyperinflation undoubtedly left a huge psychological scar, especially because it happened right after the loss in WWI. But it did not cause a long protracted unemployment period that directly resulted in mass disgruntlement.
And most importantly, the deflation was directly caused by Germany's insistence on staying on the gold standard. And this has been an almost ironclad law: large countries that insist on gold standard end up with stagnating economy.
If you want another interesting tale from the opposite side of the spectrum: https://en.wikipedia.org/wiki/W%C3%B6rgl#The_W%C3%B6rgl_Expe... - it's a town that was issuing "decaying" money in 1930-s and this helped to revitalize its economy.
Another example often cited by Paul Krugman was Washington's childcare coöp, but it's a bit too small-scale.
I always thought it was the musical energy of Bertold Brechts "Die Dreigroschenoper" that lead Hitler to power. /s
Just because two things are correlated in time, doesn't mean they are necessarily causally linked. Surely there are multiple factors at the same time behind the rise of a demagogue. In the case of Hitler the grievances of WWI played probably a much bigger role than economic problems.
Fair, but at the very least "hyperinflation caused Hitler" is a significantly weaker statement than "deflation caused Hitler", given that the former was replaced by the latter like 8+ years before Hitler's takeover.
Economic problems was a big part though, the 1929-33 great depression. It features heavily in political literature pushed by the Nazi party leading up to takeover. You know, like "Arbeit und Brot", etc.
Hyperinflation in weimar Germany ended by what, 1924-ish with a return to gold standard? Hitler came to power 8+ years later
Uh, yeah, I'm gonna need more of an explainer on that.
All the facts are true here, but "design defect" is silly. The entire purpose was to keep a country like the US from exploiting its position, and becoming the "world's reserve currency" which is just a euphemism for running up massive debts to poorer states.
Bretton Woods was sabotaged by the US and the USSR through the single vehicle of https://en.wikipedia.org/wiki/Harry_Dexter_White. Without a Bancor, the entire system simply became a mechanism to exploit the poor.
I agree with you that Bretton Woods was doomed from the beginning, both Keynes and Friedman said so, and this should be a better known POV. Economists are not historians though, and historians write human-driven stories (i.e., it was Nixon who ended Bretton Woods, it's not that it was going to inevitably collapse as an econometric question).
All that said, Bretton Woods matters because people look at the gold standard as a time when wages in the United States rose. Like that's why Bernie Bros on HN care. It's the same reason they oppose globalization: me me me. So it's worth knowing why it was flawed. They don't comprehend that before and after Bretton Woods, hourly wage charts measured a fundamentally different thing.
I think it's better to attack the charts - I mean, you're responding to a Charts Guy, a guy who's like, look at this Gold Denominated Chart guy - because that's what their brains work on. Don't worry about economics. These guys are not economists. They are Charts. The real attack on their worldview is that, well, just because the year in the X axis is an increasing, doesn't mean that you can compare a bigger year to a smaller year. They would really like the world to be ordered that way, but it's not, and taking leadership on convincing them of that is very hard.
Perhaps you could expand on why you're convinced the entirety of neoliberal economic dogma isn't "me me me"?
The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
> The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
see, i don't want to generalize about left and right. it's much simpler than that. look at what this thread is actually about: "chart for $/GLD is going up and to the right, therefore, gold good." okay? it's not complicated. it's not left vs right as much as it is, for every 1 person who's like, "things are complicated, economics are interesting, let's talk about it" there are 19 who live day to day in a relentless grind, and get-rich-quick is literally their only apparent salvation. they want the world to be ordered where they are a Green Wojack, where some random bet or gamble makes them a ton of money. that's why we're talking about it, not to figure out economic policy. same reason we talk about cryptocurrencies and startups. to most regular people - and programmers are regular people - it's about, $$$.
it is a totally valid complaint to say, "floating exchange rates do not produce charts that go up and to the right." I mean, that's their problem! They made the wages per hour chart stop going up and to the right! It's not that they are bad policy!
Do people on HN care about joe schmoe hourly worker? No. You can certainly make tons of money trading currencies, but look, these people are not trading. They're gambling. This class of get-rich-quick person likes: real estate, cryptocurrency, gold, startup stock... are you getting it?
You are making it about, "neoliberal dogmas" and "gold bugs" or whatever. Trust me, those people are not the morons. The gamblers are 10x as stupid. They are the antagonists.
The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
government policy definitely has the greatest power to create (or destroy) wealth, there are a lot of things wrong with economic policy in this country, but floating currency exchange is not one of those problems.
I would argue that any policy that allows the government to print money freely and inflate the currency is a major thing wrong with a country.
And you'd be wrong. It's not even difficult to understand why. Uncontrolled inflation is bad. Deflation is much, much worse. You do not want deflation. It rots your economy and nukes lend and spend. We trade a small amount of inflation to avoid the nuke that is deflation.
This is, like, one of the few things economists -- even most of the crazy ones -- agree on.
That's an oversimplification. Demand-side deflation can be bad for the economy, but it's also because our modern economies are basically reliant on inflation to manage our insane debts. Typically, critique of inflationary principles is coupled with a broader critique of MMT and how our economies are run. Deflation is fine or even beneficial when it comes from increased productivity (supply-side). Heck, we have deflation in some sectors of our economy (eg. technology) and consumers greatly benefit from it. Unfortunately the good type of deflation we see in our economies is overshadowed by the money printer going brrrrrrr.
Deflation is bad for the elites and politicians, and good for consumers. When the former are running the show, of course they will claim that deflation is the worst thing ever, despite the immense harm inflation inflicts on the average person. And if you spend like 5 minutes pondering the justification for why that is, you'll see it's mostly BS.
> Deflation is bad for the elites and politicians, and good for consumers.
Hahahaha no. Other way around. I assume you meant "consumers" as a short hand for "normal people" and not its actual meaning of "people who need to buy things on a regular basis" because you do not want to be a consumer in a deflationary market. You're constantly having to piddle your wealth away because you're forced to exchange money for goods and services. Like food and shelter.
Deflation means no access to modern lending because there's no incentive to do anything with money except hold it. That's fine if you're already wealthy, because either you have it on hand, have assets for collateral, or can call in a favor. If you're not wealthy, you're just fucked.
Having easy access to debt is, overall, a phenomenal thing for the non-wealthy. Can you abuse it? Yup. Can it be predatory? Sure. Does it mean the average person gets access to capital without access to generational wealth or decades of saving? Absolutely. The middle class kind of doesn't exist without it. See also: The Ability to File For Bankruptcy is Good, Actually.
> And if you spend like 5 minutes pondering the justification for why that is, you'll see it's mostly BS.
I'm always a fan of examining things, but there's a prerequisite. You need enough education, critical thinking skills, and maturity to understand why you start at the null hypothesis: any "Secret Knowledge They Don't Want You To Know" theory is conspiracy bullshit.
And enough cynicism to know when people start talking about "elites and politicians" like they're one homogenous lump of evil agenda, it's usually a shibboleth for other, ah, less socially acceptable beliefs.
the best way to expand your worldview is to consider that time series charts do not tell a whole, or even accurate, story, a lot of the time. for example, looking at a chart of a line going up and to the right for money supply isn't as meaningful as you think it is.
Several of them would have protested if they could have found the right arguments.
> trade, then French Navy picked those gold bullions from NY
I couldn’t find any clear news source or academic reference to that event. I see a lot of references on gold buying/selling sites mostly. I would imagine a Fench Navy ship docked NY and loading tons of gold would make quite a stir.
Gold is very dense. 10 Tonnes of gold takes up less than a cubic meter of volume.
Moving tonnes of gold doesn’t look like huge pallets of gold with tarps over them like a James Bond movie. It looks like a handful of supply crates.
