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Jim Rickards continues:


“Germany had enough gold in 1923, they needed more and they got some more, ultimately from the United States.  But that’s how Germany reestablished itself.  By the way, Germany, people remember the hyperinflation, but they are unfamiliar with the fact that between 1924 and 1929, Germany was one of the fastest growing economies in the world.


The German economy did extremely well after that episode because they went back to gold.  But that left it to the other countries in Europe and what were they going to do?  In a series of conferences between 1923 and 1925, Europe established what’s called, ‘The Gold Exchange Standard.’  Now this was gold backed, but it was highly flawed because they picked the wrong price.


Ever since economists have disparaged gold and trashed the gold standard, they point to the Gold Exchange Standard of the 1920’s as not only a failure but also a contributer to the Great Depression.  Well that criticism is actually true.  The Gold Exchange Standard did contribute to the Great Depression and it was highly deflationary, but it wasn’t because of gold, it was because they got the price wrong.


They picked the old pre World War I price, but they ignored the fact they had printed enormous amounts of paper money to fight World War I.  So to go back to the old price you had to cut the money supply by 50%, and of course that’s deflationary.  So as I say, Eric, the problem there was not the gold standard but it was the price.  But the price was what it was and it was deflationary.  So people resorted to the currency wars....


Continue reading the Jim Rickards interview below... 




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When asked about London Gold Pool I & II, Rickards replied, “You know you talk about the London Gold Pool, London Gold Pool was a price fixing operation, gold manipulation operation conducted by the major G7 countries throughout the 1960’s...So that worked but it was like any price suppression mechanism -- it could work for a while, but eventually the gold drain was too great.


Of course ‘London Gold Pool II’ is metaphorical in the sense that ‘London Gold Pool I’ was official policy.  Maybe the individual purchases and sales were kept secret, but the existence of the gold pool, the existence of the concerted effort by the G7 was not a secret.  Now what they learned from that is when you challenge the market, the market can say bring it on, which is what happened when the London Gold Pool broke up in 1968. 


So today the effort is secret.  They are not public about it, not transparent about it.  They do operate through dealers, but that’s done in the utmost secrecy.  We get little hints of it here and there, some testimony, some letters and some footnotes in the BIS annual report.  So there are glimpses of it and of course we can see it in the price action.  But it’s very much a secret operation by the central banks.


But it’s not going to be any more successful at the end of the day, it never is because you’re fighting global markets.  This secret gold pool is going to be no more successful than the official gold pool of the 1960’s.  The question, of course, is timing and I don’t see it going beyond the next couple of years.”  


In this interview Rickards discusses his extraordinary new book Currency Wars: The Making of the Next Global Crisis.  He also lets King World News listeners know what to expect from London Gold Pool II, the ongoing currency wars and much more.   The KWN audio interview with Jim Rickards is available now and you can listen to it by CLICKING HERE. 


James Rickards is a Senior Managing Director of

Tangent Capital in New York and the author of

“Currency Wars: The Making of the Next Global Crisis”

Penguin/Portfolio Nov., 2011, to pre-order CLICK HERE.


© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


Eric King

KingWorldNews.com

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