Foreign Relations of the United States, 1964–1968
Volume VIII, International Monetary and Trade Policy, Document 191
191. Editorial NoteIn their March 14, 1968, public statement, Secretaries Fowler and Martin invited the Central Bank Governors to consult on the gold problem (see footnote 2, Document 190). This initiative led to a meeting in Washington on March 16 and 17 of the Central Bank Governors of the seven nations active in the gold pool. The Managing Director of the International Monetary Fund and the General Manager of the Bank for International Settlements also attended these sessions.
Walt Rostow and Edward Fried sent several memoranda and telegraphic reports to the President at the LBJ Ranch in Texas, March 15–17, on developments at this weekend meeting. Texts are in the Johnson Library, National Security File, Subject File, Balance of Payments, Vol. V [2 of 2], Box 3, and ibid., 1968 Balance of Payments Programs, Memos and Miscellaneous [1 of 2], Box 4. A “Position Paper for Gold Pool Negotiations, March 16–17,” which contains no drafting information, is ibid., Bator Papers, Gold Crisis, March 13–16, FMB Washington Trip, Box 10.
On March 17 the Governors issued a communiqué supporting the U.S. Government's policy of continuing to buy and sell gold at $35 per ounce. The communiqué also noted the U.K. Government's determination “to do all that is necessary” to end its balance-of-payments deficit, the intention of most European governments “to pursue monetary and fiscal policies that encourage domestic expansion consistent with economic stability,” and the Governors' decision to increase the total of credits (including the IMF standby) available immediately to the United Kingdom to $4 billion.
The communiqué also stated:
“The Governors agreed to cooperate fully to maintain the existing parities as well as orderly conditions in their exchange markets in accordance with their obligations under the Articles of Agreement of the International Monetary Fund. The Governors believe that henceforth officially held gold should be used only to effect transfers among monetary authorities and, therefore, they decided no longer to supply gold to the London gold market or any other gold market. Moreover, as the existing stock of monetary gold is sufficient in view of the prospective establishment of the facility for Special Drawing Rights, they no longer feel it necessary to buy gold from the market. Finally, they agreed that henceforth they will not sell gold to monetary authorities to replace gold sold in private markets.” (Annual Report of the Secretary of the Treasury … , 1968, page 371)
The Governors' decision in effect led to two gold markets, one for official transactions only with the price fixed at $35 per ounce, and the second for private transactions with the price freely determined by supply and demand.
Pierre-Paul Schweitzer, IMF Managing Director, also issued a personal statement on March 17 endorsing the Governors' communiqué and urging the cooperation of other IMF members. Text is ibid., pages 371–372.
A full summary of the steps leading to the gold pool agreement as well as subsequent international reactions is in Current Economic Developments, Issue No. 802, March 26, 1968, pages 1–6. (Washington National Records Center, RG 59, E/CBA/REP Files: FRC 72 A 6248, Current Economic Developments)