The CIA Chimes In On Gold Control; Highlights Historical Gold-To-Foreign Holdings Shortfunding

Tyler Durden's picture

After yesterday we highlighted a declassified document by the Department of State, in which it was made clear just how critical it is for the US to remain "Masters of Gold", today we present a comparable memorandum from the same time period (December 1968) this time by the CIA, which presents comparable key high-level gold-related deliberations by the then-administration.

Some of the key points:

We lose influence in world affairs whenever:

  • The dollar is weak in exchange markets
  • There is a major outflow of gold; and/or
  • We are obliged to pressure countries into holding dollars or giving us payments assistance

Our position can also be improved by action on the international monetary system itself to:

  • Decrease vulnerability to confidence crises
  • Increase world monetary reserves (liquidity); and
  • Improve tools for adjusting payments surpluses and deficits

With $33 billion of foreign dollar holdings ($16 billion in official hands) and only $10.7 billion of gold in the U.S. reserve, the risk is clear. To contain these pressures our strategy is:

  • To isolate official from private gold markets by obtaining a pledge from central banks that they will neither buy nor sell gold except to each other;
  • To bring South Africa to sell its current production of gold in the private market, and thus keep the private price down.

And here are the seeds for the need for a fiat currency: growing an economy when monetary supply (and, by implication, currency devaluation) is limited, can only pad the growth rate for the core economic entities so much.

Increasing liquidity


Trade won't be able to grow, and the system will remain vulnerable to speculation unless there is regular growth in the international money supply.

Gold can't provide the needed increase: industrial and speculative demand is too high. U.S. payment deficits can't either: foreigners are unwilling to hold more dollars when we run large deficits and unable to increase net reserves by accumulating dollars when our deficits are small.

Our strategy is to supplement gold and dollars with a new international asset, Special Drawing Rights (SDR).

And, of course, if the SDR does not work, the fall back reserve currency can always just be printed in limitless amounts, thus allowing massive liquidity-based expansion in the trade system, which will further allow the U.S. to grow its trade deficit to record amounts. Just fast forward 41 years.

Indeed, this document was presented before the gold standard was officially abolished. However, in the very near future Zero Hedge will disclose documents that highlight how even in the post-1971 world, gold was still perceived with the same liquidity management and "strategic control" interest as ever before.


h/t Geoffrey Batt

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AN0NYM0US's picture

China to invest in Fed's PPIP? (indirectly)


Oaktree to Receive $1 Billion from CIC

"Oaktree is expected to invest CIC's money over the course of several years in distressed debt and other fixed-income assets, and it adds to other inflows to the firm this year, people familiar with the matter say. ...

Oaktree was among nine big asset-management firms chosen by the U.S. Treasury as fund managers for the Public-Private Investment Partnership, or PPIP, the government program designed to rid banks of toxic assets."



London Banker's picture

"And they who control the credit of the nation, direct the policy of Governments and hold in the hollow of their hands, the destiny of the people." - Rt. Hon. Reginald McKenna

And private ownership of gold was illegal in the USA until 1975 and in the UK even longer.

I am not a gold bug, but neither am I convinced that confidence in banks or the government is in my best interests at this time, leaving few alternatives.


Lionhead's picture

Yes, we are quite in the "hollow of their hands." Collectively, we allowed it to happen seduced by easy credit & debt. A human tragedy...

Anonymous's picture

London Banker? Are you THE London Banker?

If so, are you active anywhere on the web? I'd love to read again what you have to say.


AN0NYM0US's picture

I noticed him here the other day - I think he is "the" London Banker - I think it woud be great if he could take the time to pen an article - his followers really miss his blog

London Banker's picture

Yes, it's me old friend.  I've started commenting here - and still comment over on Roubini's blog.  I can't blog as I once did in my current position, but still enjoy the give and take of comments.

It's nice to know I'm missed.  Perhaps I will be underemployed and blogging again in the future . . . but there's still too much to do in the real world for now.

London Banker's picture

Yes, it's me old friend.  I've started commenting here - and still comment over on Roubini's blog.  I can't blog as I once did in my current position, but still enjoy the give and take of comments.