I imagine that the French Navy visits NY ports of a regular basis. Pretty normal for Navy’s to sail into the ports of allies during peace time. There would be nothing unusual about a French Navy vessel sailing into NY loading up with some supplies and leaving.
https://www.wolframalpha.com/input?i=10tonnes+of+gold
For a country like France it would be on the order of hundreds or a thousand tons. So that’s maybe on the order of hundred trips by delivery trucks at most. Yeah I suppose spread out over a few years it wouldn’t be noticed. At least not by the general public. But since the claim is that this triggered the collapse of the Bretton Woods system it would be documented and referenced a lot more, still.
Most delivery trucks (like a box truck) have capacities more like 10 or 20 tons. A heavy freight truck, like used to load ships? Even more.
You don’t generally just throw gold in a box truck… it typically moves by armored freight.
The Hope diamond was famously transported by... USPS.
"The postage cost him $2.44, plus $142.85 for $1 million worth of insurance." —https://about.usps.com/who-we-are/postal-history/hope-diamon...
Maybe in some volumes, but I think most people would be shocked by the overall volume of gold that moves by UPS in small brown boxes.
The gold would be moved by cash-in-transit trucks which have relatively modest payload capacities of 5000-9000lbs today, a bit less in the 60s. 3 tons per truck is probably on the high end.
Was that the case in the 60s as well? I know trucks of that era had much lower capacity than today, even when comparing across class like "half-ton" trucks.
The Federal-Aid Highway Act of 1956 set the gross vehicle weight limit for trucks at 73,280lbs. I imagine trucks of the day probably at least came close to that limit?
https://en.wikipedia.org/wiki/History_of_the_trucking_indust...
That was likely targeting tractor trailers of the era though, not box trucks.
A half-ton truck is a consumer pick-up truck, not a commercial shipping vehicle. Much much smaller.
Yes I understand, that's why I was asking about box trucks of the day. I'll dig into it myself as I am curious now, I've only ever really looked into cab-over bread trucks from that era and those aren't a great comparison either. I was just curious if the GP already knew what 60s era box trucks would have been rated for.
Yup that's what I had in mind, a 60s city delivery truck, not a semi, so googled that and came up to about 10t.
I seem to be having more luck with French language sources, mostly the Bank of France records. From what I can tell the shipping was done mostly commercially with some later by air[1]. Reportedly De Gaulle was frustrated with the speed of change wanted to use the Colbert warship but was dissuaded by the minister of finance.[2]
[1]https://archives-historiques.banque-france.fr/ark:/56433/115...
[2]https://www.lesechos.fr/finance-marches/banque-assurances/st...
Gold is routinely transported across the Atlantic (and the world) by air today:
https://www.youtube.com/watch?v=CRt_Ld5vtHI
> I couldn’t find any clear news source or academic reference to that event.
It happened though. Here are the sources for it:
- https://en.wikipedia.org/wiki/Nixon_shock#Criticism_and_decl...
- https://www.thegoldobserver.com/p/how-france-secretly-repatr...
- https://www.elibrary.imf.org/view/journals/001/1994/128/arti...
What happened is the gold got repatriated. I was looking for a source that a French warship docked and started loading thousands of tons of gold.
Your source confirms it as well:
> Involving the French Navy was considered, but that would have blown the operation’s cover. Instead, BdF used ocean liners from the Compagnie Générale Transatlantique
So it was multiple trips and in commercial liners.
It's something that sounds like a plot point for a heist movie.
Check what happened to the Spanish gold before the end of the Spanish civil war. I think it would be even more dramatic movie: https://en.wikipedia.org/wiki/Moscow_Gold_(Spain)
You should look into how often nuclear weapons are moved by truck.
You've probably driven past more than a few.
Which almost might have been one of the arguments the Minister of Finance used to dissuade CDG
As a French speaker, I looked up French sources and found https://www.lesechos.fr/finance-marches/banque-assurances/st... - here is a snippet translated to English below. But many more references can be found by googling "opération vide-gousset".
1963: Operation Empty-the-purse ("vide-gousset")
It was also by warship that De Gaulle planned to conduct "Operation Empty-the-purse" in 1963, the code name for the repatriation of French gold deposited at Fort Knox in the United States (1). More than 1,150 tons—the result of converting French dollars into gold, a decision made by De Gaulle in response to the lax monetary policy of the United States—were being used to finance a growing trade deficit through the printing of money.
Valéry Giscard d'Estaing, then Minister of Finance, recounts (2): "De Gaulle was getting impatient and asked me at every meeting: 'So, has that gold finally come back?' One day, he told me: 'We need to move much faster: we're going to send the navy cruiser 'Colbert' which will bring back all the gold that's still there.'" “I told him that if we did that, we would alienate American public opinion forever.” Ultimately, De Gaulle abandoned the Colbert plan, and French gold returned from the United States in small quantities. Not for very long, it's true. The events of May 1968 and the ensuing monetary crisis depleted the reserves, which fell from 4,650 tons to 3,150 – 1,500 tons had crossed the Atlantic again to defend the franc, which De Gaulle refused to devalue.
Thank you, this helps and clears up my confusion. I just couldn't imagine this kind of an event, a warship loading this much gold, not triggering some media commentary, even mockery or criticism to defend the US establishment.
> Ultimately, De Gaulle abandoned the Colbert plan, and French gold returned from the United States in small quantities.
So I think the story about the warship got twisted from a plan or threat to "it actually happened". Doing it in small quantities over a few years was the right way, indeed. Looking back it seems like it didn't make many waves in the news at the time, so Giscard was absolutely right.
https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?art...
Whether the exact ship was a battleship or a destroyer might make the search result.
https://archive.ph/ioukS
I can’t open that link. Too bad.
Cloudflare DNS?
I think I munged the link. Anyway, the answer is in a search result, with some discussion about whether it was a battleship or destroyer.
Historically, if a ship carrying gold sinks, whoever salvages the gold/loot gets ownership of it. However, if the ship is a warship, the loot belongs - FOREVER - as the property of the nation-state (or their descendants). This has led to some legal battles over nautical salvage in the Atlantic (were those "Spanish Galleons" military or non-military? Hundreds of millions of dollars depends on that answer during some lawsuits in the 1990s) or nautical salvage in South East Asia where artifacts from long gone kingdoms (that didn't reflect borders created centuries after they collapsed) end up in court over what country gets to show them in museums.
So yes, if you need to move national quantities of gold/silver across the ocean, then for legal reasons, it is best to ship it via your navy.
https://www.helleniscope.com/2025/07/31/august-1971-the-day-...
https://www.huffpost.com/entry/august-15-1971_b_4284327
One armored car can carry a ton of gold. If they left and drove to the closest US Navy port, where the French ship would dock. it wouldn't raise eyebrows.
It’s just that they repatriated close to 3000 tons. That’s one long convoy of armored cars, all going to a French warship docked in New York.
Based on some sibling discussion it seems it just never happened. It was multiple shipments, over many years, going over commercial liners. It may have well been armored trucks but they just didn’t all do it at once. It worked well that it didn’t create much of a media uproar.
> De Gaulle initiated a systematic, aggressive policy where they converted USD into physical gold
The dude was a visionary for many things, but I didn't know about this. Borderline prescient. What a guy.
Just like the majority of the classical economists and policymakers, you would call him a blithering idiot and overzealous nationalist two decades ago. It was thought that this kind of behavior caused world-wars. I mean it did cause them. It is just we're speed running the next one that changed the narrative.
This behavior is economically inefficient, that's why it's criticized. And it's undeniable
But the point is that "economical efficiency" is not the only metric that matters, stability and power do not come cheap.
I think many academics are often specialized in one area of their expertise and overfit in that dimension. Journalists pick this up and promote those views a bit too much. This results in non-optimal decisions due to skewed public perceptions.
We need to promote holistic thinking considering multiple dimensions and not just one where academics are proficient in.
> many academics are often specialized in one area of their expertise and overfit in that dimension
An economist saying a national-security measure costs this much is fine. Where it goes off the rails is in turning costs into damnation without accounting for what one gets in return. In an attention-driven media environment, that sells.
