What A Confidential 1974 Memo To Paul Volcker Reveals About America's True Views On Gold, Reserve Currency And "PetroGold"

Tyler Durden's picture

Just over four years ago, we highlighted a recently declassified top secret 1968 telegram to the Secretary of State from the American Embassy in Paris, in which the big picture thinking behind the creation of the IMF's Special Drawing Right (rolled out shortly thereafter in 1969), or SDRs, was laid out. In that memo it was revealed that despite what some may think, the fundamental driver behind the promotion of a supranational reserve paper currency had one goal in mind: allowing the US to "remain masters of gold."

Specifically, this is among the top secret paragraphs said on a cold night in March 1968:

If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.'s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years.

This then puts into question just what the true purpose of the IMF is. Because while its stated role of preserving the stability in developing, and increasingly more so, developed, countries is a noble one, what appears to have been the real motive behind the monetary fund's creation, was to promote and encourage the development of a substitute reserve currency, the SDR, and to ultimately use it as the de facto buffer and intermediary, for conversion of all the outstanding "barbarous relic" hard currency, namely gold, into the fiat of the future: the soon to be newly created SDR. All the while, and increasingly more so as more countries converted their gold into SDR, such remaining hard currency would be almost exclusively under the control of the United States.

Well, in the intervening 44 years, the SDR never managed to take off, the reason being that the dollar's reserve currency status was exponentially cemented courtesy of both the great moderation of the 1980s and the derivative explosion of the 1990s and post Glass Steagall repeal 2000s, when the world was literally flooded with roughly $1 quadrillion in USD-denominated derivatives, inextricably tying the fate of the world to that of the dollar.

However, back in 1974, shortly after Nixon ended the Bretton Woods system, and cemented the dollar's fate as a fiat currency, no longer convertible into gold, the future of the SDR was still bright, especially at a time when the US seemed set to suffer a very unpleasant date with inflationary reality following the 1973 oil crisis, leading to a potential loss of faith in the US dollar.

Which brings us to the topic of today's article: the international monetary system, reserve currency status, SDRs, and, of course, gold... again.

Below is a memo written in 1974 by Sidney Weintraub, Deputy Assistant Secretary of State for International Finance and Development, to Paul Volcker, when he was still just Under Secretary of the Treasury for Monetary Affairs and not yet head of the Federal Reserve. The source of the memo was found in the National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 1, Gold—8/15/71–2/9/72. No classification marking. A stamped notation on the note reads: "Noted by Mr. Volcker." Another notation, dated March 8, indicates that copies were sent to Bennett and Cross. It currently resides in declassified form in Document 61, Foreign Relations Of The United States, 1973–1976, Volume XXXI Foreign Economic Policy, and is found at the Office of the Historian website.

The memo is a continuation of the US thinking on the issue of the then brand new SDR, the fate of paper currencies, and the preservation of US control over reserve currency status. Most importantly, it addresses several approaches to dominating gold as well as the US' interest of banning gold from monetary system and capping the free market price, contrasted by the opposing demands of various European deficit countries (sound familiar?) on what the fate of gold should be at a time when the common European currency did not exist, and some European countries were willing to fund their deficits with gold: something the US naturally was not happy about.

While we urge readers to read the full memo on their own, here the two punchlines.

First, here is what the US' intentions vis-a-vis gold truly are when stripped away of all rhetoric:

U.S. objectives for world monetary system—a durable, stable system, with the SDR [ZH: or USD] as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR [ZH: or USD].

In other words: gold can not be allowed to dominated a "durable, stable system", and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.

We continue:

To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price and encourage the gradual disposition of monetary gold through sales in the private market. An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders, or by other agreement.... Any redefinition of the role of gold must be based on the principle stated above: that SDR must become the center of the system and that there can be no question of introducing a new form of gold– paper and gold–metal bimetallism, in which the SDR and gold would be in competition.

And there, in three sentences, you have all the deep thinking behind the IMF's SDR: simply to use it as a vehicle through which a select few can accumulate gold (namely those who can create fiat SDRs d novo), while handing out paper "profits" to the happy sellers.

