by James Rickards
This Thursday — just 48 hours from now — the United Kingdom may soon make the greatest monetary blunder since 1925. That’s when Churchill returned sterling to gold at £4.25 per ounce, the pre-war price. Keynes warned Churchill a much higher price was needed to avoid deflation. Churchill ignored Keynes advice, and plunged the U.K. into depression.
The new blunder is not about the price of gold; it’s about the quantity. If the U.K. leaves the EU, it will turn its back on any share in the Eurozone’s 10,788 tonne gold hoard; the combined total of all Eurozone members plus the ECB.
The U.K. has 310 tonnes of gold, giving it a miniscule 0.5% gold-to-GDP ratio. This compares with gold-to-GDP ratios of 4.8% for Russia, 2.8% for the Eurozone, 2% for the U.S., and 1.6% for China. (The Chinese ratio uses reliable estimates of 4,000 tonnes of gold. A lower amount of 1,788 tonnes is officially reported by China to mask the extent of China’s gold purchase program).