EPILOGUE
On the last day of February 1946, almost a year after the war ended, the French navy sent out the message: ORDER TO THE MONTCALM TO MAKE DIRECT ROUTE TO CHERBOURG STOP. The 350 tons of gold that had arrived in Martinique in June 1940 finally set out from the Caribbean on its way home. There were 9,766 wooden boxes aboard, each weighing just over one hundred pounds. When the cargo arrived in France, most of the bullion, which consisted largely of coins, was smelted and turned into bars. Once again the country’s gold, one of the world’s largest holdings of the precious metal, was home. It was the biggest return of World War II gold.1
Humankind never seems to lose its fascination for gold. Some people love it; some hate it. Few are indifferent. Perhaps that has something to do with the price, which has had lots of volatility in recent times but has risen sharply in value. In the last eighty years, the price of the metal has gone from $35 an ounce to nearly $2,000. The world’s two most populous countries, China and India, have millions of gold bugs, which means the metal is likely to remain popular. Many academics, though, still mutter about it being a barbaric relic.
World War II did not end gold’s role in the international economy. Bullion remained paramount for the world’s political and financial leaders, and it would play an important role in rebuilding the world economy. The international monetary system that Harry Dexter White pushed through at the Bretton Woods Conference of 1944 reaffirmed the primacy of gold as an instrument of international debt payments between nations. It also raised the U.S. dollar to the honored position of being on a parity with gold. It was the only currency with that status. During the initial years after the war, Bretton Woods worked fairly well. Countries wanted dollars to buy American cars, steel, machinery, and more for their economic recovery. In November 1961, eight major countries attempted to maintain the gold standard by setting up the London Gold Pool. They defended the price at $35 per troy ounce by interventions in London, the largest bullion market. In March 1968, though, that collapsed. America’s predominance in gold holdings continued slipping, and foreigners soon held more than the U.S.2
Starting in the 1960s, the U.S. was spending heavily on both the Great Society social programs and the Vietnam War without any appropriate tax increases, which caused serious balance of payments problems. The results were large deficits and a weakening American currency. The dollar eventually became overvalued, and the global monetary system ran into trouble. The post-war financial system was really only operational from 1959 to 1968.
Critics complained that Bretton Woods gave the U.S. an unfair advantage in global business. Charles de Gaulle, the president of France, became the leader of the anti-Bretton Woods offensive. At a press conference in 1965, he launched the first attack. He also strongly endorsed bullion, saying, “In truth, one does not see how one could really have any standard criterion other than gold.” Starting three years earlier, France had begun converting its surplus dollars into gold, buying as much as $150 million a month and having it shipped to Paris. U.S. gold holdings were soon only about half what they had been at the end of the war. Jacques Rueff, a long-time Banque de France official, provided the intellectual firepower for the French attack.3
The U.S. successfully fought off the French assault, but the American currency continued to be weak, especially against the post-war economic powers, Germany and Japan. Washington continued to lose more and more gold to countries such as Portugal and Spain who began following the French lead. Finally on August 15, 1971, President Nixon closed the gold window and refused to sell the metal, thus essentially ending Bretton Woods, although it limped along for a while. It was a traumatic episode for the world economy and became known as the Nixon Shock. The price of bullion on the world market began rising, and by the end of the 1970s was more than $800 an ounce. It then fell to less than $300 for several years before roaring back in the late 1980s to $500. It took another long slide in the 1990s, but has come back strong in the new millennium.4
Many economists, central bankers, and finance ministers would be happy for gold to just go away as a global system of value and be no different than other metals such as copper or iron. At the turn of the new century, gold was down to about $270 an ounce and falling. Gordon Brown, the British Chancellor of the Exchequer, thought he saw the handwriting on the wall and announced that he would sell fifty-eight percent of his country’s gold reserves. Between 1999 and 2001, he sold off four hundred tons at about $275 an ounce. That turned out to be one of history’s greatest financial blunders. The price was soon once again rising. The chancellor had sold at the bottom of the market, and that period became known as Brown’s Bottom.5
In more recent times, the price of gold has fluctuated widely on international markets, but has been generally rising. There have been several spikes, which were usually concurrent with inflation or political unrest. Gold continues to retain its allure as a safe haven in times of trouble. The historic high closing London fixed price was on September 5, 2011, when it reached $1,896.50 an ounce.6
According to experts, less than 200,000 tons of bullion have been mined in history. Current world production is about 2,500 tons per year, and the four largest producers are China, Australia, the United States, and Russia. Together they mine nearly half of new global output.