And just in case it was not quite clear, here it is again, point blank:

Option 3: Complete short-term demonetization of gold through an IMF substitution facility. Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market. Profits from the gold sales could be distributed in part to the original holders of the gold, allowing them to realize at least part of the capital gains, while part of the profits could be utilized for other purposes, such as aid to LDCs. Advantages: This would achieve our goal of demonetization and relieve the problem of gold immobility, since the SDRs received in exchange could be used for settlement with no fear of foregoing capital gains. Disadvantages: This might be a more rapid demonetization than several countries would accept. There would be no benefit from the viewpoint of financing oil imports with gold sales to Arabs (although it is not necessarily incompatible with such an arrangement).

One wonders just who in the "private market" would be stupid enough to convert their invaluable paper money into worthless, barbaric relics?

And finally, was there the tiniest hint of a proposed alternative system to the PetroDollar. Namely, PetroGold?

There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports... Although mobilization of gold for intra-EC settlement would help in the financing of imbalances among EC countries, it would not, of itself, provide resources for the financing of the anticipated deficit with the oil producers. For this purpose, it would be useful if the oil producers would invest some of their excess revenues in gold purchases from deficit EC countries at close to a market price. This would be an attractive proposal for European countries, and for the U.S., in that it would not involve future interest burdens and would avoid immediate problems arising from increased Arab ownership of European and American industry. (The Arabs could both sell the gold and use the proceeds for direct investment, so that the industry ownership problem would not be completely solved.) From the Arab point of view such an asset would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control

One wonders if the price of gold is "high enough" now for Arab purposes, and just where the Arabs are now in their thinking of converting oil into gold... or alternatively into a gold-backed renminbi. And if not now, soon, once the pent up inflation in the Fed's $4 trillion, and rising, balance sheet inevitably start to leak out?

The full Volcker memo can be found here.

h/t Koos Jansen

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a growing concern's picture

Fuck you, Obama!

And Reggie, you cocksucking bastard!

Oh, and GOLD!! It's what's for dinner, bitchez!

sunaJ's picture

Ahem, this is when stuff started to REALLY get kinky.  Since we are living a false narrative of the "wealth" of humanity, controlled by those that have profited very well (and continue to do so), we have passed the emperor-has-no-clothes moment.  I think that what we have experienced is so absurd since 2008 (a COMPLETE and fraudulent takeover of the markets), that we are living a slow-motion implosion -the anesthetizing calm before the hurricane.  People are no longer playing the game, but no matter, we have computers that will keep it all going...nothing could go wrong there.  It is a 100-year ponzi in it's desperate death throes. We have historical records of the same human tendencies. 

James_Cole's picture


This is a paper which we prepared for Secretary Kissinger giving some of our views on the gold question. 

Kissinger, ultimate Bond villian.

However, there is still substantial disagreement on what the exact future role of gold should be—whether it eventually ought to be phased out of the system(the U.S. view) or retain an important function as a reserve asset and means of international settlement (the position of some European countries).

synergize's picture

And costs of gold production continue to rise - over $1200 per ounce in the second quarter BEFORE taxes and writedowns:


That's an uh-oh for the shorts - one day it will turn around...

markmotive's picture

The world of money isn't as complicated as most make it. It is made complicated so few understand that we are being screwed.

Gold is part of a secret world for a reason.


The Shootist's picture


NOBODY would ever manipulate gold or engage in diabolical financial terrorism.

Cough* USSA

piceridu's picture

I don't think this is sinking in for many here on this site...This is a smoking gun for the manipulation of gold prices. This is the equivalent of a video of OJ killing Nicole. This is the equivalent of a Zapruder film of the grassy knoll showing CIA operatives holding smoking bolt action Carcano rifles. This is 100% evidence of the continuing suppression of gold prices worldwide and to what levels they will go to keep the biggest ponzi in man's history afloat. Am I wrong? Mega fucking kudos to the Tylers.

TruthInSunshine's picture

Critical issues that this essay doesn't address is the differences that have taken place between 1974 and now in terms of the structure of who has oil and to what degree, who imports and to exports oil and to what degree, and exploration (and advances in exploration & extraction technologies) and newfound deposits of oil since then.

