By Julian D. W. Phillips
Kitco News
By the beginning of the 1960s, the U.S. $35 = 1 oz. Gold price was becoming more and more difficult to sustain. Gold demand was rising and U.S. Gold reserves were falling, both as a result of the ever increasing trade deficits which the U.S. continued to run with the rest of the world.
Shortly after President Kennedy was inaugurated in January 1961, and to combat this situation, newly-appointed Undersecretary of the Treasury Robert Roosa suggested that the U.S. and Europe should pool their Gold resources to prevent the private market price for Gold from exceeding the mandated rate of U.S. $35 per ounce. Acting on this suggestion, the Central banks of the U.S., Britain, West Germany, France, Switzerland, Italy, Belgium, the Netherlands, and Luxembourg set up the “London Gold Pool” in early 1961. One wonders why they were so cooperative with the U.S. Granted the gold that left these nations ahead of the war was still in the U.S. and slowly but surely they felt it necessary to get it back.
What happened in occupied Europe was that U.S. dollars became more abundant there and a market in ‘Eurodollars’ sprang up derived in part from U.S. soldiers still in Europe. But the volumes grew more and more as the U.S. established a perpetual trade deficit feeding the rest of the world with them.