Gold And You (1968)

Your local Pet Dairy, quality fresh hot milk, ice cream, and other fresh dairy foods brings you the Screen News Digest. In plants like this, Pet Dairy processes a complete line of fresh dairy products for your health and enjoyment. Strict laboratory controls by trained technicians assure the quality goodness of all fresh pet dairy products. Quick delivery on modern refrigerated trucks by your friendly pet salesman guarantees the freshness of its products from the dairy to you. [Music] Through all of recorded history, men have searched for gold And yet all the gold that has ever been mined can be stored easily on the ground floor of the White House. Even today, a year's output fits comfortably inside a telephone booth. As money, gold served well. It was scarce, but not too scarce. It could be easily melted down and shaped into coins. It was lasting. It did not spoil, and it could be reworked again and again. In country after country, gold, coins, and currency became the traditional medium of exchange in buying and selling goods and services. Gold also became the means of settling a nation's balance of payments, measured in income against outgo. Income includes those goods and services that bring trade dollars into a country such as exported goods, exported services, income from foreign investments and repayments on loans. Outgo such as military overseas, foreign aid, imported goods, imported services, drain dollars. When outgo is greater than income, an unfavorable balance of payment occurs and the deficit must be settled through payments in gold. 1945, World War II is ended, and the nations of Western Europe, both victor and vanquished, are heavily scarred by the long years of the costly conflict. The industrial heart of the continent is in ruins. Factories are reduced to rubble. A war ravaged people struggle day to day just to keep alive. In these reconstruction days, exports from America flood the foreign markets. Goods and services sold abroad far exceed those imported from overseas. And the United States enjoys year after year a favorable balance of payments. This balance is reflected in the amount of gold that flows into America from foreign countries to settle their annual trade deficits. [Music] In the years after World War II, the United States accumulates more than $30 billion in gold. But then postwar recovery takes root and the European economy comes alive again. Out of the ruins of the Third Reich, West Germany creates a peaceful industrial revolution. backbone of the remarkable recovery is a compact little car that competes with and finds a place beside the American automobile in the world market. [Applause] Europe's economic resurgence is given a new impetus when France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg create the common market. Frontier barriers are lifted, artificial trade restraints removed, goods flow freely among the six nations. The results of the fateful decision are phenomenal. The 160 million people of the common market countries challenged the United States and Russia for industrial leadership in the world. In 8 years, steel production jumps 100% nearly equaling America's output. The revitalized continent within 15 years after the end of World War II is caught up in the biggest boom in its history, and soon the common market becomes the second largest exporter of manufactured goods in the world. The effects are quickly felt in Great Britain. The country cannot compete. It takes action, drastic action, to cut the cost of the goods that it produces. It devalues the pound. Where before 5 could purchase this clothing, now 10 is required. But while devaluation raises prices at home, it lowers them overseas. And the lower prices enable England to compete at least temporarily with the common market countries. [Music] [Applause] England is not alone in feeling the effects of Europe's industrial expansion. There is an everinccreasing volume of direct and indirect investment abroad by American corporations. The foreign lending and investment begin to drain dollars out of the United States to end the favorable post-war balance of payments and replace it with a deficit. The drain is accented by America's growing military commitment around the world and the funds needed to fulfill and maintain that obligation. Servicemen and their dependents spending their dollars overseas tip even further the balance of payment scale. Tourism does its part, too. The United States enjoys a period of unparalleled prosperity, and Americans with more money and more leisure time travel as they have never traveled before. The coming of the jet age accelerates this exodus to overseas cities and foreign lands. Aircraft from nations around the globe transport hundreds of thousands of Americans overseas. [Music] Nations and places that once were days and even weeks away are now within a few hours flying time. And people who never dreamed of journeying abroad even once return again and again to Europe, Africa, Asia, South America. Year after year, the number grows greater. The drain on the dollar more serious. In 1967, American tourists spent $2 billion more overseas than foreign visitors spend in the United States. America's balance of payments position so favorable, so strong, so secure in the post-war years, is now vulnerable, now under pressure. Events in England heightened the crisis, threatening Prime Minister Wilson and his Labor government and undermining the whole financial stability of the free world. The British leader announces still another devaluation of the pound, the third since the end of World War II in a drastic attempt to reverse his country's continuing balance of payments deficit. The action shakes banking circles in the Commonwealth countries and his reverberations echo throughout the free world. Other nations whose economies are closely linked to Great Britain devalue their currency, too. And on stock exchanges in Europe, Asia, North America, there are fears that a dollar will be marked down. Within a month, the United States is forced to deliver almost half a billion dollars from its gold reserves to meet the demands of creditor nations. France is among the biggest of the countries demanding gold in exchange for dollars owed. All payments in gold are based on a price of $35 an ounce, a figure fixed by the American government in 1934 and guaranteed ever since. But by 1968, the continuing run on gold threatens the ability of the United States to keep his commitment and to protect the dollar as the cornerstone of the world economy. There is a fullscale crisis in gold. This graph illustrating in billions of dollars America's balance of payments from 1957 through 1967 shows dramatically the extent of the dollar dilemma. 1957 is the last year in which the United States showed even a small favorable balance of payments. [Music] Every year since then, there have been deficits in varying amounts up to $4 billion. From a post-war high of more than $30 billion, America's gold reserves have shrunk by the start of 1968 to only 12 billion. And almost 11 billion of that amount are needed to provide the 25% gold cover mandated by law as backing for Federal Reserve notes. These notes represent almost all the paper money in circulation in America. Reacting to the crisis, President Johnson vows vigorous action to bring the balance of payments to or close to equilibrium. In his State of the Union message, the president reaffirms in general terms his determination to defend the dollar through cuts in overseas spending. >> On January the 1st, I outlined a program to reduce our balance of payments deficits sharply this year. We will ask the Congress to help carry out those parts of the program which require legislation. We must restore equilibrium to our balance of payments. And we must also strengthen the international monetary system. And we have assured the world that America's full gold stock stands behind our commitment to maintain the price of gold at $35 an ounce. And we must back up this commitment by legislating now to free our gold reserves. Americans traveling more than any other people in history took $4 billion out of their country last year in travel costs. We must try to reduce the travel deficit that we have of more than $2 billion. And we're hoping that we can reduce it by $500 million without unduly penalizing the travel of students or teachers or business people who have essential necessary travel or people who have relatives abroad that they need to see. And even with this reduction of 500 million from the 4 billion, the American people will still be traveling more overseas than they did in ' 67 or 66 or 65 or any other year in their history. Now, if we act together, as I hope we can, I believe we can continue our economic expansion, which is already broken all past records. The president asks elimination of the gold cover to free America's remaining gold supply for international settlements. The lasting problem continues to be the chronic deficits in America's balance of payments. Action has to be taken to stem the drain on the dollar. In time, history will measure its failure or success and whether the dollar will continue to be as it has been, good as gold. The living history of the Screen News Digest has been brought to your local pet dairy.