It's nice to know I'm missed.  Perhaps I will be underemployed and blogging again in the future . . . but there's still too much to do in the real world for now.

MsCreant's picture


Someone may have left The Fed a message. I do not approve of this and it is probably backwards yokels, but still:

Feds probe US Census worker hanging in Kentucky

The 51-year-old Sparkman was found hanged from a tree near a Kentucky cemetery and had the word "fed" scrawled on his chest, a law enforcement official said Wednesday, and the FBI is investigating whether he was a victim of anti-government sentiment.


Screwball's picture

I've been following this a bit.  Not much to go on really, but from what I have read, and having been through that area, it could be anything.  It is possible this guy may have ran across a meth/pot/moonshine camp.  This area is also highly against the FED, as in the government.  Goes way back to the moonshine era.  I'm curious to see how this shakes out once we have more details, if they ever come out.

SloSquez's picture

Being so close to harvest season, I suspect he happened on a pot farmer who was not going to have his kids go without Christmas again.  IMHO.  Sad as it is, the people on that end of the state are extremely suspicious of anyone who remotely looks Federal.  When you see those little "No Trespassing" signs, quite a few of the ones in this area of the country really mean it.  I'm not codoning this type of behaviour at all, I'm just stating a fact.

Anonymous's picture

killing census workers as much as i despise them
is going over the top....if they are going to
kill someone, they need to kill an honest to
goodness lying sack of shit like alan blinder,
alan greedscam, ben bernanke, janet yellin and
other financial terrorists...

Anonymous's picture

Suicide or David Caradine like scenario. Questions: Lets think about how many people it would take to hang a man (dead already or alive). Several if dead already, more if alive (5-10?). Coroner says he was asphyxiated so now we have 5-10 perpetrators involved. How could nobody hear about this in such a small little town? If it was a drug producer why would they tempt further investigation by a public display like this? (They wouldn't) Why would all of these men drive the truck to the hanging scene? Why could no evidence be found on the truck? Why was the man naked? This sort of display is more indictive of psycho-sexual activity (or self induced psycho-sexual activity). Lots of holes in this - lets be honest, they'll do anything to get Obama out of the news for a day.

Mos's picture

Holy conspiracy theory batman!

Anonymous's picture

The correct term is conspiracy...theory goes out the window when it is a real conspiracy.


Hephasteus's picture

I'm so glad we have better politicians and businessmen today. I mean South Africa was so poor back then and now with all this gold buying help and the help of all these prominant wealthy philanthropists. They are rich and lack nothing. They even have Al Gore to help stave off global warming. We love them so much we don't even want them to have to sweat too much while they are mining the few bits of gold and diamonds needed to maintain their wealthy lifestyle.

RobotTrader's picture

Observations from Rasputin:

"Here is what the buggy whip and silver spoon "hoarders" had to face these past five days:

1. The Fed Politburo stating that one day, they swear, they are gonna stop buying Treasuries and Agencies

2. The Fed further announcing that they also, they swear, are sorta start pulling back on some of the Alphabet Soup programs

3. Uncle Sugar issuing 100 billion fiatscos of new debt (always an occasions to crush PMs and drive people into Treasuries)

4. The massive commercial short positions in PMs

5. The G20 goons releasing a statement that any day now, they
swear, they are gonna return to fiscal and monetary sobriety and,
furthermore, "a strong U.S. nightcrawler is in the best interests of
the U.S., blah, blah".

6. Finally, Fed Head Warsh comes out swinging with both and
editorial in the WSJ and a speech that are one-hundred eighty degress
OPPOSITE of the Fed's own FOMC release two days earlier and threatens
that the Politburo may just spike interest rate to da moon if the Fed
feels that "asset prices" (translation: gold) get too frothy.

(Ras): Usually ANY ONE of these events would be sufficient to
crush the GHS/SHS crowd and collapse buggy whips by fifty fiatscos and
silver spoons by two fiatscos. Yet to my utter astonishment, useless
yellow rocks only dropped less than seventeen fiatscos and spoons
dropped by one measly fiatsco.

