With Sen. Rand Paul calling on Elon Musk and DOGE to audit Fort Knox, interest has turned to what might be found inside. Last fully audited over eighty years ago, still the physical gold will be present but to whom has it been leased out to - to what degree has it been rehypothecated, i.e. lent out to multiple parties.
When they come to audit Fort Knox what they will uncover is that a large chunk of the gold that is there was originally British and it’s presence in America stems from the dark days of 1940 to 41 when Britain was in serious danger of being defeated by Nazi Germany.
How all of Britain’s gold reserves ended up being owned by the US is not widely discussed in the history of World War Two, and certainly not in the history of relations between Britain and America. However the decisions taken between 1939 and 41 had far-reaching consequences, not only for Britain, but also for the balance of world power and still colours Britain’s relationship with the US today.
As our EU leaders seem hell bent on taking us into another war they should remember that war is cripplingly expensive and highly inflationary. Once Britain declared war on Germany in September 1939 the financial cost of fighting quickly precipitated a financial catastrophe.
In 1939 Britain was acknowledged as the foremost military power in the world. This was based primarily on it’s huge 1,400 ship Navy and its vast territorial Empire that encompassed a quarter of the world’s surface.
The US wasn’t far behind regarding it’s own Navy and its economic power. It had already overtaken Britain by the time of the first world war. Meaning that, although America was officially isolationist under Roosevelt, it was challenging Britain’s place in the world.
For Winston Churchill, the new Prime Minister, the stance was victory over Germany at all costs. It was those costs that caused Britain to ask for American help.
Cash and Carry
To buy equipment and fund costs necessary to wage war they turned to the US. Supportive of Britain's war aims, nonetheless the US didn’t trust the British after they had defaulted on World War One debts amounting to over $4bn. This took place in 1934 contributing to the world depression. As a result the Treasury was tough and only accepted bullion and securities in exchange for aid. The scheme was called Cash and Carry.
How much was World War Two costing? Historians estimate Britain was spending £48m a day in 1941 prices. Equivalent to £1bn today. In other words it represented 60% of national income, much of which was raised by taxation. Due to Cash and Carry British citizens were ordered to surrender their gold to help pay to continue to fight the Germans.
Returning from Dunkirk in June 1940 the British Army had lost most of it’s weapons, vehicles, artillery guns and equipment. A huge surge in newly recruited forces found themselves short of basic necessities, including uniforms.
However, at this point, Churchill was mostly concerned with the U-boat war in which a staggering amount of British warships were being sunk. If this continued it would severely curtail Britain’s access to food and supplies and could have forced Churchill to the negotiating table.
Operation Fish
However, he chose instead to go cap in hand to the Americans. So began Operation Fish in which gold was taken from the vaults of the Bank of England and taken by ship to Canada.
HMS Revenge, a battle ship, accompanied by two converted Ocean liners shipped - at 1940 prices - £60m in gold bullion arriving safely in Halifax, Nova Scotia in early June. Then later in June HMS Emerald crossed the Atlantic packed with £30m in bullion and £200m in negotiable securities.
The gold was then escorted on a heavily guarded train to Ottawa and the securities to Montreal.
In July HMS Revenge and HMS Bon Adventure along with some passenger liners carried between them a further £12m of gold bullion. These trips continued as long as there was still gold to sell.
Much, if not all, of this gold ended up at Fort Knox. On this point the world gold council figures are emphatic. In 1938 the US had about 9,000 tons of gold in reserve, by 1942 that figure was almost 20,000 tons. The 11,000 ton difference was largely made up of the transfer of British gold reserves including those held in South Africa. In 1938 Britain’s gold reserves were about £800m, but in 1939 alone £300m was spent on Cash and Carry.
This lasted until 1941 when Britain was effectively bankrupt. The US Treasury knew it and conducted an audit of Britain’s assets or those that could be turned into cash. For those suspicious of the British, Treasury Secretary Henry Morganthau Jr reported to Roosevelt;
they have no dollar assets beyond those they have disclosed to me. Lacking a formula by which Great Britain can continue to buy supplies here I think they will just have to stop fighting, that’s all.
Instead the financiers pushed for Lend Lease, an interest bearing war debt to be settled after the war. This allowed Britain to keep fighting but at a huge cost. Receiving $32bn through Lend Lease comparative today to $561bn and a debt amounting to a third of it’s GDP.
With Britain now bankrupt, it’s gold sitting pretty in Fort Knox and owing $32bn to the US, relations shifted between the two nations. Great Britain finally paid off it’s Lend Lease debts in 2006.
When they do come to audit Fort Know it’s guaranteed many bars will carry the stamp of the Bank Of England a direct link to the shifting of economic dominance from the British Empire to the Americans.
Now with the threat of European war on the horizon private European money is sending their gold to the US once more. Meanwhile Britain has promised Ukraine £2.6bn loan guaranteed by the interest of frozen Russian assets. This blatant theft has started an avalanche of central banks around the world to buy gold, pushing prices to new all time highs.
The gold will be in Fort Knox, no doubt about it, but who actually owns it is an entirely different question. There’s a reason Nixon had to shut the gold window in 1971 as the US gold reserves were being drawn down due to the ruinous Vietnam war.
Conclusion - war is expensive, let’s not go down that path and hold on to your gold.
Thanks go to Mark Felton Productions