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Lethbridge Herald, The (Newspaper) - December 19, 1974, Lethbridge, Alberta Thortday Ovctmbvr 19, 1974 THE LETHBRIDGE HERALD 5 U.S. attempts to exorcise gold fever By John Graham, London Observer commentator WASHINGTON The an- nouncement by the United States that it will soon start selling its "official" gold stocks on the free market has revived the ancient question: "What is the true price of The immediate reasons behind the American decision, and its immediate effects, are discernible. From Jan. 1 Americans will be allowed to own gold other than in the form of objects, jewellery or teeth for the first time since 1934. This is assumed to create a market additional to the market that exists already for gold in Europe and elsewhere. By selling ounces from the stockpile, the U.S. will achieve the following short-term aims: It will prevent the new purchasers from having to buy outside the U.S., thus contributing to the payments deficit, lowering the relative value of the dollar, and marginally hindering the anti inflation drive. The U.S. at present has to import about million of gold a year for artistic and industrial pur- poses. The proceeds of the sale, say million at current prices, will offset that amount of treasury financing, thus helping the administration in its wish to keep long-term interest rates down. It is as clear a sign as anything that the U.S. is com- mitted to complete demonetization of gold. This has, of course, been at the centre of American monetary policy since the formal link of the dollar to gold was broken by President Nixon on Aug. 15, 1971, but it has now been given its most practical ex- pression. Among the immediate effects will be considerable anxiety in South Africa, dis- ruption on the new Winnipeg exchange (the only gold futures market in the and a very thin market in Europe between now and the American saies on Jan. 6. This will be accompanied, unless the experts are again con- founded, by a steady fall in the current price. Two million ounces, after all. is roughly equivalent to about two months' output in South Africa, there would need to be a colossal increase in demand for South Africa to be able to withstand continued sales by the U.S. of this sort of volume. In Winnipeg, people who have bought forward for delivery next April at or next October at may be in severe trouble. And in London the price has already dropped since the announcement to about an ounce compared with a peak level of last month. So, at the U.S. treasury, the Federal Reserve, and the International Monetary Fund there is general agreement that the administration has done a very clever thing. But and gold has had a way of proving the "but" right no one can really say with con- fidence what will happen to the price in the long term. There are two main views, the American view and what may best be called the Other view. The American view is that there will not in fact be a huge interest on the part of American citizens in owning gold bullion. First, Americans are not like Swiss or Indian or Frenchmen. Secondly, real wealth in the U.S. has been severely diminished recently by inflation and by the collapse of the stock market, and may be further diminish- ed by recession, especially in 1975. People are simply feel- ing poor, many of them are much poorer, and they are not about to go and buy a lot of non interest bearing gold to squirrel away. In addition, regular domestic use of gold far ex- ceeds domestic production. This imbalance will be par- tially met by the stockpile sales, thus reinforcing the tendency to treat gold just as any other commodity, such as copper or eggs. Moreover, by varying the amounts and timing of such sales, the U.S. may be able to create enough instability in the free price that interest in gold for hoarding will be dampened. And finally, much of the rise in price over the last few weeks has been in anticipation of the Jan. 1 liberalization. The American view is that many dealers are currently over stocked, and will wish to unload fast. This, plus the sudden increase in supply, will bring the price sharply downwards. Although this will, of course, reduce the treasury's financing gains, it will also reduce the import bill. The Other view is that the Americans may well be cor- rect for the very short term, i.e. for the early months of next year, but that in the long term there will be an ex- plosive new demand. No previous attempts by authorities, working either together or separately, have succeeded in persuading or- dinary people that gold is simply another commodity. Ordinary people, sadly un- tutored in the finer points of international economics and monetary reform, stubbornly persist in rather liking the yellow metal, and in buying it whenever they get the chance. It may be, say the skeptics, that Americans are feeling poor, but what about Iranians, or Germans, or Arabs? Didn't the Saudi Arabians only a few months ago actually have their gold reserves crated and shipped from America to Saudi Arabia, because they have a law that the gold reserves must be kept within their national frontiers? (That they hadn't done