a blast from the past (the more things change, the more they stay the same)
secondrepublic
Posts: 2,619 ✭✭✭
Came across this Congressional testimony from 1978 regarding a proposal to mint gold medallions. Some interesting quotes:
Senator William Proxmire: "This morning's hearings concern Treasury sales of US gold and a bill introduced by Senator Helms S 2843 which would require that a portion of any gold sold by Treasury be in the form of 1 ounce and 2 ounce medallions. This is the committee's first oversight hearing on Treasury gold sales and it comes at an important juncture for US policy. Treasury has been selling gold since April [1978] at the rate of 300,000 ounces per month. Last Tuesday evening Treasury announced that sales would be increased to 750,000 ounces per month 2 times the current rate. All sales will continue to be for minimum bids of 400 ounces.
"The United States has been off the gold standard for 44 years since the Gold Reserve Act of 1934. Gold ceased to play a major role in the international monetary system with the advent of floating exchange rates in 1973.... I think it's no secret that one of the reasons given for the [Treasury's] gold sales is to help build confidence in the dollar and to prop up the dollar but I think it's also clear this is at the very best a superficial tentative assistance in that area. Obviously to do anything significant about the dollar we have to cope with the inflation problem. That's the heart of it and if we don't adopt fiscal policies and monetary policies which are prudent and careful and inspire the confidence of investors here and abroad the dollar is going to continue to fall no matter what we do with gold.
"Now a strong case can be made that getting gold out of the monetary system was the right step. Gold is a commodity like copper, zinc, wheat and sugar: it is not money.... Treasury has justified its sale of gold bullion from the United States gold stockpile since April as a further step toward eliminating the international monetary role of gold.
"Some people ask why the US Government continues to hold gold and to pay storage and security costs on a gold stockpile if gold is completely unnecessary for monetary purposes.... It has been suggested by others that the American taxpayer would be well served if Treasury were to announce its intention to sell off all the gold within a few years to anyone who wants to buy it at the best price that can be obtained."
Senator Jesse Helms: This "hearing is also on the topic of the wisdom or lack thereof of gold sales from the US gold reserves. I generally oppose the gold sales because as Presidents Kennedy and Johnson's Under Secretary of the Treasury Robert Roosa said of our gold 'In this world I think we should retain our ultimate assets. It's the storm cellar we should retain in case the system breaks down.'"
"Gold sales have no effect on the money supply and the revenues gained by selling a few million ounces of gold are minute compared to the rate at which the Federal Reserve Board is creating money. Selling gold to sop up excess dollars is a little like attacking a flood with a sponge.
"Professor Miroslav Kriz, an international economist at Princeton University. states that "The Treasury wants to not take any action to suggest that gold is a sound way for Americans to invest their savings; they could sustain substantial losses. The answer is that the Treasury's solicitude was perhaps understandable years ago when the dollar was strong respected and the envy of the world; today it sounds hollow".... When will the Treasury recognize that governments abroad are not ready to give up gold as an instrument of monetary reserves? This is evidenced among other postures by the fact that governments abroad for the most part have added to [gold] reserves"
Senator Orrin Hatch: "Mr Chairman, in 1934 when the American people were forced by law to deposit their gold through the office of the Treasury and into Fort Knox they were reimbursed at the rate of $20.67 and later at $34.45 an ounce. Since then the American dollar has depreciated to the context that 1 ounce of gold now sells for more than $200. In buying this gold the US Government obviously made a very shrewd investment its gold reserves now have a dollar value 10 times greater than that of the original purchase. Unfortunately this investment was made by taking from the American people something that does not depreciate and giving them in return currency whose value has been steadily decreasing for years."
Asst. Treas. Secretary Bergsten: "[T]he extreme volatility in the market price of gold makes it a high risk asset. For example the price of gold moved from a peak of $195 per ounce at the end of 1974 to a trough of $104 in mid 1976 and back to a new high of $215 on August 16. As of August 24 the price was about $203 per ounce.
"As I have pointed out gold is a highly speculative commodity subject to volatile swings in price. The investor in... [gold] at the end of 1974 would have seen the value of his investment drop by 47 percent by mid 1976. We should thus avoid any implication that the US Government is promoting such investment."
Link to official testimony.
(Of course, gold hit $800 the year after Bergsten gave this testimony).
