Gold and the Dollar

December 15, 1960

Report Outline
Deficit in U.S. international Accounts
American Monetary Policy Since 1933
Gold Outflow and the New Administration

Deficit in U.S. international Accounts

A problem of great complexity awaiting the Kennedy administration is how to restore full confidence in the American dollar abroad without impairing free world defense or the country's foreign aid programs, and without instituting austerity measures which would further depress economic activity at home and make it necessary to postpone many of the welfare advances promised in the 1960 Democratic platform. Steps recently taken by the Eisenhower administration to redress the balance of international payments, and thus to stem the loss of gold and strengthen the dollar in foreign markets, represent the first facing up to a problem which has become increasingly serious over the last few years. Some of these steps may be further elaborated, and others modified or abandoned in favor of measures promising greater effectiveness, when the new administration takes office.

In late November the country's monetary gold stock fell below $18 billion for the first time in more than 20 years. Only a few years ago economists were saying the world faced a “permanent dollar shortage.” Today, after gold losses of $2.2 billion in 1958, $1.1 billion in 1959, and $1.5 billion in the first eleven months of 1960, there is talk of a “permanent payments deficit.” The recent experience of the United States and other countries is held by some economists to demonstrate the need of a thoroughgoing reorganization of the international monetary system,

Concern Over Decline of Confidence in the Dollar

The weakening of international confidence in the dollar was dramatized by a feverish rush on gold in the London market in mid-October. A surge in speculative buying lifted the price of gold from $35.25 to nearly $41 an ounce. In the space of four days the value of the dollar, in relation to the price of gold, fell more than 13 per cent before starting to rise again. The flurry of speculation was attributed to reports that Swiss bankers were convinced that the next administration at Washington would be compelled to devalue the dollar.

ISSUE TRACKER for Related Reports
U.S. Dollar and Inflation
Oct. 2008  The Troubled Dollar
Feb. 13, 1998  Deflation Fears
Mar. 13, 1987  Dollar Diplomacy
Oct. 14, 1983  Strong Dollar's Return
Jul. 11, 1980  Coping with Inflation
May 16, 1980  Measuring Inflation
Dec. 07, 1979  Federal Reserve's Inflation Fight
Jun. 09, 1978  Dollar Problems Abroad
Sep. 20, 1974  Inflation and Job Security
Feb. 26, 1969  Money Supply in Inflation
Feb. 14, 1968  Gold Policies and Production
Dec. 15, 1965  Anti-Inflation Policies in America and Britain
Mar. 15, 1965  World Monetary Reform
Dec. 02, 1964  Silver and the Coin Shortage
Oct. 17, 1962  Gold Stock and the Balance of Payments
Dec. 15, 1960  Gold and the Dollar
Oct. 10, 1956  Old-Age Annuities in Time of Inflation
Jan. 17, 1951  Credit Control in Inflation
Aug. 10, 1949  Dollar Shortage
Oct. 04, 1943  Stabilization of Exchanges
Jan. 21, 1941  Safeguards Against Monetary Inflation
Mar. 25, 1940  United States Gold in International Relations
Dec. 14, 1937  Four Years of the Silver Program
Oct. 04, 1934  Inflation in Europe and the United States
Jan. 30, 1934  Dollar Depreciation and Devaluation
Sep. 05, 1933  Stabilization of the Dollar
May 29, 1933  Invalidation of the Gold Clause
Mar. 15, 1933  Inflation of the Currency
Oct. 25, 1924  Bank Rate and Credit Control Federal Reserve Policies and the Defaltion Issue
BROWSE RELATED TOPICS:
Currency
Deficit, Federal Debt, and Balanced Budget
Economic Analyses, Forecasts, and Statistics