it earlier was due only to their not having completed the necessary vaults. Sand is too easy to dig through And one man who actually holds the American view ad- mitted to me the possibility that the manoeuvre might have precisely the opposite effect from that intended. There is a danger, he said, that the rest of the world may get the idea that the U.S. is trying to put a ceiling on the price of gold, and if this happens they will simply run all the gold out of the Federal Reserve as fast as they can carry it. This would depend, of course, on whether the U.S. will continue to sell off the stockpile at frequent (however irregular) inter- vals. Mr. William Simon, the secretary of the treasury, said the U.S. would make further sales, but probably smaller ones. With a hoard of 276 million ounces, they could sell two million a month until well into 1986. This they almost certainly do not plan to do, and their oc- casional sales will no doubt cause matching shudders in the otherwise steadily rising price. But industrial and ar- tistic demand seem likely to go on increasing, and can anyone put his hand on his heart and predict that a U.S. Treasury financing manoeuvre will exorcise an ancient prejudice? Gold gamble a desperate move By Bruce Whitestone, syndicated commentator Desperate governments grappling with desperate situations are inclined to do desperate things. Given the fact that concern about the economic situation grows more acute, this is how the attempt to restore confidence in the U.S. dollar by selling some of its gold will be interpreted. The U.S. treasury secretary's proposed auction on Jan. 6 of two million ounces of gold will reconfirm the blindness of governments to true economic reality. No only will this move prove to be self defeating, but it is likely to give added impetus to the forces that are now threaten- ing the world economy. By selling part of its gold reserves, the price of gold will be forced down only for a tem- porary period. Sooner, rather than later, holders of U.S. paper dollars will make an increasing effort to exchange these paper holdings, with a declining gold reserve behind them, for gold itself. In fact, this move would only serve to weaken confidence in the U.S. dollar, and would mean that holders of U.S who had not planned to convert their dollars into gold, would be tempted to do so while the gold was still available. What the exponents of the "get gold down at all costs" 'theme have failed to recognize is the fact that the market price is now about four times the official one, and is not the cause of ebbing confidence in paper curren- cies but the reflection of it. So what is the reaction likely to be when official gold is channelled into the free market in an attempt to rig the currency thermometer? The U.S. government is partly motivated by a desire to curtail imports of gold in Jan. when gold ownership becomes legal for U.S. citizens. This could lessen the pressure on the U.S. balance of payments but only at the cost of jeopardizing long term faith in the U.S. currency and related investments there. Weakening of confidence in the U.S. must eventually reduce the flow of investment capital there, which obviously would not lead to an ultimate improve- ment in its balance of payments problems. Too, the reality is. that the U.S. sale of gold will work against an improvement in the U.S. fight against inflation. The "profits" from the sales will be treated by the U.S. government as a wind- fall. Everything realized above the fixed price of 22 per ounce will be used to meet budget needs. In other words, per ounce will be used to redeem the Federal Reserve gold certificates, as required by law, and the realized balance will be used to meet current operating ex- penses, all rather like using one's patrimony to pay for riotous living. This proposal is far from helpful to other countries. Italy, which has been running a payments deficit of billion per year, has used her gold as collateral for loans to finance her trading account. Gold is vital to getting many nations off the hook and enabl- ing them to pay for the oil im- ports which have risen so sharply in price. There is no difficulty in see- ing that it is not going to be easy to restore international confidence so that foreign trade can proceed. If the U.S. continues to behave in an un- helpful fashion, the process may he delayed, but ul- timately, currencies must be linked to gold. Even though the U.S. has hinted that it will sell more of its gold reserve stock, when it becomes apparent that de- mand will quickly absorb all the selling, it seems unlikely that sales of official gold will continue The increase in demand stemming from the legislation Book review to make gold ownership legal for U.S. citizens could be of considerable magnitude, far in excess of estimates made by U.S. officials. Two newly established mutual funds, which provide shareholders with an opportunity to par- ticipate in ownership of gold bars, will absorb at least half of the two million ounces of gold offered for sale. Further, general over all demand for gold is likely to accelerate, when it is realized that the U.S. has as reserves