Blood Lust by Alex Josey Read Free Book Online

to be expressed in European units of account, like
today’s SDRs and privileged landlords like Oxford colleges won the right to
insert commodity clauses into their leases. So much for gold’s eternal
verities!
    The age of the full gold standard in Britain
was extremely brief and it was shorter still in the rest of the world. During
the 19th century, world output expanded as never before, mostly accompanied by
falling prices. Productivity increased rapidly in this early stage of
industrialization, government expenditures (and services) were minimal, the
resources of new continents lay open to Europe’s surplus population, labour was
docile and so were commodity producers. These circumstances were not the result
of the gold standard—they were the circumstances that allowed the gold standard
to work. When these circumstances ceased to exist the gold standard was
abandoned, never to be tried again.
    Finally, a word by Mendelsohn about the
importance still attached to gold as a strategic reserve by defence ministries
more than by finance ministries. The evidence, he says, does not show that gold
has been particularly helpful in modern war. Britain financed only three per
cent of its net foreign purchases by the sale of gold during the Second World
War, fighting mainly on credit. Russia similarly fought mainly on credit and
aid, while Germany found the real resources of occupied countries more useful
than their bullion. The larger powers did not need gold and Czechoslovakia
provides the classic illustration of its futility for a small power. In 1938,
that country’s gold stock was transferred for safe-keeping to the Bank of
International Settlements, which lodged it in the Bank of England. The
following year, Hitler was recognised as the ‘Protector of Czechoslovakia’ and
the Czech gold was transferred to the Reichsbank. After the war, it was
‘returned’ to the Czech government which in 1975 was still trying to get the
money out of the vaults of the New York Federal Reserve Bank, where most of the
world’s gold is stored (not at Fort Knox).
    In 1979, Singapore was the sixth largest
importer of gold in the world market. Of an estimated total supply of 1,835
tons, the Republic absorbed 65 tons, or nearly four per cent. Working on an
average price of about US$307 an ounce, the approximate value of 2.1 million
ounces comes to about US$650 million.
    These figures were published in the review
of the bullion market by Samuel Montagu and Co. of London. The review said that
in the Far East in 1979 demand was 285 tons, about 75 tons higher than 1978.
The three most important markets were Japan, Hong Kong and Singapore. Hong Kong
merchants imported twice as much as they did in 1978 and most of it was thought
to have found its way to Taiwan, where there is a lot of hoarding. The report
also said that in Southeast Asia there were significant imports into Singapore
from Europe. Out of the 65 tons about 13 tons remained in Singapore. A
significant proportion of this gold moved to Indonesia, but during the second
half of the year considerable re-flows from Indonesia were noted.
    Total production of gold in 1979 was
estimated at 961 tonnes. USSR sales were estimated at 240 tonnes.
    Estimating world gold supply is very much a
guessing game.  Michael Brown, the chief economist at South Africa’s powerful
Chamber of Mines, expected global gold supply to the markets to fall to 1,650
tonnes in 1980 compared to his estimated 1979 total of 1,750 tonnes. This view
was based largely on a possible further cut in Soviet sales and cuts in
official sales by monetary authorities, such as the United States Treasury. The
South African mines were unlikely to produce much above 700 tonnes in 1980. All
bullion sales to world markets are handled by the South African central bank.
The companies can market Krugerrand gold coins up to a volume of one-third of
total gold output. A record 6,012,293 Krugerrands were sold in 1978 (192 tons
of gold). In 1979,