The gold was stored in large compartments about ten feet wide, three meters high and six meters deep.  The stacks of gold bricks filled the space to the ceiling, each that brick is approximately the size of three bars of chocolate. They weigh a dozen pounds each and were worth in those days, fourteen thousand dollars. It was 1940, six years after  gold was officially thirty-five dollars per ounce. Even at this value the pile was worth  up $ 2 billion, a sum sufficient at that time to  buy the total output of goods and services of the United States for four days. It was, however, in a small secure volume, lying in five floor’s under the  traffic of the streets of New York. The contemplation of  more than one hundred miles of gold ingots stacked to the ceiling and under the bright lights was an experience both chilling and unforgettable.

This gold was not owned by the  United States. It belonged to France, England, Switzerland and many other countries. For a long time, these countries kept some of their official holdings of gold in the Federal Reserve Bank of New York, both for reasons of safety and convenience. Each bar was recorded and  bore the stamp of its owner and any other identifying mark. This process of marking is called “earmarking,” a phrase which undoubtedly refers back to the method  used to indicate membership of animal herds. This marking avoided each nation the  worry and expenses associated with the transport of gold from one country to another (especially if it had to cross an ocean), when for one reason or another, gold changed owner. For example, if England had to pay gold to France, an employee of the Federal Reserve just took a cart to the compartment assigned to  England, loaded the appropriate ingots and transported them to the  French compartment, changed the signs on gold bullion and noted the change in a book.

I landed a job in the documentation department of the Federal Reserve Bank of New York at the heart of the financial district. One day, as a favor, my boss took me to see the gold that was stored in the sanitized vaults of the bank, five floors underground. They were dug deep into the rock to deter burglars building an access tunnel. We entered the secured area by heavy cylindrical stainless steel doors, waterproof and airtight, which unlock automatically at nine o’clock in the morning and lock automatically at five o’clock in the evening. A basket was placed inside, just after entry, with fresh sandwiches, renewed daily, for any unlucky employees who sometimes found themselves locked in, when the doors automatically locked at the end of the day. A little further, there was a scale for weighing gold. It was so sensitive that a small speck would set it in motion. With gold, even dust counts.

These movements of a few meters from one compartment to another, often corresponded to significant changes in the distribution of wealth between countries, with profound impact on the level of living. However, citizens of each country never saw the gold of their governments. If all this gold, for example, had been submerged in the Hudson and we have continued to keep books of accounts the same way as before, the economic and financial implications for each nation would have been exactly the same and just as profound as when gold was physically moved from one compartment to another.

From the book The Power of Gold by Peter L. Bernstein

See our other article on “wealth is static“

Tags: DOLLAR, Gold, Money

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