about billion in gold at current prices, as backing for billion in paper money out- standing. In addition, there is more than billion in Eurodollar paper in cir- culation. It is common knowledge that gold had been unable to perform its traditional func- tion as a store of value because the price was held down by the U.S. government. Now that the tide of demand has proved irresistible, gold is likely to strong market until inflationary ero- sion of paper currencies ceases. More and more, North Americans are becoming aware of gold's traditional value as a protection against the inflation that is threaten- ing other forms of savings and investment. Gold's reinstatement as an essential part of our monetary system is gradually being brought about. Remonetiza- tion of gold seems inevitable, in spite of the U.S. government's move to depress the price and impor- tance of gold. Early days of the U of L "Come Hell or High Water" by Owen G. Holmes (The Lethbridge Herald, 141 As the old story goes, the travelling salesman was trapped by flood waters with a family in the upper story of an isolated farm dwelling. From his position near a window, he observed with considerable wonderment a hat floating with, against, and across the current of the raging torrent outside. Upon inquiring as to The Ideal Family Gift manse Built in 8 track, AM-FM. FM multiple radio, diamond stylus, 6 speaker system We could go on and on but why don't you drop in and see this beautiful machine now on special. Introductory offer FAIRFIELD TELEVISION APPLIANCE (Opposite the Elks) 9 9 P' the cause of this apparently unnatural phenomenon, he was told by the somewhat bored housewife: "Oh, that's Grandpa; he said he was go- ing to mow the lawn today, come hell or high And that was Owen in the early days buffeted by political cross currents, threatened by bureaucratic inundation, tacking with the winds of change, but holding steady to his course. Although he mutes his own role, he, more than any other single in- dividual, built The University of Lethbridge, and this little book, published more than a year ago, is all about that agonizing struggle. With wit unusual in a chemist, Dr. Holmes has put together a highly readable chronology of the events accompanying the establishment of Alberta's third university. It is a "must" reading for the facul- ty and should be on the bookshelves of every concern- ed resident of the province. How well I remember that turbulent period! From the far corners of the earth Owen assembled his founding faculty. Frustrates and mis- fits, for the most part, and yet in their one and several ways as extraordinary a crew as ever bid for a place in academic history. Plotting by day and revelling by night, we rallied around our leader and disciplined our ranks. We worked and we fought and we had fun. Early University of Lethbridge was an exciting place. Days blended into weeks and weeks into months as we slowly but surely took shape. Could a modern faculty do the same thing? I doubt it. For those were the days before self infatuation, intellectual narcissism, and what Riesman calls "inward migration." We are now so obsessed with "doing our own thing" and "being our own man that we never could achieve the necessary consensus. Universities are not built on the shifting sands of ideological idiosyncrasy and philosophic anarchy. B. J. GORROW 'One bar or two... Can individuals help 111 By Eva Brewster, freelance writer COUTTS Cynics (or wise who bought this year's Christmas cards and presents in last January's sales, won't have anything to worry about but what about the rest of us? Haven't many of us said year after year: "Christmas has become a commercial Tip-off. Who cares about getting cards from people whose names one hardly remembers just to have to send one back? Who wants a present from somebody one hardly knows but which, nevertheless, requires reciprocating? We must give this wasteful custom." With these, not exactly charitable sen- timents, most of us manage quite successful- ly to live through spring, summer and. until a few years ago, fall without giving the next Christmas much'thought. Yet, every year the count-down seems to start a little earlier Calendars remind us from month to month that there are only so many shopping days left Stores are beginning their Christmas advertising in late summer or early fall and the first kids, representing firms on a com- mission basis, were trying to sell Christmas cards in August And then, in spite of all previous resolutions, families again debate the seasonal subject: "Do we or don't we send cards and give Whatever is finally decided, somebody is going to suffer from a guilty conscience. Yet, there are a lot of possibilities for individuals to do something worthwhile without violating prin- ciples that rightly reject the materialism that has crept into Christmas. There seems to me no better way of giving and receiving pleasure than to purchase cards and presents from organizations which give work and support to people who cannot otherwise make an adequate living or help themselves. My favorite Christmas cards come from the Mouth and Foot Painting Ar- tists (Rehandart Canada