What does the world come to when one of the largest, oldest insurance companies on the planet has decided that gold – yes, gold – is the best insurance against a monetary catastrophe?
That’s what I thought a few weeks ago when Munich Re, one of the world’s 20 largest financial services companies, said it kept bullion and money in the company’s vaults out of disgust for the European Central Bank (ECB) and its negative interest rate policy.
I mean, once the accumulation of gold was the realm of the crowd of table hats – think of Scrooge McDuck sitting in his bunker, counting down Looney and Krugerrands.
Saying “I like gold” used to be an alternative, and a little “there”. Like vinyl albums and a pot, gold is now part of everyone’s personal stock.
Okay, for me do it two out of three. But you realize that gold goes mostly.
Or maybe, more precisely, the main direction is starting to go for gold.
Munich Re, mind you, has been around for a long time.
Founded in 1880, it has undergone nearly 150 years of disaster. The company paid the inflation-adjusted equivalent of $ 150 million for the 1906 San Francisco earthquake. It survived the loss of its operations in the United States at the beginning of World War II, surviving the Third Reich and devastating Europe with war. When the Twin Towers received a blow, Munich Re paid nearly $ 2 billion in claims.
But, according to the company, negative ECB interest rates could be the biggest disaster he had to prepare for.
“Everything is out of control here,” Munich Re CEO Nikolaus von Bomhard told reporters on March 16. “This is the official end of monetary policy.”
Oh. Strong words coming from someone in a harsh world, no nonsense, global reinsurance at $ 570 billion.
Gold: Cash Accident Insurance
Herr von Bomhard did not finish. He warned of “devastating side effects” and “massive redistribution from poor to rich” as Europe’s economy bypasses sewers.
He then added, “The government can’t just let this happen!”
But it happened. And it is.
The Munich Re solution? Upload gold and cash and store them in the company’s own vaults.
By the standards of a company the size of Munich Re, the amounts are not very large. He withdrew $ 11 million in short-term deposits from the bank (saving, according to my estimate, about $ 44,000 in ECB “penalty interest” by 0.4%).
And von Bomhard said the company is already building its position in gold, although it has not given specifics. The Munich Re annual report for 2015, however, states that it contains $ 331 million.
So is Munich Re just trying to make a statement about the ECB? Is this a real strategy to combat negative central bank rates?
Von Bomhard told reporters it was both, “We’re just trying, but you see how serious the situation is.”
The rest of Germany’s financial establishment is also a cause for concern. The chief economists of Germany’s largest savings banks warned the ECB of its “hasty monetary policy” in an emergency communiqué earlier this month.
And thanks to negative interest rates, these savings banks are beginning to think about another radical idea: to keep in their vaults bales of euros in paper currency, rather than storing them electronically in the ECB (where money will be fined at a negative interest rate).
What impresses me the most is that the decisions that these large financial institutions are trying to make are the same topics we have been writing about for a long time: get a good safe and do not trust that your bank will always be near you …
And, yes, yes – buy gold, because the main crowd understands that the alternative wealth store is not so “there” after all.