Chapter 217
Chapter 217
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Translator: crow
Chapter Title: Gold Convertibility
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As the United States printed dollars without limit to cover its massive fiscal spending, European countries began to question whether Washington actually had that much gold.
“Isn’t the U.S. printing dollars way beyond its gold reserves? Is it really okay to keep churning them out like this?”
“Looking at how they’re flooding the market, it seems like they won’t be able to honor the gold convertibility promise.”
If Washington ever suspended convertibility citing a gold shortage, the value of the dollars held by every country could evaporate overnight.
“Ha. Print a little less, would you? Why make everyone so damn anxious.”
No one was free from complaints about the issue.
Still, they couldn’t openly voice their dissatisfaction with the United States—not when they owed Washington so much.
With all that debt to repay, who could afford to challenge America?
So everyone tried to stay quiet, but one man stepped up to the plate.
The man who could shout “No!” when everyone else said “Yes”—de Gaulle.
“Our France is already in dire straits as it is. How are we supposed to sit idly by and watch our assets vanish?”
De Gaulle demanded gold convertibility from the United States point-blank.
“Hand over gold for the dollars we hold. As promised—1 ounce for every 35 dollars!”
“No, that’s the principle, but you can’t demand it like this. Don’t you know shaking the dollar’s credibility endangers world trade?”
“I don’t care about that. We absolutely need our gold convertibility.”
At first, this was just noise between the United States and France.
“Bickering like this won’t make Goldwater cough up the gold.”
De Gaulle decided to escalate.
“Send the navy to collect our gold.”
“Yes, sir. We’ll bring back our gold for sure.”
When French warships actually set sail for the United States, the gold convertibility issue became a global crisis.
Dispatching warships to fetch gold? It was impossible for that not to blow up.
“Have those frog-eating French gone completely mad?!”
The United States jumped in outrage.
Washington tried sweet-talking Paris and even pleading.
But de Gaulle wouldn’t budge.
“Hand over the gold while we’re still asking nicely.”
The Goldwater administration racked its brains over the matter.
Refusing convertibility would shatter the dollar’s credibility.
“First, give us gold for 100 million dollars’ worth.”
Goldwater reluctantly handed it over, swallowing his pride.
“That’s the taste of victory.”
France loaded the gold onto its warships and sailed home triumphantly.
Seeing this success, other European nations quickly lined up.
“We’d like to redeem our gold too.”
West Germany, Switzerland, Spain, and others followed suit, launching their ships.
“How can they suck the sweet nectar from the Bretton Woods system and then act like this? This is betrayal!”
Washington bellowed, but they all stood firm.
“It’s unfair for France alone to get the honey. Give us a fair shot too.”
As the European nations threw tantrums, the United States handed over gold for now.
Behind the scenes, it scrambled to quash further redemption demands.
It wielded diplomatic tools and applied pressure through security issues.
Even so, Europe wouldn’t easily abandon gold convertibility.
Conversely, Korea—which everyone expected to be prickly—took a cooperative stance on the issue.
“We trust Washington’s credibility. Rest assured, we won’t demand gold convertibility.”
Korea also signaled its intent to help recover dollars by buying U.S. Treasuries with its holdings.
“At least Pyongyang’s being reasonable.”
“Korea clearly gets that the dollar can’t collapse.”
Washington’s officials, amid the gold redemption woes, came to see Korea as a partner they could grasp hands with in a crisis.
But Korea’s cooperation alone couldn’t shore up the dollar’s shaky position.
To reverse it, the United States needed to become a current account surplus nation that absorbed dollars.
That was easier said than done.
Even if possible, sucking up global liquidity would strangle the world economy.
As long as the dollar remained the key currency, a current account surplus was a pipe dream.
In the end, America faced a dilemma and had to choose.
Abandon gold convertibility to print dollars freely, or relinquish the dollar’s key currency status.
Either way, the collapse of the Bretton Woods system—which had guaranteed U.S. hegemony—was inevitable.
Of course, it wouldn’t happen tomorrow.
The Goldwater administration chose to maintain the status quo for the time being, even as gold drained away.
