
Texas Repatriates Gold at Federal Reserve in New York to Texas - randomname2
http://gov.texas.gov/news/signature/21038
======
Aloisius
There are still a lot of gold bugs out there who really dislike the idea of
fiat currencies and believe gold is an investment. Rick Perry, the former
Governor of Texas, for instance thought it was treason that the Fed printed
more money during QE. Fears of hyperinflation still seem to exist out there
even though we went through a brief deflationary period.

The gold in question actually isn't in the Federal Reserve in New York. It is
at HSBC in a private vault [1]. Texas bought the gold back in 2011 near the
height of the gold bubble [2]. It has actually lost quite a bit of its value
since then since gold prices are about 25% lower since it was purchased.

Sadly, the Governor seems to still say they are moving $1 billion in gold (as
opposed to $750 million). You'd think losing $250 million would be a big deal
for a state.

1\.
[http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/26/t...](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/26/texas-
wants-its-gold-back-wait-what/)

2\. [http://www.ai-
cio.com/channel/ASSET_ALLOCATION/UTIMCO_Bullio...](http://www.ai-
cio.com/channel/ASSET_ALLOCATION/UTIMCO_Bullion_Buy__Political_Statement_or_Prescient_Investment_.html)

~~~
nostromo
They haven't lost $250 million as they haven't sold their holdings.

For what it's worth, UT has the second largest US educational endowment now,
only second to Harvard. On the whole, they've done very, very well. It doesn't
surprise me that some of their investments are currently underperforming, as
that's a hallmark of a diverse portfolio.

~~~
mikeyouse
Paper losses are still losses.. If your holdings decrease in value by 25%,
they need to increase by 33% to recover their previous price.

Another way to think of it; You can borrow against assets using the gold as
collateral. Texas's borrowing ability is much smaller today than it was when
the gold was worth $1B. It's clear that they've lost some tangible value.

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rwmj
People still think gold is important? In the case of some massive catastrophe
(eg. famine, nuclear war), it seems as if the skills of people to recreate
society and technology would be much more important than some metal. I'm
really, genuinely interested to hear about why physical possession of gold is
that important.

~~~
err4nt
People still think money is important? In the case of some massive catastrophe
it seems as if the skills of people to recreate society and technology would
be much more important than some treasure.

In tbe event of a massive catastrophe, gold is worth MORE than money. Think of
it this way, name a civlization in history. Would you rather have $100 of
their currency now, or $100 worth of gold from that era now?

~~~
lisper
If the era is January 1980 I'll take the cash. $100 worth of 1980 gold (bought
with 1980 dollars) would be worth about $40 today.

~~~
pdq
Even though you are cherry picking a peak value, I don't follow your logic.

$100 worth of gold bought at $850/ounce buys 0.117 ounces of gold. Today that
gold (at $1181/ounce) is worth $138.90.

Your cash is worth $100.

~~~
lisper
I was using inflation-adjusted prices. I took the phrase "$100 of their
currency now" to mean one hundred 1980 dollars now, which would be worth about
$250. Otherwise the argument is a straw man. Any non-perishable commodity is
going to outperform an inflating currency in the long run. There's nothing
particularly special about gold in that regard.

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randomname2
Texas is not the first to do this. Over the last year, The Netherlands,
Austria and Germany have also started repatriating gold from the NY Fed. In a
way this points at a lack of faith in central bank trustworthiness.

I actually wonder about two things here:

a) What if every other state follows Texas' example and repatriates their gold
as well?

b) Perhaps a ridiculous hypothetical, but could this be the first step down
the road towards secession? They'd need that gold if they ever wanted to
establish their own country.

Also an interesting tidbit in the bill which may point at raising fears of
confiscation among the more paranoid-minded: the bill includes a provision to
prevent seizure, for private parties who want to avoid another 1933 style
confiscation of their bullion by Federal authorities.

~~~
krapp
Texas likes to maintain the appearance of being just a hair's breadth away
from secession at all times.

~~~
allendoerfer
It is a common political strategy. Once the focus of the people shifts from
the alternatives inside to the enemies and dangers outside, your approval
ratings rise. Another pro is that you can assign blame when something bad
happens as the public is already convinced of the common enemy.

Horst Seehofer does the same in Germany's Texas, Bavaria.

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sehugg
Germany has been repatriating a little gold too, since some custodians haven't
been very transparent in their auditing:
[http://www.bloomberg.com/news/features/2015-02-05/germany-s-...](http://www.bloomberg.com/news/features/2015-02-05/germany-
s-gold-repatriation-activist-peter-boehringer-gets-results)

~~~
m_alexgr
And Austria repatriated 110 tonnes from the Bank of England this year.
Venezuela 160 tonnes in 2011. Many other countries are moving in this
direction.

Good interview from the "father" of the German repatriation movement:
[https://www.youtube.com/watch?t=136&v=nmuNeQr276U](https://www.youtube.com/watch?t=136&v=nmuNeQr276U)

~~~
vacri
There's a bit of a difference between sovereign nations doing it and a state
moving stuff around domestically.

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raldi
One hidden cost of this: If Texas wants to sell gold to someone else, and it's
held at the NY Fed, it often just has to be rolled down the hall, which is
pretty easy from both a security and transportation point of view.

If they house it locally, they have to ship it to and from NYC or elsewhere to
exchange it with others.

~~~
Canada
> often just has to be rolled down the hall

Would they even bother moving it at all?

~~~
donatj
They don't. The bars have serial numbers and there's a registry of owners

~~~
mcphage
The Ingotchain?

~~~
hydrogen18
While your statement is meant to be ironic, yes that is pretty accurate. The
same way a vehicle has a title and there are records indicating all of the
owners, a bar of gold has some documents and a record of its owners.

~~~
mcphage
It's meant to be one of those ironic comments that still contain deep
insight—prompting you to think of me as a flippant genius, like Tony Stark.
_fingers crossed that it worked_

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snowwrestler
It's a move heavy in symbolism but with no actual financial implications
whatsoever--so, perfect for politicians.

~~~
hydrogen18
Actually, this will "create" jobs somewhere in Texas. So there will be some
financial implications for ~50 or so Texans.

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Redoubts
> keeping taxpayer funds from leaving Texas to pay for fees to store gold in
> facilities outside our state

Will they not still be paying for them through Federal taxes? If not, how do
the upfront costs compare to the marginal costs of using a National depository
shared by 49 other states?

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desireco42
I think this is a trend, it is wise move for Texas. It might be also a move to
make more independent Texas.

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mc_hammer
good for you!!

