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Most of the public is still unaware of that the gold price is currently suppressed bygovernments and central banks in collusion with bullion dealers. Even fewer realizethat suppression of the price of gold has plenty of historical precedence. Thefollowing is the story of the London Gold Pool.
Originally published June 14, 2009 by Jake Towne. The article can be viewed at http://towneforcongress.com/economy/rip-the-london-gold-pool-1961-1968-1
"When gold speaks, all tongues are silent."
- Italian proverb This article will briefly review the history and aftermathof the infamous London Gold Pool. For those unfamiliarwith monetary history, let me quickly establish theevents framing the London Gold Pool.In 1933, the FED's monetary inflation caused the GreatDepression which was also America's first bankruptcy.FDR plundered the American people's gold and onemonth later outlawed the private possession of gold, anillegal act that existed until 1975. From 1933onwards,
A "gold bullion standard" exists when goldcoins are not minted and owned by the people, but largeinternational transactions with foreigners are handled ingold bar. However, the FED, America's central bank,continued inflating the monetary supply which debasesthe currency and likewise increases the foreigner'sredemption of gold. (
)Following the chaos of World WarII, the heads of the world's 44industrialized nations gatheredin New Hampshire, and made theBretton Woods agreement. TheBretton Woods agreement madethe dollar the world's reservecurrency, and stipulated that allmember nations' reserves had toconsist of either physical gold orcurrency convertible into intogold (domestically the privateownership of "monetary" goldremained a felony until 1975). These member countries thenhad a "
" and manipulated their currencies on their national level,often trying to devalue their currencies at the same or slightly higher rates than what thedollar was being devalued, or inflated, at. (
)
The Bretton Woods system began to break down very quickly. In the 1950s, the United Statesfound itself having to redeem vast sums of gold. In the recession of 1958, the FED created$2.25 billion of excess credit, which was redeemed by foreign central banks. This annual lossof 2,000 metric tons of gold still remains the largest known loss of gold in one year by anynation in history - currently, on paper the United States is still the largest official owner of gold at about 8,100 metric tons categorized as "
." (see note1)By 1971, President Nixon had declared America's second bankruptcy. The FED had inflatedthe money supply by too much to fund the Vietnam War and President Johnson's "GreatSociety," and America was no longer able to redeem foreign-held dollars into gold. The worldentered the twilight zone of freely floating exchange rates. In between 1958 and 1971, theseveral governments and central banks fiendishly created the London Gold Pool to suppressthe price of gold.
THE LONDON GOLD POOL
In October of 1960, gold trading on the London gold exchange reached $40/ounce, which was$5 higher then the central bank's target price. Rampant speculation that a Kennedypresidency would lead to more inflation, along with the building of the Berlin Wall and the U-2spy plane incident, triggered fears about economic stability. To curtail these fears, President Kennedy pledged in February 1961 that America wouldmaintain the official price to our foreign creditors, and the price of gold fell to $35/ounce.Fearing a relapse, the international bankers of the BIS and the FED-US Treasury secretlyformed the London Gold Pool. Each member of the Pool would pledge some of their gold tokeep the London market suppressed. The Bank of England would dump their gold on theLondon market whenever necessary, and at the end of each month the other members wouldreimburse the BoE in accordance with the percentage of the pool they owned. The memberswere:
•
50% - United States of America with $135 million, or 120 metric tons
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11% - Germany with $30 million, or 27 metric tons
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9% - England with $25 million, or 22 metric tons
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9% - Italy with $25 million, or 22 metric tons
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9% - France with $25 million, or 22 metric tons
•
4% - Switzerland with $10 million, or 9 metric tons
•
4% - Netherlands with $10 million, or 9 metric tons
•
4% - Belgium with $10 million, or 9 metric tons(
)By acting in secret, the governments hoped to stagnatethe market and keep potential buyers away. In 1962, aseries of events involving Soviet sales of gold led to achange in strategy by the Pool. They found themselves able to profit off the changes in goldsupply, and at one time in 1965 the Pool even reached $1.5 billion, or a five-fold increase over
the initial Pool gold. However, the Vietnam War expenses after 1965 combined with theFrench shipping its' $3 billion in gold from the New York FED to Paris, and leaving the Pool in1967 led to catastrophic losses. The
reveal the full extent of the centralbank's panic. Here are several excerpts:"The announcement on Thursday, December 7, of a $475 milliondrop [422 metric tons - auth] in the Treasury's gold stock seemedto have been accepted by the markets as about in line with priorexpectations of the costs of the gold rush following sterling'sdevaluation. What the market did not know, of course, was thatonly a $250 million purchase of gold from the United Kingdomsaved the United States from a still larger loss in the face of someforeign central bank buying... The logistical acrobatics of providingsufficient gold in London were performed with a minimum of mishaps, although the accounting niceties were still being ironedout."Of greater concern, however, was the fact that the drain on thepool was accelerating again... the measures taken by the Swisscommercial banks and by some other continental banks to impede private demand for goldworked quite well, although it was clear from the start that such measures could serve only asa stop-gap until some fundamental change was agreed upon. Persistent newspaper leaks--mainly from Paris--about current discussions on this subject and their reflection in gold marketactivity Monday and today pointed up the need for speed in reaching a decision. " (
)(
)On page
, the group then discusses placing "restraints on access to the London goldmarket" and it was commented that Italy and Belgium were "not prepared to stay in the goldpool indefinitely if that would mean continued substantial gold losses." The group did agree tothen implement "some program of restraints on demand, particularly in the London market,should be worked out; in the meantime, all of the participating countries were willing to stayin the pool... In particular, the British were concerned that limitations on access to the Londonmarket, by diverting demand elsewhere, would work to the detriment of that market which forthe past 13 years had been the world's principal market for gold." These excerpts also serve to remind us all that the central banks love their hold on the moneypower. However, from some of their perspectives, they may well believe they are simplydoing "what's best," blindly disregarding the fact that all of their interventions and controlsare only made necessary from their prior meddling with the free market:"Although the German case was the most striking example of central bank operationsfollowing the meeting in Frankfurt, the availability of forward cover into guilders and Belgianfrancs at reasonable rates had also helped to reassure the [gold] market." (
)"
, who had led the U.S. delegation to Frankfurt,made the necessary arrangements, and the group met with him in Basle yesterday.Meanwhile, representatives of the countries in the gold pool met in Washington last week tomake a preliminary review of possible additional measures to keep the gold market situationunder control. Not unexpectedly, the gold pool also was the main topic of conversation at theregular Basle [Switzerland, the home of the BIS - auth.] meeting on Saturday and Sunday, andit was discussed in detail by the governors on Sunday evening." (
) (see note 2)
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