Severing dollar-gold convertibility wasn’t a decision to make lightly.
In fact, while the United States agonized over gold convertibility, Pyongyang considered landing a blow on Washington.
But Yi Seong-jun blocked the discussion.
“Even if we force them to abandon convertibility, we can’t dethrone the dollar as the key currency. Demanding it now would just earn America’s wrath with little gain.”
“But when else will we get a chance to shake Washington if not now?”
“Think long-term, and drop the impatience. How long can America sustain the Bretton Woods system?”
Yi Seong-jun stressed that Pyongyang must not reveal its ambitions while the system was doomed to collapse anyway.
His stance was that Korea should always appear to America as a “competitor capable of mutual prosperity.”
“Would you heighten Washington’s wariness just to topple the dollar five years sooner?”
Yi Seong-jun viewed America as a rival but sought to avoid direct confrontation at all costs.
“We’ll follow Your Excellency’s lead.”
Instead of demanding gold convertibility, Korean officials devised ways to preserve the value of Korea’s assets.
They snapped up real estate and bonds—assets that would surely appreciate if held long enough.
By buying U.S. assets this way, Korea sent signals of support to Washington.
It issued similar directives to China and Japan.
But did Korea play the fool for America?
Far from it.
In truth, Yi Seong-jun smiled sweetly to Washington’s face while stabbing it in the back.
“The gold ploy is proceeding smoothly.”
Korea spread rumors to China, Japan, and the Third World that gold prices would keep rising, steadily driving up the international gold price.
This was a scheme to ensure no country could abandon gold convertibility.
“How much has the gold price risen compared to last year?”
“Up 16 percent. Without London controlling it, it would’ve doubled.”
“That’s plenty.”
Yi Seong-jun knew even 10 percent was enough to stoke nations’ greed.
“Keep spreading word that dollar assets will keep falling too.”
“Of course.”
America remained oblivious.
It just thought gold prices were weirdly high, making it hard to persuade allies.
“How about releasing some Federal gold reserves to drop the price?”
Goldwater muttered in frustration.
Of course, it was nonsense.
With federal reserves already short on gold, getting caught doing that?
The fragile gold standard could collapse instantly.
“That’s far too risky a gamble.”
“Then come up with a plan. With gold prices this high, who’ll buy us ditching convertibility?”
“First, the Federal government must halt gold purchases.”
With prices elevated, persuasion failed.
The only option was to slash gold demand.
But even when the U.S. government announced this policy, Korea meddled again.
“Gold is the only asset with unchanging value. Wise words indeed. Of course, better than scraps of paper dollars.”
Korea spread the message to its own people that gradually accumulating gold was smart asset management.
“Well, gotta get my kid at least one gold ring.”
Koreans were already far wealthier than before.
When Korean gold demand exploded, the U.S. government’s purchase halt had little effect.
Gold prices held steady.
“When the hell will gold prices drop?”
“Your Excellency, please be patient.”
With no purchases, Fort Knox and Federal Reserve gold stocks steadily declined each time a European ship arrived.
The Korean government quietly bought gold too.
“We’re the world’s third superpower now. We need at least 5,000 tons of gold.”
With 2,000 tons already, they needed 3,000 more.
Adding Korea’s stealth buying choked Washington.
Fed up, Goldwater sent a message to Yi Seong-jun.
“We thank Pyongyang for its past goodwill. Since you’re helping, could you do one more favor?”
“What can we assist with?”
“Could Pyongyang stop buying gold?”
“Mr. President, we’ve cooperated by forgoing convertibility. Shouldn’t Washington acknowledge our right to hold gold for currency defense?”
“Please understand our urgent situation.”
After repeated pleas, Korea relented.
On the surface, Korea appeared more loyal to Washington than its staunchest ally, Britain.
This stirred complex feelings among Washington’s officials.
*'Will those guys really harm us if they grow bigger?'*
A frightening rival on one hand, the finest partner on the other.
Korea planned to keep wearing this confusing mask.
Until when?
Until the day no mask was needed.