[REPORT] The 1966 Crisis Part I: London Gold Pool Collapses

May, 1966

LONDON GOLD POOL COLLAPSES

The London Gold Pool set up only five years ago has now collapsed following a spiralling of a crisis culminating in the devaluation of sterling amidst the British economic crisis.

Already increasingly unable to balance the outflow of gold reserves with buybacks due to the excessive inflation of the US money supply the United States was no longer able to redeem foreign-held dollars into gold, the supplies of which have plataeued in recent years against ever increasing money supplies (primarily from the United States).

The withdrawal of France from Bretton-Woods in February 1965 saw large amounts of gold moved from New York to Paris setting the LGP up for the potential to take a dive should more shocks arrive to the system.

This shock arrived in the form of the British Economic Crisis, which following the devaluation of the sterling has seen a moderate run on gold by investors worried that the impact on sterling reserves would make convertibility harder amidst attacks on pound sterling and measures being taken by the IMF.

On the May bank holiday the British government (at the request of the United States) closed the Gold Pool early on the Thursday while the US and UK began to discuss how to navigate the crisis to save the LGP.

During this time the United States Congress has voted near unanimously to repeal the requirement that the United States Dollar be backed with a gold reserve, and the consequences of this and the conference between US and British ministers saw the Gold Pool closed for two weeks in total while the price of gold iin other markets continues to steadily increase.

Unable to bring the London Gold Pool out of its death spiral, it has been announced that it will not be reopenling again.

The US Federal Open Market Committee has noted that "the international financial system is moving toward a crisis more dangerous than any since 1931"