Cut in Gold

The Senate Banking Committee last week approved a bill to lower the minimum gold backing of Federal Reserve notes from 40% to 25%, the backing of Reserve deposits from 35% to 25%. Then the bill went to the Senate.

The committee had no choice. The U.S. gold hoard, which amounted to a historic $22,737,000,000 at the time of Pearl Harbor, is now down to $20,452,000,000. This might shrink even further if foreign balances in the U.S. of $5.3 billions are converted into gold. Reason for today's lowered total: the U.S. has been paying cash for more than half of its war imports and purchases in foreign lands (most of its vast exports are lend-lease, bring home no U.S. dollars). Thus the gold which poured into the U.S. in the '30s is now going out again.

But U.S. currency in circulation has tripled since 1940 to an alltime high of $26 billions: so that, in spite of still having a large gold hoard, gold reserves against Federal Reserve notes and deposits have dropped from 91% to 49%, are expected to hit 40% by year's end.

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