A Sterling Crisis and the Adenauer–de Gaulle Threat
125
By November 18, 1967, the British Labour government of Harold Wilson bowed to the inevitable, despite strong pressure from Washington, and announced a 14 per cent devaluation of sterling from $2.80 down to $2.40 per pound, the first devaluation since 1949. The sterling crisis abated, but the dollar crisis was only just beginning. Once sterling had been devalued, speculative pressures immediately turned to the U.S. dollar. International holders of dollars went to the gold discount window at the New York Federal Reserve and demanded their rightful gold in exchange. The market price of gold began an even steeper rise as a result, despite efforts of the U.S. Federal Reserve to dump its gold reserves onto the market to stop the rise. Washington, under the sway of the powerful dollar-based New York banks, adamantly refused to budge from the $35 per ounce official valuation of gold. But the withdrawal of France, one of the largest holders of gold, from the Group of Ten gold pool, had intensified Washington’s problem. By the end of the year, Washington’s official gold stock had declined another $1 billion to only $12 billion. DE GAULLE IS TOPPLED The crisis gathered momentum into 1968, and between March 8 and March 15 of that year, the gold pool in London had to provide nearly 1,000 tons to hold the gold price. The weighing-room floor at the Bank of England, loaded with gold, almost collapsed under the weight. U.S. Air Force planes had been commandeered to rush gold in from the U.S. reserve at Fort Knox. On March 15, the U.S. requested a two-week closing of the London gold market. By April, 1968, a special meeting of the Group of Ten was convened in Stockholm, at Washington’s request. U.S. officials planned to unveil yet another scheme, creation of a new ‘paper gold’ substitute through the IMF, so-called Special Drawing Rights (SDRs), in an effort to postpone the day of reckoning still further. At the Stockholm gathering, designed to set the stage for official IMF adoption of the Washington SDR scheme at the upcoming IMF meeting the following month, France defiantly blocked unanimous agreement, with France’s minister Michel Debré reasserting traditional French policy on a return to the original rules of Bretton Woods. De Gaulle’s adviser Rueff had repeatedly proposed a ‘shock’ devaluation of the U.S. dollar of 100 per cent against gold, which would have been elegantly simple, would have doubled official U.S. gold reserves in dollar terms and would have been sufficient to allow the United States
Engdahl 02 chap08 125
24/8/04 8:17:44 am
