Word: goldings
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Dates: during 1960-1969
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While TIME is not in the predicting business, many of our stories look toward the future. It seems worth noting that our Essay "The Dollar Is Not as Bad as Gold" (Jan. 12), said that President and Congress would soon remove the 25% gold cover for U.S. currency - and it happened two months later. This week's cover story, written by Gurney Breckenfeld, researched by Kathleen Cooil and edited by Champ Clark, not only tells what is going on but also looks into the future at what might happen in the months and years to come...
Sitting with the Western world's chief central bankers as they weighed the gold crisis last week in Washington was a saturnine Frenchman who still bears the scars of his days as a Buchenwald prisoner. Though Pierre-Paul Schweft-zer, 55, spoke rarely, he got undivided attention when he did. As managing director of the 107-nation International Monetary Fund-which acts as an arbiter of exchange rates, guardian of fiscal good behavior among sovereign states, and rescue squad for countries in financial trouble-Schweitzer holds a pivotal role not only in the present struggle to shore...
With Schweitzer's full approval, the central bankers of the U.S. and six other leading industrial nations revised a key part of the world's monetary rules. They agreed to stop buying and selling gold, and to use their remaining store of the precious metal only to settle debts between nations. Thus out of their hastily called weekend meeting was born a two-tier pricing system for gold. For central-bank exchanges of gold and dollars, the familiar $35-per-oz. price continues. For speculators, hoarders and industrial users, the price was freed to find its own level...
Fear & Faith. The international monetary system-the agreed way of exchanging one currency for another-runs on faith. For 24 years, the bulwark of that system has been the U.S. Treasury's pledge to redeem dollars held by foreign governments for gold, at an unchanging $35 per oz. Other countries value their own money in terms of dollars, usually keep a big part of their reserves in dollars. After World War II, as other nations gradually followed the U.S. into currency convertibility and trade liberalization, those relationships helped build an enormous, dollar-based world market. Foreigners were delighted...
...with the size of the U.S. economy (larger than all of Europe's), that balance of payments deficit seems trivial; it has averaged a mere 0.004% of the gross national product. But the dollars thus placed in foreign hands now total $34 billion, while the U.S. stock of gold has dwindled from a postwar peak of $24.6 billion to $10.4 billion last week, the thinnest gold line since 1936. If all the dollar holders demanded gold at once, there would be too little in Fort Knox to satisfy even a third of them. Already whetted, the speculative appetite...