The problem is that there isn't simply an efficient solution for everything. At one point every problem has solutions with pros and cons
France could do it as it is a rich and big country but smaller countries do not have a viable choice. This reasoning could have been applied to France too in another universe.
It's a balance impossible to totally tilt one way or another.
So no amount of extra information could help when it's matter of opinion at the end of the day
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De Gaulle was not an overzealous nationalist. He actually ended French colonialism and started an alliance with Germany.
He was a patriot and very pragmatic. He knew France had been diminished. He had no time for delusional ideas.
De Gaulle was ahead of his time. He was very skeptical of the control that the US had over Europe through NATO. He left the alliance to build an independent French nuclear program which is paying dividends today amid the current leadership situation in the US.
Nitpick, but France never left NATO proper, only the integrated command, and reintegrated it in 2008 under Sarkozy.
Sarkozy, who renamed what descended from De Gaulle's party into "Les Républicains" because of his obsession for the US. Who also got sponsored by Gaddafi, and invited him to pitch his tent in the Elysée's garden. And who ten years ago was still spewing climate change denial crap. He probably still would, but he's too busy talking about how his 10 days in prison was the most atrocious experience a human being had to endure.
Funny how much his pathetic 5 years in office keep on giving.
> to build an independent French nuclear program
For which France was helped by the UK, so it certainly would make sense if France helped the europe and uk to build its own nuclear deterrence.
That was a cooperation, both sides benefitted. So there's no debt to repay.
He also called Brexit before the UK had even joined.
IIRC, De Gaulle & Churchill proposed a UK-FR union at one point (1940?) but it didn't get sufficient support within the French government. Interesting to ponder what the war and later EU trajectories might have looked like if that had happened.
That union was a last ditch effort to try and keep France in the war. If they had implemented it, it would have been undone once the nazis were beaten you can be sure.
It was suggested again in 1956 in the context of the Suez crisis:
http://news.bbc.co.uk/2/hi/uk_news/6261885.stm
That was also a last-ditch effort to maintain pre-WW2 geopolitical structures rather than a bipolar US-sphere vs Soviet-sphere world. Note that this was basically the nail in the coffin that led to their full-fledged decolonization in the following years. At the time the UK still held very significant military and political sway over the middle east, east africa, and asia
https://en.wikipedia.org/wiki/British_Empire#/media/File:Bri...
From my recollection, the plan was to grant French citizenship to every British citizen and vice versa, in effect "forcing" the governments to defend their citizens to the end. This was very ambitious, hence why it probably did not happen. But if it had happen, I have a hard time seeing how it could be undone, stripping people of their citizenship, even if they have a second one is no trivial matter.
I think that is the part that the parent is referring to.
France is currently contacting selected partners to build a collective nuclear weapon coalition, probably focusing on Norway due to their location and recent oil wealth. Given recent events, reasonable people may disagree strongly on the directions that is leading.
Europe isn’t pulling its weight in defence spending.
But if it tries to it’s also a problem?
The problem is that Europe does not spend enough on US weaponry. Bulding nukes domestically does not help with that.
NATO was explicitly built to keep Europe in line. That worked to the benefit of everyone, until national security intrests and land expansion put a stop to it.
Time to make the "De Gaulle was Right about everything" baseball cap.
Let’s not get carried away. He was also wrong about many things. He was a good strategist, which was useful during WWII and helped France massively in the post-war years. His domestic policies were very much a mixed bag. He was not exactly authoritarian, but built himself a strong presidential political system. Which would have been fine if he had been right all the time, but he was not.
Or a "De Gaulle Apology Form":
https://i.redd.it/opw3zv6x4qke1.png
Certainly debatable.
De Gaulle started this 'policy' in 1965 and it's mainly the current leadership situation that's been a problem—60 years later. So to a certain extent the policy in question was 'wrong' for decades. How "right" can you really consider them when it was a problem year after year, decade after decade:
* https://en.wikipedia.org/wiki/Henny_Penny
It reminds me of the folks that keep saying there will be a major crash on Wall Street year after year after year… and then it just happens to be occur.
* https://awealthofcommonsense.com/2023/12/rich-author-poor-re...
In what sense was the policy wrong? Emphasizing independence when it comes to security doesn't strike me as self-evidently wrong. Curious to hear your arguments. "They were very happy about it 60 years later" alone isn't evidence of it being wrong.
I disagree. It was a right policy in the sense that it bought France an insurance policy that essentially no other Western country has. Like all insurance policies, you hope to be wrong, but when the time comes, you are protected from some of the worse case scenarios.
Yes, this is the debatable part: the policy is "wrong" for 60 years and extracted a cost to France over those years (at least when it came to nuclear weapons?).
There just happened to be a whacko that got into the White House, but if ~70k (out of >100M) had gone the other way in 2016, Hillary Clinton would have won and the world would be a different place. (See also ~500 votes in Bush versus Gore.)
I'd be curious to know the 'insurance premium' that was paid by France every year and the total.
> There just happened to be a whacko that got into the White House
My counter to this is that such an occurrence was increasingly likely starting around the time the massive US Evangelical base was essentially fully captured by (and became a wing of) the Republican party. It was more and more obvious over a period of at least 40 of those 60 years you mention.
If you prepare for a crash to happen on September 23rd, you're a fool. You can't point to a crash that happens a year later and say you got it right.
But if you prepare for a crash to happen at some point, that's just good sense. Only a fool would think that there would never be a crash. If you arrange your finances to withstand a crash, and there's eventually a crash, then that was the right thing to do even if it took a long time.
Ensuring the independence of your nation is more of the second kind. And it pays off even when there isn't an outright crisis. The policy wasn't "wrong" for decades. It was fine the whole time.
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Excessive debt build up in particular due to the Vietnam war caused the US to cancel the dollar gold convertibility.
De Gaulle of this man.
Underrated comment
From Franceэs perspective, they were just playing by the rules
The whole of international politics is the real rules vs the unwritten rules.
Goes for local politics as well.
Sounds like corporate politics too!
"closed the gold window" is a weird euphemism for "defaulted"
"I am altering the deal. Pray I do not alter it any further."
This is not gain at all. At least in theory: You own some tons of gold at the start of the process, you have the same tons of gold at the end of the process.
The only real gain is that you have gold in the US custody and the US can be tempted to just use it without telling you anything.
In other words, you had "paper gold" or "virtual gold" that the US can confiscate anytime, for example after invading Greenland, blackmailing France to do nothing.
You gain custody of what is yours.
From the full press release:
"In 2025 and at the start of 2026, while the volume of gold reserves remained unchanged, the Banque de France had to align a residual portion (5%) with technical guidelines, resulting in a significant realised currency gain. This exceptional foreign exchange income totalled EUR 11 billion for 2025."
-- the keyword here likely being "realized"
Is the logic that it's "unrealised" while the gold is stored in the US but becomes "realised" once it is stored in Paris? Why?
If you buy $100,000 of RAM and just hoard them, and a shortage happens, you won't update their value according to their market price, until you sell them.
That's it. It has nothing to do with whether your RAM is stored in New York or Paris.
You treat your brokerage account this way? I'm sure that the retirement funds don't.
If you're a retail business that sells RAM then yes, this is the way.
If you're a fund that holds RAM in some indirect manner (like you hold hypothetical RAM futures) then it depends on whether your country's laws ask for market-to-market value for that specific kind of security.
France didn't pay taxes on the gold, so it didn't keep it "on the books" at decades-old prices. It tracked the real-time value.
However, that doesn't mean there isn't profit possible, even over a supposedly super-liquid asset like gold.
Bank of France "transported" their reserve by selling the gold held in New York, and subsequently buying the same amount in European market.
They opted to do so because it's just more efficient. It takes a lot of efforts to physically move 129 tonnes of gold after all. And as a side effect of this relocation project, they ended up recording a capital gain. It's nothing-burger.