Central banks still hold about twenty percent of the world’s gold. Since 1999, some two-dozen nations, including the U.S., have had an agreement not to sell more than four hundred tons per year. They have also stated as their policy was that “gold will remain an important element of global monetary reserves.” A few countries such as Holland and Belgium have nonetheless quietly sold off bullion. Switzerland was the last major country in the world to go off the gold standard, which it did only in 2000.
Gold remains a product that many people trust because they lack confidence in politicians, who seem all too ready to debase the currency so that they can operate irresponsible economic policies, steal the national treasury, or run it as a Ponzi scheme. The words of Herbert Hoover to Franklin Roosevelt in 1933 still ring true: “We have gold because we cannot trust governments.”7
As for my personal view of gold, dear reader, I follow the recommendation of my investment consultant Paul Koether, who has been a friend and watched over my money for many years. He advised me to put some of my retirement nest egg into gold. So I own gold coins. They might be useful in the next apocalypse.
Appendix I
STATISTICS OF NAZI GOLD
Germany was historically a major holder of central bank gold, but just prior to the war the country had only a small amount because of its ongoing economic problems. Following orders from Reichsbank President Hjalmar Schacht, the holdings as early as 1933 were divided between published accounts and hidden ones, so that the world would not know how much the country actually had. Nazi leaders needed gold to buy critical war material on the international market. Before the world conflict began, Germany captured a large amount of bullion in Austria and a smaller cache in Czechoslovakia. Most of that, though, was soon spent on armaments, and the bullion holdings were again low when World War II began with the invasion of Poland. The Nazis captured much more after their invasion of Western Europe in 1940. Almost all of the gold seized during the war had been confiscated by the end of 1940. Although the world’s public was outraged by the theft of bullion as well as other valuables from private individuals, in particular concentration camp inmates, that was a relatively small amount when compared with what was stolen from central banks.
Reichsbank Holdings in 1938 Prior to Nazi Aggression1
Published $28.6 million
Hidden $120.5 million
Total $149.1 million
Stolen Central Bank Gold2
Austria March 1938 $91 million
Czechoslovakia March 1939 $45 million
Danzig September 1939 $4.3 million
Netherlands May 1940 $137.2 million
Belgium May 1940 $204.9 million
Luxembourg May 1940
$4.8 million
Yugoslavia April 1941 $3.8 million
Greece April 1941 $7.4 million
Italy December 1943 $64.8 million
Albania September 1943 $2.6 million
Hungary March 1944 $32.2 million
Total $598 million
Appendix II
PARTNERS IN GOLD
Switzerland was by far the most important way for Germany to unload its stolen gold and buy war goods. Nearly eighty percent of all the bullion shipments between the Reichsbank and other countries went through Switzerland. In the first two years of the war, Berlin dealt mainly with private Swiss banks, but the Berne government in October 1941 stopped that and demanded that business be done with the Swiss National Bank. That small country that was home to a major international central bank remained a good Nazi partner until late in the war, when the Allies announced the Gold Declaration of January 1944. The U.S., Britain, and the Soviet Union declared that they would not recognize the transfer of looted gold and would not buy it from any country that had not broken relations with Axis countries. Nonetheless, the Reichsbank’s Emil Puhl was still selling bullion to the Swiss in the spring of 1945. The Swiss government’s Bergier Report in 2002 confirmed that the Swiss knew by 1943 that the Nazi gold it was accepting was taken both from central banks and citizens of occupied countries.
