Following the devaluation of the U.S. dollar in January, 1934, and increase in the monetary price of gold from $20.67 to $35 per ounce, a large inflow of gold began to the U.S. This flow was not interrupted until well along into World War II, when Lend Lease and Military expenditures abroad were chiefly instrumental in reversing the flow in 1944 and 1945. After resumption of net imports for 1946-1949 inclusive, there ensued an almost steady yearly decline in the U.S. Treasury's gold stock, so that from a post-World War Ii high of $24,427 million at year-end 1949 (at official valuation of $35 per fine troy ounce), the U.S.'s gold stock declined to $10,732 million at year-end 1970 and $10,332 million at end of July, 1971. By comparison, the U.S. dollar liabilities to official institutions still totalled $32,952 million at the end of July, 1971, and pursuant to the Articles of Agreement of the INTERNATIONAL MONETARY FUND, such dollar liabilities were convertible into U.S. gold stock at the monetary price of $35 per ounce for such official accounts. In the background of this situation was the succession of yearly deficits in the U.S.'s balance of payments, caused principally by substantial capital outflows and the development of a "dollar glut" in foreign holdings of U.S. dollars, aggravated by a fall in interest rates in the U.S. as monetary policy eased to offset the recession in 1970. From the beginning of 1971 to mid-August, 1971, the U.S. Treasury paid out over $3 billion in reserve assets, chiefly gold stock, about 40% of this total in early August as the drain accelerated.
On August 15, 1971, the U.S. closed the "gold window" and suspended convertibility of the dollar into gold. The value of the U.S. dollar in terms of several major currencies started to float. An additional tax of 10% on goods imported into the U.S. was imposed. A 10% cut in foreign aid supplied by the U.S. was ordered by the President.
The gold window has remained closed since. The U.S. monetary gold was revalued from $35 per fine troy ounce to $38 per fine troy ounce on May 8, 1972, pursuant to the Par Value Modification Act, P.L. 92-268, approved March 31, 1972, which revaluation created an increment amounting to $822 million. The U.S. monetary gold was further revalued from $38 per fine troy ounce to $42.22 per fine troy ounce on October 18, 1973, pursuant to the amending of Section 2 of the Par Value Modification Act, P.L. 93-110, approved September 21, 1973, which further revaluation created an additional increment of $1,157 million.
In the "managed float" that has ensued in the foreign exchange markets for the U.S. dollar as well as other currencies, the U.S. authorities (Treasury in co-ordination with the foreign operations of the Federal Reserve System's open market account) have intervened in the FOREIGN EXCHANGE markets either defensively, aggressively, or not at all, according to the dollar's situation relative to economic considerations.
With the U.S. dollar inconvertible into gold, international movement of gold is in private channels. See the appended table under GOLD IMPORTS for recent years' imports, exports, changes in earmarked gold, and the U.S. gold stock.
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