Word: deficit
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Dates: during 1960-1969
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Lost World? The rush was on because speculators-some avaricious, some panicky, some merely prudent-had become convinced that the U.S. and its partners could not much longer maintain the $35 price. With a balance of payments deficit of $3.6 billion last year and a war in Viet Nam that is costing some $30 billion annually, the U.S. has seen its gold reserves shrink by 50% from a postwar peak of $24.6 billion. Now, believed the speculators, the U.S. was nearing the end of its gold tether. If the U.S. could no longer sell gold to all takers...
Still, Ramparts is far from rescued. Its overall deficit stands at about $250,000; its editors put the blame on timid advertisers frightened off by the magazine's iconoclasm. This is true in part; its contents encourage people to imagine a CIA operative behind every bush-or a Kennedy assassin. But Ramparts has had plenty of other troubles. After a furious intramural spat, it ousted Founder-Publisher Edward Keating. Total adulation of the Black Power movement, plus an article blaming the Middle East war on Israel, caused two other wealthy backers of the magazine to withdraw support...
Most of the reasons for the gold crisis are rooted in the U.S. The country's continuing balance of payments deficit, its constantly out-of-balance domestic budget and its rising outflow of money to finance the war in Viet Nam are basically responsible for global concern about the soundness of the dollar. Concern has led to the belief that the U.S. would soon have to stop selling gold to all buyers at $35 an ounce and somehow raise the price. The possibility of a price increase touched off the worldwide run on gold...
However, this effect will probably be overshadowed by the result of reduced U.S. imports. The payments deficit can only be narrowed by expanding exports or restricting imports. A government has control over imports both through tariffs and fiscal policy. But since it is virtually helpless to expand exports rapidly, the latter course is inevitable. Unfortunately, U.S. imports are by definition the exports of other nations, so they must face reduced exports, which will cause them to reduce their imports, which are the exports of still other nations, and so it goes. Because of the complexity of trade relations...
...ripples will finally return to wash the shores of the U.S., reducing its exports and widening the deficit once again. The process is ultimately self-defeating; a small decrease in the deficit is purchased at the cost of decreasing total world trade by a much greater amount...