As just one example of how much global dynamics have shifted, while recognizing that oil is fungible, the U.S. produces 1/2 of the oil it consumes from domestic deposits, and imports a large % of the remainder of its oil from Canada.

Now, given that oil is fungible, consider the U.S. Military's network of global bases, and its ability to project power in its quest to support "friendly" regimes in MENA oil producing nations, as well.

On this issue, does anyone here seriously believe that such MENA oil producers now protected by the U.S. are going to gamble staking their very continuation of power based on some form of trust in China military superiority, regardless of any other factors?

There's no doubt that the U.S. and now E.U. have to cap the value of potential fiat currency competitors such as gold. But it's in China's best interest to do the same given their economic model, deepening dependence on fiat monetization of their banking & economic system through the PBoC in precisely the same manner as the Fed & ECB, and their desire to NOT float their fiat currency freely (as this could destroy their export dependent economy).

This essay speaks to issues occurring in a world that's much different than that of today.

Doña K's picture

As an optimist, I am looking for the silver lining (pun intended) of this revelation and I see that despite the desires of the US, there are major forces in the opposite direction and considering that this was written 40 years ago and none of the options have been implemented, the whole memo while an eye opener, it is inconsequential.

Gold still has fans, still has its luster, still freely bought and sold and I believe that US is alone in its quest to supress it.

I noticed that the USD/rand moves in tandem with the gold price. Can someone suggest an arbitrage here?

clymer's picture

Don't be so sure that the chinese don't like and are not taking advantage of this artifical suppression



GetZeeGold's picture



Don't you just hate it when the gold Nazis take over?


Paul Volcker......worse Fed Chaiman......EVA!


We try that 20% interest rate crap now.....and death and destruction will come quickly.

new game's picture

what to do with all that gold out there. if it would just go away. poooff-gone, life would be so much simpler for the ptb.

but there it is representing something they don't have and will never have unless of course they obtain some...

the opposing force of their pnzi scheme. they now it and hate it. it just won't ever go away, cause that is why it is so valuable...

keep 20 percent as ultimate insurace that the ponzi unwinds. get z gold!

SafelyGraze's picture

great memo, mister weintraub

"There is, in fact, still a considerable emotional attachment to gold as a monetary asset, and a basic distrust of bank or paper money not having intrinsic value."

"central banks would cling to their gold in expectation of further official gold price increases"

emotional and clinging.

that's what banks are.

instead of putting complete trust in their own "monetary asset" not having instrinsic value.


pmbug's picture

Emotional and clinging?  I've been called worse.  Doesn't diminish my respect for math and history though.

Oh, and:  Tradition!

safe as milk's picture

although it's true that the situation has changed since the memo was produced, the memo is still very relavent. don't kid yourself about the domestic oil situation. we may be producing 50% of our own oil but at a break even cost of at least $75/barrel not to mention the environmental/groundwater cost. the russians are now as big, if not a bigger player in the oil market than the saudis. and let's not forget about iran. there are plenty of parties who would be happy to use a gold backed currency for trade settlement. we haven't made a lot of friends since this memo was written.

rabbitusvomitus's picture

IMHO it's no suprise that while the rest of the worlds( ie. MENA)  reserves of oil are waning, at home we are becoming net exporters of black gold and on track to become the largest producers of same. Once the transition from saudi/iraqi/kuwati et al, oil is complete (once they are drained dry) the USSA will stop "caring" about what goes on over here, much the same way that we don't give a shit about what goes on in the rest of continental africa. that's when the next "big one" starts cuz we won't be intervening. But then again, I've been wrong before. 

Flakmeister's picture

You have to figure out what are fairytales and what is reality...

Here is a summary showing oil imports by country


The US is nowhere close to being a net exporter of Oil... and will never be for that matter

DaveyJones's picture

Did anyone see the latest OPEC- NSA-Snowden leaks? 

This "declassified" memo is pretty amazing

Never seen a more naked confesson

that the bankers and government work together

to pillage the village

that currency is nothing but paper

and oil is everything

while it lasts

johny2's picture

It is just that many have read about the CIA and US government so much things and getting away with it, that the smoking guns are so many and normal. Each of the US presidents and FED in the last 100 years have been involved in the operations to instigate and carry out a war somewhere for the profit of the banking underworld. Manipulating the gold is just one of their tricks, but even before the Gold was "demonetised" ( demonised ), they were getting away with mass serial murders. 