Senator William Proxmire: "This morning's hearings concern Treasury sales of US gold and a bill introduced by Senator Helms S 2843 which would require that a portion of any gold sold by Treasury be in the form of 1 ounce and 2 ounce medallions. This is the committee's first oversight hearing on Treasury gold sales and it comes at an important juncture for US policy. Treasury has been selling gold since April [1978] at the rate of 300,000 ounces per month. Last Tuesday evening Treasury announced that sales would be increased to 750,000 ounces per month 2 times the current rate. All sales will continue to be for minimum bids of 400 ounces.
"The United States has been off the gold standard for 44 years since the Gold Reserve Act of 1934. Gold ceased to play a major role in the international monetary system with the advent of floating exchange rates in 1973.... I think it's no secret that one of the reasons given for the [Treasury's] gold sales is to help build confidence in the dollar and to prop up the dollar but I think it's also clear this is at the very best a superficial tentative assistance in that area. Obviously to do anything significant about the dollar we have to cope with the inflation problem. That's the heart of it and if we don't adopt fiscal policies and monetary policies which are prudent and careful and inspire the confidence of investors here and abroad the dollar is going to continue to fall no matter what we do with gold.
"Now a strong case can be made that getting gold out of the monetary system was the right step. Gold is a commodity like copper, zinc, wheat and sugar: it is not money.... Treasury has justified its sale of gold bullion from the United States gold stockpile since April as a further step toward eliminating the international monetary role of gold.
"Some people ask why the US Government continues to hold gold and to pay storage and security costs on a gold stockpile if gold is completely unnecessary for monetary purposes.... It has been suggested by others that the American taxpayer would be well served if Treasury were to announce its intention to sell off all the gold within a few years to anyone who wants to buy it at the best price that can be obtained."
Senator Jesse Helms: This "hearing is also on the topic of the wisdom or lack thereof of gold sales from the US gold reserves. I generally oppose the gold sales because as Presidents Kennedy and Johnson's Under Secretary of the Treasury Robert Roosa said of our gold 'In this world I think we should retain our ultimate assets. It's the storm cellar we should retain in case the system breaks down.'"
"Gold sales have no effect on the money supply and the revenues gained by selling a few million ounces of gold are minute compared to the rate at which the Federal Reserve Board is creating money. Selling gold to sop up excess dollars is a little like attacking a flood with a sponge.
"Professor Miroslav Kriz, an international economist at Princeton University. states that "The Treasury wants to not take any action to suggest that gold is a sound way for Americans to invest their savings; they could sustain substantial losses. The answer is that the Treasury's solicitude was perhaps understandable years ago when the dollar was strong respected and the envy of the world; today it sounds hollow".... When will the Treasury recognize that governments abroad are not ready to give up gold as an instrument of monetary reserves? This is evidenced among other postures by the fact that governments abroad for the most part have added to [gold] reserves"
Senator Orrin Hatch: "Mr Chairman, in 1934 when the American people were forced by law to deposit their gold through the office of the Treasury and into Fort Knox they were reimbursed at the rate of $20.67 and later at $34.45 an ounce. Since then the American dollar has depreciated to the context that 1 ounce of gold now sells for more than $200. In buying this gold the US Government obviously made a very shrewd investment its gold reserves now have a dollar value 10 times greater than that of the original purchase. Unfortunately this investment was made by taking from the American people something that does not depreciate and giving them in return currency whose value has been steadily decreasing for years."
Asst. Treas. Secretary Bergsten: "[T]he extreme volatility in the market price of gold makes it a high risk asset. For example the price of gold moved from a peak of $195 per ounce at the end of 1974 to a trough of $104 in mid 1976 and back to a new high of $215 on August 16. As of August 24 the price was about $203 per ounce.
"As I have pointed out gold is a highly speculative commodity subject to volatile swings in price. The investor in... [gold] at the end of 1974 would have seen the value of his investment drop by 47 percent by mid 1976. We should thus avoid any implication that the US Government is promoting such investment."
Link to official testimony.
(Of course, gold hit $800 the year after Bergsten gave this testimony).
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
0
Comments
Yep, it's that risky, risky asset that causes all the trouble. The government should discourage people from doing crazy things like thinking for themselves.
I knew it would happen.