World Monetary Reform

March 15, 1965

Report Outline
Attack on the Dollar in World Markets
Gold Standard Vs. Gold Exchange Standard
Basic Reforms in Monetary Arrangements

Attack on the Dollar in World Markets

Since the end of World War II, the United States has served as banker to the world by virtue of the unquestioned primacy of the dollar in international monetary exchanges. The dollar is still the strongest currency, but recent events show that it no longer is unassailable. Emboldened by a chronic deficit in the U.S. balance of payments, French President Charles de Gaulle has mounted an offensive of sorts against the dollar and the prevailing gold exchange standard. He seeks, in essence, return to a gold standard that would use the metal almost exclusively—instead of dollars and pounds sterling plus gold—as a medium for settling international accounts.

De Gaulle's challenge, spearheaded by conversion of French-held dollars into gold, has been poorly received by most of the major trading nations. Yet it has forced a long overdue assessment of existing monetary arrangements, as well as of measures aimed to stem the drain of American gold stocks. A week after de Gaulle on Feb. 4 called for a return to the gold standard, President Johnson sent a special message to Congress proposing a variety of measures to help solve this country's balance of payments problem. The President already had been forced by the gold leakage to ask Congress to repeal statutory requirements for gold backing of deposits in Federal Reserve banks.

These events emphasized the need to establish new mechanisms to strengthen the free world's monetary machinery. Reform is needed, first, to ease the strain on the dollar and the pound as reserve currencies and, second, to prepare for the time when there will not be a sufficient flow of reserve currencies abroad—“international liquidity” —to finance the steadily growing volume of world trade. A step toward solving the latter problem was taken on Feb. 26 when the International Monetary Fund announced a general increase in member quotas of about $5 billion, or 25 per cent. This expansion of the fund's ability to extend credit to member countries was voted over French opposition.

ISSUE TRACKER for Related Reports
U.S. Dollar and Inflation
Jul. 19, 2019  The Future of Cash
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
International Finance