SafelyGraze's picture

the hunt bros caught on



damn those hunt fellas


make them the whipping boys

teach everybody else a lesson

do not look behind that FREEKIN curtain

now eat your vegetables, you sheep.



Doña K's picture

They played the leveraged paper market and the .gov changed the rules in the middle of the game.

robobbob's picture

I didn't know soylent green classifies as a veggie.

fonestar's picture

I like gold but I hope we do not wind up back on a gold standard.  Invariably, people get fat, lazy and stupid.  Their kids want things before they can pay for them.  Gold restricts credit and debt, so we go back onto a fiat/debt system.

Time to try something different.


zhandax's picture

WTF?  This is where we are now; "the kids want things before they can pay for them"  Allow me to introduce a few alien concepts; discipline, thrift, patience.  Riddle me this, when did people get more 'fat, lazy and stupid'; between 1891 and 1933 or between 1971 and 2013?

fonestar's picture

Time to take people out of the equation.  People only change when they are forced to and if politicians have the ability, they will manipulate the currency through inflation or deflation.

An algorithmically run currency is far superior to a gold standard or fiat standard.

Doña K's picture

Brilliand, creative and profound thinking!




Gief Gold Plox's picture

"An algorithmically run currency is far superior to a gold standard or fiat standard."

I agree. Only as long as your sitting down in front of an ipad in an air conditioned room online ordering pointless crap you don't need using currency you don't own. Came down to my farm to buy some food, eggs, chickens, cows or what have you and convince me how there's a secret number that your GPUs came up with and people ascribe value to because it fits into a certain cryptographic block.

...Oh, the entertainment value.

Put your bitcoins where your mouth is and donate some of that fiat you bash to help the people on the Philippines.

therover's picture

Gief...I need a dozen eggs, 2 steaks and a chicken.


How many ounces of silver would that cost ? Do you take pre-65 or prefer bullion ?


Gief Gold Plox's picture

Diesel Fuel and/or Ammo are preferred, but PM in any form are fine. In a world where silver wasn't insanely manipulated I'd probably charge 1/3 or maybe 1/2 oz. Ag. Seeing that we don't, I currently charge much more in fiat. Helps me grow my stack though. :)

therover's picture

So based on 1/2 oz of Ag, my reserve stack of 500 oz of Ag can basically buy my family breakfast (steak and eggs) and a chicken dinner (I got the veggies covered) everyday,  for close to 2.5 years. 



RafterManFMJ's picture

That's exactly what I'm doing, getting ready by only eating one meal a day. Just now ate bacon, with saurkraut fried in the bacon grease. Delicious. And on Saturday nights, I waterboard myself. Get ready, people!

Race Car Driver's picture

GFY, shill. You are here to heard folks into digital currency.

Go fucking authenticate yerself and leave the rest of us out of it.

To the rest of us ... ignore the title and just watch the video and see where BTC is going. BTC is no different than Google or Facebook - the spooks are behind it.


quasimodo's picture

Anyone got a link that works? I can't find one anywhere, seems too many folks viewed this and they used the copyright excuse.

Stuart's picture

not much has changed.  The fight continues.  Those who espouse no manipulation are charlatans and complicit shills. 

Kobe Beef's picture

Yup. SDR = just another con.

maskone909's picture

Damn where do u find this shit tylers? I can never find anything substantial on sdr's. Good read thx

maskone909's picture

What the fuck were they thinking declasifying this? Isnt this like a smoking gun?!? How fucking insidious these fuckers are. Another conspiracy theory turned conspiracy fact. Tradition my fucking ass ben

HardAssets's picture

Would they worry if that memo was shown to a classroom of 8th graders ?  That's the reading comprehension level of the average American adult. Most of them haven't read a book since h.s.  42% of the college grads haven't read a book since leaving university. Go into homes and see how many books are on the shelves and what type.

