Evening star., 1961-02-06

to Congress today on the bald
States,
The gold outflow of the past
three years has dramatically
focused world attention on q
fundamental change that has
been occurring in the economic
! position Of the United States,
! Our balance of payments-the
. accounting which shows the
. result of all of our trade and
financial relations with the
! outside world-has become one
of the key factors in our ma
{ tional economic life. Mainly
because that balance Of pay
/ ments has been in deficit we
have lost gold.
: This loss of gold is naturally
important to us, but 1t also
concerns the whole free world.
For we are the principal banker
of the free world and any
potential weakness in our
dollar spells trouble, not only
for us but also for our friends
and allies who rely on the
dollar to finance Q substantial
portion of their trade. We must
therefore manage our balance
of payments in accordance with
'our responsibilities. This means
that the United States must in
the decades ahead, much more
than at any time in the past,
take its balance of payments
into account when formulating
its economic policies and con-
ducting its economic affairs. :.
Concern Justified
Thanks to our international
reserves we have time, II we
use it wisely, In which to
strengthen our domestic econ
.omy and make 1t fully competi-
tive with that Of other nations.
Our situation is one that JUS
titles concern but not panic
or alarm. ...
The steps I now propose will
strengthen our dollar position
and insure that our gold re-
serves are employed effectively
to facilitate the commerce of
the free nations and to protect
the stability Of their currencies.
Because these steps supplement
the policies for strengthening
our domestic economy, and
because we can take them
calmly and deliberately. they
are not for that reason any
less important or less urgent.
Those that are within the
present authority Of the Execu-
tive will be the subject OF
vigorous action. Where action
by the Congress is required ]
urge early consideration and
approval. E.
Last year, 1860. the surplus
Of our exports Of goods and
services over our imports In
creased from $2.2 billion In
1859 to $50 billion. This was
caused, principally, by ar
increase-amounting to more
than So billion-in our exports
This once more reduced what
may be called our basic deficit
it was only about SIS billion
for the year. However. during
1850 there was . large move
ment abroad uf khOrt-ternl
capital. Favorable interest
rates abroad, . high rate Of
growth and good investment
prospects in Europe and some
speculative fears concerning
the future value Of the dollar
all played O part. It Is eSti-
mated that this outward flow
Of short-term funds was be-
tween 50 and $2.5 billion, and
this was the crucial factor ir
raising the overall deficit tt
$3.8 billion. OF this, SIT bill.
lion was transferred in the
form of gold and $2.1 billion
took the form Of increased
foreign dollar holdings. :.
$l7.5 Billion Reserve
Our gold reserve now stands
at SITS billion. This Is more
than 11a times foreign officia'
dollar holdings and more thar
90 per cent Of all foreign dollar
holdings. It Is some two-fifths
Of the gold stock Of the entire
free world.
In any reckoning Of interna-
tional assets and liabilities, the
United States has a strong SOL
vent position.
In short, powerful resource!
stand behind the dollar. Oul
gold and monetary reserves are
large; SO are the physical ant
m on etary assets we holc
throughout the world. And, ir
the years ahead, If the program
! previously outlined is pursued
the dollar will have the added
strength Of the reviving powel
Of the American economy itself
Conclusions Listed
Certain firm conclusions fol.
low:
/. The United States officia
dollar price Of gold can and vii
be maintained at $35 an ounce
Exchange controls over trad
and investment will not be in
voked. Our national securit.
and economic assistance pro
grams will be carried forward
Those who fear weakness in tn
dollar will find their fears un
founded. Those who hope TO
speculative reasons for an in
crease in the price Of gold vii
find their hopes in vain.
2. We must now gain contro
Of our balance of payments po
sition so that we can achiev
overall equilibrium in our in
ternational paym nts. Thi
means that any sustained fu
ture outflow Of dollars into tn
monetary reserves Of othe
countries should come abou