The U.S. Federal Reserve in collaboration with the white house had forged a secret agreement in 1975 with the government of Germany who agreed to not purchase gold above the then U.S. government price of $42.22 per ounce. “I have a secret understanding in writing with the Bundesbank – concurred in by Mr. Schmidt – that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce.” At the time this document was sent it was labeled “Strictly Classified.” The price of gold in 1975 was selling on the open market between $160 to $175 per ounce.
The document revealing this gold price manipulation undermining the free-market was declassified September 15, 2009 from the Gerald R. Ford library but sat for four years after the declassification was stamped on the memorandum June 28, 2005.
The answer to the question “why” is revealed within the pages of the document itself. “Until we and other countries have forged a genuine consensus on the desired shape of the future world monetary system, we should not isolate the gold question and deal with it apart from other critical issues of monetary reform. Moving ahead on gold in the absence of such a consensus may inadvertently and dangerously prejudge the shape of the future monetary system.”
The outcome of the secret “shaping” by the Federal Reserve is evident today. The dollar is worth a small fraction of what it was then as evidenced by the sharp increase in the number of dollars needed to buy an ounce of gold.
What's interesting to note is that the Treasury's position on gold was not in alignment with the then Federal Reserve chairman Arthur. F. Burn's agreement with Germany. Several other developed countries were allied and “severe criticism” was assured in the document if the Treasury's position continued.
France was also not a supporter of the U.S. gold manipulation scheme and the document outlays several options to change that, “there is in my judgment a reasonably good chance of a “successful” negotiation in Paris next week, even if it proves impossible to win French acceptance of individual country gold ceilings and other aspects of the U.S. position on gold issues. The political pressures to reach agreement on increases in IMF quotas are great.” “I have consulted Henry Kissinger as to whether there is some political quid pro quo we might want to extract from the French in exchange for acceding to some part or all of their desired position on gold.” The United Kingdom, Japan, and some other unmentioned developed countries did agree to manipulate gold.
The document was sent to the Ford administration. Then Secretary of the Treasury William Simon, then Chairman of the Council of Economic Advisers Alan Greenspan, Henry Kissinger, then Director of the OMB James Lynn, and then Ford economic adviser Bill Seidman, were all cc'd on the memorandum.
The entire declassified document is here.
Victor Del Prete
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