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The U. S. Money Crisis
C. Austin Barker
Financial Analysts Journal
Vol. 25, No. 1 (Jan. - Feb., 1969), pp. 45-58
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4470458
Page Count: 14
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The recent budget deficits and extraordinary rate of increase of new money by the Federal Reserve are related to rising prices and the international money crisis. The author points out that the immediate sword over the head of the international monetary system is the extensive "overhang" of the U.S. short-term obligations to foreigners which net $26 billion, the accumulation of 18 years of payments deficits. Additional payments of $14½ billion of our gold to settle other payments deficits have brought the gold reserve down to $10.3 billion, a necessary minimum war chest. Since it would create a recession to squeeze $26 billion of inflation out of the economy, the preferable remedy would be to raise the price of gold and instantly realign all other IMF currencies so as not to devalue the dollar vis-a-vis other currencies. Part of the U.S. gold profit could go toward paying off some of the $26 billion of the short-term obligations. Price tables since 1834 indicate that a $75 price for gold is realistic and equitable. This price should bring enough net new gold production and gold from dishoarding to provide the growing gold base for growing world trade credit for a generation.
Financial Analysts Journal © 1969 CFA Institute