Chapter 65 4. Gold Mutual Aid Fund

In the process of abolishing the currency status of gold and silver, international bankers adopted the strategic policy of first silver and then gold.The main reason for taking silver first is that by the early 1960s, only a few countries in the world were still using silver as currency. Removing silver from the U.S. monetary system was only a partial operation, and the resistance and impact encountered were all limited. The problem with gold is much more complex and difficult.In the five thousand years of human social practice, no matter what era, no country, no religion, no matter what race, gold is recognized by the world as the ultimate form of wealth.This deep-rooted consciousness cannot be resolved by Keynes and others saying that gold is a barbaric relic.International bankers know very well that gold is by no means an ordinary precious metal. In essence, gold is the only political metal that is highly sensitive and deeply burdened by historical heritage. Stormy.Before the silver battle is over, the gold front must be stabilized.

Due to the large-scale inflationary policy of the Federal Reserve since the 1930s, the Federal Reserve has issued a serious excess of money, and the excess banknotes have inevitably pushed up the price of gold and silver in the process of chasing the limited gold and silver currencies.In the United States, the Treasury Department is responsible for suppressing the price of silver. Internationally, there must be a corresponding organization to perform the function of the Treasury Department, responsible for selling gold to the market, and suppressing the raging gold offensive at the beachhead.

The advent of the jet age allowed international bankers to meet frequently and discuss countermeasures in secret.The BIS in Basel, Switzerland then became the location of their famous Basel weekend conference. In November 1961, after intensive consultations, international bankers reached a clever plan. The United States and seven major European countries established a gold mutual fund. Its main purpose is to suppress the price of gold in the London market.The fund is funded by the central banks of the participating countries, with a total of 270 million U.S. dollars equivalent to gold. Among them, the United States is the richest and has the sole responsibility for half. Germany's post-war economy has taken off, and its wallets are also gradually bulging. In addition, the defeated countries feel that they are dwarfs A cut, so the amount pledged is second only to the United States, reaching 30 million US dollars.Britain, France and Italy are 25 million, and Switzerland, Belgium and the Netherlands are 10 million.The Bank of England is actually in charge of the trading, first advances gold from its own vault, and then settles with other participating central banks at the end of the month in proportion.

The primary goal of the gold mutual fund is that if the price of gold exceeds three to five.At $20, give it a head-on blow, and never allow one step beyond the threshold.Three five.The $20 price included the cost of shipping the gold from New York. All central banks participating in the fund pledged not to buy gold from the London market, nor from third countries such as South Africa and the Soviet Union, and the United States also pledged to lobby central banks of other countries to adopt the same policy wherever possible . The contents of all gold mutual aid funds were top financial secrets at the time, and like the traditional secret meeting of the Basel Bank for International Settlements, no written records were allowed, not a single piece of paper was allowed.Any agreement is reached verbally, just as the old Morgan completed huge transactions with handshakes and verbal agreements, and the verbal commitments of international bankers have the same or even higher binding force as legal contracts.

In the first few years of the gold mutual fund's operation, it was very successful, even so good that it was completely beyond the pre-imagined.In the autumn of 1963, the Soviet Union, a big gold producing country, had a severe agricultural harvest and had to sell a large amount of gold to import grain. All the gold wealth of the mutual fund, in 21 months, the gold ammunition of the gold mutual fund has skyrocketed to 1.3 billion US dollars, international bankers can hardly believe their good luck. However, the escalation of the Vietnam War led the Federal Reserve to continuously increase the supply of US dollars, and the flood of US dollars quickly swallowed up the surplus and most of the wealth of the gold mutual fund.Seeing that the general trend was over, France took the lead in withdrawing from the gold mutual aid fund. Not only that, the French government stepped up to exchange a large number of dollars, which were losing their purchasing power, into gold. From 1962 to 1966, France exchanged nearly Three billion dollars of gold was shipped back to Paris for storage.

By the end of November 1967, the gold mutual funds had lost a total of one billion dollars in gold, nearly 900 tons.At this time, the US dollar is already in a crisis of confidence around the world. President Johnson finally lost his composure, and he wanted to do something. Around President Johnson, there are a group of national bankers as his senior advisers. They have repeatedly instilled in the president the idea that short-term pain is worse than long-term pain. Take out all the gold belongings, flood the London metal trading market, solve the problem of gold's appreciation against the US dollar once and for all, and regain the world's confidence in the US dollar.Johnson accepted this almost crazy suggestion, and the entire gold reserve of the Federal Reserve was bet on this unprecedented scale of gambling.Tens of thousands of tons of gold bricks were shipped to the Bank of England and the Federal Reserve Bank of New York, preparing to teach speculators all over the world who are bullish on gold a painful lesson.If the plan goes well, the Bank of England and the Federal Reserve Bank of New York jointly sell gold in large quantities, causing a sudden oversupply of gold and bringing the price of gold below $35. A larger sell-off of gold.After the popularity of gold buyers is completely defeated, the gold is gradually bought back at a low price, and the gold is returned to the vault unconsciously.It's really a seamless plan.