This unusual resolve shown by the "Seditionists" in the face of
such massive, coordinated attacks impels me to believe that perhaps
things aren't quite as rosy as the Fed and G20 would have us believe."


Lionhead's picture

Amen, and more time go on, the less effective their statements & pronouncements will have as their credibility fades into the sunset. The double dip will eventually drive the stake into their heart as they finally accept they cannot create demand for their useless credit.

MsCreant's picture

I hope double dip will do it, but honestly, how can any of us have any hope that this charade will finally stop, it has gone on for so much longer than I had ever dreamed possible? It just keeps getting more and more surreal, the truth spills over the edges of the petri dish, and still it goes on.

I wonder if it can keep on till after my death? I wonder if my son will think his mom is just a nut because it all keeps going on, and then it falls on his head, not mine.

I want justice and to see things set straight but I am starting to think it is logistically impossible. These complex systems we have inherited (WE DID NOT CREATE THIS WE WERE BORN INTO IT) will spin on and on and then collapse. Can't rebuild it while we have to depend on it for our livelihood. Ya gotta shut it down at some point. But in the shut down, how do we take care of everyone? So much coordination needs to happen that won't.

Short version of this post? We are so SCREWED.

SWRichmond's picture

I have moments of despair myself, but they are tempered by my knowledge that we (humans, U.S.A., etc) have gotten through much worse than this is history.  Keep working towards the goal: truth and genuine liberty, and a financial and governmental system based on truth and individual liberty and property rights.  Reclaim your birthright.  The genius of America is (was?) its unleashing of the human spirit.  That is how we succeeded so brilliantly.  There is no reason we cannot do it again.

Danz Gambit's picture

No, I think he got it right - we are screwed.


Want cheered up (not), read this little ditty

Anonymous's picture

Oh really?

"3.1) The entire basis upon which Western Industrial Civilization is built, — growth, and ‘Capitalism’, as a form of political economy, is based on the theoretical construct of ‘perpetual resource discovery, acquisition, development and exploitation’; and thus, as finite resources decline and ultimately deplete — as they must, capitalism and perpetual growth must decline and ultimately cease also!"

If that was the case Major Tom would be telling Ground Control that his away team found another planet with a 3 mile crust made up of solid gold and a 12 mile deep inner crust filled with crude oil.

SWRichmond's picture

Ridiculous.  We'll find something else to use.  Will the process be painful?  You bet your ass it will be.  But what you (seem to) want is for some super-body to be put in charge of resource allocation, especially energy, and your supporting assertion is that if we don't we're headed "back to the Olduvai". 

The proof you are wrong is in the article: "1979 US per capita energy use peaked".  We found ways to do more with less energy input.  Imagine, those clever humans.  Since that time, air quality advances and water quality advances are notable. I remember the 70's.

Anonymous's picture

Ridiculous. We'll find something else to use. Will the process be painful? You bet your ass it will be. But what you (seem to) want is for some super-body to be put in charge of resource allocation, especially energy, and your supporting assertion is that if we don't we're headed "back to the Olduvai".

You simply do not understand.

There is no energy crisis. There is an oil crisis. There is no substitute for oil. There may never be. It is so much awesome energy density that there is no reason to rely on a miracle discovery.

Besides which, and please think carefully about this, there is no assurance that this miracle you have decided is more likely than no miracle . . . needs time to happen. There is no law of the universe that says you will have that time.

DiverCity's picture

Hear, hear.  Most folks don't understand the energy contained in carbon in the form of oil.  They think, erroneously, that fusion or some other newfangled sci fi substitute will make everything all better.  It very likely won't.  We must learn to live some other, more primitive way.  But don't despair;  instead, rejoice.  We'll all be much happier if we can keep the evil heavy hand of government off of our backs.

Anonymous's picture

the evil hand of government is behind all of these
moronic atavistic moves to primitive ways....

and it will only be the little people who live can rejoice in your hut all
you want...

Anonymous's picture

No, No, you don't understand. The power of the human mind is the most powerful force of all! We're so smart, we can will die-off away! We'll come up with something, you'll see. You treehuggers are so stupid.