Ltd., 159 Bay St., Suite 712, Toronto, ONT. M5J 1M And if you have any doubt about their particular merit, try lifting a hammer or even just a paint brush with your toes or write with a pencil between your teeth and pretend you have no arms. It may be too late to purchase their lovely Christmas cards this year but they also produce an art calendar, cards for every occasion, and framable prints of their own paintings, all of which are so full of life, joy and color, they can't fail to remind us day after day of the miracle of man's willpower, courage and spirit and of our own blessings and advantages. I couldn't think of a better present than any one of the Mouth and Foot Painting Artists' unique efforts and ac- complishments. And, of course, there are organizations like The Herald's Cup of Milk Fund of the Unitarian Service Committee, the Salvation Army, individual churches and a lot more who help and feed children and the un- derprivileged everywhere. While the choice may be difficult, it would really suffice if every Canadian gave just one dollar to each of his favorite good causes whose sole finan- cial aim is, after all, to help people in need. A word of caution The one criterion for my choice is the amount of money that actually reaches those it was meant for. If I find that 75 per cent of my contribution goes into ad- ministrative costs, I cross that organization off my list. And I am very suspicious of appeals which send me "Dear Co-Worker with Christ" newsletters, whose author proclaims only too frequently: "Again I am winging my way over the Pacific Ocean to Tokyo and then on to Honolulu" or "My private jet is taking me to an important meeting in Cairo, Jordan, Addis Ababa, Rome, etc., where banquets are being held in my or whc even boasts that, his plane having broken down, he had to wire for a replacement from his private fleet of jets in America to take him from Cairo to Rome. Somehow, such a self-styled "Ambassador without Portfolio for Peace" will have to fly his kite at more gullible people's expense I am all for peace but not to the detriment of the starving and those squeezed dry by egocentric missionaries. For the former we can and should afford to send cards and gifts but we can do the world a service exposing the latter's extravagance. ART BUCHWALD We'll all be rich WASHINGTON Muhlenberg dashed into my office yelling, "GOLD! GOLD. I've dis- covered "Take it easy, I said. "You mean you've hit a gold "No, you he shouted, his eyes blazing. "On Dec. 31 we're going to be allow- ed to buy gold. We'll all be rich." "How can we be rich if we have to buy the "Haven't you read the advertisements in the newspapers? Gold is going to go up to an ounce. If we buy it at we'll more than double our money." "But, Muhlenberg, there is no guarantee that gold is going to go up. Suppose it goes "It can't go Muhlenberg cried. "Everybody wants gold. Now we can get our hands on it and stuff it in our mattresses and no one can touch us." "You've really got the gold fever, Muhlenberg. But I think I better warn you. Owning gold isn't what it's cracked up to be. It breaks up friendships and marriages. It turns man against man, and woman against woman. If someone knows you have gold in your mattress they'll do anything to get it including pillage and rape." "I read that somewhere. In any case, gold turns people into animals. Is this what you want to become an "Don't worry about he protested. "When I get my gold I'm not going to change. I'll still be the Muhlenberg you knew before. I may not go out as much because I'm going to have to stay home at night to weigh it and count it to make sure I've got all of it. But outside of that you won't even know I have the stuff." "I've read articles about this crazy gold buying I said, "and they indicate the oniy ones who stand to make money on gold are the dealers who sell it, the insurance companies who insure it and the banks who store it. Also the Mafia seems to be into it and a lot of gold bars may turn out to be brass. I would be very careful if I were you before I got into this business." Muhlenberg snarled like Humphrey Bogart. "I might have known it. You're just saying this because you want to drive down the price of gold so you can buy my gold cheap-. You're all alike. Everyone's after my gold. Well, you're going to have to kill me first before you get it." "Muhlenberg, will you please put that gun down. No one is after your gold. You can buy of it you want to. It's yours to do with what you want." "Then why did you bring up the pillaging and "I was just trying to warn you that people have done it in the past to get their hands on gold. Perhaps this time they won't. After all, Americans are much more civilized than most peoples. You're a perfect example of someone who hasn't lost his cool because his government is going to allow him to buy gold." Muhlenberg put his gun back in his belt. "Well, there are other things in life besides gold. I'll tell what. Because you were in on this with me irom the beginning, I'm going to let you in on a good thing. There's this guy in Florida who just discovered a cache of gold coins on a sunken Spanish galleon and for ;