Within a few weeks of early 1968, the plan was put into action.To the utter horror of President Johnson and everyone else, the market absorbed the selling of gold.In this campaign, the Federal Reserve lost a total of 9,300 tons of gold.President Johnson, who loves power but has lost a mess, soon announced that he would not run for re-election as president. In March 1968, the Gold Mutual Fund was on the verge of collapse. On March 9, Special Assistant to the President Rostow wrote in a memo to Johnson: The conclusion of all (the President's economic advisers) is: unanimously opposed to raising the price of gold in response to the current crisis.Most people tend to keep the gold mutual fund running, but they think it is difficult to coordinate with the European side, and it is difficult to restore calm in the market.So they think we end up having to close the gold mutual fund.Everyone's thoughts are rather confused. I don't know how to persuade countries that are not gold mutual funds to cooperate with us. They think that the International Monetary Fund may come in handy.They believe that we must have a clear idea of ​​where we are going and act within thirty days.

Comments: As you can see, the ideas are not very different from ours.After this weekend's Basel meeting (the Bank of International Settlements), we will have a more accurate picture of what the Europeans think. On March 12, in another memo, Rostow wrote: Mr President: Me to Bill.Martin (Chairman of the Federal Reserve, just finished attending the Basel meeting) understands the following points: 1. For changes in the price of gold, the British and Dutch may favor this option (keep the gold mutual fund).The Germans hesitated.There was strong opposition from Italians, Belgians and Swiss.

Second, he reached an agreement that everyone will add an additional 500 million US dollars in gold and promise another 500 million US dollars to ensure the continued operation of the fund. (Judging from the current rate of gold losses in the London market, these golds can only support a few days.) 3. Europeans realize that we will soon face very unpleasant choices.They are prepared to close the London gold market if they have to, and let gold go with the market. 4. Under such circumstances, the Ministry of Finance, the State Department, the Federal Reserve, and the President's economic advisers have been busy all day considering how to coordinate in the future once we announce the closure of the gold mutual fund.

5. We don't yet know about Fowler's (Treasurer) and Bill's personal views.We'll have an exchange with them tonight or tomorrow morning. My personal feeling is that we are getting closer to the moment of truth. On March 14, on the question of gold, Rostow reported further: Your Senior Advisors agree on the following: 1. The current situation can no longer continue, and I hope things will improve. Second, we need to hold a meeting of participating countries of the gold mutual fund in Washington this weekend. 3. We will discuss: the rules of gold during the transition period, measures to maintain the continuity of financial markets, and the intensification of special drawing rights.

4. During the transition period, we will exchange official central bank dollar holders at the original price. 5. If no agreement can be reached, we will suspend the official exchange of dollars for gold, at least temporarily.Then call an emergency meeting. 6. This will likely throw world financial markets into chaos for a while, but it is the only way to force other countries to accept a long-term solution.We agree that letting the price of gold go up is the worst possible outcome. You must now make up your mind whether to close the London gold market immediately. No matter what measures are taken, the fate of the bankruptcy of the gold mutual fund cannot be saved.On March 17, 1968, the Gold Mutual Fund Program finally closed its doors.The London gold market was closed for two full weeks at the request of the United States. At the same time as the Fed's gold fiasco, the situation in Vietnam changed dramatically.On January 30, 1968, the Vietnamese guerrillas simultaneously launched a large-scale attack on the capitals of 30 South Vietnamese provinces, even occupying some important targets in Saigon, and the ancient capital of Hue was also captured.Kissinger believes that although North Vietnam achieved a political victory in this offensive, it was the biggest failure of North Vietnam from a military point of view. In positional warfare, under the superior firepower of the US military, the guerrillas suffered heavy casualties.If the U.S. military launched a large-scale offensive against the main force of North Vietnam, which had lost guerrilla cover, the outlook on the Vietnam battlefield could be fundamentally changed.To Kissinger's regret, Johnson passed up such an opportunity.At this time, Johnson's disastrous defeat on the financial battlefield had already made him lose the confidence to persist in the Vietnam War. The fiasco of the London gold market plunged the decision-making elites of the United States into a general panic, and there was a fierce debate between the conservatives who insisted on the gold standard and the mainstream who demanded the abolition of the gold standard.But both sides believed that in such a chaotic financial situation, it was time for the Vietnam War to end. As a result, the direction of American news and public opinion began to undergo a fundamental change.On February 27, 1968, Cronkite predicted that the United States would fail.The Wall Street Journal asked whether the situation has messed up our original manageable goals?The American people should prepare, if not already, to accept the bleak outlook of events in Vietnam. "Time Magazine" said on March 15 that in 1968, the Americans realized that victory in Vietnam, or even a favorable situation, was no longer within the reach of the world power (the United States).At this time, the senators who had been asleep for a long time also woke up, and Fulbright began to question: Does the government have the right to expand the war without the consent of Congress?Mansfield declared: We are in the wrong place, engaged in the wrong war. On March 31, 1968, Johnson announced the suspension of bombing operations north of the 20th parallel. He also stated that he would not send large numbers of troops to Vietnam, and declared that our goal in Vietnam was never to eliminate enemy.He also announced that he would not run for re-election as president. The essential reason for the end of the Vietnam War was that the fiasco of the London Gold Battlefield led to the depletion of the financial confidence of the ruling elite.