Anonymous's picture

Our best bet is the much maligned nuclear. True salvation will be if the National Ignition Facility in Livermore CA unravels the true physics of fusion. That's what it was built for. This will be the Black Swan of energy. The prize is unlimited energy. Of course China, Russia, France & England & Israel & everybody else has agents swarming over it like flies hoping it works too. Even if there is no fusion breakthrough we now have TRULY FAILSAFE fission reactor designs. I know the waste problems are formidable, but formidable is not the same as impossible. Even if we get unlimited fusion power we will still have to deal with the waste heat. I would guess that it would triple global warming IF we are lucky. Getting rid of that heat would be the next challenge.

Anonymous's picture

Knowing that others have suffered is little consolation.If anything, knowledge of history brings me greater dispair -- it is a catalogue of misery and rarely a roadmap.

I am firmly convinced that the present degree of corruption is so great, it cannot be remedied without a great deal of violence and the collapse/rebuilding cycle. Again, going back to history, a nation with a degree of self-regulation and freedom is the exception. I appreciate your optimism and wish I could share it, but I believe to expect emergence of a free nation is to hope against odds.

It is many of the unsettled answers of the American Revolution brought back to the spotlight.

Anonymous's picture

Actually America didn't really have a revolution. We fought England to separate our government in existence from them. Most of the rest was from the Indians & of course Athens. Real revolutions are like France & Russia & China; Long drawn out violent, bloody, between factions inside the country. The alternative 'War of Independence' is the more accurate name. Are we headed towards a real internal blood & guts revolution? I certainly hope not. The world mostly hates & envies us. It would pounce upon us in a heartbeat if we took up arms against each other.

Anonymous's picture

I couldn't agree more with this statement, hopefully politicians like Ron Paul and potentially Peter Schiff can gain more clout. I hate to think of america as a place for only the well connected few, and yet it is pretty staggering how much the top percent of income earners make and own versus the people whom are just middle class. And yet obama is like bush's 3rd term, but then again, it does not cost much to buy our politicians these days.

Bubby BankenStein's picture

I just finished telling my daughter about the Bloomberg FOIR and 1207.

We expect knowing the truth will be shocking and potentially destructive to the "System".  The "System" players will fight to the death to keep the secrets secret.

We demand the truth no matter how serious as repercussions could be.  I would rather step up to the problems now.

How else can a viable replacement be built.

Lionhead's picture

Yes, we're all screwed. The solution lies with the public; take back the gov't, abide by the Constitution, punish the offenders. Or allow the spin to continue until it does eventually blow up & collapse taking everyone down with it. We created it, or allowed it to happen unknowingly, now we have to stop it as it is reality.

I'm old, maybe 20 more years on the planet, but I can say I truly feel for all my nieces, nephews & their children as well as yours. They have to face the problems ahead and the solutions will entail sacrifice & courage. ZH has done much to reveal the problems. Now we all have to get the political ball rolling to take the first steps of the solution.

You're not nuts; your son should be proud of you to acknowledge & accept the truth. The others are nuts as they allow the lunacy to continue unabated.

Anonymous's picture

Short answer, you simply don't take care of everyone.

Everyone will, for the most part, have to take care of themselves.

We - plural - are screwed. We (or I) - singular - perhaps not so much. Some of us have been at this for years and are more prepared than others. It must truly suck to realize at this late stage of the game that you cannot take anything for granted.

Hardly a day goes by that I do not manage to make myself more prepared. I spent this afternoon printing and laminating ballistics tables.

I intend to thrive while many responsible for this falter.

What does our society do for me that I cannot do for myself? Large scale power generation; advanced medicine; production of certain advanced technologies (this computer being a prime example). These things are nice, but probably not worth the hassle attached to them - stifling government, confiscatory taxes. Rules, laws, and regulations about every damned thing you do from the time you get up in the morning to the time you go to bed at night... every freaking day, for the rest of your life.

Screw it, it's not worth it. Who's to say that what comes next will be any better or worse? It could well be better - for some.

whopper's picture

It is like keeps morphing into something worse. 