Bank Recipients of Nazi Gold During World War II3
Swiss National Bank $389.2 million
Swiss Commercial Banks $61.1 million
Spain $140 million
Sweden $59.7 million
Romania $54.2 million
Portugal $43-$49 million
Turkey $10-15 million
Bank for International Settlements $ 12 million
Sales to Private Swiss Private Banks in 1940-19414
Swiss Bank Corporation $36.3 million
Bank Leu $12 million
Union Bank of Switzerland $7.6 million
Basler Handelsbank $1.8 million
Eidgenössische Bank $0.1 million
Sales to the Swiss National Bank (1940-1945)5
1940 222 million Swiss francs
1941 349.9 million
1942 493.2 million
1943 609.3 million
1944 257.4 million
1945 15.7 million
Total 1,947.8 million Swiss francs
Other Nazi Gold Sales6
Soviet Union $23 million
Japan $4.2 million
Bank for International Settlements $21.5 million
Appendix III
POST WAR
Despite all the gold the Allies seized from defeated Germany, the Reichsbank ended the conflict with nearly twice as much as it had prior to the war. Ten countries made claims to the Tripartite Commission for the Restitution of Monetary Gold. Most of the cases were settled within two years after the commission started its deliberations in 1945. The organization, which had its headquarters in Brussels, existed for much longer largely because of the lack of a settlement for the Albanian claim. Britain blocked it because of three incidents involving British ships in Albanian waters just after World War II. After that dispute was finally settled, the Commission was dissolved on September 9, 1998. It was recognized from the beginning that no country would get total restitution since so much more gold was stolen than had been recovered. The victim countries received about two-thirds the amount that the commission recognized they had lost.
Reichsbank Gold Holdings at the End of World War II7
$256 million
Total Nazi Gold Trade 1938-19458
Reichsbank gold transactions $909.2 million
Looted from central banks $475 million
Seized from individuals, both German and others $146 million
Nazi spent during the war and lost gold $645 million
Gold Recovered in Germany in 19459
U.S. Army recoveries from April-December 1945 $262.2 million
Merkers $238.5 million
Reichsbank branches $14 million
Other locations $9.7 million
Bullion Soviet army seized at the Reichsbank in Berlin $4 million
Tripartite Commission Restitution of Monetary Gold10
Claimed Recognized
Netherlands 145.7 tons 110.2 tons
Italy 73.4 69.3 tons
Albania 2.6 2.3 tons
Austria 91.3 78.3 tons
Czechoslovakia 45 13.3 tons
Yugoslavia 12.3 2.7 tons
Belgium 204.9 198.4 tons
Greece 12.6 none
Luxembourg 4.3 4.2 tons
Poland 138.7 (Danzig only) 4.1 tons
ENDNOTES
ABBREVIATIONS
BA British Archives
BHM Bavarian Main State Archives Munich
BNB Belgian National Bank Archives
FDR Franklin D. Roosevelt Presidential Library
FNB French National Bank
Fold3 Fold3 Website
GARF The State Archive of the Russian Federation
GFAB German Federal Archives Berlin
HM Papers and Diary of Henry Morgenthau, Jr.
HT Harry S. Truman Presidential Library
BC Italian Central Bank Archives
IMT International Military Tribunal (Nuremberg Trial)
IWM Imperial War Museum, London
NACP U.S. National Archives College Park, Maryland
NAN National Archives of Norway
NYFED New York Federal Reserve
RGAE Russian State Archive of the Economy
RGASPI Russian State Archive of Social and Political History
RGVA Russian State Military Archives
TCA Tripartite Commission for the Restitution of Monetary
Gold Adjudication, National Archives College Park
TD Thomas Dodd Nuremberg Papers, University
of Connecticut
TsA Central Archive of the Federal Security Service of the
Russian Federation
PROLOGUE
1. Greater glory to come: Charles M. Province, Patton’s Third Army, p. 223.
2. Your just reward: “Absolute War” in The Poems of George Patton.
3. Down the road: NACP RG 331 Bernstein Report to Brig. Gen. F.J. McSherry G-4. /390/46/9/2. Function in ETOUSA Operations: Merkers-Harringen-Frankfurt Areas in Germany 9 April to 22 April 1945. Dated 26 April 26, 1945.