The transport would likely be quite expensive as well. Lots of armed people needed to move gold around, plus special vehicles.
For context, in 2025H1, 480 tons where moved from CH to the US (I assume originating from UK after being recast).
My guess is that the choice to sell rather than transport was also due to using the (at the time) price divergence between US and European markets. (arbitrage + not having to pay transport + refining)
You bought it once at X price, it's realized when you sell it, it's unrealized while "open"
If they held it for 100 years and finally sold it, then profit/loss is realized now
But then they bought it again. They had 129 tons of gold, and now they still have 129 tons of gold. Where does the realised gains come from?
From paper shenanigans. Don't expect accounting spreadsheets to perfectly mirror real life. Most of the financial economy is kayfabe.
They "realized" it just for a short time.
Let's say I bought a 100-ounce gold bar in 1965, when gold was $35/oz, for a total price of $3500. Let's say I sold it today at $4700/oz, for a total price of $470,000. That gives me a gain of $466,500.
And let's say that I regret it. I decide that I really want to hold some gold, so I take the $470,000 and buy another 100-ounce gold bar.
The situation was that I had a gold bar worth $470,000 with a taxable basis of $3500. Now the situation is that I have a gold bar worth $470,000 with a taxable basis of $470,000, and I owe the IRS taxes on $466,500 of capital gains.
TL;DR: Selling and re-buying the same asset gives you the accumulated gains, and resets the price basis.
The variation in gold prices in the time they carried out this exchange process.
So they had 129 tons of gold, and now they have 129 tons of gold and 11 billions of euros? Sounds like a good deal if so.
Edit: wtf is going on with you for downvoting a question…
They had gold worth X to the market but X minus 11 billion on paper. So when France accounted for its gold in euro terms they would say they have X minus 11 billion Euros worth of gold.
Now they still have the same amount of gold but they "realized" a gain of 11 billion. They don't have that much cash left after the repurchase but now they say they have X Euros worth of gold which is 11 billion more than before.
So no they didn't make a profit from this as gold is higher on both sides of the Atlantic than last time they did their accounting updates.
> worth X to the market but X minus 11 billion on paper.
Why was it worth “X minus 11 billions”?
Probably based on the price they paid for it or when they last did some kind of asset accounting to calculate the Euro value of all assets held
Welcome to the wonderful world of commodities trading.
It's just accounting terms. They have to show it in their annual reports (afaiu they have to take into accounts unrealized losses, and realized gains, it's the case for many companies as well -- eg it came up with some Bitcoin treasury companies).
No, it becomes realized when it is sold. They held a bunch of gold that appreciated in value. On paper, they became richer. By selling it that became realized. After that, they bought gold again (different type elsewhere but it doesn't matter). That did not make them any poorer; they just converted cash to gold.
No. Firstly the gain is to a certain extent a matter of accounting. The most accurate method of accounting is “mark to market”. So if you have some gold and you think in dollars, then every day you look at how much gold you have and you look at the price of gold in dollars, you multiply the two and the difference between that value and the value you got to the previous day is your “mark to market pnl”.[1] This means you have a very accurate valuation for your asset but the downside of this approach is that your pnl is very volatile as the gold price moves around. This is the approach taken for most assets by most wall st firms. In fact at JPMC and Goldman it’s not stretching a point too far to say mark to market is nearly a religion. In this methodology there is no such thing as “unrealised” pnl.
Another approach is “historical cost” or “cost basis” accounting. In this approach you officially hold assets at the price you bought them, and only realise pnl when you dispose of them. This means you don’t get pnl volatility from marking to market and then you get a big lump of pnl when you sell.[2] Until you sell or otherwise crystalize the pnl, the profit is “unrealised”, which is just an imaginary amount that you may or may not get but you look at in your brokerage statement and smile if it’s green or frown if it’s red. The advantage of this method is you don’t get the pnl volatility and you can wait until an advantageous moment to take the profits. The downside is if you want to, you can deceive yourself by holding these assets at a valuation that is unrealistic and store up pnl pain for the future. This methodology caused a lot of problems in the 2008 crisis with institutions holding bonds at prices that they could never hope to sell them.[3]
“Moving” the gold from NYC to Paris may not (for practical reasons) have involved actually physically taking the bars from one place to another. They may have found a buyer in NYC and then bought some bars on the IME in London and had them delivered to Paris. (This would clearly have required crystalizing the profit if they were holding them at historical cost). It sounds from a brief read of the article as if the bars were in some non-standard format so they may have had them melted down and recast, which would have required an assay and so would have triggered a new valuation, realising the profit. Assuming they were holding them at historical cost, which it sounds like they were.
[1] Technically, if you sell some gold during the day, then the pnl on the portion you sold is “trading pnl” and the pnl on the remainder is “mark to market” but whatever. It’s pretty much the same for the French reserve bank which has gold and thinks in EUR, except they not only have gold MTM pnl but also FX pnl in the EUR/USD rate (because gold prices in USD but they think in EUR).
[2] Or do some other event which requires valuation. There are rules about this kind of thing.
[3] When Lehman collapsed they had bonds marked at 100 that were trading at less than 40 cents. One weekend I’ll never forget I got a call from a very senior partner and was asked to value the European part of that portfolio as part of the US regulators frantic attempts to find a buyer for Lehman before the market opened.
Assets like this are one of the complexities in calculating national import and export figures.
For example, imagine there's some German-owned gold in a UK bank vault, the owners sell it to a UK broker who sells it to a Chinese investor? The physical bars don't move, but on paper it's been imported to the UK then exported.
But a lot of people looking at export figures are expecting to learn things about the manufacturing industry, and picturing exports as washing machines, cars and computer chips - which imply lots of well paid jobs for skilled labour. So the UK reports import/export figures with 'non-monetary gold' listed separately.
(The fact flows of gold are highly volatile allows a classic bit of political sleight-of-hand - if you include gold, UK exports are both up and down since Brexit, depending on the pair of dates you choose)
It's probably just a technical accounting update. Old assets are often kept valued at their buy price and not reevaluated every year to avoid taxes (Banque de France is not exempt from taxes). As they swap a type of gold by another and do a sell/buy action, the new gold is valued to current market price while the old one was valued in accounting at an old value.
They had a deficit last year, so they can probably avoid to pay tax this year by balancing last year loss with this year profit.
The concept of "paper" assets isn't specifically about whether you hold physical custody of the asset, its whether the asset exists at all.
If the US holds 100 tons of gold on behalf of another country and possesses that full amount, it isn't paper gold.
Derivatives are where paper assets come into play. You buy the right to own 100 tons, for example, and whoever owes you that either owns only a fraction of their total liability or plans to buy it when delivery is requested. That's an over simplification of a much more complex market, but the key is that "paper gold" owed doesn't exist in the full amount.
As @somenameforme wrote:
[] they sold their 'non-standard' (seems to be bars below the modern purity standards) US reserves, and replaced them with new reserves purchased elsewhere which are now stored in France. As the price of gold continued to rise as they did this, they ended up making a bunch of dinero while also centralizing their reserves.
sounds like a gain to me.
A gain of $15b? That's roughly the value of 100 metric tons of gold, remarkably close to the 129 tons that the article says was moved... did they double the value of their gold?
When something is "realized" is a matter of accounting. It means to make the change, they sold the gold fo currrency, then bought it back. For many of us, realizing a gain is when taxes happen, though I'm not sure what it means for a nation state.
https://www.investopedia.com/terms/r/realizedprofit.asp
So they could sell it again and buy it again and realise another $15b?
No, there wouldn't be any gains to realize — unless the gold price went up since they bought it, of course.
If you buy something for $10 and sell at $15, you realized a gain of $5. If you then buy at $15 and sell it at $15, you realized a gain of $0.
That's an orthogonal matter (if the gain/loss was calculated correctly).
But they didn't just move gold bars around, is my point, and in what they did (sold, rebuy) there indeed was an opportunity to make a gain.
