August 1971: The Final British Gold Demand That Did in Nixon

Aug. 22, 2021 (EIRNS)—A long and detailed “timeline,” constructed from papers in the Nixon Archive and at the National Bureau of Economic Research, of the days leading up to Nixon’s fatal Aug. 15, 1971 decision to break the dollar-gold reserve link, was published by BullionStar on Aug. 16. The summary is by a gold-bug, Ronan Manly of BullionStar, but coheres with previous EIR researches in showing that it was the Bank of England and British government which brought Bretton Woods down. In the microcosm, it comes down to “the British ambassador to the U.S., the 3rd Earl of Cromer, a.k.a. George Rowland Baring [of Baring’s Bank—ed.], showing up at the U.S. Treasury offices in Washington D.C. on 12 August 1971 and demanding that [$3.1 billion in] U.S. dollars held by Britain be converted into gold.”

As described in the various historical papers cited in the article, the dollar had been depreciating within its narrow Bretton Woods range of variation, due to the conversion in the late 1960s of American trade surpluses into deficits, because of the failure of capital goods and manufactured exports to the underdeveloped sector which FDR intended as the guts of the 1944 Bretton Woods agreement. European countries, also no longer getting Marshall Plan exports, inflated their own currencies in reaction, by buying more dollars from private companies. But this resulted in August 1971 in gold purchases from the U.S. Treasury by France, Switzerland and the Netherlands in the tens or low hundreds of millions of dollars. France, for example, bought $191 million in gold in order to repay an IMF loan (it could have done so in dollars).

The British decision to demand $3.1 billion was of a different order of magnitude, and Nixon’s cabinet thought it would cut U.S. gold reserves below $10 billion. Not made clear in the article on BullionStar, is that the British banks and financial firms had such large volumes of dollars in reserve accounts at the Bank of England, because they had been printing dollars, Eurodollars, based on pulling dollars out of the U.S. economy and into London through high-interest dollar accounts. These actions were in direct violation of the regulations required of member nations under Bretton Woods.

The timeline on BullionStar emphasizes, and proves:

“The British request for U.S. Treasury gold was the main event of August 1971. There is ample evidence in everything from archives to academic papers to the memoirs of the U.S. government officials involved, that it was ... crucially British requests to exchange U.S. dollars for gold in the week prior to 15 August that forced the U.S. government to close the gold window and suspend U.S. dollar convertibility into physical gold.”