4. Back to Merkers: Ibid.
5. Arrested all the mine executives: Ibid.
6. Cardboard or wooden containers: NACP RG 260 Monthly Report of Financial Aspects of the Allied Occupation of Germany, April 1945.
7. Property in world history: NACP RG 331 Report of Developments in Removal of Treasure from Kaiseroda Mine at Merkers, Germany sent to Brig. Gen. McSherry April 8, 1945. Arthur Smith, Hitler’s Gold, p.163.
CHAPTER ONE: THE GLITTER OF GOLD
1. The human race: Gerard Loeb, Battle for Investment Survival, p. 102.
2. Period of time: Peter L. Bernstein, The Power of Gold, p. 367.
3. A barbaric relic: John Maynard Keynes, Monetary Reform, p. 172.
4. On each side: Peter L. Bernstein, The Power of Gold, p. 3, and World Gold Council.
5. Second Millennium B.C.: Fernand Braudel, Memory and the Mediterranean, p. 61.
6. Things go smoothly: Thucydides, The History of the Peloponnesian War, VI, 34, 2, the Jowett Translation.
7. In great quantities: Fordham University, Internet Medieval Sourcebook. www.fordham.edu. Christopher Columbus: Extracts from Journal.
8. Most productive eras: Ibid. Columbus Letter to the King and Queen of Spain, 1494.
9. An ounce: World Gold Council paper by Timothy Green, Central Bank Reserves, www.gold.org.
10. Pre-war level: The Churchill Centre, www.winstonchurchill.org, speech May 4, 1925, House of Commons.
11. In the bourgeois sense: Joseph Schumpeter, History of Economic Analysis, p. 406.
12. The twenty-first century: Peter L. Bernstein, The Power of Gold, p. 372.
/> 13. Vote for Gold: Ibid. p. 369.
14. In his mattress: Benjamin P. Thomas and Harold M. Hyman, Stanton, p. 319.
15. Limit the power of government: Liaquat Ahamed, Lords of Finance, p. 169.
16. The toothpaste tubes: Felix Rohatyn, Dealings, p. 3.
17. Worth of gold: Noel Barber, The Week France Fell, p. 298.
18. Before a higher god: Adolf Hitler, Mein Kampf, Vol. 2, Chapter 2.
19. Europe’s national depositories: Arthur L. Smith, Jr., Hitler’s Gold, p. 163. Hjalmar Schacht, Gold for Europe, p. 13.
20. All hazards get gold: Peter L. Bernstein, The Power of Gold, p. 15.
CHAPTER TWO: SPANISH PRELUDE
1. Half a million dead: Hugh Thomas, Spanish Civil War, p. 900.
2. In its vaults: Angel Viñas, The Financing of the Civil War in the book Revolution and War in Spain 1931-1939, p. 267.
3. National parliament: Gerald Howson, Arms for Spain, p. 2.
4. Sisters were killed: Paul Preston, The Church’s Crusade Against the Republic, p. 53.
5. Religion and the church: Papal Encyclicals Online, Pius XI, Dilectissima Nobis. www.papalencyclicals.net.
6. Nationalists and Catholicism: Hugh Thomas, Spanish Civil War, pp. 938-939.
7. Plotted a coup d’etat: Gerald Howson, Arms for Spain, pp. 5-15.
8. Funeral of democracy: Hugh Thomas, Spanish Civil War, p. 5.
9. Republican-controlled Madrid: Oliver Todd, Malraux, p. 181.
10. Planes to Franco: Hugh Thomas, Spanish Civil War, 331-334. Angel Viñas, The Financing of the Civil War, p. 253.
11. Until March 1937: Ibid. Angel Viñas, p. 268.
12. From your country: Hugh Thomas, Spanish Civil War, p. 338.
13. Spanish Republic: Oliver Todd, Malraux, p. 183.
14. Bullion to France: Angel Viñas, The Financing of the Civil War, p. 268
Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion Page 47