> This is not gain at all. At least in theory: You own some tons of gold at the start of the process, you have the same tons of gold at the end of the process.
I see a lot of comments like this but I just can't get my head around what you are trying to prove (or disprove).
Every definition of gain (or loss for that matter) implies that the same amount of _something_ is now worth more (or less) than when you bought it.
Following you logic, if I buy a share of MSFT at $10, sell it for $100, there is no gain because I still have 1 share of MSFT?
but you sold it...
(I know share rehypothication exists, but it shouldn't)
Even if you rebuy it at $100 it's the same, your profit didn't change, you just exchanged cash for an asset.
Before you sold it you had unrealized gains, after you sold it you had realized gains, after you bought it again you have the same gains but materialized as shares.
Paper/virtual gold perhaps bought ages ago at a far lower price point, now turned into real, solid gold in parity with today's price point. To me this sounds like the implied gain.
If it were that simple, the gain would be much more. Gold sold at $35/troy ounce then; over $4000 now.
EDIT: Wow, gold prices!
> The only real gain is that you have gold in the US custody and the US can be tempted to just use it without telling you anything.
What if you're at war, you can't risk to get your gold out and the US doesn't sell you anything because.. you can't pay?
If your solution is to "write France's debt on a piece of paper and hope they honor it", I've got some news to tell you about the system you just "invented."
It's more of a loss for the USA, which IMO is the unwritten point of the article.
France upgraded their gold bars to a new standard and as they were doing that, gold has appreciated massively in price, so France has the new shiny easier to trade bars, and the USA has the old harder to trade bars.
They can be melted and brought to the modern standard, which is what they did with the rest of their holdings on the old continent. They sold these only because it was cheaper than transporting it.
I doubt recasting them is cheap?
> This is not gain at all. At least in theory: You own some tons of gold at the start of the process, you have the same tons of gold at the end of the process.
Correct. A better way to put it is you shorted the USD. Which is a smart move at any rate. So a gain indeed.
https://news.ycombinator.com/item?id=47659007
The article isn't saying they magically created value out of nowhere
which can be the difference between losing that entire amount or gaining it, and in this situation with this America, this is a big win if they manage to get it back in fact, if it hasn't been stolen or sold already
u mad bro ?
Is anyone here actually reading the article? Yes, they really made a gain of $15B:
> But instead of refining and transporting the gold, it opted to sell the bars and purchase new bullion in Europe. […] Due to rising gold prices, the move helped the bank to generate a capital gain of 13 billion euros ($15 billion),
This doesn't make sense. If they first sold the bars held in the US, then the gold prices rose, then they bought gold in Europe, how the hell did that amount to a capital gain of $15b? How exactly do prices rising over the course of the process lead to these $15b?
First thought: Maybe they bought the gold first? Or the gold price was at a temporary high when they sold it?
Second thought: The numbers don't seem to check out: 129t are 4,147,456.307 troy ounces (1 troy ounce = 31.1034768 g). The total gains of 15e9 USD would thus correspond to gains of $3,616.68 per troy ounce, which seems excessively high, given that today's gold price is at ~$4,712. Even if they sold everything at the current all-time high of $5,589.38 on January 28 (and that's a big if), they would have had to buy for not more than $1,972.70, a price we last had in fall 2023.
They must have had an exceptional crystal ball!
Unless their cost base was around $1000 per troy ounce or less, as it was before 2010.
Imagine they bought the gold in the US for 1b and sold for 16b. Yes they turned around and purchased 16b of order gold immediately but there's was still a transaction where they sold an asset for more than they bought it.
If you bought your house for $500k 20 years ago, sold it today for a million, then bought it again tomorrow for a million, would you describe that to your friends as having just made $500k? Like yes in the most pedantic technical accounting way it's a gain. In spirit I would call this an unrealized gain
No, you’d remark that your house has appreciated in value over the past 20 years. But you wouldn’t have realized any of that gain until you sold the house - the point being that the realization is the actual taxable event, which is why it matters from the pedantic technical accounting POV. The fact that you turned around and bought another house just means you’re doing something new with your realized gains. Now you have a new cost basis. Maybe that’s what you’re saying with “unrealized gain” though.
Sure in the spirit it's an unrealized gain but wouldn't the tax man consider it a realized $500K capital gain? seemingly this is would be the more appropriate way of categorizing it?
No but I read the article and that was the way it described the gain.
Gold is down 10+% since its recent peak. They likely sold then and repurchased later.
Then they made money thanks to gold prices fluctuating, not thanks to gold prices rising?
And how does a 10% market shift lead to gaining $15b, roughly the value of 100 tons of gold, from the sale and re-purchase of 129 tons of gold?
This math ain't mathing.
It's more that the english ain't parsing, for some at least.
The mining.com quote is classic weasel phrasing, seemingly meaningful yet disturbingly ambiguous:
So, the move helped the bank generate ...Just as, say, one guy helped four others push a car back up on the road.
We've been given, accurately or not .. likely true, figures on how the bank did over a period, we've also been told the gold movements helped with that ... so they almost certainly kicked in at least $1.
Other costs? Deviations in the actual figures from the estimates we're using here? 100 is not a million miles away from 129.
Doesnt selling stuff publicly somehow reduce the price for basically all the rest?
Dumpling $15B on the market should lead to a drop. Anyway, the gold price is not always going up.
The claim is that rising gold prices lead to gains of $15b. As in they started with 129 tons of gold in the US, then they sold that and bought gold in Europe, and in the end, due to rising gold prices, they had 129 tons of gold in Paris plus $15b extra cash. Please explain a hypothetical course of events which makes this plausible.
Keep in mind that 129 tons of gold is worth just a bit more than $15b, so small market fluctuations on the scale of 10% isn't enough by itself.
They purchased 129 tons of gold in Europe. Their asset position did not change: they converted cash to gold of the same value.
They then sold the 129 tons gold in the US vaults for $16 billion. That gold was originally purchased I'm guessing many decades ago for $1 billion. The have a book profit of $15 billion and still have 129 tons of gold.
They captured some of the appreciation in gold value as a realised profit on their books.
Their balance sheet did not change, just their income statement
Very succinctly stated, thank you!
Gold prices probably went up due to turmoil in middle east.
The US gold would have been on the books at the original purchase price, so something like US$35 from 1910 (when a penny had a purchasing power of 38 cents now). Having deemed it more efficient to sell that gold and buy the same amount to replace it, the new gold is on the books at the 2026 purchase price. As the 2026 money price is far higher than the 1910 price, the value on the books shows a dramatic realized capital gain.
No gain would have shown for the gold that was simply moved, even though in this case the buying and selling was simply a more efficient way of doing the equivalent of moving the gold.
Gold that was simply moved wouldn't show the same gain.
That makes more sense, thank you! Though do gold assets on the books really never get adjusted? I guess that's up the central bank to decide but I would find it surprising.
It's the rules of how they must account for the value of the gold they have. Gold is valued at the price paid. Then, it is valued at the price sold. If there is no sale for more than a century, it stays on the books at the price paid. Once a transaction happens, the numbers update. Then, the gain that everyone knows is there is 'realized'. It's like if you mined Bitcoin in the early days. Your gain is only 'realized' when you actually sell it. Until then, it is only theoretical.
Mark-to-market accounting systems are one way to deal with this quirk, but they create their own issues.
What I was trying to get at is that there are other ways to update asset valuations besides daily (market-to-market) and once (price paid) – those are just the extreme ends of a spectrum. What makes sense really depends on the asset class and how long you're holding the positions. As for "It's the rules", I'm aware that there are strict accounting rules for companies and regular banks, but do those really apply to the central bank in the exact same way? (A central bank typically operates on a much longer time scales.)
If the central bank doesn't follow rules, who would trust it? The central bank's entire purpose is to put national trust into individual banks; both assuring investments (accounts) and establishing base (prime) loan rates.
