The diabolic plot is to use the very virtue of gold that makes it the best money known to man commanding the lowest rate of interest, to destroy people s trust in gold. Through their greed unscrupulous bullion bankers and others can be enticed to take the gold at the low lease rate, sell it, and put the proceeds in high-yield government bonds. The sale will crush the price of gold. Should it still show signs of lingering life, it can be clubbed down again and again, with more and more leasing. Clearly, if it did not have the virtue of commanding the lowest rate of interest, then this stratagem to destroy people s faith in gold could not work.
Central bankers are on the horns of a dilemma.
On the one horn, they would love to use their gold in a dumping campaign to punish all those who trust their savings to gold. On the other horn, their gut-feeling tells them that outright sale may not be a good idea after all. They would give up the best kind of monetary asset that is nobody s liability, and replace it with the worst kind, namely, irredeemable promises of devaluation-happy governments. Such a course could undermine the strength of their balance sheet, perhaps fatally, with incalculable consequences to the value of their banknotes. Those central bankers who still read history may know that in the 1931 episode of the devaluation of the British pound the directors of the Bank of France were scurrying around the building to find overlooked assets, and they put not only the value of the building, but also the desks in the building, and the paper clips on the desks into the balance sheet in the forlorn hope to cover up the losses that the bank suffered due to the devaluation of the pound.