So to those who continue to say that “gold doesn’t matter” because it hasn’t been used as an official asset in the monetary system for decades, I say give me a break. In fact, the reality of gold having been largely demonetized makes it an even greater threat going forward if the U.S. does not have all the gold it claims to, and other nations have more than they admit to.
Thanks to In Gold We Trust for bringing this to my attention. Choice excerpts are provided below, and breaks in the conversation are denoted with an “…” Enjoy.
Secondly, Mr. Secretary, it does present an opportunity though—and we should try to negotiate for this—to move towards a demonetization of gold, to begin to get gold moving out of the system.
Secretary Kissinger: But how do you do that?
Mr. Enders: Well, there are several ways. One way is we could say to them that they would accept this kind of arrangement, provided that the gold were channelled out through an international agency—either in the IMF or a special pool—and sold into the market, so there would be gradual increases.
Secretary Kissinger: But the French would never go for this.
Mr. Enders: We can have a counter-proposal. There’s a further proposal—and that is that the IMF begin selling its gold—which is now 7 billion—to the world market, and we should try to negotiate that. That would begin the demonetization of gold.
Secretary Kissinger: Why are we so eager to get gold out of the system?
Mr. Enders: We were eager to get it out of the system—get started—because it’s a typical balancing of either forward or back. If this proposal goes back, it will go back into the centerpiece system.
Secretary Kissinger: But why is it against our interests? I understand the argument that it’s against our interest that the Europeans take a unilateral decision contrary to our policy. Why is it against our interest to have gold in the system?
Mr. Enders: It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings—about 11 billion—a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control—
…
Mr. Enders: Yes. But in order for them to do it anyway, they would have to be in violation of important articles of the IMF. So this would not be a total departure. (Laughter.) But there would be reluctance on the part of some Europeans to do this. We could also make it less interesting for them by beginning to sell our own gold in the market, and this would put pressure on them.
Mr. Maw: Why wouldn’t that fit if we start to sell our own gold at a price?
Secretary Kissinger: But how the hell could this happen without our knowing about it ahead of time?
Mr. Hartman: We’ve had consultations on it ahead of time. Several of them have come to ask us to express our views. And I think the reason they’re coming now to ask about it is because they know we have a generally negative view.
Mr. Enders: So I think we should try to break it, I think, as a first position—unless they’re willing to assign some form of demonetizing arrangement.
Secretary Kissinger: But, first of all, that’s impossible for the French.
Mr. Enders: Well, it’s impossible for the French under the Pompidou Government. Would it be necessarily under a future French Government? We should test that.
Secretary Kissinger: If they have gold to settle current accounts, we’ll be faced, sooner or later, with the same proposition again. Then others will be asked to join this settlement thing.
Isn’t this what they’re doing?
Mr. Enders: It seems to me, Mr. Secretary, that we should try—not rule out, a priori, a demonetizing scenario, because we can both gain by this. That liberates gold at a higher price. We have gold, and some of the Europeans have gold. Our interests join theirs. This would be helpful; and it would also, on the other hand, gradually remove this dominant position that the Europeans have had in economic terms.
…
Mr. Rush: Well, I think probably I do. The question is: Suppose they go ahead on their own anyway. What then?
Secretary Kissinger: We’ll bust them.
Mr. Enders: I think we should look very hard then, Ken, at very substantial sales of gold—U.S. gold on the market—to raid the gold market once and for all.
Mr. Rush: I’m not sure we could do it.
Secretary Kissinger: If they go ahead on their own against our position on something that we consider central to our interests, we’ve got to show them that that they can’t get away with it. Hopefully, we should have the right position. But we just cannot let them get away with these unilateral steps all the time.
Full transcript here.
In Liberty,
Mike
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