Gold Policies and Production

February 14, 1968

Report Outline
Renewed Controversy Over Gold Policy
Scarcity and Special Properties of Gold
Status of Gold Mining in United States
Proposals to Alleviate the Gold Crisis
Special Focus

Renewed Controversy Over Gold Policy

President Johnson's proposal to remove the remaining gold backing of United States currency has underlined the historic importance of gold as the primary medium for settling international accounts. It also has intensified the long-standing debate on the merits of gold as a monetary reserve. The traditional view, as often expressed in recent years by French President de Gaulle, is that gold is, “at all times, the immutable and fiduciary value par excellence.” On the other hand, William MeChesney Martin Jr., chairman of the Federal Reserve Board, regards gold as a “barbarous metal.” France, whose monetary gold reserves have been growing, seeks a return to the gold standard and a substantial increase in the price of the metal. The United States, whose gold reserves have been dwindling for almost 20 years, wants to make the international monetary system less dependent on gold and to maintain the price at $35 an ounce.

Plan to Remove Gold Cover From U. S. Currency

The U. S. Treasury's standing offer to buy from or sell to foreign governments any amount of gold at $35 an ounce represents the keystone of the world monetary system. That fixed exchange rate, dating from 1934, has helped to ensure stability of the dollar. Foreign governments, confident that dollars were as “good as gold,” have accepted them as a part of their monetary reserves.

The trouble is that a decade of big American balance-of-payments deficits has led to a massive accumulation of dollars in European central banks and thus to potentially large claims on this country's monetary gold stock. The United States gold reserve is now down to about $11.9 billion, and $10.7 billion of that total represents the required gold “cover” of outstanding Federal Reserve notes. Federal Reserve Board Chairman Martin and Treasury Secretary Henry H. Fowler, testifying before the House Banking and Currency Committee on Jan. 23, said that the remaining $1.2 billion of “free gold” would disappear within two years even if foreign governments refrained entirely from exchanging their dollars for gold. About $500 million worth of gold is needed every year, they explained, to back the normal $2 billion annual increase in paper currency. In addition, licensed sales of gold to industrial and artistic users aggregate about $150 million a year.

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
Financial Institutions
International Finance