A central bank answers directly to the government, not the judiciary. But it still answers to power, and follows established rules.
I'm not saying it shouldn't follow rules, I said the rules might be different.
A balance sheet becomes pointless if some assets are valued at today's prices, while other assets are valued at their price from 100 years ago.
Mark to market versus mark to book accounting for central bank gold reserves is an endless source of crank adjacent debates.
Did they buy before selling? Otherwise that doesn’t make sense.
The gold price is fluctuating. It doesn't always go up.
Sell at high, buy at low?
You sell in country A and buy the *same quantity* in country B. You were just lucky that the gold you bought a century ago was rocketing to Mars.
I think the confusion is that both statements can be true depending on what you mean by "gain"
Actually reading the comments first because the page isn't loading for me.
Is that what led to gold price falling?
Same amount of gold was sold and bought. So, presumably not.
This article is poorly written. No new wealth was created.
They monetized an existing accounting/revaluation gain by selling older, non-standard bars and replacing them with compliant bars, while keeping the overall gold quantity unchanged. That is not the same as "we moved gold home and earned $15B on the move."
In simple terms:
- You buy x of gold at $10
- You sell it much later for $100
- You made a profit of $90, and you hold $100 of cash
- You rebuy x of gold for $100, back to the same gold exposure, but on the books, you have $90 of profit
I don't get your point. Gold price increased, the gains were unrealized, now they realized when they rolled to a new position. The only nitpick would be that they did not mention the benchmark rate, so it's hard to guess the absolute gain.
What is poorly written or misleading here...?
That just looks like a normal capital gain to me.
The article even says exactly that:
"Due to rising gold prices, the move helped the bank to generate a capital gain of 13 billion euros ($15 billion), bringing it to a net profit of 8.1 billion euros for the 2025 financial year after a net loss of 7.7 billion euros in 2024."
I would have thought the audience here would understand something as straight forward as a capital gain.
https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
Capital gain and losses are when you need to pay taxes. If you sold 100K of SPY that you bought for 10K actually, and bought it back (It is a gain so there is no wash sale) immediately, you need to pay taxes for $90K. This is just an exchange based on the comments I am reading.
No, capital gains are simply the amount you earn when selling capital for profit. They may be taxed, or may not be taxed, depending on the country or location they occurred in.
What is the benefit of realizing the gains for France? They had gold, they still have gold. They don't pay tax on their gold or gains.
I don't think they cared about realizing the gains. They just wanted to roll to a new position on higher standard ingots. It just so happen that it meant selling/buying, which realizes the gains.
I think the GP was saying that there was no gain. France has the same amount of gold they did last week. The whole article is like saying "holy shit, france has the exact same amount of wealth they did last week!"
Did you read the article at all? Or just the title? The article is about bringing gold back to France by selling US bars and buying new bars in Europe. The alternative would be melting the bars down and recasting them to the new standard.
The capital gain is just a by-product, standard financial stuff, but apparently broke HN readers brains.
I did read the article, thanks for asking.
Sounds like you agree with me, France has the same amount of wealth in gold that they had last week.
I don't care about that. That's not what the article is about.
>> The article is about bringing gold back to France by selling US bars and buying new bars in Europe. The alternative would be melting the bars down and recasting them to the new standard.
> Sounds like you agree with me, France has the same amount of wealth in gold that they had last week.
What did I miss?
Good for France to relocate gold back to their own territory, but, uh, how can this result in a 15 B gain?
"The overall size of France’s gold reserves still remained unchanged at roughly 2,437 tonnes, which are now entirely held at the BdF’s underground vault in La Souterraine."
Is this some special form of French accounting, where the gold becomes more valuable when it returns to French soil?
It's gold only if it comes from the Dore région of France. Otherwise it's just sparkling metal.
That accent somehow migrated two characters too far.
Nah that's how it's spelled in French.
True, but ‘Doré’ means golden, and would make for a better joke.
On the other hand, Dore is an actual toponym.
https://en.wikipedia.org/wiki/Monts_Dore
The French part in that sentence should be the name of the region (eg Doré(e) ), not "région", and if you wanted to use the French spelling of "région", you'd have to say "région Dore".
Using the French spelling of région but the wrong word order doesn't make sense.
Ahh I see, thanks.
There is no joke so funny and trivial that HN can't overthink and criticize it.
Above all, we want our comedy accurate.
True connoisseurs prefer the metal from Lingots.
It's in the terroir.
Better than keeping gold in the tiroir.
Over about a year they sold their 'non-standard' (seems to be bars below the modern purity standards) US reserves, and replaced them with new reserves purchased elsewhere which are now stored in France. As the price of gold continued to rise as they did this, they ended up making a bunch of dinero while also centralizing their reserves.
The French gold originally deposited by France in US reserves in the 1950s was of the exact same purity as the French gold now, what is meant by "non-standard" just means "not stored in France".
If it was a lower purity, then when they sold the 129 tons, they would not have obtained 129 tons of "higher purity" gold and still turned a profit. They would have gotten fewer tons of gold. Your logic has the wrong sign.
Also, the fact that gold prices are rising means when France sold the gold and then purchased it later, the higher price to obtain the same quantity of gold would mean they incurred a loss, not a profit. Here, too, your sign is wrong.
Finally, at current prices, 129 tons of gold is worth $19 Billion dollars in total. It seems hard to believe that short term price declines (which is what is needed to turn a profit) would be such that gold fell over 80% in value, which is what would be needed to sell 129 tons of gold, then wait a while and buy 129 tons of gold, and end up with a profit equal to over 80% of the price of gold in question.
Moreover, rising gold prices would cause the French to earn a loss, not a profit
> As the price of gold continued to rise as they did this,
Seems counterintuitive to me. This would only make gains when they bought the new gold before selling the old, or when there's some arbitrage going on between Gold/USD, Gold/EUR and USD/EUR.
If they first sold the old for USD, then bought the new for USD, with a rising gold price, they'd miss the price-gain during the time between the trades, when they held the USD. It'd be a loss, not a gain.
If there's some arbitrage going on, then I highly doubt that brings $15B gain. The differences would have to be huge.
I think the (author (AI)) writing that article is simply mixing up stuff. I think this gain is not a cause-effect of the conversion, merely the gains from rising gold prices on the gold it holds over that period.
The source is a press conference where they state the total amount and total value of gold stored hasn't changed. In le figaro they report the profit is due to variation in price between the different transactions. Which seems to be a polite way to say they took exceptional risk.
> In le figaro they report the profit is due to variation in price between the different transactions. Which seems to be a polite way to say they took exceptional risk.
Nah it's just regular realized gain (delta between acquisition price and selling price).
https://www.banque-france.fr/fr/actualites/resultats-2025-de...
(so it's kinda irrelevant, it's just they have to put it in their books)
They repatriated 129 tonnes in total, its was absolutely impossible to make $15B from that since that’s what 129 tonnes are worth in total more or less.
They didn't repatriate the gold in the sense of physically moving it from the US to France. Instead, they sold the gold that was held in the US and used the money raised to buy gold from other sources, which is held in France.
Different gold, and two financial transactions, accounts for the financial gain.
Yes but the article implies that they somehow made 15B in profit by selling the gold in US and buying an equivalent amount which can’t be the case.
What happened was that
a) they bought the gold long time ago for basically nothing and had it on their books valued at basically nothing
b) they sold it now (in the US) for around $15b and thus for accounting purposes realised a $15b gain
c) they bought it back (in France) for around $15b and will have it on the book now valued at $15b.
The fact that the gold price rose over the course of b) selling and c) buying doesn't matter (despite what the article implies). That the gold price rose between a) the original purchase and now b)c), that's what resulted in the profit.
Well they has 129 tonnes in US which happens to be wroth around $15B or so. Probably the author has no clue what they are talking about and grossly misinterpreted..
I don't understand this. Did they increase the overall amount of gold they held?
Sold it at the peak, and then bought it locally a few months later.
