July 31, 2013
WeÂ previously showed hard evidenceÂ of the Bank of Englandâ€™s complicit hiding of the truth about the quality of Bundesbank gold stored in the Fedâ€™s vaults. A fewÂ weeks laterÂ in a â€œcompletely unrelatedâ€ action, the Bundesbank dramatically shifted its recent stance, and demanded that its gold be repatriated into its own vaults (and we now know the impact that has had on the paper-physical paper markets). However, in yet another one of theÂ â€˜darkest episodes in central banking historyâ€™Â theÂ FT reports, theÂ Bank of England facilitated the sale of gold that was looted by the Nazis after their invasion of Czechoslovakia in 1938.Â Of course, judging todayâ€™s central bankers by this ethical (and potentially criminal) behavior of over 70 years ago is unfair but it is notable that the pattern of whatever-it-takes and at-all-costs decisions, coupled with pervasive opacity and stark unaccountability, appear to have been formed a long time ago.
TheÂ Bank of England played a vital role in one of the darkest episodes in central banking history, facilitating the sale of gold looted by the Nazis after their invasion of Czechoslovakia in 1938.
According to aÂ hitherto unpublished history of the BoEâ€™s activities in and around the second world war, the UKâ€™s central bank sold gold on behalf of the Reichsbank â€“ which Germanyâ€™s central bank had seized from its Czech counterpartÂ â€“ after the UK government had frozen all Czech assets held in Britain following the Nazi invasion.
TheÂ episode has long weighed on the reputation of the BIS. However, what has received less attention is the role of the BoE in the affairâ€¦
It would appear they knew what the right thing to do wasâ€¦ butÂ politics meant ignore the ethics for the preservation of the status quoâ€¦
So just how powerful is the Central Bank?
â€¦theÂ UKâ€™s central bank prioritised the appeasement of the BIS over the British governmentâ€™s wishes to freeze the sale of Czech assets.
The history, written by BoE officials and completed in 1950 but never published, also records thatÂ the UK central bank sold gold after this date on behalf of the NazisÂ â€“and without waiting for the consent of the British governmentÂ â€“ on the back of pressure from the BIS.
The documents also show thatÂ Montagu Norman, then governor of the BoE, was opaque in his communications with John Simon, the chancellor at the time, when pressed on whether the central bank still held the Czech gold.
This episode did not go unnoticed in the US pressâ€¦
AndÂ the full archive is here: