Ferdinand Lips was a visionary with a profound understanding of monetary history and the perils of legal tender irredeemable paper-ticket-electronic money. He was mindful of the importance of transitioning to an honest monetary system with gold-as-money. More than that, he went to extraordinary effort and expense to help set things right.
For example, long before there was even a whisper that there might be something seriously wrong with the world’s fiat monetary system, he sponsored in 1992 and then again in 1996 The International Currency Prize of Bank Lips, Ltd, a 25,000 Swiss Franc prize for the best proposal for reform of the international monetary system.
I was honored to have served on his international jury for the 1996 award. It was about that time that Ferdi became a trustee of the Foundation for the Advancement of Monetary Education, an organization that I founded to promote understanding about the money issue, and he and I began to collaborate, with me as his editor, on his forthcoming book Gold Wars: The Battle Against Sound Money As Seen From A Swiss Perspective.
After providing a brief history of gold, the major thrust of Gold Wars is to offer a thorough analysis of the pressures driving Switzerland to sell 1,300 tonnes of its gold reserves, something Ferdi was adamantly against. Some will recall that Switzerland continued to back the SFr with gold long after President Nixon, on August 15, 1971, defaulted on the United States’ sovereign promise to redeem dollars for gold to foreign governments at the rate of one ounce of gold for $35.
As Gold Wars recounts, because the SFr was backed 40% by gold this led to a strengthening of the SFr relative to other currencies which were then all completely fiat. At first, folks who had some historical memory about currency collapse made such a rush to deposit their savings in Swiss banks that those banks, rather than paying interest, began to charge interest against monies on deposit.
While a boon to those in Switzerland who had savings, and there were many since the Swiss had a reputation for thrift and probity, there were others who were adversely affected: those whose income was dependent on exports, e.g. Swiss manufacturers. More importantly, Swiss bankers noticed the growing profits that were accruing to U.S. banks, and they wanted to participate. Gold backing for the SFr was a limiting factor. Finally, SFr appreciation against the dollar was a signal that the United States monetary authorities were mismanaging the fiat dollar.
Part of the thesis of Gold Wars is that things don’t just happen at random. There are always players, most times rarely identified, who behind the curtain advocate and drive policy. In the case of Switzerland, the issue was how to get rid of, or at least greatly reduce, the role of gold in the Swiss monetary system so that the SFr would weaken or at least stop appreciating against other currencies. The first step was in 1992 for Switzerland to join the International Monetary Fund. What was the public policy justification for that? To almost everyone this is a mystery.
Few were aware that the role set for the IMF with regard to gold had greatly changed. At the 1944 Bretton Woods Monetary Conference it was agreed that the dollar would be the world’s “reserve currency” and would be redeemable on demand for gold at the United States Treasury. This meant that IMF member countries were to peg their currencies not to gold, but to the dollar — which was then said to be “as good as gold” — and keep dollars as the reserve backing for their currencies.
The IMF was to monitor and to help ensure that member country exchange rates relative to the dollar were kept within tight channels and possibly extend temporary loans when exchange rates began to deviate from those channels.
However, without any fanfare, and hardly known to anyone, in 1978 the IMF, presumably at the urging of the United States since the United States by far has the largest vote at the IMF, modified its Articles Agreement to prohibit member countries from linking their currencies to gold and only to gold. Thus, by Switzerland joining the IMF, for which there is no other explanation that makes any sense to me, it was committing itself to demonetize gold! One wonders if the Swiss people would have gone along with this if they understood the implications.
The second step, which followed on April 19, 1999, was for Switzerland to change its constitution to strike the requirement that the SFr be 40% backed by gold. The third step was for Switzerland to begin divesting its gold in exchange for fiat paper. Ferdi Lips saw the handwriting on the wall and understood the implications not only for Switzerland but for the world.
Ferdi took it upon himself to fight changing the Swiss Constitution and the subsequent gold divestiture. Gold Wars was his intellectual ammunition. He hand-delivered copies and met with many members of the Swiss Parliament to make his case.
The book explains the background about what happened both within Switzerland and on the world’s stage with myriad historical references and first-hand observations and meetings with the principal players. With the insights from Gold Wars one can much better comprehend how monetary policy is made, especially as it relates to gold.
Ferdi Lips has done the world a great service. He will always be remembered as a sage and a true Swiss Patriot.
Larry Parks, Executive Director
The Foundation for the Advancement of Monetary Education, (www.fame.org)
December 1, 2011
 In 1998, Switzerland had 2,590 tonnes of gold. By 2009, that amount had been reduced to 1,040 tonnes.
 So-called “backing” is not the same as promising redemption on demand, which the Swiss stopped allowing circa 1936. “Backing” only puts a soft limit on the amount of SFr that may be issued.
 International Monetary Fund Articles of Agreement, Section 4-2b