You will see a t.v. Likely several in the house. Maybe even a large screen version.  TPTB own the media and control the 'reality' that people merely parrot. And you can bet this document won't be featured on 'the news'.

So declassifying this kind of stuff isn't really a problem for them.

new game's picture

and that is why it gets worse. until, well, plan accordingly and ask one question to the ones that didn't plan - suck my cock for some beans...

now, that wasn't very nice...

how can you have any compassion for the people that are getting us deeper down the rabbit hole.

i would help the people that  truely are prepers but had an unfortunate situation-you will know.

only the good die young-well maybe...

to see if you are prepared try this: in a predefined area in full camo and armed(w/o live ammo) try to kill your partner.

bang your dead. great fun and can take hours - ultimate preping.... just sayin.

Oracle of Kypseli's picture

I read the whole linked memo and China + other Asian countries were not even in the picture then or mentioned. Can we restart the game please?

Totally different world now and the US may be alone trying to tie 190 loose ends.

190 = all the countries in the world more or less


topshelfstuff's picture

as for this quote:
""""In other words: gold can not be allowed to dominated a "durable, stable system", and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.""""


The author must have been referring to Most HERE, certainly not to the intentionally put asleep, dumbed-down Public

and Note: the SDR's are comprised of the 4 given the High Speed FIAT PRINTERS

rabbitusvomitus's picture

Me thinks you give "them" too much credit. These pricks ain't that smart. The core is so rotten they can't keep up with what should be hidden and never declassified and what is fit for publick consumption.


Real Estate Geek's picture

Stock vs. flow . . . stock vs. flow.

Tall Tom's picture

Synergize wrote: "And costs of gold production continue to rise - over $1200 per ounce in the second quarter BEFORE taxes and writedowns:


That's an uh-oh for the shorts - one day it will turn around..."

The Gold Miners are the ones whom are Shorting Gold. They are Forward Selling. They are selling that which they have not mined. (If you are looking for the "boogeyman" for "Price Manipulation" you need not look any farther. That is the Gold that backs all of that Paper Gold on the Comex and LBMA.)


It is is easier to sell and make a profit on Gold in the Ground, promised at a later date for delivery, than to expend scarce resources and labor and "dig it out of the Ground". (Process Ore...Chemically treat it, isolate the Gold, refine it...)


With profitting from Declining Gold Prices, through Forward Selling, they are mortgaging their future. If demand began to rise (perhaps because of a Lack of Confidence in the US Currency), prices would rise across the board for all resources. In an environment of "across the board" price increases, costs to mine the Gold will become exorbinant. Many Gold Miners would simply not be able to allocate enough resources to obtain that Forward Sold Gold, which they "solemny promised", for delivery.


So they will DEFAULT ON DELIVERY to the Comex Warehouse. They simply declare Bankruptcy and the Gold remains in the Ground, unprocessed and unrefined. Do you want to write about a Fraud? There it is.


What happens to the Gold Price at that point?


Watch your GOFO Rates.


The people whom invest in Gold Minig stocks only serve to provide Financial Support to the Fraud by providing the Miners the Liquidity to do this. It is rather unproductive to take a Long position in Gold while buying Gold Stocks They just use your Capital to buy the Shorts.. You are only paying the people whom are out to cut your throat.


It is all a fraud as there is nothing real in this economy. Nothing will be more pleasing than a Derivatives Meltdown caused by moves in the Interest Rates in the US Ten Year. Because of the Leverage just a minor move, in either direction, will have major impact on the Interest Rate Swaps. I am hoping for an HFT Black Swan that will trigger the entire Derivatives Market to implode. What do you think that will do to the confidence in the US Dollar?


Maybe we will learn to abandon Fraud at that point. Is there a chance of abandoning Fraud? It is the same chance that an HFT Fukuppy can trigger a Derivatives Meltdown. That becomes more likely with every passing day.

BoNeSxxx's picture

Say what you want about these globalist cental banker psychotic fuckshites...

One thing you have to admire is their patience... 1974 and they are still at it.  Most rational people would have given up by 1976.

Anusocracy's picture

Their desire to control is innate as is their warped morality which guides them in achieving that control.

Nature has created many parasites and predators - they are amongst them.