First sell the gold, then buy same amount at a slightly lower price a bit later (on average)
> the price of gold continued to rise as they did this
This would mean they sold low and bought high, right?
It’s because they’re using European mathematics. You wouldn’t understand if you’re American.
In reality the article is attempting to account for a capital gain pnl accounting for taxes.
I'm not sure the central bank is paying capital gains taxes?
price of gold dropped from $5500 to $4600 in the last few weeks then came back. all is possible
Then they didn't make money as a result of the price rising, which is what the original commenter and article claimed.
Usually that's how you want your selling and buying combos to be...
But the gold price has been rising (on average) a lot over the period July 2025 to January 2026
From the annual report, it looks like the headline number (XXB gain) is just because it's realized capital gain (which due to their reporting requirement appears in their annual report, unlike unrealized gains).
They have ~same amount of gold between both years and it doesn't look like they took extra market risk.
Impossible to make anywhere close to that amount since they only sold 129 tonnes
They sold the existing holdings and bought new of equivalent weight(?), so somehow they ended on profit on those moves.
The profit is just realizing the gains (resetting the cost basis for accounting purpose).
My guess is they buy before selling. An increasing market with a large buy might increase enough to allow for a profitable sell.
On top of this, this is physical gold, so location of the gold must play into it as well.
Gold in hand is worth $15B in the bush?
It’s a paper gain created by mark to book accounting treatment of central bank goal reserves. Not a real economic gain.
The US could re-create the same “gain” by selling and repurchasing their gold. Fundamentally doesn’t really matter.
Central banks often hold gold on their books at very old prices
On that topic, video about the underground vault: https://www.youtube.com/watch?v=txyKenOq5Pw
Thanks for sharing this little hidden gem!
This seems to be the source article (Reuters, March 24): https://www.reuters.com/business/french-central-bank-books-1...
Germany also needs to pull all gold. We have 1236t there.
With the way the US is going that might just end up in a gold trump statue instead
But that statue would rotate to face the sun!
If Turkmenistan can have it, why not the US?
https://en.wikipedia.org/wiki/Neutrality_Monument
(Though it no longer rotates.)
> Germany also needs to pull all gold. We have 1236t there.
They had better act fast, before an executive order prevents that from ever happening.
US also has gold reserves and investments in Germany. They can be seized.
The real question is who has more invested in the opposing country
Would be good to not depend on the US that much any longer, since they have proven to be such an unreliable "partner". Even in a non-Trump future one cannot rely upon some future election not resulting in some similar disaster. Better to pull out, before some hothead gets weird ideas about that gold.
Maybe the fact that US soldiers and military bases exist inside Germany's borders is slightly more important than where the gold is. First regain your sovereignty, I'd say.
Nothing wrong with going for the low hanging fruit first.
Yes, close Ramstein and close Landstuhl, which were used for every US war in the Middle East in the last 30 years.
The USA is threatening to pull out of NATO anyway, so those might go away.
I am guessing that these bases are one of the last things to go. Would be a major diplomatic incident. But then again Trump creates those for breakfast, so who knows when we finally have had enough.
There was that whole spiel of Elon and Trump going to Fort Knox to see if the gold was still there, What ever happened to that?
I’m pretty sure Trump thought or heard mention of Minchin (first Trump Treasury Secretary) visit to Fort Knox in 2017 recent to that comment and just blurted out the first thing that came to his mind - like most of his off the cuff remarks, it doesn’t make any sense on close examination but appeals to MAGA supporters.
The doesn’t answer the question.
Like most off the cuff Trump remarks - it made headlines for a while but nothing came of it, it’s not in Project 2025 and Musk fell out of favor with Trump for whatever reason. The combo of Musk and Trump was just dry kindling for the forest fire of baseless conspiracy theories with no founding in reality - like “omg, government incompetence lost the gold, Biden stole the gold after Trump didn’t lose in 2020” since Minchin told Trump what he saw in 2017 and Minchin posted interior photos of Knox with his wife at the time on social media. Since it disappeared from news after the remark and there is no one in current Trump admin who would pass up an opportunity for internet karma, a reasonable person can conclude it was just another bit of flooding the zone with information - credit where credit is due - several strategies executed by Trump that were outlined in Jacques Ellul seminal book - Propaganda.
The funny thing about this is that since 1945, France keeps and uses the majority of the gold reserves of 14 former French colonies in West and Central Africa and uses that power to make them use the CFA Franc, a currency pegged formerly to the French Franc but now of course to the Euro [1].
It's worth noting that the stated reason here isn't because of, say, US instability but rather "standardizing" the gold. It doesn't say what that means but I assume France is basically selling some New York held nonstandard gold to "standard" gold held in France. "Standard" here probably means a given size and purity. Yes, there are different purity levels to gold. So think the heavy bullion bars you see on movies.
[1]: https://www.brookings.edu/articles/how-the-france-backed-afr...
Not your keys, not your coins.
This doesn't make much sense as you would use something like this to keep your keys safe.
It's a trust issue. And trust and competence are inextricably linked.
Most of us with career-track jobs use electronic deposit to an account at a bank, and keep things there. The account is "yours", and the trust is established over time--most people using most banks continue having access to their deposit of record most of the time. When that fails, you get a bank run--which is systemically undesirable, but also ends with people not having "their" money. They thought it was theirs, but it turned out not to be.
If your bank started publishing poorly-written notices about how they'd terminate accounts and retain holdings for certain customers based on arbitrary behavior, and kept changing that definition, would you leave "your" money there--even if the only alternative were to purchase precious metals and lock them up yourself?
> 2. Improvement in income from non-monetary activities
> Net income from assets denominated in euro rose by EUR 2 billion, driven by an increase in outstandings. Income from assets held for own account rose by EUR 12.2 billion as a result of an exceptional item. In 2025 and at the start of 2026, while the volume of gold reserves remained unchanged, the Banque de France had to align a residual portion (5%) with technical guidelines, resulting in a significant realised currency gain. This exceptional foreign exchange income totalled EUR 11 billion for 2025.
> Net operating expenditure remained under control, falling to EUR 831 million from EUR 888 million in 2024. Since 2015, net operating expenditure has fallen by an average of 4.1% in volume terms.
> Overall, after transferring EUR 5 billion from reserves and booking a corporation tax charge of EUR 1.5 billion, net profit for 2025 totalled EUR 8.1 billion.
> A total of EUR 0.4 billion of this amount has been allocated to the special reserve, in accordance with regulations, while the remainder has been used to clear the deficit in retained earnings (EUR 7.7 billion) that was left after the allocation of the net loss in 2024
> After clearing these past losses in their entirety, the Banque de France’s net equity – comprised of own funds plus unrealised capital gains on asset holdings – is now extremely solid at EUR 283.4 billion, up from EUR 202.7 billion in 2024. The Banque de France’s net equity includes a revaluation reserve of state gold and foreign exchange reserves (RRRODE) of EUR 11.4 billion, to cover future monetary expenses
I assume that this increased equity makes selling bonds a bit easier?
From: “Net profit of EUR 8.1 billion, enabling the clearing of losses carried forward” https://www.banque-france.fr/en/press-release/net-profit-eur...
I doubt the claim, honestly. Such an institution would never buy and sell to trade the market, they probably never stopped being exposed to gold by buying and selling simultaneously and the 15b is the realized gain of the sold gold, which is only in paper as they still hold the gold.
> Such an institution would never buy and sell to trade the market
This is not what they're doing.
They're just re-asserting their sovereignty over their property, a smart move in the current geopolitical climate.
I'm actually surprised the utter dumbass they have at the helm over there managed to cook up such a smart move.
Good. The US is not to be trusted anymore.
Lol "anymore"
Vietnam war: i sleep
CIA regime change: i sleep
MKULTRA on its own citizens: i sleep
five-eyes global surveillance network: i sleep
orange man saying canada/greenland joining as the 51st state would be neat: real shit
That's a mild way to describe how the current administration antagonizes its allies
The keyword here is allies.
