This race to nationalize gold sped up again as the world struggled – and failed – to re-establish the classical Gold Standard after the big guns fell silent in November 1918. “The days of widely circulating [gold] coin were over,” as Green goes on. “By 1929, central banks held an estimated 92 percent of all ‘monetary’ gold.” The impact on politics, wealth and the world economy? It’s been little examined to date; today’s most ardent “gold bugs” fret more about central bank gold sales and loans than about how that gold ever wound up in government vaults in the first place. But nationalizing the world’s monetary gold stock saw governments take control of what had been freely exchanged as the final – and freely chosen – arbiter of wealth over more than 5,000 years.

And I don’t believe it was any coincidence that the “total war” of the 20th century first required a “total war” on freely held private wealth:

When the field guns withdrew and the poppies returned to north-eastern France in 1919, the economic disaster that followed only accelerated this nationalization of what had until then been privately-held money.

Gold was sucked into government vaults at an ever-increasing pace, while personal freedoms and liberty were vacuumed up by governments of all stripes – communist, socialist, national socialist and imperial. Mass unemployment, fascism and European re-armament saw a race to get gold and the power it brought under official control.

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No bureaucracy seized control of this wealth more urgently than the United States. One evil day in 1933 – and just ahead of the Nazi government in Berlin annexing gold from the vaults of Czechoslovakia, Poland, Austria, Belgium and Holland, as well as from the Jews it murdered across central Europe – the U.S. government actually made private gold ownership illegal, forcing people to sell their gold to the Treasury on pain of a $10,000 fine or imprisonment.

Not content with the tonnage he’d prized from American citizens, President Roosevelt then devalued the dollar, slashing its value from $20.67 to $35 per ounce of gold and thus encouraging foreign-owned gold to pour into Washington’s hoard at the new, higher price. All told, during the final nationalization of privately held gold that swept the world during the 1930s, fully 60 percent of all new central bank gold ended up in U.S. reserves.

The United States then acquired yet more gold during WWII, taking it from the British and Soviet state vaults in return for ships, tanks, food, boots, gasoline and warplanes. Its acquisition of gold continued even after the war, when “European central banks sold what little gold they had left to the U.S. Treasury for badly needed dollars to rebuild their shattered economies,” as Timothy Green explains.

At high tide, in 1949, the Treasury held more than 70 percent of all nationalized gold. Thus did the United States achieve the near-total annexation of the world’s monetary gold stock. It coincided with America’s financial and political preeminence worldwide – a dominance that continues today.

Inside the U.S., privately held gold remained illegal until 1974. Outside it, central banks hoarded dollars – just as in 2008 – alongside their gold. The two were fully convertible, after all, under the post-War Bretton Woods settlement…if only for central bank ambassadors, rather than private citizens wanting to swap paper for gold.

John Maynard Keynes – chief architect of the new “Gold Exchange Standard” – was so pleased with the potential wonders of this dollar-gold system, he twice jibed that the metal represented a “barbarous relic,” a prehistoric superstition that mankind would do well to abandon.

The world very nearly achieved that feat as the 20th century drew to a close. But only nearly.

P.S. Read on here for the first part of Adrian’s post on the demise of the gold standard. Click on the following link to see how to buy gold at a cheap price.

Source: Operation Meltdown, Part II: Hoarding for War, Vaulting for Victory

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