U.S. gold stocks at lowest since 1935

Press, Volume CXI, Issue 32679, 7 August 1971, Page 17

U.S. gold stocks at lowest since 1935

(N.Z.P.A. Staff Correspondent)

WASHINGTON, August 6.

There are plenty of warning signs about that another of the recurring international monetary crises may soon erupt. United States gold stocks are at their lowest point since 1935, America faces its first balance of trade deficit since last century and currency speculators are frantically buying into European currencies.

Administration officials are . watching the developing situation with alarm. Concern is evident that international pressure for a dollar devaluation win again become intense.

Earlier this year the Administration resisted such demands and West Germany, Switzerland, the Netherlands, Belgium and Austria took action. Austria and Switzerland revalued while the others floated their respective currencies. Anger about Bonn

The French and other European nations were angry at Bonn for deciding to float the mark, a decision which virtu-

ally pushed the Netherlands and Belgium into following suit. But they were united in their resentment of the passive role adopted by the United States in the crisis.

Nervousness has persisted in international monetary circles, even though the German move took the heat out of the May crisis. The United States officially held to the line that the problems of the period had sprung from what it termed a short-term capital movement resulting from higher European interest rates. It did not stem, said the Administration, from a lack of confidence in the dollar. But the seeming inability of the Administration to put a halt to United Sates infla-

ion and persisent doubts about the strength of the currency, once considered “as good as gold,” threaten to produce, in the view of many monetary authorities, another dollar crisis. The influential “Wall Street Journal” yesterday reported that Europe was fast losing its old faith that the dollar could escape eventual devaluation. “The European concern is clearly what underlies the increasingly frantic activity in currency trading abroad,” the journal reported.

It said that among Continental monetary officials and bankers an eventual 10 per cent to 15 per cent devaluation was coming to be taken almost for granted, although few expected it before the 1972 Presidential election.

The fact plaguing the dollar is that the United States continues to spend and invest more dollars overseas than foreigners return to the United States. As far back as last May foreign governments and central banks held some SUSIOOOm theoretically outvaluing existing Treasury gold stocks which Washington is pledged to pay out for the dollars. Next month the 118member International Monetary Fund will hold its annual meeting in Washington and observers expect a round of tough talking between the United States, Europeans and Japanese. The fact that the meeting is approaching is thought likely in itself to spur rumours of fresh developments, adding to the worries causing speculative currency movements.