Hephasteus's picture

Well as long as they swear. I can see their resolve from here. They know how the system works. They know they have to weasel out of it.

Anonymous's picture

FYI: GLD has HUGE counterparty risk!!!! Read their rules/regs and you will see their claimed gold holdings ARE NOT insured, they DO NOT have proper and regular independent auditing, etc. IMHO if you actually believe they have all the physical gold IN FULL and none of it has been loaned you are only kidding yourself.

Am sure everyone on ZH knows by now if you do not physically hold your gold investment you do not own it.

Moral of the story: BEWARE COUNTERPART RISK!

chumbawamba's picture

RT, how do you embed images into your comments?  I tried it by turning off the rich-text editor, then inserting HTML tags, then turned RT editor back on, my photo was then embedded in the editor, but when I submitted it the image does not show up.

I am Chumbawamba?

Bubby BankenStein's picture

It's really interesting how serious the concerns were about monetary stability in 1968.

I would imagine the secret communications going on today are exceptionally disturbing.

When Bernanke was asked who received the $500B swap lines he looked like he let a big wet fart.

AN0NYM0US's picture

Hey Robo - do you have a link to where Rasputin posts?


Anonymous's picture


Perhaps you missed my late comment on your previous post on this matter.

Gold in 1968 was _deemed_ to be money which it is not now. You are reading this document out of context and barking up the wrong tree as a result.


Tyler Durden's picture

Perhaps you missed the last sentence which points out that we will shortly disclose information which confirms that we are barking up the right tree. stay tuned.

theGhostofXmasPast's picture

While I will be curious to see Tyler's docs, it is really intriguing to me how many people absolutely don't get that gold IS money. Spend just a little time reading about money, it's history, etc., and you will find that the sum total of human decision making over the past 3000 years has anointed gold with the unique roll of money. There really is no getting around it.

Simply because we have experimented for 38 years with yet another attempt to make a fiat CURRENCY into actual money doesn't mean it has actually occurred. The dollar is a currency, not money, and ultimately it is only the dollar's ability to be exchanged into true wealth that gives it any value whatsoever. Remove the confidence factor from any fiat currency, and you go Iceland overnight. Period. You really shouldn't try to argue with millennia of history.

So, gold is still money, and it will stay money for a long, long time. That's why the Fed, ECB and ever other central bank are so f'n concerned about gold. And why the Chinese are buying it as fast as they can.

Anonymous's picture

"gold IS money" You're assuming that money has value.

Land/Real Estate ownership has value.
Food/Water supplies has value.
Pussy has value.
Refined crude oil has value.
Easy transportation has value.

Maslows hierarchy of gold? If the SHTF, and it never, ever will. (It didn't even hit the fan during the great depression, things just got rough for a little while for SOME people). Gold will be of little value. When was the last time that the world reverted back to caveman days? It will never happen. Too many humans inhabit this planet.

Gold is for JEWelers. US Dollars are for people interested in preserving their wealth over a lifetime horizon and passing on a solid legacy.

The reason that the Fed, ECB and ever other central banks buy gold is so it cannot be used as currency by the flock of sheep that panic because a stupid IB (Lehman) employed too many DeVry® graduates, and University of Phoenix® PHD's that did everything wrong.

Wake up Junior Durdens!

perpetual-runner-up's picture

"Land/Real Estate ownership has value.
Food/Water supplies has value.
Pussy has value.
Refined crude oil has value.
Easy transportation has value."

so if you have too much of any of the above and someone wants to trade for something...and you have enough of all that normally they would trade (hence you are wealthy), what do you trade your excesses for that can store the value and trade to someone else that may not need anything you have, but has too much themselves???


Gold retard....

Anonymous's picture

errrr. Gold.

I'd be more worried if every woman in this world bought a Doc Johnson vibrating Rabbit and cut off access to the juicy loins until their demands were met. Now that would be a bonafide crisis.

I wonder if CNBC would cover it?

Oh I forgot they only cover the "bottom" of a certain SENIOR reporter.