The Gold Scheme

As the new Administration moved in, a prime question was: Will the U.S. raise the price of gold? For months, speculators and wishful thinkers had been puffing up the possibility, and support from abroad gave the glittering scheme some weight.

But the arguments for revaluation were dubious at best. The theory was that by raising the price of gold from $35 to perhaps $52.50 an ounce the U.S. could 1) increase the value of monetary gold stocks in the hands of foreign governments and central banks, 2) encourage hoarders to bring gold out of hiding. The $12 billion windfall from revaluation of the U.S.'s own $23 billion gold reserves could then be used to set up an international fund to stabilize weak currencies.

But currency juggling alone could not cure fundamental economic ills. At a time when most of the world was afflicted by inflation, revaluing gold would only make it worse by depreciating currencies.

There were other objections. The supposed benefits of revaluation would not extend to countries with small gold reserves, such as France and Italy, which are most in need. It was even debatable whether revaluation would bring gold out of hiding; it might only increase hoarders' distrust of paper money. And even though revaluation would artificially increase the value of a nation's gold stocks, it would not stop the drain. Only a balance between imports & exports could do that. If the balance were achieved, then even a small gold supply, such as France had, would be ample. And the price of gold had not been kept artificially low. Bar gold, in which the big trading is done, was quoted at barely $3 to $4 over the official price.

In the face of the overwhelming arguments against revaluation, the new Administration had no plans to change the price of gold.

This file is automatically generated by a robot program, so reader's discretion is required.