$15 B gains... Just to put things in perspective: France has a GDP of about 3.5 trillion USD and a public debt of 117% of that amount. $15 B is not even a drop in the bucket.
To add to France's problem: in 2024 the PIB growth was 1.2%, which doesn't even counter inflation. And it's been like that since 2008: inflation adjusted in USD, no growth (while both the US and China's GDP inflation-adjusted skyrocketed).
The EU, and the eurozone in particular, is totally losing the plot: 1 company in the top 50 companies by market cap, ASML (and it's not french).
One.
Charles de Gaulle was such an incredible man, nearly 60 years after his death he still keeps influencing the direction of France (for the better)
Feels like one of those stories where the headline makes it sound geopolitical, but the details are mostly about accounting and logistics
Yes and no. Even though the use of USD as reserve has been falling globally over time, there are a lot of news articles showing up on this site lately about divestment in USD.
So on the surface level this is politics in the sense that it marks the end of a long process between two countries.
Deeper, it is very political in that some entity wants to normalize and for us to be thinking a lot about the future of American isolationism.
At least they got their gold this time.
The last time they asked for their gold back Nixon "temporarily" ended the convertibility of the USD to gold.
It’s exactly the opposite. Last time France was trying to exchange USD to gold. This time France was selling gold presumably exchanging gold to USD in New York.
I wonder if someone in Fance recently saw the Die Hard movie where thieves robbed the Federal Reserve Bank in NY.
Site doesn't load for me. https://archive.is/ePH8u
lol at all the finance folks
This isn’t reddit. This is a technical forum. We talk about cool tech stuff.
The "BdF’s underground vault in La Souterraine" sounds profoundly interesting.
"La Souterraine" is underground, you say? :D
When is it correct to use “tonnes” or “tons”?
Not done for political reasons.
Unless one reads between the lines.
Of course not . absolutely definitely nothing to do with the mad king (who is great and handsome)
And winning athletes and sports teams don't go to the white house due to 'scheduling conflicts'. And Amazon paid $75m for a Melania documentary because they saw real profit and need there. And Qatar bought Trump an airplane because it was important for his work. And everyone nominates him for a nobel prize because he ends wars and doesn't get into wars (we're just in a special military operation atm).
Would it count as a "political reason" if their risk management calculations crossed a threshold where it's worth it to move the gold back? I imagine such calculations are done and revised all the time and account for the perceived stability and reliability of a country.
Russia's frozen assets probably were considered safe by the similar calculations. Everything is safe until it is not.
The gas supply from Russia was announced as secure* until it was not.
* mainly by Russia and people on their payroll that is.
I don't understand what point you are making.
Are you suggesting they did this for technical or economic reasons? Like what? Is the US charging an unreasonable storage fee?
I'd read the article, but the site seems to be down.
If you search Google for "France sells US gold for 13b euro gain" you'll find lots of results. The reasons provided across the various articles are:
1. The bars were of an old variety and therefore not standard tradable.
2. Transporting them, refining them, and recasting exceed the cost of selling kind #1 and obtaining kind #2
Here's one such link though it appears there's some primary source everyone is rewriting: https://www.rfi.fr/en/france/20260404-french-central-bank-ne...
It appears that the gain mentioned is a realization of their asset value. I would also speculate that what happened is that they wanted LBMA bars because those are a standard variety and therefore easily tradable. An arbitrary LBMA bar is generally fungible. I would also speculate that they held many bars in the US from ancient times. After 2008, they repatriated 200-ish tonnes and 'upgraded' them (which I would speculate again is 'ensured they were LBMA-standard').
https://www.moneymetals.com/news/2024/10/05/why-france-repat...
These articles all have the flavour of the game of telephone common in this style of article where the currency that the gain is in changes wording, the motivation seems to shift, and phrasing lacks real detail instead relying on 'upgrading' and 'refining'.
I wish there were a good LLM agent that were capable of tracing all this back to the real original source that spawned all these things, but the information environment is currently full of smoke and getting real news is quite hard.
I can't realistically conclude whether this was politically motivated or not. The original motivation is sufficiently strong on its own, but it is completely normal for governments to move something to be earlier, or to do a marginal thing if there is other gain.
Ground news?
They started the process in 2005 [1]. The goal has been to upgrade all their goal to modern purity standards (99.999% purity). The repatriation to France may have been done for national security reasons, but not political as in ideological.
[1] https://www.banque-france.fr/fr/actualites/resultats-2025-de...
What makes you say that?
> BdF Governor Francois Villeroy de Galhau said the decision to keep the new bars in Paris is “not politically motivated,” as the higher-standard gold bars it bought were traded on a European market.
Well they are probably just being diplomatic, there is no point in accidentally triggering the ape.
To be fair, it's an ongoing process started in 2005 and which should finish in 2028. I doubt there was much political (tho the whole tariffs stuff probably made their job/decision easier when the gold price started diverging between NY and European markets). At this point it was cheaper than flying the gold to CH for recasting.
(1784 tons moved to standardized holding over the years, 134 tons are now left to convert -- all stored in Paris)
"We do not do this as a political statement —we simply want our gold ingots to exist next week."
Still, a win does signal a dumb process behind the trade as the smart move would be to hedge with future options and/or futures.
But then again, maybe they did hedge the trade and it's just not the right time or place to report it.
Reading the article is what made him say that.
Looks like we're at the beginning of
FBRICS
EUBRICS, but it also includes Canada but not Russia and it's really more like "sane countries readjusting their politics against a mad ape".
good target for the Louvre thieves!
We in Holland should do the same but our government (especially the right wing VVD) adores the US so they never bothered :(
The netherlands as a whole should do this. Not just holland.
Oh yes that's what I mean. I don't like calling it the Netherlands.
Why not?
Oh there's just some stupid 'rebranding' going on. https://www.bbc.com/news/blogs-news-from-elsewhere-49921029
As I hate our government I don't play by their rules.
Besides, Holland is shorter and easier to pronounce.
I obviously don't have a horse in this race, but this seems... more correct this way? And with Holland being a region (or two) and not the majority of the territory, how do the Dutch not living in Holland feel about it? It would seem like referring to Canada as "Québec", way to piss-off the non quebecers...
We don't really see it that way. I mean some people do, but not the overwhelming majority. For most Dutch people "Holland" is totally fine even if they're from Brabant or Limburg. In fact until recently the country 'marketed' itself as Holland internationally.
The Quebecians also inherited the chauvinism of the French (similar to the Wallonians in Belgium) so for them it's a huuuuge issue. But we don't really have that kind of nationalism.
I kid you not one time I saw the Netherlands spelled as: The 'Neanderthals' . I had such a good laugh. Almost choked on my coffee.
I'm curious about this too. I thought saying "we in Holland" was equivalent to "we in England" rather than "we in the UK". Is it acceptable in the Netherlands? (Or maybe just in Holland proper?)
I just called them the Dutches. lol
> Oh yes that's what I mean. I don't like calling it the Netherlands.
it was tongue-in-cheek dude.
literal people are a hoot.
True everyone loves hooters :3
Considering how Project2025 declared Europeans as enemy, it really is time to focus on more reliable partners than the current (and most likely future) USA version. Trump is a war-president - when he babbles about what Project2025 tells him to say, he stumbles over his own lies increasingly so, most likely because his brain no longer works that well. The recent "we can not extend health care and social care because we must wage wars" was kind of a slip-up of the real agenda - not that this is a real secret either, but even folks who voted for Trump thinking he cares about him (as if billionaires care about other people ever), should now realise the path the USA has decided to walk. ICE shooting down US citizens also show this - you protest, you get shot.
It has more to do with Putin than any of that. Trump says he and Putin “went through a hell of a lot” together. Values inverted at last year’s Munich security conference, and the US advised Europe to just lay back and take it. Then, Greenland.
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