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4. A major problem in getting rid completely of the gold price-support program, as of the wheat price-support program, is the transitional one of what to do with accumulated government stocks. In both cases, my own view is that the government should immediately restore a free market by instituting steps 1 and 2, and should ultimately dispose of all of its stocks. However, it would probably be desirable for the government to dispose of its stocks only gradually. For wheat, five years has always seemed to me a long enough period, so I have favored the government committing itself to dispose of one-fifth of its stocks in each of five years. This period seems reasonably satisfactory for gold as well. Hence, I propose that the government auction off its gold stocks on the free market over a five-year period. With a free gold market, individuals may well find warehouse certificates for gold more useful than actual gold. But if so, private enterprise can certainly provide the service of storing the gold and issuing certificates. Why should gold storage and the issuance of warehouse certificates be a nationalized industry? |
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5. The U.S. should announce also that it will not proclaim any official exchange rates between the dollar and other currencies and in addition that it will not engage in any speculative or other activities aimed at influencing exchange rates. These would then be determined in free markets. |
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6. These measures would conflict with our formal obligation as a member of the International Monetary Fund to specify an official parity for the dollar. However, the Fund found it possible to reconcile Canada's failure to specify a parity with its Articles and to give its approval to a floating rate for Canada. There is no reason why it cannot do the same for the U.S. |
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7. Other nations might choose to peg their currencies to the dollar. That is their business and there is no reason for us to object so long as we undertake no obligations to buy or sell their currency at a fixed price. They will be able to succeed in pegging their currency to ours only by one or more of the measures listed earlierdrawing on or accumulating reserves, co-ordinating their internal policy with U.S. policy, tightening or loosening direct controls on trade. |
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