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Gold and the Monetary System

Recently Marketupdate published (Dutch) a historical document about the European revaluation of gold reserves. In this article, we write about a conversation between Henry Kissinger and his advisors. Despite the depth of this article we were able to reach quite a substantial audience.

A lot of time is involved in translating such articles from English to Dutch, but for our English speaking audience we can just copy and paste such documents and provide a brief introduction! 😀

In the article below you read about the divergence arising between the United States and Europa during the seventies regarding the role of gold in the monetary system. To give a historical perspective on the situation: back in 1974 the US dollar was disconnected from gold, the goldprice was rising fast beyond the official $42,22 per troy ounce and inflation was on the rise. The oil producing countries wanted a better compensation for their oil, now the dollar was no longer backed by a promise to deliver physical gold. As a result, the price of oil started to increase as well, pushing consumer prices higher in both the US and Europe.

The US wanted to remove the discipline of physical gold OUT of the monetary system, while they received news from Europe about plans to bring gold back IN the monetary system at a higher free market price. This way, gold could be used in international settlements among European countries. Especially Italy and France, countries with both a large deficit and a large part of their reserves in gold, wanted to return to a system in which they could activate their gold reserve to settle debts with other European countries. But they were reluctant to do so, because of the artificially suppressed price of gold of just $42,22 per troy ounce.

A revaluation of gold was necessary for the European plan to work, but that would be against the interests of the United States. In the following article we can read how the United States analyzed this interesting situation. We have highlighted important parts of this document in green, while the most essential ones are green and bold.

Source Market Update

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